$90 Oil? Thats Not Expensive Enough.

You will find the attached table quite informative. (BTW, the $40 oil reached after the Iranian revolution will translate into $101.50 in current dollars)



Year ..............................................Money of...........Inflation
.......................................................the day ............adjusted

1864 - Pennsylvania oil boom...................$8.06....................$104.35
1876 - Russian oil exports start..................2.56.........................48.64
1948 - Rebuilding post World War Two.....1.99.........................16.74
1974 - Arab oil embargo..............................11.58........................47.54
1979 - Iranian revolution............................31.61........................88.13
1980 - Iran-Iraq war starts.......................36.83........................90.46
1990 - Iraq's invasion of Kuwait................23.73........................36.76
1998 - Asian economic crisis.......................12.72........................16.22
2003 - China 2nd biggest oil consumer.....38.27.......................40.83
+2007 Year-to-date average......................67.38.......................67.38

Life After Oil

Take a critical look at "lifeaftertheoilcrash.net"

Future world oil supplies: There is a finite limit
L. F. Ivanhoe, Novum Corp., Ojai, California

Unscientific reserve claims for political reasons may obscure the fact that most large, economic oil fields have been found, and permanent oil shock is inevitable early in the next century

from WORLD OIL, October 1995

The question is not whether, but when, world crude productivity will start to decline, ushering in the permanent oil shock era. While global information for predicting this "event" is not so straightforward as the data M. King Hubbert used in creating his famous curve that predicted the U.S. oil production peak, there are indications that most of the large exploration targets have been found, at the same time that the world's population is exploding.

This theme and a discussion of "reserve" and "resource" definitions and use, or abuse, are the subjects of this article. Discussions and illustrations give one indication of where the world is in crude production and reserves, and where it is headed.

EXPLORATION MILESTONES: AN OVERVIEW

Petroleum exploration is an efficient technical procedure. Shooting of a modern seismic net of lines across any basin will delineate virtually all significant prospects, thus outlining where to lease for further test drilling. However, it is a fact that the largest oil and gas fields in any basin or oil province are also the biggest targets and the easiest to find with any given technology; thus they are normally found early in any exploration phase.

Dates when past exploration techniques were routinely used by large oil companies include: surface geology (1900), refraction seismic (1925), electric well logs (1930), analog reflection seismic (1935), mud logging (1940), digital reflection seismic (1965), and 3-D digital reflection seismic (1978). Significant drilling developments include: rotary drilling (1920), offshore drilling barges (1950), deepwater drillships (1956), semi-submersible rigs (1964) and horizontal drilling (1985).

All of these were significant steps in the improvement of land and marine exploration. There are today virtually no areas where petroleum exploration cannot be successfully carried out if preliminary geological studies indicate a good chance of finding major petroleum fields.

OIL FIELD DISCOVERY TIMING

H. D. Klemme made exhaustive studies of oil field discovery patterns in different types of basins, e.g., cratonic, deltas. [1] His analyses showed that in all types of basins, 100% of the reserves in the five largest fields were, on average during 1970-80, made within six years after the first field was found. Of course, the area had to be politically accessible, i.e, leasable, or no exploration could be conducted. The average figure noted decreased steadily to the 6-yr level, from 37 years pre-1930, as geophysical techniques improved.

We should be reminded that some of our grandfathers were excellent oil finders even though they worked with the crudest of tools. For example, the peak year for discoveries of world-class oil field giants, i.e, ultimate recovery of 500 million bbl oil, in the U.S. was 1930—in the world, 1962.

The present phase of petroleum exploration began with introduction of 3-D digital seismic methods in the late 1970s. This technical refinement coincided with the Iran-Iraq war and the accompanying 1980 oil price surge to $40/bbl, which produced a global public energy panic. A worldwide exploration boom followed immediately to find oil anywhere outside the Persian Gulf. Unfortunately, despite intense efforts by all of the world's oil companies, only a few of the new major fields, i.e., ultimate recovery of 100 million bbl promised by their geologists, were actually found.

The world's accessible oil provinces had all been previously recognized and most of their major fields found earlier. No new major oil provinces, i.e., ultimate recovery 7.5-25 Bbbl, were found—the world is finite. [2] The 1,311 known major and giant oil fields contain 94% of the world's known oil, and are, accordingly, the most critical for future global oil supplies. [3]

We must "think to scale" on global problems, as the following table shows.

U.S. vs. world statistics Area (time period) Discovered Extracted Consumed U.S. (15 yr, 1977-91 ) 5 Bbo 45 Bbo 92 Bbo World(10 yr,1982-91) 91 Bbo 221 Bbo 221 Bbo Bbo = Billion bbl crude oil.

