America Is On The Mend

The job market is bad. The economic scene is worse. And Federal debt is spiraling out of control. How can America be on the mend? Ambrose Evans-Pritchard tells the story.

He mentions shale gas. We now have at least a 50 year supply and maybe 100.

Then there is shale oil.

Total US shale output is "set to expand dramatically" as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009. The US already meets 72pc of its own oil needs, up from around 50pc a decade ago.

That is a pretty dramatic rise.

Ah. But there is more.

"Made in America, Again" - a report this month by Boston Consulting Group - said Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap. China is no longer the "default location" for cheap plants supplying the US.

A "tipping point" is near in computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture.

"A surprising amount of work that rushed to China over the past decade could soon start to come back," said BCG's Harold Sirkin.

Feathers in the wind? What about actual companies? What are the people who make corporate decisions doing?

The list of "repatriates" is growing. Farouk Systems is bringing back assembly of hair dryers to Texas after counterfeiting problems; ET Water Systems has switched its irrigation products to California; Master Lock is returning to Milwaukee, and NCR is bringing back its ATM output to Georgia. NatLabs is coming home to Florida.

Boston Consulting expects up to 800,000 manufacturing jobs to return to the US by mid-decade, with a multiplier effect creating 3.2m in total. This would take some sting out of the Long Slump.

As Cleveland Fed chief Sandra Pianalto said last week, US manufacturing is "very competitive" at the current dollar exchange rate. Whether intended or not, the Fed's zero rates and $2.3 trillion printing blitz have brought matters to an abrupt head for China.

Fed actions confronted Beijing with a Morton's Fork of ugly choices: revalue the yuan, or hang onto the mercantilist dollar peg and import a US monetary policy that is far too loose for a red-hot economy at the top of the cycle. Either choice erodes China's wage advantage. The Communist Party chose inflation.

On the inflation front we are working hard but we got beaten by the Chinese. Good for us. Bad for them.

Now for the bad news. Which I alluded to at the start.

The switch in advantage to the US is relative. It does not imply a healthy US recovery. The global depression will grind on as much of the Western world tightens fiscal policy and slowly purges debt, and as China deflates its credit bubble.

Yet America retains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.

It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.

Our bad policies at the top are temporary. Our natural advantages manifest. And we have something no other country has. The American Spirit.

Cross Posted at Classical Values

Doing Well In Business

If you want to do well in business have a friend in government. Evidently Exxon-Mobil is short of friends.

Unfortunately, Exxon has discovered firsthand what it’s like to deal with what Investors Business Daily calls “regulatory pirates” in the Gulf of Mexico:

ExxonMobil, and its Norwegian partner Statoil made the biggest discovery of all — a field worth a billion barrels of oil — 7,000 feet below sea level in its “Julia” field in 2007.

Exxon tried to keep its discovery secret to keep marauders away. Sadly, the pirates in this instance are U.S. regulators — and their aim is to stop them.

That’s right: Instead of marvel at the continuing treasures of the New World, or hail the human ingenuity that made retrieval of so much oil possible, or simply quantify how this discovery will boost U.S. energy security, Interior Department bureaucrats moved instead to snatch Exxon’s permits and shut the whole thing down.

They may not have paid enough to the right party.

Here is a group that paid plenty and is unhappy with their ROI (yes it is a pun using a foreign language - the nominal meaning is Return On Investment)

Let’s see. Obama has lost Wall Street, the progressive grassroots, and even a few unions. Now it looks like another funding source for his re-election bid might fade as well — high-tech Silicon Valley. Politico reports that the innovation center once celebrated the fact that they had backed a President who uses a Blackberry, but now think he’s just another middle-aged man with some ubiquitous personal technology...

Let us not forget that he is a middle-aged BLACK man. That still counts for something. Not as much as it used to. In any case if you make efforts to strangle the electrical supply - which the boys in the valley totally depend on to make their products and make them useful - people interested generally take notice. Making oil more expensive isn't helping either.

Go to the "paid plenty" article for a multitude of links.

Huge Oil Discovery In The Middle East

Saudi Arabia? Nope that has already been picked over. The "new" oil find is in Israel.

The old energy order in the Middle East is crumbling with Iran and Syria having left the Western fold and others, including Saudi Arabia, the largest of them all, in danger of doing so. Simultaneously, a new energy order is emerging to give the West some spine. In this new order, Israel is a major player.

The new energy order is founded on rock – the shale that traps vast stores of energy in deposits around the world. One of the largest deposits – 250 billion barrels of oil in Israel’s Shfela basin, comparable to Saudi Arabia’s entire reserves of 260 billion barrels of oil – has until now been unexploited, partly because the technology required has been expensive, mostly because the multinational oil companies that have the technology fear offending Muslims.

Of course you should read the whole thing for details but the essence is that if this oil can be exploited it will put a lid (depending on demand of course) on what can be charged for oil. In any case immediate fears of an oil shortage are put off a little longer. And if the Wave Engine works out it could extend that "little to fear" era by 50 or 100 years. Long enough to develop what ever comes next without requiring a crash program.

Speaking of offending Muslims. I wonder if they would be offended if the price of oil declines by half? It would be good to see that proposition tested in the real world.

Cross Posted at Classical Values

The Worst Disaster Since The End Of WW2

The situation in Japan is dire and besides reactors out of control the logistical situation is not so hot either. Fuel and heating oil are in short supply. The food situation is not looking so good either.

Nearly a week after the disaster, police said more than 452,000 people were staying in schools and other shelters, as supplies of fuel, medicine and other necessities ran short. Both victims and aid workers appealed for more help.

"There is enough food, but no fuel or gasoline," said Yuko Niuma, 46, as she stood looking out over Ofunato harbor, where trawlers were flipped on their sides.

Along the tsunami-savaged coast, people must stand in line for food, gasoline and kerosene to heat their homes. In the town of Kesennuma, they lined up to get into a supermarket after a delivery of key supplies, such as instant rice packets and diapers.

Each person was only allowed to buy 10 items, NHK television reported.

With diapers hard to find in many areas, an NHK program broadcast a how-to session on fashioning a diaper from a plastic shopping bag and a towel.

