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Contemptuous
05-03-08, 04:13 AM
iTulipers jeering at comments from people like Stephen Leeb about the manifest, historically ascertained, even quite banal reality of resource depletion seem almost childish compared to the serious glance taken at the topic of just one commodity - uranium depletion, in the article below. People making rash statements here about "doomers" are using sloppy, vague, opinionated terms like "doomertainment" while elsewhere they are talking glibly about vague unspecified "new technology" that will produce the energy we will be using in the first quarter of the 21st Century to replace petroleum estimated to amount to close to half what the world uses today. A vage reply to this is worthless. If you have a claim about nuclear energy, then debunk this author just for starters! These same easychair critics leave large unanswered questions as to what replaces petroleum in the next 25 years, while they grin and quip affably about the "foolishness" of the rest of us, who worry precisely about how terribly vague you all sound.

How many iTuliper's know in any even sketchy detail, that there are real issues with scaling Uranium production up even remotely adequately to handle what you so dreamily imagine will be mankind's replacement for oil in 25 years? Just who is it here who is demonstrating the beginnings of a grasp of the parameters of the issue? Do we have a grasp of how many BTU's we are talking of replacing in one half of today's global oil consumption? The comments alone seem so grossly simplistic. Here are people, in what presumes to be a community full of genuine skepticism and the spirit of probing curiosity - smirking and kidding around, and yet offering nothing even remotely equivalent to a quantitative reply to the simple question - it is all scoffing conjuring up 5000 notional nuclear reactors that "will get built" within 25 years to replace the equivalent of half of today's petroleum consumption.

Lots of posturing and easy jibes - and "doomertainer" has a nice sardonuic ring to it - very jaunty indeed - while no-one in this little community seems to have a clue that the replacement of all that petroleum by ANY energy - let alone URANIUM - is even assured in this short span of time. Read this brief excerpt from The Oil Drum and then cast your eyes on the pathetic response to Stephen Leeb's expression of vivid concern - which is being most rashly disparaged by people who have utterly failed to offer any detailed alternative more specific than an arm wave towards "human ingenuity". iTulipers come off looking uninformed, opinionated, reactive, even mildly spiteful in a petty fashion, towards any observer having the temerity to speak up on these issues.

Altogether a pathetic, misinformed display here - read even just this cursory overview of the gaping open questions about energy - what will or can step in to provide that 50% of current global annual petroleum consumption in a scant 25 years as 3 billion people inexorably industrialize - whether there is even sufficient Uranium to power the Jetsons future you imagine all rational people must normally envision as "just around the corner". It's easy to see from just skimming through this one article, how utterly inappropriate the smirks here have been regarding Stephen Leeb's own reference to the seriousness of these issues. Doomertainment indeed. Doubtless a real intellectual high point among all the debates on this website.

_______________

Uranium Depletion and Nuclear Power: Are We at Peak Uranium? - Posted on The Oil Drum - on March 21, 2007 - 12:00pm - Miguel Torres

ORIGINAL ARTICLE HERE: http://www.theoildrum.com/node/2379

A ecent post by Martin Sevior has invigorated the nuclear energy debate causing over 240 comments with the most diverse opinions. I would like to further pursue this debate, as the question of whether nuclear power can provide a big part of the worlds energy needs is extremely important in the Peak Oil debate, because it is the only alternative energy source beside coal providing the type of electricity production necessary for the current electric grid model: big, base-load capable power plants. If that role is fulfilled, the current electricity production system can continue beyond Peak Oil, and even expand to provide the energy necessary for electrified transport. If it falls short, a new energy model is needed.

<!-- close summary -->To anyone seeking the truth about the issues surrounding nuclear energy, the situation is extremely frustrating. There are two camps stating opposing claims. On the one hand, the environmentalists dislike everything nuclear, and on the other hand the nuclear industry paints an overly rosy picture where all problems are solvable, or non-issues at all. Whom should we believe?
Because Martin Sevior has portrayed the view of the nuclear industry, this post will explain what the other camp has to say. While I could address his post point by point, it would result in a very large article that nobody would read. So I have opted to first answer just one point, Uranium production, which I chose both because it is most similar to the PO depletion theme, readers should be familiar with some of its challenges, and because a new study sheds new light on it.

The biggest issue I have with nuclear energy proponents, including some members of TOD community, is that they just repeat what the nuclear industry sales men say. A good example is the post by Martin Sevior. It repeats their arguments without a shadow of doubt nor criticism. The same highly educated, Peak Oil literate individuals who know about OPEC resource mis-reporting, and can tell the difference between KSA reserves and Canada's, the difference between light crude oil and tar sands and know who Yergin and CERA are, believe all the arguments of the nuclear industry word by word. Why that is so, I do not know.

TODers should know that even though Canada now has greater stated reserves than KSA, tar sands will never reach OPEC production volumes. Reserves, and R/P ratio is not the same as a production profile, which produces a peak well before complete exhaustion. Uranium, like any other resource, can't be mined at any desired rate, nor every last drop or ounce of the resource can be mined. No matter the technology, at some point it is just not worth it to mine lower grade ores. While energy balance analysis are complicated and a discussion about it would only bring controversy, another way of putting it is more easily grasped. For any mined ore, the lower the grade, the higher the material throughput you need to process. There is always a limit. And despite what the nuclear industry might tell you, for Uranium too.

The materials throughput (not unrelated to the energy needed) is inversely proportional to the ore grade for any mined material: To extract 1 kg of uranium out of 1% ore containing material needs the processing of 100 kg. Extracting the same amount from 0.01% ore needs the processing of 10,000 kg. You can easily see that even if, for the sake of the argument we assume that the EROEI of nuclear energy for all ore grades is positive, there are physical limits to the production throughput Uranium production can ever reach. So what should be done is not just to list possible Uranium reserves, but also to analyze the maximum throughput attainable by the mining industry. That is: The Uranium production profile for the world.

The recently formed Energy Working Group has recently published a paper titled URANIUM RESOURCES AND NUCLEAR ENERGY (http://www.lbst.de/publications/studies__e/2006/EWG-paper_1-06_Uranium-Resources-Nuclear-Energy_03DEC2006.pdf). I will now explain their work. All figures and quotations are taken from this paper.

About the Energy Watch Group


This is the first of a series of papers by the Energy Watch Group which are addressed to investigate future energy supply and demand patterns. The Energy Watch Group consists of independent scientists and experts who investigate sustainable concepts for global energy supply. The group is initiated by the German member of parliament Hans-Josef Fell.SUMMARY

Any forecast of the development of nuclear power in the next 25 years has to concentrate on two aspects, the supply of uranium and the addition of new reactor capacity. At least within this time horizon, neither nuclear breeding reactors nor thorium reactors will play a significant role because of the long lead times for their development and market penetration. This assessment results in the conclusion that in the short term, until about 2015, the long lead times of new and the decommissioning of ageing reactors perform the barrier for fast extension, and after about 2020 severe uranium supply shortages become likely which, again will limit the extension of nuclear energy. I won't discuss the first point here (you may read the whole study, if you so wish) and I will concentrate on the Uranium supply.

Uranium Supply

This study uses the same data as the post by Martin Sevior. What he labels "Additional recovarable Uranium" is in reality "undiscovered resources prognosticated" and "undiscovered resources speculative". They are very unreliable data, considered by the study too speculative and with a very low probability of ever being brought into production. While some quantity in that category will be eventually mined, it wouldn't matter much in the time-frame considered.

<CENTER>http://www.theoildrum.com/files/Uranium_Resources.png (http://www.theoildrum.com/files/Uranium_Resources.png)
Figure 1: Reasonably assured (RAR), inferred (IR) and already produced uranium resources </CENTER>
About 2.3 million tons of uranium have already been produced. Reasonably assured resources below 40 $/kgU are in the range of the already produced uranium. At present reactor uranium demand of about 67 kt/year these reserves would last for about 30 years, and would increase to 50 years if the classes up to 130 $/kgU were included. Inferred resources up to 130 $/kg would extend the static R/P ratio up to about 70 years. [...] However, the production profiles and reported reserves of individual countries show major downward reserve revisions in USA and France after their production maximum was passed. These downward revisions raise some doubts regarding the data quality of reasonably assured resources. It will surely be interesting for TODers to have a look at the depletion curve for uranium in France. It clearly shows that uranium does deplete in a manner not entirely dissimilar to oil.
<CENTER>http://www.theoildrum.com/files/Uranium_Production_In_France.png (http://www.theoildrum.com/files/Uranium_Production_In_France.png)
Figure A-3: Uranium production in France </CENTER><CENTER></CENTER>According to the latest NEA statistics the "inferred resources between 80 and 130 $/kgU" still amount to about 11 kt. Now, the interesting thing is that "reasonably assured" and "estimated" resources estimates were increasing as long production was increasing, but as peak was reached, resource estimates were significantly downgraded.

