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Dividing a Growing Pie
By Tom Whipple
Falls Church News-Press, On-Line Issue
June 1 - 7, 2006
In recent weeks, there has been a spate of stories about oil-producing countries either nationalizing their oil industry or unilaterally announcing new contract terms for international oil companies (IOCs) operating in their countries.
As the price of oil increased rapidly in recent years, exporting nations that had foreign oil companies operating within their borders looked at the unprecedented profits being earned by IOCs and began asking, “Why aren’t we making that money; it’s our oil?”
This is not a new issue. Nearly 70 years ago the Mexicans asked the same question as they nationalized their oil production. In the decades after World War II, most Middle Eastern producers took control of their own oil resources, either peacefully as with Saudi Arabia or accompanied by turmoil as in Iran and Iraq .
The current wave of nationalization/renegotiation began in 2004 when the Russian government moved to bring its giant Yukos oil company, that had been in private hands since the collapse of the Soviet Union , back under state control. This of course was an internal matter for the Russians.
This year has seen more pressure on the IOCs as Venezuela, Bolivia, and Ecuador either announced nationalization, in the case of Bolivia’s gas fields, or new contract terms that would bring the government more control and a greater share of the profits.
Last week the spotlight swung back to Russia when Moscow floated the notion that it should have 51 percent ownership in three of the biggest foreign oil projects in Russia — Shell's Sakhalin-2 field, Exxon's Sakhalin-1 and the Kharyaga license held by Total. The Russians claim these projects are all behind schedule, over budget and short on Russian involvement.
Although there has been no movement as yet, there is speculation other oil producers with a significant foreign oil company presence will be either announcing or asking for contract renegotiations.
The reason the foreign companies are present at all is because they alone have had the resources and technical expertise to find, produce, and market the oil. In many cases, the host government’s major function is to collect and spend the revenue check. Now, the tightening world oil supply and spiraling prices have brought a whole new dynamic to the revenue sharing question.
Most of the relationships between producing nations and the IOCs go back many years if not decades. Production and revenue sharing contracts were written back in the days of $10 or $20 a barrel oil. Contracts usually provided for the IOCs to make all the investment in return for some share of the profits. If the deal were for a 50-50 split, and the oil sold for $10 a barrel, then each partner might make a couple of dollars a barrel after a expenses.
The problem came when the value of oil quickly rose to $70 a barrel with little increase in perceived expenses. Then the IOC and the host government could each be making $30+ per barrel. From the host government’s point of view, the question became why should the IOC that was satisfied with a couple of dollars per barrel profit be entitled to a profit of $30 or more.
The question shifts to one of how much leverage the producing government has to demand more of the revenue pie. This, of course, requires a careful analysis and a lot of luck on the part of the government seeking a bigger share of the revenue. Given that most oil companies are making money, in some cases a lot of money, from their foreign operations, it is obvious that they have a lot of give. Naturally, they want to continue profitable production contracts and they already have made multi-billion investments in their projects.
In many cases, there are other factors to consider besides the profitability of the IOC. What other economic or political relations does the host government have with foreign oil importers? Should the government feel that its national security rests on good relations with Washington or some other importer, then it is going to be reluctant incur the problems of breaking existing contracts in hopes of gaining more revenue. The size and potential for a nation’s oil production would enter the equation. If oil production is minimal by world standards, an IOC could easily close up shop and leave the host country on its own.
Another new factor in the equation may be technically competent countries such as China , Japan , and South Korea who are becoming concerned about the future of their energy supply. In many situations, these countries would be more than happy to assist exporting nations with their oil production in return for access to the product.
Yet another complicating factor is that most new oil production is coming from deep-water fields these days. Finding and producing oil from beneath deep waters is a difficult task that requires huge investment, many years of effort, and much technical expertise. Losing access to the money and know-how of the IOCs is something a country that wants to continue in the oil production business should not take lightly.
Much debate is taking place as to whether recent grabs for a bigger piece of the profits will pay off in the longer run. Venezuela , which is currently producing about 2.7 million barrels a day but has large reserves of hard-to-produce heavy oil, is the most interesting. Having unilaterally announced major increases in their share of the revenue and control over heavy oil production, Caracas is awaiting a response as the whether the IOCs will acquiesce in the unilateral breaking of long-term contracts.
If the IOCs pull out or reduce their efforts in Venezuela , at stake are US imports of 1.6 million barrels a day plus long-term access to large quantities of geographically close heavy oil. If there is a break in the oil relationship, both countries are likely to suffer for an indefinite period.
Most observers hold that Bolivia and Ecuador have made mistakes in breaking their contracts with foreign oil companies. Their production is relatively small and they lack the capital and expertise to increase production without outside help.
Are any other nations likely to succumb to the lure of more pie and seek revisions to existing contracts? In reviewing the list of major producers, most such as China, Mexico, Norway, Canada, and Saudi Arabia either do not have production sharing agreements or are unlikely to get into the contract-breaking business.
There are others in the world such as Nigeria and Angola who might be tempted but in these cases other overriding factors could come into play.
As oil depletion sets in and the price of oil moves up, pressures on producing nations to get all they can, while they can, will increase. In this situation there is much opportunity for miscalculation. This would probably come in the form of the IOCs either pulling out of a country under pressure or a reluctance to make major new investments while under threat of expropriation. In either case future oil production will suffer and the day of peak oil will move a little closer or worldwide depletion will be a little faster.
Ethanol and Peak Food
By Tom Whipple
Falls Church News-Press, On-Line Issue
May 25 - May 31, 2006
No sooner had the high-gas-prices frenzy on Capitol Hill died down than a new obsession emerged— ethanol. Everywhere one looked, there was ethanol. If you live in an "over-ozoned, non-attainment" region, then every gas pump you visit has the words "10% ethanol" affixed. Television ads, magazines, and newspapers are filled with pictures of corn-yellow SUVs filled with motorists happy in the knowledge that their vehicle can run on good old American grown E-85 (85% ethanol- 15% gasoline). Their fuel dollars are staying right here in the USA and are not filling the coffers of foreign potentates.
Last Sunday, the Washington Post, which is in charge of keeping the nation's capitol up to date on all sorts of things, ran a major "A" section story on the ethanol craze sweeping the nation. From sea to shining sea, everyone from Microsoft's Bill Gates to New York 's Governor Pataki was building or announcing new ethanol plants. Rural America will soon be awash in them.
Across the farm belt everyone was getting rich making fuel from corn. Iowa wants ethanol to replace 25 percent of the state's gasoline consumption and General Motors pledged to build 400,000 more E85 capable cars this year. Farm state Congressmen are smiling as the century old problem of agricultural overproduction seems to be coming to an end. Corn prices are markedly higher. Agribusiness profits are soaring.
One searches the Post story in vain, however, for the downside to all this euphoria. As anyone who has followed the issue is well aware, there is a major debate going on about whether or not the production of corn-based ethanol takes more energy than it produces. If it does, then ethanol from corn is a giant loser for everyone but the farmer and the agribusinesses. There is also the fact that while ethanol burns cleaner than gasoline, it only produces about 70 percent of the energy and therefore gets 25-30 percent less mileage. If ethanol and gasoline are selling in the vicinity of $3 at the pump, then, in reality, you are paying $4 a gallon in comparison to sticking with plain old gasoline.
Finally we have the big question. As America is going through 500 million gallons of motor fuel per day, how much of this can safely be replaced by sharing our food with our fuel tanks?
A few days after the Post story, the answer came with a thundering crash when Canada 's National Union of Farmers issued a report on the world grain situation. The first sentence says it all: "The world is now eating more food than farmers grow, pushing global grain stocks to their lowest level in 30 years".
If the first sentence didn't get your attention, the second one says: "Rising population, water shortages, climate change, and growing costs of fossil fuel-based fertilizers point to a calamitous shortfall in the world's supplies in the near future."
There is a lot more detail, but the conclusions are the same— worldwide food production is on the downswing. The Canadian analysis is confirmed by numerous reports from around the world. A drought is affecting production in much of the world's wheat producing belt with losses of as much as two thirds of the crop in some areas likely.
A food vs. fuel debate has already broken out between Cargill and Archer, Daniel, Midlands (ADM), the two giants of the US agribusiness. While addressing a group of business writers, the CEO of Cargill said he saw the production of food as the most important task of agriculture. He pointed out that if the entire US corn crop were used for fuel, it would only replace 20 percent of US gasoline consumption.
The next day, the chairman of ADM retorted that the world has plenty of capacity to grow food. He maintains "there is no consumption vs. combustion debate" and that hunger and malnutrition around the world come from "a lack of infrastructure and a lack of capital." ADM is producing about 1 billon gallons of ethanol a year and plans to increase this to 1.5 billion.
Overall, about 15 percent of the US corn crop is used to produce ethanol, but there are so many corn-to-ethanol plants under construction or planned for the near future, this could easily increase to 40 or 50 percent of the corn crop according to an industry consultant.
If current trends continue much longer —crop destroying droughts, hurricanes, increasing energy prices, and the construction of ethanol plants— it is obvious that food is going to become more expensive, probably much more expensive.
Current US policy, deriving from aggressive lobbying by agribusiness and the plight of some farmers who have suffered for decades from low agriculture prices, is to support fuel from crops. While there are obviously short-term benefits, such as the rapid reduction of surpluses, higher agricultural prices, and a generally stronger farm economy, it is starting to look as if the "short term" may be very short indeed.
Increasing gasoline prices are likely to increase the demand for ethanol and thus the profitability of converting it to a motor fuel, thus exacerbating the situation. At some point the government will have to become involved and the food vs. fuel debate will begin in earnest.
This will, of course, be a short debate. There are acceptable alternatives to putting corn into your gas tank such as slowing down, staying home, taking a bus, or joining a car pool. There are no substitutes for eating.
As much of the world's food production rests on oil, then a decline in oil and natural gas production must reduce food production. If it hasn't happened already, then at some point there will be a peak food year when worldwide production of grain or food calories, or whatever you want to measure, will reach a maximum for the foreseeable future. However, unlike oil which was bequeathed to the world in a finite amount, until recently food was grown without benefit of fossil fuels. Thus the potential is there for food production to resume its growth someday without benefit of oil. This, however, is likely to happen in some other era.
In the meantime, however, it is a safe bet we are going to be hearing a lot more about food vs. fuel and that large-scale food-crop-based ethanol production is likely to slip quietly away.
Imports—America's Achilles' Heel
By Tom Whipple
Falls Church News-Press, On-Line Issue
May 18 - May 24, 2006
Very few Americans realize how precarious their lifestyle has become in recent years, as the United States becomes increasingly dependent on imported oil. Every year our aging oilfields produce less oil, while newly virulent hurricanes will likely continue to tear up oil and gas fields in the Gulf of Mexico .
Of the 20+ million barrels we burn each day, some 12 million are now imported from nearly 70 different countries either as crude oil or refined products. These countries range from our friendly neighbors, Canada and Mexico , to quite a few who for, one reason or other, don’t like America one bit and who would like nothing better than to stop “their” oil from going into “our” tanks.
As the growth of world oil supplies slows, more oil-short technically-advanced nations with something tangible to offer, such as China, India, Korea, and Japan, are propositioning the world’s oil producers in an effort to ensure future access to oil supplies. In this competition, US oil companies and their sisters in Europe , are finding themselves at an increasing disadvantage. This situation is almost certain to lead to serious problems for the United States very soon in the form of reduced access to importable oil.
As the value of oil exploded in recent years, the major oil companies, operating under years-old contracts, found themselves earning record (some say obscene) profits for no other reason than they were able to sell cheaply purchased and produced oil at current prices. These unprecedented profits, of course, have made their local operations prime targets for nationalization or at least contract renegotiation by governments outraged by the inequity of it all.
Dissatisfaction with the division of the pie is not a new phenomenon. Nearly 70 years ago, the Mexicans kicked out the foreign oil companies and enshrined the principle of “it's our oil” in their constitution. Forty years later, most Middle Eastern oil producers followed suit. During the past week, Venezuela , Bolivia and Ecuador have moved to take control over their oil and gas assets. The objective, of course, is to maximize the revenue the local government receives for its oil and to minimize the profits of foreign oil companies to the extent possible.
The new factor in all this is that oil-exporting countries can now find other partners to take the place of the international oil companies. There are now a number of oil-importing countries that have the resources and technical expertise to assist the oil-exporting countries in return for a guaranteed source of oil.
All this does not bode well for the US . Many of the countries from which we import our oil are already facing some sort of restrictions on their ability or willingness to sell oil to the US . The most politically friendly and stable— Canada , Mexico , the UK , and Norway , are all undergoing, or will soon face, varying degrees of oil depletion. It is important to remember that as an oil exporting country goes into depletion, exports will drop at a much faster rate than the country’s oil production, for an exporter will cover its domestic requirements first.
The many perils to the future of Middle Eastern oil exports are obvious. A future for Iraqi oil exports shows less promise with each passing day. The possible outcomes of the Iranian nuclear impasse range from oil market rattling exchanges of threats, through a complete or partial stoppage of Iranian exports, to military hostilities. At best, this situation will contribute to higher priced gasoline and at worst, it will lead to a sudden and major reduction in US oil imports.
Throw in growing Sunni-Shiite sectarian violence, Al-Qaeda’s proclaimed objective of destroying Middle Eastern oil facilities, and the likelihood of a succession crisis in Saudi Arabia , and the chances of oil flows continuing at current rates look very poor indeed.
Currently however, the best prospects for an imminent reduction in the US oil supply are the Nigerian and Venezuelan situations. In Nigeria an insurgency has already succeeded in shutting down some 20-25 percent of oil production. Last week, the insurgents announced they are preparing for another round of attacks that will shut down even more— and they usually mean what they say.
Last week in Venezuela , President Chavez unilaterally announced a contract-breaking new division of oil revenues that could cost the foreign oil companies some $2 billion per year. This initiative clearly will test the oil companies’ patience. If they conclude there is no longer money to be made in Venezuela , they might reduce their operations or even abandon their investments and pull out. Indeed, this could be exactly what Chavez has in mind as he lays the groundwork to sell oil to anybody but the US.
Powerdown or Collapse?
By Tom Whipple
Falls Church News-Press, On-Line Issue
May 11 - May 17, 2006
Last weekend, I attended a conference in Washington entitled "Petrocollapse." The organizers of the conference believe at some point the price of oil suddenly will rise so rapidly and will become so scarce that much of the world's current economic system will be unable to function. A corollary seems to be that beyond that unhappy day, governments as currently constituted won't be able to do much to help the situation.
One of the speakers at the conference pointed out that it really is impossible to know where civilization is going without cheap, abundant oil. There are so many people, governments, organizations, and economic phenomena involved in the current economic order, the results of their interaction during oil depletion is impossible to foretell. This, of course, is perfectly true. There is no way of knowing how our grandchildren are going to be living 50 years from now and what they are going to be doing, but it does seem a few general observations about the early years of peak oil can be made.
Those who think, or at least write, about the future of society from the perspective of knowing that peak oil is imminent, fall along a spectrum ranging from life-as-we-know-it-with-hydrogen-cars to most-have-died-off from oil wars, famine, and disease with the remainder living in scattered tribes on subsistence agriculture.
Narrowing this spectrum a bit, we first get to the "mitigators" who believe that if we can muddle through 20 or 30 years of economic depression, perhaps severe, we can gradually emerge with a new set of sustainable energy technologies. Clustered around the other end of the scale will be the "pessimists" who believe the oil/industrial age and all its wonders has over shot and that we will be in a deep, deep hole. They believe there are no foreseeable energy technologies that can replace oil sufficiently soon to prevent a significant economic and societal collapse. Nowhere will this collapse be harder and faster than in the United States , which uses five times the average world consumption per capita and, must import, nearly 70 percent of its consumption.
As usual, the truth is likely to fall somewhere in between.
It is relatively easy to foresee what is likely to happen in the early APO (after peak oil) years. Few will disagree that $5-10+ gasoline will result in a major reduction in personal automobile travel and explosive growth in mass transit, alternative vehicles and ride sharing. The substantial increase in the cost of transporting goods and raw materials will result in unprecedented price increases, high interest rates, and an economic downturn. As most of the economy won't resume recent rates of growth at any foreseeable time, the stock market won't be the same for a long, long time. The type of employment opportunities we have had for the last 50 or so years will change markedly. Far more of us are going to be doing some flavor of essential-to-support-life manual work and far fewer will be sitting around offices doing the things people do in offices.
Like it or not, people are going to turn to their governments at all levels to get them through the crisis whether it turns out well or ends in societal collapse. They are already demanding that something, anything, be done about $3 gas. Just think of what they will demand when we get to $5 or $10 gas, or restricted availability of gas.
There are no other institutions, other than government, with the authority and command of resources to keep civilizations of the complexity we have built during the oil age running. Only a few percent of us, in America, live on or anywhere near a farm anymore and what were once near universal agricultural skills are now possessed by very few. The true necessities of life — food, shelter, clothing, and medicine— come to us through highly complex supply chains— all of which run on oil. Simply getting the remaining oil flows to where they are needed most during the decades of oil depletion will be a major challenge.
While many governments appear to be bumbling badly at the minute, there is a lot of recent and ancient history showing governments have tended to rise to the occasion when presented with a very great challenge. America ’s responses to the Civil War, the Great Depression, World War II, and the challenge of the moon landings are shining examples of what a motivated government can accomplish. In Europe , Churchill's Britain , Stalin's Russia and even Hitler's Germany had spectacular accomplishments during the 1940's.
Although it is apples and oranges, it is difficult to imagine that worldwide oil depletion will be anything more difficult than the Russian government and people faced the day Hitler’s Wehrmacht stormed into their country bent on destroying or enslaving them all. In the lifetimes of many of us, governments and their people have met and overcome some very big challenges. Admittedly the rapid withering of the liquid fuel supply that powers so much of our essentials of life will be one of the major challenges of the 21 st Century, but I for one have trouble seeing the oil depletion phenomenon leading to a total societal collapse.
Jumping ahead 20 or 30 years is obviously much more speculative than opining in a general way about the remaining years of the current decade. As with everything else, these decades of transition away from the oil age could result in a really bad outcome, a relatively good outcome, or any of a million in betweens.
The really bad possible outcomes of the great peak oil transition range from nuclear wars to runaway biology or an over-the-tipping-point climate. The good outcome, of course, would be mankind’s mastery of an environmentally friendly, sustainable, inexpensive source of energy. And finally there would be innumerable in between outcomes, which would be some unknowable mixture of the good and the bad.
One thing is sure however, the peaking of world oil production is certain to launch a round of social and economic changes comparable to the advent of the industrial age.
A Frenzy in Washington
By Tom Whipple
Falls Church News-Press, On-Line Issue
May 4 - May 10, 2006
http://www.fcnp.com/609/peakoil.htm
Shortages Ahead?
By Tom Whipple
Falls Church News-Press, On-Line Issue
April 27 - May 3, 2006
Driving down the New Jersey Turnpike last Sunday, I encountered an unmistakable sign that gasoline problems are close. Every service plaza we passed from New York to Delaware had 100 or more cars waiting in line for gas. Now these lines might have been a simple case of economic theory in action. For some unfathomable reason, the New Jersey Turnpike plazas were selling gasoline for 25 to 30 cents per gallon cheaper than surrounding states. As this comes out to something like $6 per tank full, it is possible that there was no real shortage and a lot of motorists decided that a 100-car line was worth the savings.
The sight of gas lines, which I have not personally encountered for over 25 years, capped a volatile month in which the price of gasoline increased by 50 cents per gallon and shortages related to the MTBE to ethanol conversion developed up and down the US east coast and in scattered other cities required by the EPA to sell cleaner burning gasoline.
