The document warns of the potential for regional shortages, market failures, and a shift in political power toward those capable of exporting oil. This report describes potential outcomes that require planning and preparation. The scenarios outlined in the paper are exactly the kinds of drivers that lead me to advocate for greater regional energy self-sufficiency. The report clearly lays out just how vulnerable Europe will be because of its continuing dependence upon Russia for both oil and gas, and notes that Russia will be in a very strong political bargaining position as a result.

The report can be accessed from the popular German paper Der Spiegel in this story: Bundeswehr-Studie warnt vor dramatischer Ölkrise. The report is so far only available in German, and while Ich spreche ein wenig Deutsch (I speak a little German), I am not fluent enough to capture the essence of the report. (Der Spiegel has summarized the report in English now: Military Study Warns of a Potentially Drastic Oil Crisis).

However, I have a friend who is both fluent in German (his native tongue) and passionate about peak oil outreach. Given a week, I could probably translate the report. My friend (who didn't want to be identified) did it overnight. Below is his translation of the major points in the report.

Peak Oil

Implications Of Resource Scarcity On (National) Security

Center for German Army Transformation, Group for ?Future Studies?

July 2010

1. Introduction

The focus of the document is on the topic of finite resources, using Peak Oil as an example. The report is part of a series of publications focused on the long term (30 years) with the intent to enable the Ministry of Defense to take action early.

In the past, resources have always triggered conflicts, mostly of regional nature. For the future, the authors expect this to become a global problem, as scarcity (mainly of crude oil) will affect everybody.

The authors confirm multiple views on Peak Oil timing and concede that there will be Peak Oil eventually. The study isn?t about positioning the problem on a timeline, but instead about the consequences of a peak. They expect major consequences with a delay of 15-30 years after the peak has hit.

The report refers to the uncertainty of reserve statements mainly in OPEC countries based on the quota allocation method within OPEC but also refers to the possibility of better extraction technologies.

They suggest that it has become urgent to understand those consequences of an eventual peak now in order to have enough time to adapt.

2. The Importance of Oil

2.1 Oil as a driver of globalization

95% of all industrial outputs is dependent on oil as a fuel and/or as a chemical base for polymer production etc. Oil has become a key driver of modern lifestyle and globalization.

Substantial oil price increases poses a systemic risk, not just for obvious things like transportation, but equally for other subsystems.

Thus, internationally, but equally nationally, there is a vital interest in securing access to oil, which is currently possible on world spot markets, with OPEC being cooperative due to a mutual dependency between key actors (and a massive presence of the U.S military in the Gulf region).

Yet, on the other hand, regional conflicts can always at least partially be attributed to resources, such as in the Caucasus region, the Middle East or in Nigeria. They may also fuel conflicts due to the wealth they create (such as in Africa).

The report sees ? within a timeframe until the year 2040 ? a changed international security layout based on new risks (including transport risks for fuels) and new roles of actors in a possible conflict around the distribution of increasingly scarce resources.

2.2 German energy security.

The term is defined narrowly as ?reliable energy supply?, and then extended to include environmental objectives, technology transformation of societies, planning for energy demand and the long-term planning of a national strategy, tied in with international organizations.

This expansion of the view is seen as required based on the globalization of energy markets. However, the report then narrows in scope again to the possible risk from a supply shock, focusing on the key suppliers of oil: Russia, Norway and the U.K. It is noted that both European partners are already past their peak and that Germany is increasingly dependent on Russia, which currently is reliable but not necessarily so in the long term. Given the expected decline in German energy consumption, the Russian share will likely be 40% by 2025, with the Middle East, Africa and sources around the Caspian Sea making up for the increasing gap from declining European production.

3. Possible Scenarios After Global Peak Oil

This chapter looks at gradual changes (3.1.) and the risk of disruptive changes (3.2) past a certain tipping point.

3.1 General interdependencies driven by Peak Oil

3.1.1 Oil as a deciding factor in international relationships

With increasing scarcity, producers are increasingly in an advantageous position, both from high revenues and access to cheaper oil when compared to spot market prices. This partly reverses the trend to free oil markets which took place after the '70s shocks, and gives those countries more control over the supply chain, with a risk of monopolies and nationalizations, and of ?political pricing.?

Further, oil producers use increasing amounts of their production internally at lower prices, which increases domestic consumption and inefficiencies, accelerating the problem. [The authors miss out on the fact that high oil prices also bring more wealth to the country which AGAIN increases resource consumption].

The report then looks at increasing ?strategic? moves by key actors including the Chinese CNPC (China National Petroleum Corporation), which tries to grab the sources that are still available (particularly in Asia and Africa), but often at relatively unattractive conditions.

Overall, the authors expect a reduction of ?free market? mechanisms in oil trade, and a rise in more protectionism, exchange deals, and political alliances between suppliers and customers, which could lead to significant geopolitical shifts. Equally, the authors expect this interdependency to shape foreign affairs of oil importers, making them more tolerant towards rogue behavior of suppliers out of sheer need.

Overall, higher volatility and loss of trust are seen as possible outcomes in a world where oil supplies are limited, increasing the need for ?oil related diplomacy? and thus increasing the risk of moral hazard among all actors, which in turn decreases overall global supply security.

The report then refers to already existing actions of the German government to tie close economic relationships with energy suppliers, and to the tendency of consuming countries to reduce oil dependency, trying to steer clear of risks of future supply shocks.

The Middle East is identified as a very dangerous region with high external involvement from many players and thus a very unstable overall situation.

Overall, the report expects a reduction of the importance of ?Western values? related to democracy, and human rights in the context of politically motivated alliances, which increasingly are driven by emerging economies such as China ? likely leading to double standards. Emerging economies are equally expected to receive higher recognition in international organizations, particularly those with strength in resources (such as Russia).

3.1.2 New security risks based on additional/alternative energy resources

New conflicts are potentially arising from oil exploration in international or disputed ocean waters, where multiple issues arise, particularly around the Arctic Circle, with further geopolitical risks for conflict.

Also, the shift to natural gas is reviewed as an extension of the ?oil age?, because it might be able to replace crude oil as a bridging source until new solutions are found. The risks for problems from transporting gas (pipelines) and the related issues (as seen between Russia and its neighbors during the past years) are highlighted.

Equally, nuclear power as a potential source is highlighted ? emphasizing the risk for safety and the proliferation of nuclear technology. This would also require an increasing shift towards electricity.

Equally, the competition between biofuel and food production is highlighted, showing the limits of biofuel outputs to compensate for reductions in oil availability, and also showing risks for water supply and soil degradation from excessive use.

Overall, the authors see a trend to increase the energy autonomy of entire regions from external supplies, both in the ability to generate alternative fuels (from biofuels and coal), but particularly in electricity generation.

3.1.3 A shift in roles between private and public actors

Based on the increasing importance of oil, governments are becoming more relevant in securing the benefits of oil, both on the supply and on the demand side. This puts a higher emphasis on political negotiations and deals, and increases the risks for nationalizations of resources and key exploration activities.

Exploration licenses are seen as a key area where bidding wars (including non-financial commitments) might emerge. Equally, increasing pressure to renegotiate or revoke already existing licenses might emerge. Ultimately, each country will try to secure sufficient oil to maintain its standard of living.

On the other hand, private enterprises are seen on the rise in protecting infrastructure and ensuring production and transportation security in less developed regions, particularly if weaker countries become unable to keep their own services up.

The dependency on oil-related infrastructure (pipelines, refineries, harbors, key pathways on oceans) will increase, and thus the risk. Damaging infrastructure through hostile acts (sabotage, war) might become an attractive target for groups or countries with a tendency to use violence. The same is expected for electricity and natural gas-related infrastructure ? they all might require higher protection.

Generally, the focus of risks is expected in the region which the authors consider the ?strategic ellipse? (a term used for the region East of Europe reaching from Saudi Arabia in the South to Russia and former Soviet Union countries in the North), because a majority of oil reserves are located in this area.

3.1.4 Economic and political crises as a consequence of the transition to ?post-fossil? societies

A number of risks of higher oil prices are seen for modern economies, particularly in transportation. Security risks are seen in resulting systemic crises.

A first direct consequence of higher oil prices and lower availability of fossil fuels is a possible reduction in transportation capacity, equally in individual transportation and in freight forwarding. This might lead to another ?mobility crisis? for societies that heavily depend on cars and trucks.

Higher cost in commercial transportation markets might severely affect current supply chains, and no alternatives are in sight (electric trucks don?t exist yet). Food particularly might become a critical issue for countries that are a) highly dependent on imports and b) are susceptible to price-increases of food products, particularly affecting Africa, parts of Asia and Latin America, and the Middle East.

High oil prices would further affect almost all aspects of society, as it will also influence the cost of chemicals and all products derived from them, which might substantially alter the nature of value chains and make certain things uneconomical ? ultimately leading to higher unemployment during a transformational phase away from an oil based economy. This might particularly affect the German car industry.

Limits in availability might also strengthen regulatory efforts, encourage the allocation of energy (oil) by rationing schemes and possible other actions limiting free markets.

Additionally, the changes and likely reduction in standard of living might render societies less stable and make them more attracted to extremist political positions and even trigger changes in government systems, as trust into key actors in politics will diminish. This might be a particular risk for the relatively young democratic countries in Eastern Europe.

3.1.5 More selective intervention ? key actors overwhelmed

Overall, more expensive transportation and increasing problems ?at home? might reduce the ability of larger countries to intervene internationally (politically and/or with military action), and also lower the readiness to provide help to poorer countries. The focus will be more on a country's (energy) interest for itself and not so much on an ideal of transferring Western values. The gap will likely not be filled by NGOs, as they will be affected by similar limits.

Overall, international institutions will be weakened, as they will have less resources to provide help and support, and it becomes equally possible that help will be attached to direct (energy) needs of the donors.

3.2 Systemic risks after reaching a ?tipping point?

In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the possibility of a relatively steady downward trajectory.

Such a scenario could develop through an initially slow decline of trade and economic activity, combined with higher stress on government budgets from lower tax income, higher social cost and growing investment into alternative technologies.

Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust in currencies and a break-up of value and supply chains ? because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.

4. Challenges for Germany

4.1 Risk of new dependencies for Germany

Oil as a new factor of global power would create significant dependencies for Germany, and in order to avoid supply issues, strong ties with suppliers are a must, but equally a diversification of supply relationships, taking into account that a supplier might intentionally reduce capacity to accomplish political objectives.

Among the key supplier countries is Russia (supplying 35% of German oil imports), where reliability risks are prevalent, given past experience. Natural gas, as a possible temporary substitute, bears the same risk (37% comes from Russia). Thus, a diversification becomes essential.

4.2 Focus of politics on supply relationships

Germany needs strong and reliable ties to Russia and other Caspian Sea countries. This might create some challenges in international relations, particularly with smaller Eastern European countries [like Poland]. Thus, intensifying relationships to the Middle East might be equally relevant. However, all those relationships have an inherent risk of being instruments in conflicts, which puts a certain limit on treating all foreign partners the same.

4.3 More pragmatic foreign policy

The need to mitigate supply risks might require some compromises on foreign affairs topics (such as human rights). Equally, more active diplomatic efforts will be required with a focus of energy security in mind. This is more difficult given Germany?s reluctance to engage in political power play due to its history, but needs to be tackled in order to deal with the challenges ahead. The authors don?t want to encourage military solutions, but suggest a strong preventive development of political and diplomatic initiatives to tackle the problem.

4.4 Importance and freedom of industrial nations reduced

All industrial nations that depend on energy imports will become more dependent on new partners, both in emerging economies and supplier countries. This requires a new focus in foreign affairs, sometimes giving up standards in negotiations with countries that have different cultures and political systems.

4.5 Help in stabilizing supplier countries at risk

Some supplier countries (and surrounding regions) might be destabilized by the force of higher resource prices. This is an area where Germany needs to help by providing support for nation building and conflict resolution on the national and international level. This is in conflict with the lower economic power likely to result from Peak Oil, which might make interventions less likely and requires new approaches of ?stabilization with lower effort.?

4.6 Growing conflict potential concerning the Arctic Circle

Germany might have to take positions in case of an upcoming conflict regarding resources in the Arctic Circle, where multiple countries (including Russia) have open claims for accessing oil and gas fields. This requires further research.

4.7 Nuclear technology proliferation

The risk for nuclear technology proliferation and thus more countries with the potential for nuclear weapons (and the risk for terrorists having access to nuclear material) is growing due to the proliferation of nuclear technology for energy generation. Equally, risks for terrorist attacks and accidents on German soil are rising. Both scenarios require more surveillance, intelligence and preventive action.

4.8 Higher conflict potential regarding critical infrastructure

Energy delivery infrastructure for all sources including electricity will have a higher importance in an oil constrained world, thus, securing its reliability, security and availability becomes mission-critical. International cooperation is needed to secure large international supply paths (pipelines, sea routes).

4.9 Larger ?energy regions? change international alliances

The expectation of stronger connections between suppliers and consumers across continents creates different settings for current international alliances and security risks. DESERTEC (a large power production system in Northern Africa based on CSP) would require different settings even for military strategies.