At the same link you can see video of a helicopter dropping water on a nuke plant. What does it mean? Nothing good that is for sure.

All of the water from one of the spent fuel-rod pools is gone, according to the chief of the U.S. Nuclear Regulatory Commission. With no water to cool the fuel rods, they could just get hotter and eventually melt down.

Gregory Jaczko, chair of the U.S. Nuclear Regulatory Commission, warned there was no water left in the spent fuel pool of reactor 4, resulting in "extremely high" radiation levels.

A police water cannon was deployed to help top up the water in the containment pool and expected to go into action early Thursday, Jiji Press news agency reported.

Workers at the plant, run by Tokyo Electric Power Co (TEPCO), have struggled to maintain water levels as the rods have heated up the water, threatening to evaporate it and expose the rods to air, which would send out radioactive material.

Helicopters which were to dump water on the plant were forced back by the radiation levels.

Right now the accident is rated level 6 by most knowledgeable observers. That would be one level above Three Mile Island and one level below Chernobyl. The problem is: until the situation is under control (it is not at this time) it could get worse. I expect it will.

One explanation may be corruption in Japan's nuclear industry.

"Everything is a secret," said Kei Sugaoka, a former nuclear power plant engineer in Japan who now lives in California. "There's not enough transparency in the industry."

Sugaoka worked at the same utility that runs the Fukushima Dai-Ichi nuclear plant where workers are racing against time to prevent a full meltdown following Friday's 9.0 magnitude quake and tsunami.

In 1989 Sugaoka received an order that horrified him: edit out footage showing cracks in plant steam pipes in video being submitted to regulators. Sugaoka alerted his superiors in the Tokyo Electric Power Co., but nothing happened. He decided to go public in 2000. Three Tepco executives lost their jobs.

The legacy of scandals and cover-ups over Japan's half-century reliance on nuclear power has strained its credibility with the public.

Well that is not very encouraging. Neither is this.

Japanese authorities experimented with new measures Thursday to bring the country's stricken nuclear power plant under control, as the United States gave a dire assessment of the nuclear crisis and warned radiation levels at the plant are "extremely high."

Operators of the Fukushima Daiichi power plant, where explosions and fires have hampered efforts to cool overheating reactors, began using helicopters to dump water on the reactors and said they were close to finishing a new power line, AP reports.

But early reports said efforts to dump tons of water on reactor No. 3, which reportedly experienced damage to its containment vessel during an explosion earlier in the week, had failed to bring down radiation levels.

What I'm seeing is one ad hoc plan after another. Water cannons? Helicopter drops spreading a few tons of water per drop over a wide area? My guess is that they have lost it. Almost totally.

OK. They are bringing in electrical power. Excellent. But some one had better be checking the pumps, the pumped coolant, and the coolant pipes so that the pumps last beyond a few minutes. In the military you think about these things because people are throwing heavy things at you filled with explosives. The equivalent of an earthquake + a tsunami. So you think about making things work in adverse conditions. I wonder if the Japanese - having a non-nuclear Navy - think about that sort of thing as much?

Of course the reactors are American designed. By GE.

I live near the Byron Nuclear Plant and I'm happy to say it is not a GE and not a Boiling Water Reactor.

The Byron Nuclear Generating Station is a nuclear power plant located in Ogle County, Illinois, 2 miles (3.2 km) east of the Rock River. The reactor buildings were constructed by Babcock and Wilcox and house two Westinghouse pressurized water reactors, Unit 1 and Unit 2, which first began operation in September 1985 and August 1987 respectively. The plant was built for Commonwealth Edison and is currently owned and operated by Exelon Corporation.

The plant provides electricity to northern Illinois and the city of Chicago. In 2005 it generated on average about 2,300 MWe, enough power to supply about 2 million average American homes.

Pressurized water reactors have two loops so that the water that circulates next to the fuel is not the same as the water that circulates through the steam plant. This is handled by a device called a steam generator. Boiling water reactors (BWR) have no separation between reactor water and steam plant water. They are the same. Thus with boiling water plants you have one less level of containment. On the other hand BWRs are a lot cheaper to build. No primary loop pumps. No steam generator. Lower operating pressures and temperature differentials (OK not in every detail but generally).

But back to Japan - half a million homeless, supplies running low, and a nuclear disaster. The worst disaster for Japan since the end of WW2.

Cross Posted at Classical Values

Bill Is Oil Slick

Bill? That would be our former President Bill Clinton talking about oil. And what is he saying about oil?

Former President Bill Clinton said Friday that delays in offshore oil and gas drilling permits are “ridiculous” at a time when the economy is still rebuilding, according to attendees at the IHS CERAWeek conference.

Clinton spoke on a panel with former President George W. Bush that was closed to the media. Video of their moderated talk with IHS CERA Chairman Daniel Yergin was also prohibited. …

Clinton said there are “ridiculous delays in permitting when our economy doesn’t need it,” according to Noe and others.

Every thing is fine - for now though. And how do we know they are fine? Well US production is up.

The administration rightly notes that domestic oil and natural gas production have increased since 2008, while imports have decreased.

OK, but: Erik Milito of the American Petroleum Institute told Environment & Energy Publishing, "The increased production levels in 2010 are a credit to the vision of previous administrations." Milito credited the 1995 Deepwater Royalty Relief Act signed by Bill Clinton and passed by a GOP-controlled Congress.

So maybe Bill knows something Obama doesn't know. What might that be?

Clinton himself lamented "ridiculous delays in permitting when our economy doesn't need it." The administration didn't issue a permit since the blowout until last month -- and then only after a federal judge's prompting.

Not to mention the steady job-killing creep of climbing gasoline prices.

There always has been a corner of Obamaland that doesn't appreciate the job-creating properties of cheap fuel. Now-Energy Secretary Steven Chu told the Wall Street Journal, "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe." Chu said that in September 2008 -- and still Obama picked him for the slot.

Civilization runs on energy. In fact the more energy you can run through your system the more civilization you get. So why would our President be trying to strangle future oil supplies? I think you can come to one of two conclusions.

1. He doesn't understand
2. He does

Cross Posted at Classical Values

They Still Have To Eat

Spengler at Asia Times makes a very good point about how Asian prosperity is hurting Muslim countries lacking exportable resources.

