tag:blogger.com,1999:blog-9676850083396183412024-03-12T18:16:08.696-07:00Peak Oil Proof Your PortfolioProtecting investments and making profit as we enter a post-peak-oil world.Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-967685008339618341.post-80567873527410910912016-11-14T13:21:00.001-08:002016-11-14T13:21:04.176-08:00Redirect<script type='text/javascript'>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-11633540900442998452016-02-17T10:11:00.005-08:002016-11-14T13:18:33.816-08:00Peak Supermajors Introduction & 4Q2015 Result<script type='text/javascript'>
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<b>This blog post was originally published at <a href="http://willmartin.com/">willmartin.com</a>- go to <a href="http://willmartin.com/">willmartin.com</a> to stay up to date on future blog posts.</b><br />
<a href="http://willmartin.com/peak-supermajors-introduction-4q2015-results/"><b>http://willmartin.com/peak-supermajors-introduction-4q2015-results/</b></a><br />
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Introduction</span></div>
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Today I would like to introduce my “Peak Supermajors” project. The goal of this project is to answer the question “when will we reach peak oil” by studying the production and financial health of the world’s largest oil companies. Because oil is a finite resource, its daily global production will eventually reach a peak. By measuring when individual oil companies reach peak oil, I hope to bring us closer to answering the question “when will we reach peak oil?”</div>
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I am beginning my project by analyzing the largest publicly-traded companies: the “<a href="https://en.wikipedia.org/wiki/Big_Oil" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">supermajors</a>“. These 5 companies – BP, Chevron, ExxonMobil, Royal Dutch Shell and Total – produce nearly 20% of the world’s oil and gas. They are mostly descendants from the original “<a href="https://en.wikipedia.org/wiki/Seven_Sisters_(oil_companies)" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Seven Sisters</a>,” which themselves were largely descendants of John D. Rockefeller’s <a href="https://en.wikipedia.org/wiki/Standard_Oil" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Standard Oil</a> Company. These companies are leaders in the industry, both financially and technologically. By understanding the history of these companies and their strategy for the future, we can better understand the historical arc of the broader oil industry. As I fill out the database I plan to expand it to include data from all of the largest global oil companies.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Seeing Oil on a Longer Time Horizon</span><br />One of my goals with this project is to expand the peak oil conversation to a longer time horizon. I am a member of the <a href="http://longnow.org/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Long Now Foundation</a>, an organization whose goal is to “provide a counterpoint to today’s accelerating culture and help make long-term thinking more common.” When I read news stories about the oil industry, the time horizon discussed always seems to be a financial quarter or (at most) a year. News stories talk about production changes “year on year” but never “decade on decade” or “since the company reached peak oil in 1972.” By collecting a database of multi-decade production data I hope to expand the quarterly production discussion to a longer time horizon.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Focus on Oil and Gas Production Individually </span></div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">When quarterly earnings are reported, financial news sites usually mention the change in the company’s “headline” production figure (if they mention production at all). This “headline” figure combines oil production with gas production by converting gas to “barrels of oil equivalent” based on its embedded energy content. This is worse than combining apples with oranges.</span><a href="https://www.youtube.com/watch?v=xliyZMPJvjk" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Chris Martenson</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;"> describes it “as if someone asked you how many calories you had stored in your pantry, and you lumped together not just your food, but also the batteries in your flashlights and other home electronics. They might have caloric energy equivalents, but you sure can’t eat them.”</span></div>
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Oil and gas are not used in the same way. Oil is used to produce liquid transportation fuels (gasoline, diesel, jet fuel and marine “bunker fuel”) and to make lubricants. Natural gas is burned in power plants to make electricity and is converted by chemical plants into fertilizer and plastics. Due to the differences in outputs, oil and gas operate in very different competitive environments. Oil competes with biofuels (ethanol, biodiesel) and the electrification of transportation (electric cars, high speed rail). Gas competes with renewable electricity sources (wind, solar, hydropower, etc), organic fertilizers and bioplastics.</div>
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So instead of lumping oil and gas production together, I will be discussing them separately each quarter. Hopefully this will help steer the quarterly conversation away from “headline” numbers and towards an analysis of oil and gas production individually.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Seeing Peak Oil From Miltiple Angles</span><br />This database fits into a multi-faceted way of measuring peak oil. There are many ways to slice-and-dice global oil production including measuring production by country, by field, and (now) by company. Each of these measurements allows us to better measure whether we are approaching peak oil, are at peak oil or have passed peak oil. For example, using a country-level production database like the BP Statistical Review of World Energy allows us to determine which countries have passed peak oil. <a href="http://www.resilience.org/author-detail/1154023-steve-andrews" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Steve Andrews</a> publishes an analysis annually using the BP data to summarize all of the “Pre- and Post-Peak Nations.” Once enough countries have reached peak oil, we will pass the global peak in oil production. Using field-level data from <a href="https://www.ihs.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">IHS</a> (<a href="http://www.woodmac.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Wood Mackenzie</a> offers a similar field-level database) the <a href="http://energywatchgroup.org/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Energy Watch Group</a> in Germany has produced a series of reports showing current and future peaks by oil producing region. Once enough fields have reached peak oil, we will pass the global peak in oil production. The third way of looking at peak oil is at a company level. Every single barrel of oil is produced by a company, whether it be a publicly-traded company like ExxonMobil or a privately-held national organization like Saudi Aramco. Once enough oil companies have reached peak oil, we will pass the global peak in oil production. Looking at company-level data is just another window into peak oil.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Data Sources and Future Work</span><br />My ultimate goal is to have a “full history” of production data for all of the supermajors. Because these companies can trace their origins to the very beginning of the oil industry, this means collecting over 100 years of data. To achieve this monumental task I began by collecting the most recent data from the company annual reports and SEC filings currently available online. I quickly learned that this data only goes back about 15 years and started searching for additional data sources. I found additional annual reports on company websites, online databases, archive.org, eBay, Amazon, Google Books, Google Scholar and the <a href="http://www.nioclibrary.ir/oil-companies.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">National Iranian Oil Company’s online library</a>. I have also spent dozens of hours at <a href="https://library.stanford.edu/libraries/green/media-microtext-center" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Stanford’s Media & Microtext Center</a> scanning microfiche copies of old annual reports. To fill in some of the gaps and double-check my work I relied on Richard Heede’s extensive database at <a href="http://carbonmajors.org/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">carbonmajors.com</a> as well as<a href="http://www.ogj.com/ogj-survey-downloads.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Oil and Gas Journal</a> company surveys.</div>
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I now have a private collection of over 1,000 annual and quarterly reports for some of the world’s largest oil companies. I will continue to expand the database and improve its accuracy over time. The database now stands at tens of thousands of data points, with hundreds of thousands of metadata points backing up each datum. Along with collecting 100+ years of production data I’ve also been collecting 100+ years financial and operational data for each company. I am planning to use this data to perform long-term analysis. For example, how has capital efficiency changed over time? Have the supermajors reached “peak production per dollar of inflation-adjusted CAPEX spend?” How has employee productivity changed over the last 100 years? Have the supermajors reached “peak free cash flow per barrel of production?” Have they reached “peak production per employee?” These are just a few questions that I plan on analyzing. As I complete the analysis I am planning to submit my findings to the <a href="https://aleklett.wordpress.com/2015/03/18/the-oil-age-a-new-quarterly-peer-reviewed-printed-journal/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Oil Age journal</a> (arguably the best source for peak oil research) for academic publication. In the interim I’m planning to publish these short updates on a quarterly basis to show the current amalgamated state of the supermajors’ oil and gas production rates.</div>
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The data accuracy is not perfect right now. I’m about 80% confident with the accuracy of the data – which I consider “good enough to blog” but not necessarily good enough to submit to an academic journal. I still have some data validation to do and I plan to complete a full statistical audit with a large enough sample size to get me to 95% confidence in the data accuracy. So for the time being take all of this with a grain of salt.</div>
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Before I begin, I would like to knowledge the amazing work of people who inspired me to begin this project. I was inspired by similar company-focused efforts by <a href="http://carbonmajors.org/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Richard Heede</a>, <a href="http://crudeoilpeak.info/author/matt" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Matt Mushalik</a>and the researchers at the <a href="http://energywatchgroup.org/experts/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Energy Watch Group</a>. I would also like to thank <a href="http://failinggracefully.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Mason Inman</a> for helping me think through the idea.</div>
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If you are interested in keeping up-to-date on this project, please <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">SUBSCRIBE</span> using the link to the left.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">On to the show…</span></div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Supermajors</span><br />The supermajors’ liquids production rate for Q4-2015 was 9,329,500 barrels per day. Year-over-year, production rose by 611,022 barrels per day. Overall oil production peaked at 30,554,482 barrels per day in Q1-1973. Since reaching peak oil, Supermajor liquids production rate has fallen by 69.5%. This represents a post-peak compounded annual decline rate of 2.7%. If production continued to linearly decline at this rate, it would reach zero production in 2034. The more recent peak occurred at 11,135,767 barrels per day in Q3-1999. Since reaching the second peak, Supermajor liquids production rate has fallen by 16.2%. This represents a compounded annual decline rate of 1.1%. If production continued to linearly decline at this rate, it would reach zero production in 2099.</div>
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<img alt="" src="file:///C:/Users/wmjy/AppData/Local/Temp/enhtmlclip/Image(8).png" style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: middle;" /><a href="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil.jpg" rel="attachment wp-att-1861" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="Peak Supermajor Oil" class="alignnone wp-image-1861 size-full" height="480" sizes="(max-width: 864px) 100vw, 864px" src="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil.jpg" srcset="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil-300x167.jpg 300w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil-768x427.jpg 768w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil-200x111.jpg 200w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil-450x250.jpg 450w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil-600x333.jpg 600w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Oil.jpg 864w" style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 5px 20px 20px 0px; max-width: 100%; padding: 0px; vertical-align: middle;" width="864" /></a></div>
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The supermajors’ natural gas production rate for Q4-2015 was 40,598,130,435 cubic feet per day. Year-over-year, production declined by 1,338,695,652 cubic feet per day. Overall oil production peaked at 47,339,390,527 cubic feet per day in Q1-2010. Since reaching this primary peak, Supermajor natural gas production rate has fallen by 14.2%. This represents a post-peak compounded annual decline rate of 2.6%. If production continued to linearly decline at this rate, it would reach zero production in 2050.</div>
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<a href="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas.jpg" rel="attachment wp-att-1862" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="Peak Supermajor Gas" class="alignnone wp-image-1862 size-full" height="480" sizes="(max-width: 864px) 100vw, 864px" src="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas.jpg" srcset="http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas-300x167.jpg 300w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas-768x427.jpg 768w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas-200x111.jpg 200w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas-450x250.jpg 450w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas-600x333.jpg 600w, http://willmartin.com/wp-content/uploads/2016/02/Peak-Supermajor-Gas.jpg 864w" style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 5px 20px 20px 0px; max-width: 100%; padding: 0px; vertical-align: middle;" width="864" /></a><img alt="" src="file:///C:/Users/wmjy/AppData/Local/Temp/enhtmlclip/Image(9).png" style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: middle;" /></div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">ExxonMobil</span><br />ExxonMobil’s liquids production rate for Q4-2015 was 2,481,000 barrels per day. Year-over-year, production rose by 299,000 barrels per day. Overall oil production peaked at 7,010,929 barrels per day in Q1-1972. Since reaching peak oil, Exxon Mobil Corporation’s liquids production rate has fallen by 64.6%. This represents a post-peak compounded annual decline rate of 2.3%. If production continued to linearly decline at this rate, it would reach zero production in 2039. The more recent peak occurred at 2,803,460 barrels per day in Q1-2007. Since reaching the second peak, ExxonMobil’s liquids production rate has fallen by 11.5%. This represents a compounded annual decline rate of 1.4%. If production continued to linearly decline at this rate, it would reach zero production in 2083.</div>
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ExxonMobil’s natural gas production rate for Q4-2015 was 10,603,000,000 cubic feet per day. Year-over-year, production declined by 631,000,000 cubic feet per day. Overall gas production peaked at 14,652,000,000 cubic feet per day in Q4-2010. Since reaching this primary peak, Exxon Mobil Corporation’s natural gas production rate has fallen by 27.6%. This represents a post-peak compounded annual decline rate of 6.3%. If production continued to linearly decline at this rate, it would reach zero production in 2029.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Chevron</span><br />Chevron’s liquids production rate for Q4-2015 was 1,775,000 barrels per day. Year-over-year, production rose by 43,000 barrels per day. Overall oil production peaked at 10,718,904 barrels per day in Q1-1973. Since reaching peak oil, Chevron Corporation’s liquids production rate has fallen by 83.4%. This represents a post-peak compounded annual decline rate of 4.1%. If production continued to linearly decline at this rate, it would reach zero production in 2024. The more recent peak occurred at 2,273,819 barrels per day in Q4-1998. Since reaching the second peak, Chevron’s liquids production rate has fallen by 21.9%. This represents a compounded annual decline rate of 1.4%. If production continued to linearly decline at this rate, it would reach zero production in 2076.</div>
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Chevron’s natural gas production rate for Q4-2015 was 5,385,000,000 cubic feet per day. Year-over-year, production rose by 285,000,000 cubic feet per day. Overall gas production peaked at 13,472,131,148 cubic feet per day in Q1-1972. Since reaching this primary peak, Chevron Corporation’s natural gas production rate has fallen by 60.0%. This represents a post-peak compounded annual decline rate of 2.1%. If production continued to linearly decline at this rate, it would reach zero production in 2045.<br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">BP</span><br />BP’s liquids production rate for Q4-2015 was 2,137,000 barrels per day. Year-over-year, production rose by 169,000 barrels per day. Overall oil production peaked at 6,362,701 barrels per day in Q1-1973. Since reaching peak oil, BP plc liquids production rate has fallen by 66.4%. This represents a post-peak compounded annual decline rate of 2.5%. If production continued to linearly decline at this rate, it would reach zero production in 2037. The more recent peak occurred at 3,084,248 barrels per day in Q3-1988. Since reaching the second peak, BP’s liquids production rate has fallen by 30.7%. This represents a compounded annual decline rate of 1.3%. If production continued to linearly decline at this rate, it would reach zero production in 2077.</div>
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BP’s natural gas production rate for Q4-2015 was 7,076,000,000 cubic feet per day. Year-over-year, production declined by 148,000,000 cubic feet per day. Overall gas production peaked at 10,128,700,000 cubic feet per day in Q1-2000. Since reaching this primary peak, BP plc’s natural gas production rate has fallen by 30.1%. This represents a post-peak compounded annual decline rate of 2.2%. If production continued to linearly decline at this rate, it would reach zero production in 2052.<br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Total</span><br />Total’s liquids production rate for Q4-2015 was 1,077,000 barrels per day. Year-over-year, production rose by 0 barrels per day. Overall oil production peaked at 1,560,000 barrels per day in Q1-2006. Since reaching peak oil, Total SA liquids production rate has fallen by 31.0%. This represents a post-peak compounded annual decline rate of 3.7%. If production continued to linearly decline at this rate, it would reach zero production in 2037. The more recent peak occurred at 1,560,000 barrels per day in Q1-2006. Since reaching the second peak, Total’s liquids production rate has fallen by 31.0%. This represents a compounded annual decline rate of 3.7%. If production continued to linearly decline at this rate, it would reach zero production in 2037.</div>
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Total’s natural gas production rate for Q4-2015 was 6,219,000,000 cubic feet per day. Year-over-year, production rose by 0 cubic feet per day. Overall gas production peaked at 6,312,000,000 cubic feet per day in Q1-2015. Since reaching this primary peak, Total SA’s natural gas production rate has fallen by 1.5%. This represents a post-peak compounded annual decline rate of 2.0%. If production continued to linearly decline at this rate, it would reach zero production in 2066.<br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><br /><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Shell</span><br />Shell’s liquids production rate for Q4-2015 was 1,859,500 barrels per day. Year-over-year, production rose by 100,022 barrels per day. Overall oil production peaked at 5,887,671 barrels per day in Q1-1973. Since reaching peak oil, Royal Dutch Shell plc liquids production rate has fallen by 68.4%. This represents a post-peak compounded annual decline rate of 2.7%. If production continued to linearly decline at this rate, it would reach zero production in 2035. The more recent peak occurred at 2,584,870 barrels per day in Q3-2002. Since reaching the second peak, Shell’s liquids production rate has fallen by 28.1%. This represents a compounded annual decline rate of 2.5%. If production continued to linearly decline at this rate, it would reach zero production in 2049.</div>
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Shell’s natural gas production rate for Q4-2015 was 11,315,130,435 cubic feet per day. Year-over-year, production declined by 844,695,652 cubic feet per day. Overall gas production peaked at 13,940,791,209 cubic feet per day in Q1-2013. Since reaching this primary peak, Royal Dutch Shell plc’s natural gas production rate has fallen by 18.8%. This represents a post-peak compounded annual decline rate of 7.3%. If production continued to linearly decline at this rate, it would reach zero production in 2027.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-77361280169453512992016-02-17T10:10:00.005-08:002016-11-14T13:18:18.595-08:00Do Aerator Shower Heads Use More Energy?<script type='text/javascript'>
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Our house had an old “high flow” shower head. As California is in the midst of an epic drought (despite all the recent rain), I was planning on installing a low flow “aerator” shower head. These shower heads mix in air with the outgoing water to lower the flow rate while theoretically not sacrificing comfort. Compared to a traditional shower head the water pressure felt is higher but the flow rate is lower, so they end up saving water.</div>
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But right as I was about to install one I heard a theory that these aerator shower heads actually end up using more energy because the mist causes the shower to feel colder, which means the user turns the hot water dial up, thereby using more hot water, which requires the hot water heater to burn more natural gas (or use more electricity, which burns more coal and natural gas) to reheat more water.</div>
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At first I thought this was a calculus problem, (think high school calculus – water goes in to a tank at one rate and leaves at another rate, how long until the tank is empty?) but then I realized it’s actually a simple algebra problem. Since the user turns up the amount of hot water in the mix, we can just assume a temperature change differential and calculate the change in hot water usage.</div>
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I calculated the existing flow rate of the shower using a stopwatch and a bucket at 3.5 gallons per minute (it took 45 seconds to fill a 10 liter bucket). Other older high flow shower heads can be up to 5.5 GPM. According to the <a href="http://www3.epa.gov/watersense/docs/ws_shower_better_learning_resource_508.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">EPA</a>, the average shower length is 8 minutes. This means my existing shower head uses 28 gallons per shower.</div>
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According to <a href="http://www.energystar.gov/ia/partners/prod_development/new_specs/downloads/water_heaters/Bosch_052907.pdf?442a-1e83" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Bosch</a>, the average shower temperature is 106 degrees Fahrenheit and the average groundwater temperature is 58°F. The <a href="http://energy.gov/energysaver/projects/savings-project-lower-water-heating-temperature" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Department of Energy</a> recommends setting your hot water heater at 120°F. Our hot water heater was set to a scalding 140 degrees Fahrenheit, so I turned it down to 120. This means for each gallon of hot water you pull out of the hot water heater it needs to heat another gallon of water by 62°F (Delta T).</div>
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It takes 1 <a href="https://en.m.wikipedia.org/wiki/British_thermal_unit" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">British Thermal Unit</a> to heat 1 pound of water 1°F. At 58°F, 1 gallon of <a href="http://antoine.frostburg.edu/chem/senese/javascript/water-density.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">water weighs</a>8.34 pounds. At 120°F, 1 gallon of water weighs 8.25 pounds. Using the average of the two, and assuming a 90% <a href="https://www.energystar.gov/ia/partners/prod_development/new_specs/downloads/water_heaters/Water_Heater_Market_Profile_2010.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">thermal efficiency</a> in converting natural gas to hot water, a hot water heater uses about 570 BTUs for each gallon of hot water consumed.</div>