Let's try to sort out some of the forces at work and look at implications for the rest of the year. The root cause of the price increases/shortages is, of course, that the world is either at, or approaching, peak oil. The definite answer, however, to the "at" or "approaching" question lies several years away when we can look back at the numbers and say authoritatively "world oil production has peaked." For now, all we can do is watch the evidence accumulate that peak oil either has arrived or is still on the way.
Currently, the most interesting evidence is the lack of significant growth in world oil production for the past year as first reported and then re-reported, after due consideration, by the International Energy Agency and US Government's Energy Information Administration. These monthly reports coupled with a world-wide depletion rate, probably somewhere between 5 and 8 percent a year, means the world oil industry must come up with between 4.2 and 6.7 million barrels a day of new production each year just to stay at the current level of 84.5 million barrels a day.
As yet there are no reports the recent price increases are significantly reducing demand. Although the press is filled with anecdotal stories of people curtailing automobile travel, official reporting by the US Department of Energy says US consumption of petroleum products during the last month is running 1.3 percent ahead of last year. Chinese imports during the last quarter are reported to be 25 percent higher than last year and world economic growth is still slated to be above 4 percent this year.
There is also a worldwide shortage of drilling rigs and technical expertise to produce oil from untapped geologic formations, which now are typically under thousands of feet of water. There also seems to be an increasing reluctance by governments of oil-rich countries and their national oil companies to form revenue sharing partnerships with the major international oil companies that have the equipment, capital, and expertise to develop the difficult geologic formations. This go-it-alone attitude is bound to slow the development of new fields.
It is too early to decide whether the peaking of world oil is a major or minor factor in our current price run-up, but keep the possibility in mind. Sooner or later the peaking of world oil production will be the predominate factor in your escalating gas bills.
Currently many parts of the United States are experiencing gasoline shortages due to problems in converting from the smog reducing additive MTBE to ethanol which performs a similar function. This conversion is causing the oil industry numerous headaches, for the ethanol must be added to the gasoline locally rather than at the refinery. There are also issues of whether there is a large enough supply of ethanol available. In addition to causing shortages, this conversion program is widely believed to be a factor contributing to the recent price run-up, as the ethanol is more expensive than the chemicals it is replacing.
On Tuesday President Bush, obviously feeling political heat from the gas price issue, announced a number of steps to at least give the appearance of doing something to reduce gas prices. First he made the obligatory announcement that the government would root out and punish price gougers and suggested that perhaps the oil companies were making too much money. He then announced that the oil companies that had borrowed crude oil from the Strategic Petroleum Reserve would not have to replace it until fall.
For the last four months, refiners have been replacing the borrowed crude at the rate of about 58,000 barrels a day. Considering that the US consumption is more than 20 million barrels a day, it is doubtful that letting refiners hang on to an additional 0.3 percent of daily volume will have a measurable impact.
To deal with the ethanol conversion issue, the President directed the EPA to grant any waivers states request to avoid having to make the conversion immediately. This move is unlikely to have much impact either as the oil industry is already committed to making the conversion so that in most cases, stopping a process already underway will just add to the costs and confusion.
Now we come to the worrisome development for American consumers. In the eight weeks ending April 21, US gasoline inventories dropped by 24.9 million barrels. Gasoline inventories are now 5.5 million barrels below the normal range for this time of the year. These stocks normally grow by 3 million barrels during April in preparation for the summer heavy driving season. Moreover, total US imports of crude and products have also been dropping in the last few weeks.
Now there may be a totally benign technical explanation for the drop— residual effects from the hurricanes, unusually prolonged refinery maintenance, the conversion to ethanol situation, tanker availability. The situation may soon correct itself and the summer driving season may be completely normal except for higher prices. Given the extremely tight worldwide supply and demand situation however, some are beginning to talk about the possibility of major gasoline shortages and much higher prices before the year is out.
The scenario for this unhappy occurrence is simple. Either the world supply/demand situation is so tight that US importers are unable to purchase all the gasoline required to fulfill US needs, or exporters, in anticipation of much higher prices, are holding some of their exportable oil off the market. There are other possibilities such as insufficient sweet crude, particularly from Nigeria , which yields so much gasoline when it is refined.
So far, no industry or government spokesman has emerged with an explanation of just what might be going on with respect to US oil and gasoline imports. This leaves outside observers free to think the worst.
The only thing for certain is that unless US gasoline imports pick up shortly or US refineries start producing a lot more refined products, we are going to see higher gas prices this summer. Oh— and by the way, the surface temperature in the Gulf of Mexico is already higher than it was in April last year.
Politics After the Peak
By Tom Whipple
Falls Church News-Press, On-Line Issue
April 20 - 26, 2006
There is little doubt the effects of peak oil will someday soon radically change the political landscape in America—and nearly everywhere else for that matter. It is still a little too early to say when oil depletion will start appearing in political equations. If we have a particularly bad summer as some suggest, then "gas prices" could feature prominently in our November 2006 mid-term elections. If predictions of peaking within the next couple of years are correct, then energy policy likely will be a major factor in the 2008 presidential election. If peaking slips a bit then it is almost certain that the 2012 and 2016 elections will be fought over nothing else.
From the vantage of April 2006, it would be folly to speculate on the details of elections taking place months or years from now. A new "Peak Oil Party" could emerge to lead us out of the darkness (literally) or the same old Republicans and Democrats, retooled for the post-oil era, could compete for our votes. America could emerge from a decade or two of converting to new lifestyles as a new and stronger democracy, or the demise of the oil age could be too much of a strain for our current political arrangements. However, there is a lot of recorded history around for insight and human nature being human nature, a few general observations might be in order.
One of the most disturbing things I have read recently pointed out how hard it is for people to radically change a way of life. The writer noted how in 1860 when the South was threatened by abolition, an entire generation picked up arms and marched off to endure terrible sufferings in order to protect a way of life from which few benefited directly.
Equally disturbing is how a significant portion the German middle class embraced the Nazi Party after their economic well-being was wiped out by hyperinflation.
Given the love affair that Americans, and everybody else in the world that can afford one, have with cars, giving them up is going to be the collective trauma of a lifetime. Polls tell us a vast majority of car owners say they will drive to their last dollar or until there simply is no choice.
From a political point of view, such a strong emotional and lifestyle attachment is fertile ground for demagoguery. The Congress already has summoned the oil executives to lecture them before the cameras about high gasoline prices. Various states have passed anti-price gouging bills to make it look as if they are doing something. The administration has declared an "Advanced Energy Initiative" which throws a few million dollars at a problem that will require trillions. The trivial increases in CAFÉ standards for SUVs will someday appear as laughable as battling an ocean with a sword.
We are starting to see scattered instances of peak oil tax demagoguery. At a time when government should be rapidly increasing energy taxes to slow consumption, some politicians are calling for the elimination of gas taxes so their hard-working constituents can afford to drive as they wish. At a time when gasoline prices will soon be thought of in round dollars —$3, $4, $5 gas— rather than cents, eliminating a few pennies of tax will soon be recognized as pointless.
The ultimate absurdity will be the price cap. If anyone wants to bring transportation in a country to a complete halt, simply decree that motor fuel can't be sold for more than "X." Osama Bin Laden couldn't come up with a better idea if he tried.
As some point however, the silly season will end, the body politic will come to recognize that hearings, tax cuts, price caps, and drilling in national parks are not the remedy for peak oil. Whenever that day comes, congressmen, legislators and governments will start look for real solutions: massive conservation and a transition to sustainable fuels and lifestyles. The real question then is whether this will happen soon enough to avoid causing damage that will set the transition back many years and increase the hardships. Will an administration —the current, the next or the one after that— have a change of heart mid-term, or will an election have to be fought over remedies for peak oil first?
Any poll taken today will show Americans are worried about "dependence on foreign oil" but are not yet ready for hardships, such as serious reductions in driving to achieve this goal. For an administration committed to not rocking the boat while tossing in a sea of other troubles, it probably will take a mega-development in the oil production world that quickly spikes gasoline prices into the $6-$7 range to force a change.
The bellwether for change will be the imposition of a strictly enforced nationwide 55 mph speed limit. Until such an inexpensive and effective oil conservation measure is passed, our politicians are still listening to the call of a bygone age rather than preparing us for the next.
Before the oil age comes to a complete close, let's hope someone rehabilitates Jimmy Carter as one of the most prescient Presidents ever to hold the office. Congress might even rename an airport for him— just before it is shut down forever.
It's Time to Start Planning
By Tom Whipple
Falls Church News-Press, On-Line Issue
April 13 - 19, 2006
Let's start with the completely obvious. We are no longer living in the 19th century. Seventy percent of Americans no longer live on farms as they did when the first oil well was drilled (it now is more like 2-3 percent). Very few have transportation pastured behind the house. Nor do many have a chicken coop, a wood lot, a vegetable garden or a place to hunt for food. Somewhere along the line, the 20th century with its abundance of oil got in the way of self-sufficiency and everything changed.
Very, very, few of us are, or could be, anywhere near self-sufficient in the 21st century. Oil has created a very specialized society in which the essentials of life —food, clothing, shelter— come to us through a complex social and economic chain involving thousands of people each performing specialized tasks.
The whole system sustaining our lives is bound together by oil. It is the cheap freely available oil that has allowed us to move ourselves and our goods around cheaply, quickly, and efficiently. Specialized highly efficient production has of course resulted, for many, in a golden age, a cornucopia. Take away the oil, or simply raise the price high enough, and the social/economic order starts to come apart rapidly. Then what?
The answer is obvious. We in America , and indeed in many other countries, will turn to government to organize a solution. Which government? All of them. Every level from village council to presidents and prime ministers will be overwhelmed by the need to take action. Needs will be enormous, compared to anything we have known in recent years.
If anybody doubts this assertion, just ponder for a minute, one or two of the many changes that took place during the oil age. On the average we got a lot older. There are currently about 40 million of us over 65 years old in the United States and nearly 20 million over 75. If anybody thinks the average octogenarian is going to jump on a bicycle and pedal 20 miles over to the Wal-Mart to pick up supper, they're wrong — it just won't happen. Most of us are going to need help to get through the transition to a post carbon world. Life threatening situations will abound.
In addition to the elderly, there are other problems such as the 2 million people currently locked up in some jail or prison. What's the warden or the state governor going to do when the guards can no longer afford to drive in for their shifts, the electricity goes out as part of a rolling blackout, and kitchen manager reports he can no longer get enough food delivered for three square meals a day? There are endless scenarios, but by now you should be getting the picture. By a wide margin, the peak oil crisis will be one of the biggest problems governments have had to face in the modern era.
As oil depletion sets in, we are going to see dozens, then hundreds, then thousands, and ultimately 300 million (population of the US ) new problems show up which clearly will be beyond the means of our current social/economic system. Just imagine the New Orleans flood engulfing the whole country at once to get some sort of feel for what things might be like.
Where to start? The answer to this one is easy. Governments at all levels must start planning, planning, planning for what clearly is to come — be it in five months or five years. What should they plan for? Here the details are difficult but the general concept is rather straightforward. Let’s look at state and local governments today for the federal response to peak oil is a whole other story.
Before a state or local government can help its citizens, it must first ensure that it can function. Then it must ensure it has sufficient authority and resources to do whatever is necessary in the decades when the effects of peak oil will be the worst. Although there will be endless debates over the government's role during the decades of transition to a post-oil world, I believe protecting life and maintaining civil order come first/b], followed by helping new economic arrangements emerge.
The number one planning objective for any level of government is to prepare for a sudden and long-lasting reduction in the availability of oil. There are presently numerous situations festering in the world ranging from giant-hurricane spawning temperatures in the Gulf of Mexico to numerous militant or terrorist organizations and governments that are working at shutting down substantial portions of the world's oil supply.
Thus plan #1 should focus on a government's ability to function. Can a government's employees get to where they are needed? Is there sufficient fuel for government vehicles? Is there enough money to pay for the fuel and likely increases in activity? What happens to tax revenue?
Then there is a question of authority. Can a government prioritize the distribution of limited fuel, or even food stocks? Can it institute rationing, conservation measures, impose fuel-saving speed limits, mandate car pools? Clearly a high priority should be given to preparing a package of emergency powers for governors and local councils.
Beyond the initial need to develop the organization to maintain life, civil order, and the distribution of vital goods and services, there will be a need for government in establishing extensive new systems of mass transit. If, as most expect, there will be very serious economic disorders, we start to raise issues of government as the employer or provider of last resort.
Looking Through Peak Oil Lenses
By Tom Whipple
Falls Church News-Press, On-Line Issue
April 6 - 12, 2006
Once a person assimilates the idea that peak oil and its consequences are imminent, it radically changes one's world outlook. Nearly every issue one confronts will be affected by peak oil. In the last 100 years, oil has become so pervasive in our civilization that few issues or individuals will be immune to the reduced availability and much higher prices that will soon be upon us.
At the top of the list of problems coming with the peaking of world oil production are all manner of economic troubles. Optimistic students of peak oil say, at best, we are going to have a great depression lasting a couple of decades. Pessimists write of much worse. The bottom line is the good times much of the world has enjoyed for the last sixty years will not last long.
Start with the innumerable personal decisions you make every day. Is your job likely to be an early casualty of rising gasoline prices? If you make or sell SUVs, the answer is easy. If your job depends on people's discretionary spending— be wary. The polls tell us people will spend close to their last discretionary dollar on gasoline before giving up driving their beloved and "essential" cars. Thinking of buying or selling a home? The housing situation, particularly in the US , is going to be markedly different in a few years.
If, however, you are a farmer (and not many of us are anymore), you may be on the verge of the golden age. Chances are the world's farmers are going to be mighty busy growing plants that can be converted into liquid fuels as well as food. The golden age for some could start as early as this summer when large quantities of surplus corn are converted into ethanol for use as a pollution reducing gasoline additive. On the other hand, it seems some major droughts are shaping up across the world, possibly even in the US , so the golden age of farming may be delayed for awhile.
If your part of the world suffers from traffic congestion, just wait awhile. We know people will give up a lot of things before they park their cars, but after gasoline gets past $6 or $7 per gallon and a lot of credit cards start maxing out, "non-essential" driving is bound to slow way down. Every car you see on the road will have someplace important to go and I suspect will have more people on board than we see now.
Thinking about a trip? You had better go soon. The International Air Transport Association just reported the collective fuel bill for all the world's airlines topped $92 billion last year, up 50 percent from 2004. It is not hard to imagine that airfares currently measured in the $100s will one day be measured in the $1000s, leading to a marked reduction in air travel.
Currently, one of the top political issues in the US is immigration policy, so it is fair to ask what insights a peak oil perspective might have on this issue. There would seem to be two sides. As people who have been following peak oil are aware, oil production in Mexico has started into decline and just might decline very rapidly. As the Mexican federal budget depends very heavily on oil revenues, Mexico, and indeed all of Central America, may be faced with some very tough times ahead leading to increased pressures to migrate north.
In the US , the role for immigrants will largely be determined by how well the economy fares in the early years of peak oil. As long as the GDP continues to grow and unemployment is low, there will be a demand for immigrant labor. However as the economy weakens from steadily increasing oil prices, laid-off workers will be willing to take less-desirable jobs, thus displacing immigrants. While some types of jobs that have come to be filled largely by immigrants —agricultural and meatpacking— should continue at current levels. After all, we have to eat. Others, such as construction, landscaping, hotel and restaurant work, are likely to see a substantial decline with the advent of a peak oil induced depression.
The last point to ponder a bit would be the role of government, at all levels, in a post peak world. We no longer live in a 19th century world where most of us lived on farms and could more or less provide for ourselves. We have become so dependent on elaborate networks of transportation, energy, and communications to sustain our lives, and there are now so many of us -- 300 million in the US, 6.4 billion in the world --- it is clear governments are the only entities with the authority and the means to get us through to the post peak oil world.
If you are skeptical of this, ponder 1929 to 1945 and the pervasive role that government came to play in the economy and our lives during the depression and the ensuing war. There seems little doubt that the problems coming with peak oil will be comparable to those of the 1930s and '40s.
Once you have absorbed the notion that peak oil is both inevitable and imminent, one's world outlook and perhaps one's politics are in for a radical change.
The Department of Defense meets peak oil
By Tom Whipple
Falls Church News-Press, On-Line Issue
March 23-29, 2006
Among the largest consumers of energy in the world is the US Department of Defense (DoD). It uses about 4 percent of the fuel consumed in the US . Planes, ships, tanks, trucks, bases— the list of uses for oil, coal, natural gas and electricity the US defense establishment has discovered in the last century is endless. However, for an organization that prides itself on planning and more planning, DoD has, until recently, been silent about just how they are going to get along when the oil starts running low. They have had an "Assured Fuels Initiative" going since 2001 seeking to encourage US industry to produce liquid fuel from domestic coal, but little else is readily evident.
Last week, however, Congressman Roscoe Bartlett brought a DoD-sponsored report to the world's attention during one of those late night special orders speeches on peak oil he has been giving recently. It seems that somebody in the Army Engineers' Research and Development Center is charged with worrying about how to keep all those Army bases running in the decades ahead. That person must have heard energy might be getting a little tight, so a study was commissioned on “ Energy Trends and Their Implications for US Army Installations.” Last September the study came in and, believe it or not, the contractor reported, with all the appropriate citations, that not only is peak oil imminent, but that the Army better get onto this right now. The report concludes with a lot of sensible recommendations about conservation and renewables.
One report, however, does not change an institution the size of DoD. It is doubtful that, prior to last week, more than a handful of people had read it and still fewer had grasped its import. You have to start somewhere, so just examining the problems of keeping bases running with diminished energy supplies is as good a place as any. While this report and the Assured Fuels Initiative are a beginning, they do not seriously address the potential consequences of peak oil or the role DoD will have to play in the coming crisis.
Despite many people's negative opinion of the US Defense establishment, it can, when properly motivated, be one of America 's greatest assets. Remember how it recruited, organized, equipped, trained and deployed 14 million men and women to fight in World War II. Remember the Manhattan Project, jet transport planes, digital computers, the Internet. The last 70 years have seen outpouring of innovation from DoD projects that, for good or ill, has made much of the world the way it is today. It is fair to say that Defense and its associated agencies have been the number one priority of the United States since the Pearl Harbor attack. Among the many things all these trillions of dollars have or have not accomplished, one clear result has been the demonstrated capability to plan and manage very large projects— many even reasonably well.
This management know-how might just be where peak oil and the Department of Defense come together. If the peak oil crisis comes upon us quickly —either by a major reduction in our ability to import oil or simply because of an unexpectedly rapid depletion of the world's oil fields— the US is going to need some very large projects to mitigate the effects of the missing oil, very fast. These projects could easily be on such a scale —trillions of dollars— that DoD could turn out to be the one organization with the appropriate project management skills and contracting expertise to tackle the consequences of peak oil on a timely basis
Nobody knows what American society, or others, would look like after a few years of declining oil and natural gas supplies, but there are a number of books out there predicting very bad things. If even a fraction of these come to pass, America, and of course, most other countries, are going to need some very solid, well-disciplined institutions to get us through the decades between the age of plentiful oil and whatever is to follow. If, as many believe, there will be much social disorder, then there may develop a need for DoD help in insuring the domestic tranquility.
For DoD, we are talking about a very big paradigm shift. Throughout history, armed forces have existed to insure the security of their political entity either by offensive or defensive action or simply by deterrence. This may be about to change.
Some believe the first of the "oil depletion wars" already have begun and are predicting that we shall see more of these as governments struggle to get a share (fair or not) of whatever oil is left. Others hope "oil depletion protocols" will enable the world to devise an equitable distribution of the remaining fossil fuel supplies, leaving countries free to concentrate their efforts on moving their economies to renewable energy sources and new lifestyles.