While the USA is not nearly completely depleted like France is, the analysis of historical resource reports reveals similar patterns like the ones shown for France before. Shortly after reaching the production peak, in 1983 the "reasonably assured and inferred resources" where downgraded by 85%, a decline of almost 1,000 kt. The implication is that the reserve reporting practices are not "transparent" and "understated" as the nuclear industry will tell you.
This happened at a time when exploration expenditures reached their highest level. Though the reasons for the production decline in the USA could be manifold, this strong correlation between declining production and downgraded resources is at least interesting. Therefore it is possible that production was declining because of a lack of resources. Apart from this observation, a decline of "reasonably assured resources" is hard to understand, this is to say that in fact the formerly stated resources were not "reasonably assured" after all. A known discovered resource was converted into an unknown undiscovered resource: this does imply that the reporting practice of known resources is highly questionable and unreliable. A decline of 1,000 kt is a relevant quantity which reduces the static R/P-ratio (at 50 kt production) by 20 years. Back to the big picture. At present, of the current uranium demand of 67 kt/yr only 42 kt/yr are supplied by new production, the rest of about 25 kt/yr is drawn from stockpiles which were accumulated before 1980.
If the present reactor capacity remains constant, the annual demand amounts to 67 kt/yr. If the annual production amounts to 45 kt and if 22 kt are taken from stocks, then stocks will be exhausted by 2015 (possible changes due to uranium enrichment and MOX fabrication are marginal). The continuing consumption of 67 kt/yr exceeds the reserves below 40 $/kgU by between 2030 and 2035. The inclusion of reasonably assured resources below 130 $/kgU would exhaust these resources by around 2050. Even the inclusion of the inferred resources below 130 $/kgU would lead to exhaustion of resources by around 2070. But as any Peak Oiler knows, ultimate reserve exhaustion is not the only important thing. Throughput is as important. Uranium production lends itself to a bottom-up approach to production forecasts probably better than oil.


<CENTER>http://www.theoildrum.com/files/World_Uranium_Production.png (http://www.theoildrum.com/files/World_Uranium_Production.png)</CENTER><CENTER>




Figure 6: History and forecast of uranium production based on reported resources. The smallest area covers 1,900 kt uranium which have the status of proved reserves while the data uncertainty increases towards the largest area based on 4,700 kt uranium which represents possible reserves. </CENTER><CENTER></CENTER>
So it looks like Peak Uranium for this reserve estimates arises before 2040 at the latest, even though reserves will still be available beyond 2100.

In Annex 9 we find a Country by Country Assessment of Future Production Profiles Based on Resource Restriction (According to NEA 2006). Essentially the same as before but with individual countries represented.


In order to ensure the continuous operation of existing power plants, uranium production capacities must be increased considerably over the next few years well before the stocks areexhausted. Rising prices and vanishing stocks have led to a new wave of mine developments. Actually, various projects are in the planning and construction stage which could satisfy the projected demand if completed in time. Annex 7 lists the mines which are planned to be in operation by the indicated years according to the Nuclear Energy Agency (NEA 2006).


In total, about 20 kt/yr of additional production capacity are expected by 2010. This would increase the present capacity from about 50 kt/yr to 70 kt/yr, enough to meet the current demand once the stocks are exhausted. However, it is very likely that new mining projects experience cost overruns and time delays which raises doubts whether the production capacities can be extended in time. These problems can be observed e.g. at the development of the Cigar Lake project which is supposed to produce about 8 kt/yr U3O8 (equivalent to 6.8 ktU) starting in 2007. In october a severe water inflow occured wholly flooding the almost finished mine. At present it is very unclear whether the project can be developed further (more details are given in Annex 8). The black line represents the uranium demand of nuclear reactors which in 2005 amounted to 67 kt.


The forecast shows the uranium demand until 2030 based on the forecast of the International Energy Agency in 2006 in its reference case (WEO 2006). Taking account of the uncertainty of the resource data it can be concluded that by between 2015-2030 an uranium supply gap will arise when stocks are exhausted and production cannot be increased as will be necessary to meet the rising demand. Later on production will decline again after a few years of adequate supply due to shrinking resources. Therefore it is very unlikely that beyond 2040 even the present nuclear capacity can still be supplied adequately. If not all of the reasonably assured and inferred resources can be converted into produced volumes, or if stocks turn out to be smaller than the estimated 210 kt U, then this gap will occur even earlier.


Now if you take into account that nuclear energy produces 16% of world electricity, and less than 5% primary energy supply, it seems impossible to me for nuclear energy with current technology to ever satisfy a big part of the world's energy demand.


This study may have flaws, but so far it is more convincing to me than the position of the nuclear industry, which regards Uranium as mineable without limits. If you believe some, we could mine it form the earth's crust, from sea water, ... or use breeders. And if all fails we have thorium. That is not serious. Being able to do it, even to technologically demonstrate it is not the same as doing it. We can extract gold from sea water too. While all those possibilities may be workable in the future, they could just as well not be viable. You cannot bet your energy future, the biggest investment society has to make, on such assertions. You may as well choose fusion.


There is a real posibility that Uranium supplies will not be sufficient for an expansion nuclear energy capacity and I am concerned that the reserve reporting practices could be too optimistic. Breeders, Thorium and such, whether workable or not are another matter not discussed here. I'll be glad if the members of the TOD community that evangelize nuclear fission step up to the challenge and criticize or outright debunk this study. That way, between all the highly educated people in the community we may even reach a conclusion on the Uranium resource question.


On a closing note, Raise The Hammer (http://www.raisethehammer.org/index.asp?id=22) has posted an interview with Richard Heinberg, known for The Oil Depletion Protocol (http://www.oildepletionprotocol.org/) and his books The Party's Over and Powerdown (http://www.raisethehammer.org/index.asp?id=023), where he gives a hint about the second study of the Energy Working Group. Apparently they consider coal reserves to be as overestimated as Oil and Uranium reserves. Heinberg also states that he is tracking an independent Dutch study-in-progress reaching the same conclusions (for coal).
Ryan McGreal, Raise the Hammer: Coal is cheap and abundant. Other than the fact that it would increase CO2 production, can countries resist ramping up coal-to-liquids programs to replace declines in conventional oil?
Richard Heinberg: Actually, future global coal production is routinely overestimated. That, at least, is the conclusion of an as yet unpublished study by the Energy Watch Group of Germany. That team has found that in the countries where coal reserves are well reported, the size of resources has been downgraded dramatically in recent years. There are other countries that have not changed reserves reports for decades, and it appears that those numbers are probably even more inflated than oil reserves numbers for OPEC.
The study concludes that global coal production will peak in 10 to 20 years. I'm tracking a Dutch study-in-progress where the researchers are using different criteria, and their preliminary results confirm the German study.
All of this has enormous implications for the climate debate (which is mostly about coal) as well as discussions about substituting coal-to-liquids for diminishing oil. Ultimately we are facing not just a liquid fuels crisis, but a general energy crisis. Miquel Torres has a degree in Physics from the University of Valencia, he currently lives in Germany and works in secondary education and in the field of energy investment.

Starving Steve
05-03-08, 03:45 PM
Driving around Aromas, California ( near Watsonville ) this Saturday morning, May 3rd, I found myself to be just about the only person on the road. Eleven AM, and no-one was on the road--- as if everyone had died. I passed the gas station in Aromas, and the sign proclaimed $4/gallon gas and worse.

I had gone out to look at a house foreclosure--- in a vast sea of foreclosures and unsold properties that were not to have happened in California but did, in fact, just happen. And then when I got home again, I stumbled upon this article here at itulip discussing the times--- whatever you call these times: "the Greater Depression", "the Reckoning", "the Bush-Greenspan-Bernankee Disaster," "the End of Oil", "Peak Oil," "Eco-fraud Rule," whatever?