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By the time the 120°F hot water makes it from the hot water heater through the copper pipes to your shower it has lost about 5°F of heat. If you prefer your shower at 106°F then you will need to set your shower dial at a mix of 84% hot water (.84*115+(1-.84)*58=106). This checks out with the shower dial position of the old shower head being about 85% of the way towards full hot water. So the “high flow” shower head used about 13,406 BTUs per shower. (570 BTUs per gallon of hot water * 3.5 gallons per minute * 84% hot water mix * 8 minute shower = 13,406.4 BTUs).</div>
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After installing the new low-flow shower head, I noticed that I needed to move the shower dial slightly closer to the “full hot” position to achieve the same comfort level. I’d estimate it is about 95% of the way to hot. This means that the shower head lowers the temperature of the shower by about 6°F (106-(.95*115+(1-.95)*58)). The new low-flow shower head uses 2 gallons per minute. So at this new hot-cold mix, it uses about 8,664 BTUs per shower. (570 BTUs per gallon of hot water * 2.0 gallons per minute * 95% hot water mix * 8 minute shower = 8,664 BTUs).</div>
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So to answer the question of this blog: YES, aerator shower heads do save energy (and lots of water).</div>
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But how long does it take to pay for itself? According to the <a href="https://www.eia.gov/tools/faqs/faq.cfm?id=45&t=8" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">EIA</a>, natural gas contains about 1,028 BTUs per cubic foot. At a cost of $10 per thousand cubic feet of natural gas (about the <a href="http://energyalmanac.ca.gov/naturalgas/historical_residential_yearly_prices.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">residential average in California</a> for the past few years), each shower saves about 6.3 cents of energy. ((570 BTUs per gallon of hot water * 1.5 gallons per minute difference between the high flow and low flow shower heads * .95 percent hot water mix * 8 minutes) / 1028 BTUs per cubic foot of natural gas) * $0.01 per cubic foot of natural gas). If we reach “peak gas” in the near future, this cost could increase dramatically. Since the shower head cost $14, it will pay for itself after about 222 showers. Some water districts (including our own <a href="https://www.ebmud.com/water-and-drought/conservation-and-rebates/residential/rebates/free-conservation-items/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">EBMUD</a>) give away these shower heads for free, making the return on investment infinite!</div>
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Bonus:</div>
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While I was installing the new shower head I also installed a “<a href="http://www.amazon.com/gp/product/B0017YXIKC" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">ladybug</a>” water saving temperature-controlled shutoff valve. This ingenious device shuts off the flow of water once it reaches a certain temperature. To restart the flow you simply pull a cord. So when you want to take a shower, you simply run it as you normally would; once the ladybug detects the shower is hot, it slows the flow to a trickle; then you just hop in and pull the cord to restart the flow.</div>
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<a href="http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_.jpg" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="The Ladybug Temperature-Controlled Shutoff Valve" class="size-medium wp-image-1857" height="300" sizes="(max-width: 300px) 100vw, 300px" src="http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-300x300.jpg" srcset="http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-150x150.jpg 150w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-300x300.jpg 300w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-1024x1024.jpg 1024w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-100x100.jpg 100w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-200x200.jpg 200w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-450x450.jpg 450w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-600x600.jpg 600w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_-900x900.jpg 900w, http://willmartin.com/wp-content/uploads/2016/01/61EyxPHV-8L._SL1424_.jpg 1424w" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" width="300" /></a><div class="wp-caption-text" style="border: 0px; font-family: inherit; font-size: 12px; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5em; padding: 10px; vertical-align: baseline; word-wrap: break-word;">
The Ladybug Temperature-Controlled Shutoff Valve</div>
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The alternative way to avoid wasting water while you wait for the shower to heat up is to install a <a href="https://en.wikipedia.org/wiki/Circulator_pump" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">recirculating pump</a>. This pump sits under your bathroom sink and is connected to the hot and cold water lines. When you’re ready to take a shower you push a button and the pump sucks water from the hot water line and forces it down the cold water line until the hot water line reaches the desired temperature. Besides being expensive (they cost about $200 without installation), a recirculating pump also causes your cold water line to have some warm water in it, so when you go to the sink to get cold water after a shower, it will be warm for a bit (which bothers some people).</div>
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Waiting for a shower to heat up wastes water and energy because most people don’t want to sit around with their hand in the shower stream waiting for it to heat up. This means that they might let it run for a minute or two longer than they need to. At 2 gallons per minute, an extra 2 minutes of run time amounts to a savings of about 2.1 cents per shower ((570 BTUs per gallon of hot water * 2 gallons per minute * .95 percent hot water mix * 2 minutes) / 1028 BTUs per cubic foot of natural gas) * $0.01 per cubic foot of natural gas). At a cost of $29, this will pay for itself after about 1,377 showers. While this may seem like a while, for a family of four, this is a payback period of less than a year.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-19957352800963052932015-10-30T19:22:00.001-07:002016-11-14T13:17:30.123-08:00Peak Oil + Autonomous Cars = Traffic Nightmare<script type='text/javascript'>
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Originally posted at <a href="http://willmartin.com/peak-oil-autonomous-cars-traffic-nightmare/">willmartin.com</a>.<br />
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<a href="http://willmartin.com/wp-content/uploads/2015/10/IMG_4455.jpg" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="" class="" src="http://willmartin.com/wp-content/uploads/2015/10/IMG_4455.jpg" height="286" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" title="Traffic" width="509" /></a><br />
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How you’re going to feel once peak oil and automated cars make traffic a nightmare</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br /></span><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Autonomous Cars</span><br />
For a number of years now, high-end luxury cars have had <a href="https://en.wikipedia.org/wiki/Autonomous_cruise_control_system" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">autonomous cruise control</a> systems that use lasers or radar to maintain a set distance to the car ahead. Earlier this month Tesla<a href="http://www.wired.com/2015/10/tesla-self-driving-over-air-update-live/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">rolled out</a> an autonomous driving mode in its electric cars that takes this a step further. Teslas will now drive themselves on a freeway, accelerate and decelerate on their own and maintain a set distance to the car in front. However, unlike other cars with autonomous cruse control, they will now also change lanes – if you click the turn signal the car will automatically check your blind spot and execute a lane change. This is just one more step toward a fully autonomous car that consumers can buy.</div>
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Some of the world’s largest tech companies are working on autonomous vehicles. Google has driven their autonomous prototype cars over a <a href="https://www.google.com/selfdrivingcar/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">million miles</a>, which have been completely accident-free, except for other <a href="http://www.dailymail.co.uk/news/article-3268421/All-Google-s-self-driving-car-crashes-caused-humans-testers-claim.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">human drivers crashing into them</a>. Apple has also been hard at work on an <a href="http://www.macrumors.com/roundup/apple-car/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">autonomous, possibly electric, </a>car of their own. In all, over <a href="https://www.cbinsights.com/blog/autonomous-driverless-vehicles-corporations-list/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">25 companies</a> are currently developing autonomous cars.</div>
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Most industry experts believe that fully autonomous cars will be mainstream in just <a href="http://www.autoguide.com/auto-news/2015/08/when-will-self-driving-cars-really-arrive-.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">5 years</a>. Others predict that in <a href="http://www.wired.com/2014/07/in-20-years-most-new-cars-wont-have-steering-wheels-or-pedals/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">20 years </a>most cars won’t have a steering wheel or pedals and in <a href="http://www.wired.com/2012/09/ieee-autonomous-2040/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">25 years</a>most people won’t need a drivers license.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Speed Records</span><br />
Recently Alex Roy teamed up with Carl Reese and Deena Mastracci to complete a cross-country speed record in a Tesla with the new autonomous control upgrade. Roy is best known for breaking the <a href="https://en.wikipedia.org/wiki/Cannonball_Baker_Sea-To-Shining-Sea_Memorial_Trophy_Dash" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Cannonball Run</a> record by driving across the United States in <a href="http://www.amazon.com/The-Driver-Dangerous-Pursuit-Outlaw/dp/0061374997" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">32 hours and 7 minutes</a> in a BMW M5. (This record was most recently bested by Ed Bolian in <a href="http://jalopnik.com/meet-the-guy-who-drove-across-the-u-s-in-a-record-28-h-1454092837" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">28 hours 7 minutes </a>with a Mercedes CL55 AMG.) Reese and Mastracci are known for previously driving the Cannonball Run route in an electric car in just <a href="http://jalopnik.com/they-drove-a-tesla-from-la-to-new-york-in-a-record-58-h-1699782187" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">58 Hours and 55 Minutes</a>. Using Tesla’s new autonomous mode, the trio completed the route in <a href="http://jalopnik.com/we-set-a-cross-country-record-in-a-telsa-that-drove-its-1739410767?rev=1446145154580" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">57 hours, 48 minutes</a> – over an hour faster than their previous electric car record, but still about 30 hours slower than the petroleum-powered record. For reasons I will describe below, Bolian’s record may stand for eternity as the fastest transcontinental automobile crossing. In the future, traffic may simply become so bad that no one will be able to achieve such a feat again.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The Promise of Autonomous Cars Ending Traffic</span><br />
Cornucopian futurists have suggested that increased adoption of autonomous cars could bring an end to our traffic congestion woes. One MIT researcher thinks they could reduce traffic by<a href="http://www.govtech.com/transportation/Driverless-Cars-Could-Reduce-Traffic-by-80-percent.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">80%</a>. The <a href="http://www.brookings.edu/research/papers/2014/02/improving-highway-performance-winston" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Brookings Institute</a> says that autonomous cars will “reduce much of the congestion and delays that make road travel so onerous.” They could even eliminate traffic in <a href="http://www.nbcnews.com/tech/innovation/can-l-kill-traffic-self-driving-cars-n217211" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Los Angeles</a>– arguably the world’s most car dependent city. It will be “<a href="http://www.techandinnovationdaily.com/2013/11/20/driverless-car-regulation/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">An End to Traffic Jams Forever</a>!”</div>
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The idea is that unlike human drivers, autonomous cars have perfect reaction times. They can follow the car in front of them with very little braking distance, matching speeds perfectly. If a group of autonomous cars gets together on the freeway they could form a “train” – all traveling in unison just inches from each other’s bumpers. It has been theorized that having <a href="http://gizmodo.com/whats-keeping-self-driving-cars-off-the-road-1450916024" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">just a few autonomous cars</a> on the road could greatly reduce traffic congestion for everyone else.</div>
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The appeal of this is obvious. The average suburbanite is desperate for any news that allows them to think they can continue their “<a href="http://realitysandwich.com/134692/talking_james_howard_kunstler/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">suburban, car-dependent, happy motoring living arrangement</a>.” Driverless cars seem to offer the ability to continue living in a quiet suburban cul-de-sac miles from the nearest workplace or shop. You’d simply sit back, play around on your phone and let your robot car whisk you away to your destination dozens of miles away. “<a href="http://super-commuters/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Super-commuters</a>” (those who commute more than 50 miles to work) wouldn’t need to change a thing – they could just catch up on some shut-eye while their robot car drives them to and from work.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Peak Oil and Climate Change Legislation</span><br />
Peak Oil is the point at which global oil production reaches a maximum rate and begins a permanent decline. Oil is a finite resource, so peak oil will happen – it’s just a mathematical fact. The controversy around peak oil isn’t about whether it will happen, but when, why and how it will happen: Is it happening now? Will it happen because oil gets too expensive to produce, restricting supply? Will it happen because oil gets too expensive to consume, restricting demand? How quickly will production decline after the peak? Will substitute forms of energy and transportation technologies offset the decline? No one can definitively answer any of these questions, but we do know that at some point in the future we will be faced with declining levels of global oil production. One possible outcome of peak oil is that we won’t have sufficient economic substitutes for oil and the price of oil rises significantly. Perhaps electric car production is limited by the high cost of extracting lithium for the batteries (especially since mining requires so much oil). Perhaps <a href="https://en.wikipedia.org/wiki/NIMBY" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">NIMBY</a>ism prevents us from increasing the walkabillity of our neighborhoods through the construction of public transportation routes and higher-density mixed-use buildings. In any case, in this scenario people would be stuck relying on their car, but oil prices would incentivize them to use as little fuel as possible.</div>
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Another source of higher energy prices is a potential global climate change agreement. Already 114 nations have signed the Copenhagen Accord, which states that the parties agree to limit global warming to 2 degrees Celsius above pre-industrial levels. The <a href="http://ec.europa.eu/clima/policies/ets/registry/index_en.htm" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">European Union</a> has enacted climate change legislation. If all of the existing fossil fuel reserves that are on the books of the world’s oil, gas and coal companies were burned, it would generate more than 2.8 trillion tons of CO2 – well in excess of the 1 trillion ton “budget” that almost every country has agreed to. In order to keep that excess 1.8 trillion tons of carbon in the ground, a global climate change agreement would need to raise the cost of emitting carbon to a point where more than half of the remaining reserves are never burned. This could be accomplished through a global carbon tax or a global cap and trade program, but the result would be the same – far higher prices for gasoline at the pump. If a global climate change agreement is reached, the average motorist will see rising fuel prices and will be incentivized to use as little fuel as possible.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The Eco Button</span><br />
Many cars on the road today already have an “eco” button on the dash. The button doesn’t do very much today – it typically changes the throttle response, adjust the climate control and changes the fuel mapping a bit. In the future of automated cars, however, the “eco” button could do far more – it could pick the most efficient route to the destination (with the fewest hills and stops), it could drive at an optimal speed, and it could accelerate and decelerate at the optimal rates. Today the “eco” button gives drivers about <a href="http://www.autoblog.com/2011/01/28/car-eco-button/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">5-10% better fuel economy</a>. In the future, self-driving cars could easily double your fuel economy at the simple push of an “eco” button. People today are used to hitting the “eco” button when they want to save a bit of fuel. In the future, if fuel prices are far higher and self-driving cars allow a far more impressive fuel economy improvement in “eco mode,” it seems obvious that more and more people will be pushing the “eco” button.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Hypermiling</span><br />
As gasoline prices have gotten higher over the past two decades a group of fuel maximizing techniques know as “<a href="https://en.m.wikipedia.org/wiki/Energy-efficient_driving" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">hypermiling</a>” have become more popular. This can involve physically modifying a car by eliminating weight and improving aerodynamics. More commonly hypermiling is accomplished through driving techniques like optimal speed management and acceleration modulation to keep the internal combustion engine at optimal stoichiometric efficiency. Colloquially this is known as “driving like a grandma.”</div>
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Today hypermilers are able to achieve some amazing feats of fuel efficiency. Hypermilers are<a href="http://www.cleanmpg.com/cmps_index.php?page=garage" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">routinely</a> able to get double the “sticker” fuel economy of average cars. For example, hypermilers can get <a href="http://2006%20toyota%20prius/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">127 MPG</a> out of a Toyota Prius, which is rated by the EPA for 60 MPG. They can get <a href="http://www.cleanmpg.com/cmps_index.php?page=garage" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">62 MPG</a> out of a Toyota Corolla, a car rated for 35 MPG. Even with the king of fuel inefficiency, the Hummer, hypermilers are able to get <a href="http://www.motivemag.com/pub/feature/versus/Motive_Versus_Mini_meets_Maxi_-_Hypermiling_a_Hummer_Mistreating_a_MINI.shtml" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">22 MPG</a> in a truck that normally gets 10 MPG.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Pulse and Glide Driving and the Accordion Effect</span><br />
Internal combustion engines are most efficient when they are under full load at low to medium RPMs. This means when you are driving up a hill you will consume less fuel to maintain the same speed if you use <a href="https://www.reddit.com/r/explainlikeimfive/comments/2ack4z/eli5_when_going_up_a_hill_in_a_car_do_you_get/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">full throttle in a higher gear</a> (at a lower RPM) than if you downshifted and used less throttle at higher a RPM. This becomes evident when one looks at the brake specific fuel consumption (BSFC) efficiency contour chart for a typical internal combustion engine:</div>
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<a href="http://willmartin.com/wp-content/uploads/2015/10/600px-Brake_specific_fuel_consumption.svg_.png" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="A brake specific fuel consumption efficiency contour chart" class="wp-image-1844 size-medium" src="http://willmartin.com/wp-content/uploads/2015/10/600px-Brake_specific_fuel_consumption.svg_-300x225.png" height="225" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" width="300" /></a><br />
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A <a href="https://en.wikipedia.org/wiki/Brake_specific_fuel_consumption" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">brake specific fuel consumption</a> efficiency contour chart</div>
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Most internal combustion engine cars these days use electronic fuel injection; This allows the engine to consume zero fuel when you completely let off the throttle and coast. When driving on level ground this means the most efficient way to drive is to “pump” the throttle by accelerating at full throttle from 1500 to 2500 RPM and then coasting back down to 1500 RPM with no throttle. Hypermilers call this the “<a href="http://www.metrompg.com/posts/pulse-and-glide.htm" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">pulse and glide</a>” technique. Unfortunately, as anyone whose been in a taxi recently can attest, this “throttle pumping” accelerator modulation is also the best way to make passengers carsick.</div>
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Besides making passengers carsick, the pulse and glide fuel saving technique also contributes to traffic through the “<a href="https://en.m.wikipedia.org/wiki/Accordion_effect" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">accordion effect</a>.” When traffic is dense and a road is close to reaching its maximum capacity a single speed different can ripple through the crowd, causing stop-and-go traffic to pile up. This speed disruption can be as simple as someone looking down to check their phone; when they look back up the may realize they are following too closely and brake; the cars behind them see brake lights and they brake as well out of an abundance at caution; a mile back this ripple of brake lights brings traffic to a complete halt.</div>
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In the future, autonomous cars may be programmed to pulse and glide their accelerators to maximize fuel economy. As the autonomous cars coast down in speed, human drivers behind them will hit the brakes, causing stop-and-go traffic.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Speed Limits and Speed Minimums</span><br />
If you asked the average person driving down the freeway to tell you the speed limit, chances are they would have a good idea. But if you asked the same people to tell you the minimum speed, I bet most would have a hard time coming up with it. In California most suburban freeways have a 70 mph speed limit and a 45 mph speed minimum. In reality this means that in the absence of traffic people in the left lane are driving 80 mph while people in the right lane are driving 65 mph. Anyone driving the speed minimum of 45 mph would be traveling at a 35 mph difference to other people on the road. Imagine standing on the side of a road and watching a car pass you at 35 mph – that’s a significant speed difference. Differences in speed cause traffic to pile up – as human drivers come up on an autonomous vehicle traveling significantly slower than they are the human drivers will hit their brakes which will cause everyone further back to hit their brakes, which will lead to the “accordion effect” of stop-and-go traffic.</div>
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If automated cars are put into “maximum economy mode” it is likely that the computer will poll its database for the minimum speed it can drive on any particular freeway and accelerate up to just that speed. Any police officer that pulled over an owner of an automated car driving the speed minimum would have hard time in court fighting a perfect computerized output of GPS coded data proving the car was following the letter of the law.</div>
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What this means in practice is that either politicians will have to raise the speed minimums of freeways or that we will have to live with traffic congestion caused by automated cars driving the minimum highway speed. My money says that very few politicians will want to go to bat for increased speed minimums.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Electric cars and “Range Maximization”</span><br />
In a post-peak oil future with global climate change legislation, carbon-based fuels may be more expensive, but elections may not. If an electric car owner charges their car with electrons from solar panels on their home’s roof, they may not care as much about the cost of the electrons. But unless there is a major breakthrough in the energy density of electric car batteries, owners of electric cars will still have a major incentive to drive in a way that maximized the range of their vehicles. Importantly, the techniques used to maximize fuel economy in an internal combustion car are very similar to the techniques used to maximize the range in an electric car.</div>