Because of the many uncertainties, it is difficult to predict just where DoD might fit into a world of rapid oil depletion. While it could be oil wars, the US experiences in Iraq suggest that sending troops to maintain production from foreign oil fields might not be a good choice. Eventually the cost and availability of liquid fuels will put constraints on supporting large air, sea, and mechanized forces. When the choice gets down to growing sufficient food or running an aircraft carrier, DoD might not fare as well as in the past.
As an alternative, DoD could be pulled into the management of very large and vital civil programs such as massive development of renewable energy or revitalizing railroad transportation. This would be especially true if the economic dislocation from the peaking of oil production leaves sectors of the economy dysfunctional.
Many commentators have noted the civil unrest ensuing from peak oil could reach a point where DoD, or at least the National Guard, would have to become involved to supplement civil authority. Large population movements are conceivable. Indeed, it seems possible to make a very long list of situations that could arise under oil depletion where there is a need for DoD or other government agency intervention. Let's hope somebody out there has started to think about this.
Canada , the US , and Oil -- An Increasingly Bizarre Relationship
By Tom Whipple
Falls Church News-Press, On-Line Issue
March 16-22, 2006
The issue is back again. This time a trio of Canadian research organizations has released a harsh report entitled Fuelling Fortress America , that calls into question the basis of Canada 's energy relationship with the US .
The story goes back to the 1980s when the Mulroney government dismantled Canada 's National Energy Policy by stripping regulatory powers from its National Energy Board, allowing US oil companies to invest in Canada , and removing a "vital supply" policy that required the country to have a 25 year reserve of oil and gas available before exports were allowed.
The situation was complicated further by the incorporation of articles into the 1989 North American Free Trade Agreement (NAFTA) that banned Canada from placing any restrictions or taxes on exports of gas and oil to the US . Another article of NAFTA known popularly as "proportional sharing" says that if Canada should ever want to conserve or be forced to cut back on oil or gas production, it must, under NAFTA, continue exporting to the US the same proportion of its total supply (production + imports) that was exported during the previous three years. Mexico , also a party to NAFTA, received an exemption from these clauses in return for other concessions.
In the years since NAFTA was signed, Canadian exports of oil and gas to the US have nearly doubled. In the spring of 2004, Canada became the largest foreign supplier of oil to the US . By December 2005, Canadian oil imports had reached 2.6 million barrels a day, thus surpassing total US imports from the Persian Gulf .
In recent years, production of conventional oil in Canada has been running about 1.4 million barrels a day. Over the next ten years this output is projected to drop to about 500 thousand barrels a day, although there is some hope CO2 injection might delay this decline for a while. Added to the production of conventional oil, however, is the output of synthetic oil cooked from the Alberta tar sands which, at great monetary, environmental, and social cost, is now running about 1 million barrels a day.
Thus, the conventional oil (from wells) situation in Canada is pretty straightforward. They are currently producing 1.4 million barrels a day, consuming about 1.7, and are expecting production to deplete to about 500 thousand barrels a day over the next decade, unless, there are major new discoveries in the polar regions. Canada consumes about 1.7 million barrels a day and imports oil to make up whatever is needed after exports to the US are subtracted from production. This may not be as bad as it sounds, for it is cheaper to send oil by pipeline to the US 's mid-western states and to supply Canadian costal provinces with foreign crude brought in by tanker.
Enter the Athabasca tar sands of northern Alberta , constantly heralded as the future of the oil age. These sands contain either 200 billion barrels of "oil," or perhaps even 2.5 trillion if we improve extraction technology. Keep in mind, the world is currently consuming about 31 billion barrels per year. Thus, at first glace, it looks as if the tar sands alone could keep the world going for 7 years or perhaps 70, even if all the conventional oil sources in the world dried up.
Three companies in Alberta are already producing about 1 million barrels a day and plans are in the works to expand this to three million over the next 15 years. The chances are, however, this will never come to pass, for the mounting downsides of extracting usable fuel from the tar sands may soon override possible benefits. The major problem is the need for prodigious quantities of natural gas, a fuel soon to be in very short supply, to melt the tar from the sand. To overcome this obstacle to further production, tar sands developers are planning to build a special pipeline from gas fields in Canada's far north to supply the needed gas. Given that major shortages of natural gas, resulting in dramatic price increases, are coming soon, it is doubtful that using valuable and versatile natural gas to melt tar out of sand will continue to make economic sense.
The list of negatives to increased production from the tar sands goes on and on and on— massive CO2 emissions, massive need for fresh water, production of toxic wastewater, huge capital investments, inhospitable climate, social problems, to name a few. On top of all this, the oil companies currently pay only a one percent royalty fee for the energy they extract, an amount that does not begin to cover the costs of the mess they make. The authors of “Fueling Fortress America ” conclude the only rational course for Canada is a moratorium on further tar sands development until such time as all the long-term implications and economics of tar-sands-to-fuel projects are understood.
Moving on, the report calls for Canada to develop a real long-term energy policy controlled by its National Energy Board and not by the profit motive of unregulated foreign oil companies. Moreover, the authors call for Canada to obtain an exemption from the absurdity of the "proportional sharing" clauses of the NAFTA agreement. Failing this, they recommend Canada withdraw completely from the agreement. As long as Canada is required by treaty to export the bulk of its oil and gas to the US , there is no way it can ever obtain energy security.
With a population of 33 million, Canada is one of the few industrialized nations in a position to supply its own oil and gas needs for the foreseeable future. The ball is now in the court of the new Conservative Canadian government. Although their instincts are probably on the side of laissez-faire and let-capitalism-do-its-thing, peak oil will soon bring new set of pressures on Ottawa . Canadian oil prices are now inextricably bound to the world market. The next time world gasoline prices spike, the demands from Canadian citizens will force new policies.
Warning to America ! Unrestricted exports, proportional sharing, and dreams of unlimited access to what the oil companies like to call "oil sands" do not have much of a future. "Secure" Canadian oil just might turn out to be much less secure than we think.
Rationing by Price
By Tom Whipple
Falls Church News-Press, On-Line Issue
March 9-15, 2006
We are just about through winter, and as yet, nothing really bad seems to have happened to the world's energy supplies. Unless, of course, you were among the unlucky folk who keep warm with Russian natural gas and, depending on where you live, were subjected to state blackmail, or diverted gas, or blown-up pipelines, or perhaps reduced flows during one of the coldest winters in recorded history.
On the American side of the globe, however, all was well. An unusually warm winter led to bulging oil and gas stockpiles and somewhat lower prices. In the Mid-East, the Saudis stopped Al Qaeda from blowing up an important oil facility and, despite significant increases in the violence in Iraq and the rhetoric in Iran , for now, oil continues to flow from both countries.
Demand is growing nicely. In the United States , we managed to consume 2.5 percent more gasoline in February that we did last year. That’s an additional 9.1 million gallons per day. The Chinese just announced they had imported 3.2 million barrels a day during January— a 69% increase over last year. Some economic forecasters have noted how little $60 oil seems to be affecting economic growth, and are predicting banner years ahead with world economic growth doing better than 4%.
On the supply side, however, things did not fare quite as well during the winter. A combination of conflict in Iraq , hurricane damage in the Gulf of Mexico , and the insurgency in the Niger delta resulted in about a million barrels a day of "normal" production being stopped. In fact, world oil production, after surging higher and higher early in the decade, has been basically flat at around 84.5 million barrels a day since 2004.
We are all getting used to the pattern of oil cycling around $60-65 per barrel as it has since just after the hurricanes last fall. Many analysts are attributing what we think of as high prices mostly to geopolitical instability. They may have a point. There are least five political situations in the world —Iraq, Iran, Nigeria, Venezuela, and Al Qaeda— that frequently flare up in a way that threatens to close down some important share of the world's oil production. We could add Atlantic hurricanes to the threat list as the season starts in another three months and forecasters are already talking of another bad year.
If demand for oil products in the US, China, and presumably other parts of the industrialized world continues to grow, and production remains stagnant, then obviously prices have to go up, perhaps way up.
So far, we have learned gasoline costing $2.50 or so a gallon does not reduce consumption in the US any more that $6 per gallon does in Europe . It is going to take much higher prices than the industrial world has experienced so far to force changes in the habits of people who can afford cars.
There are some 220 oil-consuming countries in the world (a few are rather small islands). If, however, you rank these by their annual oil consumption per capita, interesting insights emerge. A few, like the US and Canada are really into using oil, going through a 1000+ gallons per capita each year. Others, like many European nations, seem to get along rather well on 400-800 gallons per person each year.
As you move down the list, you find average world consumption currently is about 200 gallons per capita per year. The bottom half of the list contains nearly 100 countries that consume 100 gallons per person per year or less, one-tenth of what we each consume in the US . About 4 billion people or two-thirds of the world's population live in countries that consume less than 100 gallons per capita per year. Finally, at the absolute bottom are about 20 countries using 10 gallons per capita per year, or 1/100th of what we burn in America .
In many countries, government traditionally has subsidized oil products so that citizens can afford their benefits. This, of course, contrasts markedly with North America and Europe where oil has been taxed or heavily taxed. The sad fact, however, is that in the last year or so a number of countries, particularly in Asia , have come to the point where they could no longer afford to subsidize oil products to the traditional extent. Remember the eight-cent per gallon gasoline in Baghdad .
We don't read much about the removal of these subsidies, except when they lead to riots. In America , mostly grumbling results when gasoline goes from $1.50 to $2.50 per gallon. If you live in the underdeveloped world however, and find the fuel for your truck or taxi, or perhaps your cooking kerosene suddenly going from 20 or 50 cents per gallon to much higher, you have an unaffordable problem to which the only answer is to stop consuming.
In the last few months, riots, some resulting in many deaths, have taken place across the underdeveloped world as governments have been forced to raise fuel prices. The returns aren't in as yet but the conclusion seems obvious. To Americans and others in the industrialized world $2.50 or even $6 gasoline is, or will be, an inconvenience requiring some adjustments in lifestyle; to most of the world however, $60 per barrel oil is beyond what most can afford to enjoy even the barest minimum trappings of industrial civilization.
The irony of all this is that the demand destruction currently taking place in the third world simply frees up sufficient fuel to allow the industrialized and industrializing nations to carry on with business as usual for a few more months or, perhaps, a few more years. But peak oil will come. With the same inevitability as the rising and setting sun or the changing of the seasons, it will come.
Your First Electric Car
By Tom Whipple
Falls Church News-Press, On-Line Issue
March 2 - 8, 2006
Whether peak oil arrives with a bang or just sort of sneaks up on us, it is highly unlikely that ten years from now there is going to be enough liquid fuel to power all the world's cars, trucks, buses, planes, trains, and boats. The responses of governments to this situation will vary by political temperament and circumstance. Some will mandate draconian conservation measures, some will impose rationing, and some will let rationing-by-price direct dwindling fuel supplies to those who can afford them.
Judging from the primal screams of "I-can't-afford-to-farm-at-these-energy-prices" that are appearing with increasing frequency in rural newspapers, the issue will eventually come down to eating or driving. This, of course, is not a choice; even the most free-market Congressman will soon get the message that there are priorities for our dwindling supplies of liquid fuels, and that gasoline for the privately owned vehicles ranks close to the bottom of this list.
If world oil depletion comes as soon, and supplies of liquid fuels disappear as rapidly, as some of us suspect, gasoline-powered cars and light trucks will soon be museum pieces. Liquid fuels, be they from conventional oil, tar sands, liquefied coal, or cellulosic ethanol, will be in such short supply, they will have to be restricted to vital-to-civilization uses such as farming, mass transit, railroads, and countless kinds of heavy industrial equipment.
Thus it seems obvious that cars and light trucks will have to run on electricity if they are to run at all. Electricity is nearly universally available. Its availability can be quickly increased either through conservation or by building new generating stations— hopefully using renewable fuels. Unlike hydrogen-powered vehicles, this technology is here now, it’s cheap and likely to get cheaper, and significant improvements in electric cars such as much better batteries and in-wheel motors may soon be available.
Anyone who looks into electric car technology soon discovers the Achilles heel is the battery. Until recently, batteries have been heavy, took a long time to charge, and would not give us the hundreds of miles of range we have been accustomed to with liquid fuel vehicles. There is nothing inherently wrong with an electric car once the range is increased, or preferably, the recharge time is reduced significantly. Given that at some gasoline price, electric vehicles are going to be the only affordable means of transportation beyond a bicycle or walking, the chances are they are going to become extremely popular very soon.
Currently, nobody is making electric vehicles beyond the neighborhood variety that have very limited range, speed and comforts compared to gasoline-powered cars. This is about to change.
Many of you are aware that a few years back several major manufactures, including GM, were actually building and leasing in California what a lot of people thought were quite satisfactory electric cars. Why they no longer are available is another story, but it does indicate the manufacturers are perfectly capable of doing so when they perceive that gasoline is no longer affordable for most of their customers.
There are at least four flavors of "new technology" batteries either available or showing promise. The first of these, the nickel-metal hydride battery, is already used to power hybrid vehicles. They work well, but there are better technologies in sight, and some believe there is not enough nickel in world to power all the world's cars with this type of battery.
Just coming on the market in a form suitable for powering automobiles is the lithium-ion battery. These batteries pack in considerable more energy than previous types, but are very expensive at current volumes. A handful of Toyota hybrids are running around with after-market lithium-ion batteries that are recharged by plugging into a wall outlet. These vehicles are capable of going 30-40 miles at moderate speeds on electricity alone or of achieving in excess of 100 mpg when used in conjunction with the gasoline engine. A Toronto firm has started to sell conversion kits for existing hybrids.
Even President Bush recently has been touting the lithium-ion plug-in hybrid as a partial solution to imported oil. Automobile manufacturers, however, claim to be skeptical of the lithium-ion battery's durability in an age when car buyers expect 100,000-mile warranties.
Several manufacturers are working on this technology and Mitsubishi is talking of selling a lithium-ion electric vehicle (in Japan of course) in 2010. Mitsubishi is aiming for a top speed of 93 mph and a range of 93 miles on a single charge. There is even talk of very fast recharge times.
When we move beyond the "available now" category to the "just announced" category, we come to Peoria and Firefly Energy, a spin off of Caterpillar Tractor. These folks have just received a US patent on a completely new form of battery in which the heavy lead battery plates are replaced with lightweight graphite foam. It sounds too good to be true, but Firefly claims their battery can provide the performance of nickel metal hydride batteries at one-fifth the cost and fraction of the weight. If all this pans out, affordable plug-in hybrids and all electric cars just might be available in the near future.
Another interesting battery technology, which has just been announced by MIT, is an improvement on the lithium battery. By modifying the crystal structure, scientists have found that a battery can be recharged ten times faster. This would open the possibility of all electric cars, with a reasonable range of 100 miles or so, that can be recharged in 5 or 10 minutes from an electric outlet. When you look at the alternatives, all this is starting to sound pretty good provided we have enough resources left to build them.
The transition from the liquid fuel cars and light trucks to electrically powered vehicles is not going to be pretty and will take decades. Worldwide, there are now over 600 million cars and over 200 million trucks and buses. When it comes, peak oil will be a worldwide phenomenon and is likely to arrive with little or no warning. Thus, except where governments move to subsidize fuel, prices will inexorably ratchet up and up and up.
At each price increase, some share of the owners of these 800-900 million vehicles (especially those that can not pass along the fuel costs) will park their vehicles and begin a desperate search for alternative forms of transportation.
Sales of liquid fueled cars and trucks will have nowhere to go but way down. Whether the worldwide automobile industry will be able to respond to this challenge is an interesting question. Collectively, we have trillions of dollars invested in the current vehicle fleet. Perhaps with a little ingenuity, some portion of this huge investment could be converted to electric power and not be simply left to rust along the roadside, or on driveways, or in parking lots.
As there seems no realistic alternative, the demand for electric vehicles will quickly overwhelm the ability of manufacturers to produce. As this will be a worldwide problem, filling domestic needs are likely to take priority, so exports may slow for a while. The need for personal transportation will be so great, the manufactures resources so limited, and personal wealth so reduced, luxury vehicles are likely to disappear for a time as the industry strives to produce utilitarian vehicles in large quantities.
Welcome to peak oil!
The Hirsch Report—One Year Later
By Tom Whipple
Falls Church News-Press, On-Line Issue
Feb.23-29, 2006
http://www.fcnp.com/551/peakoil.htm
Cantarell--An Omen?
The Peak Oil Crisis
By Tom Whipple
Falls Church News-Press, On-Line Issue
Feb.16-22, 2006
http://www.fcnp.com/550/peakoil.htm
Yamana Gold to Acquire Viceroy in Stock Swap
By David Friend
17 Aug 2006 at 11:00 AM EDT
TORONTO (CP) -- Keeping its eye on Brazilian resources, Yamana Gold Inc. [TSX:YRI; AMEX:AUY] has made a deal to acquire Viceroy Exploration Ltd [TSX:VYE; AMEX:XVE] in a C$577-million stock swap.
The move is the latest in a long line of gold explorers pledging to expand their presence in the Latin American country.
Yamana said it will offer Viceroy shareholders 0.97 of a Yamana common share for each Viceroy share. Both companies' boards have approved the takeover.
The deal is valued at C$10.86 per Viceroy common share, based on closing prices on the TSX Wednesday of C$11.20 for Yamana and C$8.65 for Viceroy, representing a 25.5% premium.
In early trading on the Toronto stock market, Viceroy shares headed C$1.97 higher to C$10.62 while Yamana shares lost 31 cents to C$10.89.
The hot Brazilian gold market has been a target for plenty of companies willing to invest major funds in the country over the past few years.
On Wednesday, Luna Gold Corp. [TSXV:LGC] struck a deal to acquire a 50% stake in Brazil-based miner Aurizona Goldfields for US$6.67 million. And earlier this month, Kinross Gold Corp. [TSX:K; NYSE:KGC] announced a US$470-million expansion at one of its Brazilian projects.
As for Yamana, the latest acquisition builds on its presence in the country. Earlier this year, the company added Brazil's Desert Sun Mining Corp. to its portfolio.
Viceroy's advanced-exploration Gualcamayo gold project in Argentina will also come under Yamana's control once the deal is completed. The new company would be held 85% by Yamana stockholders and 15% by Viceroy shareholders.
Peter Marrone, CEO of Yamana, told analysts in a conference call that one of the company's main objectives is to reach production of more than one million ounces of gold per year by 2008. Marrone added that the company could surpass that goal.
''Viceroy represents a unique opportunity for us as it complements our already dominant mining platform in Brazil,'' he said.
Catherine Gignac, an analyst for Wellington West CM, said Yamana is delivering on its promise to expand while keeping its main focus on gold.
''They came out with a strategic long-term plan in October 2005 and, basically step-by-step, they've been implementing that plan,'' she said.
''Yamana's future growth prospects are much higher than some of the other companies (involved in Latin American production) simply because those companies may have seen their growth and now they're levelling off,'' she said.
Gignac said she is maintaining her ''buy'' recommendation at a C$17 target price.
Patrick Downey, CEO of Viceroy, said his company will benefit from being combined with another. ''That's something I believe is really undervalued at this time,'' he said.
Viceroy's market capitalization on the Toronto stock market is about C$458 million while Yamana is at C$3.2 billion.
Under the acquisition, Downey will join management at Yamana, most likely as executive vice-president of operations, continuing his role in the development of Gualcamayo.
© The Canadian Press 2006
Yamana Gold to Acquire Viceroy in Stock Swap
By David Friend
17 Aug 2006 at 11:00 AM EDT
TORONTO (CP) -- Keeping its eye on Brazilian resources, Yamana Gold Inc. [TSX:YRI; AMEX:AUY] has made a deal to acquire Viceroy Exploration Ltd [TSX:VYE; AMEX:XVE] in a C$577-million stock swap.