My simple-minded understanding of the future is that we could have about 100 years of uranium to use in reactors if we use our heads--- something heretofore, that we have not done. We could RE-PROCESS depleted uranium from power plants and re-use it for a while longer. This will take some PLANNING by GOVERNMENT and industry, regardless of what the eco-frauds might have to say about our energy future.

So the best case would be that we might have a century of breathing space to prepare for a different energy future, perhaps one in which fusion power makes its debut.

As far as other futures are concerned, solar power looks like a joke. Wind looks like another joke. Sugar-cane ethanol may be an alternative, but a viable bio-fuels programme is going to take years of planning and direction from government.... Why did the Bush Administration fall in love with corn ethanol?

Meanwhile, the energy crisis is on now, and that means a solution now. So, that means, nuclear power by fission for another century. That means re-processing fuel rods and mining uranium. That means building atomic power plants nearly everywhere. And this future means conservation too; for example, shipping could be done by rail again, not trucks, no matter how convenient trucking may be.

The short-term future is definitely: rail, sugar-cane ethanol, nuclear fission, and conservation. Clean coal might help too. And the long-term future may be a fusion break-through, at least, let us hope so.... Meanwhile, stay tuned for $200 oil; that comes next.

Olduvai
05-03-08, 03:46 PM
It's worse.
In most studies the declining EROeI of fossil or nuclear energy is not taken into account. This means that NET energy is declining even if the same amount of energy is mined or drilled.
Even if, for example, the same amount of oil is pumped from one year to the next the NET energy gain is declining.
Just to maintain the same energy from year to year you have to mine/drill ever increasing quantities to get the same NET energy gain.
This goes to the point when NET energy approaches zero and remaining
recources are left in the ground as they bring no NET energy gain.

Peak total energy already in our rearview mirror.

Contemptuous
05-03-08, 03:56 PM
It's worse.
In most studies the declining EROeI of fossil or nuclear energy is not taken into account. This means that NET energy is declining even if the same amount of energy is mined or drilled.
Even if, for example, the same amount of oil is pumped from one year to the next the NET energy gain is declining.
Just to maintain the same energy from year to year you have to mine/drill ever increasing quantities to get the same NET energy gain.
This goes to the point when NET energy approaches zero and remaining
recources are left in the ground as they bring no NET energy gain.

Peak total energy already in our rearview mirror.

Olduvai - Good luck trying to explain this to people like GRG55 (or EJ too for that matter).

EJ
05-03-08, 05:16 PM
Olduvai - Good luck trying to explain this to people like GRG55 (or EJ too for that matter).

http://www.itulip.com/images/energyintensity.gifTaking a long-term perspective, and using the simple Energy/Gross Domestic Product (E/GDP) ratio, the amount of energy needed to produce a dollar's worth of goods and services in the U.S. economy fell by more than half between 1949 and 2004. The nation's output of goods and services, as measured by inflation-adjusted Gross Domestic Product (GDP), increased more than six-fold, from $1.63 trillion to $10.75 trillion over the period. Total energy consumption increased three-fold, from 32 Quadrillion British thermal units (QBtu) to slightly less than 100 QBtu. As a broad measure of energy intensity, the ratio of energy to GDP (E/GDP ratio) declined by 47% over this 55-year period. These long-term trends are illustrated by indexes, relative to 1985, in Figure 1.

This entire period, however, can be better understood by considering three sub-periods. In the period up to the Organization of Petroleum Exporting Countries (OPEC) oil embargo (1949 through 1973), total energy consumption generally grew slightly slower than GDP. Corresponding to this trend, energy intensity (measured by the E/GDP ratio), declined by 11%. The 1973-1974 oil embargo and subsequent price shocks of the late 1970s and early 1980s encouraged energy conservation and efficiency improvements in all sectors of the economy. Between 1973 and 1985, the E/GDP ratio decreased by 28%. Oil prices fell sharply in 1986, accelerating price declines in all fuels whose prices had peaked in the early 1980s. In spite of this development, after 1985 the E/GDP ratio has continued to decline, dropping another 26% by 2004. Translating these declines into annual average rates indicates that up to 1973, the E/GDP ratio declined at about 0.5% per year; between 1973 and 1985, it declined about 2.7% per year; and between 1985 and 2004, it declined 1.6% per year. - US Dept. of Energy (http://intensityindicators.pnl.gov/total_highlights.stm)

Provisional iTulip forecast: As oil prices rise to $300 between 2008 and 2018, the energy intensity of the US economy with respect to the transportation sector will decline by more than 80% from 0.8 to 0.16 with an intermediate goal of 0.4 by the end of 2012.

Starving Steve
05-03-08, 05:29 PM
I always like the bottomline, so this question pops into my mind:

If North America becomes more efficient in its use of energy in the next few years and less energy is used to produce GDP, does that mean that our standard of living will not go down the toilet?

Just give me the bottomline answer to this question because the roads around me in Aromas, California are empty to-day--- as if everyone died. It is as if everything has gone to hell.

Starving Steve :confused:

FRED
05-03-08, 06:13 PM
I always like the bottomline, so this question pops into my mind:

If North America becomes more efficient in its use of energy in the next few years and less energy is used to produce GDP, does that mean that our standard of living will not go down the toilet?

Just give me the bottomline answer to this question because the roads around me in Aromas, California are empty to-day--- as if everyone died. It is as if everything has gone to hell.

Starving Steve :confused:

EJ writes in:

US energy intensity declined over 50% since 1949. Has our standard of living gone down the toilet?

Assuming your fellow Californians were not abducted by aliens, let's speculate on what they are doing instead of wasting time sitting in traffic or money buying crap they don't need at the mall.

Home hanging out with family and friends? Watching a movie? Eating a cheap, healthy home cooked meal instead of an expensive, salty, sugary, greasy restaurant meal? Reading a book? Posting a message on an Internet forum?

Contemptuous
05-03-08, 07:06 PM
Provisional iTulip forecast: As oil prices rise to $300 between 2008 and 2018, the energy intensity of the US economy with respect to the transportation sector will decline by more than 80% from 0.8 to 0.16 with an intermediate goal of 0.4 by the end of 2012.

EJ - are you also using energy consumption charts of the US, in the scond half of it's industrialisation, as a template for projecting global trends? As far as I can discern, that would lead to a series of errors in the global context. A) We can't use a US chart to project a global trend because it is a mature economy, and all mature economies exhibit declining energy consumption relative to unit of GDP, and B) you omitted to include for reader understanding the energy trajectory typical of emerging economies - which is instead massively spring loaded towards robust increases in global energy consumption which completely cancel out and go on to overwhelm US consumption declines. The early charts of US energy use per unit of GDP as well as those of any early industrialising country evidence soaring energy consumption.

The industrialising world outnumbers the OECD world by 3-1 or more demographically and these countries economic activities have a lot less to do with 'telecommuting" than do the G7 for example. In the 21st Century a typical G7 business traveler comprises a tiny subset of future energy consumers. The mere fact of couching a description of global future energy consumption in terms of telecommuting evidences a focus firmly upon the mature economies and giving little weight to the fact that 3 to 1 the future energy consumers are elsewhere. A commodity producer working in Brazil, Africa or Papua New Guinea not just today,but for the next 25 years, has little use for telecommuting or the "service economy" we are engrossed with. They will have lots and lots of use for heavy and mid-range industrial equipment, and lots and lots of transport - and they are working in vast and remote parts of the world where the ubiquitous wall plug we consider part of every "normal" landscape does not even exist. They will be primarily interested in one thing alone to grease their economic growth - petroleum, or energy with a kick to it that's equivalent - and lots of it!

Starving Steve
05-03-08, 08:54 PM
EJ writes in:
US energy intensity declined over 50% since 1949. Has our standard of living gone down the toilet?


Assuming your fellow Californians were not abducted by aliens, let's speculate on what they are doing instead of wasting time sitting in traffic or money buying crap they don't need at the mall.


Home hanging out with family and friends? Watching a movie? Eating a cheap, healthy home cooked meal instead of an expensive, salty, sugary, greasy restaurant meal? Reading a book? Posting a message on an Internet forum?

