Book Review: 'Game Over' by Stephen Leeb

I first read Stephen Leeb’s book The Oil Factor back in 2004. I read it again in 2008 and it reads more a history book now as Leeb’s projections for oil prices, precious metals, and investing in general were all spot-on. His latest book Game Over continues the main thesis unveiled in The Oil Factor: the world is beginning to run out of the essential raw materials such as oil, silver, titanium, iron ore and steel which are needed to support economic growth. Energy remains the key, and Leeb continues to pound the table in support of comprehensive and strategic energy policies for the US and the world.

Leeb is obviously a believer in peak oil and now proposes the concept of Absolute Peak Oil. He defines this as the point in which we’d have to invest more than a barrel’s worth of energy to pump, refine, and truck a barrel’s worth of it to the local gas station. He believes this point in time is very near and therefore suggests a massive investment in alternative energy. This is particularly important for the US, considering its 65% dependence on foreign oil.

Leeb discusses society’s complexities, both on an historical and a current basis. He points out that when complex societies run low on resources, they typically undergo wholesale collapse and experience large scale violence and starvation. Reading between the lines, it would appear he feels the US could easily slip into such a state if it continues to ignore its energy crisis. He points out that humans tend to live in denial and tend not to make significant changes until being forced to. The danger, he points out, is that waiting until then will be too late. We need wise and intelligent energy policy now.

But that policy won’t be easy to articulate. Obtaining the metals and water needed to generate more energy is a vicious circle of resource depletion. He points out the challenges in providing all the steel necessary to build 200,000 wind generators. Every investment at this point, Leeb says, must be analyzed in terms of resource/energy return on investment.

If I had to criticize Leeb it would be on his incomplete analysis of natural gas as a near and mid-term solution. Leeb goes into some detail on most topics, yet glosses over the major role natural gas could play over the next few decades in solving the problems he is most concerned about. He apparently does not quite understand the abundance of natural gas in the US and in the world. This is too bad considering the influence Leeb could have in advertising the strategic importance of US natural gas reserves. For the money Leeb suggests go toward energy research, the US could build out a very significant natural gas transportation infrastructure which would immediately and significantly reduce foreign oil imports. Mr. Leeb would surely benefit by reading Robert Hefner’s book The Grand Energy Transition.

Leeb continues to recommend investing in gold and suggest several countries and currencies which will benefit from resource shortages. Not surprisingly, the US does not make the cut and he forecasts further pain for the US in the near future: dollar depreciation, rising and rampant inflation, significantly diminished investment returns for the majority of Americans, and a Wall Street whose best days have come and gone.

I see no reason to discount Leeb’s predictions of the future and would recommend this book to anyone who hasn’t already read The Oil Factor. That said, it will be hard for Leeb to every write another book as timely and vital as was The Oil Factor. If only US policymakers had read The Oil Factor in 2004, perhaps the US wouldn’t find itself as unprepared for the future as we currently find ourselves.

Comments

[dan-d:]

All energy sources will be needed in the future. Since we, as a specie, are adding 100,000,000 new souls to the planet each year.
It should be obvious, even to the most obtuse, that the need for energy is insatiable. Fossil sources are finite and polluting and nuclear has major risks and will become increasingly expensive.
Alt energy sources will become more and more effective as time goes on and can be used for many of the current energy needs.
The key for the investor is, AS IT HAS ALWAYS BEEN, picking the right horse. BOLA

May 26 04:57 PM

[fran:]

re-handling spent nuclear fuel--

we could always recycle as the french have done for years. or as done by USA navy for subs, a/c cariers, destroyers since 1960s. please research the subject. it's done for more things in this world than yard waste, plastic/aluminum containers and old news paper. recycle also extends supply and reduces nasty ore mining.