The move is the latest in a long line of gold explorers pledging to expand their presence in the Latin American country.
Yamana said it will offer Viceroy shareholders 0.97 of a Yamana common share for each Viceroy share. Both companies' boards have approved the takeover.
The deal is valued at C$10.86 per Viceroy common share, based on closing prices on the TSX Wednesday of C$11.20 for Yamana and C$8.65 for Viceroy, representing a 25.5% premium.
In early trading on the Toronto stock market, Viceroy shares headed C$1.97 higher to C$10.62 while Yamana shares lost 31 cents to C$10.89.
The hot Brazilian gold market has been a target for plenty of companies willing to invest major funds in the country over the past few years.
On Wednesday, Luna Gold Corp. [TSXV:LGC] struck a deal to acquire a 50% stake in Brazil-based miner Aurizona Goldfields for US$6.67 million. And earlier this month, Kinross Gold Corp. [TSX:K; NYSE:KGC] announced a US$470-million expansion at one of its Brazilian projects.
As for Yamana, the latest acquisition builds on its presence in the country. Earlier this year, the company added Brazil's Desert Sun Mining Corp. to its portfolio.
Viceroy's advanced-exploration Gualcamayo gold project in Argentina will also come under Yamana's control once the deal is completed. The new company would be held 85% by Yamana stockholders and 15% by Viceroy shareholders.
Peter Marrone, CEO of Yamana, told analysts in a conference call that one of the company's main objectives is to reach production of more than one million ounces of gold per year by 2008. Marrone added that the company could surpass that goal.
''Viceroy represents a unique opportunity for us as it complements our already dominant mining platform in Brazil,'' he said.
Catherine Gignac, an analyst for Wellington West CM, said Yamana is delivering on its promise to expand while keeping its main focus on gold.
''They came out with a strategic long-term plan in October 2005 and, basically step-by-step, they've been implementing that plan,'' she said.
''Yamana's future growth prospects are much higher than some of the other companies (involved in Latin American production) simply because those companies may have seen their growth and now they're levelling off,'' she said.
Gignac said she is maintaining her ''buy'' recommendation at a C$17 target price.
Patrick Downey, CEO of Viceroy, said his company will benefit from being combined with another. ''That's something I believe is really undervalued at this time,'' he said.
Viceroy's market capitalization on the Toronto stock market is about C$458 million while Yamana is at C$3.2 billion.
Under the acquisition, Downey will join management at Yamana, most likely as executive vice-president of operations, continuing his role in the development of Gualcamayo.
© The Canadian Press 2006
Yamana Gold to Acquire Viceroy in Stock Swap
By David Friend
17 Aug 2006 at 11:00 AM EDT
TORONTO (CP) -- Keeping its eye on Brazilian resources, Yamana Gold Inc. [TSX:YRI; AMEX:AUY] has made a deal to acquire Viceroy Exploration Ltd [TSX:VYE; AMEX:XVE] in a C$577-million stock swap.
The move is the latest in a long line of gold explorers pledging to expand their presence in the Latin American country.
Yamana said it will offer Viceroy shareholders 0.97 of a Yamana common share for each Viceroy share. Both companies' boards have approved the takeover.
The deal is valued at C$10.86 per Viceroy common share, based on closing prices on the TSX Wednesday of C$11.20 for Yamana and C$8.65 for Viceroy, representing a 25.5% premium.
In early trading on the Toronto stock market, Viceroy shares headed C$1.97 higher to C$10.62 while Yamana shares lost 31 cents to C$10.89.
The hot Brazilian gold market has been a target for plenty of companies willing to invest major funds in the country over the past few years.
On Wednesday, Luna Gold Corp. [TSXV:LGC] struck a deal to acquire a 50% stake in Brazil-based miner Aurizona Goldfields for US$6.67 million. And earlier this month, Kinross Gold Corp. [TSX:K; NYSE:KGC] announced a US$470-million expansion at one of its Brazilian projects.
As for Yamana, the latest acquisition builds on its presence in the country. Earlier this year, the company added Brazil's Desert Sun Mining Corp. to its portfolio.
Viceroy's advanced-exploration Gualcamayo gold project in Argentina will also come under Yamana's control once the deal is completed. The new company would be held 85% by Yamana stockholders and 15% by Viceroy shareholders.
Peter Marrone, CEO of Yamana, told analysts in a conference call that one of the company's main objectives is to reach production of more than one million ounces of gold per year by 2008. Marrone added that the company could surpass that goal.
''Viceroy represents a unique opportunity for us as it complements our already dominant mining platform in Brazil,'' he said.
Catherine Gignac, an analyst for Wellington West CM, said Yamana is delivering on its promise to expand while keeping its main focus on gold.
''They came out with a strategic long-term plan in October 2005 and, basically step-by-step, they've been implementing that plan,'' she said.
''Yamana's future growth prospects are much higher than some of the other companies (involved in Latin American production) simply because those companies may have seen their growth and now they're levelling off,'' she said.
Gignac said she is maintaining her ''buy'' recommendation at a C$17 target price.
Patrick Downey, CEO of Viceroy, said his company will benefit from being combined with another. ''That's something I believe is really undervalued at this time,'' he said.
Viceroy's market capitalization on the Toronto stock market is about C$458 million while Yamana is at C$3.2 billion.
Under the acquisition, Downey will join management at Yamana, most likely as executive vice-president of operations, continuing his role in the development of Gualcamayo.
© The Canadian Press 2006
Great Panther Extends Silver-Gold Mineralization at Guanajuato Mine
Thursday August 17, 12:10 pm ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 17, 2006 -- GREAT PANTHER RESOURCES LIMITED (TSX VENTURE:GPR.V - News) is pleased to announce that the Company's Phase II surface diamond drilling program and extensive underground sampling have extended the limits of the silver-gold mineralization in the Guanajuatito-Encarnacion area of its wholly-owned Guanajuato Mine in Guanajuato, Mexico. Both the drilling and sampling are part of a comprehensive, ongoing exploration program at the Mine aimed at better understanding and delineating the silver-gold mineralization in this world class deposit.
The first part of the 2006 drill program, comprising 3,205 metres in thirteen holes, was completed under and northwest of the Guanajuatito ramp, and in the adjacent Encarnacion area along the trend of the Veta Madre, approximately one kilometre northwest of the famous Valenciana Mine (now owned by Great Panther). The program was designed to surround the 2005 drilling that intersected 692 g/t silver and 5.17 g/t gold over 5.8 metres and 1,096 g/t silver and 4.15 g/t gold over 2.5 metres (see News Release Dec. 1, 2005 and longitudinal section on Company web-site). A total of nineteen holes have now been drilled in this area at approximately 50 metre intervals, covering a strike length of 400 metres and a vertical extent of 100 to 150 metres.
The work to date in this northwest area of the Guanajuato Mine Complex has included the collection of more than 1,000 underground channel samples and is leading to a better understanding of the distribution of silver-gold mineralization. It has been observed that, while the Veta Madre quartz breccia is fairly consistent and is present in almost every hole, silver and gold grades vary somewhat, with higher grades tending to cluster in pockets with lower grade material in between, a typical feature of precious metal vein deposits. This is illustrated on the level plan maps on the Company website. As such, even low grade intersections of vein material in drill holes spaced 50 metres apart are important as they indicate the continuity of the zone. Continued detailed sampling underground and/or follow-up drilling on a closer spacing will be needed to better define the actual grade of the zone.
Significant results from the 2006 drilling include 2.87 metres of 651 g/t silver and 3.16 g/t gold in hole GTT-06-015, located approximately 50m vertically below GTT-05-005 (1,096 g/t silver and 4.15 g/t gold over 2.5 metres). Drill hole GTT-06-015 helps define a high grade zone of silver-gold mineralization below the Guanajuatito ramp in the section 2800N area (see longitudinal section). Drill hole GTT-06-014 intersected 9.5m of anomalous Veta Madre mineralization including 6.0 metres of 111g/t silver and 1.55 g/t gold under the Guanajuatito level +45 (mining formerly took place above level +45). Drill hole GTT-06-010 intersected 6.0m of anomalous Veta Madre with 1.0 metre of 82 g/t silver and 0.35g/t gold. GTT-06-010 is 40 metres vertically below the high grade GTT-05-004 (692 g/t silver and 5.17 g/t gold over 5.8 metres). Drill hole GTT-06-013 intersected 8.2m of anomalous Veta Madre while GTT-06-019 intersected a broad zone of silica breccia with 1.0 metre of 77 g/t silver and 0.59 g/t gold. This hole is 60m northwest of former mining on the Encarnacion sublevel 45. Details of significant intersections are listed below.
As in the 2005 drilling, two styles of mineralization were noted in the 2006 holes: silver-gold mineralization in the Veta Madre itself and a zone of gold-arsenic-antimony stockwork mineralization in the hanging wall. Although only the Veta Madre style has returned grades of an economic level so far, the stockwork style often contains anomalous levels of gold and will be evaluated underground to better understand the distribution of the mineralization.
Highlights of Diamond Drilling:
------------------------------
True
From To Width Width Ag Au
Hole No. (m) (m) (m) (m) (g/t) (g/t)
GTTO-05-004(i) 131.7 137.5 5.8 4.1 692 5.17
GTTO-05-005(i) 110.5 113.0 2.5 1.77 1,096 4.15
GTTO-05-006(i) 113.5 115.0 1.5 1.06 209 1.55
GTT-06-010 160.0 161.0 1.0 0.9 82 0.35
GTT-06-013 156.7 158.5 1.8 1.5 22 0.55
GTT-06-014 167.0 176.5 9.5 8.1 90 1.13
Includes 169.0 176.0 6.0 5.1 111 1.55
GTT-06-015 168.83 171.7 2.87 2.4 651 3.16
GTT-06-016 218.5 220.4 1.9 1.6 127 0.91
GTT-06-019 220.5 221.5 1.0 0.9 77 0.59
(i) designates results released Dec 1, 2005.
The drilling and sampling to date are starting to define a zone of silver-gold mineralization (the Guanajuatito Zone) that appears to plunge off to the southwest. This zone is approximately 200 metres along strike and could extend for at least 400 metres down-plunge as it appears to join up with mineralization intersected in deep drilling from the 1980's (see longitudinal section on website). Structurally, this appears to be a new trend to mineralization in the mine complex and may be related to the contact between a dioritic intrusive that forms the hanging wall in the Guanajuatito area and the "Guanajuato Conglomerate" which is the hanging wall unit along strike to the southeast.
Plan maps for the Guanajuatito +45 level and Encarnacion +15 level (all mine levels are referenced to the '0 metre' elevation at the access to the Rayas shaft) have been included on the Company website. Re-sampling of these levels (2450N - 2750N sections) returned some excellent values associated with the Veta Madre silica breccia. Mineralized intersections in GTT-06-013, 014 and 019 imply further potential in this area and have helped to define the western limits to the Encarnacion Zone, which appears to follow the more common southeast plunge and is open to depth. Continued evaluation of this part of the mine will be conducted from underground as is will be more cost-effective than drilling from surface.
On the Guanajuatito +45 level, 31.6% of the samples assayed greater than 55 g/t silver equivalent (AgE) using US$525/oz gold and US$10.50/oz silver. These samples averaged 178 g/t AgE (143 g/t AgE using an 80% historic mill recovery rate). On the Encarnacion +15 level, 57.1% of the samples assayed greater than 55 g/t silver equivalent (AgE) using the same prices. These samples averaged 231 g/t AgE (185 g/t AgE using an 80% historic mill recovery rate). On both levels, the higher grade values cluster into distinct zones as seen on the level plans.
The Guanajuatito ramp provides easy access to the mineralization throughout the Guanajuatito-Encarnacion area where only a minor amount of mining has taken place in the past. Further underground development is already underway and this part of the mine is providing about 150 tonnes per day to the mill. Underground mapping and sampling is continuing in this area and the surface drilling is continuing in the Animas and Promontorio area in the Cata and Rayas shaft areas to the southeast. Results for these areas will be released in due course.
Samples were assayed at ALS Chemex Labs in Vancouver and SGS in Durango and diamond drilling was contracted to BDW Drilling Mexico, of Guadalajara. The Company's QA/QC program includes the regular insertion of blanks, duplicates and standards into the sample shipments. Aspects of the Guanajuato Mine relating to mining and metallurgy are overseen by Ing. Francisco Ramos Sanchez, Vice-President of Operations for Great Panther and its Mexican subsidiary, Minera Mexicana El Rosario, S.A. de C.V. (MMR). Robert F. Brown, P.Eng. and Vice-President of Exploration for Great Panther and MMR is designated as the Qualified Person for the Guanajuato Project under the meaning of NI 43-101.
Great Panther owns a 100% interest in the Guanajuato Mine Complex. Historically, the Guanajuato Mine was one of the largest silver producers in Mexico and encompasses the core of the Guanajuato District, which has produced 1.2 billion ounces of silver and 4.5 million ounces gold.
ON BEHALF OF THE BOARD
Robert A. Archer, President & CEO
This news release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario) (together, "forward-looking statements"). Such forward-looking statements include but are not limited to the Company's plans for production at its Guanajuato and Topia Mines in Mexico, exploring its other properties in Mexico, the overall economic potential of its properties, the availability of adequate financing and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements expressed or implied by such forward-looking statements to be materially different. Such factors include, among others, risks and uncertainties relating to potential political risks involving the Company's operations in a foreign jurisdiction, uncertainty of production and cost estimates and the potential for unexpected costs and expenses, physical risks inherent in mining operations, currency fluctuations, fluctuations in the price of silver, gold and base metals, completion of economic evaluations, changes in project parameters as plans continue to be refined, the inability or failure to obtain adequate financing on a timely basis, and other risks and uncertainties, including those described in the Company's Annual Report on Form 20-F for the year ended December 31, 2004 and reports on Form 6-K filed with the Securities and Exchange Commission and available at www.sec.gov and Material Change Reports filed with the Canadian Securities Administrators and available at www.sedar.com.
TSX-V Tier 1; Trading Symbol: GPR
SEC 20-F Statement Filed; Standard & Poor's Listed
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Contact:
Contacts:
Great Panther Resources Limited
Brad Aelicks
(604) 685-6465
Great Panther Resources Limited
Don Mosher
(604) 685-6465
(604) 685-9744 (FAX)
info@greatpanther.com
http://www.greatpanther.com
--------------------------------------------------------------------------------
Source: Great Panther Resources Limited
For those of you who have not read the following post, it is imperative that you do so now!
Testimony before the Australian Senate by Dr. Samsam Bakhtiari, a senior expert employed by the National Iranian Oil Company (NIOC), 07 11 06
AGENDA
Australia’s future oil supply and alternative transport fuels, with particular reference to:
a. projections of oil production and demand in Australia and globally and the implications for availability and
pricing of transport fuels in Australia;
b. potential of new sources of oil and alternative transport fuels to meet a significant share of Australia’s fuel
demands, taking into account technological developments and environmental and economic costs;
c. flow-on economic and social impacts in Australia from continuing rises in the price of transport fuel and
potential reductions in oil supply; and
d. options for reducing Australia’s transport fuel demands.
Continue reading the following link:
http://www.investorshub.com/boards/read_msg.asp?message_id=12729823
sumisu
A MUST READ
Testimony before the Australian Senate by Dr. Samsam Bakhtiari, a senior expert employed by the National Iranian Oil Company (NIOC), 07 11 06
http://www.aph.gov.au/hansard/senate/commttee/S9515.pdf
No Longer Over a Barrel
By Peter Montgomery
16 Aug 2006 at 12:32 PM EDT
BIRMINGHAM, Ala. (ResourceInvestor.com) -- In the Grimm Brother's fairy tale, Rumpelstiltskin spins straw into gold. Thanks to advances in biotechnology, researchers can now transform straw, and other plant wastes, into "green" gold - cellulosic ethanol.
(Continued in following link)
http://www.resourceinvestor.com/pebble.asp?relid=22781
Ethanol fuel presents a corn-undrum
Corn ethanol yields an energy dividend but gains are higher with soy biodiesel, a new study shows
A definitive study of ethanol derived from corn reveals its pros and cons compared with biodiesel fuel from soybeans and points the way toward new sources of renewable energy.
By Deane Morrison
Five University researchers have taken a stand in the long-running debate over whether ethanol from corn requires more fossil fuel energy to produce than it delivers.
Their answer? It delivers 25 percent more energy than is used (mostly fossil fuel) in producing it, though much of that 25 percent energy dividend comes from the production of an ethanol byproduct, animal feed.
But the net energy gain is much higher -- 93 percent -- from biodiesel fuel derived from soybeans. And alternative crops such as switchgrass or mixed prairie grasses, which can grow on marginal land with minimal input of fossil fuel derived fertilizers and pesticides, offer the best hope for the future.
Led by Jason Hill, a postdoctoral associate in the Department of Ecology, Evolution, and Behavior and the Department of Applied Economics, the team published this first comprehensive analysis of the environmental, economic and energetic costs and benefits of ethanol and biodiesel in the pages of the Proceedings of the National Academy of Sciences.
A major challenge is getting enough biofuel. Already, 14.3 percent of corn grown in the United States is converted to ethanol, replacing just 1.72 percent of gasoline usage. Even if all the remaining corn were converted to ethanol, the total ethanol would only offset 12 percent of gasoline. The entire soybean crop would replace a much smaller proportion of transportation fuels--only 6 percent of current diesel usage, which itself amounts to a tiny fraction of gasoline usage.
With world energy and food demands increasing, the study fills a need for guidance in choosing the best alternative energy strategies. That's why the University's Initiative for Renewable Energy and the Environment (IREE), which aims to make Minnesota a national leader in the development and production of renewable fuels to reduce greenhouse gas emissions and other forms of pollution, helped fund the work.
"Quantifying costs and benefits of biofuels throughout their life cycle allows us to make rational choices and identify better alternatives," Hill says in a news release.
"The reason for doing this study was to learn from our first two successful biofuels how we could do it better," says Tilman. "It's a bit like the Wright Brothers--a good first start, but if I'm flying across the Atlantic, I want a jet." Besides Hill and Tilman, who is the world's most cited ecologist, study authors were Stephen Polasky and Douglas Tiffany, professors of applied economics; and Erik Nelson, a graduate student in applied economics.
The researchers point to nonfood plants that can grow on marginal lands with minimal input of fertilizers and pesticides as the best hope for bio-based energy. Crops like switchgrass, diverse prairie grasses, and woody plants may offer the best prospects for supplying biofuels.
The researchers examined every stage of the biofuels' production and use. They considered such costs as the effort to raise crops, environmental effects of fertilizers and pesticides, transportation and the energy required to distill ethanol.
The analysis showed that growing both corn and soybeans caused soil and water pollution from such chemicals as the nitrogen and phosphorus in fertilizer and from pesticides, with the pesticides used in corn production being especially harmful. But biodiesel used, per unit of energy gained, only 1 percent of the nitrogen, 8.3 percent of the phosphorus and 13 percent of the pesticide (by weight) of corn production.
The researchers also compared greenhouse gas emissions from the two biofuels with emissions caused by producing and burning enough gasoline or diesel to yield the same amount of energy. Emissions from the production and use of corn grain ethanol were 12 percent lower than the net emissions from gasoline; the reduction was 41 percent for biodiesel from soybeans. These figures show that biofuels have the potential to provide significant environmental benefits.
However, the benefits will only be substantial when much more biofuel is produced and when it has much greater greenhouse gas reductions. For example, if one replaced a total of 5 percent of gasoline energy with ethanol energy, greenhouse gas emissions from driving cars would be a bit more than a half percent lower (5 percent times 12 percent). It must be borne in mind, too, that these figures are only for transportation-related energy usage. Considering total energy use, which includes building heating and electricity, the fraction of savings from transportation biofuels drops by two-thirds.
