Anandakos

Understanding Energy: Professional Money Management and Peak Oil

Finc 101,

I worked for ten years as an I/T person in the geosciences departments of Sohio, Amoco, and Shell. I've seen the large-scale deposit maps. There are over 2.5 million ten-digit API base numbers (the well head identifier) in the continental United States.

They are <b>everywhere<... that igneous or metamorphic rocks are absent at depths of less than 15,000 feet. The cheap glory holes you are imagining have all been drilled. The only significant hydrocarbon accumulations in onshore North America are trapped in thin strata between impermeable shales, like the Bakken deposits underneath the upper great plains.

Many have been known about for a long time, but the thin "pay" made them uneconomical to exploit with vertical drilling techniques. Now that we have horizontal drilling and fully steerable bits we can exploit them, but the thin pay is still a limitation to the total deposit. There are no more supergiants in North America, expect perhaps offshore in the Gulf.

Anything else is a gnat bite compared to America's voracious appetite for liquid hydrocarbon fuels.

On Oct 27 11:51 PM Finc101 wrote:

> The reason why oil is so expensive is because drilling is so expensive.
> In the early days of oil almost all discoveries were made by the
> inexpensive cable tool method. This is a slower drilling process,
> but requires only 2 men crews and can drill thousands of feet deep.
> It is very simple and requires no mud pits, pumps or other capital
> intensive equipment. In fact, almost all of the great Texas oil fields
> were discovered this way. If we wanted more domestic oil production
> and more domestic oil discoveries, the US must allow wildcatters
> to utilize this cheap drilling method and find more oil. Currently,
> this method is made impractical by regulations require anti blowout
> equipment and other devices designed to elimiate waste and damage
> to the environment. If drilling is cheaper, then the well exploration
> process can be riskier (producer or dry hole) and dont have to produce
> as many barrels per day to be profitable. It changes the whole economic
> picture of drilling from one of hiring expensive contractors to a
> DIY proposition potentially. There is no way that the fields in
> P.A. or Texas would have been discovered by using todays expensive
> methods, no one would have taken the risk to drill. We need wildcatters
> again to discover new fields on the cheap.

Understanding Energy: Professional Money Management and Peak Oil

Perceptions,

Well said. And this is another reason to put money on China. We may all be leery of the techno-fascist government of the country, but they are following exactly the correct path for an oil-constrained future.

In ten years they have opened as many kilometers of HSR as exist in Europe. They have stated a national goal that 20% of cars sold in the country will be electrically powered by 2015. Yes they're building coal plants too rapidly, but they're also dumping gigayuan into solar energy production and use.

On Oct 27 08:55 AM perceptions_now wrote:

> Regrettably, I am of the opinion that Oil Production has already
> effectively Peaked in 2005, in that it has subsequently failed to
> keep up with inflation, Demand or Population growth.
>
> There are no new sources of Oil, which will now prove sufficient
> in size to overcome the depletion of the existing, but decaying old
> super fields.
>
> If we were just treading water, with no growth, we would need 1 new
> Saudi Arabia every 3 years!
>
> If Production were to keep up with inflation, Demand &amp; Population
> growth, then another 2 Saudi Arabia's would need to be found &amp;
> put into production every 3 years.
>
> New unconventional sources such as Canadian Tar Sands &amp; Shale
> and the newer deep water fields are simply not sigificant enough
> to offset the depletion rates at the old super fields, such as Ghawar.
>
>
> I suspect the current Production plateau may continue, for a short
> period, but production will fall behind Demand. However, as Demand
> outsrips Supply and Prices rise, those very Price rises will trigger
> the cost ratio to run ahead too much, thus triggering the next Economic
> &amp; Share Market pullback.
>
> The old rules are changing, the return on Money &amp; Energy are
> being irreversibly delevered. The EROEI (Energy Return O Enrgy Invested)
> was 100/1 in the early days of Oil, it is now less than 10/1 and
> falling. New Oil is going to be much more costly to find &amp; Produce
> and the Investment return is not going to be anywhere near what it
> used to be.
>
> When perceptions finally accept that Oil has Peaked, then the rush
> away from Oil, into the search for something that may not be there,
> will also severely dilute the capital needed for Oil Exploration,
> as the EROEI will be decimated!
>
> In fact, even though Demand and Price has been rising, the investment
> in new Exploration has already been falling!
>
> There are no guarantees in life, but the likely outcomes suggest
> that 5-10 years from now, the Global Economic outlook, will be significantly
> different to today and I am not talking of upsides!