On May 26 04:03 PM SeekingTruth wrote:

> I suppose that the French could obtain 100% of their electrical power
> from Nuclear sources, but that would not make it's use any safer
> , would it?
> That said, in their defense, I suspect that their methods and safety
> record are far better and safer than ours (that's not hard to do
> unfortunately for us).
>
> Before adding any new Nuclear facilities, we must know where and
> how the new Nuclear waste will be stored and handled safely and whether
> those selected methods are satisfactory to the citizenry occupying
> nearby populated areas.
> Of course, the storage locations and methods must also hold up to
> critical scientific inspection scrutiny as well.
> A competitive cost/benefits/payback analysis that includes storage
> and safe handling costs, using in part, well published and disseminated
> past history as a foundation would also be in order.
>
> I don't think this is asking too much for use of a difficult to contain
> deadly toxic carcinogenic substance that hangs around for thousands
> of years, do you?

May 26 05:55 PM

[Michael Fit...:]

SSALarry: i mispoke when i said i am in the "all of the above" camp. this isn't true and i need to clarify. i obviously support natural gas for transportation. i also support wind, solar, and nat gas for electrical generation. i do NOT support coal, ethanol, or biofuels. i only support nuclear because the alternative seems to be coal (it should be natural gas, but once again, congress, the EPA, and obama/chu have their heads up the "clean coal" chute.

GoSooners: the only time i have seen leeb on tv was on CNBC, and the interviewers, as normal on CNBC, ask dumb questions to push their agenda (which for some reason is not to believe in peak oil). leeb has been recommending gold for years. if you are going to pick a book to read, i'd read "the oil factor" first.

fran: well said.

fran again: recycling nuclear waste isn't 100% though, right? at the end of the day, there are still radioactive wastes true? didnt i read something once that the french were disposing of their nuclear waste in the US and at the bottom of the ocean? i need to do more research on nuclear energy and the waste issue.

May 26 10:55 PM

[Michael Fit...:]

oops, the "well said" was meant for SeekingTruth's comment. not that yours wasn't fran ;)

May 26 10:57 PM

[ripskii:]

Thanks for the good book review. I've read Leeb's other books in the past, but not this latest. I also get his newsletter and he has been consistently pounding the table on investing in energy and resources lately while warning of their finite availability and coming price volatility.

You previously clearly outlined all the reasons why we must immediately shift to NG for transportation fuel and I agree with that conclusion. In addition we must also immediately move forward on advanced nuclear reactors which will solve our spent fuel nuclear waste problem and generate the large quantity of electricity required. Reprocessing the nuclear waste as some suggest is not the answer as that leads to plutonium that can easily be diverted to weapons. The IFR reactor design can consume the long half-life waste while producing a much smaller quantity of short half-life waste. There is no doubt that we must have nuclear energy as a major component of a realizable overall energy plan, especially if we need to decrease coal burning. Note that coal burning creates far more radioactive waste than nuclear power plants.

The French nuclear power generating success stems largely from their one design reactor policy and good quality control. That also lowers the electrical energy cost and theirs are the lowest in Europe. Even with fuel reprocessing they still have a waste disposal problem.

www.ourenergyworld.com...

May 26 11:16 PM

[Grampa Jim:]

Dr. Leeb:
Many thanks for your book, The Oil Factor. I read it in 2004, and, prompted largely by it (you), I set out to learn much, much more about peak oil and many other energy issues. Now, energy, alternative energy and clean tech make up approx 20% of my portfolio as an "Other" category...other than equities, bonds and cash. Until this price drop, I enjoyed being long BTU, PCX, CHK, CVX, RIG, NOV, FTEK, FCEL, SPWRA, AKNS, TSL, NBR, ENER, WFR, SSL, JOYG and GE. FSNGX and PRNEX are in there too! Yes, I've taken my lumps, but I'm holding for the times you forecast with the hope that I'm properly positioned - at least MOSTLY well positioned! Oh, and in this recent rally, our portfolio came back much stronger than the broader US market. -Jim


On May 26 10:17 AM Dr. Stephen Leeb wrote:

> Thank you very much for your kind words. Your commends helps me feel
> like I am truly helping individual investors become more aware of
> the upcoming volatility. Good luck with your investment choices.
>
>
> Sincerely,
> Stephen Leeb, PhD

May 26 11:52 PM

[Old Wizard:]

Fitz, I'm for wind and solar,too, but I think its impact on our energy problem and more importantly our current account balance and strategic dependence on bad actors is not sufficient to be significant in the next 5 to ten years. My simple-minded example above was intended to show the magnitude of the problem that providing 20% of the electricity to only home owners represents. Also, as you have pointed out coal now generates 51% of our electrical power. To create the solar generating facilities I scoped out will take a significant amount of energy which will presumably come from gas, oil or coal which in the near term will require more conventional energy generation. All this before we force the use of all electric cars which in turn will require more electrical generation capacity. The plan now spells very little if any decrease in oil or coal usage and more than likely will demand more. On the other hand, using natural gas for transportaion, will have a short term effect that decreases oil usage while the alternatives are created. This is what I was getting at with some very conservative assumptions to show the fallacy of the plan in which the administration has embarked.