Also, these reductions hold only for crops grown on land already in production.
"Converting intact ecosystems to production would result in reduced greenhouse gas savings or even net greenhouse gas release from biofuel production," the researchers write.
The researchers noted that rising gasoline and diesel prices have made the development of biofuels more economically advantageous, and that biodiesel's environmental benefits seem strong enough to merit subsidy. Yet ethanol also plays an important role as an additive by oxygenating gasoline and making it burn more cleanly.
"New and better transportation biofuels and greatly increased energy efficiency are essential for our economy and our environment," says Tilman. "We also need renewable electricity, including both wind energy and renewable biofuels that take the place of coal. Coal is a major source of electricity and of greenhouse gases."
The researchers point to nonfood plants that can grow on marginal lands with minimal input of fertilizers and pesticides as the best hope for bio-based energy. Crops like switchgrass, diverse prairie grasses, and woody plants may offer the best prospects for supplying biofuels. Researchers at the University and elsewhere are hard at work finding ways to tap the energy of such plants, which is locked up in difficult-to-digest cellulose and related plant materials. One thing that made corn and soybeans so attractive in the first place was the relative ease of extracting energy from the carbohydrates and oils in those crops. But with global warming rapidly changing the world environment, and energy prices soaring, there is no choice but to find alternative sources of energy, and fast.
http://www1.umn.edu/umnnews/Feature_Stories/Ethanol_fuel_presents_a_cornundrum.html
RAILROADS VERSUS TRUCKING
Review this link by Livonia, Avon & Lakeville Railroad.
It provides pertinent information about rail transportation, which will grow in importance under a Peak Oil scenario, as railroads are three times more fuel-efficient than truck.
http://www.lalrr.com/faq.html#considerrail
Some frequently asked questions about the economics of using rail for shipping include:
"When should I consider using rail?"
In recent years, trucking economics have been hammered by steeply rising insurance costs, higher fuel prices, regulations mandating expensive changes in truck diesel engine design and maintenance practices, and regulations governing the hours of service that truck drivers may legally work. While railroads are also paying higher insurance, fuel, and regulatory costs, they have not been affected as severely. Because railroads are three times more fuel-efficient than truck, for example, higher fuel prices have less of an impact.
This increase in rail's economic advantage has been coupled with steady improvements in the reliability and speed of rail service. Accordingly, many shippers are finding that rail can cut their supply chain costs significantly. The advantages are greatest for:
Long hauls -- 500 miles and over (but many shorter hauls work!)
Dense freight -- would weigh out a truck before it cubes out
"Balloon" freight -- would cube out a truck before it weighs out
Movements which would stress the available supply of truck trailers and/or drivers
As motor carriers become more aggressive about penalizing shippers and receivers who delay their drivers and equipment, many customers value the convenience of loading or unloading freight cars on their own schedule, instead of the truck driver's. Also, when truck dock space and parking are limited, rail allows them to handle more business.
Rail is less advantageous when the transit time must be equivalent to truck, when the service must be just-in-time (i.e., no buffer stock), or when the routing includes competing railroads.
"When should I consider using multimodal services?"
"Multimodal" refers to combined rail/highway transportation. Many bulk commodities can be unloaded from a rail car to truck for final delivery. Bulk commodities handled this way include sugar, grain, liquid and dry bulk fertilizer, chemicals, cement, and plastic pellets among others. Multimodal also includes various warehousing options where the product arrives by rail and is delivered to the end-user by truck. Commodities include steel, lumber, and paper.
Because the rail car typically holds 100-110 tons of payload vs. truck capacity of 20-25 tons, using rail for the long haul offers substantial savings in transportation cost. Vendors of some commodities also offer a lower unit price for purchases in larger quantities. Multimodal may be attractive if your facility is not located on our railroad or you need offsite inventory storage. Some commodities can be held in rail cars and drawn down as you need them.
LAL and its subsidiary railroads offer multimodal services ranging from simple team tracks (public-use sidetracks) to product quantity and temperature reporting, heating, and other enhancements. Customer-operated facilities on our rail lines offer additional commodity-specific multimodal capabilities. LAL can recommend a motor carrier to make final delivery, or you are free to utilize any qualified motor carrier.
As Transportation Costs Surge, Railroads Keep On Truckin'
By Tom Granahan, Editor-In-Chief, Manufacturing.net
Manufacturing.Net - August 11, 2006
With transportation costs gobbling up a growing portion of manufacturers’ budgets, here’s one guess as to where that money is going: railroads.
{TO VIEW REMAINING OF ARTICLE INCLUDING SOME INTERESTING GRAPHS, CLICK ON FOLLOWING LINK.)
http://www.manufacturing.net/article/CA6360790.html
Slower Selloff By Central Banks Keeps Shine on Gold
By Charlotte Mathews
15 Aug 2006 at 11:21 AM EDT
JOHANNESBURG (Business Day) -- The failure of central banks to sell the full amount of gold they are entitled to in the current year of their sales agreement could be positive for the gold price in future, says the latest gold-hedging report by Virtual Metals Research and Consulting.
An important factor helping to stabilise the gold market in the past few years has been the voluntary signing of sales agreements - which limit how much gold signatories will sell each year - by a number of central banks.
In the year to this September, the signatories were permitted to sell 500 tons of gold but by the end of July they had sold only 331 tons. They cannot carry over the allocation from one year to the next.
Virtual Metals said it seemed unlikely the signatories would sell the full allocation this year - and if they did not, it would not only limit the amount of gold in the market at present but also affect future assumptions about sales by central banks. Previously, the banks had sold their full allocations every year.
Virtual Metals researcher Matthew Turner said reduced selling by central banks was not necessarily a general policy change, but largely reflected the dispute between the German government and the Bundesbank over using Germany’s gold reserves to cut the budget deficit. Once this was resolved, Germany could resume selling its allocation.
What was significant, though, was that other central banks had not taken up Germany’s sales allocation. In the past six months, the gold price has also been supported by big gold producers’ shrinking forward sales commitments.
Gold hedging in the second quarter of this year fell 5.1-million ounces, the largest quarterly decline in Virtual Metals’ records.
Turner said the rapid dehedging supported the gold market because it temporarily reduced supply into the spot market. However, gold producers could not continue dehedging at this pace.
Barrick Gold [NYSE:ABX; TSX:ABX], AngloGold Ashanti [NYSE:AU] and Newcrest [ASX:NCM] were responsible for 82% of the 10-million ounce decline in the global hedge book this year.
Apart from AngloGold, there were also small declines in the hedge positions of other South African producers - Harmony Gold [NYSE:HMY; JSE:HMY], Western Areas [JSE:WAR] and Metorex [OTC:MRXLF], the report said.
Forward selling of gold by producers, known as gold hedging, is a protection measure against a decline in the gold price. It is a controversial strategy, with those against saying shareholders buy gold companies’ stock to gain exposure to the gold price. Also, when the gold price rises, gold hedgers have to mark-to-market their hedge books, which has a substantial accounting effect, and the average gold price they receive will be below that received by nonhedgers.
The effect of producer hedging on the gold market as a whole was analysed by Anthony Neuberger of the London Business School in a May 2001 paper for the World Gold Council. He concluded that pro-ducer hedging probably depressed the gold price in the 1990s, but the effect was too small to explain all of the real decline in the gold price at that time.
Click to see exclusive coverage by Resource Investor.
Peak Oil - The Great Tsunami
By Michael Payne
18 February, 2006
Online Journal
A long-predicted tsunami is heading toward the shores of America, a wave of incredible proportions, gathering momentum with each passing day. America has had many, many warnings of how this giant wave would develop, but these warnings have been totally ignored. Very soon our American society will experience an extremely painful awakening to the dark specter of "Peak Oil" as it looms on our horizon and then comes crashing down upon our nation. Peak Oil will result in drastic and dramatic changes to our society and our lifestyles, the likes of which we will find extremely difficult to comprehend.
By now, most Americans know what a tsunami is. However, the vast majority of America has no clue as to what Peak Oil is. In the simplest of explanations, Peak Oil is that point when the total world production of oil and all known reserves are surpassed by the world demand. At that point the supply will be steadily reduced and the ravages of Peak Oil will begin.
The US experienced an American Peak Oil in the 1970s when, because of our lack of production capacity and reserves, we were forced to import more and more from foreign sources. Our insatiable appetite for that black gold has now increased to the point that we are now importing about two thirds of our total oil consumption from OPEC and other exporting countries.
Of the approximate 84 million barrels of oil consumed on a daily basis by the nations of this planet, the US consumes roughly 21 barrels million of that total, or about 25 percent -- an astounding figure for a nation that represents about 5 percent of the entire world's population. Now that the economies of China and India are growing very swiftly, they are consuming greater and greater quantities of oil. With this new sharp upward spike in world demand, the specter of Peak Oil looms over this planet more ominously with each passing day.
Is Peak Oil a solid theory? Numerous world-class scientists and petroleum experts have conducted intensive studies of this predicted happening over many years and are convinced that it will not only happen but that we are now situated at its very beginning. There are detractors, of course, who say that these scientists and other experts are practicing scare tactics just as those who have issued dire warnings about Global Warming. Even so, some of the most knowledgeable experts in this field are of the opinion that we have already entered the Peak Oil era; many others say that it will begin somewhere between 2006 and 2010.
While I am personally convinced that Peak Oil is a definite reality that America and the world cannot avoid, it seems apparent that Americans simply have no conception of this monumental problem they will soon have to face. They hear little to nothing on network or cable TV or in their newspapers or magazines. To become knowledgeable, Americans must tune in to the Internet. Websites such as peakoil.com, fromthewilderness.com are good starting points. Answers.com is a great website that identifies a wide array of other websites that concentrate on Peak Oil, as well as all sorts of references and links to essays and discussions on this subject. Googling "Peak Oil" will also bring up numerous links.
Now, let's examine and discuss just how our lifestyles, yours, mine and those of all Americans, will be radically changed forever, and will never be the same, at least until this planet can be powered by energy other than fossil fuels. As you gain knowledge about Peak Oil, you will understand that the supposed fallback certainty of alternative energy, including hydrogen fuel cells, electric cars, windmills, etc. is more talk than action. Our government, automakers, and corporate energy giants are doing little to nothing to promote conservation or develop new energy sources. Fossil fuel is king and those in power are more than willing to accept that sad fact.
The 4-5-Car Family -- One of the very first casualties of the effect of Peak Oil will be that the 4-5 car family will disappear, as it should since it is one of the most egregious examples of how petroleum is wasted in the US. The now common practice of high school seniors being given their own vehicles, with many unnecessarily driving to high school will abruptly end. The great American dream of the automobile that has now turned into a virtual nightmare will see a drastic reduction in the number of autos in this nation. Because fuel will simply not be available for millions of America's autos, families will be forced to share and cooperate as they have never done before. They will have no choice.
Gas Guzzling SUVs, 500-HP Pickups, Hummers -- The sales of overly large, grotesque SUVs, the monster pickup trucks and the totally nonsensical Hummers will quickly tank and millions of these societal aberrations will end up in the scrap heaps long before their natural life has passed. That will be a blessing in itself. Many, many Americans will be forced to wake up and will gravitate to the high mileage hybrid autos pioneered by Toyota and Honda, now also being developed by US automakers.
Our National Trucking, Distribution System -- The very lifeblood of our entire economy will be severely crippled as millions of trucks will find less and less available fuel. This, of course, will directly affect every element of our economy as noted in sections below. Years ago when railroads should have been subsidized through intelligent planning and developed into a system, such as found in Europe, our short-term thinkers in Washington poured all the monetary resources into the Interstate Highway System. The trucking industry took off like a rocket and the railroads began to die. That scenario will now be completely reversed as Peak Oil delivers our nation a terrific blow. Railroads will be one of our prime fallback positions.
The Airline Industry -- Again, Peak Oil will have a devastating effect on most of the airline industry since jet fuel represents one of the greatest uses of petroleum. With several airlines now approaching potential bankruptcies, just think of what this industry will have to face in the future. The disruptive and continuing disagreements regarding wages, healthcare, and pensions between management and unions will be totally set aside as the industry frantically tries to figure out to survive. The US government will be helpless to even try to bail them out.
Millions Upon Millions of Auto Commuters -- Today, in many, many cities the average number of occupants in a typical auto commuting to work is somewhere around 1.5. That will change very quickly as our oil supplies begin to dry up. What will people do? In many cases, the railroads will benefit as more and more commuters will have to choose railroads as their primary way to get to work. But the overall magnitude of this problem will be astounding because of the suburban sprawl. Those millions who typically have a 100-mile plus round trip drive to work will face a monumental problem.
Supermarkets, Wal-Mart, et al -- Since the trucking industry will be severely crippled, you can be certain that those shelves containing 50-75 brands of bread, cereals, aspirins, deodorants and many other products will be greatly reduced and the products offered will be much more basic. And, when you stop to think about that, that sounds like one of the least of our problems. Wal-Mart may find itself in dire straits, indeed, since their stores are chock full of plastic products which will not be able to be transported from China and the rest of the world.
Auto, Truck Production -- Because the demand for these vehicles will drop drastically, the major auto producers will find themselves at the brink of bankruptcy. Since the American Dream revolves around the automobile, this will be one of the most drastic results of the lack of oil, with the loss of thousands upon thousands of jobs in the auto industry and related suppliers.
Agriculture -- The most critical of all elements of our economy and for our very survival is our food supply, including the supply chain that farms use to produce crops and the distribution of the resulting foodstuffs to the nation. Pesticides and fertilizers are largely derived from petroleum. Our farm industry will be put at risk when the supply of oil begins to dry up and our government will need to put agriculture at the very top of the list of those who will receive priority in coping with the Peak Oil crisis.
Overall, General Effects -- As the Peak Oil era begins and then accelerates, Americans will be affected in many different ways. Have you noticed just how rapidly the cost of a gallon of gasoline has escalated in the past year as the price of petroleum has recently risen to some $60 barrel? That is nothing when considering that Texas oilman T. Boone Pickens has predicted that the price of gas will hit $3 a gallon sometime in 2006. The housing boom will be affected in many ways, including the fact that thousands upon thousands of tons of roofing shingles will not be produced, and many other critical materials will not be able to be transported to thousands of towns and cities. The availability of tires for autos and all other vehicles will be severely diminished. Millions of asphalt streets and highways will not be repaved and others will not be constructed. The Interstate Highway System that we now enjoy and take for granted will begin a steady deterioration and will severely impact our economy. We Americans will see our travel for business and leisure reduced to a very significant degree.
To conclude, while I could go on and portray many other elements of the devastating effect that Peak Oil will have upon our society, my message to the American people is just this. To the millions upon millions of Americans who are content to be safely tucked into their protective cocoons, in a self-imposed state of apathy and disinterest relating to these massive problems that America faces, this may be the very final wake-up call. If we, as a nation do not collectively recognize the threat of this great tsunami, refuse to think more deeply or get educated and involved, we will be sealing the fate of our children, our grandchildren and those who follow. They are the ones who matter. We simply cannot refuse to address this monumental issue that threatens their very future existence!
When Peak Oil slams into our society with its tsunami-like force, there will be an instant negative effect on each and every one of us. The US government will have to take immediate measures to prioritize the uses of petroleum for the good of the nation in an effort to overcome the horrendous obstacles that we will face. I am sure that the military, our national police forces, energy providers, the agriculture industry, water supply sources and other critical users of gasoline and natural gas will be given the highest priorities. All other uses of petroleum will be given much lower priorities and will not be considered critical. And that is exactly why lifestyles will be altered drastically.
We simply cannot let our insatiable, our totally out-of-control thirst for oil, cripple our nation and our society as we stand in a completely docile, sheep-like state and just let it happen; just let nature take its course. Just as the Titanic went down with the loss of more than 1,500 passengers who believed she was invincible, Peak Oil will bring down America (and actually the entire world) if we, collectively, do not have the heart and the desire to get involved and demand solutions.
Copyright © 1998-2006 Online Journal
Urban and Rural Futures Revisited
Cities, Peak Oil, and Sustainability
(Published in Permaculture Activist #58, November, 2005)
In mid-August I drove to a party in the country outside of Portland, Oregon. Twenty miles of freeway took me to a two-lane road that wound ten miles up steep forested hills and down through remote valleys. As the roads grew narrower and less traveled, I began to wonder how, if gas hits $5 or $10 a gallon, people and supplies will reach these isolated spots. What kind of post-oil vehicle will climb this hilly, winding road that quite literally goes nowhere—a converted truck run on home-made biodigested methane? Then, after I arrived at the secluded acreage, I questioned whether my hosts could really supply most of their own needs, just the two of them and their kids.
I think these isolated places will disappear the way that Roman outposts in Britain and Gaul did during the empire’s decline.
In a recent issue of this magazine (Permaculture Activist 54 p. 2, “Designing Beyond Disaster”) I wrote that when I moved to the country 11 years ago I assumed that rural people use fewer resources than urbanites, but now that I’m back in the city I can see that isn’t true. That article has generated more response than any other I’ve written, and has been reprinted around the Web many times, often with some furious comments. Obviously, a lot of people are thinking about the same topics. I’d like to re-visit the subject, respond to some of the commentary, elaborate on my reasoning, and describe some new thoughts on the subject.
First, a clarification on word usage. When I speak of rural, I generally mean places where people live on acreage outside of towns, with most services too far to walk to. Small towns decreasingly can be called rural, as their takeover by chain stores, engulfment by sprawl, and reliance on non-local goods renders many indistinguishable from suburbs.
Inspiration for my article came from a piece called “Green Manhattan” by David Owen in the October 18, 2004 New Yorker. Owen argued that Manhattanites have a far smaller ecological footprint than the average American, whether urban, rural, or suburban. In Manhattan, hardly anyone drives cars, dwellings are tiny (even a ritzy Park Avenue apartment is much smaller than a typical suburban McMansion), and per-capita energy use is relatively low, since far less energy per person is used to heat and cool an apartment building than single-family dwellings housing the same population. No, New Yorkers aren't growing their food, but then, neither are most other Americans.
But, you ask, what about all of New York’s infrastructure? It’s got enormous water pipes, thousands of miles of roads, and so forth. Doesn’t that use a ridiculous amount of resources? Well, yes. But that densely compacted infrastructure serves many million people. Owen pointed out that if the inhabitants of New York City were spread out at the same density of the small Connecticut town where he now lives, they would occupy all six New England states plus Delaware and New Jersey. Think of all the roads, wires, pipes, fuel, and so on, those spread-out suburbanites would consume—far more than what New York uses now. Living in rural Connecticut, Owen uses seven times the electricity he used in Manhattan. Other non-urban sites fare as badly. An average apartment in San Francisco uses one-fifth the heating fuel per capita burned by a tract house out in the suburbs. Given two present-day urban and rural populations of equal size, the urban one has a much smaller ecological footprint.
Some readers of my article thought I was saying that cities are paragons of ecological living. Please. Little in the US, let alone an enormous city like New York, is sustainable. Manhattan may use a bit less energy than some places, but the practice of pouring billions of tons of resources, gathered from millions of acres, into a few square miles to supply many million people in sky-high buildings is only feasible in an era of cheap oil. And we all know that era is ending. When oil hits $200 a barrel, riding an elevator or pumping water to a 17th-story apartment won’t be an option for any but the ultra-rich. I think the mega-metropolises like New York, Atlanta, Houston, and Chicago will decline as energy costs skyrocket. Some economies of scale become dis-economies when fuel is expensive.