4.10 Peak Oil for armed forces

Armed forces would also be significantly affected by fossil fuel limits, as they are very dependent on oil products. Significant investments in alternative energy procurement technologies (biofuels, coal-to-liquids - Fischer-Tropsch) and applications (electric and hybrid vehicles) would be required, with long transition times. Further, local energy-independence of stationary troop infrastructure (like military bases) using more renewable sources would be beneficial. The long term objective would be to fully convert Germany?s armed forces to only use renewable energy sources by 2100.

4.11 Crude Oil as a systemic risk

For scenarios which end with a complete destabilization of societies, Germany is at a significant risk given its strong participation in a globalized economy. Being still able to act requires a number of basic infrastructures to keep functioning, both for the country and its armed forces. Work is required to look into redundancy, high-resilience of infrastructure and local self-organization approaches.

5. Summary

The report sees significant risks arising from an unavoidable peak in oil production, which go beyond gradual shifts in energy systems and economies. This will likely lead to economic change and new geopolitical risks that affect much more than just what we can anticipate. The overall ability to describe exact outcomes is very limited, as many scenarios are possible, and further research is required.

Overall, more emphasis needs to be put on understanding and shaping international relationships with respect to energy security, anticipating and integrating the ongoing shift to different players in a resource-constrained world.

In any case, Germany has to identify and implement alternatives to the current transportation technologies that require oil, and put a similar emphasis on avoiding other dependencies, for example concerning rare earths.

For armed forces, Peak Oil creates significant risks, both from a mobility standpoint as well as from dependencies on other societal services. Understanding those risks requires further analysis and likely a very different approach in the future.

In general, more preparation is required for society and the army to make sure that problems are recognized and solutions are actively implemented.

Update, 6:00pm Thursday: The cap was removed from the well late Thursday afternoon. The next step will be removing the blow-out preventer, which is considered forensic evidence.

The annotations to the ROV feeds from BP are becoming a little more descriptive, particularly with those related to the Q4000, which will be playing a significant part in the replacement of the blowout preventer (BOP) on the Deepwater Horizon well. However, at 9 pm on the 1st, with the waves still a little higher than desired, the activity has yet to start.

One of the new camera feeds that is being displayed is a weight indicator on the deck of the Q4000. This is not yet on line, but Admiral Allen pointed out on Wednesday the loads that will come onto the vessel.

We anticipate removing the blowout preventer with the latching mechanism that will be attached to a drill pipe string that will be suspended from the Q4000. . . . . . .

The combined weight of the drill string, the latching mechanism and the blowout preventer itself is approximately a million pounds. When they released that blowout preventer from the well it will be suspended at about 5000 feet below the surface.

There are two things we’re concerned about when this occurs, number one is the wave height. You can imagine the Q4000 riding up and down on the waves. When they ride up it exerts more dynamic loading on that pipe system. So we’re concerned about the weight and the ability of the pipe system to handle that.

Before the BOP itself is removed, the capping stack has to be taken off. The latching mechanism to attach to that is already down underwater, and is being monitored by the Enterpise, through ROV2. The stack will come off first, and it is that activity which is now expected to start at noon on Thursday.

Once the Q4000 latches onto the original BOP, it is going to raise it up, through the platform of the vessel, and then set it back down on that deck. There are two additional static cameras on the Q4000 which are monitoring the moon pool, and which are presumably going to be carrying all this activity starting Thursday and running perhaps 36 hours, depending on the weather and how easily the BOP assembly breaks away from the well.

As soon as the Q4000 has the BOP on board, it has to move out of the way (and trans-ship the parts of the BOP, once separated to smaller ships to be sent ashore) so that the new BOP can be put in place.

This is the task for Development Driller 2, but before the job is finished the BOP has to be thoroughly tested to ensure that everything is now functional, the BOP will then be ready for the final stages. At this point it will be possible to restart the relief well to complete the bottom kill. That is still not anticipated to start until after Labor Day.

I am going to insert the quote on what the Admiral said on hydrates it its entirety, since I am not sure exactly what his point was.

Hello, Admiral. Can you tell me how the current BOP is attached to the well head and if there’s any concern about hydrates or other (inaudible) that might make it difficult to latch?

Thad Allen: Well, the current BOP is attached to the wellhead with the same connector they would use for any similar drilling well. To the extent that hydrates are there, we don’t expect that to be a problem right now. Had we continued to try and fish and get the pipe out of there, there was some concerns that hydrates would be blocking our ability to use a camera and actually operate down there. So I’m not sure that’s an issue. If there’s an issue at all, it’s probably the issue of the condition of the wellhead itself. When the Deepwater Horizon exploded and sank it bent the riser pipe over and ultimately the riser pipe was severed from the drill rig. At that point, if you can imagine, as massive as the blowout preventer was and that wellhead was, it probably bent over to some extent and then when the riser pipe separated from the rig it popped back up. It did not pop straight back up and there’s been some attempt to level that, to make sure we could get that as close to vertical as we can. I believe the current estimate right now, it is about two degrees off center line. So as we go in to pull the blow out preventer out, I would say hydrates are not a real big concern. I think the alignment to the true vertical about two degrees off would impact somehow to a very small degree the pull on the BOP as you’re trying to free it. We are aware of it. The engineers have taken that into account. We don’t think it will be a prohibiting condition, but it is something we are aware of.


In the other story that I have been watching, that of the miners in Chile, the equipment has started, and the preliminary drilling of the central shaft is now down more that 20 m. At the same time the rescuers are considering ways of reaming one of the smaller drill holes that have already reached the area. This might take a greater number of stages to get the hole out to the required size, but could, in total, be faster than the two-stage operation that is currently in progress. In either case, moving the muck from the bottom of the excavation with wheelbarrows, and ensuring that none of it gets stuck as it falls from the machine, are both concerns that will have to be addressed as the work moves forward.

John Michael Greer - Green Wizardry: A response to Rob Hopkins

Rob Hopkins is a smart guy, and even though he?s garbled a fair number of the details, his post raises useful points regarding some of the core issues I?ve tried to bring up in the Green Wizards posts.

The first of those is that one of the motivations behind the Green Wizards project is a recognition of the limitations of the Transition Towns project. I?ve discussed my concerns about that movement on several occasions on this blog, and don?t see any need to repeat those comments just now. The crucial point, though, is one that Hopkins himself cheerfully admits: that neither he nor anyone else in the movement can be sure that it will accomplish what it?s trying to accomplish.

That?s a bold statement, and one that?s worthy of respect. Still, it has implications I?m not sure Hopkins has followed as far as they deserve. If the difficult future ahead of us can?t be known well enough to tell in advance what strategies will best deal with it, in particular, it seems to me that it?s a serious mistake to put all our eggs in one basket, whether it?s the one labeled "Transition" or any other.

Peak Oil Modelling

Oil is clearly a finite resource. It would follow then, that the key issue surrounding discussions of peak production is not whether we will reach a point of maximum global production followed by steady declines, but rather the timing of the peak and the rate of post peak decline. The research carries with a wide range of answers to these questions.

?Green? cannot be America?s only goal

Future-Dated Jan. 1, 2072.

The downfall of the U.S. can be traced to a crippling shortage of available energy supplies.

There were other factors: Uncontrolled government spending, and more people living off the government than those paying to support it. And sudden, frenzied worship of the environment, right up to the day we deprived ourselves of the ability to wrest a living from it.

The nation ground to a halt when her cars, trucks, buses, trains, planes, boats and power plants all ran out of fuel. Without transport the nation's massive urban centers had no food. The stench of uncollected garbage and unburied bodies filled the air and mixed with the smoke of uncontrolled fires. Without fire engines the firemen couldn't reach the fires and without fuel the pumps were useless.

Analysis: Global Jackup Report Card

Industry consensus among offshore drillers points to stability in the jackup market over the remainder of 2010. Eight months into the year, global jackup utilization of 80% is exactly where we started the year. Utilization has been helped by the strong demand for high-spec jackups as lesser capable rigs have faced their share of headwinds.

Deepwater Drilling Moratorium Hits Louisiana Hard

Both Republicans and Democrats in Louisiana say the federal moratorium on deepwater drilling in the Gulf of Mexico -- put in place after the BP oil spill -- is now that state's biggest problem. US federal government officials and many environmental activists say the temporary ban on drilling is necessary to prevent further accidents. But people in the Gulf region are worried that many of the well-paying jobs provided by the energy industry might leave and never come back.

Landowners Shout `Bingo' as West Australia's Mining Towns Boom

The housing shortage in a region that?s one of the world?s biggest suppliers of iron ore and natural gas is driving up costs for companies such as Chevron Corp. and BHP Billiton Ltd. as they mine raw materials to feed China?s industrialization. Chevron, the second-largest U.S. oil company, was forced to lease seven-year-old cruise liner MS Finnmarken to house 350 workers at its A$43 billion Gorgon gas project.

How China Could Avert a Water Crisis Without Uprooting 330,000 People

Water needs in the North have forced hundreds of thousands out of their homes as dams expand, but an innovative desalinization solution could spare them.

Saudi Aramco extends bids for Wasit gas plant

KHOBAR, Saudi Arabia (Reuters) - State oil giant Saudi Aramco has extended the closing date for bids to build the kingdom's largest gas plant, industry sources said on Thursday.

The due date to submit bids for the onshore packages has been pushed to Oct. 24 from a September deadline, sources said.

The Politics of Power Cuts in Egypt

Are Mubarak's Gas Sales to Israel Partly to Blame?

Power to the people

Technology and development: A growing number of initiatives are promoting bottom-up ways to deliver energy to the world?s poor.

Electric car upswing would crash grid: Toronto Hydro chief

?If you connect about 10 per cent of the homes on any given street with an electric car, the electricity system fails,? Haines told an audience at Ryerson University Wednesday. ?It basically can?t handle that load.?

What to do? That?s part of the reason why Toronto Hydro, Hydro One and the Ontario Power Authority have pledged a total of $7 million over the next five years to kick-start Ryerson?s new Centre for Urban Energy.

Americans in the dark about energy use

NEW YORK (CNNMoney.com) -- Americans aren't known for their energy-thrift ways. Maybe that's because they have little idea as to how much energy things use.

While people are generally able to rank items according to energy use - i.e. the dryer uses more than the toaster - they are way off the mark when it comes to gauging by just how much, according to a recent study from researchers at Columbia University and elsewhere.

Example: Most people knew that a laptop computer uses less energy than a desktop. But few knew the lap used one-third the amount.

Eco-author baffled by a violent fan

The "Ishmael" books are aimed at encouraging radical social change ? but their author says hostage-taking is definitely not the change he had in mind.

Canada thirsty for new water ethic

In a single generation, Canada has evolved from a from a nation that took great pride in its citizens' ability to drink from almost any river, stream or lake in the country, to one seriously concerned about water quality and availability now and in the future.

Growing Community Food Systems

Food systems can be a very powerful tool for resilience. In a revolutionary way, you can completely trasform things without people realizing what's happening--they are aware, but it just makes intuitive sense this way. It's also not about just going out and fighting the proverbial "man," or continuing an academic dialogue about what could happen or should happen; you don't have time for this because you've got a lot to do.

So instead of having people just being oppositional and trying to get someone else to make the changes, you have people who are assets to their community, who are making the transformation happen themselves (but being oppositional when they need to be).

The miracle of the cerrado

Brazil has revolutionised its own farms. Can it do the same for others?

Transition group plans community dinner

HONESDALE, PA ? A newly formed group in Honesdale is holding a ?Creating Community? potluck dinner on Saturday, September 11 at the Parish House of Grace Episcopal Church at 9th and Church Street in Honesdale from 6 to 8 p.m.

?Everyone?s invited,? said Barbara Lewis, who is helping to spearhead this new local initiative.

The group, which calls itself Transition Honesdale, is inviting individuals and groups who wish to be a part of efforts to raise awareness of sustainable living and the need to build local ecological resilience. It encourages the community to seek out methods of reducing energy usage and dependence on fossil fuels and avoid purchasing products that are shipped over thousands of miles. In many communities, for example, the Transition Towns movement has led to the establishment of community gardens to produce local food and to the development of canning skills.

Post Carbon Exchange #3: Richard Gilbert & David Bragdon

RICHARD GILBERT and DAVID BRAGDON discuss the future of transportation systems as we near the end of cheap oil. What are the solutions? How will we get there? Are we facing the end of the internal combustion engine?

Judge rules against U.S. government on oil drilling

HOUSTON (Reuters) ? A federal judge on Wednesday rejected the U.S. government's request to dismiss an industry lawsuit challenging its deepwater oil and gas drilling moratorium, dealing another blow to the Obama administration.

Hornbeck Offshore Services Inc and other drilling companies sued the administration on June 7 after it first ordered a halt to deepwater drilling in the Gulf of Mexico following BP Plc's well rupture that killed 11 workers and caused the world's worst offshore oil spill.

As a result of Louisiana-based Hornbeck's lawsuit, U.S. District Court Judge Martin Feldman in New Orleans blocked implementation of the drilling ban on June 22.

Oil Trades Below $74 After Falling on Bigger-Than-Forecast Supply Increase

Oil declined as equity indexes slipped and traders waited for signs whether the European Central Bank will extend emergency lending.

ECB President Jean-Claude Trichet may signal at a rate meeting today that policy makers will keep offering unlimited cash to financial institutions through the end of the year. A U.S. government report yesterday showed crude stockpiles increased almost three times more than analysts forecast.