Fannie and Freddie: Worthless?

@Duude,

In actual fact, the total indebtedness of the all sectors of the US economy is very nearly exactly the same today as it was twenty-four months ago at the first rumblings of the crisis. Yes, government debt has ballooned, but private debt has shrunk by the same amount.

Would you <i>really</i> have preferred an <i>actual</i> shrinkage of the total capital debt of the US economy by 2.5 trillion dollars in two years?

Yes, over time it needs to come down a percentage of GDP, most likely by growing more slowly than does GDP. Actually shrinking total debt when investors are rushing equity capital out of the country to emerging markets would be insane. Are you a bond ghoul who would love to be paid back with ever scarcer and hence more valuable dollars? If so, admit it so we can evaluate your posts accordingly.

Since the capital base of American industry is steadily shrinking through disinvestment and depreciation, for the US to "grow its way out of this recession" -- everybody's favorite prescription -- it must have capital. Long term equity capital is vanishing from America as rapidly as the middle class. We either borrow (more productively than in the past to be sure) or we sink into genteel poverty like most of quaint and lovely old England.

On Oct 20 10:09 AM Duude wrote:

> These companies will survive but not as private companies. They're
> simply an arm of the US government. They will never be recapitalized,
> broken up or spun off with a new public offering. They have far too
> much bad debt and taxpayers won't stand for more tax dollars to recapitalize
> it. This is unfortunate because it only means the government will
> continue to subsidize mortgages, creating a bigger and more dangerous
> bubble. Government believes the best fix for a bubble is to make
> it bigger still. Taxpayers are already buried in debt and the government
> is now building a mountain with more and more dirt on the corpse
> of taxpayers everywhere.

When Morgan Stanley Almost Died

Whoops. Apparently HTML tags are persona non grata on Seeking Alpha. Especially those with no matching closing tag......

On Oct 05 02:56 PM Anandakos wrote:

>
> Felix,
>
> Thanks for having the courage to advocate for better regulation.
>
>
> My favorite is revoking deposit insurance from any depository institution
> which has more than 2% of national deposits or is a part of a larger
> group which does. It would have to be withdrawn over a period of
> time, of course, in order to prevent runs on the big banks.
>
> But over that implementation period it would force them to retrench
> to a smaller size and force the breakup of the financial supermarkets
> which have so much inherent risk.
>
> Yes, it <b>would</b> increase the risk of direct <b>banking</b...
> failure for each surviving individual bank, because they'd have less
> ability to cross-capitalize from unregulated siblings. And, they'd
> inevitably be more regional, since it would be impossible for a nationwide
> depository to have less than 2% of total deposits.
>
> But it would greatly reduce the risk of infection from those same
> unregulated siblings and the temptation to inflate earnings by financial
> engineering gambles. It would reduce banking to the regulated utility
> it should be. There are <b>plenty</b> of talented bankers running
> regional banks and large credit unions who would be glad to step
> up to running the sorts of large regional banks that would survive.
> Let the Dimon's, Lewis's, Blankfein's, and Kovacevich's of the world
> run investment banks. There fill an important role in a truly free
> capitalist system, but gamblers like them should <b>never</b> have
> been allowed into the no risk world of FDIC and Fed backed commercial
> banking. Never.
>
> One simple regulatory change with <i>enormous</... potential for
> restructuring.