Apocalypse, Not
I’m not a believer in the Peak Oil “end of the world” scenario, where decreasing oil production somehow mutates into the sudden, permanent shutoff of urban water supplies, and contented suburbanites are transformed overnight into looting gangs. Yes, fossil fuels surely will become much more expensive in the next decades, and scarce soon after. I don’t doubt that several tipping points will be broached along the way, with rapid and unexpected changes cascading through society. But civilization won’t end. People have repeatedly predicted the apocalypse: in millennial 1000, again in 1666 (the number of the beast), and many times between and since. Is our memory so short that we have forgotten the foolishness around Y2k? Or are we so wedded to the delicious notion of our annihilation that we grasp at any possibility? Why do we hunger so for our own extinction?
Many Peak Oil disaster scenarios are premised on an overnight catastrophe, as if suddenly all over America we’ll flip the light switch or turn the tap and nothing will happen. Yes, that would result in riots, martial law, and chaos. But Peak Oil almost certainly won’t look like that. We won’t drop from today’s production of 80 million barrels per day to nothing overnight, or even in 20 years. We’ll go to three-dollar-a-gallon gas, then four, then six, with increasing conservation steps along the way. Comparisons to major power outages or massive storms are wrong. Acute and chronic problems wreak very different results.
The US economy has gone from $1.50 per gallon gas to near $3 with nary a hiccup. A group of 60 economists predicted that gas prices will have to pass $4 per gallon before the economy even begins to slow perceptibly. So where is this magic trigger point that will spark the end of civilization?
Like any addict, we will fight for our fix. As the price of oil rises, hard-to-extract deposits will become worth refining, even in disregard of net energy yields (since large concentrations of money make it possible to temporarily ignore long-term economic reality). In August, Congress began authorizing states to drill in previously unavailable off-shore reserves. Record petroleum profits will be poured into new extraction techniques. We’ll probably—sigh—build a lot of nuke plants. And high prices will reduce demand and encourage conservation: SUV sales are already down nearly 30%. We’ve already cut back in response to high prices. Although the economy has doubled in size since 1979, oil use has only grown 9% (US DOE statistics). I’m not trying to paint a rosy scenario here—Peak Oil will hurt—but we won’t all die. Even a societal collapse (read Jared Diamond’s book) takes decades or centuries.
Some experts estimate that over 90% of all resources are wasted by the time the finished product or energy is used, so there is plenty of room for upping efficiency. Simply by doubling car mileage—which is within easy technological reach—the US would cut oil use by 25%, taking us back to the consumption levels of the 1950s. Conservation is the cheapest way to create more resources. So my bet is on a decades-long slide—not a sudden crash—into a post-oil age, while we learn to be far more efficient, urged on by skyrocketing costs. In the end, we won’t be cranking up the air-conditioner, but we won’t be scratching in the mud, either.
Size Matters
Neither the mega-cities nor the survivalist’s bunker will be viable in a post-oil future. The places with the best chance of surviving an oil peak will be cities of less than a million people, ranging down to well-placed smaller cities and towns. Cities of a million or so existed before fossil fuels—ancient Rome proper held roughly a million people—thus they are clearly possible in a limited-oil era.
Scale works to the advantage of sensibly sized cities. For example, Portland’s 500,000 people are served by two sewage treatment plants that use about 2000 miles of pipe to reach every home. Building this cost in the low hundreds of millions of dollars (exact figures don’t exist). Compare this to the sewage system for 500,000 rural people. That’s roughly 125,000 septic tanks, each with 300 or more feet of drain-field pipe, plus trenching and drain rock for all. A septic system costs about $10,000 to build, so the cost of 125,000 of them is $1.25 billion, several times that of the urban system, and the ruralites need 7000 miles of pipe compared to Portland’s 2000 miles. Of course, composting toilets and graywater systems would obviate the need for both of those unsustainable, resource-intensive methods of waste treatment, but I’m talking about what exists right now. Virtually any service system—electricity, fuel, food—follows the same brutal mathematics of scale. A dispersed population requires more resources to serve it—and to connect it together—than a concentrated one. That fact cannot be gotten around.
Some readers confused my concerns over the sustainability of rural life with my disappointment with the quality of my own rural community. Wonderful rural communities exist (as do wonderful urban ones). We happened not to choose one when we moved to the country, but rather, an area depressed by the collapse of the timber industry, where alcohol, spouse beating, methedrine, and child abuse were rampant responses to a shattered economy. But sadly, that describes most of the rural Pacific Northwest, and much of the rest of rural America. Our county was not unique. Country people in Appalachia, the Rust Belt, and the stricken farm states are not exactly flush with cash and optimistic about the future. There are pockets of prosperity in the rural US, but overall the social and economic picture is miserable, and most people there lack the education and resources to cope with even today’s economy, much less one ravaged by an oil shortage.
Even if a country community is vibrant, having friendly neighbors does not reduce rural America’s immense ecological footprint. In rural areas, a car is even more essential than in suburbia. As the sewage-plant example shows, the laws of physics force a spread-out populace to consume more resources than one that is compact. The key question is, how large can that compact populace be and still be sustainable? What size of community is best for a post-oil world? No one knows the answer, but the mega-cities are surely too large, and the survivalist in his bunker is too small.
My guess at a post-oil scenario is for the disappearance of suburbs and a return to the city/country pattern as it existed for thousands of years before the oil age. In the film, “The End of Suburbia,” James Howard Kunstler calls the suburbs “the greatest misallocation of resources in the history of the world.” I believe as suburbs empty or condense over several decades they will be gutted for their re-usable resources and be replaced by what preceded it until forty years ago: small farms ringing every city, producing food in easy reach of urban markets.
I often hear the assumption that without land, urbanites will starve. Nonsense. Farmers were feeding urban populations long before the oil age, and they will do so after it. New Jersey’s seemingly absurd license plate motto, “The Garden State,” refers to its thousands of vanished market gardens that fed New York City until the 1960s. Even urbanites in triplexes will be able to buy locally grown food.
Giving up Fantasies
It’s likely that suburbs, many isolated small towns, and dispersed rural homes will wither and die. Tools and other essential supplies won’t be transported far from the cities where they are produced and where economic power is, so people outside urban areas will need to be virtually self-reliant.
One of the most common responses to the Peak Oil panic is, “We’re planning on moving to the country with our friends and producing everything we need.” Let me burst that bubble: Back-to-the-landers have been pursuing this dream for 40 years now, and I don’t know of a single homesteader or community that has achieved it. Even the Amish shop in town. When I moved to the country, I became rapidly disabused of the idea of growing even half my own food. I like doing one or two other things during my day. During my life.
Growing all your own food, repairing and maintaining tools, keeping livestock, cutting firewood, doing all the carpentry and plumbing, and so forth, is dawn-to-after-dark work. And learning to live in an intentional community is a supremely difficult task—I’ve been around plenty of them. Combine the donkeywork of survivalism with the stress of building a new community, and the failure rate climbs to near 100%. Post-oil, we will all still be as interdependent as we have been since before we came down from the trees, and the farther you live from other people, the poorer you will be.
One out of a thousand has the temperament to grow and make everything he needs. One out of a million—maybe—has actually done it. America’s pioneers were a tiny minority of the millions who stayed behind or came after the task of settlement was finished. If anyone reading this is utterly self-reliant, I would love to hear your story. And if anyone truly believes that fleeing to the country is the solution, then pack up now, because it will take a decade to develop the skills you’ll need to eke out a lonely subsistence.
Some of the back-to-the-landers do have one thing right. It will be healthy communities that will survive the end of the oil age. Even in the unlikely “roving terror gang” scenario, which neighborhood is likely to be invaded? One where each household and its own little garden is isolated, or one in which 30 neighbors are solidly looking out for each other?
Communities are much easier to create where people live near each other. They form when population passes a critical mass, and where people have similar interests and needs. During my rural sojourn, I was astounded by how little my neighbors had in common. Present-day development in rural areas is wildly haphazard, with mansions next to decrepit trailers. The makeup of the new ruralism is not yeoman farmers and ranchers (fewer than 7% of ruralites farm), but a cheek-by-jowl mix of retirees, poor refugees from cities and declining inner suburbs, low-wage workers in service or resource industries, and affluent dabblers in country life.
Consider our two-mile gravel road in southern Oregon. There were no farmers. My wife and I were middle-class urban refugees. Our nearest neighbor on one side was a meth-selling ex-con living in a trailer; on the other, a retired psychiatrist. Nearby were lower-middle-class ex-suburbanites living in a double-wide, a right-wing retired graphics artist, a liberal young school teacher, and a Christian auto-body mechanic. With no commonality, there was no hope of community where I lived, and it didn’t happen. This miscellaneous assortment of unlinkable diversity is common in the rural US. In rural areas (meaning where houses have acreage), neighbors often come from utterly disparate income brackets, lifestyles, and beliefs, with scant chance of finding common ground. In contrast, in cities, zoning and housing prices encourage people of similar incomes and backgrounds to live near each other. The city neighborhoods I know—and I’ve lived in a lot of cities—have far less diversity than rural ones. Cities overall have more diverse populations than most countryside, but they are generally segregated into neighborhoods having similar attributes such as affordability, hipness or staidness, and ethnic make-up. Of course, uniformity can lead to monotony, exclusivity, and a false belief that everyone is like you. But it also means that urban opportunities for community are much greater than in the country, from sheer proximity, from common backgrounds, and because more galvanizing issues arise to spark gatherings.
Breadlines Are a Good Sign
In my earlier article, I cited scholars who said that that in hard times, city dwellers had in general fared better than those in the country. A few readers argued that during the Depression it was in the city that breadlines formed, not in the country. But this proves the point. Breadlines, though the classic image of the Depression, occur when local restaurants and other businesses team up with city governments to bake bread, cook meals, and offer them at little or no cost. Breadlines mean a community is pooling its resources. That can’t easily happen where people are dispersed and don’t have cars to connect them. During hard times, in the country, hungry people just starve—or flee to the city. Some readers cited anecdotes of their grandparents having plenty of food on their Depression-era farm, but this is belied by the data showing hundreds of thousands of rural folk abandoning their homesteads. Urban breadlines contained plenty of relocated farmers. The Okies weren’t from the city.
To believe that ruralites will fare better, post-oil, than urbanites is to believe that scattered individuals are more resourceful and capable than large assemblages of people acting in concert. Of course, groups can be as stupid as individuals. But collective wisdom and action are usually far more effective than isolated single efforts. Just as most science, technology, art, culture, education, political and social action, money, and power are created and applied in the city, solutions for a post-oil world will also evolve among concentrations of people.
Will a post-oil era look like the Depression? The Depression was not a time of scarce resources, but rather of money. Peak Oil, however, means scarce resources, so comparisons may not be apt. One thing we know about the future is that predictions are almost always wrong. Perhaps the doom-and-gloomers are right and Peak Oil will result in an utterly calamitous crash and unspeakable horror. In that case, all bets are off and both cities and farms will be places of death and misery. But the fact that the end-of-the-world crowd has been crowing for millennia and still have a 100% record of error suggests that they are wrong this time too. Any of several other scenarios is more probable: a technological fix and business as usual (I’m not betting on that one, either), slight descent to a techno-green future (only a bit less unlikely given our political leadership), or a long decline to living within our true energy budget.
My point is not to trade the scenario of post-oil urban chaos for one of rural disaster. I don’t believe either place will be the nightmare that some claim. I simply want to counter the notion that we’d be better off abandoning the city. In the “end of the world” scenario, cities and everywhere else may be full of gangs roving and looting—and then starving with the rest of us. But I don’t buy that prediction. I think as oil prices rise, driving 20 miles to get your chainsaw repaired or to take your child to soccer practice will be the first piece of contemporary life to evaporate. When prices soar, country people will be far from friends, manufactured goods, medical care, and everything but their gardens—if they know how to garden. Urbanites will have mass transit and bicycles. And my favorite urban farms, my livelihood, and my friends will still be within walking distance.
[A note added after Hurricane Katrina: For some, the looting and assaults in New Orleans after Katrina are signs of what Peak Oil has in store for cities, but I don't agree. There will be rough spots, and perhaps even sporadic gasoline riots. A generation of smug “I've got mine” leadership in this country has instilled a beggar-thy-neighbor ethic sadly evidenced in a few cases in Louisiana. But the rapid evacuation and destruction of a major city and the sudden deaths of hundreds from flood and disease bear little resemblance to the much slower evolution of Peak Oil stresses. Looting an empty store in a ruined metropolis deserted by its populace and police takes no courage or organization. Someone trying the same in a functional city inhabited by gun-toting store owners, a police force, and wary neighbors generally ends up in jail or dead. The circumstances, scale, time-frame, and causes in the two cases have little in common. A comparison is both forced and unwise.]
Copyright 2005 Toby Hemenway
Monday, August 14, 2006 - Page updated at 12:22 AM
Oil crisis: It's only just begun
By Paul Salopek
Chicago Tribune
KUNI TAKAHASHI / CHICAGO TRIBUNE
Last summer, a gasoline station opened in South Elgin, Ill., an old farming village that's now being swallowed by the westward sprawl of Chicago.
As service stations go, it's an alpha establishment. A $3 million Marathon outlet with 24 digital pumps, a computerized car wash and a convenience store lit up like an operating room, it sells everything from ultra-low-sulfur diesel to an herbal "memory enhancer" to Krispy Kreme doughnuts.
Howard Dunbar's Tanker Truck 6 rolled into the station one night last September and proceeded to unload 7,723 gallons of gasoline and diesel into underground tanks.
This bonanza would be sucked dry by customers in 24 hours, a small, stark example of the nation's awesome petroleum appetite at a time the planet appears to be lurching into an energy crunch of historic proportions.
By now, most Americans realize that something is profoundly awry in the global oil patch.
For most motorists, like the "swipe and go" customers at the South Elgin Marathon, the evidence is painfully obvious: record-high fuel costs that have surpassed last year's infamous price spikes after Hurricane Katrina. Prices are expected to go even higher, especially in the Pacific Northwest and California, after the shutdown of an oil pipeline on Alaska's northern slope.
Yet to fully grasp the scope of the crisis looming before them, Americans must trace their seemingly ordinary tankful of gasoline back to its shadowy sources. This is, in effect, a journey into the heart of America's vast and troubled oil dependency.
"I truly think we're at one of those turning points where the future's looking so ugly nobody wants to face it," said Matthew Simmons, a Houston energy investment banker who has advised the Bush administration on oil policy. "We're not talking some temporary Arab embargo anymore. We're not talking your father's energy crisis."
What Simmons and many other experts are talking about is a bleak new collision between geology and geopolitics.
Below ground, the biggest worry is "peak oil" — the notion that the world's total petroleum endowment is approaching the half-empty mark, a geological tipping point beyond which no amount of extra pumping will revive fading oil fields.
Peak-oil theory is controversial. Many think it alarmist. Yet even Big Oil is starting to gird itself for possible fuel shortages: Chevron, the nation's second-largest oil company, has bluntly declared that "the era of easy oil is over" and is warning energy-hungry Americans that "the world consumes two barrels of oil for every barrel discovered."
Aboveground, things look little better. Most petro states, aware that crude supplies are growing increasingly valuable, have limited drilling rights to their own oil companies.
Meanwhile, thirst for petroleum continues to run wild. Producing nations are pumping at maximum capacity. Yet the competing energy demands of America and rapidly industrializing China and India now threaten to outstrip global oil output. Chinese oil imports are projected to double to 14 million barrels a day over 20 years. Many credible analysts foresee a new "energy cold war" as the United States and China square off over the planet's last reserves.
The new Marathon station in South Elgin turned out to be an ideal laboratory to parse these sobering issues. Exclusive access to industry refining data made it possible, for the first time, to track oil consumed by this one gas station back to the dusty war zones, belligerent autocracies and tottering nation-states from where it came.
For years, oil companies have insisted that this could never be done. Conventional wisdom holds that America's colossal oil flows are mixed, swapped among companies and rebranded too many times to pinpoint the actual source of your $40 purchase of unleaded.
Yet, with a little research and proprietary data supplied by Marathon Petroleum, the Chicago Tribune could trace with unparalleled clarity virtually every bucketful of trucker Howard Dunbar's shipment to its distant origins.
On the hydrocarbon menu that September night, in round figures:
• Gulf of Mexico crudes: 31 percent
• Texas crudes: 28 percent
• Nigerian crudes: 17 percent
• Arab light from Saudi Arabia: 10 percent
• Louisiana sweet: 8 percent
• Illinois Basin light: 4 percent
• Cabinda crude from Angola: 3 percent
• N'Kossa crude from the Republic of Congo: .01 percent
Thus, $73.81 worth of unleaded pumped one Saturday by a Little League mom was traced not simply back to Africa, but to a particular set of Nigerian offshore fields through which Ibibio villagers canoed home to children dying of curable diseases.
Every day, the jaded tanker drivers brought human stories echoing in their trucks. They plunked their long wooden measuring sticks into the Marathon station's 40,000-gallon underground tanks, and the resulting subterranean gong evoked — depending on the changing oil vintage — an Iraqi ex-colonel's cavernous loneliness. Or the laments of a West African fisherman named Sunday, afloat on a fishless stretch of the Atlantic. Or the songs of Marxist Indians reveling in their newfound oil wealth atop a dusty South American plateau.
The voices of Chinese oil prospectors gurgled inside all of the fuel shipments. And diluted in the gas came a warning that many Americans seem unprepared to hear: Our nation's energy-intensive joy ride, powered by 150 years of cheap petroleum, may be coming to an end.
Journey to the pump
It was September. Hurricanes Katrina and Rita had delivered their one-two punch to the energy-rich Gulf Coast, swamping New Orleans and disabling the offshore wells and pipelines that yield one-third of America's domestic energy production. In South Elgin, population 20,000, gas prices at the Marathon had broken the $3-a-gallon barrier, and people were stealing Michelle Vargo's gasoline.
"You'd think it would only be the crummy cars, but people in nice cars are doing it, too," the frazzled station manager exclaimed. "I never seen anything like it."
Vargo, 36, is too young to recall that this had happened during the Arab oil embargo of 1973 and the Iranian hostage crisis of 1979.
In typically murky industry fashion, the station is branded and supplied by Marathon but actually owned by an independent fuel retailer — in this case, Prairie State Enterprises of Barrington, Ill. Freelance shippers called "jobbers" haul the gas. And even though much of the station's petroleum does in fact bubble from Marathon's oil patches, the company as often purchases its oil from Exxon Mobil, Iraq's Southern Oil Co. or Venezuela's PDVSA, a swaggering national oil company with its own patriotic song.
A single mom with a hard-edged life, Vargo is one part in a ruthless business that earns a pittance from gasoline sales (oil companies and refiners snatch the bulk of the fuel's profits). Her station's income comes from the incidentals of frantic modern life: cigarettes, energy drinks, stay-awake pills, the Lotto, and sweet and salty snacks.
The clerks are a motley group. Many are the working poor. Some can't pay their bills. Several live with their parents.
Vargo drives to work in a car she can't afford — a white Chevrolet Suburban that churns out a ruinous 10 miles a gallon and rides so high that she has to boost herself into the driver's seat as if jumping into a saddle. Her two-hour daily commute, about 40 miles each way from Lockport, is roughly double the national average.
"I don't feel safe in small cars," Vargo said defensively.
The only perk for the station employees is free coffee. There are no discounts on gas.
From the ocean's floor
In 1940, the United States was the Saudi Arabia of the world. It produced 63 percent of the planet's oil. Today, it generates 8 percent.
About one-third of Vargo's fill-up on a recent day came from the last major pool of crude remaining in oil-starved America: the basement of the Gulf of Mexico. Trace it from seabed to suburbia, and you X-ray America's aging industrial innards.