May 26 11:52 PM

[ripskii:]

Fitz: I recently saw an interview with the head of Bluewater Wind discussing off-shore wind power generation. He stated that several careful studies of the wind resource off the north east coast (Delaware, etc) showed that wind availability was 83%. This is much higher than the usual 20% assumed availability on land. He also pointed out that power generated off the coast was close to the population centers where it is consumed. This fact reduces losses in grid transportation and in fact improves overall grid performance because coastal regions would not have to rely on long haul lines from generators located in remote locations. This would appear to make off shore wind quite a bit more effective for the east coast where the shallow continental shelf extend out quite a ways. Even so a very large number of turbines would be required to make a significant contribution toward our requirements.

www.bluewaterwind.com/

www.popularmechanics.c...

May 27 12:48 AM

[Michael Fit...:]

rip: i certainly like the one reactor design concept. it sure seems like the US should get its best minds and best companies in a room, lock the door, and come out with one nuclear plant design that is optimized for safety, fuel handling, construction, and water usage. that design should then be fully reviewed by all involved and a first design built and analyzed. seems simple, but i am sure the process is more complex. btw, you are correct to point out that coal combustion generates radioactive waste. i was told by some folks (i did not see this myself) that after the disaster at kingston tennessee, the emory river was glowing a blue/green color that same night. now, in fresh water, i know of nothing that could have caused that glow but radioactivity.

oldwizard: oh, i understood your argument totally. however, i still think the cost benefit for wind is there (especially when compared with coal). it wouldn't bother me if all coal plants were shut down in favor of nat gas. meantime, i am all for the buildout of wind. solar still needs some efficiency improvements, but there are areas of the country where it works fairly well, and again, when compared with all the external costs of coal (environmental, health care) i favor solar over coal as well. however, as you point out, if obama's dream of electrifying transportation comes to pass any time soon, i don't see how it happens without nuclear (assuming no coal and apparently no robust push into natural gas).

rip: yup, offshore is a great place for wind, as europe has already proven. however, everytime i hear about offshore wind in the northeast US, i hear complaints by environmentalist. should be interesting to see how it works out. all that said, the wind profile in the US great plains is also very prolific, as boone pickens keeps pointing out. but, like you said, this strategy relies on building new and highly efficient transmission grid. it probably also relies on the gov declaring imminent domain so that the grids can be built quickly and cheaply (without courts getting involved for every mileage of farmland they cross). so, there are obviously some challenges, but i am all for moving forward on wind. i just wish the country would simulataneously do so with nat gas!

May 27 08:52 AM

[Old Wizard:]

Fitz and all, Every day brings new data that stregthens the argument for natural gas transportation. Did you see the item in today's Wall Street Journal where Volkswagan is negotiating with a Chinese firm to prvide them with the lithium battery the Chinese firm has developed for use by Volkswagan in their cars? Is this another evidence that the US is behind and that instead of creating more jobs here,we will wind up buying batteries for our future electric cars from China? This portends more negative balance of trade and will not foster a domestically viable batery manufacturing industry as planned without large subsides or tariff restrictions. The latest Dr Chuism is that, if we paint roofs white and make our paved road surfaces a light color we will save the amount of energy our cars use in 11years. If this is true, we should give all unemployed folks a paint brush, a years worth of white or pastel paint and pay them to start painting. Now that's instant job creation. If China is that advanced in lithium batteries, what is it that stops them from building all electric cars than any of our domestic car manufacturers at a lower price? Surly it isn't higher labor rates.