Although one weekend of Californians sitting at home at sharing a meal or a movie with friends and loved-ones would not mean a drop in the standard of living, every weekend of such (from now on) would mean failed-businesses and closed-up restaurants, a drop in tax receipts, and a trend to general depression.

No, we don't have to drive Hummers, but we do have to drive something---- and, I do not mean bicycles. Otherwise, the drop in our standard of living is going to be horrendous.

Unless I am missing something here, going down the toilet is not really an option.....And really, the politicians of all political parties need to get this message: Economic decline with food shortages, energy shortages, inflation, and hard times is NOT going to be an option.

bart
05-03-08, 09:41 PM
How many doomsters does it take to screw in a light bulb?
None. ("That's all right...I'll just sit here in the dark...")


... and for an encore:
How many libertarians does it take to change a light bulb?
Libertarians never change light bulbs, because someone might enter the room who wants to sit in the dark.

Finster
05-09-08, 02:55 PM
How many doomsters does it take to screw in a light bulb?
None. ("That's all right...I'll just sit here in the dark...")

Hmmm ... sounds like a finster in one of his 'darker' moments ... or perhaps a stormy night in the bart cave ... ;)

bart
05-09-08, 03:42 PM
Hmmm ... sounds like a finster in one of his 'darker' moments ... or perhaps a stormy night in the bart cave ... ;)

Indubitably so... and the bart cave is only lit by monitors anyhow... ;)


http://www.nowandfutures.com/grins/trading_room.jpg





And just so I stay on topic, an oldie & goodie:


How many California blonds does it take to screw in a light bulb?

None - California blonds screw in a hot tub.

Shakespear
05-10-08, 06:18 AM
This analysis may give you guys a better picture of the HC usage problem.

http://www.financialsense.com/editorials/mckillop/2008/0507.html

Any changes in US consumption will have little impact on future demand for oil, the demand growing in the East is the driver now.

metalman
05-10-08, 10:29 AM
This analysis may give you guys a better picture of the HC usage problem.

http://www.financialsense.com/editorials/mckillop/2008/0507.html

Any changes in US consumption will have little impact on future demand for oil, the demand growing in the East is the driver now.

not only the east but oil producing countries. greg's explained it... and this graph shows oecd demand falling. greg's been telling us for a while that opec is at the edge and every time a country like nigeria falls behind, output lags. there's no spare capacity, and the saudi's don't have it. like this... why are the saudi's decreasing output with oil over $100? on purpose? don't make no sense.

Platts Survey: OPEC Pumps 31.87 Million Barrels per Day of Crude Oil in April, Down 350,000 b/d (http://www.foxbusiness.com/story/markets/industries/media/platts-survey-opec-pumps--million-barrels-day-crude-oil-april--bd/-885443875)

LONDON, May 09, 2008 (PR Newswire Europe via COMTEX News Network) ----The 13 members of the Organization of Petroleum Exporting Countries (OPEC) pumped an average 31.87 million barrels per day (b/d) of crude oil in April, a 350,000 b/d decrease from March, according to a Platts (http://www.platts.com/) survey of OPEC and oil industry officials released Friday. The sharp drop was largely the result of steep output losses in Nigeria.

Excluding Iraq, the 12 members which participate in output agreements pumped an average 29.49 million b/d, 360,000 b/d down from an estimated 29.85 million b/d in March.

"OPEC production has been relatively steady in recent months, but the sharp fall in Nigerian output shows how vulnerable overall supply from the group can be to developments in one country," said John Kingston, Platts global director of oil. "Given that spare capacity is also relatively tight, any disruption has a bigger impact on markets."

Ongoing losses in Nigerian supply as a result of continuing strife in the Niger Delta were exacerbated by a week-long pay strike at ExxonMobil, which shut down most of the company's 800,000 b/d of production and forced it to declare force majeure on exports from the 400,000 b/d Qua Iboe terminal.

Other smaller decreases came from Angola, Iran, Qatar, Saudi Arabia and Venezuela.

Iraqi volumes were a shade higher at 2.38 million b/d, with a slight dip in exports offset by slightly higher internal supply. Libyan output also edged up, to 1.75 million b/d from 1.74 million b/d in March.

The latest estimates show the OPEC-12 missing their 29.673 million b/d output target by 183,000 b/d.

Finster
05-10-08, 01:01 PM
...

Folks, it looks like we are also going to have to cobble up a theory of Peak Cotton, Peak Copper, Peak Wheat, Peak Lead, Peak Cocoa, Peak Gold, Peak Orange Juice, Peak Pork Bellies ...

Because there is nothing special going on with the price of oil. Here is a chart that graphically shows the relationship between the oil price and the price of a basket of commodities. Rather than address the question of "How many dollars does it take to buy a barrel of oil", it asks the question "How many bales of cotton, pounds of copper, bushels of wheat ... etceteras does it take to buy a barrel or oil". Specifically, you are looking at the entire history of the oil price versus the DJAIG Spot Commodity index from inception through last quarter ... a logarithmic plot of the oil price divided by the DJAIG.

Oil As Priced In Real Stuff

http://users.zoominternet.net/~fwuthering/Posts/OilAsPricedInRealStuff199100200825.png

Either that, or we could just step back for a minute and ask ourselves: What is the common denominator in all these prices?

We quote the price of oil in dollars per barrel. We quote the price of cotton in dollars per bale. We quote the price of copper in dollars per pound. And this is the way all of the commodities in the DJAIG basket are priced in the calculation of the dollar denominated index.

If you want to know what is really going on with the price of oil in dollars, you have to look at the dollars. Here I've done the same thing with dollars as I did with oil in the above chart. Same time frame. Simply asked the question what is the value of the US dollar in terms of real stuff? This is just taking the question posed by the DJAIG and turning it around. Rather than asking how many dollars it takes to buy its basket of commodities, we ask how much commodities it takes to buy a dollar. Just take the reciprocal of the DJAIG Spot, plotted log.

We find that the value of the USD is simply falling off a cliff.

USD As Priced In Real Stuff

http://users.zoominternet.net/~fwuthering/Posts/USDAsPricedInRealStuff199100200825.png

So either we must come up with an array of Peak X theories to explain the similar price action for all of these different physical commodities - or - we look to a single common denominator for the answer.

We report. You decide.

metalman
05-10-08, 01:08 PM
have to dig it up but somehere ej makes the case that the 1970s "oil embargo' was about opec shipping oil to the usa through intermediaries. plenty of oil but at high prices. today i find...

Gas jumps above $3.67, oil passes $126 on Venezuela concerns (http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD90IO2SG0)

On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia's government. Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela's leader to arm guerillas. That appears to heighten the chances that the U.S. could impose sanctions on one of its biggest oil suppliers.

"If we put on sanctions, I'm sure Chavez would threaten to cut off our oil supply," said Phil Flynn, an analyst at Alaron Trading Corp. "Obviously that would have a major impact on oil prices."

Even if Chavez cut oil shipments to the U.S., Venezuelan oil would still make its way to the U.S. via middle men, who would buy it from Venezuela and resell it to the U.S., Flynn said. But that new layer in the supply chain would bump up costs.

--

he also made the point that "opec was blamed but the us had to print the money to pay for the oil" or something along those lines.

bang! we have a match. peak cheap oil means the usa has to print more money to pay for the oil, leading to inflation in the prices everything.

that's what ka-poom theory says, no? print money to cover the debt deflation but blame it on opec?

Finster
05-10-08, 01:47 PM
I won't presume to speak for ka-poom theory, but some historical perspective is worth keeping in mind. In the 1960s a two decade bull market in stocks topped out. Going into the 1970s we had been going through a series of currency crises in which the US government found itself increasingly unable to exchange gold for dollars in the international market per Bretton Woods. It had been paying for the Vietnam-era guns and butter polices with inflation, and dollars were piling up overseas. Those currency crises finally culminated with the closing of the gold window in August of 1971. This was the final step in liberating the US monetary authorities from the gold shackles that periodically constrained them since the founding of the republic.

Within a few years, every one was talking about "oil depletion" as commodity prices soared. It reached mass hysteria proportions by the end of the decade. Finally, Paul Volcker at the Federal Reserve adminstered shock treatment to the inflation, hiking interest rates to 20%, putting on credit controls, and halting money supply growth. Within a few more years, "oil depletion" had been forgotten about, and by the 1990s we were talking about an "oil glut".