Fig. 1 summarizes when and where the known global oil fields were discovered. The peak global finding year was 1962. Since then, the global discovery rate has dropped sharply in all regions. [4]

3-D seismic and horizontal drilling techniques improved oil recovery in known fields, but made no substantial change in global discoveries of major fields. When the world oil price collapsed in 1986, exploration funds and efforts were cut back drastically everywhere; and by 1989, all major companies were consolidating and eliminating most of their geological/geophysical staffs. The minimum 6-yr period needed to discover the five largest fields in any basin had passed without making enough discoveries to whet top management's enthusiasm—so the money dried up except for prime prospects and farm-ins.

This is unfortunate because the huge remaining resources postulated by scientists will never be converted to reserves unless explored for. It is unlikely that increasing global oil price to the 1980 maximum would make any substantial improvement in the discovery rate of new major fields, as the golden age of oil exploration has passed its peak. For one example, much of the current attraction for Russian oil deals is production—rather than exploration—oriented. Western petroleum engineers and service companies are needed there to get additional production out of known pools, rather than explorationists to find new fields.

RESERVES VS. RESOURCES

Like the mining term ore, oil reserves are by definition economic, or profitable. Resources, conversely, are less tangible. Two practical definitions are:

Reserves: Engineers' (conservative) opinions of how much oil is known to be producible, within a known time, with known techniques, at known costs and in known fields. Conservative bankers will loan money on reserves.

Resources: Geologists' (optimistic) opinions of all oil theoretically present in an area. Conservative bankers will not loan money on resources.

Explorationists must first find—and then petroleum engineers convert—theoretical resources into producible reserves. An example of a resource that will never become a reserve is gold dissolved in seawater.

Use of either term by any group depends greatly on whose money is involved, e.g., resources mean your money—reserves mean my money. Differences can be enormous. Government agencies and academic scientists tend to estimate resources, whereas industrial/oil companies appraise only reserves. The public, using its money to buy gasoline, is interested in producible reserves, not in theoretical resources.

It is known oil that matters for production planning—not oil yet to be found. Published geological and political estimates of undiscovered oil resources have no set time limits stated or implied for the postulated discoveries. Such open-ended estimates effectively imply that the volume of resources yet to be discovered will lie somewhere between zero and infinity and will be found sometime between now and eternity. Such resource appraisals are only considered scientific opinions—regardless of the competence of the scientific or economic committees that originated them, or the elegance of the mathematical assumptions or computer programs involved.

As C. D. Masters, Chief of USGS Petroleum Resource Analysis once acknowledged, [5] "Assessing world oil is only the beginning of the search for oil. Assessment means nothing more than a judgement on its occurrence. Whether it will be discovered depends on discovery activity. In that sense, Ivanhoe's method of discovery index analysis, or finding rate, [6] comes closest to predicting exploration success, given that the wells are drilled." Well-intentioned, but irresponsible scientists who continue to discuss resources instead of reserves may be a significant cause of our government's lack of realistic energy policies.

ACTIVE VS. INACTIVE RESERVES

Oil companies are in business to make money—not to find oil per se. The present discounted economic value of oil to be produced more than 20 years in the future is virtually zero, regardless of its price. Major oil companies commonly distinguish between:

Active reserves: Those producible within the foreseeable future, i.e., 20 years or less, and

Inactive reserves: Existence known but not considered producible within 20 years, i.e, inaccessible or producible only with as-yet non-commercial methods like enhanced oil recovery, etc. Conservative bankers will not loan money on inactive reserves.

Some inactive reserves are called "inferred" reserves by USGS and U.S. Department of Energy scientists. [7] Inactive reserves gradually get shifted to the active category as years go by and the field gets drilled up by infill wells and stepouts.

U.S. DOE and the Energy Information Administration (EIA) report official U.S. government reserves as only active. [8] But scientific geological committees have recently blurred the older firm distinction of known reserves by including inactive with active—thus increasing the U.S. national reserves by modifying critical-term definitions and creative bookkeeping. Their definitions, while scientifically acceptable to specialists who read the fine footnote print have little bearing on planning for next year's production by either oil companies or the nation. Mature oil fields continue to decline as predicted by the petroleum reservoir engineers.

POLITICAL RESERVES

Government petroleum ministries have an inherent interest in announcing the "good news" of large national hydrocarbon reserves inasmuch as large political reserves are useful for national prestige and in negotiations for OPEC production quotas, World Bank loans and grants, etc. [9] Sudden unsubstantiated reserve increases announced by any government ministry should be viewed with considerable skepticism. They may be mostly the puffery of political reserves which will increase a nation's paper reserves, but have no effect on near-term oil production. [10]

Natural gas is commonly converted to BOE (at the conversion of some 6 Mcf/BOE) to increase a company's or nation's BOE reserves. However, gas is not the economic or social equivalent of crude due to the inherent convenience, safety and flexibility of oil. Natural gas's main global use is still as a boiler fuel for electric power plants to which a pipeline or LNG tankers must provide an umbilical from gas field to generator. Remote gas discoveries may accordingly be assigned to the inactive reserve category for decades while the special transportation lines are negotiated, financed and built.