It wasn't the financial crisis that undermined dysfunctional Arab states, but Asian prosperity. The Arab poor have been priced out of world markets. There is no solution to Egypt's problems within the horizon of popular expectations. Whether the regime survives or a new one replaces it, the outcome will be a disaster of, well, biblical proportions.

The best thing the United States could do at the moment would be to offer massive emergency food aid to Egypt out of its own stocks, with the understanding that President Mubarak would offer effusive public thanks for American generosity. This is a stopgap, to be sure, but it would pre-empt the likely alternative. Otherwise, the Muslim Brotherhood will preach Islamist socialism to a hungry audience. That also explains why Mubarak just might survive. Even Islamists have to eat. The Iranian Islamists who took power in 1979 had oil wells; Egypt just has hungry mouths. Enlightened despotism based on the army, the one stable institution Egypt possesses, might not be the worst solution.

It all depends on what proportion of the total family budget is devoted to food. In the US it runs under 10% (in 1900 in the US it was around 30%). If food prices double in the US it is an inconvenience - especially since so much of the food dollar goes into transport and processing. If food prices double in Egypt the number of calories consumed pretty much has to decline by 50% - at least among the poor. Which are quite numerous in Egypt.

When the oil runs out (or some technology replaces it) the Middle East is going to be a very sorry place.

Cross Posted at Classical Values

Safe Drilling For Oil

You can study the graphic used in the video in more detail at Safe Drilling. Which also has text and some good links.

Jonesing

And where does the term "jonesing" come from? From the Grateful Dead. And the song? Casey Jones. Introduced here by Bill Graham who talks about "all the shit that has gone down." No shit.



Grateful Dead Stuff

Oh. Yeah. A few words on how the Jones Act is hampering cleanup in the Gulf.

H/T Jccarlton at Talk Polywell

Cross Posted at Classical Values

The Lobby

JLawson is responding to a comment by Diogenes at Talk Polywell.

Diogenes wrote:

This doesn't look good.

http://www.theoildrum.com/node/6593/648967

You can read more about the link at: The Gulf - It Is Worse Than We Thought.

The reply by JLawson:

No, it doesn't. In fact - that's about as far from 'good' as I could imagine.

Ironic, isn't it, that the environmental lobby, pushing hard as they can to get oil drilling as far offshore as possible, seems to have caused the disaster that they were so anxious to avoid.

Of course, it all depends on how accurate the info and analysis is... but it rings true, unfortunately.

What can you expect from people making technology policy who have no deep understanding of technology?

Cross Posted at Classical Values

The Gulf - It Is Worse Than We Thought

The Oil Drum has an excellent bit of speculation (backed with knowledge) about what is going on with the blown out well in the Gulf of Mexico. (you should read the whole thing)

All of these things lead to only one place, a fully wide open well bore directly to the oil deposit...after that, it goes into the realm of "the worst things you can think of" The well may come completely apart as the inner liners fail. There is still a very long drill string in the well, that could literally come flying out...as I said...all the worst things you can think of are a possibility, but the very least damaging outcome as bad as it is, is that we are stuck with a wide open gusher blowing out 150,000 barrels a day of raw oil or more. There isn't any "cap dome" or any other suck fixer device on earth that exists or could be built that will stop it from gushing out and doing more and more damage to the gulf. While at the same time also doing more damage to the well, making the chance of halting it with a kill from the bottom up less and less likely to work, which as it stands now?....is the only real chance we have left to stop it all.

It's a race now...a race to drill the relief wells and take our last chance at killing this monster before the whole weakened, wore out, blown out, leaking and failing system gives up it's last gasp in a horrific crescendo.

We are not even 2 months into it, barely half way by even optimistic estimates. The damage done by the leaked oil now is virtually immeasurable already and it will not get better, it can only get worse. No matter how much they can collect, there will still be thousands and thousands of gallons leaking out every minute, every hour of every day. We have 2 months left before the relief wells are even near in position and set up to take a kill shot and that is being optimistic as I said.

Over the next 2 months the mechanical situation also cannot improve, it can only get worse, getting better is an impossibility. While they may make some gains on collecting the leaked oil, the structural situation cannot heal itself. It will continue to erode and flow out more oil and eventually the inevitable collapse which cannot be stopped will happen. It is only a simple matter of who can "get there first"...us or the well.

We can only hope the race against that eventuality is one we can win, but my assessment I am sad to say is that we will not.

The system will collapse or fail substantially before we reach the finish line ahead of the well and the worst is yet to come.

Sorry to bring you that news, I know it is grim, but that is the way I see it....I sincerely hope I am wrong.

And what is the worst case?

According to BP data from about five years ago, there are four separate reservoirs containing a total of 2.5 billion barrels (barrels not gallons). One of the reservoirs has 1.5 billion barrels. I saw an earlier post here quoting an Anadarko Petroleum report which set the total amount at 2.3 billion barrels. One New York Times article put it at 2 billion barrels.

If the BP data correctly or honestly identified four separate reservoirs then a bleed-out might gush less than 2 to 2.5 billion barrels unless the walls -- as it were -- fracture or partially collapse. I am hearing the same dark rumors which suggest fracturing and a complete bleed-out are already underway. Rumors also suggest a massive collapse of the Gulf floor itself is in the making. They are just rumors but it is time for geologists or related experts to end their deafening silence and speak to these possibilities.

I wonder if mining oil shale might not be better relative to environmental risks than drilling for oil in deep water. The risks of oil shale are relatively well known; the real risks of deep water drilling not so much. Until now.

If you want to read up on oil shale may I suggest:

Oil Shale

H/T Diogenes at Talk Polywell

Cross Posted at Classical Values

Some One Is Missing

In a discussion of Obama's handling of the Gulf oil spill it seems as if a commenter has found that some one is missing.

captainjack Jun 14, 2010 03:56 PM ET

This problem calls for someone with managerial experience and knowlege of the oil business. Hum, see if you can find that resume from that guy, uh, George something. That must have been a couple of years ago. I thought he was kinda stupid but I didn't really know what stupid was back then.