In the 1990s a two decade bull market in stocks topped out. The Greenspan Fed had been underwriting it with monetary expansion since the 1987 Crash. When the bubble finally burst in 2000-2002, several trillion dollars of paper stock market wealth evaporated. Many financial commentators worried openly about deflation, and even Ben Bernanke at the Federal Reserve authored a paper on how to deal with deflation. Greenspan responded to the threat by running Fed funds all the way down to 1% and holding them for a protracted period of time, and then only normalizing them in a series of well-telegraphed rate hikes, saying "...policy accommodation can be removed at a pace that is likely to be measured". This put an implicit ceiling on future Fed rate policy and encouraged credit market speculation. Money supply expanded rapidly and credit creation soared. In 2002, commodity prices began to rise in earnest. The government embarked on a guns-and-butter policy, and Americans borrowed and spent like never before. Dollars were piling up overseas.

By 2005, the "oil depletion" theme of the seventies had been revived under the name of "peak oil". Now, in 2008, it is again approaching a state of mass hysteria...

jk
05-10-08, 07:34 PM
...

Folks, it looks like we are also going to have to cobble up a theory of Peak Cotton, Peak Copper, Peak Wheat, Peak Lead, Peak Cocoa, Peak Gold, Peak Orange Juice, Peak Pork Bellies ...

Because there is nothing special going on with the price of oil. Here is a chart that graphically shows the relationship between the oil price and the price of a basket of commodities. Rather than address the question of "How many dollars does it take to buy a barrel of oil", it asks the question "How many bales of cotton, pounds of copper, bushels of wheat ... etceteras does it take to buy a barrel or oil". Specifically, you are looking at the entire history of the oil price versus the DJAIG Spot Commodity index from inception through last quarter ... a logarithmic plot of the oil price divided by the DJAIG.

Oil As Priced In Real Stuff

http://users.zoominternet.net/%7Efwuthering/Posts/OilAsPricedInRealStuff199100200825.png

Either that, or we could just step back for a minute and ask ourselves: What is the common denominator in all these prices?

We quote the price of oil in dollars per barrel. We quote the price of cotton in dollars per bale. We quote the price of copper in dollars per pound. And this is the way all of the commodities in the DJAIG basket are priced in the calculation of the dollar denominated index.

If you want to know what is really going on with the price of oil in dollars, you have to look at the dollars. Here I've done the same thing with dollars as I did with oil in the above chart. Same time frame. Simply asked the question what is the value of the US dollar in terms of real stuff? This is just taking the question posed by the DJAIG and turning it around. Rather than asking how many dollars it takes to buy its basket of commodities, we ask how much commodities it takes to buy a dollar. Just take the reciprocal of the DJAIG Spot, plotted log.

We find that the value of the USD is simply falling off a cliff.

USD As Priced In Real Stuff

http://users.zoominternet.net/%7Efwuthering/Posts/USDAsPricedInRealStuff199100200825.png

So either we must come up with an array of Peak X theories to explain the similar price action for all of these different physical commodities - or - we look to a single common denominator for the answer.

We report. You decide.

my problem in interpreting these charts is that oil/energy is a major input in the production of all the other goods you mention. furthermore, the djaig index is itself about 1/3 energy products.

metalman
05-10-08, 08:37 PM
I won't presume to speak for ka-poom theory, but some historical perspective is worth keeping in mind. In the 1960s a two decade bull market in stocks topped out. Going into the 1970s we had been going through a series of currency crises in which the US government found itself increasingly unable to exchange gold for dollars in the international market per Bretton Woods. It had been paying for the Vietnam-era guns and butter polices with inflation, and dollars were piling up overseas. Those currency crises finally culminated with the closing of the gold window in August of 1971. This was the final step in liberating the US monetary authorities from the gold shackles that periodically constrained them since the founding of the republic.

Within a few years, every one was talking about "oil depletion" as commodity prices soared. It reached mass hysteria proportions by the end of the decade. Finally, Paul Volcker at the Federal Reserve adminstered shock treatment to the inflation, hiking interest rates to 20%, putting on credit controls, and halting money supply growth. Within a few more years, "oil depletion" had been forgotten about, and by the 1990s we were talking about an "oil glut".

In the 1990s a two decade bull market in stocks topped out. The Greenspan Fed had been underwriting it with monetary expansion since the 1987 Crash. When the bubble finally burst in 2000-2002, several trillion dollars of paper stock market wealth evaporated. Many financial commentators worried openly about deflation, and even Ben Bernanke at the Federal Reserve authored a paper on how to deal with deflation. Greenspan responded to the threat by running Fed funds all the way down to 1% and holding them for a protracted period of time, and then only normalizing them in a series of well-telegraphed rate hikes, saying "...policy accommodation can be removed at a pace that is likely to be measured". This put an implicit ceiling on future Fed rate policy and encouraged credit market speculation. Money supply expanded rapidly and credit creation soared. In 2002, commodity prices began to rise in earnest. The government embarked on a guns-and-butter policy, and Americans borrowed and spent like never before. Dollars were piling up overseas.

By 2005, the "oil depletion" theme of the seventies had been revived under the name of "peak oil". Now, in 2008, it is again approaching a state of mass hysteria...

the big diff is that opec can't seem to pump enough oil at $126, keep missing targets. debt/gdp and debt/household assets and income levels are way worse now than in 1980. even if volcker were still in the game, he can't play the same hand. oh, and there's this war on terra, and the middle east blowing up again. etc.

Contemptuous
05-10-08, 10:12 PM
It's very heartening to see this thread has not been pruned off with the other Lukester SPAM threads. Also heartening to see some "rational objections" finding their way into these pages on certain "universal theories of financ-driven reality".

The 100% reliability of the pure financial theory of all goods prices is meeting a gust of wind from the "outer world" here. Chip, chip, chip away - sooner or later the little chips poke through to a chink of daylight. Well it's "daylight" for some and "darkest night" for others - apparently there is no such thing as an objective reality we can all agree upon. :D


my problem in interpreting these charts is that oil/energy is a major input in the production of all the other goods you mention. furthermore, the djaig index is itself about 1/3 energy products.

Finster
05-11-08, 06:33 AM
my problem in interpreting these charts is that oil/energy is a major input in the production of all the other goods you mention. furthermore, the djaig index is itself about 1/3 energy products.

Both of these facts are correct. But if oil prices were really outpacing the rest, the chart should merely show a smaller increase, due to the oil/oil part diluting the other/oil part. There is still the remaining non-oil portion of input in the production of other goods and the 2/3 non-oil portion of the DJAIG whose effect is diminished by these facts, but not eliminated.

Yet the ending value in the chart is actually a tad lower than the beginning value. Over the entire available span of the DJAIG, there is no relative increase in oil at all. If we take some finite effect and reduce it even by 90%, there would still be something left. But we don't see anything left. Except perhaps for a slight decrease over a span of over seventeen years ...

Oil As Priced In Real Stuff

http://users.zoominternet.net/~fwuthering/Posts/OilAsPricedInRealStuff199100200825.png

jk
05-11-08, 10:55 AM
you're right, finster. point taken.

GRG55
05-11-08, 10:59 AM
...

Folks, it looks like we are also going to have to cobble up a theory of Peak Cotton, Peak Copper, Peak Wheat, Peak Lead, Peak Cocoa, Peak Gold, Peak Orange Juice, Peak Pork Bellies ...

Because there is nothing special going on with the price of oil. Here is a chart that graphically shows the relationship between the oil price and the price of a basket of commodities. Rather than address the question of "How many dollars does it take to buy a barrel of oil", it asks the question "How many bales of cotton, pounds of copper, bushels of wheat ... etceteras does it take to buy a barrel or oil". Specifically, you are looking at the entire history of the oil price versus the DJAIG Spot Commodity index from inception through last quarter ... a logarithmic plot of the oil price divided by the DJAIG.

Oil As Priced In Real Stuff

http://users.zoominternet.net/~fwuthering/Posts/OilAsPricedInRealStuff199100200825.png

Either that, or we could just step back for a minute and ask ourselves: What is the common denominator in all these prices?