A flattening of total U.S. (50 states) oil production from 1976-85 was due to Alaska's new supergiant (ultimate recovery of 5.0 Bbbl) Prudhoe Bay field coming onstream, Fig. 2. However, U.S. (48) onshore core production continued to decline as M. King Hubbert predicted in 1956, except for a flattening from 1981-85.

Undue significance has been given to this relatively minor increase in total U.S. (48) production by committees of resource-calculating scientists. Such theoreticians now tend to factor in a blanket increase in the estimated ultimate recoveries (EURs) of all rations' oil fields. Consequently, hyperinflation of global oil reserves (or resources) occurred after 1986. Many of these increases are political reserves which tend to lull public, politicians and stockbrokers into complacency. But the critical numbers are U.S. and world oil production and new-oilfield discoveries in recent years, which are not encouraging, see accompanying table.

The basic assumption is unrealistic that all of the world's, non-U.S. (48), oil fields (mostly discovered since 1962) should have the same reserve increase pattern as the older U.S. (48) oil fields, most of which date from the 1930s or are of tiny size. Reservoir engineering technologies improved greatly from the discovery of the supergiant East Texas field in 1930 (pre-seismic, pre-E logs, on many small land blocks) to discovery of the Alaskan supergiant at Prudhoe Bay in 1968, (post digital seismic, post-electronic well logs, on a single large U.S. government permit to a major oil company). Again, it is the major and giant oil fields (EUR >100 million bbl) that matter globally—not the tiny oil fields so common in the U.S. [3]

HUBBERT'S CURVES

The only truly valid scientific projection of future oil production yet made was that by M. King Hubbert in 1956, [11] when he correctly forecast—on the basis of statistical projections of past U.S. (48) (onshore and offshore lower—48 states without Alaska)--that oil production would peak in 1969, give or take one year. Since then, U.S. (48) oil production has declined within 5% of Hubbert's 1956 prediction, Fig. 2.

Non-U.S. statistics were too vague for Hubbert to use for a valid projection of ultimate global crude oil recovery. He did publish several examples for a hypothetical global EUR of 2,000 Bbbl oil to show how future, virtually unrestricted global oil production might peak and then decline, Fig. 3A. Note that the gross EUR of oil has little effect on date of peak production if unrestricted, e.g., Peak year = 1988 for EUR of 1,500 Bbbl vs. Peak year = 1996 for EUR of 2,000 Bbbl. Note: Area under the curve must equal EUR volume at the scale in upper left corner of the figure. This simple "area under the curve and scale" should be included, as a control, on any theoretical analyses of potential oil reserves/production.

Fig. 3B shows two alternate Hubbert curves for EUR = 2,000 Bbbl, i.e., area under both curves = 2,000 Bbbl, for unrestricted and restricted production. Since 1973, OPEC oil policies and prices have restricted global oil production. Any additional U.S. oil produced by EOR from inactive/inferred reserves will modify Hubbert's ideal curve into a horizontal line for some years after year 2005, Fig. 2. The ex-USSR's oil production since 1950 has closely followed an unrestricted Hubbert curve and is now declining even faster than that of the U.S. (48).

Fig. 4 compares the actual restricted global oil production plotted with the concurrent population explosion in less-developed-countries (LDCs). By year 2000, global population will be 50% greater than in 1975, with a corresponding increase in LDC demand for crude. The industrializing LDCs will soon become hard competitors with western nations for world crude exports.

CONCLUSIONS

It is reluctantly concluded that there is strong evidence that the restricted Hubbert Curve for the world's total EUR of oil may first peak about the year 2000, Fig. 4, after which it may fluctuate along a horizontal production line (restricted by Saudi Arabia/OPEC) before inevitable decline towards a low baseline after year 2050. At an annual global production of 20 BbbVyr, an ultimate difference of global EUR of 300 Bbbl will defer the inevitable doomsday by only 15 years, i.e., 300/20.

Fig. 5 combines past global production with all known reserves plotted per 1989 reserve-to-production ratios (R/Ps), arranged from top to bottom by: developed, communist and OPEC nations. The heavy dotted line shows a realistic 21st Century world oil production curve. This predicted supply curve will change only slightly from year to year.

The critical date is the inflection point (peak) after which global public demand will substantially exceed available supply from the then few oil exporters. A sudden global crude shortage of 5% could bring back the gasoline lines of the 1970s-to the American public's surprise and dismay.