?There are still fears about a double-dip recession in the U.S,? said Roland Stenzel, a crude and carbon trader at E&T Energie Handelsgesellschaft mbH, said from Vienna.

DOE Update: U.S. Crude Oil Production Hits 6-Year High

U.S. crude oil production increased 1.7% from last week. Year-to-date oil output is up 3.8% from the year ago period. Production is now at the highest level since April 2004.

Russia output eases back

Oil output in Russia fell by 0.8% in August from an all-time high reached in July, to hit a seven-month low, the Energy Ministry said today.

Qatari Oil Rises on Japan's Record Low Kerosene Supplies

Qatar Marine crude is trading at the highest level in four weeks versus its official selling price as Japanese refiners replenish supplies of kerosene for heating and Saudi Arabia cuts shipments of similar grades.

Qatar Marine for loading in October jumped on Aug. 23 to a premium of 5 cents a barrel relative to the benchmark producer prices, compared with a discount of 8 cents the previous week, according to data compiled by Bloomberg. The kerosene-rich blend has traded at an average of 9 cents below its official selling price during the past year.

Cuban offshore oil plans gain momentum

Havana, Cuba (CNN) -- While the Gulf of Mexico oil spill has sparked debate in America on the merits of deepwater drilling, 90 miles away Cuba's offshore plans are quietly taking shape.

The country aims to drill seven exploration wells in its share of the Gulf of Mexico by 2014, according to American oil experts who recently met with Cuba's state oil monopoly Cupet and regulatory officials.

Norway offshore on course for record spend

Statistics Norway said today that oil and gas investments - the core driver of Norway's economic growth - were on track to set a new record high next year.

Petrobras to Buy Oil From Brazil for $42.5 Billion in Stock

Petroleo Brasileiro SA, Latin America?s largest company by market value, agreed to pay the Brazilian government $42.5 billion in new stock for the right to develop 5 billion barrels of offshore oil reserves.

Petrobras, as the state-run company is known, will pay an average of $8.51 a barrel for the oil after almost two weeks of negotiations with the government, according to a regulatory filing yesterday. More than half the oil will come from the Franco field in the offshore Santos Basin, the company said.

Russia to supply 70% of oil to JV in China

Russia will supply about 70 percent of oil at market prices for a proposed joint refinery between Rosneft and China National Petroleum Corp (CNPC), Reuters said Thursday, citing a Russian news agency.

Gazprom rides high

Russian gas giant Gazprom saw its profit for the first quarter of the year more than triple on the back of a foreign exchange gain, adding it had cut its net debt by more than 30%.

Statoil CEO Says Canadian Oil Sands `Attractive' at Current Crude Prices

Statoil ASA, Norway?s biggest energy company, said oil sands are attractive at current crude price levels and the company is working on bringing costs down to proceed with its investments in Canada.

?We?ve had a market lately that has made that type of oil attractive,? Chief Executive Helge Lund said today in an Oslo interview. ?Of course the problem two, three years ago with Canada was the costs.?

Weak Laws Bother Iraq Investors More Than Violence as U.S. Goes

Ahmed Jamal says it isn?t primarily Iraq?s violence that deters his company from investing in the country. It is its weak business laws.

?We don?t have factories or warehouses or anything like that,? said Jamal, regional sales manager for Istanbul-based beverage distributor Hayat Su, which brings bottled water to Iraq in trucks and works through a local representative. ?The investment laws are not suitable.?

BP to remove equipment at Gulf well by Sunday

HOUSTON (Reuters) ? BP Plc expects to remove a failed blowout preventer atop its ruptured Gulf of Mexico oil well by Saturday or Sunday and later plug the leak for good, the top U.S. official overseeing the spill response said on Wednesday.

"We believe in the next 24 to 36 hours, we will enter a weather window that will allow us to proceed," retired Coast Guard Admiral Thad Allen said at a briefing in Houston.

BP Tripled Ad Spending After Spill

It will come as little surprise to newspaper readers and television watchers, but BP significantly increased its spending on advertising after the April 20 Deepwater Horizon explosion and oil spill. BP spent $93.4 million on newspaper, magazine, television and Internet advertising in the three months after the disaster, three times what it spent in the comparable period in 2009, the company reported to Congress.

War of the wells

But like many communities in Montana, we may soon share our backyard with a new set of neighbors, and the changes these folks bring will not be so benign. Until recently, the oil and gas industry has been the source of horror stories from Wyoming, Colorado and New Mexico: the names of towns like Pinedale, Rifle and Farmington have become shorthand for cautionary tales told with a "thank-God-it's-not-us" undertone.

Australian leader acquires Aboriginal land

The leader of Australia's resources-rich western province has been accused of 'another invasion' by forcibly acquiring coastal land slated for return to native tribes to build a gas plant.

Colin Barnett, premier of Western Australia state, today said he had started formal proceedings to take the land for Woodside's Browse liquefied natural gas precinct at James Price Point.

Cairn Greenland ops resume after Greenpeace protest

LONDON (AFP) ? Scottish oil exploration group Cairn Energy said Thursday it had resumed operations on a rig off the coast of Greenland after Greenpeace ended a protest.

What a misanthropic bunch of stunts

Figures published by the US Geological Survey in 2008 estimated that there are 90 billion barrels of oil in the Arctic as a whole, enough to provide for the entire world?s current oil consumption for about a year. Of this, about 50 billion barrels may be found around Greenland. Given that Greenland is the biggest island in the world (assuming Australia is a continent), yet has a population of just 56,000, this could be an enormous windfall both for the local communities and for Denmark, which has formal control over the territory.

No wonder that Greenland?s prime minister, Kuupik Kleist, is less than impressed by Greenpeace?s protest: ?Greenpeace has once again succeeded in impeding Greenland?s opportunities to secure the economic foundation for its people?s condition of life. The Greenland government regards the Greenpeace action as being a very grave and illegal attack on Greenland?s constitutional rights. It is highly disturbing that Greenpeace, in its chase on media attention, breaks the safety regulations put in place to protect people and the environment.?

Will we ever get off oil?

There's been a lot of talk about oil this summer. Most of it bad. Devastating, record-setting leaks in the Gulf of Mexico and in Michigan's Kalamazoo River underscored, once again, the danger of our dependence on crude. Seductively efficient and still relatively cheap, oil provides nearly 40 percent of America's power. But it's also a finite resource that presents a very real threat to our environment, economy, security, and health. Given the growing risks and the shrinking reserves, there must be loads of people out there -- experts from government, corporations, academia, and the like -- hatching plans for a cleaner, safer, post-oil world, right? We asked our expert panel to explain where we are in oil's troubled lifespan, and whether and how we'll ever wean the world off its current fossil fuel of choice.

Peak Oil And The German Government - Military Study Warns Of Potentially Drastic Oil Crisis

A study by a German military think tank has analyzed how "peak oil" might change the global economy. The internal draft document - leaked on the Internet - shows for the first time how carefully the German government has considered a potential energy crisis.

The dirty topic of peak oil: get ready to reduce your reliance

Wouldn?t it be funny if we spent so long arguing about what to do about climate change that we ran out of cheap oil first? No, it wouldn?t really, it would be catastrophic.

But given the government?s delay in producing an Energy White Paper and the steady backsliding on the need to actually reduce our greenhouse gas emissions in Australia, it is not beyond the realms of possibility. Even the usually optimistic International Energy Agency (IEA) is starting to sound a little nervous.

How Malthus drove the Discovery Channel gunman crazy: The greatest pessimist in economic history has been wrong for 200 years, but he's still freaking people out

Among the demands of James Lee, the deranged gunman who rampaged through the headquarters of the Discovery Channel in Washington, D.C., before being shot and killed late Wednesday afternoon, was a request that the TV network "develop shows that mention the Malthusian sciences about how food production leads to the overpopulation of the Human race."

Insane, but perhaps not quite as kooky as it might initially seem. Because when choosing crazy-making prophets of doom and destruction as your inspiration, you could do a lot worse than the late 18th-century economist Rev. Thomas Robert Malthus.

New report shows state highways in good shape

A new report on the condition of the USA's state highways finds that they are in the best shape they have been in nearly 20 years.

The annual study by the Reason Foundation, a Los Angeles-based, libertarian, non-profit think tank, credits road improvement progress man by states and decreased wear and tear as commuters and commercial truckers drove less during the recession.

Canada's Renewable-Fuel Regulations Completed, to Take Effect on Dec. 15

Canada said it completed regulations that will require an average renewable-fuel content of 5 percent in gasoline as part of an effort to reduce greenhouse-gas emissions.

The rules will take effect Dec. 15, the government said in an e-mailed announcement today.

GM moves to trademark 'Range anxiety'

NEW YORK (CNNMoney.com) -- If you're thinking about buying an electric car but you're worried about getting stuck someplace when the battery runs out, General Motors has a two words for that.

"Range anxiety."

The automaker has filed for a trademark on the term. Range anxiety is a major reason car shoppers say they would avoid buying an electric car.

Chevy Volt, Electric Revolution? Or Outta Gas?

The first thing I noticed driving the Chevrolet Volt is that it?s a real car. GM did not kick out the kind of street-legal version of a golf cart like we have seen with previous attempts at making an electric car. The Volt is sturdy and it has horsepower. I had it up to 80 MPH on the test track and given how quiet gasoline powered cars are today, I was hard pressed to notice a difference between the Volt and my last airport rental.

Desertec solar hopes cloud over as support starts to waver

It has been one step forward, two steps back this year for the Desertec solar project, which aims to source 15 per cent of Europe?s electricity supply from the MENA region?s deserts by 2050.

A significant piece of good news for the ambitious ?400 billion (Dh1.87 trillion) scheme came in April, when one of its members, Germany?s Solar Millennium, said its 150 megawatt Kuraymat project in Egypt was nearing completion and could serve as a template for other north African solar farms.

Then came the bad news with Algeria?s decision last month not to participate in the Desertec Industrial Initiative, which was formally launched last year by a group of 12 European companies, mostly from Germany. On Monday, Paul van Son, the director of the group, said he was now also concerned about declining German government support for the project.

Fresh Air for Sale, in Hong Kong

HONG KONG ? ??Do your feeble breathing skills let you down? Does standing up tire you out??? The answer: Buy a breath or two of ??Fresh Air?? ? the ??revolutionary new product?? that lets you experience breathing ??like the rest of the world does.??

...??Fresh Air?? is the new campaign tool of Hong Kong?s Clean Air Network, a nongovernmental group that promotes awareness of, you guessed it, the wretched air quality in this city of seven million.

Green roofs offer antidote to urban heat island effect, say researchers

Researchers at Columbia University have demonstrated that a layer of plants and earth can cut the rate of heat absorption through the roof of a building in summer by 84%.

Welsh biochar facility opens up carbon possibilities for farmers

WALES is set to benefit from a new £180,000 biochar facility which may transform the way the country tackles climate change.

Aberystwyth University is installing a biomass waste recycling unit designed to produce biochar ? a charcoal-like substance ? that can be used to improve soil fertility and raise agricultural productivity.

How bad are the next few years going to suck?

The hot question in green circles these days is, "what next?" For the last decade, strategy has been built around getting a federal climate bill that would place a cap on carbon emissions. That attempt was supposed to culminate in success this year, but it didn't, so ... what next?

There will be much to say along those lines in coming months. I hope to share words of inspiration and uplift, to stir minds with insight and hearts with passion. To tell great tales of green pastures to come and the heroes who will sail the fleet of righteousness to the golden shores of, uh, the pastures. Just real quick, though, I need to be depressed as hell for a minute.

Prince Charles urges people to wear old clothes

Prince Charles, the heir to the British throne, has urged people to wear more old and recycled clothes, and natural fabrics like him so as to help reduce the world's carbon footprint and halt climate change. In an article for this month's 'Vogue' magazine, he wrote about his passion for reusing and repairing things. "On the whole, the older some things are, the more comfortable and familiar they become; they can even be adapted to look new in a different context."

Climate funds shouldn't divert poverty aid, UN says

The U.N.?s climate chief says poor countries are right to expect that any funding they receive to combat global warming be kept separate from development aid or poverty relief.

Climate change 'driving a new industrial revolution'

Climate change is driving a new industrial revolution that will reward creative thinking and early investment in green technologies, British economist Nicholas Stern says.

The former World Bank president warned high-emitting countries that fell behind in this global ''green race'' to transition to a low-carbon economy could face future trade barriers.

6 global warming skeptics who changed their minds

With 2010 shaping up as the warmest year on record and unprecedented heat waves gripping the planet, global warming skeptics have suffered another blow with the defection of the "most high-profile" member of their camp, author Bjorn Lomborg. But Lomborg isn't the first doubter to accept the scientific consensus that human carbon emissions are warming the planet and need to be curtailed. Here, a review of several prominent cases:

Report: Climate change threatens historic Jamestown, Va.

Human-caused climate change threatens to flood Jamestown, the first permanent European settlement in what became the American colonies and the United States, says a report Wednesday by environmental groups.

Jamestown Island, the site of the original 1607 settlement, is low enough to be inundated by rising seas and tidal waters -- even if the waters do not rise as much by 2100 as scientists predict, according to the report by Natural Resources Defense Council (NRDC) and the Colorado-based Rocky Mountain Climate Organization.