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Just as internal combustion cars have an optimal speed for minimizing fuel economy, so too do electric cars have an optimal speed for maximizing range. Worryingly, the optimal speed for achieving maximum range in electric vehicles is far slower than the optimal speed for achieving maximum fuel economy in gasoline cars. According to Tesla, the range-maximizing speed for their Model S sedan is just <a href="http://www.teslamotors.com/blog/model-s-efficiency-and-range" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">25 miles per hour!</a> The current world electric car range record was set in a Tesla P85D. The drivers achieved 452.8 miles of range on a single charge by driving an average speed of <a href="http://www.geek.com/news/tesla-p85d-sets-world-record-by-driving-452-8-miles-on-a-single-charge-1632137/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">24.2 mph</a>. If drivers push the “eco” button in an automated electric car like a Tesla, it is possible that the software would choose a route that allows it to maintain an average speed of 25 MPH. This would necessitate the car to avoid highways and use roads with lower speed limits. Most city streets, however, have speed limits of 35 MPH. Rural roads often have speed limits of 45 MPH. On many of these roads people are used to driving 5 to 10 MPH over the posted speed limit. A hypermiling automated electric car could easily be driving at 20 or 30 MPH below the average traffic speed. On a two-lane road, where it is difficult to pass, traffic would quickly back up behind such a slow car.</div>
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Tesla Range vs Speed Chart</div>
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The other main difference between electric cars and internal combustion cars is the acceleration efficiency. While internal combustion cars are most fuel efficient when accelerating at full throttle, electric cars are most energy efficient when <a href="http://www.wired.com/2010/11/to-maximize-your-evs-range-think-of-eggs/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">accelerating very slowly</a>. When trying to optimize the energy efficiency (and maximize the range) of an electric car, the best technique is to accelerate slowly (like there is an egg beneath the accelerator pedal) and to decelerate slowly by leaving plenty of stopping distance and letting the motor’s regenerative braking bring you to a halt. In fact, a driver who is truly optimizing the efficiency of their electric car would almost never need to use the brake pedal. Needless to say, this form of driving – with extremely slow acceleration and leaving many car lengths of following distance to allow for slow deceleration by the regenerative brakes – can easily case traffic to pile up.</div>
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Due to the low energy density of current electric car batteries, the easiest way to maximize the range of the car is to add as many batteries as possible to the car. Unfortunately adding more batteries adds more mass. As race car teams know very well, added mass is multiplicative – it snowballs. When you add an extra thousand pounds of batteries, you need to add an extra hundred pounds to the chassis to support the batteries; a heavier chassis requires beefier suspension arms, wheels and tires; a larger overall mass requires bigger breaks to stop, which further increases the mass of the wheels, tires and suspension; and on and on. Once the car has been designed with all of the safety and comfort requirements plus the structure to hold such a large amount of batteries it can tip the scales at astronomical values. The curb weight for the new Tesla Model X SUV, for example, is <a href="http://www.caranddriver.com/tesla/model-x" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">5441 lbs</a> – that is 741 lbs <a href="http://www.hummer3.net/specs.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">heaver than the Hummer H3</a>! What’s worse, every pound added to the car increases the amount of raw materials needed to build and increases the complexity of assembling the car; thus the current top-of-the-line<a href="http://www.zillow.com/home-values/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Tesla costs 78% of the median home price in the United States</a>.</div>
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Self-driving cars offer an alternative way for electric cars to have long range without breaking the bank. Instead of loading up a car with more and more batteries, a self-driving car could have fewer batteries but be able to achieve an impressive range when put in “range maximization mode.” The average American drives <a href="https://www.fhwa.dot.gov/ohim/onh00/bar8.htm" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">37 miles per day</a>. Currently the cheapest electric car on the market is the Mitsubishi i-MiEV, which has a <a href="http://www.plugincars.com/mitsubishi-i-miev" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">62 miles range</a> and costs just <a href="http://www.mitsubishicars.com/build/2014/EV44/trims/ES/1AT" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">$15,495</a> after rebates. Amazingly that’s just $500 more expensive than the <a href="http://www.autotrader.com/best-cars/the-7-cheapest-new-cars-in-the-united-states-224878" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">cheapest internal combustion engine car for sale today</a> (the Chevy Sonic). 62 miles of range is almost 70% more than the average person drives in a day. In the near future, automated car technology could become so inexpensive that even a car like the i-MiEV could become totally driverless.</div>
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Volkswagen recently <a href="http://jalopnik.com/your-guide-to-dieselgate-volkswagens-diesel-cheating-c-1731857018" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">got in trouble</a> for cheating on emissions testing by designing the software of their vehicles to adjust the fuel mapping to lower emissions when the vehicle sensed it was being tested on a dyno. In much the same way, it is plausible that in the future electric car companies could design their software maximize to the range of their vehicles when they sensed they were being tested. An inexpensive electric car like the i-MiEV may be able to achieve over 100 miles of range by accelerating and decelerating slowly and capping its top speed. The car may simply engage its “eco” mode when it senses it is being tested. But of course “your mileage may vary.” In the real world, ranges would be far less – but as long as the range under normal driving conditions remained above the daily driving needs of the average American, most people wouldn’t complain. For longer trips, drivers could put it in self-driving “eco mode” and just sit back and read a book while the car putters along at 25 MPH with dozens of cars piled up in traffic behind them.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Traffic Today, Traffic Tomorrow</span><br />
Too many Americans drive too much every day. Many “super commuters” travel over 50 miles each way to their jobs every day day. Heading out of their suburban and exurban homes they must contend with drowsy drivers, drunk drivers, distracted drivers texting away, and, increasingly, horrendous traffic jams. Urban sprawl has pushed people from the suburbs into the<a href="https://en.wikipedia.org/wiki/Commuter_town" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">exurbs</a>. In many places around the world individual cities have sprawled so far that they have begun to merge into <a href="https://en.wikipedia.org/wiki/Megalopolis_(city_type)" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">megalopolises</a>.</div>
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Autonomous cars seem to offer the perfect solution to our driving problems. Robots have perfect reaction times – no more “accordion effect” of stop-and-go freeway jams caused by drivers slamming on their brakes. Robots never get distracted – no more accidents from texting while driving; no more idiots driving too slowly and swerving out fo their lane because they’re not paying attention.</div>
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Unfortunately, the promise of a traffic-free future is a probably a mirage. Peak oil and global climate change legislation will raise the price of transportation fuels. Barring a major breakthrough, affordable electric cars will only be able to achieve long ranges through economical driving. As more and more people hit the “eco” button on their autonomous cars, roads will become increasingly jammed up by robotic cars driving like grandpa on his way home from the blue plate special. As the <a href="http://www.nytimes.com/2014/04/15/business/more-renters-find-30-affordability-ratio-unattainable.html?_r=0" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">cost of living in walkable neighborhoods continues to rise</a> more people may consider moving to car-dependent suburbs. Autonomous cars may make suburban commutes look attractive, but reality will be different. As autonomous car software allows more people to hypermile their cars at the push of a button, suburban commutes could become unbearable. Rather than heading towards a traffic-free future we may be headed towards a traffic jam nightmare.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-69369113331347141622015-04-05T20:17:00.001-07:002016-11-14T13:17:07.548-08:00Peak Fish and Sustainable Food’s Last Mile Problem<script type='text/javascript'>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Peak Fish</span></div>
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My wife and I are subscribers to a local sustainable “fish share.” It’s like a vegetable <a href="https://en.wikipedia.org/wiki/Community-supported_agriculture" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">CSA</a> except instead of getting locally-grown vegetables we get fish that have been caught off of the San Francisco Bay. The fish are super fresh and delicious. The fisheries are managed to restrict catches to a sustainable level. This type of <a href="https://en.wikipedia.org/wiki/Sustainable_fishery" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">sustainable fishery</a> management, unfortunately, is the exception rather than the rule around the world. Globally, somewhere between <a href="http://phys.org/news/2011-04-method-biomass-reveals-fish-stocks.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">12% and 30%</a> of fisheries have collapsed. Based on actual tonnage of fish in the sea, the world reached “<a href="http://phys.org/news11206.html#nRlv" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">peak fish</a> in the sea” in the late 1980’s. When we analyze the tonnage of fish captured globally we see that we reached “peak fish capture” in 1996.</div>
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<a href="http://willmartin.com/wp-content/uploads/2015/03/peak-fish.png" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="peak fish" class="size-full wp-image-1823" height="480" src="http://willmartin.com/wp-content/uploads/2015/03/peak-fish.png" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" width="864" /></a><div class="wp-caption-text" style="border: 0px; font-family: inherit; font-size: 12px; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5em; padding: 10px; vertical-align: baseline; word-wrap: break-word;">
Global fish capture peaked in 1996</div>
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Because population continues to rise, the date of “peak fish caught per capita” occurred in 1988. Since 1988 there have been fewer and fewer kilograms of fish caught per person living on our planet.</div>
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<a href="http://willmartin.com/wp-content/uploads/2015/03/peak-fish-per-capita.png" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="peak fish per capita" class="size-full wp-image-1824" height="480" src="http://willmartin.com/wp-content/uploads/2015/03/peak-fish-per-capita.png" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" width="864" /></a><div class="wp-caption-text" style="border: 0px; font-family: inherit; font-size: 12px; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5em; padding: 10px; vertical-align: baseline; word-wrap: break-word;">
Global Per Capita Fish Capture Peaked in 1988</div>
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We are also seeing a dramatic “peak fish” decline due to <a href="https://en.wikipedia.org/wiki/Ocean_acidification" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">ocean acidification</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">. When carbon dioxide (CO2) dissolves into the water in the ocean (H2O) it becomes carbonic acid (H2CO3) and other carbonates. These carbonates lower the pH of the ocean and make it harder for calcifying organism like coral to produce their shells. This chemical reaction (CO2+H20=H2CO3) is simple and predictable. There is no question that <a href="http://www.esrl.noaa.gov/gmd/ccgg/trends/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">atmospheric CO2 are levels are rising</a>; As a result, there is no question that our oceans will continue to acidify. </span><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">Simply put, a</span>s we pump more carbon dioxide into the atmosphere we kill more of the bottom of the ocean food chain. Without the bottom of the food chain, the top of the chain (the fish we eat) disappears. Our oceans are currently acidifying at a rate 100 times faster than any change that has occurred in the last <a href="http://www.pmel.noaa.gov/co2/story/What+is+Ocean+Acidification%3F" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">20 million years</a>. The last time things got this bad was 65 million years ago during the Paleocene-Eocene Thermal Maximum, which resulted in an extinction event worse than the <a href="https://en.wikipedia.org/wiki/Cretaceous%E2%80%93Paleogene_extinction_event" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">K-T Extinction</a>that wiped out the dinosaurs. Unlike some of the other more complicated effects of climate change, ocean acidification is directly observable – you could literally stick some <a href="https://en.wikipedia.org/wiki/Litmus" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">litmus</a> paper in the ocean water outside your house and see the change over time. Here’s what the trend looks like:</div>
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<a href="http://www.epa.gov/climatechange/science/indicators/oceans/acidity.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="Ocean Acidity" class="size-full wp-image-1825" height="548" src="http://willmartin.com/wp-content/uploads/2015/03/acidity-figure1-2014.png" style="border: 0px none; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 98.5%; padding: 0px; vertical-align: middle; width: auto;" width="528" /></a><div class="wp-caption-text" style="border: 0px; font-family: inherit; font-size: 12px; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5em; padding: 10px; vertical-align: baseline; word-wrap: break-word;">
<a href="http://www.epa.gov/climatechange/science/indicators/oceans/acidity.html" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Ocean Acidity</a></div>
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Even if we stop catching fish at an unsustainable rate, ocean acidification will continue to put pressure on fisheries around the world. This means the “ceiling” for the “sustainable catch rate” will continue to get pushed lower every year. We’ve already reached “peak fish,” but these two forces will continue to push down fish capture rates, likely insuring that the peak is permanent.</div>
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Besides unsustainable catch rates and ocean acidification, the third factor that will ensure the permanence of “peak fish” is peak oil. It takes an incredible amount of <a href="http://news.sciencemag.org/climate/2014/07/what-seafood-guzzles-most-gas" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">boat fuel</a> to capture the fish we eat. Our current global food supply chain is woefully unsustainable and incredibly dependent on cheap oil. On average, it takes <a href="http://blogs.scientificamerican.com/plugged-in/2011/08/11/10-calories-in-1-calorie-out-the-energy-we-spend-on-food/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">10 calories of fossil fuel</a> to produce and deliver a single calorie of food in the United States. A <a href="http://pubs.acs.org/doi/full/10.1021/es702969f" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">2008 paper</a> by Weber and Matthews found that, on average, the food we eat travels a total distance of 4,200 miles to get to our plates. Peak oil writer Jim Kunstler frequently uses the example of the “<a href="http://www.kunstler.com/mags_ure.htm" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">3000 mile Cesar salad</a>” to bring attention to the <a href="https://en.wikipedia.org/wiki/Food_miles" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">food miles</a>traveled in our current global food system. These long supply chains are especially evident when looking at<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;"> fish – </span><a href="http://www.aerotropolis.com/files/2006_09_AirCargoGlobalEcon.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">two thirds of the world’s fish are shipped internationally by airplane</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">. When we inevitably reach peak oil (and peak coal and peak gas) we will have fewer calories of hydrocarbon fuel available per day for each person on earth. Unless we move our food production to a sustainable system that doesn’t rely on sunlight that was stored in the ground millions of years ago, we will have to do with fewer calories of food globally.</span></div>
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For fish, much of the energy expenditure comes in the form of boat fuel burned to troll the oceans and catch the fish. Here are some examples of how many <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><a href="http://news.sciencemag.org/climate/2014/07/what-seafood-guzzles-most-gas" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 400; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">liters of boat fuel are required to catch a metric ton of fish</a>:</span></div>
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<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Sardines: 71</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Skipjack tuna: 434</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Scallops: 525</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">North American salmon: 886</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Pacific albacore: 1612</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Sole: 2827</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Shrimp and lobster: 2923</li>
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One way to look at this fuel expenditure is to think about fishing on an Energy Returned on Energy Invested (<a href="https://en.wikipedia.org/wiki/Energy_returned_on_energy_invested" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">ERoEI</a>) basis. A <a href="https://en.wikipedia.org/wiki/Food_energy" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">food Calorie</a> (big c) is more accurately called a kilocalorie as it contains 1,000 calories (small c) of energy. A “serving” of fish is about 84 grams, or 0.084 kilograms, and contains <a href="http://www.fda.gov/downloads/Food/GuidanceRegulation/ucm063478.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">about 120 kilocalories</a> of food energy. This means a metric ton of fish contains 1.43 billion calories of energy. Diesel fuel contains 8629.8 <a href="https://en.wikipedia.org/wiki/Gasoline_gallon_equivalent" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">kilocalories per liter</a>, so catching a metric ton of sole would require burning 2.44 billion calories of fossil energy. So if you sat by the dock and ate raw sushi fresh from the fishing boat you would achieve an <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">ERoEI of 0.58:1</span>. Any ERoEI below 1 is net energy negative and thus unsustainable. To put it another way, a 120 Calorie “serving” of fresh fish eaten directly from the boat required 207 Calories of diesel fuel to catch it. <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Your serving of fish required about half a shot glass worth of diesel fuel to catch it.</span> Once the fish is caught it is often “flash frozen” (requiring diesel to run the generators that power the freezers on board the boats). High-end fish used for sushi is then usually sent air freight (burning jet fuel) to a refrigerated warehouse (burning coal or natural gas) where it is then picked up by a diesel-powered delivery truck and sent to the restaurant where diners arrive by gasoline-powered cars. After adding up the energy required to catch, freeze, package, ship, pick up and cook, wild-caught fish becomes severely net energy negative.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Local Food</span></div>
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At first glance the “<a href="https://en.wikipedia.org/wiki/Local_food" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">local food</a>” movement seems to fix the problem of the high-energy 3,000+ mile supply chain that delivers most of our food. If we simply purchased food that was grown locally (or better yet ate food grown in our own gardens), we wouldn’t need to ship as much food all over the world. Food could be grown organically (without fossil fuel-based fertilizers and pesticides) and greenhouses could provide us with year-round fruits and vegetables regardless of season. But unless you’re riding a bicycle down to your local farm, most “local food” still requires a tremendous amount of gasoline and diesel to transport the food from the farm to the farmers market and to transport the shopper from their home to the farmers market and back. Industrial-scale food is produced in huge quantities and shipped with semi-trucks. Local food is produced at a much smaller scale and is usually driven to farmers markets in small pickup trucks. The semi-trucks drive longer distances than the pickup trucks but because they carry more food they get much better MPG-per-ton of food. A <a href="https://nature.berkeley.edu/classes/es196/projects/2008final/Glettner_2008.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">2008 paper</a> studied the energy differences between the two different types of food systems in Berkeley, California and concluded on an energy consumption basis that “no statistically significant difference was found between the two food systems.” Simply put, local food, as it is currently practiced, is not more energy efficient than our “3000 mile Cesar salad” system.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The Local Food Last Mile Problem</span></div>
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The main problem with our “sustainable” fish share isn’t the way the fish are caught but rather the “last mile” problem of picking up the fish. I try to take the <a href="https://en.wikipedia.org/wiki/Bay_Area_Rapid_Transit" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">BART</a> to work most days – not because I’m trying to be “green” but because I much prefer to read a book on my way to work than sit in traffic. However, on days when we have to pick up the fish in Berkeley, it’s necessary to drive to work so that I’m able to drive to pick up the fish share after work. I’m doing a “<a href="https://en.wikipedia.org/wiki/Reverse_commute" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">reverse commute</a>,” where I live in a semi-urban area (<a href="https://www.walkscore.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">walkscore</a> 76) and work in suburbia (<a href="https://www.walkscore.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">walkscore</a> 39). Due to the crazy traffic patterns of the Bay Area, I have to drive the “long way” to work, which takes less time but requires driving a longer distance. On fish pickup days the full round-trip commute from home to work to the fish and back home requires 80.7 miles of driving. I’ve been tracking our vehicle fuel efficiency using <a href="http://www.fuelly.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">fuelly</a> and for this trip I get an average of 23 mpg (it doesn’t help that I’ve got a heavy foot). This means the entire trip to pick up the fish requires 3.5 gallons of gasoline. Burning 3.5 gallons of gasoline releases about 69 <a href="http://www.eia.gov/tools/faqs/faq.cfm?id=307&t=11" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">lbs of carbon dioxide</a>. Peer-reviewed studies put the <a href="https://en.wikipedia.org/wiki/Carbon_tax#Social_cost_of_carbon" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">social cost of carbon</a> at $43 per metric ton. So if we had a carbon tax that fully priced the externalities of climate change I’d have to pay $1.35 in carbon tax to make the trip to pick up our “sustainable” fish.</div>
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Taking the BART requires 0 gallons of gasoline because it is electric, but the BART currently isn’t connected down I-680 (because doing so would <a href="http://www.ccta.net/about/download/53a20494be243.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">cost $5 billion</a>), so half the trip is done on a bus. <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">Contra Costa County uses </span><a href="http://countyconnection.com/county-connection-introduces-first-hybrid-electric-buses/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">hybrid buses</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">. These </span><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">Gillig Low Floor BRT hybrid buses get </span><a href="http://www.nbrti.org/docs/pdf/2006_brt_compendium.pdf" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">4.0 MPG</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;"> of diesel; they are often standing-room-only on the way to and from work, so with 40 passengers aboard they get 160 passenger miles per gallon of diesel. This means my entire commute takes </span><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">0.165 gallons of fuel to complete when I take public transit. That is still not a negligible amount of fuel – it would fill a “venti” coffee cup – but it is 95% less fuel than I use when I drive a car.</span></div>