It started 9,000 feet inside Earth's crust, in Miocene Epoch rocks that have the consistency of oil-soaked beach sand. The rocks simmer near the boiling point of water. This is known in the business as the "pay zone."
From that hellish place, the crude was sucked up into a 4-inch drill pipe that punctured the Atlantic floor near a submerged hillock called Viosca Knoll 786. It shot up 1,750 feet of pipe to an offshore production rig and was shunted ashore to a huge tank farm in St. James, La. There it began its long journey to the Midwest in a pipeline big enough for a person to walk in, albeit hunched over — a 632-mile-long artifact of our oil dependency that will doubtless astound future archeologists.
Arriving at the Robinson refinery in southern Illinois, it was cooked and cooled for five days inside 23-story towers. Then it gushed through 16- and 12-inch fuel pipelines for three days until it reached a 40-year-old tank farm near O'Hare International Airport. Finally, it traveled its last 12 miles to the South Elgin Marathon inside Howard Dunbar's truck.
"Takes a bit of power to bring it up," hollered Ferrell Martin, 52, a senior mechanic aboard Petronius, a drilling platform that juts above the gulf's waves near Viosca Knoll. "Our generators could electrify a small town."
The platform, co-owned by Chevron and Marathon, came on line in 2000. It cost more than $500 million to build, nearly what the United States shells out every 24 hours to buy imported crude. A masterpiece of high technology, it pumps the energy equivalent of 60,000 barrels of oil and natural gas a day — a gusher that matches Pakistan's national output and is only slightly behind Italy's.
More than 100 such gargantuan structures dot the gulf. As do an estimated 6,500 other oil-related features such as wells, pumping stations and helipads, not to mention some 30,000 miles of submerged pipelines tangled like spaghetti across the gulf floor.
"A whole new game"
One man who keeps Michelle Vargo's gas-guzzling Suburban rolling doesn't have an oil worker's rough hands. He sits in a red granite skyscraper in Houston.
"No question, we're facing a whole new game," said Jeff Rutledge, a sandy-haired New Orleans native and the senior geophysicist for Marathon. "Sure, there's a lot of resources still out there, but they're getting riskier to invest in, much harder to find and more expensive to reach."
At Marathon's technology and exploration department, desks are piled with what look like old eight-track tapes: computer drives that contain volumes of exploration data that beggar belief. Seismic surveys, the industry's main tool for locating oil, involve setting off small shock waves at Earth's surface and recording millions of "echoes" from the rock below.
Progress reports from 10 to 20 of these fantastically pricey, high-tech quests from Africa, Russia and the North Atlantic land on Rutledge's desk every day.
According to industry optimists, such Herculean efforts to squeeze out Earth's last high-quality oil are the best retort to doomsayers who worry the world is running on empty.
In the gulf, for instance, Petronius' 19 wells do things engineers couldn't dream of a quarter-century ago. They snake downward through almost 1,800 feet of seawater, bore vertically through a mile and a half of rock, then veer off laterally under the stony seabed for distances of up to five miles.
Such whiz-bang technology has encouraged the U.S. Minerals Management Service to boost the Gulf of Mexico's potential oil reserves by 15 percent, to 86 billion barrels. That's enough, in theory, to meet U.S. demand for another decade. Much of that, however, lies in deep, environmentally sensitive waters near the Florida coast and is prohibitively expensive to extract using current technology.
Many oil executives say environmental restrictions and stingy foreign governments keep valuable reserves locked up.
The United States gulps one-quarter of the crude pumped on the planet, industry critics point out, yet it sits atop just 3 percent of the globe's reserves.
"You can drill in the Arctic National Wildlife Refuge, on every continental shelf and atop every hill in America for that matter, and you still won't reverse the fact that our oil production is in permanent decline," said Rep. Roscoe Bartlett, R-Md., a senior member of the House Science Committee. "We're just sopping up what's left, digging ourselves into a deeper hole."
Bartlett belongs to a small but suddenly influential band of pessimists who are ringing alarm bells over peak oil.
The perilous "peak"
The theory of peak oil is based on the studies of M. King Hubbert, a pioneering U.S. geologist who correctly predicted in the 1950s that America's huge crude output would "peak," or hit a ceiling, in 1970.
Nobody disputes that oil will peak; the debate is over when. The output of all reservoirs begins to decline after about half of their oil is extracted. Today, peakists cite anemic oil discoveries since the 1980s, plus ominous drop-offs in production in major fields in Kuwait, China and Mexico, among other places, as evidence that the world, too, is reaching its fateful peak.
Estimates of when we will hit this milestone vary from "we've passed it already" to the U.S. Geological Survey's latest calculation of 2044 — hardly a reassuring date, given that rocketing oil prices and their attendant social chaos would stagger the industrial world well before that reckoning.
Using available technology, Rutledge said, Petronius' bounty likely will shrivel in 12 to 15 years.
"Just sinking away"
Ferrell Martin's ancestors had fished and trapped the watery maze of Bayou Terrebonne, a fabled swamp about 60 miles southwest of New Orleans, for more than 200 years. But today, Louisiana's lush wetlands, the richest in America, are dying, crumbling into the sea.
Home from his usual two-week shift aboard Petronius, Martin knelt at the bow of a bass boat steered by one of his numberless bayou relatives, trying, again and again, to get the boat unstuck from hidden bars of mud.
"I can't even find the same fishing holes anymore," Martin said, fanning away mosquitoes. "The whole place is just sinking away."
The U.S. Geological Survey thinks land in and around Bayou Terrebonne is starting to sag like a deflating wineskin as fossil fuels are pumped out in massive quantities. In some places, it has settled 11 inches. For a landscape that is in many cases only a few feet above sea level, the implications are ominous. Erosion and subsidence have eaten away at least two miles of coastline near Ferrell Martin's modest house in Montegut, La.
He recognized the irony: Oil has yanked thousands of once-impoverished Cajuns into the middle class, but it is now helping swallow their ancestral homes.
"Everything's a trade-off, I guess," Martin said.
This, too, gets burned up by the cars in South Elgin: a clod of southern Louisiana.
Yamana to boost Brazil gold output 4-fold in 06-CEO
Mon Aug 14, 2006 5:53pm ET
Market View
YRI (Yamana Gold Inc )
Last: $11.09
Change: -0.31 (-2.72%)
Revenue (ttm): $51.6M
EPS: -0.03
Market Cap: $3,203.89M
Time: 4:25pm ET
RIO DE JANEIRO, Brazil, Aug 14 (Reuters) - Canada's Yamana Gold Inc (YRI.TO: Quote, Profile, Research) will boost gold output from its Brazilian mines four-fold this year, company president and chief executive Peter Marrone said.
"In 2006, we should produce 400,000 oz, up from 100,000 oz in 2005," Marrone told Reuters in a phone interview late on Friday.
The hike is due mainly to Yamana's $631.6 million purchase in April of another Canadian company active in Brazil, Desert Sun Mining Corp, which operated the large Jacobina gold mine in Brazil's Bahia Gold Belt.
"Desert Sun has now been absorbed into Yamana,' he said.
In addition, Yamana is starting up two new mines in 2006.
They are at Sao Francisco in Mato Grosso state, which started commercial production on Aug. 1, and Chapada, in Goias state, which is due to start up late September, he said.
"Our output should then grow further to 600,000 oz in 2007, when we will become the biggest gold producer in Brazil," Marrone said.
He added that from 2008 Yaman should be producing between 700,000 and 750,000 ounces a year, excluding projects currently being studied, he said.
Increased production from 2008 will be achieved via full capacity working at mines now being brought on-stream, and the start-up in 2008 of the C1 Santa Luz mine in Bahia state.
"Gaining environmental permits for the mine projects has been no problem, because they are all simple ones," he said.
Yamana, which only started producing gold in Brazil in mid-2003, now has five producing mines, four in Brazil and one in Honduras, as well as feasibility studies for two Brazilian projects at Sao Vicente and Ernesto in Mato Grosso state.
The company's proven and probable reserves are now put at 7.2 million ounces of gold and 2.3 billion lbs of copper, making it one of the world's largest intermediate size gold companies, Marrone said.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060814:MTFH50197_2....
Plexmar Resources Inc.: Financing Closed
Monday August 14, 5:01 pm ET
SAINTE-FOY, QUEBEC--(CCNMatthews - Aug. 14, 2006) - Plexmar Resources Inc.(TSX VENTURE:PLE - News), is pleased to announce that it closed the previously announced non-brokered private placement of 6,000,000 units of the Corporation at a price of $0.35 per Unit, for total gross proceeds of $2,1M. Each Unit consists of one (1) common share and one (1) Common Share purchase warrant. Each Warrant shall entitle the holder to acquire one Common Share at a price of $0.41 per share for a period of twenty-four months (24) months following the date of closing.
The Offering is subject to the final approval of TSX Venture Exchange. All securities, shares and warrants, issued in connection with this placement are subject to a four (4) month hold period from the date of closing.
A cash commission of 10% will be paid on part of the amount to non-members. Haywood Securities and Canaccord Adams will receive an aggregate of $4,378 and 25,000 share purchase warrants. The commission is 7% of the proceeds and the warrants equal 10% of the number of shares sold. The warrants entitle the holders to purchase common shares at a price of $0.41 per share for a period of twenty-four months (24) months following the date of closing.
The net proceeds will be used primarily for exploration work on the Corporation's Peruvian properties and for working capital purposes.
110 M shares outstanding
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Contact:
Guy Bedard
Plexmar Resources Inc.
President
(418) 658-6776
1 (866) 460-0408
Paradox Public Relations
1 (514) 341-0408
--------------------------------------------------------------------------------
Source: Plexmar Resources Inc.
Oil industry hits peak production
PM - Monday, 10 July , 2006 18:34:00
Reporter: Barney Porter
MARK COLVIN: A leading expert has warned that the world's oil industry has started to reach its peak production rate and is already in the first phase of a transition to an uncertain future.
Dr Ali Samsam Bakhtiari predicted on this program two years ago that the crisis would begin in 2006 or 2007.
Now he says the current estimates of oil reserves are grossly exaggerated and we are approaching a time when oil may reach $US 300 a barrel and demand will out-strip supply.
It may happen this decade.
Barney Porter has the story.
BARNEY PORTER: Dr Ali Samsam Bakhtiari says in one regard, the science is simple.
ALI SAMSAM BAKHTIARI: Crude oil is the master domino. When you tumble crude oil, all the other dominoes tumble, whichever they are. And that is what makes this peak oil so important.
BARNEY PORTER: Dr Bakhtiari has recently retired as a senior advisor for the National Iranian Oil Company in Tehran and has written several books and more than 65 papers on the Iranian and international oil and gas industry.
In a speech in Sydney today, he said the oil industry had hit a peak production of 81 million barrels per day, which would decline to 55 million barrels per day up to 2020.
And Dr Bakhtiari says there's another, more immediate problem, for the industry.
He says the last great find was in the 1990s in the so-called 'frontier areas' which included Alaska, the North Sea, Brazil and deeper off-shore sites.
They've since been developed until there are now only two left: the Arctic Ocean, and Antarctica.
ALI SAMSAM BAKHTIARI: I hope that the oil industry will not go into Antarctica but, today I am not so sure, you know, because when the price will be $200 or $300 per barrel, then anything can happen.
BARNEY PORTER: Dr Bakhtiari says Russia's production actually peaked in 2004 and has since been in decline, which will have major ramifications for Europe. He claims the Russian industry officials won't admit the facts because they still want to attract investors.
Dr Bakhtiari says the latest finds by the industry will add only, at most, a few days to the world's reserves.
ALI SAMSAM BAKHTIARI: We are consuming, world-wide, 30 billion barrels of oil every year. It is an enormous amount. But what is the industry finding? It is finding something between four and six only.
So every year that passes, that we have passed in this century, we had a deficit on consumption versus finds.
BARNEY PORTER: As to the future, Dr Bakhtiari describes a stage he calls "Transition One" where change will be slow and gradual, a sort of business as usual, because of the world's ongoing addiction to oil.
But he also says there's an element of uncertainty because traditional laws of economics are changing. Dr Bahktiari says in theory, if the price of oil is doubled, the demand should go down.
But he notes in the past four years the price has actually tripled and demand is still increasing.
ALI SAMSAM BAKHTIARI: We are entering a brand new world, a world that is totally different. We are used to this growth and we have been addicted to this growth.
BARNEY PORTER: However in the few years left in his transition model, Dr Bakhtiari says Western Australia may be a model for the world with its approach to public transport, providing free buses and a light-rail system throughout the suburbs.
ALI SAMSAM BAKHTIARI: The more you would invest in public transport and in rail, it would be a benefit, but naturally it is going to be expensive first. But if you spend every dollar that you spend today, it's much better than the dollar that you are going to spend tomorrow.
Submitted by Spellbound in Coal Room
http://www.investorshub.com/boards/read_msg.asp?message_id=12658364
By: Byron W. King
ALI SAMSAM BAKHTIARI is a retired "senior energy expert," formerly employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran. He has held a number of important positions with NIOC since 1971. He is currently attached to the director's office in the Corporate Planning Directorate of NIOC, and specializes in questions related to the global oil, gas and petrochemical industries. This alone ought to pique your interest because Bakhtiari has the ear of the most important decision-makers in Iran. What is he telling them?
Fortunately for us in the West, Bakhtiari is also an independent consultant who writes and speaks to a worldwide audience on the subject of oil depletion in general, and Peak Oil in particular. His tribal name, Bakhtiari, means "companions of good fortune," and the story of his life is somewhat emblematic of that meaning. Based on what I have seen, Bakhtiari has a gift for understanding, and a unique ability to share this gift with others. There are few more qualified people in the world who can discuss Peak Oil. So when Bakhtiari talks, people ought to listen.
And as an aside, anyone within the Western diplomatic or military community who deals with Iranian issues at almost any level needs to understand what Bakhtiari has been telling the leadership of Iran. What do the mullahs know about oil that you may not know? It might just explain a few things about Iranian behavior.
Oil at $100-150 per Barrel
In a recent public address to the Senate of Australia, Bakhtiari stated that "I can see a range of $100-150 [per barrel of oil] not very far into the future." He amplified this statement as follows:
"We are entering an era in which we know nothing much, where we have a brand-new set of rules...One of these new rules, in my opinion, is that there will be in the very near future nothing like business as usual. In my opinion, nothing is usual from now on for any of the countries involved. And the lower you are in the pile, the worse it is going to get."
Bakhtiari believes that the world is at Peak Oil, producing about as much conventional oil on a daily basis as will ever be produced, now about 84 million barrels per day. From here on, the oil markets of the world will be dealing with the ongoing effects of oil field depletion and irreversible production decline. By 2025, Bakhtiari expects that the world's daily production of conventional oil will fall to a level between 50-55 million barrels of oil per day. Bakhtiari counsels that the world's governments, industries, and people accept the fact and begin to prepare. There is no time to lose.
Bakhtiari is pessimistic about the prospects for large-scale energy projects based on manufactured fuels, such as coal-to-oil and gas-to-oil projects. His reasons are many, ranging from the scale and cost of such projects to the raw environmental degradation they cause. In addition, much of the feedstock for these projects, for raw material and/or process heat, is supposed to come from natural gas. But natural gas supplies are about to "peak" worldwide and commence their own irreversible curve of decline, so this is not a long-term solution. Of the 30-million-barrel-per-day decline in conventional oil production that Bakhtiari envisions over the next 20 years, he anticipates that manufactured fuels will substitute for only about 5 million barrels per day. "This is a drop of water in the ocean," says Bakhtiari.
In addition, Bakhtiari is pessimistic on the future of ethanol as an oil substitute, because it will pit the world's food supply against the needs of the world's built-up transportation system for liquid fuels. "People have to eat," says Bakhtiari.
Four Phases of Decline
Bakhtiari views the future in terms of four phases of transition, or, as he puts it, T1, T2, T3, and T4. Fortunately for the world's users of petroleum, the "hidden advantage" of Bakhtiari's T1 is that worldwide oil supplies will remain almost constant during this initial phase. That is, new discoveries and production that is now coming on line will compensate for the production that is lost due to depletion. T2, T3, and T4 will be, as Bakhtiari puts it, "more turbulent phases."
At the end of T1, Bakhtiari envisions "two major scales tilting." There will be a supply of conventional oil, all of which will be subject to world demand. That is, there is not now, and will not be at the end of T1, any "swing" production, such as the cushion that Saudi Arabia provided during the past 40 years or so. Supply will dictate demand, and when the supply is gone, the demand will go unsatisfied. "In the end, it will be the total shift" to oil supply dictating demand. Rising prices will clear the market, and the prices will rise precipitously.
According to Bakhtiari, one of the key problems for the world in facing this ongoing T1 phase is that so-called "mega projects" for high-cost oil and other alternative fuels take 10-20 years to construct and come online. These mega projects include such things as large offshore oil developments in deep water, substitute oil industries that manufacture oil from natural gas or coal, or refineries capable of handling heavy oils or tar from tar sands. The problem is that rising oil prices, and spot shortages in the coming years, will trigger increases in prices for other commodities, like cement and steel.
Rising Costs and Risks for Capital Projects
One prominent example that illustrates Bakhtiari's point was just announced by Shell Canada Ltd. Shell Canada recently announced that an expansion of its Athabasca oil sands project will cost as much as $12.8 billion, because relentless cost pressures are swelling its budget. This is nearly three times the cost per barrel that was originally planned, as recently as 2002. According the Shell Canada's president, the economic environment has changed "quite substantially" in just a few years.
As recently as mid-2005, Shell Canada estimated that expanding its plant at Athabasca would cost about $200 per barrel per day of capital cost. Now the estimate is that the eventual cost will top $300 per barrel per day, and possibly approach $350 per barrel per day. That is, under these cost estimates, a facility capable of producing 10,000 barrels per day of oil equivalent product might cost as much as $3.5 billion just to build, let alone the future costs of to operating on an ongoing basis. And to construct facilities capable of producing 1 million barrels per day of oil equivalent will require a capital investment of about $350 billion.
At the same time, major companies that operate in the international environment are seeing their political risks rise along with the capital costs. Increasing exposure to large projects in problematic countries has taken much of the edge off the previous enthusiasm for expansion in such regions. For example, in Venezuela, the government of populist leader Hugo Chavez is tightening the terms of operating contracts, and imposing royalty and tax rates that are all but confiscatory.
Venezuela recently announced that it was reforming one of its production contracts with Chevron to create a "joint venture" between Chevron and Venezuela's state-owned oil company. The net effect is to remove 90,000 barrels per day of oil production from the control of Chevron and place the oil under the control of the Venezuelan entity. In order to meet its own requirements for volumes of oil, Chevron will have to find other sources of petroleum. While Chevron has announced that it plans to remain in Venezuela, some other major Western oil firms are contemplating simply abandoning operations there.
In addition, many major capital projects are subject to damage from natural events, such as last year's Hurricanes Katrina and Rita. Chevron, for example, recently announced a $300 million charge against earnings for uninsured damage caused last year to its Gulf of Mexico operations during Hurricane Katrina.
Five Steps of Preparation
Bakhtiari has a "to-do list" of what he considers to be the most urgent steps for governments, businesses, and private individuals. His list is worth highlighting here:
(1) Reprogram the mind. That is, just throw out any previous business-as-usual thinking and similar rosy scenarios. Nothing will remain as usual, going forward. This also means that people should engage in as much lateral thinking as possible. Do not just come up with Plan B, but come up with Plans C, D, and E as well. People should challenge themselves, and their associates, not just to expect the unexpected, but to begin thinking the unthinkable.