Al Gore announces appointing experts to study Pakistan floods

ISLAMABAD (APP): President Asif Ali Zardari and Former US vice president Al Gore held a telephonic conversation on Thursday to discuss the situation of recent floods in Pakistan and its possible linkage with the climate change.President Zardari while discussing the causes of floods indicated that the factor of climate change and its impact should also be examined in this regard. He said the international community must take this environmental subject seriously so that solutions could be found out for the overall betterment of the world.

Climate change puts China harvests at risk

PARIS (AFP) ? Climate change could reduce key harvests in China by a fifth if the gloomiest scenarios prove true, according to a study on Wednesday.

Publishing in the journal Nature, a team of Chinese scientists say China's climate "has clearly warmed" over the past half century, gaining 1.2 degrees Celsius (2.2 degrees Fahrenheit) since 1960.

Iowa - The Saudi Arabia of Ethanol

Iowa is to corn ethanol what Saudi Arabia is to oil. At present Iowa has the capacity to produce 3.5 billion gallons of ethanol per year, which is 26% of the nation’s total (Source). This is of course due to the large amount of corn production in Iowa, enabled by ample rainfall and rich topsoil.

But Iowa differs from Saudi Arabia with respect to energy production in one very important detail: Saudi Arabia satisfies their own energy needs with the oil they produce, and exports the excess. Iowa on the other hand exports the vast majority of the ethanol they produce while importing gasoline as motor fuel.

Gasoline consumption in Iowa is presently around 1.6 billion gallons per year (Source). This is the energy equivalent of 2.4 billion gallons per year of ethanol. Yet amazingly, Iowa does not have an E10 blend mandate (that is, a mandate for a mixture of 90% gasoline and 10% ethanol) that is so common in many other states. Of the 3.5 billion gallons of ethanol Iowa produces each year, only 100 million gallons is consumed in the state (less than 3%!). Perhaps even more amazing is that Iowa — seemingly the best candidate in the U.S. for biofuel self-sufficiency — ranks in the Top 10 consumers of gasoline per capita in the U.S. (Source).

Iowa is a state that by all accounts should be able to satisfy their own liquid fuel needs with ethanol, and still have some left for export. They are perhaps unique in the U.S. in that respect. Instead, petroleum continues to supply over 90% of the motor fuel in Iowa, and virtually all of the fuel used in the farm equipment for growing all of that corn. Something is wrong with this picture.

Why Isn’t Iowa Self-Sufficient?

That is a perplexing question. If ethanol is a real alternative to gasoline, why hasn’t it taken over the marketplace in Iowa? Ethanol should have a greater advantage over gasoline in Iowa than probably in any other state. And in fact, the price spread between gasoline and E85 (the 85% ethanol blend) is consistently higher in Iowa than in other states (Source). The reported price spread in Iowa as of July 2010 was 30.1%, which should be large enough to drive consumers to E85 over gasoline. So what is the problem?

There are three possible problems that I can identify:

1). Perhaps there isn’t enough E85 infrastructure in place.
2). There aren’t enough E85 vehicles on the road;
3). The price is still too high relative to gasoline.

Regarding infrastructure, as of January 2010, there were an estimated 136 service stations in Iowa selling E85 (out of 977 total service stations) and a total of 2,233 Stations selling E85 in the United States (Source). Iowa also has an incentive program in place to install new E85 infrastructure (see below), but with 136 stations across the state (and growing), availability doesn’t seem to be a major limiting factor.

The availability of E85 vehicles may be a more serious impediment. As of 2009, there are reportedly around 8 million vehicles on U.S. roads that are E85 capable (Source). Given a total vehicle population of around 250 million, that means that only around 3% of the cars on the road are E85-capable. (I could not find statistics specific to Iowa). This would seem to be a limiting factor at present for E85 penetration; E85 can’t capture 10% of the market if only 3% of the cars can burn it.

Yet even with some E85 vehicles on the road, sales of E85 in Iowa have been falling and sales of ethanol in general lag the rest of the U.S.:

Final 2009 Iowa Ethanol Sales Figures Show Step Back for State

JOHNSTON, IA ? The Iowa Renewable Fuels Association (IRFA) today announced that Iowans chose E10, a 10 percent ethanol and 90 percent gasoline blend, only 73 percent of the time during 2009 according to Iowa Department of Revenue (IDR) figures. According to the Des Moines Register, Iowa ranks 32nd in ethanol sales despite being the leading ethanol producer.

?Iowa?s ethanol sales did not reach the 2009 goal of the Iowa Renewable Fuels Standard,? said Monte Shaw, IRFA Executive Director. ?These are figures based on mandatory reporting of taxable gallons to the State of Iowa and the IRS ? not an incomplete, voluntary report. Obviously, IRFA members are disappointed in the results. The state has also released E85 sales for the first nine months of 2009. During those three quarters, E85 sales were down 15% compared to 2008.?

The number of E85 vehicles has been slowly rising, so if E85 sales are falling then there is also apparently a cost factor that is coming into play. For much of 2008, the price differential between E85 and gasoline was 15-20% (historical pricing available at E85prices.com). For the first half of 2009, that price differential had fallen to only 10%. Clearly, if E85 is ever to become the dominant fuel in Iowa, the price differential will have to properly reflect the fuel economy difference of E85 versus gasoline. E85 contains about 25% less energy than gasoline on a volumetric basis. Owners that experience a 25% reduction in fuel economy will expect to pay 25% less for their fuel. In fact, they may expect to pay 30% less due to having to refuel more often.

But, a real game-changer could be ethanol-optimized engines such as that touted by Detroit-based automotive engineering firm Ricardo. While their engine is projected to cost more, they project that they will deliver fuel economy from E85 that is comparable to what can be achieved with gasoline. (I reported on this concept in some detail in All BTUs Are Not Created Equally). In that case, consumers may be willing to buy E85 at a lower differential. The caveats here are that the engine is still in the lab, and the higher engine cost will determine the E85 differential that consumers will expect.

Recommendations

Before making recommendations, it is important to clearly set out the objective. As I have said numerous times, corn ethanol may not be a sustainable solution that is broadly applicable across the U.S. However, I do believe that it could be a very good solution in specific regions. Ethanol made from irrigated corn and shipped to California is in an entirely different sustainability category than ethanol produced and used locally in Iowa. In fact, despite my reputation as an enemy of ethanol from people who are careless with their interpretations, I have used Iowa for years as an example of what sustainable corn ethanol could look like. I have long believed that Iowa is in a good position to lead the way forward.

So from my perspective, the objective would be to increase the sustainability of ethanol — starting in Iowa — by increasing local consumption. This would decrease U.S. dependence on foreign oil more than if we have to transport oil from the coasts inland to Iowa while transporting ethanol from Iowa to the coasts.

Pump infrastructure in Iowa does not appear to be the limiting factor. Plus, Iowa already has good incentives in place that support rolling out additional E85 pumps (See Current E85 Incentives below). Iowa also already has a tax credit in place that is specifically directed at E85 sales (which is on top of the national ethanol tax credit). Ultimately, additional incentives may be required, as evidenced by falling E85 sales in the past year. Incentives could be in the form of direct E85 tax credits or fuel tax reductions or waivers. But the real issue seems to be lack of E85 vehicles.

According to automakers, the vehicles are on the way:

US automakers on track for more ethanol vehicles

U.S. automakers also expect to meet a goal of making half their vehicle production flex-fuel by 2012, up from around 30 percent now. But they warn that they could pull back if there aren’t enough gas stations with ethanol pumps.

On the other hand comes news that people may not be interested in buying them:

Flex fuel vehicles may be on the way out

When it comes to buying cars, Americans are still using the price of the vehicle as the primary deciding factor. A well-priced, fuel-efficient vehicle is the car of choice for Americans and this is bad news for the flex fuel vehicle industry. In a survey conducted by Harris Interactive, only 5 percent of respondents said they would be extremely likely to purchase a flex fuel vehicle, even if it only added $250 to the base price of the vehicle.

So it would appear that consumers may need some convincing before they are ready to take the plunge on an E85 vehicle. There are several ways to incentivize sales of E85 vehicles. The worst is probably just to mandate that vehicles sold in the state of Iowa are E85-compatible. (I think this is the worst because mandates often have unintended consequences; hence I prefer incentives over mandates). Probably the most manageable would be rebates or expanded tax credits — at the state or federal level — for the purchase of an E85 vehicle. Instead of a Cash for Clunkers program (which I was not a fan of), we would have been better served to have a cash for E85 vehicles program.

Such a program should probably be driven from within Iowa. After all, they arguably stand to benefit from using the ethanol they produce and moving toward true energy independence. Transportation costs cited in the recent DOE study on the proposed ethanol pipeline (that I discussed here) suggested that railing ethanol costs $0.19/gallon (shipping via pipeline was cited at $0.28/gal). Imagine that only half of the ethanol produced in Iowa is used in Iowa; there is a potential shipping savings of over $330 million per year. (However, under the present system these costs are passed through to consumers out of state, so it might be hard for Iowa to justify a program on the basis of savings for Iowans).

Beyond personal transportation, corn growers should be pushing for tractors that can run off of ethanol. They can be built. In 2006 the Saskatchewan Research Council unveiled a tractor modified to operate on 100 per cent hydrated ethanol. More on that development here:

From late December 2006 to late January 2007, the 120 horsepower ethanol-fuelled tractor clocked 60 hours of running time and got fuel mileage of 24 litres per hour. It takes about 15 bushels of wheat to create one tank of hydrated ethanol for the tractor, says Rueve, explaining that the fuel consists of 94 per cent alcohol and 6 per cent water.

As farm input costs increase, both the tractor and the truck are examples of developments that may make farm operations more sustainable in the future. Meanwhile, biofuels in general offer one option for those who are looking for ways to revitalize the rural economy.

So often we hear about how ethanol is providing homegrown fuel for automobiles, and yet the tractors that produce the homegrown corn run off of petroleum. I think it would be in the best interest of Iowa and of the country as a whole (given Iowa’s importance as a food producer) to break the petroleum dependence of Iowa’s farms by building tractors that can run off of ethanol (or biodiesel).

Conclusions

Iowa could be self-sufficient with their ethanol production if certain policies are supported. Some policies are already in place that are meant to address E85 availability and cost. However, the availability of E85 vehicles and the willingness of consumers to buy them is probably the key limiting factor. Ultimately, building up an E85 market in Iowa and eventually in the rest of the Midwest could solve a number of issues for the ethanol industry. If the Midwest adopted E85 as its flagship fuel, there would be no blend wall to be concerned about, nor would an expensive ethanol pipeline be needed to export ethanol out of the region. The potential market across the Midwest is triple the nation’s current ethanol production, giving ethanol producers an ample opportunity to grow without forcing national mandates that put E15 into cars that aren’t designed for it.

Current E85 Incentives

Iowa has tax credits in place specific to E85 sales:

E85 Retailer Tax Credit

A tax credit is available to retail stations dispensing E85 for use in motor vehicles in the amount of $0.20 per gallon for calendar year 2010, and $0.10 per gallon in calendar year 2011. After 2011, the tax credit decreases by $0.01 each year and expires after December 31, 2020. Taxpayers claiming the E85 tax credit may also claim the tax credit available for retail ethanol blends for the same gallon of fuel and tax year. (Reference Iowa Code 422.11O)

And toward blending infrastructure:

Biofuels Infrastructure Grants

The Renewable Fuel Infrastructure Program provides financial assistance to E85 and biodiesel retailers. Cost-share grants are available for up to 70% of the total cost of the project, or $50,000, whichever is less, to upgrade or install new E85 or biodiesel infrastructure. Applicants may also qualify for supplemental incentives for up to 75% of the cost of making the improvement, or $30,000, whichever is less, to upgrade or replace an E85 fueling dispenser that has not been approved by an independent testing laboratory. The supplemental incentive is available only to applicants who made the improvement no later than 60 days after the date of the publication in the Iowa administrative bulletin of the state fire marshal’s order providing that a commercially available fueling dispenser is listed as compatible for use with E85 by an independent testing laboratory.

Biodiesel distributors may apply for a cost-share grant for infrastructure upgrades and installations at biodiesel terminal facilities. Facilities blending or dispensing blends ranging from B2 to B98 are eligible for up to 50% of the total project, or $50,000, whichever is less. Facilities blending or dispensing B99 or B100 are eligible for up to 50% of the total project, or $100,000, whichever is less. The Renewable Fuels Infrastructure Board was established under the guidance of the Iowa Department of Economic Development; this 11-member board has authority to determine the eligibility of applicants. (Reference Iowa Code 15G.202-15G.204)

This thread is being closed. Please comment on http://www.theoildrum.com/node/6911.

Additional work near the Deepwater Horizon well site continues to be delayed by high waves. Once the current weather pattern clears, work can commence again.

We understand that today, Wednesday, BP is expect to submit a new report evaluating lessons learned in its response to the oil spill in the Gulf of Mexico to U.S. regulator the Bureau of Ocean Energy Management, Regulation and Enforcement. According to BP, "This report focuses in particular upon the key equipment, facilities and planning tools that were successfully deployed in responding to the spill." There will be another report released by BP later this month, which will examine the causes of the explosion.