H/T Instapundit

Cross Posted at Classical Values

Leadership

The New Your Post is discussing President Present's inadequate response to the Gulf Oil Spill. As usual I think the best commentary is in the comments. Like this one:

Mainer1776

06/13/2010 6:22 AM

This week we've learned that assistance from countries that are experienced in oil spill clean-up was rejected repeatedly by the Obama administration and the Coast Guard. We need to know why.

The explosion of the oil rig and the leakage of the oil was tragedy enough. But the intentional actions of NOT cleaning up the oil is a crime.

It may not be totally Obama's fault.

We learned a simple thing this week: that the BP clean-up effort in the Gulf of Mexico is hampered by the Jones Act. This is a piece of 1920s protectionist legislation, that requires all vessels working in U.S. waters to be American-built, and American-crewed. So while, for instance, the U.S. Coast Guard can accept such help as three kilometres of containment boom from Canada, they can’t accept, and therefore don’t ask for, the assistance of high-tech European vessels specifically designed for the task in hand. This is amusing, in a way: a memorable illustration of … the sort of stuff I keep going on about. Which is to say, the law of unintended consequences, which pertains with especial virulence to all acts of government regulation.

Well OK. So why didn't he call Congress in session to amend the law at least for the duration of the crisis? You know - take executive action.

More comments at the post:

Maspeth Sally

06/13/2010 6:30 AM

....Obama's lack of any action and his not allowing others like Bobby Jindal from doing any corrective action shows that history will call Jimmy Carter only the second worst president in modern history after Obama "the anointed one". All this president is the re-definition of idiot. I think the U.S. would be better off with having Bush back than the current empty suit at 1600 Penn. Ave.

Which reminds me of a recently famous billboard.

Another commenter notices a few fundamental problems with Obama's general approach to management.

Joanne600

06/13/2010 6:55 AM

Obama needs to understand the fundamental principle of "lead, follow or get out of the way". He has not shown leadership and his best move would now be to just get out of the way and let the experts get it done. Many proposals have been put forth, but he seems incapable of rendering a decision.

The heck with rendering a decision. He could just make one.

This commenter is replying to a comment by an Obama supporter.

Dinerboy

06/13/2010 8:46 AM

John,

Yes, the job of plugging the well falls to BP and experts, but the point that the article is making is that Obama is not showing real leadership here. It is a sign of weakness when a manager or leader has to resort to threats and firings.

He SHOULD be leading the cleanup and containment effort, mobilizing all resources and drawing from all sources on that front. And, he should be addressing that, rather than public ccck swinging and bravado that's just fueling emotions and angering one of our closest allies. Proverb from Japanese business - fix the problem not the blame.

By the way, Bush is no longer president. 2/3 of your post is Bush bashing.

Let me note that in the above comment ccck is spelled wrong. Possibly a slip of the fingers or hand. That can cause some very nasty spills although the volume is unlikely to cause a disaster.

So what can the Present do? He could read some books. Might I suggest he start here:

Drilling For Oil

H/T Instapundit and Instapundit

Cross Posted at Classical Values

Spilling Oil

Al Fin has an article on natural oil spills. He links to a Science Daily piece on oil seeps in the Gulf of Mexico.

ScienceDaily (Jan. 27, 2000) — Twice an Exxon Valdez spill worth of oil seeps into the Gulf of Mexico every year, according to a new study that will be presented January 27 at the Ocean Sciences Meeting in San Antonio, Texas.

But the oil isn't destroying habitats or wiping out ocean life. The ooze is a natural phenomena that's been going on for many thousands of years, according to Roger Mitchell, Vice President of Program Development at the Earth Satellite Corporation (EarthSat) in Rockville Md. "The wildlife have adapted and evolved and have no problem dealing with the oil," he said.

Oil that finds its way to the surface from natural seeps gets broken down by bacteria and ends up as carbon dioxide,...

So how much oil was spilled by the Exxon Valdez? About 260,000 bbls. At 5,000 bbls a day it would take about two months to equal the Exxon Valdez. And another two months to equal the natural oil seeps in the area.

So how about some math?

Say we have 5,000 bbls a day spread along 100 miles of coast. That is 50 bbls per mile. Every day. At 42 gallons per bbl that is 2,000 gallons per mile or about .4 gallon per foot. Not too bad for one day. If it goes on for a couple of months not good immediately. A lot of wild life will be killed. And then as time goes on bacteria will start eating the oil and the food chain will blossom.

If the oil spreads more – that is good. If a lot evaporates – good. If a lot can be captured before it reaches the coast – good.

Of course if more drilling and mining of oil was allowed on land the chances of an accident at sea would be reduced relatively if not absolutely (oil consumption is still rising).

The desire of the ultra greens for a risk free civilization is increasing the risk that we will wind up with no civilization. Fools.

Cross Posted at Classical Values

The Oil Underground

I was reading ChiefIO about peak oil and saw the most interesting explanation of how hydrocarbons might be produced underground.

We don’t know for sure what process makes oil and there are sound reasons to think that it is still being created in large quantities. For example, the Middle East oil fields have an astounding rate of pumping, yet they have more oil in them now as “reserves” than before the pumping began.

One very good explanation for “why” is the possibility that iron acts as a catalyst to turn CO2 rich rocks, in the presence of H2 propbably from water, into hydrocarbons in geologic subduction zones (which would explain the oil locations in places like Indonesia and coastal California with active subduction zones).

Much as we do it synthetically (heat, pressure, CO2, H2 or water, and metal catalysts – Fischer Tropsch in a nutshell); nature may be doing the same thing. Take a look at how: Oil may come from subduction of rocks.

He has a lot more to say about why we have a lot of resources even if the conventional theories of oil creation are correct. So you know go read the whole thing.

And something else to read is a book that says our oil is a product of planet formation with a little different explanation from the above of how long chain hydrocarbons like oil came to be:

The Deep Hot Biosphere : The Myth of Fossil Fuels

Oil Wars

Iran is not happy about its border with Iraq so it has taken an oil well from Iraq.

Iranian troops crossed into Iraqi territory and seized an oil well that lies in a disputed area along the two countries' southern border, Iraq's deputy foreign minister said Friday.

