The Oil Drum: Local

It is not a coincidence that just as we are hitting peak oil, world monetary systems seem to be edging toward collapse. Monetary systems are debt based, and depend on growth to continue. Resources are finite, and we are reaching limitations on them. Many of us have predicted that monetary systems may collapse, either as we approach peak oil, or shortly after peak oil. I have talked about the connection between peak oil and monetary system collapse in a number of posts. In this post, I reprint relevant sections from one of my earliest TOD posts, written in April 2007.

From Peak Moment Television, this is Matt Simmons' 26 minute talk at the ASPO convention called, "Oil and Gas--The Next Meltdown:"

As people following our energy situation are aware, many if not most energy stocks are down 60-70% or more from their summer highs. In a bizarre but not completely surprising announcement after the close (we knew someone was liquidating), Chesapeake, (the US largest natural gas producer) CEO Aubrey McClendon has been involuntarily liquidated out of his rougly 30,000,000 remaining shares of CHK in the past 3 days due to margin calls. CHK, which in July was over $70 per share, hit as low as $11.99 today, and then had a 38% rally to close at $16.52 on 5 times normal volume. We don't typically comment on individual stocks or price movements on TOD but this and related NG stock developments could have a significant impact on the industry's future - CHK and XTO in addition to being top 2 gas producers also operate over 12% of our nat gas rigs. In addition to McClendons margin call, Chesapeake also announced further reductions in capex budgets going forward which means lower natural gas production, and thus higher prices, ceteris paribus. To make things more complicated, the majority of complicated financial hedges undertaken by CHK, are at Morgan Stanley, which fell to single digits today. This is all very good news for natural gas prices but bad news for both Aubrey McClendon and the North American energy situation.

This is a slightly abridged version of an actual letter from a reader and my answer, regarding a change in career in the light of peak oil. What would you have said? This reader was not from the US. How would advice differ for different parts of the world?

Dear Gail:

I read some of your posts on The Oil Drum, and I wanted to ask you a question. Taking into consideration peak oil, what careers are likely to be better places in the years ahead?

(continued under the fold)

This is a guest post by James Ward. James has a background in science and engineering and is ASPO-Adelaide coordinator for ASPO-Australia. This post appeared previously on Energy Bulletin.

Abstract
By fitting a bell curve to historical phosphate production data, the best fit is obtained by assuming an ultimate recoverable resource of approximately 9 billion tonnes (of which about 6.3 billion tonnes have already been mined). This yields a peak in around 1990. Of course, the USGS claims an ultimate recoverable resource of some 24.3 billion tonnes (i.e. 18 billion remaining); however using this value yields a bell curve that is an inferior match to the historical data. A hypothesis is thus presented whereby phosphorus is considered in two broad forms: “easy” which is able to be mined quickly, but already peaked in 1990, and “hard” which has large remaining reserves and is yet to peak, but cannot be mined as quickly. (In reality there are probably many different forms ranging from very easy to very hard.) Just as with oil, estimates that lump all types of reserve in together will yield a theoretical peak that is high and distant, however the true system may involve periods of decline after exhausting easy-to-get reserves before other supplies come online to replace them. Ultimately we must develop a recyclable phosphorus supply if humans are to continue living on this planet.

We in the United States live in a country with a strong tradition of private ownership of companies. In recent days, we have seen changes that border on nationalization:

• The support given to JP Morgan Chase in its purchase of Bear Stearns

• The bailout of Fannie Mae and Freddie Mac

• The take-over of AIG, providing a $85 billion loan in exchange for 80% of the company

• Extension of FDIC guarantees to money market accounts

• The Fed's purchase of commercial paper, to support that market

• Most recently--the Fed's decision to start lending directly to corporations

How much more of this can we expect to see in the days ahead? What indirect impacts will this have on American businesses? Where does all of this end?

The purpose of this post is to offer readers a chance to talk about where they see this issue going. Below the fold, I offer a few thoughts on what areas arguably need federal support, and a few implications if the country moves toward more nationalization of companies.

It seems that every election season, conspiracy theories arise that the oil companies are trying to bring down gasoline prices in order to influence elections. The thinking is that oil companies tend to favor Republicans (true) and that they bring prices down to help Republican candidates. When I hear this sort of talk, I try to explain to people that U.S. oil companies control so little of the world oil market that there isn't much they can do to influence prices. They simply don't have the stroke that people think they have.

But a poll in 2006 showed that nearly half of Americans thought Bush had successfully manipulated prices down as the election approached:

Almost half of all Americans believe the November elections have more influence than market forces. For them, the plunge at the pump is about politics, not economics.

Retired farmer Jim Mohr of Lexington, Ill., rattled off a tankful of reasons why pump prices may be falling, including the end of the summer travel season and the fact that no major hurricanes have disrupted Gulf of Mexico output. “But I think the big important reason is Republicans want to get elected,” Mohr, 66, said while filling up for $2.17 a gallon. “They think getting the prices down is going to help get some more incumbents re-elected.”

The feasibility of non-combustion gas turbines in nuclear reactors

In a discussion about nuclear reactors, a discussion subthread about gas turbines as energy converters ended with this late-arriving statement:

Non-combustion gas turbines are not proven. They're mostly in pilot/research stages. You say that the conditions in non-combustion lower temp operation are more reasonable than in higher temp combustion gas turbines, but the fact that they are not commercially competing with Rankine steam cycles, even in the higher temperature regimes, should caution us not to trivialize the engineering/commercial issues.

The one-week period for comment on the post ended before I could write a response.

What's missing from this analysis?  Let me lay out the pieces:

Previously, Herman Daly wrote a guest post on the Steady State Economy, outlining core suggestions on how to overhaul our banking, financial (and value) systems. I encourage everyone to read it (if short on time, please read the conclusion). Professor Daly was Senior Economist at the World Bank before leaving to teach Ecological Economics at University of Maryland's School for Public Policy. He was also the catalyst for me to leave my own financial career and return to school to study the real economy (i.e. what we call the human economy is only a small part of a larger closed system). Below the fold are his thoughts on the current crisis (current being defined as last 30-40 years or so). (For comparison, here are links to what 'mainstream' economic icons George Soros, and Bill Gross are saying.)

Last month, we introduced the Ford Global Challenge, through which Ford sponsored six student teams from around the world to envision and build a 21st century replacement for the Model T Ford, which is celebrating its 100th anniversary. The aim was to keep it cheap and simple while meeting sustainability challenges.

Well the winners have now been announced, and the 'T²' Air Powered Car from Australia's Deakin University was joint winner with the '2015 Ford Model T' from Aachen University in Germany.