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The really crazy thing is when you compare the fuel used to catch the fish versus the fuel use in the “last mile” for me to pick up the fish. Our usual fish pickup is about 2 lbs of fish, which is about 907 grams and contains about 1300 Calories. At an EROEI of 0.58:1, that 1,300 calories of fish requires 2,241 Calories of boat fuel to catch it. The car trip to pick up the fish requires about 3.5 gallons (13.2 liters) of gasoline which at 7594.0 <a href="https://en.wikipedia.org/wiki/Gasoline_gallon_equivalent" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Calories per liter</a> is about 100,612 Calories of fuel. This means for each Calorie of “sustainable” fish I eat, it required:</div>
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<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">1.7 Calories of boat fuel to catch</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">77 Calories of car fuel to pick it up</li>
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It requires about 45 times more energy for me to pick up the fish in the “last mile” than it did for the boat to go out and catch the fish. Clearly my unsustainable “sustainable” local fish share is an extreme example and most people aren’t driving 80 miles by car to do their grocery shopping. It does, however, shed light on a major gap in our society’s quest for sustainability. Much of the US population lives in suburban and rural areas and as a result many of those people live in “<a href="https://en.wikipedia.org/wiki/Food_desert" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">food deserts</a>” where it requires more than a 20 mile round-trip by automobile to pick up groceries. The key lesson learned from all of this is that local food has the <em style="border: 0px; font-family: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">potential</em> to make our food consumption far more sustainable, but in practice such efforts often fall short. As peak fish and peak oil limit our food options, the lessons learned (including the failure in my case) from the thousands of local food efforts around our world will become incredibly important in building more resilient and sustainable food networks.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-19646015215322241892015-03-04T14:46:00.001-08:002016-11-14T13:16:18.527-08:00Sustainable Banking<script type='text/javascript'>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Our Fiat Currency System</span></div>
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As the late peak oil writer Michael Ruppert used to say, “until you change the way money works, you change nothing.” Chris Martenson does a great job in his “<a href="https://www.youtube.com/watch?v=T7up38Jyv0w&list=PLRgTUN1zz_ofJoMx1rB6Z0EA1OwAGDRdR" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Crash Course</a>” linking the banking system to peak oil. In short, our entire global fiat monetary system is dependent on exponentially-increasing levels of debt. If debt does not continue to increase exponentially, there isn’t any money to pay off the interest on the existing debt and the system seizes up. Exponentially-increasing debt is dependent on exponentially-increasing economic growth which is largely dependent on exponentially-increasing resource extraction. Of course you can’t have exponentially increasing resource extraction when you live on a finite planet with a finite quantity of resources, so eventually we will reach peak oil and “peak everything” and the whole debt-based monetary system will unravel.</div>
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Due to its basic design, our current monetary system encourages unsustainable resource extraction practices. Until we move to a sustainable monetary system, we will continue to find it extremely difficult to transition to a sustainable economy. Ultimately if we are going to live sustainably on our earth we will need to reach a sustainable equilibrium where we no longer need to extract resources from the ground and are able to provide all of our energy, food, water, housing, products, etc. from renewable energy, recycled water and recycled raw materials. Every product would be designed to be “<a href="https://en.wikipedia.org/wiki/Cradle-to-cradle_design" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">cradle-to-cradle</a>” with the full product lifecycle from manufacturing to recycling (or <a href="https://en.wikipedia.org/wiki/Upcycling" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">upcycling</a>) designed for sustainability. Instead of <a href="https://en.wikipedia.org/wiki/Planned_obsolescence" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">planned obsolescence</a> we would have products designed for multi-generational longevity (like my<a href="http://willmartin.com/sustainable-banking/aluminum%20cornhole%20boards" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">aluminum cornhole boards</a>!) But in order to get to that sustainable future, we need a currency that isn’t dependent on increasing economic growth.</div>
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I see two main sustainable alternatives to the current fiat debt-based monetary system:</div>
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<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Resource-based money</li>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Resource-Based Money</span></div>
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Before the <a href="https://en.wikipedia.org/wiki/Bretton_Woods_system" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Bretton Woods Agreement</a>, our global currencies were resource-based. The US Dollar was backed by gold. Before that, the British Pound was backed by an actual pound of silver. Going forward, we could return to this old system by having a gold or silver-backed currency where each paper or digital dollar is backed by gold or silver held in a vault which is redeemable on demand. For years people like <a href="http://www.amazon.com/The-Case-Gold-Ron-Paul/dp/1469971801" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Ron Paul</a> have been pushing for a return to the gold standard in the US. There has been speculation that the Persian Gulf countries have been accumulating gold in order to create their own gold-backed currency called the <a href="https://en.wikipedia.org/wiki/Khaleeji_%28currency%29" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Khaleeji</a>. An interesting new technological twist on the gold standard is a product by Valaurum called the “<a href="http://shop.valaurum.com/Peak-Prosperity-Aurum-LIMITED-EDITION-PP2.htm" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Aurum</a>.” The Aurum is essentially a sheet of gold laminated between plastic. Instead of holding gold in a vault and printing paper notes which are claims on physical gold, people could actually hold the physical gold inside of the note in their wallets. Obviously for larger sums of money (or for digital transactions) a gold-backed currency would still require gold to be held in a vault, but for day-to-day cash transactions the value of the gold could be held in Aurum and physically transferred. Obviously, this is the way cash transactions used to happen with gold and silver coins, but the Aurum allows for a much smaller amount of gold to be held in a familiar form-factor.</div>
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Besides precious metals, governments could also back their currencies with any physical commodity. OPEC countries, for example, could back their currencies with oil. Instead of holding gold in a vault, countries could issue notes that are redeemable for barrels of oil. Someone holding 200,000 Saudi Reals could call up the central bank and arrange for the shipment of 1,000 barrels of crude oil. Obviously the main problem with this system is transparency; since the wealth of the nation would be calculated based on the recoverable reserve barrels, the reserve estimates would need to be independently-variable.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Cryptocurrencies</span></div>
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In the last few years cryptocurrencies like <a href="https://bitcoin.org/en/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">bitcoin</a> and <a href="https://www.darkcoin.io/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">darkcoin</a> have emerged as a new asset class which could allow us to transition to a sustainable monetary system without the need for government-backed resources like gold and silver to be held in vaults. I first started investing in and blogging about bitcoin in 2010. Since then I’ve seen the value go from $1 to over $1000 and crash back to less than $300. Obviously that kind of price volatility doesn’t make for a confidence-inducing monetary system, but as adoption widens the currency value should become more stable. The reason bitcoin could provide us with a sustainable currency alternative is that the algorithm built in to bitcoin regulates the currency supply. Over time the rate of money supply for bitcoin will slow and ultimately halt at a finite amount of <a href="https://en.bitcoin.it/wiki/Controlled_supply" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">21 million bitcoins</a>. This finite supply works exactly the same way as gold or silver. Without the ability to print more money, our governments would be required to balance their budgets and wouldn’t be able to live off the “<a href="https://en.wikipedia.org/wiki/Inflation_tax" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">inflation tax</a>” they currently survive on.</div>
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One of the main problems with bitcoin is that it is “pseudoanonymous” and thus is actually far more traceable than cash if users aren’t careful. This fact came to the public’s attention recently at the trial of Ross Ulbricht, the alleged operator of the online drug marketplace Silk Road. By claiming ownership of the bitcoins that were seized by the government, <a href="http://www.wired.com/2015/01/prosecutors-trace-13-4-million-bitcoins-silk-road-ulbrichts-laptop/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">prosecutors were easily able to trace</a> all of the transactions associated with those bitcoins and prove Ulbricht’s connection to the Silk Road’s illegal activity. In June of 2014 I wrote a book called “<a href="http://www.amazon.com/dp/B00KZ6WANE" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Anonymous Cryptocurrencies</a>” (which became an Amazon #1 best seller!) about some of the alternative cryptocurrencies that offer true anonymity. Since then <a href="https://www.darkcoin.io/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">darkcoin</a> has emerged as the anonymous cryptocurrency leader, offering instant and anonymous transactions – creating the world’s first true “digital cash.” In the future we may see governments adopt darkcoin (or the technology behind darkcoin) to create a sustainable currency with a finite supply that offers their citizens financial privacy.</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Sustainable Banking</span></div>
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Until we transition to a sustainable monetary system like a resource-backed currency or cryptocurrency, we will have to make do with our current debt-based system and attempt to make it “more sustainable” in whatever way we can. One of the simple actions people can take is to switch their checking account from a global “megabank” to a local bank or credit union. When I lived in Ithaca, we had the <a href="http://www.alternatives.org/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Alternatives Federal Credit Union</a> which invested in local businesses and even backed the local alternative currency <a href="https://en.wikipedia.org/wiki/Ithaca_Hours" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Ithaca Hours</a>. <span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">Today in our household we bank at San Francisco’s </span><a href="https://www.newresourcebank.com/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: 1.5; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">New Resource Bank</a><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 1.5; margin: 0px; padding: 0px; vertical-align: baseline;">. New Resource does a great job being sustainable with our current unsustainable monetary system. They have incorporated as a <a href="https://en.wikipedia.org/wiki/Benefit_corporation" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">B-Corporation</a> and as a result are able to pursue many <a href="https://www.newresourcebank.com/content/how-we%E2%80%99re-sustainable" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">sustainability-related efforts</a> without needing to explain to investors why such efforts don’t have a direct financial return. They also invest locally with the</span> <a href="https://www.newresourcebank.com/content/who-we-finance" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">goal</a> of becoming 100% invested in local businesses that are sustainability-focused; this means that they currently invest in companies like Cowgirl Creamery and Hog Island Oysters. Local banking, however, isn’t all sunshine and rainbows. Some of the annoyances we’ve endured with our local bank include:</div>
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<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Fees</span> – local banks typically have higher fees than megabanks.</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Locations</span> – New Resource Bank has 1 location. Bank of America has <a href="http://banks.credio.com/q/2/4134/How-many-branches-does-Bank-of-America-have" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">5,132 locations</a>. Obviously more locations is more convenient.</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Hours</span> – our bank is only open 9-5 on weekdays while most megabanks are open on weekends.</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">ATM</span> – When we visited the bank a few weeks ago the bank’s only ATM was “permanently disabled.” Thus our only way to despot checks during non bank hours is gone.</li>
<li style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Fraud Lockouts</span> – much to our consternation, almost every time we travel and attempt to use an ATM we get locked out because the bank’s hair-trigger fraud detection system thinks our card has been stolen. The bank’s website also requires that you change your password every few weeks, which is also extremely annoying. Unlike megabanks, which can spread the risk of fraud across millions of customers, local banks need to be more careful, which means more annoyances for customers.</li>
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The most basic reason for all of these inconveniences is that local banks simply aren’t able to be as profitable as global megabanks, which brings me to my final point…</div>
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<span style="border: 0px; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The FED</span></div>
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One of the main threats to local banks is the Federal Reserve’s policy of keeping <a href="https://research.stlouisfed.org/fred2/series/FEDFUNDS/" style="border: 0px; color: #0066cc; font-family: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">interest rates at nearly 0%</a>. When rates are this low, the traditional small bank model of taking deposits and making loans becomes impossible to sustain. Banks simply can’t find enough low-risk people and businesses to lend to at the current rates to justify the risk-return equation required to maintain business as usual. Ultimately this will mean increasing fees for depositors as banks are unable to make enough money from loans to cover all of the overhead costs associated with providing depositor banking services. Not only has the FED painted itself into a corner with multi-century low interest rates, they are starving the local banks that provide the only semi-sustainable business model that could ultimately save us from our unsustainable monetary system.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-65333404400400757022014-12-30T09:36:00.002-08:002014-12-30T09:36:14.965-08:00Solar Electric Car vs Gasoline Powered Car: Total Cost of Ownership<div dir="ltr" style="text-align: left;" trbidi="on">
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/JAqSDskSbKY?feature=player_embedded' frameborder='0'></iframe></div>
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In this video I compare the total cost of ownership between an electric car (the Nissan Leaf) powered by rooftop solar panels and an equivalent gasoline car (the Nissan Versa Note). I find that the solar-powered electric car will become cheaper than the equivalent gasoline powered car over the next 5 years. I put the model on Github for anyone who wants to play around with the assumptions: <a href="https://github.com/willmartindotcom/peakoilproof.com">https://github.com/willmartindotcom/peakoilproof.com</a></div>
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The conceptual framework:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh50z8N-X84gaQsmrWK3lSVofhxeSFOj1M1jP_k-idtQgnblSL3xa0aM6U4YJ9OXrqk-SLqPvsH-ooqmCU2UcG04TvsIB0p3QdMuioaFGg3QqFhkCEA6eH7OIr45TiRPXgp26Rz2gajOEQ/s1600/Slide1.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh50z8N-X84gaQsmrWK3lSVofhxeSFOj1M1jP_k-idtQgnblSL3xa0aM6U4YJ9OXrqk-SLqPvsH-ooqmCU2UcG04TvsIB0p3QdMuioaFGg3QqFhkCEA6eH7OIr45TiRPXgp26Rz2gajOEQ/s1600/Slide1.PNG" height="177" width="320" /></a></div>
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Solar-powered electric cars are far better for the environment than gasoline-powered cars, both for air quality and for climate change.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjB_K88VqtXHAxzpnReKUiZYP57Fq5VMyVxztl_7-la8zHwBr8xNAlx2hhtrfb2BIXxYO0w6nJ8FpHImDxVuEs-GfmEayMqdLOwDfyb36oTjBWd0xAIJ5uB0YBwLFX9G-jPgWbJw5p6sf0/s1600/Slide2.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjB_K88VqtXHAxzpnReKUiZYP57Fq5VMyVxztl_7-la8zHwBr8xNAlx2hhtrfb2BIXxYO0w6nJ8FpHImDxVuEs-GfmEayMqdLOwDfyb36oTjBWd0xAIJ5uB0YBwLFX9G-jPgWbJw5p6sf0/s1600/Slide2.PNG" height="177" width="320" /></a></div>
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Rooftop solar prices are expected to continue to decline:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyL8FKZlzL49BVRV2ZLRqj9dZg88K9pUcmGGvRyW05-K9Ueq1UGkDfmBTURBeMfYDOiAzKQpViYfUQzuG7-yG_rb5kaHQ_eNTFZPab2B5L97TogNqIxzn87SO7bcO3xvT4Vo74MNT81lM/s1600/Slide3.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyL8FKZlzL49BVRV2ZLRqj9dZg88K9pUcmGGvRyW05-K9Ueq1UGkDfmBTURBeMfYDOiAzKQpViYfUQzuG7-yG_rb5kaHQ_eNTFZPab2B5L97TogNqIxzn87SO7bcO3xvT4Vo74MNT81lM/s1600/Slide3.PNG" height="177" width="320" /></a></div>
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Gasoline prices are expected to continue to rise:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnxJVWLAUSFMttZU-0PMbxzOep39Q-NHMBJjiZ_NsMXdjYlO-01gUDi9o2p13Dfmgy4xWg-lsG99uiH_oa9jCO2FO718C8AuOjHLNYI-n4yxeGIAsZBRV5HAYgWyqMLm2_lpFOTC1B6g0/s1600/Slide4.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnxJVWLAUSFMttZU-0PMbxzOep39Q-NHMBJjiZ_NsMXdjYlO-01gUDi9o2p13Dfmgy4xWg-lsG99uiH_oa9jCO2FO718C8AuOjHLNYI-n4yxeGIAsZBRV5HAYgWyqMLm2_lpFOTC1B6g0/s1600/Slide4.PNG" height="177" width="320" /></a></div>
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In 2012 it became cheaper to drive an electric car with rooftop solar than to drive a gasoline powered car.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6CKtjxGnCGZnNkIjLjsv2VSjHANGCNv6m7lyb6067oBBeUskndkFpONiYR-qCHi-rkLIE3APjJS0mdCZ6n80_wpuOhvJ9cEVWUv-Dv4wPvXWmxHHObvt_YeiP8wHxyR8gC8nUMvc14aM/s1600/Slide5.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6CKtjxGnCGZnNkIjLjsv2VSjHANGCNv6m7lyb6067oBBeUskndkFpONiYR-qCHi-rkLIE3APjJS0mdCZ6n80_wpuOhvJ9cEVWUv-Dv4wPvXWmxHHObvt_YeiP8wHxyR8gC8nUMvc14aM/s1600/Slide5.PNG" height="177" width="320" /></a></div>
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Electric car battery costs are expected to continue falling:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimyVMteoRRAY7rRwi4Zi7Kg_n0w-E66HNA-53Vz8WYmZ_ySLCUN3JoHxOSl8Z3ggmGzZ-tvFBgmP3eIPd2Xzmqio_AtS1HVLXQz45L2wBRQPVjDqdbfZtTV4yuq3xC6ntop0R_5upqIY8/s1600/Slide6.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimyVMteoRRAY7rRwi4Zi7Kg_n0w-E66HNA-53Vz8WYmZ_ySLCUN3JoHxOSl8Z3ggmGzZ-tvFBgmP3eIPd2Xzmqio_AtS1HVLXQz45L2wBRQPVjDqdbfZtTV4yuq3xC6ntop0R_5upqIY8/s1600/Slide6.PNG" height="177" width="320" /></a></div>
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The total cost of ownership of a gasoline powered car will likely continue to rise:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmkVUoA5j4wryAoUzEBLtGErqS0CT000Vr4ifGTrhCUwDgPkcrsXo1zRwBanY-04kx6I6etfVonIBAK3W4jukMwBIv7SRNPj9800h1wMsKhz0Jr3qoEoZiWQD2UU89z_kGIZTc9a-nagw/s1600/Slide7.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmkVUoA5j4wryAoUzEBLtGErqS0CT000Vr4ifGTrhCUwDgPkcrsXo1zRwBanY-04kx6I6etfVonIBAK3W4jukMwBIv7SRNPj9800h1wMsKhz0Jr3qoEoZiWQD2UU89z_kGIZTc9a-nagw/s1600/Slide7.PNG" height="177" width="320" /></a></div>
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The total cost of ownership of a solar-powered electric car will likely continue to fall:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMcdms-tV8ASkvjegyy2QA4EGKRyOVLon23216B5OVGRpQ5cCeUc0MGuJV1kJY4FNmBcYN5Sk_4LyYHSfjok-Oxx6w79_T6HbLMTiJViZWONZwFU5nRLhiZLXEMfXsLya_B5N3FrXUkwg/s1600/Slide8.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMcdms-tV8ASkvjegyy2QA4EGKRyOVLon23216B5OVGRpQ5cCeUc0MGuJV1kJY4FNmBcYN5Sk_4LyYHSfjok-Oxx6w79_T6HbLMTiJViZWONZwFU5nRLhiZLXEMfXsLya_B5N3FrXUkwg/s1600/Slide8.PNG" height="177" width="320" /></a></div>
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By 2016 it should be cheaper overall to drive a subsidized electric car than it would be to drive a gasoline car. By 2020 it should be cheaper to drive an unsubsidized electric car.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRMNL346rQrvk-APPN51PZJ8cOTjNser8_jFJSKsP5JN1Ub08ulgCYG60gJKatuulfXRJwmuXvPm0PkWFxN03iME8HBL7ITh_cUF0L_Y8_PGbKe6mi-qFkYggjGz6y99cRN532871TxAQ/s1600/Slide9.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRMNL346rQrvk-APPN51PZJ8cOTjNser8_jFJSKsP5JN1Ub08ulgCYG60gJKatuulfXRJwmuXvPm0PkWFxN03iME8HBL7ITh_cUF0L_Y8_PGbKe6mi-qFkYggjGz6y99cRN532871TxAQ/s1600/Slide9.PNG" height="177" width="320" /></a></div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.com1tag:blogger.com,1999:blog-967685008339618341.post-60889604965760799842014-12-12T11:49:00.001-08:002016-11-14T13:15:23.495-08:00Rooftop Solar eGallon Price Versus Gasoline <script type='text/javascript'>
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How much would it cost to drive an electric car that you charged using rooftop solar versus driving a gasoline car?</div>
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In this video I do the calculation.</div>
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/f5KV2aJulT8?feature=player_embedded' frameborder='0'></iframe></div>
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Model: <a href="https://github.com/willmartindotcom/peakoilproof.com">https://github.com/willmartindotcom/peakoilproof.com</a></div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-57692231942705738512014-07-17T06:14:00.000-07:002016-11-14T13:10:38.791-08:00Buy My Book! Bitcoin, Cryptocurrencies and a Peak Oil Future of Black Markets<script type='text/javascript'>
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People who have followed my blog for a while know that I'm writing a book on peak oil investing. I'm still hard at work on that book and things are moving forward. I've got a developmental editor helping me focus it down to a publishable state. The peak oil debate has changed a lot in the last few years and I'm working to make the book relevant to the current debate environment.<br />
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While I'm working to finish the peak oil book I want to tell you about another book I just published called "Anonymous Cryptocurrencies."<br />
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<a href="http://www.amazon.com/dp/B00KZ6WANE" target="_blank"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0yQzfyyh8_odVVhG_Jhj8EVdOfgYhK-ZCE8b8ztMN5OLKGPszJm0hyphenhyphenXPT_lFUjm7OpquRG1wd5jALkmAJZdcFj16McXNNL5-2dJzhE9mthENOIcjN_3RcNlkz60wHDy-BCSuPh-rBndY/s1600/AnonymousCryptocurrencies.jpg" /></a></div>
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Bitcoins and cryptocurrencies have been a passion of mine since early <a href="http://www.peakoilproof.com/2011/05/dollar-alternatives.html" target="_blank">2011</a>, when I worked with Ithaca Hours on a plan to digitize their local currency. Since then I’ve seen the value of bitcoin rise from under $1 to over $1000. The advantages of bitcoin are becoming known to a wider audience and more people and companies are getting involved with the "future of money." One of the main disadvantages of bitcoins, however, is that they are not anonymous. In fact, using bitcoins is like posting your credit card statement on the internet but leaving your name off of the top. If anyone can link your name to your credit card number, they instantly know your full payment history. Luckily, a lot of smart programmers are developing alternatives to bitcoin that provide true anonymity. This year I decided to write a book on the subject. Because this space is so new, I'm actually the first person to write a book on anonymous cryptocurrencies. The basic premise of my book is that the global black market is enormous and growing and if even a small percentage of that trade takes place with these anonymous cryptocurrencies, their value could skyrocket. On a longer time frame I believe that these anonymous cryptocurrencies will help protect people from identity fraud, help people around the world fight government oppression and provide a safe and cheap way for the "unbanked" to conduct remittances.<br />
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In the book I discuss peak oil and how it relates to bitcoins and other cryptocurrencies. Here is an excerpt from the book:<br />
<blockquote cite="http://www.amazon.com/dp/B00KZ6WANE">