We quote the price of oil in dollars per barrel. We quote the price of cotton in dollars per bale. We quote the price of copper in dollars per pound. And this is the way all of the commodities in the DJAIG basket are priced in the calculation of the dollar denominated index.

If you want to know what is really going on with the price of oil in dollars, you have to look at the dollars. Here I've done the same thing with dollars as I did with oil in the above chart. Same time frame. Simply asked the question what is the value of the US dollar in terms of real stuff? This is just taking the question posed by the DJAIG and turning it around. Rather than asking how many dollars it takes to buy its basket of commodities, we ask how much commodities it takes to buy a dollar. Just take the reciprocal of the DJAIG Spot, plotted log.

We find that the value of the USD is simply falling off a cliff.

USD As Priced In Real Stuff

http://users.zoominternet.net/~fwuthering/Posts/USDAsPricedInRealStuff199100200825.png

So either we must come up with an array of Peak X theories to explain the similar price action for all of these different physical commodities - or - we look to a single common denominator for the answer.

We report. You decide.

The first chart merely confirms that, contrary to recent pronouncements from the press and blowhard DC politicians, over time the reality is we do not value oil any more or any less than other important [as deemed in the index] commodity inputs to our economy. Oil is a precious fluid upon which we are heavily dependent, but I don't see why it would be deemed more important than food or copper for electricity for example, so I do not understand why anyone would be surprised by the "flatline" in Finster's chart.

The second chart is interesting because we have been taught that over time the price of any commodity will always fall to its marginal cost of production; and that marginal cost itself is falling due to improved technology and extractive techniques. What appears to be happening today is that the marginal cost of producing some commodities, oil included, is no longer falling [even in inflation adjusted Dollars]...and may in fact be on the verge ofa period, of indeterminant duration, of rising in real terms.

It's way too early to tell if this is: 1) a permanent trend change (e.g. a future of constant, relentless energy and other shortages accompanied by endlessly skyrocketing prices as some, like J. H. Kunstler, are saying) or 2) another "decade-or-so-long" perturbation that "ends" when the historically reliable and always powerful combination of: improved technologies, conservation, substitution with new and cheaper alternatives, and aggregate behaviour change bring about a different, and possibly today unimaginable, "new equilibrium". Quite frankly we simply won't know for certain until we can look back, the way we are today able to look back more objectively on the inflation/disinflation cycle over the 30 years between 1971 and 2000.

Whether we are discussing energy or food, history simply does not favour Kunstler's outcome (1). I think that is one of the points Finster is making, and I don't disagree [much to Lukester's dismay ;)].

Where Finster and I may diverge is that in the specific case of petroleum I am unconvinced of a facsimile of the '70s shortage/'90s glut, and expect the so-called new equilibrium for energy will include less petroleum, ultimately perhaps much less petroleum in the developed economies, if not for supply cost reasons, then due to a combination of supply security reasons plus public climate change/carbon emission/environmental policy influences

As I have said many times before, I flat disagree with those that believe there is an energy shortage. Mankind has energy available to it in [I]extraordinary abundance. The difficulty is converting it to usable forms and delivering it to where people consume it. For example, Boone Picken's "wall of windmills" stretching from west Texas to Montana could certainly be constructed over time. But the users of that electricity are largely concentrated across the Rockies on the west coast, or across the nation on the east coast. Delivering the power is the real impracticality.

The doomsayers point out that current known techniques cannot solve these sorts of problems and therefore the future is everlastingly grim. Our resident alarmist, Lukester, berates some of us for our inability to describe the solutions of the future in the same exacting detail that he is able to forecast the looming problems (projecting from past and current trends of course). He forgets that the world of today could not have been imagined even a few short decades ago, much less in the 19th century:

<DL><DD><DL><DD>I went to see [Cambridge mathematician] Professor Douglas Hartree, who had built the first differential analyzers in England and had more experience in using these very specialized computers than anyone else. He told me that, in his opinion, all the calculations that would ever be needed in this country could be done on the three digital computers which were then being built — one in Cambridge, one in Teddington, and one in Manchester. No one else, he said, would ever need machines of their own, or would be able to afford to buy them. </DD></DL><DD>(quotation from an article by Lord Bowden; American Scientist vol 58 (1970) pp 43–53) </DD></DL>
If (IMO...When) the next energy "crisis" hits, it will not be because of any real shortage of global energy. It will be entirely man-made, and exacerbated by the unintended consequences of foolish policy. Some things are timeless...

jk
05-11-08, 11:26 AM
As I have said many times before, I flat disagree with those that believe there is an energy shortage. Mankind has energy available to it in extraordinary abundance. The difficulty is converting it to usable forms and delivering it to where people consume it.
this is equivalent to saying that there is an extraodinary abundance of food and no basis for hunger, if only we could each photosynthesize. i don't think you can talk about scarcity or abundance without consideration of cost and feasibility.

GRG55
05-11-08, 12:17 PM
this is equivalent to saying that there is an extraodinary abundance of food and no basis for hunger, if only we could each photosynthesize. i don't think you can talk about scarcity or abundance without consideration of cost and feasibility.

I don't believe I have. The difficulty of converting energy to usable forms and delivering it to the places where people consume it is composed of many elements, of which cost and [currently] available feasible technologies are just two.

My point is that there is no shortage of energy in and of itself.

That there may not be, at present, feasible means to convert some forms of energy, or to convert it at an appropriate cost is not unique in our history. Nor should we assume that is a static situation that will persist indefinitely. History shows it has not, and I do not believe "this time is different".

But then again, maybe that is just my misguided and misplaced faith in our ability to innovate and solve our problems. In which case we should all pay closer attention to Kunstler.

zmas28
05-11-08, 12:24 PM
Great post. Reflects my own opinions to a T.
The one thing I would question (and I don't know the answer) is whether oil is "special" or not in terms of price appreciation. This is because (a) the DJAIG itself contains almost a third of its weighting towards oil and gasoline, and (b) the cost of oil is probably a large part of the production of all the other commodities, such as mining and agriculture.

EJ
05-11-08, 12:34 PM
I don't believe I have. The difficulty of converting energy to usable forms and delivering it to the places where people consume it is composed of many elements, of which cost and [currently] available feasible technologies are just two.

My point is that there is no shortage of energy in and of itself.

That there may not be, at present, feasible means to convert some forms of energy, or to convert it at an appropriate cost is not unique in our history. Nor should we assume that is a static situation that will persist indefinitely. History shows it has not, and I do not believe "this time is different".

Last week as a sponsor of the UMass, Amherst annual Technology Innovation Challenge (TIC) a $50K business plan contest for entrepreneurial engineers developed jointly by the Engineering and Business schools, a group of six graduate and undergraduate groups presented business plans for their companies. The technologies ranged from a biotech to Internet. I have for years attended various MIT groups.

This is the forth year I have participated in the TIC. Two observations and one interesting fact: one, the level of sophistication of the participating students is stunning. Compared to where my pears were at their age, they are light years ahead. Two, the quality of the groups is rapidly improving. The interesting fact is that the dean of the Engineering school informed me that enrollment in the Engineering school increased last year from 250 to 300 and this year from 300 to 400. Perhaps students are getting the message: FIRE Economy is on the wane, the pool of rentier money and thus jobs to manage it is shrinking, while global competition for engineers is heating up. Paraphrasing Jim Rogers told the graduating class of Harvard Business school a few years ago, "If you are planning to go work in the financial services industry, you made a mistake. It's over. Go back to school and learn how to make something."

Within Engineering, energy is the fastest growing area. Had oil prices not been subsidized by the US military for 30 years, the cars we drive and everything about our transportation and energy infrastructure would be completely different. As I research my book I will help readers see what is in store now that the mother of invention, high energy costs, has finally and permanently been released.

Finster
05-11-08, 12:39 PM
The second chart is interesting because we have been taught that over time the price of any commodity will always fall to its marginal cost of production; and that marginal cost itself is falling due to improved technology and extractive techniques. What appears to be happening today is that the marginal cost of producing some commodities, oil included, is no longer falling [even in inflation adjusted Dollars]...and may in fact be on the verge ofa period, of indeterminant duration, of rising in real terms...