The deputy minister, Mohammed Haj Mahmoud, said Iranian troops seized oil well No. 4 Thursday night in the al-Fakkah oil field, located in Maysan province about 200 miles (about 320 kilometers) southeast of Baghdad. The oil field is one of Iraq's largest.

Oil prices rose slightly after news of the incident.

The incursion by armed Iranians provided a dramatic display of the simmering border tensions between two nations, which have nonetheless grown close in recent years after a Shiite-led government rose to power in Iraq following the 2003 U.S.-led invasion.

Yeah. It looks like Iran and Iraq are growing closer.

I look forward to Mr. Obama's diplomacy in the matter. Maybe he can get a war going if he works the issues.

Oil Supply And Demand

Julian Murdoch thinks oil supply and demand are out of whack.

OPEC has publicly stated that they believe inventories in developed OECD countries to be equal to roughly 61 days of demand—a number OPEC is none too happy about. They'd prefer the world to be constantly on the brink of running out (that is, 55 days or less). So with all of this supply, you'd expect to see OPEC talking production cuts—or at least a drop in the price of oil.

Instead, last week the group discussed the need to increase production, so as to keep oil under $80—it seems even OPEC thinks prices are still too high. As OPEC Secretary General Abdalla El-Badri told Bloomberg:

"Anything above $80 will really hamper economic growth. Watch the floating storage, if that is eliminated, and watch the stocks, if they are at 52, 54 days, then OPEC will take action."

Of course, if the floating stocks (that is, oil stored at sea) remain at current levels and inventories stay full, then apparently OPEC will just sit back and rake in the money.

He does not say we have an oil bubble. But if you consider that supply is high and yet prices keep rising it seems obvious that there is a bubble.

And it may be more of a bubble than people think. There are a lot of new technologies becoming available sooner or later that will cut the cost of drilling wells. One of them is laser drilling of wells.

Laser drilling, Graves said, would have several advantages over conventional drilling:

-- Costs could be at least 10 times lower and up to several hundred times less than wells drilled with rotary rigs. For example, a typical, 10,000-foot gas well in Wyoming's Wind River Basin costs about $ 350,000 to drill. Laser drilling would drop that cost to $ 35,000 or lower, Graves said.

-- A laser drill's "footprint" -- the amount of surface space it occupies -- could be as little as 100 square feet, or even less with some models.

-- The laser rigs could be transported to drilling sites in one semi-trailer load. Conventional rigs take up several thousand square feet of space and require numerous truck trips to haul equipment.

-- Lasers could drill a typical natural-gas well in about 10 days, compared with 100 days for some conventional wells.
"You're looking at three months of disruption versus a week or so of disruption with a laser drill," Graves said.

-- Lasers could be programmed for precise well diameters and depths. In addition, they could alternately drill coarsely to deliver mineral samples, finely to vaporize rock and leave no waste materials, or with intense heat to melt the walls of well bores, thus eliminating the need to place steel casing in wells.

He goes on to say:

Compare this with the peak oiler theory:

So, as we slide down the Hubbert's Curve, not only will the rate of production decrease, but the cost of that production will increase.

Laser drilling may actually make production of the "hard to get" oil and gas easier than production of the stuff which was "easy to get". This would cause a lot of havoc with reserve numbers because commercially unfeasible small/deep deposits would suddenly become "proven" (i.e. exploitable with current technology).

Well OK! That article was from 2005 and so far the laser technology is not commercial despite advances in high power solid state lasers. Here a nice video about solid state lasers. However, the technology is advancing rapidly so it is only a matter of time.

But that is not all there is going on in the field. Exxon-Mobile announced in 2005 some very simple ways that it could reduce the cost of drilling substantially.

Exxon Mobil Corporation announced today that its drilling organization has developed an optimization process that consistently reduces the time required to drill oil and gas wells by up to 35 percent. ExxonMobil's Fast Drill Process (FDP) achieves this breakthrough performance by using real-time, computer analysis of the drilling system's energy consumption. This analysis, in turn, helps improve the management of the factors that determine drilling rate, such as weight on the drill bit, rotary speed and torque.

The result is significantly faster drilling rates and reduced downtime.

The company has used FDP in many of its operating areas, and the process improves performance in a broad range of conditions: hard and soft rock, deep and shallow wells, high- and low-angle wells in a variety of mud weights. It has shown comparable success in exploration, delineation and production wells.

So that technology is probably already being deployed. It may explain in part the recent reduction in costs for drilling natural gas wells.

There are other techniques that are coming to fruition. Here is another one from 2005.

Expectations are that widespread adoption of microhole technology could spawn a wave of “infill development”—drilling wells spaced between existing wells—that could tap potentially billions of barrels of bypassed oil at shallow depths in mature producing areas.

At the same time, microhole and related micro-instrumentation technologies offer the opportunity to dramatically cut producers’ exploration risk to a level comparable to that of drilling development wells.

Together, such efforts hold great promise for economically recovering a sizeable portion of the estimated remaining shallow (less than 5,000 feet subsurface) oil resource in the United States. The Energy Department estimates this targeted shallow resource at 218 billion barrels. Recovering just 10 percent of this targeted resource would mean a volume equivalent to 10 years of OPEC oil imports at current rates.

In addition, the smaller “footprint” of the lightweight rigs utilized for microhole drilling and the accompanying reduced drilling waste disposal volumes offer the bonus of added environmental benefits.

The microhole initiative is in line with the Bush Administration’s goal, set forth in the National Energy Policy, of promoting “dependable, affordable, and environmentally sound” energy production.

I knew it. That evil Bush was in cahoots with the oil companies to increase American oil supplies and reduce American dependence on the terrorist supporting nations of the Middle East. How evil can you get?

How about another Exxon project to lower the costs of drilling for natural gas?

"We're about 15 minutes away from a new frac being born," Randy Tolman, Exxon's project coordinator for the Piceance Basin, shouts over the noise. He invented this faster method of fracturing, or "fracing," the underground layers of rock and sand to unlock natural gas.

Exxon aims to export the new process to the unconventional natural gas reserves it is accumulating around the world. Drilling for more natural gas could make Exxon a lot of money as Americans demand cleaner fuel because natural gas doesn't emit as much pollution or greenhouse gases as oil and coal when burned.