Peak oil is another candidate for global economic collapse. Oil is a finite resource and as such its extraction rate will eventually peak and decline - that is a geological fact. The consequences of peak oil could be dire because we are currently “addicted to oil.” Everything you see in the room around you (including yourself) is either directly made of oil, required oil in its manufacture and/or was transported to your room using oil. Every calorie of food you eat required 10 calories of hydrocarbons in the form of pesticides, fertilizers and diesel fuel to plow, plant, harvest, package, transport and cook it. When the global rate of oil production peaks and begins to decline, the economic and societal consequences could be tremendous if we haven’t developed oil-independent energy generation, food production and transportation infrastructures. No one knows when peak oil will happen or how dramatic the decline rate will be after the peak, but if it happens soon, we could see economies collapse.<br />
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A peak-oil related advantage of cryptocurrencies is the fact that they are essentially “stores of energy.” Cryptocurrencies are usually generated through “mining” and mining requires electricity to power CPUs, GPUs and ASICs chips. The algorithms of these currencies adjusts the mining difficulty until it reaches an equilibrium. Using standard economic theory, over the long run this equilibrium should occur when the marginal cost of mining a coin reaches the marginal revenue of selling that coin. Since electricity is one of the main expenses associated with mining, over the long run the price of these currencies should fluctuate as the supply of mining rises and falls with changes in the price of energy. If peak oil (and peak gas and peak coal) will make the price of electricity rise over time, coins mined today with “cheap” energy should be a fantastic investment for a future with expensive energy.</blockquote>
From a peak oil perspective, I believe that bitcoin and other cryptocurrencies hold a lot of potential. In the past when economies have collapsed (Soviet Union, Zimbabwe, Yugoslavia) the US Dollar has stepped in to replace the collapsed currency. With all of the global fiat currencies (including the dollar) being printed at unprecedented rates, in a future collapse we may see people turn to fixed-supply cryptocurrencies like bitcoin to fill the void. In a future with expensive energy, these "stores of energy" could also be a cheap method of intertemporal energy arbitrage.<br />
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I hope you'll support my new book by purchasing a copy on amazon!<br />
<a href="http://www.amazon.com/dp/B00KZ6WANE">http://www.amazon.com/dp/B00KZ6WANE</a><br />
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-38718328518009103642014-06-25T10:34:00.004-07:002016-11-14T13:08:03.953-08:00BP Statistical Review Shows Peak Oil Bumpy Plateau<script type='text/javascript'>
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June is always an exciting month because each year BP releases their "<a href="http://www.bp.com/statisticalreview" target="_blank">statistical review of world energy</a>" around this time. The BP Statistical Review is one of three important public sources of global oil production data. The other two are the <a href="http://omrpublic.iea.org/" target="_blank">IEA Oil Market Report</a> and the <a href="http://www.eia.gov/countries/" target="_blank">EIA International Energy Statistics</a> report.<br />
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From a peak oil perspective, the big news out of BP's report is that <b>we have not yet reached peak oil</b>. Global oil production rose from 86.2 million barrels per day to 86.8 million barrels per day between 2012 and 2013. This gain, however, was a paltry 0.65% increase. If you chart the year-over-year change in global oil production for the past 50 years, you see it has been falling continuously since the 1960's. When you add a logarithmic trendline you see that it is approaching zero.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2smJMn3a0ApblWzX1cQm0sTRLex-N-Jz4CtgvELoffNM2xEosxqctxDQS05tP9575OBOtB3QzNafyqBfKgpZ2HsTLDJ4O5uKRLBJftg5ubv5aArtsSurIZPRJwqRj5GrHc59KaUIJ8AM/s1600/OilChange.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2smJMn3a0ApblWzX1cQm0sTRLex-N-Jz4CtgvELoffNM2xEosxqctxDQS05tP9575OBOtB3QzNafyqBfKgpZ2HsTLDJ4O5uKRLBJftg5ubv5aArtsSurIZPRJwqRj5GrHc59KaUIJ8AM/s1600/OilChange.JPG" height="287" width="400" /></a></div>
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Perhaps more interestingly, when you chart the world oil production against the world oil production excluding the United States, you see that world oil production has barely budged in nearly a decade if you don't count increasing US fracking production.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhU8yxLPOp2JmaU4nedqhyphenhyphenOuMwRjqIAl8SLvTGV78aw9vtHIL4J7i7jjWRaV60Rl4cFfiqeplqUKCsLxIdfhnwTzJ9BFdSkl3XwvDfuOXVVhERNRGkIVerGFziw3QVYe7jXK7S31N9oO-g/s1600/WorldProduction.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhU8yxLPOp2JmaU4nedqhyphenhyphenOuMwRjqIAl8SLvTGV78aw9vtHIL4J7i7jjWRaV60Rl4cFfiqeplqUKCsLxIdfhnwTzJ9BFdSkl3XwvDfuOXVVhERNRGkIVerGFziw3QVYe7jXK7S31N9oO-g/s1600/WorldProduction.JPG" height="290" width="400" /></a></div>
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Indeed, when you add up all of the production from every country on earth except for the United States, we have been on a "bumpy plateau" of production since 2005.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfnYYeoztMMPWLYdia0DDrHla5aQ1gx33rc5xB9hfWzd_vjBR94JzlrvzU0CEYI6XdV5M47EvO4WqMqzXwm7RWXjmeAIRlukF7Vo5axyUyQFtJyiuOjzKOySWi7rkvwESge3oDVEz0jE8/s1600/WorldExUSProduction.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfnYYeoztMMPWLYdia0DDrHla5aQ1gx33rc5xB9hfWzd_vjBR94JzlrvzU0CEYI6XdV5M47EvO4WqMqzXwm7RWXjmeAIRlukF7Vo5axyUyQFtJyiuOjzKOySWi7rkvwESge3oDVEz0jE8/s1600/WorldExUSProduction.JPG" height="288" width="400" /></a></div>
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Which leads us to the question: can the US continue to increase production and stave off global peak oil? The answer, at least according to the EIA, is no. The EIA recently released a <a href="http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm#tight_oil" target="_blank">forecast</a> showing US shale oil production peaking in 2020.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQJ7k6Bc0Q3rtDHp13nsrwbNTpdKxcR90-ILXFbVTshnVuHwIToa7IoKnzj2QlO50a76ij1Nv_hgVknnH6-Oo1178oPb3mlLo75wxBPnu1oiC3ZZ0z-_tnAVFc7lj5Pi_1mxwzaluUOAU/s1600/ShalePeak.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQJ7k6Bc0Q3rtDHp13nsrwbNTpdKxcR90-ILXFbVTshnVuHwIToa7IoKnzj2QlO50a76ij1Nv_hgVknnH6-Oo1178oPb3mlLo75wxBPnu1oiC3ZZ0z-_tnAVFc7lj5Pi_1mxwzaluUOAU/s1600/ShalePeak.JPG" height="400" width="370" /></a></div>
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The forecast of US shale production (as you can see from the chart above) follows an s-curve, meaning the rate of increase of production will begin to decline. When you dig into the <a href="http://www.eia.gov/forecasts/aeo/excel/fig97_data.xls" target="_blank">data</a>, you see that the rate of production increase for US shale oil is expected to have peaked in 2012 and will fall every year in the future. If the rate of increase for the production rate of US shale oil falls in the future, it may not be able to continue "propping up" the global oil production rate. As a result, it is feasible that we could reach peak oil in the next few years.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5AsD8uOEeyQhGofb7Kg8f6TxUSmk_Aua1Bkm5gtDfAMdo8dqzpvw5QLk3q_H7uD858Wcd0yzZUJA4_j1hutFNNAfe1QsjOoJFTQvLr4p9O2Ttc2qZP0r4iGcMERuEUdx79dj71TOI8ro/s1600/ShalePeakChange.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5AsD8uOEeyQhGofb7Kg8f6TxUSmk_Aua1Bkm5gtDfAMdo8dqzpvw5QLk3q_H7uD858Wcd0yzZUJA4_j1hutFNNAfe1QsjOoJFTQvLr4p9O2Ttc2qZP0r4iGcMERuEUdx79dj71TOI8ro/s1600/ShalePeakChange.JPG" height="287" width="400" /></a></div>
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While the date of peak oil is important, the date of "peak oil exports" is perhaps more important. The economies of countries like the US and China are extremely dependent on the world oil export market. Likewise, the price of crude oil is set by the world oil export market. When we look at BP's data, we see that <b>global net oil exports peaked in 2006</b> and have declined 3.5% since. This is mainly due to oil export cannibalization by oil producing countries. As oil exporting countries become wealthier, many begin to develop economies that demand more and more of their own oil production. When this increased internal demand is combined with declining production, we see declining net oil exports. For example, since 2006 Norway's net oil exports fell 37%, Mexico's fell 49% and Denmark's fell 88%. Production increases in countries like Russia and Iraq were not sufficient to increase total world net oil exports. If this trend continues, we could see oil prices continue to rise.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg63S550kXPxR4Sfva3XR0EgBmnMdOVXaSVE1DGzmd71LpvXvDbP0HNGjjR_dNlhyq7DBiZgIYuD1O0jAOOso9q0PP2Mc9qR09II3JK6WWCzs_TtKS-8YOkZl6wgdoBNxzXnAzX-dme5xE/s1600/WorldNetOilExports.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg63S550kXPxR4Sfva3XR0EgBmnMdOVXaSVE1DGzmd71LpvXvDbP0HNGjjR_dNlhyq7DBiZgIYuD1O0jAOOso9q0PP2Mc9qR09II3JK6WWCzs_TtKS-8YOkZl6wgdoBNxzXnAzX-dme5xE/s1600/WorldNetOilExports.JPG" height="288" width="400" /></a></div>
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We may not be at peak oil yet, but the alarm bells are certainly ringing.</div>
Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-17371217546511067542014-05-08T09:13:00.001-07:002016-11-14T11:45:16.322-08:00Peak Oil and the Outlook for Oil Supply and Demand<script type='text/javascript'>
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/GUS8IKP35SI?feature=player_embedded' frameborder='0'></iframe></div>
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This is a presentation I gave last week to the Adhesive and Sealant Council annual convention in Orlando.<br />
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The presentation starts with an explanation of the current state of the debate surrounding peak oil. I then move into the outlook for the supply and demand curves going forward. I use the "marginal cost curve" for crude oil to go one-by-one through the various sources of oil supply around the world. I then talk about the future outlook for crude oil demand and the possibility of "peak oil demand" as predicted by The Economist. Finally, I finish with some advice for people working in companies that will be directly affected by peak oil.</div>
Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-67796555156395771472014-03-18T10:36:00.001-07:002016-11-14T11:38:33.847-08:00Psychological Trigger Points For Crude Oil Demand Destruction<script type='text/javascript'>
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I've talked about <a href="http://www.peakoilproof.com/2010/11/demand-destruction-from-peak-oil.html" target="_blank">demand destruction</a> before in this blog. Demand destruction occurs when the marginal benefit of using more crude oil exceeds the marginal cost for people. Essentially, when oil prices go too high, people use less oil. On a personal level, this means that people may drive fewer miles by staying closer to home on the weekends, they might postpone a long-distance vacation, or they might start taking the bus or work from home instead of commuting by car. <a href="http://www.economist.com/news/leaders/21582516-worlds-thirst-oil-could-be-nearing-peak-bad-news-producers-excellent" target="_blank">The Economist</a> wrote a nice article on this phenomenon last year where they stated "in the rich world oil demand has already peaked: it has fallen since 2005."<br />
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While demand destruction occurs across every price up the ladder, there are certain psychological trigger points where people "wake up" to the fact that oil has gotten very expensive. Gas stations post their prices on the street and people notice when prices pass certain thresholds. In the United States, we price our fuel in dollars per gallon, and people definitely notice when regular gasoline passes $4 per gallon. In fact, when we look at the <a href="http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPMR_PTE_NUS_DPG&f=W" target="_blank">average US street price of regular gasoline</a>, we see it bounces off a ceiling of $4 per gallon:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwY6cx9-FRaggOwIpt02-vhEd3Mf2N__EPSzNuyIdNAarA_CYMyS4mxljalNCAGtvZ7GPAdVlhjw5bF0IGI3kI28JwbGdbfsg0IEp0lwUKu8L1OaBiwpaFzCES4NALUa_zIng4J4QkTP0/s1600/RegularGasoline.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwY6cx9-FRaggOwIpt02-vhEd3Mf2N__EPSzNuyIdNAarA_CYMyS4mxljalNCAGtvZ7GPAdVlhjw5bF0IGI3kI28JwbGdbfsg0IEp0lwUKu8L1OaBiwpaFzCES4NALUa_zIng4J4QkTP0/s1600/RegularGasoline.png" height="425" width="640" /></a></div>
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When Americans see $4 a gallon on their neighborhood gas station's sign, the price of oil immediately becomes front-of-mind and they start changing their behavior. Already, there are signs that <a href="http://deepblue.lib.umich.edu/bitstream/handle/2027.42/98982/102950.pdf" target="_blank">motorization in the US has peaked</a>. We can imagine that if gasoline prices rose past $5 per gallon, people would dramatically cut back on their gasoline consumption.<br />
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In Europe, gasoline is priced in Euros per Liter. The EIA keeps a summary of current prices in Europe <a href="http://www.eia.gov/countries/prices/gasolinewithtax.cfm" target="_blank">here</a>. In Germany, the largest economy in Europe, <a href="http://www.thetruthaboutcars.com/2011/04/are-europes-diesel-days-coming-to-an-end/" target="_blank">48% of cars are diesel</a>, so the price of diesel is more important than the price of gasoline. Looking at <a href="http://benzinpreis.de/statistik.phtml?o=7&display=diesel2014" target="_blank">historic diesel prices in Germany</a> we also see a ceiling, but it is at €1.5/liter:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJ0JdfHwRDj1KY5BWO35wrQrmrT0xING3lYQGA5AYvOezHKblHrMbFmfPUgAHQWDkOdpCPP4mcV4IHBOhZ-UPXv3IMXZVQQhoy-c5Kq6c0Z0lWPGmaQw6rJijmo8Wl1DLjsf81yF3QsYs/s1600/GermanyDiesel.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJ0JdfHwRDj1KY5BWO35wrQrmrT0xING3lYQGA5AYvOezHKblHrMbFmfPUgAHQWDkOdpCPP4mcV4IHBOhZ-UPXv3IMXZVQQhoy-c5Kq6c0Z0lWPGmaQw6rJijmo8Wl1DLjsf81yF3QsYs/s1600/GermanyDiesel.png" height="404" width="640" /></a></div>
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We can imagine that the next threshold in Germany is €2/liter, at which point Germans would almost certainly cut back significantly on their fuel consumption.<br />
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In China, gasoline and diesel is priced in yuan/liter. <a href="http://www.bitauto.com/youjia/beijing/" target="_blank">Current prices</a> are ¥1.77/liter for diesel in Beijing. In <a href="https://en.wikipedia.org/wiki/Numbers_in_Chinese_culture" target="_blank">Chinese culture</a>, many numbers have strong physiological associations. Seven a lucky number associated with "togetherness" - so today's price of ¥1.77/liter might be welcomed by people. Four is considered an <a href="https://en.wikipedia.org/wiki/Numbers_in_Chinese_culture" target="_blank">unlucky number</a>. In fact, many buildings in china don't have a 4th floor (similar to how many buildings in the west don't have a <a href="https://en.wikipedia.org/wiki/Thirteenth_floor" target="_blank">13th floor</a>). So while ¥2/liter is likely the next physiological threshold in China, we can imagine that if prices rose to ¥2.44/liter, they would be front-of-mind for people.<br />
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<b>Converting Crude Oil Prices to Gasoline Prices</b><br />
We can convert the price of crude oil to the price of gasoline by looking at the historical difference between these two prices. There are 42 gallons in a crude oil barrel, so a $100 crude oil price is $2.38 per gallon of crude oil. Obviously crude oil is the largest input cost for gasoline, but when you buy a gallon of gasoline you're also paying for taxes, marketing, distribution and refining costs. The EIA has created a nice <a href="http://www.eia.gov/todayinenergy/detail.cfm?id=470" target="_blank">graphic </a>showing what you pay for in a gallon of gasoline:<br />
<span id="goog_827204412"></span><span id="goog_827204413"></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcQkpBFQZPgCeLPCfBGGBcD_VAMCOuSxTJjity4SgfX33Epq3QMO2_UOIp68J7gKH0XLyo_BQHDMa4QJQXouxotMgzb-0Ef2ccbZ4e6mH_yh01CceIAsxh2pongl3RVqyWMpPNR7uMno4/s1600/WhatWePay_p2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcQkpBFQZPgCeLPCfBGGBcD_VAMCOuSxTJjity4SgfX33Epq3QMO2_UOIp68J7gKH0XLyo_BQHDMa4QJQXouxotMgzb-0Ef2ccbZ4e6mH_yh01CceIAsxh2pongl3RVqyWMpPNR7uMno4/s1600/WhatWePay_p2.png" height="346" width="400" /></a></div>
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Over time, the price of crude oil has become a larger percent of the overall cost of gasoline:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh334hBPgxHE6rbb5IBEdblFiYPuoFeiPWcB0GY8mA2zxMRVjz4AF4mAFpX8Q69Dlrp5nQxP1tTK_bPOGrfKSr6iYnhrsdJb7rhYwwP7D3m_2VXl_oZ9Wyf9dFZfFOCNXOPeJXC5cr-Ze8/s1600/CrudeOilPercentofGasolineCost.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh334hBPgxHE6rbb5IBEdblFiYPuoFeiPWcB0GY8mA2zxMRVjz4AF4mAFpX8Q69Dlrp5nQxP1tTK_bPOGrfKSr6iYnhrsdJb7rhYwwP7D3m_2VXl_oZ9Wyf9dFZfFOCNXOPeJXC5cr-Ze8/s1600/CrudeOilPercentofGasolineCost.png" height="293" width="400" /></a></div>
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Today crude oil accounts for about 75% of the cost of gasoline in the United States and for about 35% of the cost of diesel in Germany (where taxes are far higher). Using historical data we can come up with a few simple rules of thumb for converting crude oil prices to local gasoline prices for the US, Europe and China:<br />
<ul style="text-align: left;">
<li>United States: Crude Oil ($/bbl) / 31.5 = Gasoline Price ($/gallon)</li>
<li>Europe: Crude Oil ($/bbl) / 80 = Diesel Price (€/liter)</li>
<li>China: Crude Oil ($/bbl) / 61.5 = (¥/liter)</li>
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For the record, there are more accurate ways of doing this - like calculating the refinery yield for each product and adding on top of that the taxes and distribution cost for each region - but for this blog post some rules of thumb will suffice.</div>
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<b>Demand Destruction Thresholds</b><br />
Going back to our psychological demand destruction thresholds, we can use our rules of thumb to convert them to crude oil prices:<br />
<ul style="text-align: left;">
<li>€1.5/liter in Europe: $120</li>
<li>¥2/liter in China: $123</li>
<li>$4/gallon in the US: $126</li>
<li>¥2.44/liter in China: $150</li>
<li>$5/gallon in the US: $157</li>
<li>€2/liter in Europe: $160</li>
</ul>
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So looking at future prices, if crude oil hits <b>$120-$125 per barrel</b>, we will likely see demand destruction as certain psychological triggers are hit around the world. The next threshold appears to be <b>$150-$160 per barrel</b>, at which point demand destruction could be quite severe.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-29875375851338947592014-02-24T09:22:00.003-08:002016-11-14T11:36:05.449-08:00Questions<script type='text/javascript'>
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"It's hard to make predictions, especially about the future."</div>
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<b>Peak Oil</b><br />
<ul>
<li>What oil price can the global economy support without going into a recession?</li>
<li>Have we passed peak $50/bbl oil?</li>
<li>Have we passed peak $100/bbl oil?</li>
<li>With oil companies cutting back on capital spending, how will global oil production rates continue to increase?</li>
<li>Has global conventional oil production peaked?</li>
<li>Will increases in unconventional oil production be able to offset declines in conventional oil production?</li>
<li>What percentage of oil and gas well casings fail over a 1000 year time span?</li>
<li>How many earthquakes are the direct result of hydraulic fracturing and the resulting underground waste water disposal?</li>
<li>Do we have enough water to continue increasing the rate of shale oil and gas extraction?</li>
<li>Will we see peak oil because of peak demand or peak supply?</li>
<li>Once we pass peak oil, will we have a smooth transition to sustainable energy sources or will we have a collapse?</li>
</ul>
<div>
<b>Climate Change</b></div>
<ul>
<li>Once you account for the methane that leaks into the atmoaphere along the life cycle, is fracking for gas better or worse than coal for climate change?</li>
<li>What is a "safe" amount of global warming?</li>
<li>After all of the positive and negative feedback loops are accounted for, what is the real warming potential of a ton of greenhouse gas?</li>
<li>Given that warming potential, how many tons of greenhouse gas can we safely emit into the atmosphere?</li>
<li>How much economically-extractable hydrocarbon energy is left in the ground?</li>
<li>Is the amount of economically-extractable hydrocarbons in the ground higher or lower than the amount we can safely emit?</li>
<li>Is it possible with current technology to hold global warming to a safe level without harming our economy?</li>
<li>When will we see a global carbon tax?</li>
<li>Will China unilaterally tax carbon?</li>
<li>Will politicians fail to act on climate change until we see catastrophic climate disruptions (thermohaline shutdown, megastorms, megadraughts, greenland ice sheet collapse)?</li>
<li>If politicians wait until a crisis to act, will it be too late to halt climate change?</li>
<li>If we fail to act, is it possible to reverse climate change through geoengineering?</li>
</ul>
<b>Economic Sustainability</b><br />
<ul>
<li>Is it possible in this century to provide 10 billion people a developed-world standard of living without destroying the environment?</li>
<li>Throughout history, when governments have rapidly debased their currencies through money printing, it has always led to high inflation. This time though, all of the government are doing it at the same time and we haven't seen much inflation yet - is this time different?</li>
<li>How long can real interest rates remain negative?</li>
<li>What ever happened to breaking up banks that were too big to fail?</li>
<li>Why did the Federal Reserve Bank of New York say it would take 7 years to repatriate 674 tons of gold to Germany when they claim to have 6,700 tons of gold in their New York vault?</li>
<li>Can income inequality continue to get more severe every year without a triggering some kind of backlash?</li>
</ul>
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<br /></div>
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"Plan for the future because that's where you are going to spend the rest of your life." -Mark Twain</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-51896333665765478972014-01-13T10:25:00.002-08:002016-11-14T11:32:39.475-08:002014 Predictions<script type='text/javascript'>
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I love New Years because it is the one time of year when experts seem to throw caution to the wind and make wild predictions about asset prices. Of course, most of these predictions will be wrong because as Yogi Berra famously said "It's tough to make predictions, especially about the future." But nevertheless it is fun to see how the experts view the market over the coming year. So without further ado, here are the asset price predictions I scraped from around the internet:<br />
<br />
Looking back at energy prices in 2013:<br />
<br />
<ul style="text-align: left;">
<li><a href="http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RBRTE&f=D" target="_blank">Oil</a>: Down 5%</li>
<li><a href="http://www.eia.gov/dnav/ng/hist/rngwhhdd.htm" target="_blank">Natural Gas</a>: Up 36%</li>
<li><a href="http://www.eia.gov/coal/news_markets/archive/" target="_blank">Coal</a>: Up 14%</li>
<li><a href="http://www.photon.info/photon_news_detail_en.photon?id=83467" target="_blank">Solar</a>: Up 5-10%</li>
</ul>
<div>
2014 Energy Price Predictions:</div>
<div>
<ul style="text-align: left;">
<li><a href="http://www.fool.com/investing/general/2014/01/04/crude-oil-prices-in-2014.aspx" target="_blank">Oil</a>: EIA: Down 4%</li>
<li><a href="http://www.smartplanet.com/blog/the-take/oil-and-gas-price-forecast-for-2014/" target="_blank">Oil</a>: Survey of 27 experts: Down 4%</li>
<li><a href="http://finance.yahoo.com/blogs/daily-ticker/oil-prices-could--crater--in-2014--bremmer-says--but--dream--scenario-could-become-a-nightmare-132907339.html" target="_blank">Oil</a>: Eurasia Group: "a-better-than 50% chance...oil prices are cratering through $80": Down 25%</li>
<li><a href="http://articles.economictimes.indiatimes.com/2014-01-07/news/45955385_1_oil-price-demand-growth-non-opec-supply-growth" target="_blank">Oil</a>: Credit Suisse: Down 5%</li>
<li><a href="http://www.smartplanet.com/blog/the-take/oil-and-gas-price-forecast-for-2014/" target="_blank">Oil</a>: Chris Nelder: Up 3%</li>
<li><a href="http://www.eia.gov/forecasts/steo/report/natgas.cfm" target="_blank">Natural Gas</a>: EIA: Up 4%</li>
<li><a href="http://www.smartplanet.com/blog/the-take/oil-and-gas-price-forecast-for-2014/" target="_blank">Natural Gas</a>: Chris Nelder: Flat</li>
<li><a href="http://www.eia.gov/forecasts/steo/report/coal.cfm" target="_blank">Coal</a>: EIA: Up 1%</li>
<li><a href="http://press.ihs.com/press-release/design-supply-chain/ihs-news-flash-solar-market-predictions-2014" target="_blank">Solar</a>: IHS: Down 10%</li>
<li><a href="http://cleantechnica.com/2013/11/22/solar-pv-production-costs-drop-2014/" target="_blank">Solar</a>: NPD Solarbuzz: Down 6%</li>
<li><a href="https://www.greentechmedia.com/articles/read/global-pv-prices-will-increase-nine-percent-in-2014" target="_blank">Solar</a>: GTM Research: Down 1%</li>
</ul>
</div>
<br />
Looking back at various asset class investments in 2013:<br />
<ul style="text-align: left;">
<li><a href="https://www.google.com/finance?q=NYSEARCA:SPY" target="_blank">US Equities</a>: Up 32% (But <a href="http://www.multpl.com/s-p-500-earnings-growth" target="_blank">EPS</a> up just 9%)</li>
<li><a href="https://www.google.com/finance?q=VEA" target="_blank">International Developed Equities</a>: Up 20%</li>
<li><a href="https://www.google.com/finance?q=VWO" target="_blank">International Developing Equities</a>: Down 6%</li>