Thus, the question is not whether, but when, the foreseeable permanent oil crunch will occur. This next paralyzing and permanent oil shock will not be solved by any redistribution patterns or by economic cleverness, because it will be a consequence of pending and inexorable depletion of the world's inexpensive conventional crude oil supply.

The global price of oil after 1999 should follow the simplest economic law of supply vs. demand—resulting in a major increase in crude and all other fuels' prices, with the accompanying global economic/social problems of hyperinflation, rationing, etc. After the associated economic implosion, many of the world's developed societies may look more like today's Russia than the U.S.

A successful oilman once remarked, "I would never hire an exploration geologist who is not an optimist, or a petroleum engineer who is not a pessimist." By this logic, the engineering conclusions offered above are, regrettably, more conservative than tile opinions of the many exploration geologists. But haven't Hubbert's predictions for the U.S. been proved realistic, with attendant negative economic ramifications? And decline time for the global industry is not that far away. The economic and social ramifications of that event will require serious planning.

---

LITERATURE CITED

[1] Klemme, H. D., "Field size distribution related to basin characteristics Petroleum resource assessments, Ed. C. D. Masters, International Union of Geologic Sciences, No. 17,1984, pp. 95-121.

[2] Ivanhoe, L. F, "Potential of world's significant oil provinces," Oil and Gas Journal, Nov 18,1986, pp. 164-168.

[3] Ivanhoe, L. F, and G G. Leckie, -"Global oil, gas fields, sizes tallied, analyzed," Oil and Gas Journal. Feb. 15, 1993, pp. 87-91.

[4] Masters, C. D., E. D. Attansi and D. Root, "World petroleum assessment and analysts,' proceedings of 14th World Petroleum Congress, Stavanger, Norway, 1994 John Wiley & Sons.

[5] Master, C. E., "Global oil assessments and the search for non-OPEC oil," OPEC Review, Summer 1987, pp. 153-169.

[6] Ivanhoe, L. F, -Oil discovery index rates and projected discoveries of the free world,- Oil & gas assessments: Methods & applications, Ed. D. R. Rice, AAPG Studies in Geology No. 21, 1986, pp. 77-83.

[7] Root, D. H. and R. F Mast, "Future growth of oil and gas fields," AAPG Bulletin, Vol. 72/3, March 1993, pp. 479-484.

[8] Anon., U.S. DOE/EIA, U.S. crude oil, natural gas, natural gas liquid reserves 1992 Annual Report, DOE/EIA— 0216(92).

[9] Laherrere, J., "Published figures and political reserves,World Oil, January 1994, p. 33.

[10] Campbell, C. J., The golden century of oil 1960-2050, Kluwer Academic Press, 1991, p. 345.

[11] Hubbert, M. K, "Nuclear energy and the fossil fuels." American Petroleum Institute, Drilling and production practices, 1956, pp. 7-25.

L. F. (Buzz) Ivanhoe, president, Novum Corp., Ojai, California, is a registered geologist, geophysicist, engineer and oceanographer with 50 years domestic and international experience in petroleum exploration with various private and government oil companies. He was associated with Occidental Petroleum from 1968 to 1980 where he was senior advisor of worldwide evaluations of petroleum basins from 1974-80. On leaving Oxy, he moved to Santa Barbara and formed Novum, an international energy exploration consulting firm, now located in Ojai, California. Mr. Ivanhoe is the author of numerous papers on various technical subjects, including some 50 on the evaluation of foreign prospective basins and projections of future global oil supplies.

HYDROCARBON MAN
By John Myers

Just because the US Army has pitched its tents in the Iraqi
oil fields, that doesn't mean that Iraqi oil will soon be
flooding world markets or the price of oil is heading to $12
a barrel. Quite the contrary.

Indeed, one of the biggest post-war surprises is that the oil
price has jumped back over $30 a barrel. I can't say we're
surprised. We have stated repeatedly that the bull market in
oil has little to do with Iraq specifically. Although, the
politically volatile Middle Easy certainly plays a big role
in the oil price trend.

Removing Saddam Hussein from power doesn't change the
fundamental fact that the world is drawing down its oil
reserves at a record pace. Nor does it change the fact that
politically volatile Middle East nations continue to control
the lion's share of the world's oil supplies. Since most of
the rest of the world is rapidly depleting its domestic
supplies of oil, the world has become more dependant than
ever on Mid East oil. Forward-looking investors should be
looking to invest in oil and gas companies with substantial
North American reserves.

To predict what will happen to the world's oil supply, you
need only look at a single oil field. Whether you are talking
about Prudhoe Bay in Alaska or Leduc in Alberta, maximum
production of a given field is achieved some years after
initial discovery as the field continues to be developed with
additional step-out wells. But, after half the recoverable
reserves have been pumped from a field, there is a rapid
decline in the field's oil reservoir. It becomes less and
less economical to pump oil from the field until a breakeven
point is reached - a point where the expense of operating the
oil field equals the revenues produced by the field.