Do you suppose the Greenhouse gas hysteria is a plot by the oil/natural gas companies to get government to shut down their competition? I wouldn't put it past them. Thomas Edison used similar methods to get his competition, the George Westinghouse Company's Tesla invented AC electricity system, shut down. Fortunately it didn't work. Will the CO2 hysteria work against the coal companies? So far the answer is no. It all depends on the ability of the interested parties (Al Gore will make tens of millions) to get the Senate to pass the Cap Coal and Tax the People Bill. They appear to be stymied. Good.

Ah but we are not done yet. Jared Potter is working on a water/flame drill in order to tap deep geothermal energy sources. Obviously it might also be useful for oil and natural gas.

Conventional geothermal power plants draw upon underground aquifers of hot water relatively close to the surface to create steam that drives electricity-generating turbines. The problem is that underground water currently tapped for geothermal is found mainly in the western United States. But the technology Potter is developing could drill much deeper, meaning geothermal energy could be generated nationwide.

According to a 2006 MIT study, so-called Enhanced Geothermal Systems could potentially supply 2,500 times the country’s current energy consumption. That grabbed Google’s attention, and last August the Internet giant’s philanthropic arm agreed to invest $4 million in Potter Drilling as part of its green energy initiative.

The tech twist: Potter drills not with hard-as-diamonds bits but with water—extremely hot water. (More on that in a bit.) The goal is to radically cut the cost of EGS to spread the technology to regions that rely too much on coal for generating electricity but are not suited for solar, wind and other renewable energy generation.

You can watch a video of the drill in operation. Here is some of what the people who posted the video have to say:

Inspired by designs created by his father decades ago, Jared Potter is building an arsenal of ultra-powerful flame-jet drills. As seen in the NatGeo video above, one prototype directs a jet of burning hydrogen at 3200°F against a slab of solid granite. The rock doesn't melt, as one might expect under such a blast of heat; instead, the high temperature causes the rock to fracture as it expands along existing micro-cracks in the material. After a short exposure to the flame-jet drill, a gaping, perfectly smooth borehole has been created in the granite.

For deeper drilling jobs, in wet, high-pressure conditions where traditional bits jam and break, Potter has another prototype. This one burns at a toasty 7200°F, but the flame is used indirectly, to superheat a jet of water, which in turn bores through the rock and simultaneously flushes the fragments out of the borehole.

The drill could drill at up to 100 ft an hour. Not as fast as conventional drilling, however there would be no need to lift mile long strings of pipe out of the well to replace drill bits. Or at least it wouldn't have to be done as often. And when you are replacing a drill bit you aren't drilling.

And that is not the only place such work is being done. The Swiss are working on it too.

Heated oxygen, ethanol and water are pumped into the reactor burner through various pipelines and valves and mix under temperature and pressure conditions, which correspond to the supercritical state of water (see box). The auto-ignition of the mixture is being observed through small sapphire-glass windows by means of a camera. A newly developed sensor plate measures the heat flux from the flame to the plate and records the temperature distribution on the surface for different distances between the burner outlet and the plate.

Based on these experimental results, conclusions are drawn concerning the heat transfer from the flame to the rock. “The heat flux is the crucial parameter for the characterization of this alternative drilling method”, explains Philipp Rudolf von Rohr, professor at the Institute of Process Engineering of the ETH Zurich and supervisor of the three PhD students.

During the experiment, the flame reaches a maximal temperature of about 2000°C. Rapid heating of the upper rock layer induces a steep temperature gradient in it. “The heat from the flame causes the rock to crack due to the induced temperature difference and the resulting linear thermal expansion”, explains Tobias Rothenfluh. The expansion of the upper rock layer causes natural flaws, already existing in the rock, act as origin points for cracks. Disc - like rock fragments in the millimeter scale are formed in the spallation zone. These particles are transported upwards with the ascending fluid stream of the surrounding medium. “One of the main challenges of the spallation process is to prevent the rock from melting, whilst it’s being rapidly heated”, says Tobias Rothenfluh. “The lager the temperature gradient in the rock, the faster you can drill.”

The method is particularly suitable for hard, dry rock, normally encountered at depths greater than three kilometers. In such depths conventional drilling bits wear out much faster, and their frequent replacement, renders the conventional drilling techniques uneconomic: a 10 km borehole costs around 60 million US dollars.

And that is just what we know publicly. Who knows what is going on in labs all around the world that is currently being kept secret for commercial advantage?

Bottom line? We may be running out of oil. Or not. But I do think fears of a near term peak oil limit on production are greatly exaggerated. Near term our limits are political not geological or technological. But isn't it always that way? And you know what they call a system where businessmen are in cahoots with the government to restrict the competition? National Socialism.

H/T pbelter at Talk Polywell

Cross Posted at Classical Values

A Double Dip?

Are we headed to a return to recession in the American economy?

U.S. consumers cut spending in September and turned gloomier this month, underscoring the fragility of the economy's recovery even as signs emerged that manufacturing may be picking up.

Manufacturing may not be picking up as advertised. I will get to that in a minute.

How about a look at some unwarranted optimism?

A separate report showed factory activity in the nation's Midwest expanding for the first time in more than a year, but employment conditions deteriorated. A dismal job market appeared to weigh on consumers, with the Reuters/University of Michigan final index of sentiment for October slipping to 70.6 from 73.5 last month.

What are gasoline prices doing to consumer sentiment?

Gasoline prices are now up 17 straight days after climbing 0.4 cents overnight to $2.695 a gallon, according to auto club AAA, Wright Express and Oil Price Information Services. That is the highest price since Oct. 26, 2008.

Prices are up 5.9 cents from a week ago and 14.8 cents from a year ago.

The average retail price for gas was $1.686 a gallon in December. Today's price will tack about $50 a month on to the monthly gas cost for the typical customer compared with then. It comes at a time when unemployment is at a 26-year high.

"It's a wet blanket on the consumer. It's something visible you see," said economist Ken Mayland of ClearView Economics.

Oil prices that skyrocketed to $147 a barrel a barrel in July 2008 helped push the economy into recession to begin with, he said.

"Can high oil prices shut down the economy? Well, clearly the answer is yes," he said.