May 27 03:45 PM

[Market Sniper:]

A good read with some very good insights. I agree with the article's author on Leeb's passing over natural gas. I also take issue wih the author's charaterization of "speculators". Without the speculator to assume price risk between the producer of a commodity and the user of a commodity, commodity markets, as we know them, would not exist.

May 30 12:45 PM

[pockyclips ...:]

We may as well develop the coal that we have (hopefully cleaner) as the Chinese will use theirs. Most people still don't believe in global warming anyhow; besides I'll be worm food by then.

Why we don't use more NG is beyond me. No doubt politics is to blame.

May 30 03:23 PM

[MGA_1:]

I don't see oil, minerals, resources every "running out", but rather, getting more expensive. As for oil, what's happening is the depletion of "cheap" oil - stuff that is economical to pull from the ground @ $20/barrel or so. There's actually quite a bit of oil out there, it's just expensive. There are also a number of technologies comes into play when oil hits the $60, $80 price points, so the oil and energy are there, just more expensive.

The market will eventually take care of the problem, but I also don't think it would be such a bad idea to invest in alternate energy and begin the process of reducing dependence on fossil fuels.

May 30 07:08 PM

[steve graves:]

'Drilling for oil and natural gas can be done cleanly and efficiently, with little impact on the environment.'

While I generally agree with your post that sentence stopped me in my tracks. Obviously you understand that it's not the drilling of oil that's at issue, right? I assume you've heard of global warming. Carbon dioxide levels in the atmosphere are measurable and real, which means that it's the burning of fossil fuels rather than the process of attaining them that we must address. And that's why seeking alternatives is important; drilling for oil is just a side issue with only slight relevance...


On May 26 08:14 AM SSALarry wrote:

> Thanks for posting your review of Game Over, I have read many energy
> books and always enjoy hearing when a new compelling book has been
> released.
>
> I have not read Mr. Leeb's book yet, so I hesitate to make too many
> remarks. I will however make this comment, the idea that we can
> use alternative energy sources (wind, solar, bio-fuels, etc) to power
> the United States is nonsense, it can't be done. I would point folks
> to Robert Bryce's book Gusher of Lies, to get a better understanding
> of just how huge our energy needs are, and how none of the currently
> popular solutions will be effective in replacing oil. In my mind
> one of the first things the United States should do is stop thinking
> drilling is a dirty word. Drilling for oil and natural gas can be
> done cleanly and efficiently, with little impact on the environment.
> While we should continue to develop alternative energy sources to
> reduce dependency on oil, we also need to realize oil will be needed
> for a long time and stop tying the hands of the companies that can
> produce oil and gas in this country,

May 31 11:41 AM

[Canadian Re...:]

Hi, All,

Let's assume all the alternative energy options are technically viable. the next question bet asking is how are we going to finance it. If all the existing nuclear and coal power plants are to be decommissioned and replaced with green energy, I believe we will go broke in very short order.

I am of the opinion that nuclear, oil and gas will be with us for quite a while. Yes, we will transition to something else one of these days. But that day is long way into the future.

As for manufacturing work coming back to North America, let me give you some factory labour cost comparison:

Chinese - $100-150/month (10-12 hours/day, 7 days/week)
Malaysian - $200-300/month (8-10 hours/day, 5 days/week)
American/Canadian - $10/hour minimum wage

I wonder how much shipping cost need to go up to bring these manufacturing work back to North America.

May 31 07:11 PM

[jhartz:]

Whatever happened to hydrogen fusion? Last I heard, and that was several years ago, Princeton University had a reactor that was producing more energy than it was using. Is this now a dead issue? Didn't the technology pan out, or is it still in the "vaporware" realm?