In the second chart I was trying to shift the focus to a different commodity - the one whose value is the common denominator in the prices of all those other commodities. In stating the price of oil, we always invoke some currency - typically USD. As in "the price of oil is X dollars per barrel". There is both an oil unit and a currency unit. The same applies to the DJAIG. There are versions in several currencies, but the one used here is based on prices in US dollars. The raw data are, for example, dollars per bale of cotton, dollars per pound of copper, dollars per ounce of gold ... etceteras.

The point being that although we toss these numbers around in terms that focus our attention on the physical commodity (we speak of "the price of oil", the "price of copper", etceteras), there is another "silent" commodity inextricably tied up in the numbers we state. US dollars.

Taking your comment regarding the "marginal cost of production", can't we ask "What is the marginal cost of production of dollars?"? Since every price we are talking about here depends just as much on the value of the dollar commodity as the physical commodity (it's just the rate of exchange between them), perhaps the supply and demand factors for this commodity are just as relevant as those for each physical commodity to its price? And if the prices of all these physical commodities - as expressed in USD - are displaying a pronounced collective movement - perhaps the one common denominator in all these prices (dollars) is even the central, unifying factor?

To look at this question, in this second chart, we turn the price question on its head. What is the "price" of the USD in terms of a basket of physical commodities?

Considering that every price involved is but the exchange rate between some physical commodity and a monetary commodity, and that the rate of exchange is nothing but relative value (it's all relative!) are we not equally justified in saying that the price movement represents a change in the value of the monetary commodity as in saying it represents a change in the value of the physical commodity? And if a whole array of physical commodities are exhibiting similar price movement when expressed in one currency, are we not justified in concluding that it was the currency - and not the physical commodities - whose value changed?

That's exactly what I am saying. I am saying it makes far more sense to conclude that these commodities - real things of real utility - are not themselves engaging in wild increases in real value, but that the other, non-physical commodity that is the common element in every single one of their prices is the one that is engaging in wild decreases in value.

And that your own observation - that "the price of any commodity will always fall to its marginal cost of production" gives us a powerful clue as to why. After all, the marginal cost of production of dollars is practically nil ... and they seem to be headed in that direction perforce.

bart
05-11-08, 01:31 PM
...
And that your own observation - that "the price of any commodity will always fall to its marginal cost of production" gives us a powerful clue as to why. After all, the marginal cost of production of dollars is practically nil ... and they seem to be headed in that direction perforce.


I'll also add that the 80/20 rule applies, and in spades. Over a long enough period of time (decades), about 80% of the apparent gain in most items is just plain inflation.

Contemptuous
05-11-08, 06:48 PM
I don't believe I have. ... My point is that there is no shortage of energy in and of itself. ... History shows ... I do not believe "this time is different". ... my misguided faith in our ability to innovate and solve our problems. In which case we should all pay closer attention to Kunstler.


... does not favour Kunstler's outcome ... much to Lukester's dismay ... The doomsayers ... Our resident alarmist ... Lukester, berates some of us for our inability to describe the solutions .

GRG55 - It would be much appreciated if you were to refrain from this type of cloyingly arch ascription to "doomsayers" and "Lukester" as being synonymous, or I shall feel entitled to employ cloyingly arch caricatures of your own positions, which as yet I do not. You certainly don't wish to have me representing your own views in caricature, do you? Caricature does not advance the synthesis of any new ideas here. I have not anywhere directly endorsed "Kunstler's Outcome" as you suggest. Please post a reference to that or leave off it.

A note on the clarity of definitions of what "technology" is or is not. You are acknowledging your continuing unwillingness to describe the "solutions of the future" in anything but the most approximate terms (that means "unspecified"). Your description of "vast energy resources still available" refers of course to hydrocarbons. We have oil at $125 and no one is unearthing hints of these vast reserves. As Finster argues regarding the price, maybe there is no impetus to really unearth these large new reserves because the real price of petroleum has gone nowhere, and oil producers lack the financial motivation to look hard enough? Multiple references to "technology" and "innovation" here allude to technology developed in the past whose entire function and innovation was to ever more efficiently capture hydrocarbon energy, and this is the same tightly delimited definition of "energy technology" going right back through the use of coal and wood - five or ten thousand years and more. It was all stored hydrocarbon energy.

Evidently when we invent a new paradigm freeing ourselves from the hydrocarbons which have shackled energy production for 5,000 - 50,000 years, we will have taken a quantum leap forward. We have nuclear, but what else are you talking about?

What technology has NOT embodied ever in this referenced past, in any substantive way was a technique to replace hydrocarbon energy with any equivalent BTU density from a non-hydrocarbon source. Kind of like a "speed of light" barrier in any conventional technologies, except nuclear. Your hopes for these escape routes from the box are therefore squarely centered on nuclear. Meanwhile there are some wishywashy definitions being employed here oblivious to the vast technological difference, between "technology" to exploit hydrocarbons, and "technology" producing the same BTU's out of a "nothing yet clearly specified" - (which is equivalent to saying "we don't really know what, yet").

It's all very well to lean heavily on expansive predictions that "history simply does not favor Kunstler's assertions", but sooner or later you types with this abundance of faith in mankind's potential, will need to visibly get your replacement technology show on the road. As asked before (unanswered) what is your "start date" and what is the technology you are pointing us to? When do we actually get to take a peek at the wizardry sitting like a genie in a bottle in some engineering lab?


As I research my book I will help readers see what is in store now that the mother of invention, high energy costs, has finally and permanently been released.

And last observation is in reference to EJ's mentioning "high energy costs" as being now permanently released, and thereby producing powerful inputs to invention in our approaching energy constrained future. I would note that Finster has been going to some lengths to point out that our energy costs are not in fact risen at all, but are merely part of the averaged up general price level. Purchasing power of units of that petroleum sold don't buy any more today according to his thesis than they did twenty years ago. That's the putative purchasing power by which all this creative engineering talent will be drawn into the energy field. EJ's permanently high real energy costs acknowledged are sparking innovation in energy research, and Finster's arguments are that real energy prices have gone nowhere in 30 years. But can we have both being valid at the same time?

jk
05-11-08, 07:52 PM
EJ's permanently high real energy costs acknowledged are sparking innovation in energy research, and Finster's arguments are that real energy prices have gone nowhere in 30 years. But can we have both being valid at the same time?
in a word, yes. ej's high real cost of energy is relative to incomes; it takes a larger share of income to commute, heat and/or air condition the house, run the lights, and so on. finster's charts show that energy hasn't risen faster than other commodities, not that they haven't risen against incomes. so just as it takes an increased share of income to buy energy, it simultaneously also takes an increased share of income to buy food, and so on. material necessities are increasingly expensive; only toys are increasingly cheap.

Contemptuous
05-11-08, 09:48 PM
material necessities are increasingly expensive; only toys are increasingly cheap.

A whole range of "material necessities" are now increasingly "expensive"? We are lost in a hall of mirrors here in terms of claiming that no "real" prices have risen for oil then.

According to your explanation, some categories of goods have gained in "real" (means comparative) value, with oil among them. I thought Finster's argument was that oil has not gained in "real" value? What you are saying is that "other" goods have gained in "real" value right along with oil, not that oil has not gained any value.

Acknowledging oil having gained in real value has some functional merits in the eyeballs on the ground sense, because it theoretically accomodates ever larger sums of money being spent on exploration, accomodates the financial impetus into alt energy, partly accomodates inflating commodities, and most notably accomodates the massive real wealth gains accrued to oil producers, etc.

Oil gained in "real" value is the thesis which concords with myriad signals on the ground.

The semantic mincing here is what has me stymied. Which is it to be? Oil, and a bunch of other essential commodities have gained real value, or oil, and a bunch of essential commodities (which move in lockstep with it apparently) have not gained in real value?

EJ's talented engineers need to be paid more relative to other sectors today, than they were paid two decades ago, relative to other CPI indexed salaries in that period. This is required for a "new enhanced motivation" factor to exist. You are affirming that's so, because all essential raw other goods have gained a larger share of relative value along with oil?

But then Finster's assertion that oil has not gained any relative value does not hold. He says this is "100% inflation", which is quite a "high percentage".

The thesis still leaks. The co-existence of high real "relative" oil prices with the "no net real oil price gain" explained by Finster is a problem for the macro-thesis. It is a strained logical accomodation to the reconci8liation of what "real prices" have or have not done. Either the oil price has risen relative to other CPI items, or it has not.