With pessimism ruling the economy rising gasoline prices are going to hurt sentiment. The stimulus by the government is nearly played out and the government's line of credit went mostly for present consumption and not future growth. On top of that people know that with Bush's tax cuts expiring in 2010, taxes will be going up. That will further dampen current sentiment.

Now what about manufacturing? Steel is a barometer of the economy, just as steal is the watchword of politicians. And steel is going down while steal is going up. Not a good combination.

Let me start with steel tubing prices.

Price increases flopped for steel tubing products in October--in fact, they slipped--as prices of the feedstock hot-rolled sheet plateaued at September levels and tube purchasing by original equipment manufacturers declined, according to buyers.

Market sources say the proposed increase of $50/ton for structural tube has been rescinded by tubing mills in the South and Midwest. The October market price reported to Purchasing.com is $634/ton, down a smidge from a $638 average in September-and well below the $720 list price for hollow structural sections.

So demand is meeting supply at a lower price. That can only mean lower demand.

Steel scrap prices are slumping.

The economy is recovering too slowly to help U.S. steel manufacturers maintain recent steelmaking rates in excess of 60%. So, Key Bank Capital Markets analyst Mark Parr writes to clients that ferrous scrap prices could continue to decline over the next couple of months, noting that export scrap pricing for November already has dropped $30/long ton. "Domestic mills and export buyers remain on the sidelines," the Cleveland analyst writes, "likely dampening the ability to substantially maintain or raise hot-rolled pricing realizations over the near term despite low supply chain inventories."

Analyst Eric Prouty at Canaccord Adams in Vancouver, British Columbia, says market research "indicates that scrap industry fundamentals are weakening due to falling ferrous scrap prices, a relatively quiet export market, the end of inventory re-stocking by domestic steel mills and weaker seasonal trends."

And finally a how about sheet steel prices whose demand reflects the demand for autos and appliances.

Commentary from various steel mills and large service center chains discussing fourth quarter outlooks says demand for steel is muted amid the continued downturn in manufacturing and construction. This has held down prices since buyers have refused to pay what the mill shave been posting. Analysts now say recent increases in the rates at which mills are running have been an overreaction to customers, mostly distributors, who replaced inventory last quarter rather an indication that demands has increased among manufacturers.

Earlier last quarter, steel orders improved from historically low levels earlier in the year, helped by rising demand from the auto industry trying to boost manufacturing to replace cars junked in the "Cash for Clunkers" program. However, demand from the automotive and auto parts sectors appears to have slowed this month. So, the market for steel continues to pale in comparison to levels seen during much of last year.

Well well well. Cash for clunkers is no longer stimulating auto demand and with all those clunkers now in the scrap yards the demand for replacement parts has dried up. Who could have predicted this? I did. And I'm not even a government economist. I wish I was as smart as the economists now giving advice to the Obama administration. I could be getting a lot of money for saying really dumb things. Unfortunately it is not in my constitution to say things I know are dumb. Oh. Well.

Where Does The Oil Come From?

There is some relatively new sciece out about the origins of oil and natural gas.

ScienceDaily (Sep. 12, 2009) — Researchers at the Royal Institute of Technology (KTH) in Stockholm have managed to prove that fossils from animals and plants are not necessary for crude oil and natural gas to be generated. The findings are revolutionary since this means, on the one hand, that it will be much easier to find these sources of energy and, on the other hand, that they can be found all over the globe.

“Using our research we can even say where oil could be found in Sweden,” says Vladimir Kutcherov, a professor at the Division of Energy Technology at KTH.

Together with two research colleagues, Vladimir Kutcherov has simulated the process involving pressure and heat that occurs naturally in the inner layers of the earth, the process that generates hydrocarbon, the primary component in oil and natural gas.

According to Vladimir Kutcherov, the findings are a clear indication that the oil supply is not about to end, which researchers and experts in the field have long feared.

He adds that there is no way that fossil oil, with the help of gravity or other forces, could have seeped down to a depth of 10.5 kilometers in the state of Texas, for example, which is rich in oil deposits. As Vladimir Kutcherov sees it, this is further proof, alongside his own research findings, of the genesis of these energy sources – that they can be created in other ways than via fossils.

Well isn't that interesting. So called fossil fuels may not be from fossils after all.

That would tend to confirm the work of Thomas Gold and Freeman Dyson:

The Deep Hot Biosphere : The Myth of Fossil Fuels

What other findings do we have that might add further confirmation? There is some other work done in Sweden.

When Gold proposed this theory in the early 1980s, few scientists took him seriously. However, he did persuade the Swedish State Power Board to drill into a slab of granite fractured by an ancient meteor impact. Since oil is supposed to be found only in sedimentary rocks, it was a good test of Gold's theory. If gas is coming up from deep in the Earth, it might be expected to accumulate beneath the dense granite cap, and migrate slowly up through any fissures, perhaps turning into oil or tar. In the event, the prospectors did strike oil - about 12 tons of it. This was not enough to make the well commercially successful, but it did confirm that Gold was on to something.

It was not the Swedish oil that proved the most significant discovery though. Mixed in with the sludge at the bottom of the well, at a depth of over 6 km, was a large quantity of magnetite - a reduced form of iron oxide often associated with bacterial activity. After further investigation, Gold announced to the world that life exists not only on the surface of our planet but, in microbial form, deep inside the crust too.

Ah but that is not all.

There seem to be more than a few oil wells in the world that refuse to run dry.

Mystery in the Gulf

In 1973 oil was discovered in the Gulf of Mexico approximately 80 miles south of Louisiana known as Eugene Island 330. Producing 15,000 barrels per day, it was thought the well had seen better days when in 1989 its output dropped to 4,000 barrels per day. In 1990 the production of the well increased to about 13,000 barrels daily and has held steady. Although its output has slightly dropped it still refuses to run dry.

Want a Refill - Is That Possible?

Scientist working at the site discovered two important changes in the oil properties. Its age was was more recent than in previous years and its temperature was hotter. Using 3-D seismic technology scientist found a deep fault at the bottom of the well. What they saw startled, intrigued, and forced them to rethink the origins of oil. What they clearly saw was a deep fault gushing oil and refilling the well. There was no debate about it.