Some new devices that we have not commented on are the new Wave Gliders that will monitor water quality. BP is deploying these in the Gulf of Mexico, near the Macondo well site. According to an August 25th press release:

As part of its long term monitoring and research program in the Gulf of Mexico, BP is deploying a new technology that will enable nearly constant monitoring by two satellite-controlled, unmanned vehicles.

The vehicles, known as Wave Gliders and developed by Liquid Robotics in Silicon Valley, California, get their propulsion power from wave action and use solar power for their electronics. They will be deployed beginning today and begin a months-long, ongoing research program in the Gulf of Mexico.

According to the press release, the types of monitoring performed will include

• water quality ? detection of any emulsified, dissolved and dispersed oil in water; phytoplankton (chlorophyll); colored, dissolved oxygen matter (CDOM) and other scientifically useful variables
• marine mammal vocalizations
• weather and water temperature data

The first step in using the devices will be calibrating the optical sensors, according to Roger Hine, president and CEO of Liquid Robotics. "We look forward to working with BP on this extended research program."

There is also a Wave Glider Fact Sheet available. It indicates

Typically robotic systems have been challenged by limited battery power. The Wave Glider innovatively overcomes this challenge. It uses no fuel, has no motor, and no propeller - but it can swim in any direction at speeds up to two knots - for as long as necessary. It uses a unique, patented, system for converting even the tiniest amount of wave motion into thrust, in any direction. It uses solar panels to power electronics, and houses a sophisticated set of sensors, satellite communications, and microprocessors.

According to the fact sheet, the technology was invented, originally, to listen to humpback whale song. The Wave Glider fleet has been at sea for a combined total of 11.5 years and has covered over 100,000 miles.

Oil Price Ignores Long-Term Supply Worries

You could be excused for seeing a grim metaphor for the death of the oil age in the scenes of destruction visited on the U.S. Gulf coast this summer.

However, production from the ocean floor is growing more quickly than from any other type of reserve and is supposed to allay concerns about ?peak oil?, the idea that the amount of crude the world can produce might suddenly decline.

Now, so far, this notion hasn?t had much of an impact on energy prices.

But, as cheaper oil fields are run down and more crude is drawn from expensive, hard-to-reach offshore reserves, the costs of energy supply are starting to rise.

Drilling agency imposes conflict-of-interest rules

WASHINGTON ? Scandalized by federal regulators who had sex with oil company executives and negotiated with them for jobs, the agency that oversees offshore drilling is imposing a first-ever ethics policy that bars inspectors from dealing with a company that employs a family member or personal friend.

Michael Bromwich, head of the Bureau of Ocean Energy Management, said the new policy should help restore credibility to his beleaguered agency, which was widely criticized under its former name ? the Minerals Management Service ? for being too close with oil and gas companies.

President Barack Obama and Interior Secretary Ken Salazar have pledged to end the agency's "cozy relationship" with industry and slow the revolving door between government and the energy industry.

Pemex looks to shale

Pemex is considering opening an entire line of exploration that concentrates on shale gas wells in the northern state of Coahuila.

Pemex board member Hector Moreira told Market News International the new line could reduce the company's dependence on natural gas imports.

OPEC oil output falls to lowest since Nov 2009

LONDON (Reuters) - OPEC crude oil supply fell in August to the lowest since November 2009 as reduced supplies from Nigeria, the United Arab Emirates and Iraq offset increased output in Angola, a Reuters survey showed on Wednesday.

Supply from the 11 members of the Organization of the Petroleum Exporting Countries with output targets, all except Iraq, averaged 26.83 million barrels per day (bpd) last month, down from 26.95 million bpd in July, according to the survey of oil companies, OPEC officials and analysts.

The Gas Bulls of Summer Turn into Bears

Recently, the last of the raging bulls on natural gas prices traded in their horns for bear uniforms ? and we don?t mean the Monsters of the Midway variety! By throwing in the towel on gas prices for this year, these bulls-turned-bears then proceeded to claw their future gas price forecast by stating they expected $6 per thousand cubic feet (Mcf) to be the long-term average. The reality is that these bulls of summer were really merely acknowledging the power of the market as natural gas prices are about two dollars per Mcf below where they were at the start of 2010, and well below the $7.50/Mcf average gas price the bulls had forecast.

Feds downplay risk of leak when well cap moved

The federal government's point man on the Gulf of Mexico spill response said Wednesday there is no "significant risk" that more oil will leak into the sea when engineers remove the temporary cap Thursday that first contained the gusher in mid-July.

Retired Coast Guard Adm. Thad Allen said vessels will remain on standby just in case to collect any leaking oil.

FACTBOX - Key political risks to watch in Uganda

(Reuters) - Uganda expects to become an oil-producing nation in 2011, but a protracted dispute with British exploration firm Heritage Oil may delay production and risks unsettling other investors.

With the potential to be a top 50 oil producer, Uganda stands to reduce its budget dependence on foreign aid and improve poor infrastructure.

Nissan starts selling all-electric Leaf sedan today

At long last, Nissan begins taking actual orders today for the first next-generation fully electric car from a major automaker, the Leaf.

Carpooling

Passengers might be the most under-appreciated factor in how much fuel and money you waste. As I write this, for example, a business headline boasts of Toyota?s multi-million-dollar plan to boost fuel efficiency by 25 percent, with the usual discussion of what this will mean for the economy and the climate. Any of us, however, can boost the efficiency of our cars by several hundred percent instantly, with no additional expense or technology, simply by getting more people in the car.

This fact is also forgotten when we judge car owners by the wastefulness of their vehicles. An SUV is a spectacularly inefficient machine compared to a Prius, for example, but pack that Dodge Durango full of people and suddenly it is greener than the electric hybrid driven alone.

Transit systems easier to predict with smart phone apps

Allen Stern says he had a 40-minute wait between buses when he lived in Manhattan. Using a free mobile app that became available about a year ago, he could at least tap into the Metropolitan Transit Authority with his cellphone and find out exactly how far away the next bus was from his stop.

Jatropha: A new form of energy

SINGAPORE - Biotechnology firm JOil is confident that it can breed and genetically engineer the Jatropha plant to be a more sustainable alternative to fossil fuel and other biofuels.

It plans to create a Jatropha hybrid that can produce more fruits and match the four to six tonnes of oil per hectare that palm trees can generate.

Pedal power takes off as exercise produces electricity

Pedal power is gaining traction as thousands of bikes and elliptical machines are retrofitted to produce electricity.

Gyms are using sweat equity to help power their facilities. A Brooklyn eatery uses it to make smoothies. Female inmates at a Phoenix jail pedal to power their TV to watch soap operas. Actor Ed Begley Jr. bikesrides a bike to run his toaster.

Obama lobbied to add solar panels to White House

A campaign to make the White House greener is intensifying as a group of environmentalists plan this month to give President Obama a solar panel that used to sit atop 1600 Pennsylvania Avenue.

Points of departure

There is a strong correlation between energy consumption and economic growth. We can for sure hope for "decoupling" - to be able to have continued economic growth while maintaining or even reducing energy use - but no country has ever managed this Indian rope trick and that does not bode well. Maybe we are high on energy, listening a little to closely to the voice of intoxication, but it will unfortunately all too soon be replaced by a massive hangover.

The Peak Oil Crisis: Prospects for China

The key question in all this is how much longer China's economic miracle can continue before the realities of finite mineral resources force a slowdown? Another five years of 10 percent annual economic growth will result in Beijing increasing its oil consumption by another 2.5-3 million barrels per day. This alone would likely mop up much of the world's spare capacity to produce oil and result in very large price increases. When China's ever growing demand is added to that of India, Brazil and the oil exporting states, the likelihood that we will see a substantial increase in oil prices within the next five years becomes very high.

Secret German military study warns of dramatic oil crisis

Berlin : A confidential German army study warned of a looming oil crisis which could have dramatic political and economic consequences for the world, the Hamburg-based weekly news magazine Der Spiegel said Tuesday.

According to the report, a think-tank of the German army has for the first time ever analyzed the security policy dimensions of the peak oil problem.

Peak Oil from a Security Studies Perspective

The Strategic Institute of the German Bundeswehr has now published a document on the implications of peak oil for security (more precisely: the study was leaked). The study is very well written and recommended as an essential read not only for geostrategist but especially for those involved in global sustainability questions. In fact, at least in wording the authors care about such diverse issues as environmental impact of unconventional oils and the impact of global-marked-induced land-use change on indigenous populations. It is worthwhile to have a closer look on some of their results:

Remembering Matt Simmons

Matt Simmons, a long time friend of the Maine coast and its islands and a student of the winds and waters of Gulf of Maine, loved to tell the story of his first trip to Maine, courtesy of a labor strike while he worked construction one summer as a college student in his home state of Utah. When a labor dispute suddenly shut down the construction site, he and a buddy were only too happy to collect their strike checks and head out on a jaunt. They went north into the Canadian Rockies then turned right and headed toward the Inscrutable East, dipping back down into the United States via the border at Jackman, where they drove along the shores of Moosehead Lake before ending up in Boston. On a lark, Matt ducked into the Harvard Business School, which had not had a long history at that point of actively recruiting students from Mormon country in Utah, but the visit was enough to entice him to apply and enroll. Matt loved telling that story because it held the kinds of mutually opposed contradictions he loved to explore-a businessman who owed his right future to a labor strike. If genius is the ability to hold mutually opposing ideas in the mind at the same time without being paralyzed, Matt Simmons would certainly qualify.

Oil Drops, Caps Worst Month Since May, as Hurricane Earl Threatens Demand

Oil tumbled, capping its worst month since May, on forecasts Hurricane Earl will pelt the U.S. East Coast, curbing fuel demand during the Labor Day holiday weekend.

Crude dropped the most in 12 weeks amid speculation that stormy weather will keep beachgoers and travelers at home. Labor Day is the traditional end of the U.S. summer driving season, the peak gasoline demand period. U.S. gasoline demand slid to a 12-week low last week, MasterCard Inc. reported today.

?It?s the last thing we need,? said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. ?It?s a big gasoline consumption weekend. Given how poor the gasoline demand has been, it will be a final parting blow for the summer driving season if people won?t hit the beach in droves.?

Ethanol Surpasses Gasoline for First Time Since December

For the first time since December, ethanol prices are higher than gasoline as corn surges and refiners profit from tax breaks.

Gas Prices Explained

So what determines the price of gasoline? Speculators? Evil conspiring oil companies? Well, actually no. It's demand and supply, of course. On the demand side the American automobile fleet gets better gas mileage than it did a few years ago and Americans, whacked by the recession and high unemployment rates, are driving a bit less than they used to. In addition, thanks to government subsidies, about 9 percent of what goes into our gas tanks is ethanol produced from corn, which also reduces the demand for refined crude. On the supply side, global oil supplies are ample and refiners in the U.S. evidently believed the Obama administration?s rosy ?recovery summer? scenarios and stockpiled a lot of gasoline.

Sinopec Plans to Cut September Oil Processing by 4% at Refinery in Hainan

China Petroleum & Chemical Corp., Asia?s biggest refiner, will process 4 percent less crude oil at its Hainan plant in September compared with last month, an official at the refinery said.

FACTBOX-Key political risks to watch in Saudi Arabia

(Reuters) - Saudi Arabia, under the rule of an ageing King Abdullah, has the dilemma of making reforms that keep the austere clerical establishment that opposes change on side and violent Islamist militants at bay.

Any instability at the helm of Saudi Arabia, which controls more than a fifth of the world's crude oil reserves and is a regional linchpin of U.S. policy in the Middle East, would be a concern for the rest of the Arab Gulf region.

FACTBOX-Key political risks to watch in Yemen

(Reuters) - Rising al Qaeda militancy, a surge in violence in a secessionist south and crushing poverty will be this year's critical tests for Yemen, neighbour to top oil exporter Saudi Arabia.

Reid hopeful for GOP energy votes after elections

WASHINGTON (Reuters) ? Senate Majority Leader Harry Reid said he hoped to pick up Republican votes for a pared-down energy bill after the midterm congressional elections.

"Maybe after the elections we can get some more Republicans to help us on these issues," Reid, a Democrat, told reporters in a teleconference on Tuesday.

Sinopec Sees Solid Gas Growth Ahead

While oil production experienced sluggishness in the first half, natural gas production showed solid growth. China is ramping up gas production as it seeks to find alternatives to coal, which emits high carbon levels. It is set to raise the country's energy needs from the current 3% to 10% by 2020.

Insurance likely to reduce BP's liability for Gulf of Mexico oil spill

BP PLC has taken on some of the blame for the Deepwater Horizon rig that spilled millions of gallons of oil into the Gulf of Mexico earlier this year, but the company is still expected to have limited liability for mistakes made misreading pressure data that indicated a blowout was imminent.

BP Raises $363 Million in Malaysian Asset Sale to Help Pay for Gulf Spill

BP Plc, seeking cash to help pay for the worst U.S. oil spill, agreed to sell its Malaysian chemical assets to Petroliam Nasional Bhd. to focus on projects in China and India.