When Morgan Stanley Almost Died

Felix,

Thanks for having the courage to advocate for better regulation.

My favorite is revoking deposit insurance from any depository institution which has more than 2% of national deposits or is a part of a larger group which does. It would have to be withdrawn over a period of time, of course, in order to prevent runs on the big banks.

But over that implementation period it would force them to retrench to a smaller size and force the breakup of the financial supermarkets which have so much inherent risk.

Yes, it <b>would</b> increase the risk of direct <b>banking</b... failure for each surviving individual bank, because they'd have less ability to cross-capitalize from unregulated siblings. And, they'd inevitably be more regional, since it would be impossible for a nationwide depository to have less than 2% of total deposits.

But it would greatly reduce the risk of infection from those same unregulated siblings and the temptation to inflate earnings by financial engineering gambles. It would reduce banking to the regulated utility it should be. There are <b>plenty</b> of talented bankers running regional banks and large credit unions who would be glad to step up to running the sorts of large regional banks that would survive. Let the Dimon's, Lewis's, Blankfein's, and Kovacevich's of the world run investment banks. There fill an important role in a truly free capitalist system, but gamblers like them should <b>never</b> have been allowed into the no risk world of FDIC and Fed backed commercial banking. Never.

One simple regulatory change with <i>enormous</... potential for restructuring.

Why U.S. Government Should Cut Federal Workers' Lavish Compensation

You jealous carpers are completely ignoring that over 70% of non-military government workers have a Bachelor's degree or higher. Since Reagan's day there has been an accelerating trend to outsource all of the positions that ordinary workers once held in the government: janitors, mail delivery staff, cafeteria workers and so on.

What is left has on average nearly three times the college attainment of the wider society. Further, anyone above a GS-10 nearly always has a graduate-level degree.

I'm not a Federal employee so don't accuse me of arguing my self-interest. However, I know several, all of whom are sharp and work hard. Most of you have just drunk Reagan's jealousy Kool-Aid.

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

Fred Linn,

Railroad locomotives do not use lead acid batteries as a storage technology for traction power. They do have batteries to crank the prime mover if its shut down, but the batteries are not in the power train.

They work as follows: a diesel engine of significant power turns a large alternator by direct drive. If the engine uses A/C traction motors the output from the alternator is fed directly to the traction motors through a control system. If the older direct current motors are used, the output from the alternator is passed through silicon rectifiers to product direct current which is then fed to the motors.

No batteries are used in standard diesel-electric locomotives.

Now there are some new hybrid designs coming on the market in order to store the electricity generated by regenerative braking in batteries for later traction use. However, the diesel electric locomotives "we have been building for the last 70 years" emphatically are not hybrids. They dissipate the regen braking energy through large steel grids on the roof of the locomotive. They function as resistive heaters to radiate the energy from braking.


On Aug 28 03:12 AM Fred Linn wrote:

> Mr. Peterson--------" Fred Lin, in an HEV you use the batteries to
> recover the energy lost in braking and use it to help with acceleration.
> In PHEVs and EVs I'm with you, why bother? "----------
>
> Exactly my point Mr. Peterson. People should not believe what
> they are being told----and this has been going on for YEARS.
>
> Hybrid vehicles offer about a 25% fuel savings overall, depending
> on driving conditions. There is lttle if any savings on highway
> driving----most of the savings are in stop and go city traffic.
> Compare that to 200% increase in thermal efficiency using biofuels.
> Hybrids seem to me to be paltry by comparison.
>
> Then add the fact that hybrids add another $2,000 to $5,000 to the
> price. Biofuels can be produced using all off the shelf parts,
> and are well tried and well proven.
>
> Of coarse automakers want people to believe that they can only have
> cars with power and efficiency if they pay a premium price.
> They are only interested in getting the premium price---not delivering
> the goods.
>
> There is no technical reason for using all the exotic battery types
> people are mentioning here. Good old lead/acid batteries work
> just fine----we've had 150 to perfect them(this year). The Baker
> Electric is a classic car that ran on lead/acid batteries and is
> widely recognized as one of the finest cars ever built---and performed
> admirably within the limitations of its battery/charging format.
> We can build hybrid cars just fine with lead/acid batteries.
> Railroad locomotives are one of the most efficient means of transport
> we have----and we have been building diesel/electric locomotives
> (hybrids using diesel engines to charge lead acid batteries) for
> over 70 years. If we can build locomotives capable of producing
> horsepower in the 4,000 to 6,000 range----we can easily produce cars
> needing only 100-200 hp.
>
> Look back through these posts. Everyone is brainwashed on "new"
> technology. The truth is, the clamor for "new" technology is
> just coporate manuevering to get hands deeper into your pockets.
> We can do everything we want our vehicles to do, right now, in a
> clean, renewable and sustainable way, using technology we have right
> now, and have had for over 50 years.
>