The physics that apply to a single field also apply to a
region or an entire country. Consider the continental United
States. The rate at which new oil was discovered hit its peak
in 1957. By the early 1960s, the nation's total proven
reserves reached its all-time high. Less than a decade later,
U.S. production peaked. Production was relatively stable
until the mid-1980s and then began to fall precipitously.

Year after year the Americans have made up the shortfall in
oil production by importing foreign crude. But what happens
when the world's output begins to fall?

Unless we find oil on Mars, there will be no outside source
to make up for dwindling production. It will be then that the
price impact of dwindling supplies will meet surging demand -
a formula for incredible profits in oil and gas stocks.

Global oil reserves have not increased since 1990. In fact,
over the past four decades, wildcatting has yielded fewer
results. In the 1960s, the industry discovered 375 billion
barrels. In the '70s, 275 billion barrels and in the '80s,
150 billion barrels were discovered. Fewer barrels yet were
discovered during the 1990s.

At one time, the world was blessed with somewhere between 1.8
trillion and 2 trillion barrels of oil. But beginning with
the first flowing oil well in April 1861, that endowment has
been consumed. By the end of 2002, humankind had pumped and
burned about 900 billion barrels of oil, or about half of the
total amount of oil the world has to offer.

Perhaps this year - and certainly no later than 2005 - world
production will hit its apex. That means that over the second
half of this decade world oil output will begin to decline -
just as global oil demand is surging.

Each year the world pumps and burns 26 billion barrels of
this non-renewable resource. That means that every four
years, more than 100 billion barrels of oil-five times the
total reserves of the United States-are consumed.

But world demand for petroleum is expected to soar by 56
percent, or 43 million barrels per day (bpd), over the next
two decades due mostly to strong demand for transportation
fuels. According to the International Energy Agency, global
oil demand would jump to 119.6 million mb/d in 2020 from its
current level of 77 million mb/d. But even today, oil is
being burnt at a torrid rate.

The implications are serious for what Daniel Yergin calls a
"Hydrocarbon Society." Despite the advent of the microchip
and explosion of the Internet, petroleum is the primary
economic engine powering the world. And even as world oil
output peaks and then tapers, there is little evidence that
the necessity of oil, and the demand for it, will wane.

"Hydrocarbon Man shows little inclination to give up his
cars, his suburban home, and what he takes to be not only the
conveniences but the essentials of his way of life," wrote
Yergin in his best seller, The Prize. "The people of the
developing world give no inclination that they want to deny
themselves the benefits of an oil-powered economy, whatever
the environmental questions. And any notion of scaling back
the world consumption of oil will be influenced by the
extraordinary population growth ahead."

Of course, not all oil-producing nations will experience a
reduction in output at the same time. As I mentioned, in the
United States production began to fall in the 1970s. Mexico
and North Sea production are now in decline, and few expect a
major discovery in those regions.

The only other major non-OPEC oil region is Russia. But new
oil discoveries in the former Soviet Union have been in
decline since the late 1980s. The expectation by most oil
executives is that we are on the verge of declining Russian
oil production.

With reserves of around 650 billion barrels, the Middle East
is the only major oil-producing region in the world that is
not yet close to its oil reserve half-life.

Until recently it has been oil production from non-OPEC
countries that has kept oil prices in check. But as
production in these regions enter into decline, more power
falls to OPEC, particularly Arab OPEC.

In 1988, Saudi Arabia was happy with an OPEC benchmark price
of $20 a barrel. But given the falling value of the dollar as
measured by the CPI, it takes $31 to buy the same amount of
goods and services that $20 bought in 1988. So even if Mid
East OPEC would accept the kind of pricing policy that the
Saudi's implemented 15 years ago, they would insist on $11
more a barrel to keep pace.

Trouble is, Mid East OPEC wants nothing to do with the
conservative pricing that the Saudis instituted in the late
1980s. Here's why: Most Mid East nations expect maximum oil
production to happen within a decade. Under such a timetable
- they want to maximize short-term revenues. That means a
more aggressive OPEC pricing policy.

Fifteen years ago, world crude demand had slowed to a crawl.
At the same time, millions of barrels a day were being
harvested from the Soviet Union and the North Sea. Saudi
Arabia understood that if it set OPEC prices too high, the
cartel was certain to lose market share.

Not much chance this will happen today. World oil demand is
growing by more than 2 percent annually. The only region rich
enough in oil to satisfy this demand is the Middle East.

In the 1980s, Saudi Arabia was getting arms and financial
assistance from the United States. In turn, the Saudis
exercised their influence to keep oil prices affordable.
Following the War on Iraq, that type of goodwill towards the
United States no longer exists in the Middle East, or even in
Saudi Arabia.