<li><a href="https://www.google.com/finance?q=VGLT&ei=hx7UUqCMMKqziQK_3wE" target="_blank">US Bonds</a>: Down 16%</li>
<li><a href="https://www.google.com/finance?q=NYSEARCA%3ABWX&sq=international%20bond&sp=1&ei=Kx7UUrDJDLK0iAKjPQ" target="_blank">International Bonds</a>: Down 2%</li>
<li><a href="https://www.google.com/finance?cid=702708" target="_blank">TIPS</a>: Down 10%</li>
<li><a href="https://www.google.com/finance?q=VNQ" target="_blank">US Real Estate</a>: Flat</li>
<li>Real Estate in <a href="http://online.wsj.com/news/articles/SB10001424052702304202204579256620643694940" target="_blank">Silicone Valley</a>: Up 40%</li>
<li><a href="https://www.google.com/finance?q=VNQI" target="_blank">International Real Estate</a>: Flat</li>
<li><a href="https://www.google.com/finance?q=GLD" target="_blank">Gold</a>: Down 24%</li>
<li><a href="https://www.google.com/finance?q=SLV" target="_blank">Silver</a>: Down 31%</li>
<li><a href="http://www.zerohedge.com/news/2013-12-31/best-and-worst-hedge-funds-2013" target="_blank">Hedge Funds</a>: Almost every fund under-performed the S&P500</li>
<li><a href="http://bitcoincharts.com/charts/mtgoxUSD#rg360zczsg2013-01-01zeg2014-01-01ztgSzm1g10zm2g25zv" target="_blank">Bitcoins</a>: Up 590%</li>
<li>US Dollars: Down 1.5%-4.5% in <a href="http://www.shadowstats.com/alternate_data/inflation-charts" target="_blank">real </a>terms</li>
<li>US Dollars: Up against almost every other <a href="http://www.x-rates.com/historical/?from=USD" target="_blank">currency</a>:</li>
</ul>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGhyATyfqF35aoHnu9viikeGCLpjvrtlaVm3cvJtezW9BVmeh0FDau8DDrNfiXXAhC8izL9Hq7AaiSzUR0YBYoP-bEo21-rCISBR78M_O4taKCiMv6-igzTNT40mAiDBeq-8cTpoUGB5o/s1600/ExchangeRates.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGhyATyfqF35aoHnu9viikeGCLpjvrtlaVm3cvJtezW9BVmeh0FDau8DDrNfiXXAhC8izL9Hq7AaiSzUR0YBYoP-bEo21-rCISBR78M_O4taKCiMv6-igzTNT40mAiDBeq-8cTpoUGB5o/s1600/ExchangeRates.jpg" /></a><br />
<br />
<br />
2014 Asset Class Predictions:<br />
<ul style="text-align: left;">
<li><a href="http://www.nytimes.com/2014/01/04/business/2014-is-looking-a-lot-like-2013.html?_r=0" target="_blank">US Equities</a>: Average forecast according to Bloomberg: Up 6%</li>
<li><a href="http://www.nytimes.com/2014/01/04/business/2014-is-looking-a-lot-like-2013.html?_r=0" target="_blank">US Equities</a>: Goldman Sachs: Up 3%</li>
<li><a href="http://www.zerohedge.com/news/2014-01-11/did-goldman-just-kill-music-sp500-now-overvalued-almost-any-measure" target="_blank">US Equities</a>: Goldman Sachs: "The S&P500 Is Now Overvalued By Almost Any Measure"</li>
<li><a href="http://blogs.wsj.com/moneybeat/2013/12/09/guggenheim-is-beating-pimco-and-doubleline-predictions-from-its-cio/" target="_blank">US Equities</a>: Scott Minerd, Guggenheim Partners: "can rise another 10% to 15% before it pulls back"</li>
<li><a href="http://blogs.wsj.com/moneybeat/2014/01/02/one-bears-gloomy-forecast-stocks-down-20-in-2014/" target="_blank">US Equities</a>: Peter Boockvar, Lindsey Group: Down 20%</li>
<li><a href="http://www.businessinsider.com/the-contrarian-bearish-2014-forecast-2014-1" target="_blank">US Equities</a>: Emad Mostaque, NOAH Capital Markets: Down 20%</li>
<li>International Developed Equities:</li>
<li><a href="http://www.ft.com/intl/cms/s/2/9b50c6a4-34c1-11e3-8148-00144feab7de.html" target="_blank">Emerging Market</a> Equities: Jan Dehn, Ashmore: "It is entirely possible that emerging markets will be the best performing asset class in the world [this year].”</li>
<li><a href="http://www.ft.com/intl/cms/s/2/9b50c6a4-34c1-11e3-8148-00144feab7de.html" target="_blank">Emerging Market</a> Equities: George Magnus, UBS: “Emerging markets have a lot to worry about from a resurgent dollar”</li>
<li><a href="http://blogs.reuters.com/anatole-kaletsky/2014/01/02/five-predictions-for-financial-markets-in-2014/" target="_blank">Emerging Market</a> Equities: Anatole Kaletsky: "Emerging markets will make a comeback"</li>
<li><a href="http://www.ft.com/intl/cms/s/0/28cd4a70-714e-11e3-8f92-00144feabdc0.html#slide0" target="_blank">Emerging Market</a> Equities: Jeremy Grantham: "“My guess is that the US market, especially the non-blue-chips, will work its way higher, perhaps by 20-30 per cent in the next year or, more likely, two years, with the rest of the world, including <b>emerging market equities, covering even more ground</b> in at least a partial catch-up. And <b>then we will have the third in the series of serious market busts since 1999</b>."</li>
<li><a href="http://www.ft.com/intl/cms/s/0/788e0a80-73c5-11e3-a0c0-00144feabdc0.html" target="_blank">Emerging Market</a> Equities: Mohamed El-Erian: "Do not bet on a broad emerging market recovery"</li>
<li><a href="http://bonds.about.com/od/bond-market-review-and-outlook/fl/2014-Bond-Market-Outlook.htm" target="_blank">US Bonds</a>: LPL Financial Research: "Bond valuations remain expensive compared to historical averages"</li>
<li><a href="http://bonds.about.com/od/bond-market-review-and-outlook/fl/2014-Bond-Market-Outlook.htm" target="_blank">US Bonds</a>: Bill Gross: "should provide low but attractively defensive returns"</li>
<li><a href="http://bonds.about.com/od/bond-market-review-and-outlook/fl/2014-Bond-Market-Outlook.htm" target="_blank">US Bonds</a>: Bank of America: "Challenging year for fixed income"</li>
<li><a href="http://bonds.about.com/od/bond-market-review-and-outlook/fl/2014-Bond-Market-Outlook.htm" target="_blank">US Bonds</a>: Jeffrey Rosenberg, Blackrock: "Traditional bonds could experience losses"</li>
<li><a href="http://www.bloomberg.com/news/2014-01-07/goldman-to-jpmorgan-say-sell-emerging-markets-after-slide.html" target="_blank">International Bonds</a>: Morgan Stanley and Goldman Sachs: Bearish</li>
<li><a href="http://www.businessinsider.com/the-contrarian-bearish-2014-forecast-2014-1" target="_blank">Gold</a>: Emad Mostaque, NOAH Capital Markets: Up 20%</li>
<li><a href="http://www.foxbusiness.com/markets/2014/01/09/bofa-slashes-2014-gold-silver-forecasts/" target="_blank">Gold</a>: Bank of America: Down 11%</li>
<li><a href="http://www.businesstimes.com.sg/breaking-news/world/barclays-expects-gold-prices-struggle-2014-20140110" target="_blank">Gold</a>: Barclays: Down 3%</li>
<li><a href="http://www.telegraph.co.uk/finance/commodities/10540875/Gold-price-collapse-is-the-worst-for-30-years.html" target="_blank">Gold</a>: Ole Hansen, Saxo Bank: prices have "bottomed out"</li>
<li><a href="http://www.ft.com/intl/cms/s/0/1ed5c0ea-6700-11e3-a5f9-00144feabdc0.html" target="_blank">Gold</a>: Philip Klapwijk, Precious Metals Insights: Down 2.5%</li>
<li><a href="http://www.foxbusiness.com/markets/2014/01/09/bofa-slashes-2014-gold-silver-forecasts/" target="_blank">Silver</a>: Bank of America: Down 21%</li>
<li><a href="http://www.marketoracle.co.uk/Article43817.html" target="_blank">Bitcoin</a>: Jason Hamlin: Up 250%</li>
<li><a href="http://seekingalpha.com/article/1924721-8-predictions-for-2014-gold-bitcoin-3d-printing" target="_blank">Bitcoin</a>: Jason Hamlin (contradicting himself?): Up 500%</li>
<li><a href="http://lightspeedindia.wordpress.com/2014/01/13/bitcoin-2014-top-10-predictions/" target="_blank">Bitcoin</a>: Lightspeed Venture Partners: Up 500%</li>
<li><a href="http://www.coindesk.com/56-of-bitcoiners-believe-bitcoin-will-reach-10000-in-2014/" target="_blank">Bitcoin</a>: "56% of bitcoiners": Up 1000%</li>
<li><a href="http://mashable.com/2013/12/16/cameron-winklevoss-bitcoin/" target="_blank">Bitcoin</a>: Cameron Winklevoss: Up 4000%</li>
<li><a href="http://hughhendry-blog.blogspot.com/2013/12/hendry-i-would-buy-bitcoin-if-i-could.html" target="_blank">Bitcoin</a>: Hugh Hendry: "I would buy Bitcoin if I could"</li>
<li><a href="http://www.businessinsider.com/williams-bitcoin-meltdown-10-2013-12" target="_blank">Bitcoin</a>: Mark T. Williams: Down 99%</li>
<li><a href="http://www.forbes.com/sites/investor/2013/12/18/bitcoins-bite-the-dust-commodities-underperform-and-other-predictions-for-2014/" target="_blank">Bitcoin</a>: Oliver Pursche: "bites the dust"</li>
<li><a href="http://readwrite.com/2013/12/30/bitcoin-may-fade-2014-prediction#awesm=~osQt0ejujI2w30" target="_blank">Bitcoin</a>: Lauren Orsini: "the end of Bitcoin as we know it"</li>
</ul>
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<br /></div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-1051738007648431512013-11-01T08:52:00.000-07:002016-11-14T11:30:48.926-08:00Harvard's Fossil Fuel Divestment Statement<script type='text/javascript'>
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Harvard University has been under pressure since last November when <a href="http://www.thenation.com/blog/171380/harvard-students-vote-72-percent-support-fossil-fuel-divestment" target="_blank">72% of the student body voted in favor of divesting fossil fuels</a> from the school's $32 Billion endowment.<br />
<br />
This month the president of Harvard, Drew Faust, responded to this divestment request with a loud "NO." Her letter can be read <a href="http://www.harvard.edu/president/fossil-fuels" target="_blank">here</a>, but I thought I would include it here and add in some of my own "translations":<br />
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Dear Members of the Harvard Community,</div>
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Climate change represents one of the world’s most consequential challenges. I very much respect the concern and commitment shown by the many members of our community who are working to confront this problem. I, as well as members of our Corporation Committee on Shareholder Responsibility, have benefited from a number of conversations in recent months with students who advocate divestment from fossil fuel companies. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">While I share their belief in the importance of addressing climate change, I do not believe, nor do my colleagues on the Corporation, that university divestment from the fossil fuel industry is warranted or wise.</span></div>
<div style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px 0px 1.5em; padding: 0px; vertical-align: baseline;">
<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Harvard is an academic institution.</span> It exists to serve an academic mission — to carry out the best possible programs of education and research. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">We hold our endowment funds in trust to advance that mission</span>, which is the University’s distinctive way of serving society. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The funds in the endowment have been given to us by generous benefactors over many years to advance academic aims, not to serve other purposes, however worthy.</span> As such, we maintain a strong presumption against divesting investment assets for reasons unrelated to the endowment’s financial strength and its ability to advance our academic goals. </div>
<div style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px 0px 1.5em; padding: 0px; vertical-align: baseline;">
<div style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px 0px 1.5em; padding: 0px; vertical-align: baseline;">
<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: The people who gave us money for our endowment don't necessarily agree with divesting fossil fuels. Moreover, if we make divestment of fossil fuels a permanent policy, <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">we may alienate future donors</u>.</b></span></div>
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<div style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px 0px 1.5em; padding: 0px; vertical-align: baseline;">
<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">We should, moreover, be very wary of steps intended to instrumentalize our endowment in ways that would appear to position the University as a political actor rather than an academic institution. Conceiving of the endowment not as an economic resource, but as a tool to inject the University into the political process or as a lever to exert economic pressure for social purposes, can entail serious risks to the independence of the academic enterprise. The endowment is a resource, not an instrument to impel social or political change.</span></div>
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<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">We are an educational institution, not a political advocacy organization</u>.</b></span></div>
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We should also be clear-sighted about the risks that divestment could pose to the endowment’s capacity to propel our important research and teaching mission. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Significantly constraining investment options risks significantly constraining investment returns.</span> The endowment provides more than one-third of the funds we expend on University activities each year. Its strength and growth are crucial to our institutional ambitions — to the support we can offer students and faculty, to the intellectual opportunities we can provide, to the research we can advance. Despite some assertions to the contrary, logic and experience indicate that <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">barring investments in a major, integral sector of the global economy would</span> — especially for a large endowment reliant on sophisticated investment techniques, pooled funds, and broad diversification — <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">come at a substantial economic cost.</span></div>
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<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: Fossil fuel companies account for about 10% of the global equity market. Cutting yourself off from such a large percentage of available asset classes will limit the number of portfolio combinations near the "<a href="https://en.wikipedia.org/wiki/Efficient_frontier" style="border: 0px; color: #333333; font-size: 14px; font: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">efficient frontier</a>," which <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">would push down our endowment's risk-adjusted returns</u>.</b></span></div>
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Because I am deeply concerned about climate change, I also feel compelled to ask whether a focus on divestment does not in fact distract us from more effective measures, better aligned with our institutional capacities. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Universities own a very small fraction of the market capitalization of fossil fuel companies. If we and others were to sell our shares, those shares would no doubt find other willing buyers. Divestment is likely to have negligible financial impact on the affected companies.</span> And such a strategy would diminish the influence or voice we might have with this industry. Divestment pits concerned citizens and institutions against companies that have enormous capacity and responsibility to promote progress toward a more sustainable future.</div>
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<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">I also find a troubling inconsistency in the notion that, as an investor, we should boycott a whole class of companies at the same time that, as individ</span><span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">uals and as a community, we are extensively relying on those companies’ products and services for so much of what we do every day. Given our pervasive dependence on these companies for the energy to heat and light our buildings, to fuel our transportation, and to run our computers and appliances, it is hard for me to reconcile that reliance with a refusal to countenance any relationship with these companies through our investments.</span></div>
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<b style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: Divestment of companies that produce products you don't like is <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">hypocritical </u>if you continue to use those products. You wouldn't take someone seriously if they were telling you to divest from cigarette company stocks while they had a cigarette in their mouth. This also hits on the fact currently <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">there is no scalable alternative</u> to fossil fuels. Over 80% of our global energy consumption comes from fossil fuels. It is not feasible in the near term to ramp up renewable energy to offset this production in the face of increasing demand.</b></div>
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I believe <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">there are a number of more effective ways for Harvard both to address climate change and to enhance our commitment to sustainable investment. </span></div>
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Our teaching and research on environmental and climate issues is significant and growing, and it is a priority in The Harvard Campaign.</div>
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We offer some 250 courses in the broad domain encompassing environmental studies and energy. We support some 225 faculty who work in the area, as well as a graduate consortium that involves more than 100 students and seven Schools.</div>
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We have a thriving University Center for the Environment. Outstanding faculty in chemistry, biology, earth and planetary sciences, engineering, and beyond are making profoundly important contributions to envisioning the future of energy and shaping the relevant science and technology. The Kennedy School’s Belfer Center has won international acclaim for its influential work on climate change economics and policy. Harvard scholars in design are on the frontier of thinking about sustainable cities; scholars in law, business, economics, and public policy are leaders in addressing regulatory, commercial, and economic aspects of energy and the environment; scholars in public health do vital research on environmental health and its relation to energy use. Indeed, the foundation of our current national clean air regulations was a study undertaken more than two decades ago by faculty at the Harvard School of Public Health.</div>
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We also have a strong institutional commitment to sustainability in how we live and work. Our Office for Sustainability is doing outstanding work. We are making substantial progress in reducing our greenhouse gas emissions. We have become much more conscious of sustainable design principles in all of our physical planning and construction. We have created awards to recognize “heroes” who are helping to make Harvard green. And Harvard has earned an array of honors to recognize various sustainability efforts. I am very proud of all that our students and faculty and staff are doing on this front, and those efforts will continue and grow. </div>
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<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: We are an educational institution, not a political advocacy organization. As such, we are already doing a lot to address environmental issues in the capacity of an educational institution.</b></span></div>
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As a long-term investor, we need to strengthen and further develop our approach to sustainable investment. This is no small undertaking, and it will present challenges along the way. Especially given our long-term investment horizon, we are naturally concerned about environmental, social, and governance factors that may affect the performance of our investments now and in the future. Such risks are complex, often global in nature, and addressing them effectively often entails collaborative approaches. <span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Generally, as shareholders, I be</span><span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">lieve we should favor engagement over withdrawal. In the case of fossil fuel companies, we should think about how we might use our voice not to ostracize such companies but to encourage them to be a positive force both in meeting society’s long-term energy needs while addressing pressing environmental imperatives</span>. And, like other investors, we should consider how to obtain further, better information on how companies not only in the energy industry but across all sectors take account of sustainability risks and opportunities as part of their business strategies and practices.</div>
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<span style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Translation: Companies listen to shareholders more than they listen to outsiders. Since there is </b></span><b style="background-color: #fffaa5; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">currently <u style="border: 0px; font-size: 14px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">no scalable alternative</u> to fossil fuels, we are better off continuing to holding our fossil fuel investments and trying to steer fossil fuel companies towards sustainability.</b></div>
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To help us pursue this path, Harvard Management Company has recently brought on its first-ever vice president for sustainable investing. She will help us think in more nuanced, forward-looking ways about sustainable investment, including the consideration of environmental, social, and governance factors. And, in concert with colleagues, she will play a central role in considering how Harvard can achieve superior investment returns as it fulfills a university’s distinctive responsibilities to society.</div>
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Harvard has a strong interest in marshaling its academic resources to help meet society’s most important and vexing challenges, and there is no question that climate change must be prominent among them. We will continue to do so, through the energy and ideas of our faculty, students, and staff, in ways that are true to the purposes of our endowment and that best take advantage of the University’s distinctive capacities as an academic institution.</div>
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Sincerely,<br />
Drew Faust</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-61126609802811918852013-10-22T15:38:00.003-07:002016-11-14T11:28:00.920-08:00Peak Global Energy Efficiency<script type='text/javascript'>
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Fossil fuels are finite and eventually their global production will peak and decline. Since our global economic growth has a nearly perfect correlation with global energy consumption, a decline in global fossil fuel energy availability could mean "the end of growth." The argument on the other side is that we will simply become more efficient with our use of energy. The argument goes that we will become less energy-intensive consumers and the <a href="https://en.wikipedia.org/wiki/Energy_intensity" target="_blank">energy intensity</a> of our global economy will decline.<br />
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So are we on the right track? Are we becoming more energy efficient with our global economy?</div>
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To answer this question, I took data from the World Bank and from BP's Statistical Review of World Energy.</div>
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First, we see that on an absolute energy basis (in Joules) our global fossil fuel consumption continues to increase.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgndUp9fyyhx6SLwbTcp13mkTylISqHnZvt-QyFp4PJDiLt5Xu-OUiW2zoNNwfdIIQRgup8EKhaP_gHXisDFDNwU76u63FZh1q_RQ9QyP7TpnDv0Ld712Nx9CQenuU98JTOOnY-qS0Wkvw/s1600/Global+Fossil+Fuel+Consumption.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="255" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgndUp9fyyhx6SLwbTcp13mkTylISqHnZvt-QyFp4PJDiLt5Xu-OUiW2zoNNwfdIIQRgup8EKhaP_gHXisDFDNwU76u63FZh1q_RQ9QyP7TpnDv0Ld712Nx9CQenuU98JTOOnY-qS0Wkvw/s400/Global+Fossil+Fuel+Consumption.jpg" width="400" /></a></div>
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Once we multiply this consumption by the nominal price of each fuel, we can get a global "fuel bill" and compare it to the value of global trade each year.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEin3pxhTFtwYcZbaX4SfC-RU55EKaUZHsoHgT4WB0Wq4fcFrs_NOEbaiuHehEAEaxFmCR7J9RMUb0LZjojF9ANgeerkR5N-b7w338rNCzp-zEKafYZ-mYkF_zygdTpl1AvB_oDW2NAsNXQ/s1600/Value+of+Global+Trade+and+Cost+of+Global+Fossil+Fuel+Consumption.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEin3pxhTFtwYcZbaX4SfC-RU55EKaUZHsoHgT4WB0Wq4fcFrs_NOEbaiuHehEAEaxFmCR7J9RMUb0LZjojF9ANgeerkR5N-b7w338rNCzp-zEKafYZ-mYkF_zygdTpl1AvB_oDW2NAsNXQ/s400/Value+of+Global+Trade+and+Cost+of+Global+Fossil+Fuel+Consumption.jpg" width="400" /></a></div>
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Finally, when we take our global fuel bill and divide it by our value of global trade we get an estimate for how much value of trade we get for each dollar we spend on fossil fuels.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4KWH01Vv6Dopvqj19ASHs2h2IiGi4DRET66ICQMSHZWtrmqOKbWmt9F92EpExNFBypvHvn7eyDE-NH2GVFzEYeg4frgYE7W3v6HToO8qX1CXYGtUGMQ6-W8sHT0a3pRGqvPggKCShBRo/s1600/The+Energy+Efficiency+of+Global+Trade+Peaked+in+1998.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="247" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4KWH01Vv6Dopvqj19ASHs2h2IiGi4DRET66ICQMSHZWtrmqOKbWmt9F92EpExNFBypvHvn7eyDE-NH2GVFzEYeg4frgYE7W3v6HToO8qX1CXYGtUGMQ6-W8sHT0a3pRGqvPggKCShBRo/s400/The+Energy+Efficiency+of+Global+Trade+Peaked+in+1998.jpg" width="400" /></a></div>
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Unfortunately, this analysis shows us that the value of global trade we get for each dollar spent on fossil fuels peaked in 1998 and has been declining since. In essence, we are becoming less and less efficient in our use of fossil fuels at a time when we should be getting more and more efficient. This is bad news for cornucopian economists who believe that energy efficiency will save our global economy from peak oil. Despite ever-higher oil prices over the last decade, it seems that we have become unable to increase the energy efficiency of global trade. If we can't increase our global trade per barrel in the face of higher oil prices, perhaps this shows that reaching "peak everything" will indeed lead to "the end of growth."</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-71113944942849359992013-07-22T10:09:00.003-07:002016-11-14T11:23:59.493-08:00Global Oil Dashboard - Q2 2013<script type='text/javascript'>