Whether other baskets of goods rose right along with it or did not, it cannot coexist with the "engineer's paid premium to discover new alt-energy solutions" which EJ describes, unless oil is indeed commanding higher real prices relative to 25 years ago.

This is an example where the reconciliation of contradictions gets turned into "sausage" to reconcile a macroeconomic armature. Contradictions or muddy corollaries are required to fold and disappear, to permit the macro thesis to remain clear, streamlined and uncompromised.

A much more organic accomodation would be to acknowledge simply that oil's price relative to other goods and services had risen in relative value. "100% inflationary" thesis does not accomodate this wthout some "strenuous rhetorical exertions".

jk
05-11-08, 09:56 PM
finster showed that oil did not go up RELATIVE TO OTHER COMMODITIES. that is all he showed. if you wish to call "real" prices deflated by a commodities index, you can do so. i don't know what "real" means anymore, since it implies a stable and absolute measure of value. so i am content to look at RELATIVE values. oil isn't more expensive relative to other commodities. it is more expensive relative to incomes. it is no more expensive than other commodities relative to incomes. does that cover it?

Contemptuous
05-11-08, 10:21 PM
finster showed that oil did not go up RELATIVE TO OTHER COMMODITIES. that is all he showed. if you wish to call "real" prices deflated by a commodities index, you can do so. i don't know what "real" means anymore, since it implies a stable and absolute measure of value. so i am content to look at RELATIVE values. oil isn't more expensive relative to other commodities. it is more expensive relative to incomes. it is no more expensive than other commodities relative to incomes. does that cover it?

You are broadening Finster's own definitions here as you go along. Finster offered no such clarifications. The assertion has been reiterated, simple in extend and exclusive. "Oil has not risen in real price, period". Why can't you guys concede even the smallest correction to the original assertion without going back and rewriting the assertion now?

"Oil has not gone anywhere in real price". This has been the repeated, crystal clear, unequivocal assertion, and I agree with your original point, it should indeed be clearly qualified as "relative to a basket of other goods". But it should NOT be asserted as "relative to everything". Yeesh. We could be in a pre-law class here getting technical on the "verbiage".

GRG55
05-12-08, 01:22 PM
GRG55 - It would be much appreciated if you were to refrain from this type of cloyingly arch ascription to "doomsayers" and "Lukester" as being synonymous, or I shall feel entitled to employ cloyingly arch caricatures of your own positions, which as yet I do not. You certainly don't wish to have me representing your own views in caricature, do you? Caricature does not advance the synthesis of any new ideas here. I have not anywhere directly endorsed "Kunstler's Outcome" as you suggest. Please post a reference to that or leave off it.


Lukester: You may not have employed any "cloyingly arch caricatures" of my position , but you have completely failed to understand it.

With respect to your writings compared to Kunstler's I acknowledge there are numerous material differences (historically your writings are infinitely more considered, thought provoking and useful than his), but lately the similarities are growing. Particularly unfortunate and most disappointing is your increasingly frequent adoption of Kunstler's infantile technique of repeated disparagment and derogation of his fellow citizens, and his own reading audience. You now routinely apply the same technique to us.


From Kunstler:


[I]"...Go anywhere in America, among any class of people -- from the Nascar morons to the Ivy League -- and one expectation is pretty universal: that technology will only bring us more wonders and miracles, and it will certainly save-the-day where our energy problems are concerned. This would seem natural for people living in an age when a simple cassette SONY Walkman is superceded by an 80-gigabyte iPod in one generation. But what if this assumption is off? What if peak technology occurs roughly in the same wave as peak energy?...(July 23, 2007)

"...The portrait of the young American male in 2007, therefore, is of an impotent, infantalized being lost in grandiose fantasies of power and importance. It's a picture of men without real confidence, and no idea how to achieve it, who wish to project a transcendently ferocious image complete with odds-and-ends of manner taken from comic books and movies based on comic books, in order to be taken seriously..."(July 2, 2007)


From Lukester (first post, top of this thread):


Lots of posturing and easy jibes - and "doomertainer" has a nice sardonuic ring to it - very jaunty indeed - while no-one in this little community seems to have a clue that the replacement of all that petroleum by ANY energy - let alone URANIUM - is even assured in this short span of time. Read this brief excerpt from The Oil Drum and then cast your eyes on the pathetic response to Stephen Leeb's expression of vivid concern - which is being most rashly disparaged by people who have utterly failed to offer any detailed alternative more specific than an arm wave towards "human ingenuity". iTulipers come off looking uninformed, opinionated, reactive, even mildly spiteful in a petty fashion, towards any observer having the temerity to speak up on these issues.

Altogether a pathetic, misinformed display here - read even just this cursory overview of the gaping open questions about energy - what will or can step in to provide that 50% of current global annual petroleum consumption in a scant 25 years as 3 billion people inexorably industrialize - whether there is even sufficient Uranium to power the Jetsons future you imagine all rational people must normally envision as "just around the corner". It's easy to see from just skimming through this one article, how utterly inappropriate the smirks here have been regarding Stephen Leeb's own reference to the seriousness of these issues. Doomertainment indeed. Doubtless a real intellectual high point among all the debates on this website.


My apologies if I offended you with the comparison, but the effectiveness of what you have to say is partly a function of how you say it. I've tried to point this out to you first diplomatically and then with an injection of humour. Without success, apparently.

Finster
05-16-08, 05:03 PM
in a word, yes. ej's high real cost of energy is relative to incomes; it takes a larger share of income to commute, heat and/or air condition the house, run the lights, and so on. finster's charts show that energy hasn't risen faster than other commodities, not that they haven't risen against incomes. so just as it takes an increased share of income to buy energy, it simultaneously also takes an increased share of income to buy food, and so on. material necessities are increasingly expensive; only toys are increasingly cheap.

This is certainly true from the perspective of an American. To the average Chinese, the real cost of energy - in terms of share of income - might have been flat or falling. Millions, for example, can now afford to drive cars where they couldn't before.

One might hypothesize that the American perception might be in large part a product of the global labor arbitrage that has been taking place in recent years ... that the real income of Americans has been falling, and that sufficient inflation has been generated to keep it from being obvious in nominal incomes. Only when we try to spend it on stuff do we notice.

metalman
05-16-08, 05:18 PM
This is certainly true from the perspective of an American. To the average Chinese, the real cost of energy - in terms of share of income - might have been flat or falling. Millions, for example, can now afford to drive cars where they couldn't before.

One might hypothesize that the American perception might be in large part a product of the global labor arbitrage that has been taking place in recent years ... that the real income of Americans has been falling, and that sufficient inflation has been generated to keep it from being obvious in nominal incomes. Only when we try to spend it on stuff do we notice.

from itulip charts and graphs... (http://www.itulip.com/forums/photoplog/index.php?c=4)

http://www.itulip.com/forums/photoplog/images/174/1_personalconsumption10-2008.gif

this is what jk is saying.

bart
05-16-08, 05:39 PM
And here's a broader view of Personal income minus expenditures showing actual, CPI adjusted and CPI+lies adjusted... and even a chart of the same data, except log scaled.



http://www.nowandfutures.com/images/pers_income-expendutures_cpi_lies1963-current.png




http://www.nowandfutures.com/images/pers_income-expendutures_cpi_lies1963-current_log.png

jk
05-16-08, 08:49 PM
And here's a broader view of Personal income minus expenditures showing actual, CPI adjusted and CPI+lies adjusted... and even a chart of the same data, except log scaled.



http://www.nowandfutures.com/images/pers_income-expendutures_cpi_lies1963-current.png




http://www.nowandfutures.com/images/pers_income-expendutures_cpi_lies1963-current_log.png

bart, i had to laugh, seeing your log chart. have you gotten the log religion, or is the fact that the chart hardly looks different at all a sly jibe at the log rollers?

bart
05-16-08, 09:08 PM
bart, i had to laugh, seeing your log chart. have you gotten the log religion, or is the fact that the chart hardly looks different at all a sly jibe at the log rollers?

No jibe intended. Perhaps I should have made the log chart zero based like the linear chart so it would be more obvious.

I still have the same opinions about linear vs. log charts, but I've just had too many requests and complaints from folk who don't want to read a linear chart and/or didn't grow up with and understand them.