Rather than making life easy for the United States, most of
Arab OPEC would like to see things get more difficult... and
that means higher oil prices.

Sincerely,

Is it too little too late?

Eight years after it was filed the case against American Electric Power of Columbus, Ohio was settled. The case was brought by the EPA, 8 states and 14 environmental groups alleging that AEP was violating the law by exceeding the emissions standards.The parties have agreed that AEP will spend around $4.6 billion on new technology in order to reduce NOX ; Nitogen Oxide; emissions by 69% over the next 9 years and Sulphur dioxide by 70% over the coming 11 years. The company was also fined $15 million and ordered to make remedial payments of $60 million.

Did AEP really lose this case? Not in my book. They have postponed taking action for over eight years and they will not have to be in full compliance for another 11 years. What is the annual interest on the $ 4.6 billion? Is it more than $75 million? I thought so. And no one knows what kind of an Adirondeck will be left standing by 2017. Things are often not what they seem to be but hey I will take this settlement any day.

Nobel Peace Prize ups pressure for climate action

It is not clear whether Al Gore would have been as influential in spreading the case for the need to take action to control Global Warming had he been elected as a President of the United States. Actually, it would be safe to assume that he would not have had the time to work on "Inconvenient Truth" neither would his message been regarded as an objective assessment . In an ironic twist, it sure was good for Environmentalism and for humanity that the Supreme Court stopped the recounting of votes in Florida. The wonderful unforseen consequence of that act by the supremes is the awawarding of the Nobel peace prize to Mr. Gore and the IPCC .

This award has in effect broadened the definition of peacekeeping operations and it is hoped that the resulting awarness that it brings to the effort to contain Global Warming will play a major role in shaping an effective global policy in a few months from now in Bali.

Not everyone is rejoicing though. As it is to be expected the dissenters, such as Vaclav Klaus, the Czech President, were skeptical of the relationship between global warming and world peace. Obviously the Nobel Committee does not agree with the skeptics . They emphasized that rising sea levels, more floods, droughts and desertification will only lead to " increased danger of violent conflicts and wars".

China's carbon emissions, World Trade and Ecological overdraft.

Yestewrday, October 6, 2007 marked the day during which the world economy went into its overdraft form for the year 2007. Overdraft, is the term applied to describe the date that the world economy starts eating into its capital as a result of its production activities each year. It is to be noted that the "ecological overdraft" day for 2006 was not reached until October 9, 2006 and that 2005 coincided with October 12, 2005. These rough estimates are computed annually by the New Economics Institute of London and they show that we need the resources of 5.9 planets if all the citizens of the world were to live as we do in the US.

It is unconscionable in such a state of affairs to promote world trade and especially the Intra Industry Trade segment. This is the trade when say we export 100,000 cases of wine to Australia and turn around and import 100,000 cases of Australian wine. To me that is sheer ecological madness.

Another aspect of world trade that goes unreported on is the real story behind the rising carbon dioxide emissions in China.It is unquestionable that the Chinese have become the number one carbon emitters in the world but that is only because we and the Europeans have shifted so much of our production to China. As a result it appears that our carbon footprint has stabilized when in essence we have merely shifted the burden to the Chinese. Global problems call for global solutions shifting the problem to other states does not make it go away.

Carbon sequestration

Even when the Bush administration changes its view regarding the issue of global warming , as it has done last week, the standoff continues. That human economic activity is a major factor in the production of carbon is no longer as much of an issue as it once was. All parties are in agreement that it would be preferable to contain the rise in carbon concentration but how is that to be achieved is the issue. Some would argue that if higher concentrations of carbon is the major cause of climate change then we must produce less of it even if that means cutting down on our level of economic activities while others favour a less radical solution. Keep the level of economic activity where it is but devise new ways of sequestering the emissions. Another major difference that separates the US from the EU in their approach to global warming is that the EU and others favour mandates while the US wants only voluntary targets.
Note that for both carbon trading is fundamental. Actually the application of the ideas of Coase, a well defined property right, will play a major role in funding the next phase of economic development in Africa. I expect the EU and the US to rush and buy carbon rights from the African countries so that we may continue to inflict "grow and prosper". What a mess.

Renewable Oil!!!

Renewable Oil!!!

We have all become accustomed to all the talk about the energy crisis the world over. Prices of oil have more than doubled in just over a year , there are many theories that dependence on oil is ecologically damaging, hybrid cars have become the new badge of environmental awareness, wind farms for the production of electricity are spouting up all over the globe, solar collectors are being incorporated into new commercial buildings as well as residential ones, tar sands have made the Canadian province of Alberta into a global boom area, shale, nuclear and coal are expecting to experience substantial growth and the Thermal Depolymerization Process has plans to go global.