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

You say that Priuses use Nickel Metal Hydride batteries while the PHEV's and pure EV's use Lithium Ion batteries. Are you assuming that both kinds are manufactured in the same facility? It seems to me that's the only way that building more of one could necessitate building fewer of the other.


On Aug 26 11:14 AM John Petersen wrote:

> Mrfnd, the scarce commodity is the batteries. One GM Volt uses the
> same batteries that could be used to power 10 Prius class hybrids.
> One Nissan uses the same batteries that could be used to power 15
> Prius class hybrids. So for every EV you build, you are going to
> keep 10 to 15 Prius class hybrids off the road.

New Unemployment Insurance Claims Keep Rising

Karl,

I didn't know that jobs were even on a leash....;-). The proper spelling of the word that sounds like "loo-zing" is "losing". The word you wrote is pronounced "loose-ing" and though it is occasionally used -- viz. "he was loosing the hounds for the chase" it's pretty stilted and archaic.

You are right that we have "some deeper problems on our hands". Specifically, we don't make much that individuals want to buy these days. Yes, we're still the world's largest exporter, but a significant portion of that is agricultural commodities. Most of what we assemble from components consists of high end capital goods (Dreamliners!), chemicals, and machinery.

Those industries can only employ a small fraction of the workforce because they're so technology intensive. Now that the rest of the world is suspicious of our financial "products" -- not our stocks and traditional bonds, no, the "creative" stuff -- we are not going to be able to sucker them into buying dead tree certificates at a 99,000% markup. So yes, we have a problem.

Chap08,

Very true. But I'm not sure we want the dollar to fall to its "true value". How much DO you want to pay for that new Dell laptop? Ten grand?

Unlike AmEx, Capital One's Defaults Worsening

This could not happen to a nicer group of scumbuckets.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Good post, Love. Sounds like your "don't use the brakes" takes the place of a Prius' econometer. Well done.

It is odd how much extra fuel is consumed on curvy roads. It must be the greater tire friction from the turns. Yes, that's surely it.

On Aug 04 06:49 AM H. T. Love wrote:

> On Aug 02 09:04 PM Old Wizard wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

My bad. Not "$6,000 in gasoline" in the part about the Prius, but "6,000 gallons of gasoline".


On Aug 03 02:06 PM Anandakos wrote:

>
> Whaffle,
>
> You are SERIOUSLY computationally challenged. Even if one of the
> newly purchased cars goes 300K miles and is at the extreme low end
> of the allowable mileage range (23 MPG = the 18 MPG max for eligibility
> of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate),
> it will use 13,050 gallons of gas in its lifetime. Most vehicles
> don't go 300K and most of those bought will get more than the legal
> minimum for the program, but let's assume the worst case scenario.
> Any higher mileage vehicle will pay less in Federal fuel taxes over
> the life of the vehicle.
>
> The Federal fuel tax is 18.4 cents per gallon, which is a total tax
> payment of exactly $2,400 over the life of that worst case new vehicle.
> That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE
> between the new and old cars. If indeed the difference is only the
> minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal
> fuel taxes is only $652.50. That is the minimum that the fuel tax
> will lose over the life of a 300K mile vehicle.
>
> Now lets look at your "worst case" scenario. Say the traded in vehicle
> gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas
> over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes.
> Assuming that the 15 mpg vehicle could last another 300K miles --
> unlikely at best -- it would have consumed 20,000 gallons of gas
> and paid $3,680 in fuel taxes.
>
> That is a difference of $1,840.
>
> How about if the old vehicle gets 10 and the new one 30? The old
> vehicle would have paid $5,540 in fuel taxes and the new one will
> still pay $1,840 for a difference of $3,680.
>
> Let's be really bizarre and assume you're trading in a Dodge Ram
> 7 liter crew cab and buying a Prius. I don't know exactly what the
> Ram would get but if we assume you were a idiot and didn't get it
> with a diesel, it would probably be in the seven to eight mpg range.
> If 7 mpg and it made it another 300K miles it would consume 42,850
> gallons and pay $7,886 in Federal fuel taxes. The Prius is rated
> at about 50 combined, so it would consume $6,000 in gasoline, paying
> $1,104 over its lifetime. Even this completely implausible scenario
> would cost the fuel tax fund only $6,782, about 2.7% of what you
> mooted.
>
> Think before you type. Also, you might want to change your alias
> to "Whiffle" in honor of the ball that packs no punch.
>
> On Aug 03 01:32 PM Whaffle wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Whaffle,

You are SERIOUSLY computationally challenged. Even if one of the newly purchased cars goes 300K miles and is at the extreme low end of the allowable mileage range (23 MPG = the 18 MPG max for eligibility of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate), it will use 13,050 gallons of gas in its lifetime. Most vehicles don't go 300K and most of those bought will get more than the legal minimum for the program, but let's assume the worst case scenario. Any higher mileage vehicle will pay less in Federal fuel taxes over the life of the vehicle.

The Federal fuel tax is 18.4 cents per gallon, which is a total tax payment of exactly $2,400 over the life of that worst case new vehicle. That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE between the new and old cars. If indeed the difference is only the minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal fuel taxes is only $652.50. That is the minimum that the fuel tax will lose over the life of a 300K mile vehicle.

Now lets look at your "worst case" scenario. Say the traded in vehicle gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes. Assuming that the 15 mpg vehicle could last another 300K miles -- unlikely at best -- it would have consumed 20,000 gallons of gas and paid $3,680 in fuel taxes.

That is a difference of $1,840.

How about if the old vehicle gets 10 and the new one 30? The old vehicle would have paid $5,540 in fuel taxes and the new one will still pay $1,840 for a difference of $3,680.

Let's be really bizarre and assume you're trading in a Dodge Ram 7 liter crew cab and buying a Prius. I don't know exactly what the Ram would get but if we assume you were a idiot and didn't get it with a diesel, it would probably be in the seven to eight mpg range. If 7 mpg and it made it another 300K miles it would consume 42,850 gallons and pay $7,886 in Federal fuel taxes. The Prius is rated at about 50 combined, so it would consume $6,000 in gasoline, paying $1,104 over its lifetime. Even this completely implausible scenario would cost the fuel tax fund only $6,782, about 2.7% of what you mooted.

Think before you type. Also, you might want to change your alias to "Whiffle" in honor of the ball that packs no punch.

On Aug 03 01:32 PM Whaffle wrote:

> Using cars generates gas/road tax money.
> Therefore, more efficient cars will lower government revenue.
>
> Let's say every car purchased under cash for clunkers is 2x as efficient.
> Then, according to our mathematical and statistical manipulators
> (I mean, genius'es) , we'll see a 50% reduction in gas tax revenue
> over the life of the car.
> Pulling out my SWAG slide rule, that comes out to a cost of over
> 250,000$ per car.
>
> Clearly, we need less efficient cars if we want to "save our grandchildren
> from the vast debt we are creating".
>
> Disraeli was right , "there are lies, damn lies and statistics".