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Here is the second installment of the of the "global oil dashboard" for Q2 2013. I created this tool to help me track the key quantitative indicators of peak oil. Oil is a finite resource and peak oil will happen eventually. Because some experts, such as the Energy Watch Group, believe that <a href="http://www.energywatchgroup.org/fileadmin/global/pdf/EWG-update2013_long_18_03_2013.pdf" target="_blank">peak oil is happening right now</a>, I want to keep track of these indicators on a real-time basis to determine whether we are indeed passing peak oil. I designed this dashboard to be mostly automated, in order to allow me to easily update it on a quarterly basis. This dashboard also allows me to keep track of the performance of various "peak oil proof" investments to determine whether my investment hypotheses are correct. The dashboard is best viewed as a PDF - <a href="http://www.scribd.com/document_downloads/155349548?extension=pdf&from=embed&source=embed" target="_blank">Click here to download the PDF</a>.</div>
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<a href="http://www.scribd.com/doc/155349548/Global-Oil-Dashboard-Q2-2013-Will-Martin-Peakoilproof-com" style="text-decoration: underline;" title="View Global Oil Dashboard - Q2 2013 - Will Martin - Peakoilproof.com on Scribd">Global Oil Dashboard - Q2 2013 - Will Martin - Peakoilproof.com</a></div>
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The text of the PDF is as follows:</div>
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Page 1: Global Peak Oil Summary</h3>
<b>Supply</b><br />
The global rate of oil production is up slightly year-over-year. However, during the same period global net exports of oil declined. Production gains in Russia, the US and Canada are just barely offsetting production declines in Norway, UK, Latin America and the Middle East. Global supermajor production continues to fall. Based on this data, we are likely still on the "bumpy plateau" of peak oil and have likely passed "peak oil exports."<br />
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<b>Demand</b><br />
Global oil consumption was up slightly year-over-year with almost growth coming from the developing world. The developed world continues to fall from its "peak oil demand" peak. The economies of the developed world are shrinking on a relative basis to the global economy. Europe is officially in a double-dip recession. GDP growth remains strong in Asia and the developing world. In Q1 2013 China overtook the US as the world's largest oil importer - the first time the top spot has changed hands in 41 years.<br />
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<b>Price</b><br />
The price of Brent crude oil has been volatile and fell nearly 10% year-over-year, but remained well above historical averages. Prices in futures and options markets seem to indicate a belief that oil prices will continue to fall, possibly due to slowing global economic growth. The global money supply rose over 6% year-over-year as central banks pumped more money into their economies, but a falling velocity of money from economic stagnation has so far kept inflation from pushing up oil prices in real terms.<br />
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Page 2: Oil Supply: Global Oil Production Rates</h3>
The global oil production rate is up slightly year-over-year but has slowed since Q1 2013. The growth rate of the global oil production rate has been declining for nearly 30 years and is well below its 1986 peak. Major improvments in production rates in the past year have occured in the United States, Canada, Russia, China and West Africa. US oil production increased dramatically due to shale fracking, helping to offset the decline in production from Alaska and the Gulf of Mexico. Lybia experienced major production rate gains as it ramped back up following the Arab Spring.<br />
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Page 3: Oil Supply: Export Supply</h3>
The Top 10 Oil Exporting Countries Represent 81% of World Oil Export Supply<br />
Global oil exports remain relatively flat year-on-year but are still down about 3 MMBPD from their peak in 2004. Six of the top 10 oil exporting nations are now experiencing 5-year net export rate declines. Saudi Arabia, Nigeria, Venezuela, Norway and Libya are all seeing lower rates of net exports. This decline has been somewhat offset by huge increases in oil exports from Iraq and Canada. Total liquid production rates continue to decline for the Supermajors. Overall, global net oil exports do not appear to be responding to record-high oil prices, signaling that we may be on the "bumpy plateau" of peak oil and may have passed the point of "peak oil exports.<br />
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Page 4: Oil Supply: Export Supply: News Summaries</h3>
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<b>Russia Q2 2013 News</b><br />
In Q2, Russian oil production continued past its a post-Soviet record achieved in Q1 2013. Russia is now the worlds largest oil producer and world largest oil exporter.<br />
In Q1 China passed Europe to become Russia’s number one oil market. In Q2, the Sino-Russian energy relationship grew even stronger. Russia announced that China National Petroleum Corp will begin exploring for Arctic oil in Russian waters alongside Rosneft. Rosneft then signed a 25 year agreement to deliver 365 million tons of oil to China - one of the largest oil deals in history.<br />
Russia gave temporary asylum to US whistleblower Edward Snowden - harming US-Russian relations.<br />
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<b>Saudi Arabia Q2 2013 News</b><br />
Export cannibalization continues to grow in Saudi Arabia. The Saudis have 3 new refineries under construction that will reduce net exports by 1.2 million BPD in 2017. In Q2, Saudi Arabia passed Germany in total oil consumption.<br />
Perhaps indicating Saudi Peak Oil is imminent, Saudi Arabia's Oil Minister Ali Al-Naimi was quoted as saying ""We don’t really see a need to build a capacity beyond what we have today.""<br />
Stability remains precarious: oil revenue accounts for 93% of revenue for the Saudi government, which now needs $94/bbl oil to balance their budget. Based on actuarial tables, the 88-year old King Abdullah has a 15% chance of dying in the next year.<br />
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<b>Iraq Q2 2013 News</b><br />
1/2 of Iraqi oil exports now go to China. Chinese oil companies are increasingly displacing US ones.<br />
Chaos continued in many parts of the country with car bombs going off on an almost daily basis. 1000 Iraqis were killed in attacks in May. Southern Iraq is on the verge of a Sunni-Shiite civil war.<br />
Kurdistan began exporting oil directly to Turkey, bypassing the federal Iraqi government completely. In Q2 a brigade of Iraq’s Kurdish troops defected to Kurdistan, further hurting relations. Turkey recently completed a new pipeline to Northern Iraq and signed an agreement Turkey to develop Iraqi oil fields.<br />
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<b>United Arab Emirates Q2 2013 News</b><br />
In Q2 UAE oil minister Suhail Al Mazrouei declared that the ""Days of Easy, Cheap Oil are Gone"" and announced that the country would begin constructing nuclear power plants to provide 25% of its electricity by 2021.<br />
In Q1 the UAE opened the world’s largest solar plant, named Shams 1.<br />
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<b>Kuwait Q2 2013 News</b><br />
Kuwait announced that it plans to spend $56 billion over the next 5 years to raise production by 650,000 bpd by 2020.<br />
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The Kuwaiti central bank announced that its economy would likely grow at just 1.9% in 2013 – slowing oil export cannibalization.<br />
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<b>Nigeria Q2 2013 News</b><br />
Nigeria’s oil production continues to fall, mostly as the result of vandalism and oil theft. Crude oil theft now costs the country $7 billion annually. Attacks on pipelines and offshore rigs and hijackings of tankers continues. A nationwide blackout hit the country in May. Nigeria's rebel MEND group, which frequently attacks oil infrastructure, announced it would begin attacking mosques.<br />
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Nigeria's government continues to fight Islamist militants in the Northern provinces. Nigeria’s four main opposition parties formed a coalition, threatening President Goodluck Jonathan's hold on power.<br />
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<b>Venezuela Q2 2013 News</b><br />
In Q2 Nicolas Maduro was sworn in as president, following the death of Hugo Chávez on March 5th, 2013. Maduro will continue the oil industry policies of Chávez. Maduro's oil minister, Rafael Ramirez, repeated his assertion that $100/bbl should be the floor for oil prices.<br />
Venezuela announced a major currency devaluation in Q1. As of Q2, the country is on the brink of hyperinflation, with annualized inflation topping 20%. The government has begun rationing everything from toilet paper to chickens. Blackouts are becoming more common and hyperinflation could collapse Venezuela's economy, forcing down oil production rates.<br />
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<b>Norway Q2 2013 News</b><br />
Norway proves how relentless peak oil can be. Oil production continues to plummet; passing a 25-year low this year. The state of Texas now produces more oil than the country of Norway. Over the past 11 years, Norway has fallen from the world's 7th largest oil exporter to the world's 14th largest today.<br />
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The oil ministry announced that it expects production to continue to decline in 2013 and bottom out next year as new projects come online.<br />
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<b>Libya Q2 2013 News</b><br />
Oil production hit 70% of its pre-Arab Spring levels.<br />
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Bombings, kidnappings and assassinations continue to make the prospects of stability uncertain. Protests continue in Benghazi. In Q2 NATO sent a contingent of soldiers to help train Libyan government forces against militants aligning themselves with Al Qaeda.<br />
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<b>Canada Q2 2013 News</b><br />
Canadian oil production is up dramatically year-over-year. In Q2 Canada accounted for 38.7% of U.S. crude imports, the most ever by a single nation.<br />
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Oil sands production rose 13% during 2012 despite cost increases of more than 10% per year. Oil sands production could rise from 1.8 MMBPD today to 5.2 MMBPD by 2030 if it isn't hampered by climate change legislation or lower prices.<br />
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In March, 5,000 barrels of tar sands oil being delivered from Canada spilled from Exxon's Pegasus pipeline into a residential neighborhood in Arkansas.<br />
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Page 5: Oil Supply: Production Costs and Operating Profits</h3>
Production costs continue to increase for oil drilling. Despite record-high oil prices, these increasing costs are resulting in declining profits for oil majors<br />
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Page 6: Oil Supply: Global Oil Consumption Rates</h3>
Global oil consumption is up slightly year-over-year. Most consumption gains came from China, India, Japan, Brazil & Thailand. Consumption in the United States and Europe fell over the same period.<br />
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Page 7: Oil Demand: World Relative GDP Growth Rates</h3>
The global economy grew slightly in real terms year-over-year. As measured in oil or gold (as opposed to Dollars) the world's economy is growing strongly. Most of this growth came from the developing world and in particular from Asia. The GDP of the developed world fell in relative terms, as measured by its share of total world GDP. All of Europe and North America experienced negative real GDP growth year-over-year.<br />
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Page 8: Oil Demand: Global Oil Import Demand</h3>
The Top 5 Countries/Regions (US, EU, China, Japan & India) Represent 52% of World Oil Import Demand<br />
For the top oil importing countries, GDP continues to increase but at a slowing rate. Almost all of Europe is now in a recession. Some countries, such as Greece and Portugal are in a severe recession. The economies of the United States and Japan are both growing on a real basis but shrinking on a relative basis to the rest of the world. Economic growth remains robust in China and India, propping up global oil import demand, pushing the date of global peak oil closer.<br />
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Page 9: Oil Demand: Global Oil Import Demand: News Summaries</h3>
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<b>China Q2 2013 News</b><br />
In 2013 China overtook the US as the world’s largest net oil importer - a spot the US had held since 1972. Chinese car sales rose 20% year-over-year, but China’s economy grew at its slowest rate in 13 years as exports fell. In April, a short-lived cash crisis hit the country.<br />
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China signed a major gas deal with Russia to import natural gas from Russian fields. Russia also announced that it would double its exports of oil to China. China awarded contracts to 16 companies to drill in China’s shale gas reserves, but not a single one has ever drilled a gas well before. So far China has drilled 60 shale wells and they have all come up dry.<br />
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China is the world's largest emitter of carbon dioxide and at current pace will produce 4 times more CO2 than the US by 2020. Air pollution levels in Beijing went literally off the scale in Q1 2013. Not coincidentally, China’s coal consumption levels reached a record high. China now burns as much coal as the rest of the world combined. It is estimated that 1.2 million Chinese die a year from the horrendous air pollution. In March 16,000 dead pigs were found floating down the river that supplies drinking water to Shanghai.<br />
In Q1 Chinese Premier Wen Jiabao called for action to alleviate the pollution and tax minister Jia Chen announced that China would introduce a carbon tax. In Q2, China announced it will begin setting up a carbon trading market. China continued to pull ahead as the world leader in renewable energy. Wind power overtook nuclear power in China, producing 2% more electricity overall. For 2013, China announced it will install more than 5 times more wind power than nuclear power and more than 3 times more solar power than nuclear power. China now installs three times more solar each year as the United States – accounting for a third of the total world solar panels installed each year.<br />
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China announced plans to build a second aircraft carrier and Hong Kong, a Chinese protectorate, gave temporary asylum to US whistleblower Edward Snowden - harming US-China relations.<br />
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<b>United States Q2 2013 News</b><br />
In Q1 US oil production reached a 20-year high, hitting 7 million bpd for the first time since March 1993. Meanwhile, the US has almost certainly passed “peak oil demand.” US oil demand dropped to an 18-year low and us oil imports fell to their lowest level in 25 years. Gasoline consumption is at its lowest level since 2004. In Q1 Obama’s State of the Union address specifically endorsed the McCain/Lieberman cap and trade bill; If climate change legislation is enacted, US oil demand would drop further. <br />
While shale oil production rose dramatically, all other forms of US oil fell. US Gulf of Mexico oil production continued to decline off its 2009 peak. Production from Alaska’s North Slope continues to fall from its 2002 peak and was down 8% year-over-year. Shell Oil gave up on the 2013 Arctic drilling season after its oil rig, the Kulluk, ran aground in Alaska. Worryingly, the Bakken shale oil boom in North Dakota may be slowing down, with the initial productivity of new wells dropping. Companies are shifting their focus to California’s Monterey shale, where they may face heavy environmentalist opposition.<br />
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In Q2 Obama announced a series of executive actions designed to address Climate Change, including limitations on carbon emissions from existing power plants, increased appliance efficiency standards and promotion of renewable energy development on public lands. Renewable energy in the US continues to grow with solar capacity increasing 76% year-over-year. Obama announced Ernest Moniz, a supporter of fracking, as his nomination for Secretary of Energy. Obama also announced Gina McCarthy, a former Mitt Romney aide, as his pick to head the EPA. In Q2 the EPA announced its new ""Tier 3"" gasoline regulations which will bring US sulfur requirements in line with California's.<br />
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The Federal Reserve has keep interest rates near 0% for four years and has tripled its balance sheet by continuing pump $85 billion each month into the economy. In Q2 FED Chairman Ben Bernanke announced plans to "taper" such money printing; the market reacted swiftly to the negative and Bernanke quickly reversed his rhetoric.<br />
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<b>European Union Q2 2013 News</b><br />
Europe was officially in a double-dip recession in Q1 2013, shrinking by 0.6%. Greece’s economy shrunk by 6.4% year-over-year. Unemployment in the Eurozone rose to 12% - the highest level since the Eurozone was created in 1999. Europe has passed “peak oil demand”, with oil demand now down 2 million BPD from 7 years ago. In Q2 US exports of diesel to Europe hit a 23 year high. The EU now produces 13% of its energy from renewable sources.<br />
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In Q1 Cyprus announced a one-time bank levy on all Cypriot bank accounts on March 15th as part of a €10 billion bailout. A panicked bank run ensued and the government was forced to close all banks for 12 days. The government reopened its banks after it promised not to confiscate money from accounts smaller than €100,000.<br />
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In Italy, the government will likely remain in political gridlock after parliamentary elections split three ways, leaving no party in a position to govern.<br />
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<b>Japan Q2 2013 News</b><br />
Japan remained in a recession, with its economy contracting for the third straight quarter. The escalating rhetoric between Japan and China over the Senkaku islands cooled when Japan’s new prime minister Shinzō Abe send a letter to Chinese president Xi Jinping, expressing his interest in a peaceful resolution. The new prime minister also announced he would approve the construction of new nuclear reactors – a complete 180 from former Prime Minister Yoshihiko Noda, who planned to shut down all Japanese nuclear power plants by 2040. Japan announced it would begin restarting its idled nuclear power plants by the end of 2013 but in Q2 announced it would be impossible to restart the plants on schedule. New safety regulations are expected to shut down 10 more nuclear reactors.<br />
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In Q1 2013, after spending $700 million on the decade-long project, Japanese scientists announced that they had successfully extracted natural gas from subsea methane hydrates.<br />
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<b>India Q2 2013 News</b><br />
In Q1 India became the 4th largest oil consumer after China, the US and Russia. Meanwhile, India’s oil production rate fell 4% year-over-year. Amidst continued electricity shortages, Indian coal imports fell 11% year-over-year. In Q1 the Indian government announced that it would raise gasoline and diesel prices as it continues to slowly phase out fuel subsidies.<br />
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In Q2 Prime Minister Manmohan Singh announced plans to double India's renewable energy generation by 2017.<br />
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Page 10: Oil Prices</h3>
Global oil pries are down year-over-year. This 1-year and 2-year trend of declining oil prices has reversed the 5-year and 10-year trends of rising oil prices. Both Brent and WTI crude oil futures are in backwardation, indicating that traders expect the price of oil to fall in the future. This backwardation benefits investors who take long positions in futures ETFs (like DBO & OIL), as there is no negative “roll yield," like when oil is in congtango. The commitment of speculative traders and the difference in expected payoffs from put and call options contracts, however, tell us that traders believe that a price drop is le3ss likely than a price rise over the long term.<br />
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Page 11: Oil Demand: Money Supply Growth Rates</h3>
While supply and demand fundamentals affect the real price of oil, currency fluctuations affect its nominal price. The money supply for most countries continues to grow at unprecidented rates as central banks attempt to prop up their economies. For countries in the midst of severe recessions, such as Portugal and Ireland, the money supply is shrinking significanty, risking a deflationary spiral. Venezuela is in the opposite position, on the brink of hyperinflation, which could collapse the country's economy and severely harm the global oil export market. The global money supply is up over 6% year-over-year. This increase in money supply, however, has not resulted in severe inflation, as the velocity of money continues to shrink by over 3% per year.<br />
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Page 12: Peak Oil Proof Portfolio Investments</h3>
The Peak Oil Proof Portfolio rose in value year-over-year but underperformed the overall equity market. This could be expected as the global oil production rate has not yet peaked. The biggest winners were timber, industrials, health care, media, global real estate. Clean Energy gained significantly year-over-year but is still down on a 5-year basis. The biggest losers were precious metals and zero-coupon bonds. Q2 2013 saw a major crash in gold prices and rising interest rates (spured on by FED talk of "tapering") caused bond prices to fall. Outside of the portfolio, railroads, car sharing and bitcoins all has dramatic gains. Bitcoins had a dramatic bubble and bust in Q2 2013, but are still up over 1000% year-over-year.</div>
Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-775349832855083382013-06-13T13:10:00.001-07:002016-11-14T11:21:43.808-08:00Chasing Yields<script type='text/javascript'>
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Baby boomers who are retired or close to retirement are finding themselves without a lot of options for "safe" income-generating investments these days. Over the past 60 years the classic 50%/50% stock/bond portfolio has yielded a combined annual income from dividends and bond coupons of about 4%. A retiree with a $1 million portfolio could look forward to a comfortable $41,000 a year in income before any drawdowns to their portfolio. Over the past 15 years, however, the situation has changed dramatically. Today, that same portfolio would yield just $19,800 per year - half what most retirees had been expecting. When the returns are charted out, it becomes blatantly obvious why retirees today are desperately chasing yields: </div>
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<b>The Bond Bubble</b></div>
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Thanks to the Federal Reserve's Zero Interest Rate Policy (<a href="http://en.wikipedia.org/wiki/Zero_interest-rate_policy" style="color: #1155cc;">ZIRP</a>), treasury bonds are now returning their lowest yields in history. Bond prices and bond yields are inversely proportional. With interest rates having nowhere to go but up, bond prices have nowhere to go but down. Retirees holding a majority of their wealth in bonds could see their principle cut by a significant amount as interest rates rise. This bond bubble could continue on for years, but eventually it will burst.</div>
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The rise in bond rates could occur in a few ways. First, the Federal Reserve could raise rates if they believe that the economy is on a sustainable recovery. Fed Chairman Ben Bernanke's recent allusion to this caused bond rates to immediately <a href="http://www.businessweek.com/news/2013-06-13/bernanke-s-tapering-talk-backfires-amid-surge-in-bond-yields" style="color: #1155cc;">surge</a>.</div>
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A second way that bond rate could rise is through reduced confidence in the ability of the US government to pay their debt. On <a href="http://www.nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html?_r=0" style="color: #1155cc;">August 5, 2011</a>, Standard & Poor's, one of the "<a href="http://en.wikipedia.org/wiki/Big_Three_(credit_rating_agencies)" style="color: #1155cc;">big three</a>" ratings firm, downgraded the US Government's credit rating for the first time in history. Ratings firm Egan-Jones has cut the US government's credit rating <a href="http://www.bloomberg.com/news/2012-09-14/egan-jones-cuts-u-s-rating-to-aa-after-fed-adds-to-stimulus.html" style="color: #1155cc;">three times</a> over the past few years over concerns with the Federal Reserve's quantitative easing.</div>
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A third way that bond rates could rise is if China decides to stop buying US debt. China is currently the largest foreign buyer of treasury securities and has <a href="http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt" style="color: #1155cc;">$1.2 trillion</a> in holdings. If China began cutting back on its purchases, or worse, began selling its existing holdings of US bonds, interest rates would rise significantly.</div>