BP will sell its 15 percent stake in Ethylene Malaysia Sdn and 60 percent interest in Polyethylene Malaysia Sdn for $363 million, the London-based company said today in a statement. It will also be eligible for a possible $48 million dividend from the ethylene unit.

A Nuclear Giant Moves Into Wind

Exelon, a nuclear giant that recently backed away from building new nuclear plants, is moving into wind.

Canada company builds major waste-to-biofuel plant

VANCOUVER, British Columbia (Reuters) - A Canadian company started construction on Tuesday on what it says is the world's first industrial-scale plant to turn municipal waste into biofuel.

Privately-owned Enerkem Inc said the C$80 million ($75 million) facility in Edmonton, Alberta, will produce enough biofuel to keep more than 400,000 cars a year running on a 5 percent ethanol fuel blend.

Thorium Cures the Free Market

Obama could kill fossil fuels overnight with a nuclear dash for thorium ... If Barack Obama were to marshal America's vast scientific and strategic resources behind a new Manhattan Project, he might reasonably hope to reinvent the global energy landscape and sketch an end to our dependence on fossil fuels within three to five years.

New Warnings About Costs of Nuclear Power

As anticipation grows about a possible renaissance for the nuclear power industry ? and about its potential for curbing greenhouse gas emissions ? some politicians are stepping up warnings about the high cost of such projects.

Last week, Traicho Traikov, the Bulgarian economy and energy minister, said the cost of building a second plant near the Danube River had reached 9 billion euros, or $11.4 billion, according to the Sofia News Agency.

The original cost of the project for two reactors was expected to be just under $4 billion.

Homeowners Must Pay Off Energy Improvement Loans

Many homeowners who participated in a program that let them repay the cost of solar panels and other energy improvements through an annual surcharge on their property taxes must pay off the loans before they can refinance their mortgages, two government-chartered mortgage companies said Tuesday.

The guidance came from Fannie Mae and Freddie Mac as efforts to resolve a dispute over the program ? called Property Assessed Clean Energy, or PACE ? have failed.

Calif. rejects ban on plastic shopping bags

SACRAMENTO, Calif. ? California lawmakers have rejected a bill seeking to ban plastic shopping bags after a contentious debate over whether the state was going too far in trying to regulate personal choice.

The Democratic bill, which failed late Tuesday, would have been the first statewide ban, although a few California cities already prohibit their use.

A Greener Champagne Bottle

?This is how we?re remaking the future of Champagne,? he said, pointing to the area just below the neck. ?We?re slimming the shoulders to make the bottle lighter, so our carbon footprint will be reduced to help keep Champagne here for future generations.?

The Champagne industry has embarked on a drive to cut the 200,000 metric tons of carbon dioxide it emits every year transporting billions of tiny bubbles around the world. Producing and shipping accounts for nearly a third of Champagne?s carbon emissions, with the hefty bottle the biggest offender.

Cleaner Cars, A to D

The Obama administration has proposed new stickers for cars and light trucks that will make it easier to see whether you are buying a fuel-efficient one or a guzzler, and how much it contributes to global warming. The stickers are a symbol of how far this country has come in providing a wider range of environmentally responsible choices to help ensure cleaner air and a healthier planet.

L.A. mayor, Latino activists take on oil companies over Proposition 23

They say the ballot initiative to suspend the state's climate change law would hurt low-income communities already suffering the most from pollution.

Jeff Rubin: High energy prices make Copenhagen green

There is certainly much to be said for Denmark?s leadership in green energy. While North American carbon emissions have risen by around 30 per cent since 1990 (the reference point for the Kyoto Accord), Denmark?s emissions are actually lower than they were two decades ago. That?s generally ascribed to the fact that a world-leading 20 per cent of the power generated in Denmark comes from wind.

Less commonly known is the source of the other 80 per cent. I was surprised to discover that it comes from good old King Coal. In fact, coal?s share of power generation in Denmark?s power grid is basically the same as it is in China.

Tiny creatures reveal ancient sea levels

"It was a very big surprise," says David Barnes, lead author of the study at the British Antarctic Survey, of the find of similar bryozoans 2400 kilometres apart in seas on either side of the West Antarctic ice sheet, which is 2 kilometres thick.

"The most likely explanation of such similarity is that this ice sheet is much less stable than previously thought and has collapsed at some point in the recent past," he says.

"And if the West Antarctic ice shelf has been lost in recent times we have to re-think the possibility of loss in future with climate change."

Dr. Adam Brandt of Stanford University's Department of Energy Resources Engineering sent us a copy of a paper he wrote called Review of mathematical models of future oil supply: Historical overview and synthesizing critique. There seem to be quite a few things of interest, so I have summarized the paper, since the author did not have the time to do this. The box quotes are from the paper.

This paper has two goals. First, it provides a systematic review of oil depletion models produced to date. This serves to make obscure past works (often difficult to find) available to a wider audience so as to limit repetition of past efforts. Second, this paper provides synthesizing critique of previous modeling efforts, with the aim of improving future oil depletion modeling.

A major conclusion of the study is that existing models fare poorly at prediction:

Models based on quite disparate assumptions (e.g., physical simulation vs. economic optimal depletion) have produced approximately bell-shaped production profiles, but data do not support assertions that any one model type is most useful for forecasting future oil production. In fact, evidence suggests that existing models have fared poorly in predicting global oil production. The greatest promise for future developments in oil depletion modeling lies in simulation models that combine both physical and economic aspects of oil production.

Types of Models

Brandt describes four kinds of oil depletion models:

1. Curve Fitting Models

Curve-fitting models of oil production have been used since the 1950s. A variety of models exist, but their general approach is as follows.

1. Define a mathematical function to statistically fit to historical production data.
2. Include constraints to improve the quality of model fit.
3. Fit the constrained model to historical data to project future production.

Curve-fitting models vary in the function used, in the use of ultimately recoverable resources (URR) as a constraint and in the usage (or not) of symmetric model functions.

The paper provides descriptions of various curve fitting models, including Hubbert's logistic model.

2. System simulations.

Simulation models (in our classification scheme) differ from curve-fitting models as follows: simulation models explicitly represent underlying physical and/or economic mechanisms that govern oil discovery and extraction, letting the shape of the production profile emerge from these mechanisms rather than specifying it in advance. These models include a broader range of independent variables, addressing a key problem of curve-fitting models noted by Taylor [38]: ?No cause-and-effect relationship exists between time and the exploitation of crude oil.?

Thus, with the simulation models, one does not need to assume that the oil will be pumped out as quickly as possible. Oil production can follow demand, or some other approach. Brandt comments that a major difficulty of complex simulation models is the numerous input data that are required to parameterize the functional relationships. Figures 3 and 4 give an example of parts of a simulation model.

3. Bottom-up models

Bottom-up models use detailed field- or project-level data to ?build up? projections of production from larger regions (such as a nation or the world). Bottom-up modeling has become increasingly prominent as discoveries have slowed and an increasing fraction of future oil is expected to come from already-discovered fields [52].

The most widely published bottom-up model is that of Campbell and co-authors, produced since the mid-1990s [53-55] using national-level models of production to generate global predictions. . .

Skrebowski has produced a bottom up model [58e61], using a database of oil field ?megaprojects? e oil field development projects above a threshold size. Because large projects provide the majority of new oil output, this approach provides insight into short-term capacity increases.

4. Economic models of Oil Depletion

The major subcategories of these are

1. Economic optimal depletion theory, such as studied by Hotelling.

2. Economietic models of oil depletion, such as developed by Fisher and later by Kauffman and Cleveland.

Drawbacks and problems of existing models

1. Curve Fitting Models

Unfortunately, curve-fitting models are often used to make overly specific predictions of future production, ignoring many of the difficulties with such an approach.

An example is given by the excessive importance placed by some analysts on the supposed novelty and accuracy of Hubbert?s 1956 prediction. First, Hubbert?s prediction was predated by at least four publications that provided bell-shaped graphs of future U.S. oil production [13,14,81,82], and no fewer than 7 estimates from the 1950s predicted a peak in US oil production between 1963 and 1973, the approximate range of Hubbert?s low-high predictions (see Table 1). Second, Hubbert?s prediction of a peak in 1970 was based on his high value of URR, which he considered unlikely to be ach- ieved (and which itself was an underestimate). Interpretations of these facts vary: one could argue that Hubbert?s method was not extraordinary, as other methods also came close to predicting the peak date. . .

Another often neglected fact is that all of these studies of the 1950s underestimated URR, some significantly so, despite their reasonably correct projections of the peak date (see Table 1). Cumulative US production has already exceeded 200 Gbbl and significant reserves still remain. Thus, production has not dropped as quickly as Hubbert (or the other authors above) thought that it would, and the US curve is asymmetric [83].

Major issues Brandt raises about curve fitting models include

a. Using exogenous estimates of URR to constrain curve-fitting models is problematic because estimates of URR have been too low in the past.

b. The use of logistic or bell-shaped functions is difficult to support with rigorous scientific reasoning.

c. Production profiles are often asymmetric, with slower rates of decline than rates of increase.

d. Curve fitting models do not account for economic factors, such as demand or resource substitution.

2. Simulation Models

a. Authors often make huge assumptions about the assumed functions and the parameters of the model.

b. Models are often unstable and finely balanced between positive and negative feedbacks. They may omit the role of inertia.

c. While models may fit past data well, they often have poor predictive powers.

3. Bottom's up models

a. If a person builds a model from a magaprojects data base, or similar data base, the person needs more, rather than fewer assumptions about the process--peak production, decline rate, use of enhanced oil recovery

b. It is difficult to model projects not included, like infill drilling, workovers, and use of enhanced oil recovery.

c. The results are generally not reproducible; there is much reliance on the modeler's judgment.

4. Economic Models

So far, they have been kept simple, but their predictive value has been low. They need to include political factors, but it is unclear how to include them.

The Problem of Prediction

Existing models have fared poorly in predicting global oil production. Even for models that are commonly thought to be successful, after-the-fact interpretation of the success or failure of a predictive effort is not easy (recall the discussion above of Hubbert?s successful prediction). . .

This author?s judgment with respect to the predictive value of models is as follows (noting that these topics are the source of much current debate):

1. Simple curve-fitting models can provide a first-order understanding of future production, assuming a given level of URR and no significant shocks to the system (e.g., demand continues to grow at rates within historical ranges). Such models are likely sufficient to predict the decade of peak production for an estimate of URR. The mathematical logic here is that consumption is so high during the years of peak production that minor variations in URR, or minor deviations due to political or economic factors, will not serve to significantly affect the date of the peak [111]. Unfortunately, such a conclusion is often of little practical use: major disruptions (e.g., the oil crises of the 1974 and 1979), or major errors in URR estimates have occurred in the past, and could occur again.

2. More-detailed mechanistic models (e.g., bottom-up, econometric), exhibit greater fidelity in reproducing historical data and are therefore likely more useful for near term predictions. But this advantage likely wanes for long-term forecasts because they are no less ?brittle? with respect to uncertainties than other model types.

3. The most promising avenue for increasing our understanding of oil production lies in integrating the economic and physical factors of oil production.

4. There is no scientific justification for making specific predictions (e.g., the year of peak production) with any of the surveyed mathematical models: the uncertainties involved make such predictions of little use. Efforts should move away from making these kinds of predictions, and toward understanding the impacts of the inevitable transition to oil substitutes.

Improving Oil Depletion Modeling

It is no longer justifiable to build oil depletion models that neglect the reality of economic substitution with alternative resources like oil sands or coal-based liquid fuels. Nor should economic models neglect the underlying physical, geological, and engineering considerations that fundamentally drive the economics of oil production. Future progress will require building integrated models that account for both the economic and physical realities of oil production.

This thread is being closed. Please comment on http://www.theoildrum.com/node/6909.

The weather is currently holding up the proceedings at the Deepwater Horizon well site. The seas are some six to eight feet, which is apparently the height of the top 1/3 of all waves.

(There is a table that shows how it is affected by wind speed, duration and fetch, which last is the surface area that is being affected by that wind. There is also a site with a post on wind basics that explains the basics. So the underwater effort is likely to be put off for another two to three days (depending on how Earl behaves, though it's not supposed to get close, but it might. The current problems are more local to the Mississippi Delta).

So there will be a delay for at least a couple of days until the water settles down a little more. The problem is caused by the considerable length of the risers and cables on which the large steel structures sitting at the sea bed will ride as they are moved about. With the waves lifting and the swells rocking the vessels there are risks both from the changes in dynamic loading, and also in generating a pendulum effect as the weights sway. Much better to pause a little longer.

At his press conference today the Admiral described the plans for the next step in the process:

. . . the Discoverer Enterprise (will) remove the capping stack and then back off. (At) that point (the) Q4000 will come in and lift the blowout preventer (BOP) which will also (hold) the transition spool which was put in to accommodate the capping stack. And a third step will be (for the) Development Driller II, which is drilling a second relief well, (and which) will move in with the new blowout preventer, and put the blowout preventer on.

Once that blowout preventer is in place, the well will be in a position to withstand the pressures expected on the intercepts of the analysts by Development Driller III and the drilling mud that will be forced in there when that happens. All is in readiness, and at this point we are just standing by for a weather window.

In discussing the current thoughts on why there are three pieces of pipe in the BOP, the Admiral also explained where his concept of the the pipe being fragile was generated.