What’s TDP? It is a process that is too good to be true but all indications so far say that the process can deliver on the hype. Very simply it is a process that mimics nature by transforming hydrocarbons in any product into oil without having to wait the millions of years. Mix the hydrocarbon based waste with water and soil. Heat the mixture under very high pressure and presto waste becomes oil. The experimental plant in Missouri uses as its feed stock pig feet and Turkey innards from a Butterball Turkey plant. Production has been going on for almost three years and the plant has attained the scale whereby it is expected to become profitable later on this year.

This process can solve three major problems:
(1) Get rid of waste, any waste.
(2) Produce clean oil
(3)Reduce Global Warming

The first two are obvious but why should it reduce global warming? If the process becomes very widely spread then the oil it produces will not be adding new carbon to the atmosphere since it will in essence be reusing the carbon that is already above the earths surface. It will make oil a renewable commodity.

Does this sound as if it is a phantasy? I think that it is but then I have been wrong before.

Are CFL's worthwhile?

The typical light bulb, the incandescent one, was developed over a hundred years ago. It is just as inefficient today as it was then. The process of generating artificial light from heating a filament enclosed in a vaccum transforms around 90% of the energy consumed by the light bulb into heat and only 10% of the energy is used to generate light.

One alternative whose price per unit has dropped substantially is that of Compact Fluorescent Lamps, CFL's. These light bulbs will generate the same amount of light but consume only 25% of the energy of an incandescent device mainly because it is more efficient; much less heat is produced in the process. CFL's are not the only alternative to the incandescent, LED are even more promising but they are not as readily available nor as affordable yet.

Does the additional cost of a CFL present a barrier to its adoption? It should not. The following example should convince the skeptics to rush to WalMart and buy a few dozen CFL's. (WalMart is championing a national effort to sell over a 100 million CFL's through its 3000 stores in the US).

Assume that the Electric Utility Company charges the consumers $0.2 per KWH and assume that a household uses 10 light bulb for 200 hours. Furthermore assume that the 10 CFL's cost $25 to purchase while the incandescents cost only $5.00 If each light bulb of the regular variety uses 100 watts of power then the 10 incandescent light bulbs would consume 200 Kwh while the CFL will deliver the same lumens for the same time by consuming only 50 Kwh. Voila, the saving on the electricity bill over 200 hours will more than pay for the initial difference in the cost.

But is that the only reason to shift to CFL's? What if the cost of electricity is much lower and so one needs say 1000 or even 2000 hours in order to justify the initial cost. We should still go ahead and replace all our incandescents by CFL's because the resulting lower demand for electric power will translate into less coal being produced and burned. As a result less CO2 will be released into the atmosphere. That is the real savings behind such a switch.

TANSTAAFL

"There Ain't No Such Thing As A Free Lunch" is one of the most fundamental and most enduring ideas in Economics. Interestingly enough the above expression expresses the same principle that ecologists consider to be paramount; everything is connected to everything else.

When would the "shallow" environmentalist, the world over, start applying the lessons of their discipline ?Don't we have the right to expect a policy designed to be environmentally friendly to live up to its billings or have we gotten soused to sloppy thinking that we have become enamored of faddish behaviour, superficial thinking and yes, even the willingness to deceive.

To understand that ethanol is not a solution to the energy crisis and that it should not be encouraged is a no-brainer. Studies have demonstrated clearly that the production of ethanol from corn in the US uses more energy than the energy that is produced as an output in the process. Add to that the evidence that a strong mixture of ethanol in the fuel appears to be corrosive and the obvious fact that there is no infrastructure to transport ethanol and distribute it across the land and it becomes rather clear that this so called solution is actually one way to aggravate the problem. But if we are to gloss over all of the above glaring shortcomings of ethanol production there is no excuse for not having seen that the rush to grow more subsidized corn by the farmers can only create a shortage of other crops whose production is replaced by corn. And sadly this is exactly what has happened. The projected wheat crop in the US is going to be smaller than expected and that, combined with an Australian draught , has resulted in a major increase in the price of wheat. The future contract hit today an all time high of over $9 per bushel. The price has more than doubled since April.
Ironically the poor nations will suffer the most as a result of our misguided "environmental" policies. The poor will have to deal with a greater incidence of malnutrition, we will have higher food prices, rich ethanol producers , corroded internal combustion engines and no relief from the energy shortage. Oh what tangled webs we weave when first we practice to deceive.

A Bush Legacy

The following article appeared in the NYT . Please read and comment.



By JOHN M. BRODER

Published: September 9, 2007

WASHINGTON

EVERY president comes into office complaining about the 11th-hour judicial appointments and midnight regulations left on the White House doorstep by his predecessor. And every president turns around and does the same to his successor.

Adams did it to Jefferson. Teddy Roosevelt did it to Taft. Carter did it to Reagan. Bush I did it to Clinton. Clinton really did it to Bush II.