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mud Engineer,

What foolishness; the people buying these new cars are not poor. The government is not buying the car for them, lock, stock, and barrel. It is basically providing a bigger trade-in allowance on guzzlers worth less than $4,500; most buyers still have to take out a loan. It's just somewhat smaller than it would have been.

Nobody whose car is worth more than $4,500 trade in is going to participate; if they were going to buy anyway, they'll take the trade-in offered by the dealer. I hope you're able to understand that.

Because of this there will be an economic cost, paid by the buyers of relatively low-priced used cars over the next few years. The truth is that anyone who can afford a new car in this economy is probably already driving a decently running, reliable vehicle. Those worth less than $4,500 are being trashed irrevocably and removed from the pool of available used vehicles. While that's a bit of a fuel economy and emissions benefit, it is an economic cost for people who are struggling anyway.

So in fact the people who you so hate -- the "losers" of society who "don't have to pay taxes or even get a so called tax refund -- will be the ones most hurt by this program, since reliable used cars will rise in price.

I surprised you aren't cheering their comeuppance, Ebeneezer.

On Aug 03 11:35 AM MudEngineer wrote:

> This cash for clunkers program "is not a tax rebate". This is taking
> money from the people who pay taxes and giving it to the people who
> make so little money that they don't have to pay any taxes and may
> even get a so called tax refund even though they paid no taxes.
> That my friend is exactly "socialism".
>
> Your wonderful "cap and trade" will really screw the people who have
> no or little money as energy in all forms will rise in cost and they
> can least afford to pay those new taxes. All because of a few idiots
> who mistake CO2 as the cause of global temperature change when sun
> spots actually cause this cycles naturally. If cap and trade and
> the healthcare plan both pass, we will be permenantly in a recession
> or a depression. THANK YOU LORD OBAMA, OUR NEW DICTATOR!

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

WD216,

Many Americans have "an anti-business mentality" because their interactions with business are unpleasant, unsafe, and unfair. Businesses deploy armies of lawyers against their customers, collude with one another to fix prices and limit service, exploit the employees who generate the revenue keeping the lights on, and buy legislation from Congress making it all legal and protecting the processes.

There is no doubt that the limited liability corporation is the economic organization best able to accomplish large projects lasting an extended period of time. But giving such legal enterprises access to Bill of Rights protections was stupendous folly. Sure, they need access to courts and court procedures as a "person" in order to defend themselves against torts and to initiate them against one another in order to protect their contract rights. But they should not be assumed to have the POLITICAL rights guaranteed by the first ten amendments (free speech, petition of grievance, bearing of arms, and so on).

Since we don't have the initiative at the Federal level I have no idea how to correct this one hundred and thirty year old catastrophe, but it is the root of most of the distortions that afflict our democratic republic today.

On Jul 31 01:39 PM WD216 wrote:

> If those are the correct numbers, then is program costing $1 billion
> and 22,000 vehicles were sold, then the $45,000 per vehicle is correct.
>
>
> However more importantly, are the lines, "This government is, unfortunately,
> a reflection of the current state of economic immaturity that prevails
> in America. The vast majority of people, including most people in
> Congress, do not understand the forces that drive the real economy"
>
>
> Brilliant lines, they sum up the entire mess. We have a bunch of
> good speakers in office that don't know their a*s from their elbow
> when it comes to the economy. The American people don't either as
> they have an anti-business mentality, learned mostly through our
> liberal education system.
>
> The country is going to come out of this recession, only because
> of the trillions that are being spent. However, within 2 to 3 years
> you will see disaster strike due to these same spending policies.
> Our problems will be much worse then. This all due to ignornat Americans
> electing people that speak well.