When we first were looking at the riser pipe, if you remember, there was a kink. And then we were looking to cut the riser pipe, and we made a shear cut. And then we actually unbolted the stub that was bolted to the flanges before we put the capping stack on. At one point, we actually saw two pieces of pipe.

The original presumption at that point, and this is a long time ago now, was that a part of the pipe had fallen down into the Lower Marine Riser Package, and it was alongside a pipe that was extending through the centerline down into the BOP. As we have gotten into the blowout preventer itself and taken a good look at it, we found out that that pipe is fragile, is broken into three pieces, and we no longer have a pipe that's suspended in the centerline.

So our assumption is, our original assumptions on the pipe – and at that time they actually might have been. These pipes are being subjected to a lot of different forces in there. If you remember, we've had the dynamic kill and the static kill. There have been a lot of different fluids that have been forced through the blowout preventer or the capping stack, Lower Marine Riser Package.

In general, we have concluded that the pipe is of extreme fragility. And while we could try and recover it, the pipe that we can get to right now is not connected to any pipe that is on the (center) line. It could extend out into the BOP. So for that reason we just foregone any more fishing experiments, and have gone directly to remove the blowout preventer.

If I understand this correctly the current thinking is that none of the pieces of pipe above the shear ram are being held by it, and that they are less consequential as a result. Whether that also means that the DP was actually sheared in half by the ram is a different question, but apparently not one that the current investigation is going to look at further at the moment.

It does, peripherally suggest that there may not be any pipe now below the rams. Because if the different treatments that have caused the pipe to break into these bits did so across the shear ram plane, then there may not be enough holding the pipe below the BOP and it may be long gone. The gamma scan that showed the DP was there was, after all taken very early in this process, and much has happened to the well since.

The Admiral also noted that the drop in pressure (from the anticipated perhaps 9,000 psi) when the well was finally shut in is now believed to be due to reservoir depletion.

Oh, and for those of you admiring the ability of those on the platform to fish, the Admiral noted that the team involved in those operations included BP, Schlumberger, Transocean, Cameron and Baker Hughes personnel.

Incidentally I also think there was another transcription error (I tried to smooth some earlier ones by interpreting the words transcribed with my own (in paren, within the quotes). In dealing with the question of whether the DP is still there, and if it is held in place with either hydrates or cement, he said:

The answer is I don't think we know. You know we think there may be a chance the pipe might have adhered to cement during the static kill process. We don't know that to a virtual certainty. But we don't want to try and pull the blowout preventer without having a contingency ready to deal with that eventuality.

So what we're doing is, we're going to life the blowout preventer. If it doesn't come off easily, we’re going to apply 80,000 pounds of lift. And maybe somewhat of a mis—we'll calling that the gentle pull. If for some reason that does not free the pipe then we will go in and mechanically open the rams and lift the blowout preventer out over the pipe, and then we'll share the pipe with the wellhead.

I believe that last ‘share” should be “shear” and will, actually, more likely be a saw cut.

And the small flow of bubbles from the stack, which the Admiral feels inconsequential, as earlier such flows proved to be, is still going on.

Interview with Michael Smith (Part 2 of 2)

I feel the peak/plateau period is much delayed because of the recession. Currently I am looking at around 2020 - perhaps as late as 2025. But of course it is dependent on what happens to the global economy (and the environment) between now and then. When I first started forecasting in the late 1990s, I had a production plateau beginning around 2016. Over time, supplies got tighter and tighter and oil prices started to rise, and the plateau moved nearer to around 2012. Now it has moved out to 2020, showing how uncertain this modeling can be because so many technological, financial, political and social variables are at work. The fluctuation points to volatility of course which is a signal of tight energy supply. If there is a new surge in economic growth and China and India continue to grow and mop up oil supplies, then it will move back to 2016 very quickly.

Pemex Plans to Invest $269 Billion in Next 10 Years to Increase Oil Output

Petroleos Mexicanos, the state-owned oil company, plans to invest $269 billion by 2019 to increase production, the company?s chief executive officer said.

Pemex, as the company is known, should not have trouble having its planned investments approved by Congress and will spend about $27 billion a year over the next decade, CEO Juan Jose Suarez Coppel, said today at a conference in Mexico City.

Mexico sees big potential near Tsimin oil find

MEXICO CITY (Reuters) - Mexico's state oil company Pemex is increasingly optimistic about the potential of what appears to be a new cluster of light crude oil fields around its Tsimin discovery, according to company executives.

The side-by-side Tsimin and Xux discoveries are believed to hold the equivalent of 1.5 billion barrels of proved, probable and possible oil reserves said Manuel Teran, a Pemex engineer working on the discoveries, at a petroleum engineering conference this weekend.

For BP, post-spill advertising comes at an unknown cost

FORTUNE -- The coverage of BP's Deepwater Horizon spill is teaching the typically secretive oil industry something about life in the limelight. Now, the company has to account for every cent it spends.

Bahamas Bans Offshore Drilling

The Public is advised that The Ministry of The Environment has suspended consideration of all applications for oil exploration and drilling in the waters of The Bahamas. The Ministry seeks, by this decision, to maintain and safeguard an unpolluted marine environment for The Bahamas, notwithstanding the potential financial benefits of oil explorations.

Additionally all existing licenses will be reviewed to ascertain any legal entitlement for renewal.

Coal India May Set Up Power Plants Because of Shortfall in Rolling Stock

Coal India Ltd., the world?s largest producer of the fuel, said it may be forced to set up power plants to use coal that?s piling up because there aren?t enough railway wagons to carry supplies to utilities.

?It?s not a business we would naturally like to be in because there are already so many players,? Chairman Partha Bhattacharyya said in New Delhi today. ?If stocks keep building up, we may not have an option.?

Russia to protect domestic car makers with higher import duty

Russia will gradually raise the import taxes for the foreign-made cars, Russian Prime Minister Vladimir Putin said Monday.

Putin noted this would be done to stimulate foreign companies to build their production facilities in Russia.

Electricity and climate change

Also as a result of global warming, the countries of this region are witnessing dramatic increases in the demand for electric power, as the use of air-conditioning increases in households, shops, places of worship, offices, hotels and factories. And as a result of the exceptional hot weather, the sale of all types of air-conditioning devices flourished, and their stocks were effectively depleted in Lebanon, Jordan, Syria, Egypt and other countries, while their retailers achieved exceptional profits, after taking advantage of the circumstances.

Why "green wizards" get us nowhere new...

So, first question, what is a ?green wizard?? Greer defines green wizards thus, ?individuals who are willing to take on the responsibility to learn, practice and thoroughly master a set of unpopular but valuable skills ? the skills of the old appropriate technology movement ? and share them with their neighbours when the day comes that neighbours are willing to learn?. The idea, as I read it, is that any notion of a co-ordinated response, a la Heinberg?s ?Powerdown?, a scenario where communities self-organise and work with, or without, their local authorities, to start the rebuilding of that settlement?s resilience, reduce its oil dependency and carbon footprint, is now for the bin, condemned as impractical and unrealistic. Greer appears to have given up any notion that such a thing might be possible, stating ?a movement is a great thing if you want to hang out with congenial people and do interesting things together. It?s just not usually a good way to make change happen?.

Are People Smarter Than Chipmunks?

After witnessing this eccentric behavior, I began wondering why the chipmunk would behave so illogically. It didn?t take too long to realize that it simply doesn?t possess the right equipment to understand the threat posed by a car. A chipmunk?s brain and the behavior produced by it are the result of ages of natural selection ? a process that took place in the absence of roads and cars. The mind of a chipmunk, therefore, is incapable of properly interpreting the data coming its way, especially when it?s coming at 60 miles per hour.

The chipmunk?s maladaptive behavior has some prominent parallels with our own predicament. The data are approaching us at a fast and furious clip. We have ample and disturbing evidence about climate destabilization, dwindling energy resources, social breakdowns, and a host of environmental maladies. We know that the economy is a subsystem of the finite planet, and that increasing the scale of the economy impinges on the earth?s ecosystems. In an age of biodiversity die-offs and political buy-offs, however, we don?t seem to possess the wherewithal to interpret the data correctly.

Lenders Back Off of Environmental Risks

Blasting off mountaintops to reach coal in Appalachia or churning out millions of tons of carbon dioxide to extract oil from sand in Alberta are among environmentalists? biggest industrial irritants. But they are also legal and lucrative.

For a growing number of banks, however, that does not seem to matter.

After years of legal entanglements arising from environmental messes and increased scrutiny of banks that finance the dirtiest industries, several large commercial lenders are taking a stand on industry practices that they regard as risky to their reputations and bottom lines.

New Study Links Toxic Pollutants to Canadian Oil Sands Mining

Native Canadians living downstream from the oil sands mines in Alberta have long contended that their high cancer rates were related to the expanding excavation of bitumen for the production of synthetic crude. Their assertions have been disputed by the reports of a joint oil industry-government research panel that concluded that natural causes ? and not mining ? were responsible for the high levels of various metals in the sub-Arctic Athabasca River.

But now a new study in the journal Proceedings of the National Academy of Sciences is backing the position of the Native Canadians. Led by several University of Alberta researchers, the study found that unusual levels of lead, mercury, zinc, cadmium and other toxic pollutants were found near oil sands mining sites or downstream from them. The levels exceeded federal and provincial government guidelines.

Crude Oil Heads for First Monthly Slide Since May on Slowing Global Growth

Oil fell, headed for its first monthly decline since May, before a report forecast to show U.S. crude inventories increased to the most in a month.

Futures dropped as much as 1.7 percent, extending their decline from the highest level in a week reached on Aug. 27, after the Commerce Department said incomes rose 0.2 percent, less than the 0.3 percent estimate by economists surveyed by Bloomberg News. An Energy Department report tomorrow may show crude stockpiles gained 1.55 million barrels last week.

Oil Supply Climbing to One-Month High in Bloomberg Survey

U.S. crude oil inventories probably increased to a one-month high last week amid signs that U.S. economic growth is slowing, a Bloomberg News survey showed.

Supplies rose 1.55 million barrels, or 0.4 percent, in the seven days ended Aug. 27 from 358.3 million a week earlier, according to the median of 12 analyst estimates before an Energy Department report tomorrow. The gain would leave stockpiles at the highest level since July 23.

OPEC Oil Output Declined on Iraqi Pipeline Bombing, Bloomberg Survey Shows

The Organization of Petroleum Exporting Countries? crude-oil output fell in August to a seven- month low, led by Iraq, where production was hobbled by a pipeline bombing, a Bloomberg News survey showed.

Production slipped 75,000 barrels, or 0.3 percent, to an average 29.15 million barrels a day, the lowest level since January, according to the survey. Output by members with quotas, all except Iraq, dropped 5,000 barrels to 26.805 million, 1.96 million above their target.

Japan Issues Storm Warnings, Cancels Okinawa Flights as Typhoon Approaches

Typhoon Kompasu slammed Japan?s southern island of Okinawa, causing the country?s two biggest airlines to cancel flights, disrupting some shipping and closing an oil refinery owned by Brazil?s Petroleo Brasileiro SA.

Ras al Khaimah seeking electricity for growth

Ras al Khaimah?s Government is in talks with the Federal Electricity and Water Authority (FEWA) to boost power supplies to the emirate as it attracts more businesses to its industrial zones and completes development projects.

Russia eyes Rosneft sale

Russia may consider selling a stake in state-controlled oil producer Rosneft in 2011 to 2013, Economy Minister Elvira Nabiullina said today.

LUKOIL to get tax breaks for Caspian oil fields

(Reuters) - Russia's No.2 oil firm LUKOIL's CEO said on Tuesday that the government is ready to introduce tax breaks for oil extracted from the company's Korchagin fields on the Caspian Sea.

'Fracking' fractures N.Y. county

A controversial method of natural gas drilling ? known as "fracking" ? has begun to tap the energy-rich Marcellus Shale, a huge geological formation that underlies much of New York, Pennsylvania, Ohio and West Virginia. In New York, fracking has been stalled by opposition from environmental groups, legislators and people such as the Diehls.

Bad weather delays BP bid to recover blowout preventer

WASHINGTON (AFP) ? A bid to recover a key valve that failed to prevent the blowout of the BP well in the Gulf of Mexico has been delayed because of bad weather, the pointman for the US response to the oil spill said Monday.

"We are in a hold pending calming of the current weather," retired coast guard admiral Thad Allen told reporters, adding that it would be two or three days before the operation could begin.

No gas concerns Memphis officials (Michigan)

Two gas stations in the city but no gas to be pumped has prompted Memphis Mayor Dan Weaver to explore strategies for getting a station open to serve residents.

"I've been spinning my wheels talking to people trying to get us a gas station in town," he said at a recent City Council meeting where he asked officials to consider options such as asking the city's attorney to advise on issues such as eminent domain.

Stickers would help auto buyers compare fuel economy

DETROIT ? In its first major overhaul of fuel-economy ratings in 30 years, the Environmental Protection Agency and the Department of Transportation on Monday released two proposed window stickers designed to make it easier for consumers to compare vehicles.

One version gives cars and trucks a grade from A+ to a D, compares vehicles with three sliding scales and gives an estimated annual fuel cost. The other version omits the grade. At first, only electric vehicles would rate an A+.