And now President Bush has his cabinet and staff busily writing far-reaching rules to keep his priorities on the environment, public lands, homeland security, health and safety in place long after the clock strikes midnight and his presidential limousine turns into a pumpkin.

With Congress in Democratic hands and his political capital all but spent by the Iraq war, Mr. Bush has scant hope of pushing significant domestic legislation through Congress. But he still controls the executive branch and can still accomplish much through regulation and executive edict.

Mr. Clinton found himself in much the same position in 1999, after surviving an impeachment trial but still facing a hostile Republican Congress. He put his minions to work scouring the federal rule books looking for ways to leave his imprint.

That led to a flurry of last-minute rule making that included declaring nearly 60 million acres of national forests off limits to logging and road building, significantly tightening the standards for arsenic in drinking water, increasing energy efficiency of appliances, reducing tolerance for lead in paint and soil and setting new rules for privacy of medical records.

“Starting in early 1999 we had people down in the White House basement with word processors and legal pads making lists of things we wanted to get done before we left,” said John Podesta, the White House chief of staff from late 1998 through the end of Mr. Clinton’s term.

“They’ve probably got people down there right now with chain saws and drilling rigs doing the same thing,” he added with a laugh. “I’m sure they’re going to want to have some impact as they walk out the door.”

One of Mr. Bush’s first official acts as president was to withdraw the Clinton regulations that had not yet been published in the Federal Register and delay the effective date of those that had. Some Clinton rules are still in dispute in the courts, but most eventually took effect unchanged, in part because the process of unwriting a federal regulation is as complex and time consuming as writing one.

The Bush White House has already issued new rules on an important environmental matter. The federal Office of Surface Mining last month announced regulations that it says clarify the rules on so-called mountaintop mining, in which the tops of Appalachian mountains are dynamited away to get at coal seams beneath. The new rules allow mining companies to continue to dump the excess rock and soil into valleys and streams.

Earlier this summer, the Environmental Protection Agency and the Army Corps of Engineers issued regulatory guidance to field officers that officials say brings some certainty to wetlands standards, after a confusing 2006 Supreme Court ruling. But critics say the move will lead to the destruction of thousands of acres of wetlands. The government guidance will be reviewed early next year after a period of public comment.

THE E.P.A. is currently contemplating a rule that would modify the Clean Air Act’s procedures for measuring emissions from new power plants in areas with the cleanest air, including park and wilderness areas. Democrats in Congress and environmentalists say it would allow soot and smoke from coal-burning plants to muddy the air in and around many national parks. The agency is also working on two other major air quality rules to be issued next year, regarding ozone and airborne lead particles.

The E.P.A. also recently issued a study concluding that the health and environmental dangers from toxins emitted from oil refineries are low enough that no further controls are needed.

The administration is pursuing some actions that are widely seen as pro-environment as well, including the creation of a marine reserve in the Hawaiian Islands and a multibillion-dollar program for enhancement of national parks.

On health care, the administration issued guidance last month that will make it more difficult for states to expand the Children’s Health Insurance Program to cover children in middle-income families. The policy has no expiration date, but Congress could override it and allow states to apply for waivers to set more generous coverage standards.

The administration is also preparing new regulations likely to be published next year on airline security, mine-worker protections and automobile safety and fuel efficiency, White House aides said.

Although many of these new rules may not take effect until the last days of the Bush administration or the first days of the next presidency, White House officials say they are the result of a deliberate and patient process, not the “Cinderella syndrome” of rushing to act before the next Inauguration Day.

“Every administration does it,” said Susan E. Dudley, head of the Office of Information and Regulatory Affairs, the White House agency that oversees rule making throughout the executive branch. “It doesn’t matter the party the president comes from or who controls Congress. While I’d like to say this administration won’t, I have to accept that we’ll likely see an increase in activity toward the end of our time here.”

Ms. Dudley came to the White House this spring from the pro-business Mercatus Center at George Mason University under a recess appointment. Her appointment was vigorously opposed by Democrats in Congress and many environmental and consumer groups.

Ms. Dudley, an expert on government who has studied the midnight regulations phenomenon, said that she hoped to avoid what she called the “slapdash” approach of the Clinton administration after the 2000 election.

“It may be that an increase in regulatory activity is inevitable at the end of an administration,” she said, “but we’re determined to do it right, based on the best science and the best technology, with ample opportunity for the public to get involved.”

Philip Clapp, president of the National Environmental Trust, a conservation group, said that the Bush administration is working on both formal regulations and a series of arcane procedural changes that have the effect of centralizing executive authority and making it difficult for Congress or a subsequent president to undo them.

“If you want to have the regulations in place when you leave office in 2009, you have to start now, “ Mr. Clapp said. “It’s a way for an administration to have life after death.”