May 31 07:46 PM

[Michael Fit...:]

CanadianRedNeck: i certainly didn't propose decommissioning nuclear plants, however, i do propose replacing coal plants with natural gas electrical generation. i don't think this is an economic burden at all. if the true cost of coal were calculated (including gov subsidies, pollution impact, and health care cost), natural gas wins hands down. plus, nat gas has half the CO2 emissions and NONE of the toxic particulates (ask the folks near kingston, TN what coal "fly ash" wastes can do...), and would smooth out monthly nat gas demand and so protect the US natural gas industry from the boom and bust cycles that create havic for that business. i agree that nuclear and natural gas will be around a long time. oil production and consumption will peak pretty soon and begin a long trend downward. as far as industrialization and manufacturing goes, labor isn't the only imput. if we don't start creating middle class jobs in the US, the US multinational companies won't be selling anything in the US because there will be no middle class left to buy anything. so, my natural gas centric energy policy would create good jobs in the transportation infrastructure sector (refit cars to run on natural gas, build nat gas/electric hybrids), in the industrial sector (GE compressors and turbines), natural gas refueling infrastucture (stations, home garage refueling appliances), and will keep transportation fueling expenditures in the country by paying farmers and landowners royalties instead of sending the money to foreign oil producers.

jhartz: research into the holy grail of hydrogen fusion continues. it has not been figured out yet and is not happening at this time (to the best of my knowledge).

Jun 01 01:44 PM

[Canadian Re...:]

Hi, Michael,

I agree with you that coal is one of the dirtiest energies, if not the dirtiest. However, to totally replace all existing coal power plants will take long, long time and a whole bunch of money. I am quite sure the owners of those coal power plants want to be compensated.

I worked on an LNG project in China for BP. The LNG was gassified to supply several gas turbine power plants for peak shaving purposes. Base load was supplied by coal power plants located elsewhere. China is moving aggressively to nuclear power and gas turbine power plants. It takes a long time to get all these plants built even in China. Chinese government is now very concerned about pollution because they can see and smell the pollution everyday.

Trying to get any power projects approved in North America is a long drawn out process. I know of one hydro-electric power station that is going through the process for close to 25 years now.

Just a wild guess, I dare guess that it would be extremely optimistic if we manage to replace 10% of the coal power plants in the next 20 years.

Some 20-25 years, Canadian government used to provide incentive for CNG conversion for vehicles. For some reasons, it was dropped after a while. As we have quite a bit of natural gas in North America, we should go back to CNG as it is a proven technology. I believe there is a company that can provide a small compressor to refill car at home.

BTW, power plants do not create many operation jobs.

Jun 01 06:15 PM

[Michael Fit...:]

CanadianRedNeck: natural gas fired electrical generation plants are releatively simple to build and operate (especially compared to coal) right? perhaps it will take a few more environmental catastrophes like the one at the TVA's Kingston, TN before americans realize that the biggest threat from coal is not the CO2 emissions, but the cocktail of toxic metals that is destroying our creeks, lakes and rivers. how can one put a price on that? how can we put a price on the fact that it is unsafe to eat fish out of any lake in something like 20 of the lower 48 states? replacing a coal plant with natural gas generation should not encounter any regulatory problems whatsoever - nat gas has no particulate emissions, no "fly-ash", and 50% less CO2 than does coal. and they can be built and online in a jiffy. as for canadian auto policy, they kind of follow the US (unfortunately). and yes, Fuel Systems Solutions (FSYS) now deals the "Phill" home garage refueling unit. not sure why you mentioned the power plant job issue - i never said they did create alot of jobs - although someone has to make the turbines and compressors (think GE) and those are jobs. however, robust natural gas *transportation* policies would create hundreds of thousands of well paying jobs (and perhaps keep alot of auto manufacturers and dealerships from closing shop..). not to mention all the positive economic synergies of not sending all our energy money to foreign countries. thanks.

Jun 01 06:51 PM

[Canadian Re...:]

Hi, Michael,

I am quite sure we will transition to other energy options. May be it will be electric heating for houses, electricity for urban transportation, oil and gas for petrochemical and flight, etc.

If electricity is going to make a major role in future, we have to make sure that we choose the right sources. Of all probability, it would be nuclear and hydro-electric would be the main sources. I don't believe that wind and solar would be the main players. They are most probably supplementary energy sources.

I also do not believe human activities are main contributors to weather changes (PC term), but we definitely cause a lot of pollution.The several developing countries I worked in all have major pollution problems. I believe environment engineering and pollution remediation will provide good paying employments This will be a growth industry. I believe this is where more developed countries will have the edge because we face the problems earlier than the developing countries.

BTW, there are uses for fly ash. It can be blended with cement to create different cementitious materials.

Cheers.

Jun 02 10:56 PM