Toyota Prius May Lead Japan Car Sale Collapse as Subsidies End

The Prius hybrid has spearheaded sales growth for Toyota Motor Corp. in Japan for more than a year, helped by government subsidies. The model will likely bear the brunt of plunging demand as the support ends.

?A collapse in sales is unavoidable,? said Hiromi Inoue, the new-car sales chief for Tokyo Toyopet Motor Sales Co. ?The daily pace of orders for the Prius is already dropping. We are bracing ourselves for the coming crisis.?

Russian billionaire Prokhorov to roll out hybrid car models in December

Russian billionaire Mikhail Prokhorov will present three electric vehicle models in December for public approval, he said on Tuesday.

"If they don't like them, they can say 'we don't want these cars.' We will hold a vote on the Internet," said Prokhorov, an active blogger.

Prokhorov said he will decide where to produce the cars after the presentation.

The Biking Boom Breeds Discontent

Mayor Michael R. Bloomberg and other city leaders have praised the increase in cycling for reducing congestion and pollution and making the city streets safer overall. To accommodate the surge in bike commuters, the city has installed hundreds of bike racks and roughly 200 miles of new bike lanes in the past three years, with plans for future expansion.

Yet according to a recent weeklong investigative series by Tony Aiello, a reporter with New York City?s WCBS-TV (Channel 2), the cycling boom is breeding discontent. Titled ?Bike Bedlam,? the segments turned a critical eye on reckless riders who flouted traffic laws, and profiled a young father who was killed by a cyclist riding the wrong way on a one-way street in Midtown Manhattan. A former bike shop owner declared that cyclists were ?way out of control.?

Blowin' in the Wind

Pattern Energy wants to do what T. Boone Pickens couldn?t: deliver Texas? overabundance of wind power to less-windy states.

The wind and transmission line developer aims to build a $1 billion, 400-mile transmission line to carry electricity generated by Texas wind turbines to Mississippi where it could be distributed across existing lines to Georgia, Alabama, Tennessee, and other states in the South.

Red Books And Yellowcake - The Permanent Quest For Uranium

Only taking the world's present 439 civil reactors and ignoring the 200-plus reactors called "research and military", these civil reactors will need about 68 000 tonnes of uranium in 2010, but world mine output will be less than 55 000 tonnes. If the vaunted "Nuclear Renaissance" takes place as planned by the industry and about 200 - 225 new reactors are added in 2010-2020, world uranium fuel needs will grow to about 125 000 tonnes a year by 2020.

And You Thought Radiation Was a Problem for Nuclear Plants?

A power plant has overexposed its workers to radiation, and the Nuclear Regulatory Commission is proposing a fine. The plant, though, is not a reactor; it runs on coal.

E.P.A. Turns Down Request to Ban Lead Bullets

The Environmental Protection Agency on Friday rejected a request that it ban lead bullets, saying it does not have the legal authority to do so. The American Bird Conservancy and the Center for Biological Diversity had petitioned for the ban.

To Win, the Green Movement Needs to Understand Leverage, not Just Footprints

A few years ago I got into a heated debate about Al Gore's Inconvenient Truth with a green-minded friend of mine. My hippy friend couldn't stand the movie?not because of anything it said, but because of the 'hypocrisy' of flying around the world to preach about climate change. "Doesn't he know this sends his carbon footprint through the roof?!" exclaimed my irate drinking buddy.

"He probably doesn't care." replied I. "Nor should he."

I've wondered before why so much of the environmental movement is focused on individual virtue instead of collective success. Yet I'm increasingly realizing that that's just one part of a broader issue I have with greens?we spend too much time talking about impact, and not enough talking about leverage.

Greenpeace claims to have shut down Greenland oil well

Greenpeace claims its activists have shut down a ''dangerous'' oil drilling operation by a British energy company in the Arctic.

Author Simon Singh Puts Up a Fight in the War on Science

The British Chiropractic Association sued Singh, hoping to use Britain?s draconian libel laws to force him to withdraw his statements and issue an apology. Losing the case would have cost Singh both his reputation and a substantial amount of his personal wealth. Such is the state of science, where sometimes even stating simple truths (like the fact that there?s no reliable evidence chiropractic can alleviate asthma in children) can bring the wrath of the antiscience crowd. What the British chiropractors didn?t count on, however, was Singh himself. Having earned a PhD from Cambridge for his work at the Swiss particle physics lab CERN, he wasn?t about to back down from a scientific gunfight. Singh spent more than two years and well over $200,000 of his own money battling the case in court, and this past April he finally prevailed. In the process, he became a hero to those challenging the pseudoscience surrounding everything from global warming to vaccines to evolution.

Three degrees is at least one too many

It is fittingly ominous that 2010, year of the next big climate change conference, has been the hottest in recorded history. The heat rises inexorably yet the world dithers and looks away. None of the excitement that surrounded the opening stages of the climate summit at Copenhagen last year looks like materialising this November at Cancú*in Mexico.

Japan Forsees Starting Carbon-Emissions Trading in 2013, Panel Reports

Japan plans to start emissions trading in 2013, as the government revived a climate-protection draft law that was scrapped earlier this year when then Prime Minister Yukio Hatoyama resigned.

Cap-and-Trade Is Beginning to Raise Some Concerns

Critics have warned for years that this form of offsetting would encourage profiteering, with little or no value in efforts to curb climate change.

More recently, opponents of offsetting have likened the system to the kind of financial engineering on Wall Street that helped precipitate the recent banking crisis.

Review Finds Flaws in U.N. Climate Panel Structure

UNITED NATIONS ? The United Nations needs to revise the way it manages its assessments of climate change, with the scientists involved more open to alternative views, more transparent about possible conflicts of interest and more careful to avoid making policy prescriptions, an independent review panel said Monday.

The review panel also recommended that the senior officials involved in producing the periodic assessments serve in their voluntary positions for only one report ? a statement interpreted to suggest that the current chairman of the climate panel, Rajendra K. Pachauri, step down.

Virginia Case Against Climate Researcher Is Rejected

RICHMOND, Va. (AP) ? The state attorney general has failed to back up accusations that a former University of Virginia climate change researcher defrauded state taxpayers in obtaining government grants, a judge ruled Monday.

Climate Change and the Wealth of Nations

Professor Kahn isn?t skeptical about global warming, but he is (quite reasonably) skeptical about our ability individually and collectively to reduce carbon emissions: ?attempts to reduce or reverse our carbon output ? to mitigate the damage that we?ve already done ? aren?t going so well? and ?evidence shows that very few individuals have cut back on their carbon-producing activities at all.? Consequently, he predicts, ?the world is going to get hotter.?

But while this would lead many people to doomsday scenarios, Professor Kahn is an optimist who believes ?that we will save ourselves by adapting to our ever-changing circumstances.? He says this salvation will come from ?a multitude of self-interested people armed only with their wits and access to capital markets.? In short, the same economic system that led to global warming will rescue us from it.

Climate 'sceptic' Bjørn Lomborg now believes global warming is one of world's greatest threats

One of the world?s most prominent climate change sceptics has called for a $100bn fund to fight the effects of global warning, after rethinking his views on the severity of the threat.

Atlantic Rising: sea level rise threatens the Orinoco Delta in Venezuela

Rising sea levels are forcing the migration of indigenous peoples and threatening the freshwater ecosystem of catfish and piranha found in the Orinoco Delta near the coast of Venezuela.

Arctic ice: Less than meets the eye

Barber, an environmental scientist at the University of Manitoba in Winnipeg, Canada, went to sleep one night at midnight, just before the ship was due to reach a region of very thick sea ice. The Amundsen is only capable of breaking solid ice about a metre thick, so according to the ice forecasts for ships, the region should have been impassable.

Yet when Barber woke up early the next morning, the ship was still cruising along almost as fast as usual. Either someone had made a mistake and the ship was headed for catastrophe, or there was something very wrong with the ice, he thought, as he rushed to the bridge in his pyjamas.

This is a letter I received from a reader (with the name changed). Below the fold is an expanded version of my answer to him. I would be interested in what other people's thoughts are on this subject as well.

Hello,

My name is John Smith. I have been following the peak oil situation since about 2005. A few years back I thought I had a handle on what I could expect from peak oil. Then, the recession hit, and changed (delayed) everything.

My problem is, I have not seen an rigorous peak oil studies/projections that take recent events into account on peak oil projections going forward. As an expert on the subject, could you please point me to some literature that would be of help?

I do not know what the future holds, but it is clear to me that realities have changed, and with it, the timeline of peak oil.

Regards,
John

Dear John,

Curve fitting techniques including Hubbert Linearization, and forecasts based on amounts of reserves and dates of discovery, can be useful tools but, unfortunately, they provide only rough estimates. Now that we are so close to the peak oil date, the deficiencies of these techniques become more of a problem, because a difference of 5 or 10 years in peak date becomes more of an issue.

One thing that these techniques do not tell us is how much oil is really economic. In a way, this is equivalent to saying that these techniques do not tell us how much oil has a high enough Energy Return on Energy Invested (EROEI) that it really can be recovered and sold at a price that customers can afford. We are only now learning what this price might be. A rough estimate is that if the prices are above about $85 a barrel, they will send the economy into recession. It may be that in some places, enhanced oil recovery can be economically used, while in other places it is too expensive, and reserves should be adjusted accordingly.

Another problem with this type of technique is that these techniques were developed in a period when the world economy was growing rapidly, and it was reasonable to assume that the world economy would continue to grow rapidly. Thus, it seemed reasonable to assume that as much oil as could be produced, would be produced. But once oil production starts hitting economic limits, it sends the economy into a downward spiral. Instead of inadequate supply, what one gets is inadequate demand, because the value that the oil can produce is too low to provide consumers enough benefit that they can afford to buy high priced oil, plus all of the other goods they need to sustain their lifestyles. It is not clear that these techniques model inadequate demand as well.

It seems to me that what one really needs is models which consider both geological factors and economic factors, but at this point, I don't think we really have good models of this type. It is not just recession that is an issue, either. For example, if a country's tax rate on oil companies goes up, I would expect oil production to go down. It may be higher tax rates on oil companies that bring us down off the current peak oil plateau--not geological constraints.

It would probably also be helpful to adjust the models to reflect improvements in technology. If a better method is developed for extracting very heavy oil, for example, extraction of some such oil may become economic, when it has not been in the past.

Recent Forecasts

We published one recent post showing peak oil projections, but which did not look at economic issues. This was Steve Mohr's thesis. He used several techniques which give a range of peak oil dates from 2005 to 2019. Regarding OPEC Oil Production, in his thesis paper itself, he says, "OPEC oil production peaks broadly in line with literature peak dates which range from 2008 to 2042." All of these are very broad ranges.

Another recent estimate of peak oil dates is Forecasting World Crude Oil Production Using Multicyclic Hubbert Model by Ibrahim Sami Nashawi, Adel Malallah, and Mohammed Al-Bisharah of Kuwait University, published in March 2010. This model estimates a peak date of 2014. It was discussed a bit in Drumbeat. It also does not consider economic issues.

Jean LaHerrere and Jean Luc Wingert published an analysis in October 2008 called Forecast of liquids production assuming strong economic constraints. It develops a peak date range of 2012 to 2027. It concludes:

Since 2001 we in ASPO France have claimed that future oil production will be a bumpy plateau with chaotic oil price, but we did not plot any curve, only saying that the smooth peak model (below-ground constraint only) with the estimated ultimate could be disturbed by above-ground constraints. The strong financial crisis the world is now facing will of course have some impact on the world economical situation and oil consumption. Is the financial system going to collapse or not and how quickly is it going to recover? We do not try to answer these questions but imagined two crisis models. Reality will probably be none of the two but we can see that with these simple scenarios, the possible oil peak dates vary below 90 Mb/d from 2012 to 2027 with the same ultimate of 3 Tb. The tensions on oil production will be realised for some years, the risk would be to forget the necessary efforts that have to be made to increase our energy efficiency.

Colin Campbell used to publish forecasts of world oil production, but retired from this after ASPO Ireland's Newsletter 100 in April 2009. In the final newsletter, this forecast was shown:

Dr. Campbell's forecasts did not particularly take into account economic conditions, as far as I know. He expected oil production to decline after 2008.

There have also been a number of forecasts based on analyses of oil megaprojects, by Chris Skrebowski and by "ace" (Tony Eriksen) and by Sam Foucher. These studies are fairly different from the general modeling done by others, mentioned above, in that they look specifically at large known projects, and when they are expected to be online, and compare these to expected losses in oil production due to natural declines in oil production. They require keeping abreast of a large amount of detail data, and even then a considerable amount of judgment is required: If capacity of a given amount will be added, how much will really be produced, and for how long? How much impact will infill drilling and enhanced oil recovery have? The most recent projection of this type that we published was by "ace". It was published in November 2009, and showed oil production declining production after that date.

Information on Connection between Oil Production and Recession

If you want to read more about the connection between oil prices and recession, one possibility is Jeff Rubin's book, "Why Your World is about to get a Whole Lot Smaller." I have also written about the issue, for example, in this post and this post and this post.

We will continue to run posts forecasting future oil production, using modeling techniques, as they become available.

Thanks for asking.

Sincerely,

Gail Tverberg, Editor
The Oil Drum