Mystery in the Mideast and Elsewhere

It's been said that the Mideast oil was a finite resource and could last 40 or 50 years at best. Yet over the past 25 years, reserves have more than doubled. With no new wells geologist have been hard pressed to explain why and it appears there is no end in sight. These fields have been methodically exploited since the first gusher was discovered. Today, OPEC is pumping over 30 million barrels of oil per day.

Cook Island in the Gulf of Mexico and oil fields in Uzbekistan are other examples of wells that refuse to dry out. Many wells around the world are refilling.

Peak oil? I dunno. Maybe not.

And then there is the biology of the Gulf of Mexico. We hear a lot about killer oil spills. But what if oil is life? Here is an article about all the oil seeping out of the gulf of Mexico.

The discovery of abundant life where scientists expected a deserted seafloor also suggested that the seeps are a long-duration phenomenon. Indeed, the clams are thought to be about 100 years old, and the tube worms may live as long as 600 years, or more, Kennicutt said.

The surprises kept pouring in as the researchers explored further and in more detail using research submarines. In some areas, the methane-metabolizing organisms even build up structures that resemble coral reefs.

It has long been known by geologists and oil industry workers that seeps exist. In Southern California, for example, there are seeps near Santa Barbara, at a geologic feature called Coal Oil Point. And, Roberts said, it´s clear that "the Gulf of Mexico leaks like a sieve. You can´t take a submarine dive without running into an oil or gas seep. And on a calm day, you can´t take a boat ride without seeing gigantic oil slicks" on the sea surface.

Roberts added that natural seepage in places like the Gulf of Mexico "far exceeds anything that gets spilled" by oil tankers and other sources.

"The results of this have been a big surprise for me," said Whelan. "I never would have expected that the gas is moving up so quickly and what a huge effect it has on the whole system."

Although the oil industry hasn´t shown great enthusiasm for the idea -- arguing that the upward migration is too slow and too uncommon to do much good -- the search for new oil and gas supplies already has been affected, Whelan and Kennicutt said. Now, companies scan the sea surface for signs of oil slicks that might point to new deposits.

Well what do you know. Look for an oil slick, find oil.

If you do some searching around on your favorite search engine you can find lots more of this stuff. Which made me think of the Firesign Theater Album: Everything You Know Is Wrong.

Peak oil? Probably more like peak hysteria. Well it used to sell newspapers. Today? Not so much.

Cross Posted at Classical Values

Got Gas?

Yes we have gas. Lots of gas. Lots of natural gas.

Last October, just as the economy was tilting into crisis, a small oil and gas company in Houston quietly announced the discovery of a mammoth natural gas field in South Texas that at any other time might have garnered bigger headlines.

Petrohawk Energy's find, however, did not go unnoticed in the oil and gas industry — and it didn't take long before oil companies large and small began making their moves.

Today, though the economy and natural gas prices remain weak, the Eagle Ford shale remains one of the hottest prospects in North America, and energy companies are moving forward there even as they're pulling back elsewhere.

That's because of what some companies suggest is a virtually recession-proof combination of highly productive wells and low drilling costs they say can yield profits even as natural gas prices hover near seven-year lows.

Just how much gas is there in the new fields using the new methods?

Recently discovered U.S. shale plays, including the Haynesville in Louisiana and Marcellus in Pennsylvania, are expected to provide a major boost to U.S. natural gas supplies in coming years. The dense rock formations, once thought too difficult to explore, have been unlocked with the help of recent advances in drilling technology.

The core areas of the eight largest U.S. shale plays may contain 475 trillion cubic feet of recoverable resources, according to an estimate by Ross Smith Energy Group, an industry research firm in Calgary, Alberta. That's roughly ten times the size of Texas' famed Barnett shale play in the Dallas-Fort Worth area, which supplies nearly 10 percent of U.S. natural gas production, excluding Alaska.

That is a lot of gas. But really what does the new gas situation look like from a longer term perspective?

After declining for 15 years, U.S. natural gas production is finally on the rise, thanks to new technological developments that make it possible to draw large amounts of gas from deposits previously thought to be unreachable. An increase in natural gas production of the magnitude many industry insiders predict could do wonders for business, the environment and even U.S. energy independence.

U.S. gas production is up 9% this year – a rate of increase not seen since 1984 – with most of that gain coming from natural-gas shale, particularly the Barnett Shale, a deposit that now produces 7% of the country’s gas supply. Indeed, there could be as much as 842 trillion cubic feet of retrievable gas in shale deposits throughout the United States alone, according to Navigant Consulting. That would support the current level of U.S. consumption for about 40 years.

And that is just from the gas found so far. I have seen estimates that go as high as 100 years for the total amount of gas available with current methods. More than enough time to get fusion or even economical wind/solar/storage going.

And if Thomas Gold's The Deep Hot Biosphere : The Myth of Fossil Fuels theory is correct we may have much more than 1,000 years of gas and oil available if we can drill deep enough.

Now that would make our transition off fossil fuels very comfortable. Time and a few very deep exploratory wells will tell.

Cross Posted at Classical Values

Lower Gasoline Prices

Purchasing Magazine predicts lower gasoline prices for at least 6 months and maybe longer.

Gasoline prices have been on a recession-defying march in the first half with futures prices rising largely on optimism that a strengthening economy eventually will drive demand higher. However, "it's more hope than fact," analyst Adam Sieminski of Deutsche Bank in New York tells the Associated Press. "Investors think the economy has bottomed and possibly recovering and they're moving to assets they think will benefit from the economic recovery and that includes commodities generally and oil specifically."

The retail price of gasoline may have peaked around $2.63/gallon in early June, according to economists who see prices slipping this autumn. "This run-up in gasoline prices shouldn't last," according to Tom Kloza, chief oil analyst for the Oil Price Information Service in Wall, N.J., who says a repeat of the 2008 record run-up past $4/gallon in July isn't anticipated. "It would take a geopolitical disaster, an earthquake or major hurricane damage to drive prices much higher than they are now," he says.

You have to wonder why the greedy oil companies haven't jacked up prices? After all people were willing to pay $4 a gallon last year. Maybe they do operate on the supply and demand principle after all.