(2) Reduce oil consumption, mercilessly. According to Bakhtiari, the normal 30% of wasted use should be shed offhand. Governments, businesses, and individuals should also pay down debt levels as swiftly as possible, because the effects of T1 will inevitably bring higher inflation and interest rates. Minimize travel of all sorts to economize use of oil-derived fuels, because it is going to happen in any case. Reduce all types of consumption and just plain get leaner and be ready for even bigger cuts. This is as close to where you live as revising home lighting and heating systems, and also includes reducing the size and number of automobiles as soon as possible.
(3) Reuse as much as possible. Many things are easily reusable, but it will require a mental focus to accomplish the effort. Whether it is plastic bags or retreaded tires or outdated appliances, it is important to adopt a new cultural mind-set toward the scarcity of manufactured goods and products. The most important thing to care for and husband may well be fresh water, which is already in short supply and will almost certainly be a precious commodity in the future. Bakhtiari even mentions wood as a future critical commodity.
(4) Recycle as much as possible. Bakhtiari believes that tomorrow's industrial boom will be in recycling industries on a worldwide scale. Recycling much of what is now considered garbage should be made mandatory, as in Germany or a handful of U.S. cities, such as Seattle and Pittsburgh. Industrial production should design "recycling" into products from the time they are on the drawing board, as is now the case in some sectors of the automobile and computer industries, as well as some other business sectors.
(5) Reward people for their efforts. Bakhtiari urges using market incentives to reward people for reducing, reusing, or recycling. It is far better to make use of positive subsidies, instead of negative reinforcement. The implications of Peak Oil are negative enough even without the prospect of negative reinforcement.
Addicted to Oil and Cold Soup
"Whether we like it or not," said Bakhtiari in a recent posting, "all developed societies are addicted to crude oil and its myriad derivatives." However, he continues, "Many decision-makers are trying to park 'Peak Oil' in the farthest corner of their minds (praying it will go away), and remain in denial that there is no replacement for oil." Bakhtiari amplified this comment in another discussion:
"Nobody likes the idea of Peak Oil. Firstly, you have the politicians. Naturally, a politician will never say that there is such a thing as Peak Oil. It is suicide to give bad news, so a politician will never do that...Secondly you have the media. The media do not like Peak Oil. Why? There is no sponsorship for Peak Oil. The oil companies do not like Peak Oil because you should not say that your soup is cold; you should always say that it is very hot and very tasty, yes? So nobody wants to hear of this phenomenon of Peak Oil."
Where Do We Go From Here?
Bakhtiari is a prolific writer and speaker, and he has much more to say on the subject of Peak Oil. We will review his work in future Whiskey & Gunpowder articles. But for now, where should leaders in the government, business, and the private sectors be focusing their attentions? Here are a few ideas.
Governments and the private sector should make every effort to come up with projections of oil production and demand at local, regional, national, and international levels. Based on these projections, the next step is to assess the implications of reduced availability and dramatically higher prices for oil and related transportation fuel.
Governments and the private sector should also, at the same time, strive to reduce in absolute terms local, regional, and national demands for oil and oil-related products. The oil supply simply will not be there a few years hence. Thus, it is imperative to make energy policy that allows classical market mechanisms to work rapidly, in order to foreclose the future political urge during the next "crisis" to come up with some sort of top-down, command economy form of coercive policy.
Related to the foregoing, governments and the private sector should work to assess the potential of new sources of liquid fuel, and alternative transportation methods, to meet (or, preferably, substitute for) a significant share of respective national fuel demands. This must take into account technological developments and both short- and long-term environmental and economic costs.
There is something ironic here. The government of Iran is making trouble for many nations and people in this world, what with its nuclear program, sponsorship of international terrorism, dealings with North Korea, and other bills too lengthy to describe just now.
But for all of the trouble that many people in the West (and elsewhere, truth be told) think is being caused by the government of Iran, here is an Iranian among the most direct and sincere in identifying and proposing the elements of a solution to a profound energy dilemma.
Spellbound,
Great find; I had heard about this testimony on Jim Puplava over the weekend.
I added some interviews at the bottom of my room; they are interviews with James Howard Kunstler and Richard Heinberg. I have read the books mentioned in the interviews.
http://www.investorshub.com/boards/board.asp?board_id=6609
Hope this link opens,
sumisu
Miramar Mining Reports Earnings for Second Quarter 2006
Monday August 14, 8:00 am ET
Quarterly earnings of $1.9 million as a result of a reduction in the future income tax rate for Hope Bay
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 14, 2006 -- Miramar Mining Corporation (TSX:MAE.TO - News)(AMEX:MNG - News) today announced its financial results for the second quarter ended June 30, 2006. For the period, Miramar reported consolidated net earnings of $1.9 million or $0.01 per share compared to a net loss of $0.5 million of $0.00 per share for the same period in 2005. Included in the quarter results is the effect of the reduction in future tax rate changes which were approved on June 6, 2006, by the Canadian Federal Government. Consequently, the Company reduced the tax rate used to calculate future income taxes on its Hope Bay project from 34.1% to 31%, which resulted in a reduction of the future tax liability by $2.7 million. We anticipate this tax rate reduction will have a significant positive impact on the estimated future taxes to be paid in the long-term operating scenarios at Hope Bay and will result in higher after tax cash flows estimates. The Company is currently assessing alternatives for Phase 2 of development of the Hope Bay Project which would follow the proposed Doris North project.
Quarter Highlights
The second quarter saw accomplishments in several areas.
Miramar released its new Hope Bay resource estimates which showed an increase in resources of 40% over last year. The exploration success of 2005 was followed up by a significantly larger campaign for 2006 that set out to determine parameters for assessment for the next phase of production at Hope Bay.
A total of 31,100 metres of drilling was completed during the second quarter focussed on the Madrid deposit and in particular the Suluk zone. Drilling significantly extended the Suluk deposit to the south as well as established continuous mineralization between Suluk and Rand gaps. These and other exploration results can be found on the company's website:
http://www.miramarmining.com
Also during the quarter, the company announced two concurrent equity financings for gross proceeds of $95.1 million which consisted of a public offering of 19,200,000 common shares priced at $4.17 per share and a private placement flow through financing of 2,900,000 common shares priced at $5.20 per share. On July 12, 2006 the Company completed the initial closing of these financings. The underwriters also had a 30 day over allotment option related to the common share offering which closed on August 11, 2006 and resulted in gross proceeds of $4.6 million. The proceeds from these financings are not included in the 2nd Quarter results.
Subsequent to the quarter, on July 28, 2006 the Minister of Indian and Northern Affairs Canada (INAC) accepted the Nunavut Impact Review Board's recommendation that the Doris North Project proceed. Miramar is now in the final phase of permitting for Doris North. Dependent on receipt of all final licences and permits, Miramar hopes to be operating at Doris North in mid-2008.
Financial Results
For the quarter ended June 30, 2006, the Company had earnings of $2.2 million or $0.01 per share compared to a net loss of $0.5 million or $0.00 per share in 2005. Excluding the effect of the future tax rate recovery of $2.7 million the loss in the quarter would have been $0.5 million or $0.00 per share. On June 30, 2006 the Company had consolidated working capital of $52.2 million compared to $64.3 million at the end of 2005 which includes $60.0 million of cash and cash equivalents. This does not include the $99.7 million raised in the equity financing.
See the full Financial Statements and Management's Discussion and Analysis attached to this news release.
Forward-Looking Statements
This press release and the attached financial disclosure contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 including, without limitation, statements relating to Miramar's strategies, goals and objectives at the Hope Bay project and the expected results of exploration work. Forward-looking statements are statements that are not historical facts and are generally but not always, identified by words such as "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "goal", "objective", "strategy", or variations thereof or similar expressions or statements that events or conditions "will", "would", "may", "could", or "should" occur.
Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation, risks related to fluctuations in gold prices; uncertainties related to raising sufficient financing in a timely manner and on acceptable terms to fund the planned work; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties, and that commercially viable deposits may not be identified; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; the possibility that the estimated recovery rates may not be achieved; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in work programs or mine closures; the risk of environmental contamination or damage resulting from Miramar's operations and other risks and uncertainties, including those described in this press release and the attached disclosure and in the Miramar's Annual Report on Form 40-F for the year ended December 31, 2005 and Reports on Form 6-K filed with the Securities and Exchange Commission. Forward-looking statements are based on the beliefs, estimates and opinions of Miramar's management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements if management's beliefs, estimates or opinions, or other factors, should change.
This news release has been authorized by the undersigned on behalf of Miramar Mining Corporation.
Tony Walsh, President & CEO
(consolidated financial contained in link below)
http://biz.yahoo.com/iw/060814/0153631.html
Miramar Mining Reports Earnings for Second Quarter 2006
Monday August 14, 8:00 am ET
Quarterly earnings of $1.9 million as a result of a reduction in the future income tax rate for Hope Bay
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 14, 2006 -- Miramar Mining Corporation (TSX:MAE.TO - News)(AMEX:MNG - News) today announced its financial results for the second quarter ended June 30, 2006. For the period, Miramar reported consolidated net earnings of $1.9 million or $0.01 per share compared to a net loss of $0.5 million of $0.00 per share for the same period in 2005. Included in the quarter results is the effect of the reduction in future tax rate changes which were approved on June 6, 2006, by the Canadian Federal Government. Consequently, the Company reduced the tax rate used to calculate future income taxes on its Hope Bay project from 34.1% to 31%, which resulted in a reduction of the future tax liability by $2.7 million. We anticipate this tax rate reduction will have a significant positive impact on the estimated future taxes to be paid in the long-term operating scenarios at Hope Bay and will result in higher after tax cash flows estimates. The Company is currently assessing alternatives for Phase 2 of development of the Hope Bay Project which would follow the proposed Doris North project.
Quarter Highlights
The second quarter saw accomplishments in several areas.
Miramar released its new Hope Bay resource estimates which showed an increase in resources of 40% over last year. The exploration success of 2005 was followed up by a significantly larger campaign for 2006 that set out to determine parameters for assessment for the next phase of production at Hope Bay.
A total of 31,100 metres of drilling was completed during the second quarter focussed on the Madrid deposit and in particular the Suluk zone. Drilling significantly extended the Suluk deposit to the south as well as established continuous mineralization between Suluk and Rand gaps. These and other exploration results can be found on the company's website:
http://www.miramarmining.com
Also during the quarter, the company announced two concurrent equity financings for gross proceeds of $95.1 million which consisted of a public offering of 19,200,000 common shares priced at $4.17 per share and a private placement flow through financing of 2,900,000 common shares priced at $5.20 per share. On July 12, 2006 the Company completed the initial closing of these financings. The underwriters also had a 30 day over allotment option related to the common share offering which closed on August 11, 2006 and resulted in gross proceeds of $4.6 million. The proceeds from these financings are not included in the 2nd Quarter results.
Subsequent to the quarter, on July 28, 2006 the Minister of Indian and Northern Affairs Canada (INAC) accepted the Nunavut Impact Review Board's recommendation that the Doris North Project proceed. Miramar is now in the final phase of permitting for Doris North. Dependent on receipt of all final licences and permits, Miramar hopes to be operating at Doris North in mid-2008.
Financial Results
For the quarter ended June 30, 2006, the Company had earnings of $2.2 million or $0.01 per share compared to a net loss of $0.5 million or $0.00 per share in 2005. Excluding the effect of the future tax rate recovery of $2.7 million the loss in the quarter would have been $0.5 million or $0.00 per share. On June 30, 2006 the Company had consolidated working capital of $52.2 million compared to $64.3 million at the end of 2005 which includes $60.0 million of cash and cash equivalents. This does not include the $99.7 million raised in the equity financing.
See the full Financial Statements and Management's Discussion and Analysis attached to this news release.
Forward-Looking Statements
This press release and the attached financial disclosure contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 including, without limitation, statements relating to Miramar's strategies, goals and objectives at the Hope Bay project and the expected results of exploration work. Forward-looking statements are statements that are not historical facts and are generally but not always, identified by words such as "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "goal", "objective", "strategy", or variations thereof or similar expressions or statements that events or conditions "will", "would", "may", "could", or "should" occur.
Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation, risks related to fluctuations in gold prices; uncertainties related to raising sufficient financing in a timely manner and on acceptable terms to fund the planned work; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties, and that commercially viable deposits may not be identified; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; the possibility that the estimated recovery rates may not be achieved; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in work programs or mine closures; the risk of environmental contamination or damage resulting from Miramar's operations and other risks and uncertainties, including those described in this press release and the attached disclosure and in the Miramar's Annual Report on Form 40-F for the year ended December 31, 2005 and Reports on Form 6-K filed with the Securities and Exchange Commission. Forward-looking statements are based on the beliefs, estimates and opinions of Miramar's management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements if management's beliefs, estimates or opinions, or other factors, should change.
This news release has been authorized by the undersigned on behalf of Miramar Mining Corporation.
Tony Walsh, President & CEO
(consolidated financial contained in link below)
http://biz.yahoo.com/iw/060814/0153631.html
Miramar Mining Reports Earnings for Second Quarter 2006
Monday August 14, 8:00 am ET
Quarterly earnings of $1.9 million as a result of a reduction in the future income tax rate for Hope Bay
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 14, 2006 -- Miramar Mining Corporation (TSX:MAE.TO - News)(AMEX:MNG - News) today announced its financial results for the second quarter ended June 30, 2006. For the period, Miramar reported consolidated net earnings of $1.9 million or $0.01 per share compared to a net loss of $0.5 million of $0.00 per share for the same period in 2005. Included in the quarter results is the effect of the reduction in future tax rate changes which were approved on June 6, 2006, by the Canadian Federal Government. Consequently, the Company reduced the tax rate used to calculate future income taxes on its Hope Bay project from 34.1% to 31%, which resulted in a reduction of the future tax liability by $2.7 million. We anticipate this tax rate reduction will have a significant positive impact on the estimated future taxes to be paid in the long-term operating scenarios at Hope Bay and will result in higher after tax cash flows estimates. The Company is currently assessing alternatives for Phase 2 of development of the Hope Bay Project which would follow the proposed Doris North project.
Quarter Highlights
The second quarter saw accomplishments in several areas.
Miramar released its new Hope Bay resource estimates which showed an increase in resources of 40% over last year. The exploration success of 2005 was followed up by a significantly larger campaign for 2006 that set out to determine parameters for assessment for the next phase of production at Hope Bay.
A total of 31,100 metres of drilling was completed during the second quarter focussed on the Madrid deposit and in particular the Suluk zone. Drilling significantly extended the Suluk deposit to the south as well as established continuous mineralization between Suluk and Rand gaps. These and other exploration results can be found on the company's website:
http://www.miramarmining.com
Also during the quarter, the company announced two concurrent equity financings for gross proceeds of $95.1 million which consisted of a public offering of 19,200,000 common shares priced at $4.17 per share and a private placement flow through financing of 2,900,000 common shares priced at $5.20 per share. On July 12, 2006 the Company completed the initial closing of these financings. The underwriters also had a 30 day over allotment option related to the common share offering which closed on August 11, 2006 and resulted in gross proceeds of $4.6 million. The proceeds from these financings are not included in the 2nd Quarter results.
Subsequent to the quarter, on July 28, 2006 the Minister of Indian and Northern Affairs Canada (INAC) accepted the Nunavut Impact Review Board's recommendation that the Doris North Project proceed. Miramar is now in the final phase of permitting for Doris North. Dependent on receipt of all final licences and permits, Miramar hopes to be operating at Doris North in mid-2008.
Financial Results
For the quarter ended June 30, 2006, the Company had earnings of $2.2 million or $0.01 per share compared to a net loss of $0.5 million or $0.00 per share in 2005. Excluding the effect of the future tax rate recovery of $2.7 million the loss in the quarter would have been $0.5 million or $0.00 per share. On June 30, 2006 the Company had consolidated working capital of $52.2 million compared to $64.3 million at the end of 2005 which includes $60.0 million of cash and cash equivalents. This does not include the $99.7 million raised in the equity financing.
See the full Financial Statements and Management's Discussion and Analysis attached to this news release.
Forward-Looking Statements
This press release and the attached financial disclosure contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 including, without limitation, statements relating to Miramar's strategies, goals and objectives at the Hope Bay project and the expected results of exploration work. Forward-looking statements are statements that are not historical facts and are generally but not always, identified by words such as "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "goal", "objective", "strategy", or variations thereof or similar expressions or statements that events or conditions "will", "would", "may", "could", or "should" occur.
Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation, risks related to fluctuations in gold prices; uncertainties related to raising sufficient financing in a timely manner and on acceptable terms to fund the planned work; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties, and that commercially viable deposits may not be identified; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; the possibility that the estimated recovery rates may not be achieved; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in work programs or mine closures; the risk of environmental contamination or damage resulting from Miramar's operations and other risks and uncertainties, including those described in this press release and the attached disclosure and in the Miramar's Annual Report on Form 40-F for the year ended December 31, 2005 and Reports on Form 6-K filed with the Securities and Exchange Commission. Forward-looking statements are based on the beliefs, estimates and opinions of Miramar's management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements if management's beliefs, estimates or opinions, or other factors, should change.
This news release has been authorized by the undersigned on behalf of Miramar Mining Corporation.
Tony Walsh, President & CEO
(consolidated financial contained in link below)
http://biz.yahoo.com/iw/060814/0153631.html
West Hawk arranges $15-million warrant offering
2006-08-14 11:25 ET - News Release
Mr. Michael Townsend reports
EST HAWK ANNOUNCES $15,000,000 PRIVATE PLACEMENT
West Hawk Development Corp. has signed an agreement with Salman Partners Inc., as lead agent, to raise up to $15-million with an oversubscription allotment for up to an additional $5-million.
The syndicate, led by Salman Partners, includes Bank Insinger de Beaufort NV of London, England. The financing will consist of a reasonable best-efforts agency offering of special warrants by way of a private placement. Each special warrant will be offered at a price of 75 cents per special warrant. Each special warrant will be exercisable into one common share of the company and will include one-half of one transferable share purchase warrant. Each whole share purchase warrant will entitle the holder to purchase one common share of the company at a price of $1 per share for a period of two years from the closing of the financing.
The special warrants, together with the shares and warrants underlying the special warrants will be subject to a four-month hold period, however the company has covenanted to use its best efforts to prepare and file a prospectus qualifying the distribution of the underlying securities by Oct. 15, 2006, failing which holders of the special warrants will be entitled to receive an additional 10 per cent of the number of shares and warrants issuable upon exercise or deemed exercise of the special warrants.
The syndicate will be afforded an opportunity, at their election, to purchase an additional 6,666,700 special warrants on the same price and terms, as an oversubscription allowance. The syndicate will have 30 days from the date of closing of the special warrant financing to exercise their oversubscription allotment. In consideration for acting as agents, members of the syndicate will receive a cash commission of 6.5 per cent of the proceeds of the offering, plus warrants to acquire a number of common shares equal to 10 per cent of the number of special warrants sold under the offering. Such warrants will entitle the holder to acquire one common share at a price of $1 for a period of two years. The offering is expected to close on or around Sept. 7, 2006.
The purpose of the financing is to enable the company to commence drilling operations on the Figure Four property, Piceance basin in Colorado, and for general working capital purposes.
In addition, the company has also granted incentive stock options to directors, officers and consultants to purchase up to a total of 425,000 common shares in the capital stock of the company, exercisable for a period of two years, at a price of 80 cents cents per share. The above is subject to TSX Venture Exchange approval.
Phil,
Thanks for that link; I kept it for my favorite files.
Hope your garden is doing well,
sumisu
JalapenoBuck,
I think that I was over watering, most likely to the heat wave and then I continued watering at the same rate when it heat ended. The last two nights have been 52 degrees; feels like September.
Now, my Jalapeno peppers are doing fantastically well with the same amount of water, but they are in containers and can dry out pretty quickly.
Thanks for the response,
sumisu