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This combination of historically low interest rates and the inevitability of lower future bond prices has caused many analysis to begin calling US treasury bonds "return free risk" (a play on "<a href="http://en.wikipedia.org/wiki/Risk-free_interest_rate" style="color: #1155cc;">risk free return</a>" - the role that treasury bonds have historically played). Clearly it doesn't pay to be in bonds right now.</div>
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<b>The Search for Yield</b></div>
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As treasury yields have plummeted to historic lows, investors have set out on a quest for higher yields in fixed income securities.</div>
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The first methods for finding higher yields is investing in longer maturity bonds. Instead of buying 10-year treasury bonds with a <a href="http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/Historic-Yield-Data-Visualization.aspx" style="color: #1155cc;">2.25%</a> interest rate, retirees may now be investing in 30-year treasury bonds with a <a href="http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/Historic-Yield-Data-Visualization.aspx" style="color: #1155cc;">3.37%</a> interest rate. The problem with this approach is that the prices of longer maturity bonds are more highly leveraged against interest rates. When interest rates rise, as they inevitably will, people holding 30-year bonds will get burned far worse than people holding 10-year bonds.</div>
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A second method of finding higher bond yields is to move into riskier bonds. Instead of buying treasury bonds, retirees may park their money in corporate bonds, municipal bonds or even junk bonds. While the yields of these bonds may be higher, the risk of default is higher as well. If the economy enters into another severe downturn, many companies and cities could enter bankruptcy, leaving bond holders with nothing.</div>
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A third path to higher bond yields it to look internationally. Just as with the other options, this one carries increased risk. Buying foreign bonds exposes the investor not only to the sovereign default risk of the country they are buying from but also to risk of currency fluctuations between their home currency and the currency that the bond is denominated in. Nevertheless, many investors are beginning to look overseas for increased bond yields. For investors worried about peak oil, it is possible to buy government bonds from 5 of the top 10 oil exporting nations: <a href="http://www.tradingeconomics.com/russia/government-bond-yield" style="color: #1155cc;">Russia</a>, <a href="http://www.tradingeconomics.com/nigeria/government-bond-yield" style="color: #1155cc;">Nigeria</a>, <a href="http://www.tradingeconomics.com/venezuela/government-bond-yield" style="color: #1155cc;">Venezuela</a>, <a href="http://www.tradingeconomics.com/norway/government-bond-yield" style="color: #1155cc;">Norway</a>, and <a href="http://www.tradingeconomics.com/canada/government-bond-yield" style="color: #1155cc;">Canada</a>. As we pass peak oil and oil continues to get more expensive, government revenues should continue to increase for these countries, ensuring that they can avoid sovereign default while oil importing nations like Japan and the United States struggle. Buying Nigerian 10-year government bonds, for example, can land you a whopping <a href="http://www.tradingeconomics.com/country-list/government-bond-10y" style="color: #1155cc;">14.4%</a> yield today. For investors simply wishing to reduce their exposure to US default risk, Canada and Norway 10-year bonds have about the same return as US treasury bonds but with arguably a much lower risk of default.</div>
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<b>The Need for Yield</b></div>
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While the income from a typical 50/50 stock/bond portfolio has fallen by half over the past 20 years ago, many retirees are also finding that the cost of living in retirement has risen sharply over the same period. The price of gasoline, for example, has doubled over the past decade.</div>
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If you wanted to hedge against the cost of driving, you could buy 1300 shares of ExxonMobil stock and over the past 20 years the dividends you would have received would have almost perfectly offset the increases in the price of the gasoline you purchased each year. The problem is, it would have cost you just $12,000 in 1993 to buy 1300 shares of ExxonMobil stock, but in 2013 you'd have to spend nearly $110,000!</div>
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We may not be at peak oil yet, but we are certainly feeling the effects.</div>
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<a href="http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/" style="color: #1155cc;">Food prices have also doubled</a> over the past decade. Because each calorie of food we eat requires <a href="http://www.amazon.com/Eating-Fossil-Fuels-Coming-Agriculture/dp/%200865715653" style="color: #1155cc;">10 calories of hydrocarbon energy</a> to produce, it is no wonder that the rise in oil prices nearly is nearly perfectly correlated to the rise in food prices.</div>
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Combined with declining investment income, these rising costs of living are pushing retirees further in search of investment yields.</div>
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<b>A Stock Bubble?</b></div>
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Without any good option in bonds, many investors have sought out yields in other asset classes, like annuities, royalty trusts, master limited partnerships and real estate investment trusts. All of these asset classes, however, usually carry increased risk of default and price volatility. In the case of annuities, investors face serious counter-party risks -- people holding Lehman Brothers annuities before the last crisis are lucky if they got anything following the bankruptcy.</div>
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This leaves investors with just one place left to go for increase yields: stocks. With retirees desperate for income and the value of treasury bonds certain to plunge at some point in the future, it is no wonder that investors are pouring their money into equities in the hope of receiving dividend income. By doing so, however, these investors are simply piling on more risk. Not only does the underlying value of stocks tend to swing far more wildly than bonds, but unlike the coupon of a bond, which you're guaranteed to get as long as the bond issuer doesn't default, continued high dividends from companies are far from a sure bet. If we enter another downturn, dividends could fall as companies try to shore up their balance sheets. </div>
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Despite these risk, investors continue to pile into stocks in the quest for higher yields. I believe that this reality helps explain why the stock market continues to hit record highs as the real economy continues to drag along with high unemployment and near zero real growth. I certainly don't have a crystal ball, but I do have an uneasy feeling about the current "recovery" here in the United States.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-53921598615517743642013-05-23T09:32:00.001-07:002016-11-14T11:18:29.694-08:00The Core Peak Oil Debate: Speed and Scale<script type='text/javascript'>
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I just got finished reading Ramez Naam's new book "<a href="http://www.amazon.com/gp/product/161168255X/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=161168255X&linkCode=as2&tag=peaoilproyoup-20" target="_blank">The Infinite Resource</a>." The first part of the book is a great overview of peak oil and climate change. He accurately describes the gigantic nature of a both problems and the potentially massive negative consequences we face as a society from them. He's clearly done his homework and gives a lot of examples of how these issues are affecting us all right now.<br />
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He also does a good job framing the climate change debate and walking through the real issues that are currently being debated (like whether peak oil will stop climate change and what level of atmospheric carbon dioxide we should consider "safe") while knocking down the "red herring" debating points (like whether humans are causing climate change).<br />
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On page 96 he finally gives us <b>his main thesis</b>: that <b>we can solve the issues of peak oil and climate change with technology, innovation and substitution</b>. He goes on to back up this assertion by showing many different ways in which technology is improving renewable energy, food production and sea water desalination.<br />
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On page 175 he <i>finally </i>addresses the main issue of the peak oil debate: <b>Speed and Scale</b>. His whole thesis (that the issues of peak oil and climate change will be solved by technology, innovation and substitution) is dependent on innovation improving renewable energy technology at a fast enough rate to allow us to offset the energy lost through fossil fuel depletion at a speed and scale necessary to avoid collapse. <b>That is the core issue of the peak oil debate: will we be able to substitute renewable energy fast enough to make up for declining rates of fossil fuel production?</b><br />
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Naam is supremely confident that technological innovation in renewable energy will occur at a fast enough pace to allow us to both overcome the pace of fossil fuel depletion once we pass peak oil, peak gas and peak coal, but <b>also </b>that the rate of technological innovation will occur fast enough to allow renewable energy technologies to continue to ramp up to tremendous scale in the face of <b>other limits</b> like the limits of available "high potential" locations for wind and solar, the limits to speed and scale of the required electrical transportation infrastructure, the limits of available skilled manpower to build out that infrastructure at a fast enough pace, the depletion of required resources (peak rare earth metals, peak copper, peak silver) required to build out that infrastructure, the backlash of Jevon's Paradox to increases in efficiency, the potential decline in available capital should peak oil push us into another recession through another oil price spike and the potential social backlash (NIMBYism) to the massively ramped up scale of renewable energy infrastructure.<br />
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<b>My argument </b>is because of all of these limits, it is unlikely that we will be able to ramp up renewable energy generation and the electrification of transportation fast enough to offset the decline in available energy once we pass peak oil. The consequences of this shortfall are what worry me most. Naam's optimism that "technology" will solve the problems of peak oil and climate change by allowing us to seamlessly switch from from fossil fuels to renewables is, in my opinion, dangerous. Optimism breeds complacency. By telling readers that "innovation" will solve all of our problems, people can put down the book and go back to their normal lives without making the dramatic changes required to make themselves more resilient and to move us all towards a more sustainable future. This kind of optimism causes people to say "well this guy says there are some smart scientists out there working to fix the problem, so I guess I don't have to worry about peak oil and climate change."<br />
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Perhaps our difference in opinions comes from the fact that my professional experience is in the energy industry -- where projects take billions of dollars and years to ramp up to scale -- and Naam's professional experience is in the technology industry (specifically at Microsoft) -- where new software can be developed overnight on a shoestring budget and ramp up to infinite scale with little cost and few "real world" obstacles. Unfortunately, our global energy infrastructure isn't made out of bits and bytes, it's made out of iron and steel (and copper and rare earth metals). Energy projects can't be ramped up overnight. Engineering lead times for renewable energy projects can take a decade. We have trillions of dollars of capital stock (cars, airplanes, trains, farming machinery) locked up in technologies that are dependent on oil. Every car, every airplane, every train and every farm tractor has a usable life. In the case of a farm tractor, that usable life may be in the decades. Rolling over this multi-trillion-dollar capital stock is going to be an extremely slow process. It will take decades and trillions of dollars to switch our transportation infrastructure away from oil and on to renewable electricity and biofuels. Unfortunately, with peak oil staring us in the face, we do not have decades to solve the problem. With atmospheric carbon dioxide levels <a href="http://articles.washingtonpost.com/2013-05-10/national/39164136_1_carbon-dioxide-pieter-tans-charles-david-keeling" target="_blank">passing 400 ppm this month</a> and with <a href="http://science.time.com/2013/01/29/the-scariest-environmental-fact-in-the-world/" target="_blank">China now burning more coal than the rest of the world combined</a> (making any carbon reduction the developed world does a moot point), we certainly don't have decades to fix our climate change problem. You can't simply wish away these problems with optimism about "innovation."<br />
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The consequences of this kind of unhinged optimism are perhaps more serious in the investing world. When deciding how to invest in the future of energy, we need to balance our optimism for technological innovation with our pessimism that the limits to innovation won't allow us to substitute away from fossil fuels fast enough to avoid collapse as we begin seeing a post peak oil decline. The key here is deciding how much optimism we should have. With most activities in life, it pays to be an optimist: sports, love, friendships, philanthropy, work, etc. But with investing, it arguably pays to be a pessimist, or at least to walk the line between pessimism and optimism. Optimists ignore investment risks and get burned. Pessimists see those investment risks, weigh them and decide to invest in ways that expose their portfolios to the upside while hedging the downside risk. In the world of peak oil, all of these risks will increase dramatically.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-90821230107149531832013-05-17T11:58:00.000-07:002016-11-14T11:15:25.354-08:00Global Oil Dashboard - Q1 2013<script type='text/javascript'>
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Introducing the "global oil dashboard." I created this tool to help me track the key quantitative indicators of peak oil. Oil is a finite resource and peak oil will happen eventually. Because some experts, such as the Energy Watch Group, believe that <a href="http://www.energywatchgroup.org/fileadmin/global/pdf/EWG-update2013_long_18_03_2013.pdf" target="_blank">peak oil is happening right now</a>, I want to keep track of these indicators on a real-time basis to determine whether we are indeed passing peak oil. I designed this dashboard to be mostly automated, in order to allow me to easily update it on a quarterly basis. This dashboard also allows me to keep track of the performance of various "peak oil proof" investments to determine whether my investment hypotheses are correct.<br />
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-10758224307704126542012-12-04T19:21:00.001-08:002016-11-14T11:12:24.380-08:00Investing for the End of Cheap Oil - ASPO-USA 2012 Conference<script type='text/javascript'>
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My speech on "Investing for the End of Cheap Oil" at the 2012 Association for the Study of Peak Oil and Gas ASPO-USA conference in Austin, Texas.</div>
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<a href="http://www.youtube.com/watch?v=1a-0nFerIAI">http://www.youtube.com/watch?v=1a-0nFerIAI</a></div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-66074717824744961532012-11-25T09:54:00.000-08:002016-11-14T11:08:40.471-08:00Shale Fracking - Energy Independence or Ponzi Scheme?<script type='text/javascript'>
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<span style="white-space: pre;"> </span>Over the past few years, the hype over horizontal multistage hydraulic shale fracturing, or “fracking”, has grown louder and louder. During the 2012 election, both candidates focused heavily on the technology. <a href="https://my.barackobama.com/page/content/newenergy_more" target="_blank">Barack Obama promised to increase permitting on federal lands for fracking</a>. <a href="http://www.mittromney.com/sites/default/files/shared/energy_policy_white_paper_8.23.pdf" target="_blank">Mitt Romney made fracking a cornerstone of his energy policy</a>, promising that it would allow us to “achieve North American energy independence by 2020.” Citigroup, <a href="https://www.citigroupgeo.com/pdf/SEUNHGJJ.pdf" target="_blank">in a paper playing up shale drilling</a>, announced that peak oil was dead, saying “The concept of peak oil is being buried in North Dakota, which is now leading the US to be the fastest growing oil producer in the world.” Following these pronouncements, <a href="http://www.iea.org/publications/freepublications/publication/English.pdf" target="_blank">the International Energy Agency</a> stated that the United States would overtake Saudi Arabia in oil production by 2020. According to the IEA, this massive projected increase in production will come as the result of increasing shale oil extraction. With all of this hype over shale fracking, it’s worth looking into the possible future of the technology.
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<span style="white-space: pre;"> </span>The most talked-about shale oil play right now is the Bakken formation in North Dakota. The Bakken formation isn’t really an “oil” formation in the way that most people think about it. The formation actually holds oil that is stuck in a layer of sandstone 10,000 feet underground that has <a href="http://pubs.usgs.gov/pp/p1653/p1653.pdf" target="_blank">extremely low porosity and permeability</a>. This layer of oil-bearing sandstone is in turn sandwiched between two layers of shale. In order to extract oil from this low porosity sandstone, oil companies must drill about 10,000 feet down and then drill multiple long lateral wells. After they’ve drilled these laterals, they must hydraulically fracture the wells in multiple stages, <a href="http://www.eprinc.org/pdf/EPRINC-BakkenBoom.pdf" target="_blank">between thirty and forty times per well</a>. The water needed for this fracking amounts to about <a href="http://www.hydraulicfracturing.com/Water-Usage/Pages/Information.aspx" target="_blank">4.5 million gallons per well</a>. At <a href="http://watfordcitynd.com/?id=10&nid=1380" target="_blank">between 1,450 to 2,940 wells per year</a>, that’s 9.9 billion gallons of water per year.<br />
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<b>Concerns of Fracking Opponents</b></div>
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<span style="white-space: pre;"> </span><a href="http://www.gwpc.org/e-library/documents/general/State%20Oil%20and%20Gas%20Regulations%20Designed%20to%20Protect%20Water%20Resources.pdf" target="_blank">Between 0.5% and 2%</a> of hydraulic fracturing fluid is composed of dozens of chemicals, such as hydrochloric acid and benzene, that are used to improve the flow rates of the oil and gas through the fractures. Many of these chemicals are <a href="http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1038&context=wmelpr&sei-redir=1" target="_blank">toxic to humans and animals</a> and can potentially cause <a href="http://democrats.energycommerce.house.gov/sites/default/files/documents/Hydraulic%20Fracturing%20Report%204.18.11.pdf" target="_blank">nervous system disorders and cancer</a> if people are exposed to them. Contrary to popular belief, most contamination of well water happens from the surface, through accidents, negligence and criminal conduct like illegal dumping, rather than from migration of fluids from the fracked well below to the surface. Hydraulic fracturing can <a href="http://www.businessweek.com/news/2012-06-05/fracking-trucks-hauling-sand-subject-to-workday-limit-u-dot-s-dot-says" target="_blank">require 1,000 truckloads of water</a>, chemicals and other materials per well. Since most hydraulic fracturing fluid is transported by semi-trucks on public highways, <a href="https://www.google.com/search?q=fracking+fluid+spill" target="_blank">spills can happen</a> as a result of collisions and accidents. Since hydraulic fracturing began, Pennsylvania’s Department of Environmental Protection found that <a href="http://www.scientificamerican.com/article.cfm?id=wastewater-sediment-natural-gas-mckeesport-sewage" target="_blank">improper chemical disposal has contaminated the water of 350,000 people</a>.</div>
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<span style="white-space: pre;"> </span>The industry has attempted to quell opposition by disclosing the chemicals they use in hydraulically fractured wells on <a href="http://fracfocus.org/">fracfocus.org</a>, but according to Bloomberg, <a href="http://www.bloomberg.com/news/print/2012-08-14/fracking-hazards-obscured-in-failure-to-disclose-wells.html" target="_blank">energy companies have failed to disclose the chemicals used in 2/5th of the wells that they drilled</a>. In Texas, Oklahoma and Montana, <a href="http://www.bloomberg.com/news/print/2012-08-14/fracking-hazards-obscured-in-failure-to-disclose-wells.html" target="_blank">energy companies failed to disclose the data on toxic chemicals use in more than half of the wells fracked</a>. This failure of the industry to be fully transparent with their use of hazardous chemicals has led opponents to note that “<a href="http://business.financialpost.com/2012/08/15/is-fracfocus-just-a-fig-leaf-for-the-industry/" target="_blank">FracFocus is just a fig leaf for the industry</a> to be able to say they’re doing something in terms of disclosure”.</div>
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<span style="white-space: pre;"> </span>Moving forward, the key technical challenge is to make these chemicals safe enough that any of the inevitable future chemical spills won’t greatly impact human health. Halliburton is at the forefront of this effort, recently introducing its “<a href="http://www.halliburton.com/ps/default.aspx?pageid=4184&navid=93&AdType=JPTCSTC" target="_blank">CleanStim</a>” line of hydraulic fracturing fluids that are made entirely out of materials used in the food industry. Allegedly, both <a href="http://www.kunc.org/post/colorado-governor-addresses-fracking-and-water-concerns" target="_blank">the governor of Colorado and the CEO of Halliburton have drank the CleanStim fluid</a> to prove that it is safe. However, once the industry stops using toxic chemicals in their hydraulic fracturing fluids, opponents will likely just shift their focus to other concerns.</div>
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<span style="white-space: pre;"> </span>The main groundwater contamination that occurs from hydraulic fracturing is not contamination from the toxic fracking fluids, but rather contamination from natural gas escaping from the fracked wells. According to research by the National Academy of Science, <a href="http://www.pnas.org/content/early/2011/05/02/1100682108.full.pdf" target="_blank">85% of drinking water wells tested in the Marcellus shale region contained methane</a>. Wells that were within 1 mile of a natural gas hydraulic fracturing operation were 17 times more likely to be contaminated with methane. Worse still, the methane levels in the average well in a drilling area were above what government agencies define as “hazardous”, where the methane level could potentially lead to an explosion or asphyxiation of home occupants. By carbon-dating the methane they were able to determine that the methane was hundreds of millions of years old, and therefore caused by natural gas hydraulic fracturing, and not by natural methane production in the soil. Using an infrared <a href="http://www.flir.com/thermography/americas/us/content/?id=18296" target="_blank">FLIR</a> gas leak detection camera, Cornell scientists have captured video of <a href="http://www.youtube.com/watch?v=ov5nkkRDfGQ" target="_blank">clouds of methane being released from gas drilling sites during hydraulic fracturing</a>. This is why in movies like <a href="http://www.amazon.com/Gasland-Josh-Fox/dp/B0042EJD8A" target="_blank">Gasland</a>, people are able to light the water from their kitchen faucet on fire.</div>
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<span style="white-space: pre;"> </span>Air pollution is another major concern for the general public. According to a report by the Colorado School of Public Health, residents living within half a mile of wells that were being hydraulically fractured had a higher risk of exposure to <a href="http://frackingfreeireland.org/wp-content/uploads/2011/08/Human_health_risk_assessment_of_air_emissions1.pdf" target="_blank">cancer-causing volatile organic compounds</a> (VOCs) like <a href="http://www.iom.edu/~/media/Files/Activity%20Files/Environment/EnvironmentalHealthRT/2012-Apr-30/Adgate.pdf" target="_blank">benzene</a>. More studies certainly need to be done, but these preliminary results show that air pollution may be another major concern for local residents who oppose hydraulic fracturing.</div>
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<span style="white-space: pre;"> </span>Since there are currently very few natural gas pipelines set up from the new wells in North Dakota, and very few potential paying customers anywhere nearby, <a href="http://csis.org/files/attachments/111207_EnergySorensenPPT.pdf" target="_blank">most oil companies are currently flaring the gas</a> that is produced along with the oil there. This flaring causes significant air pollution, which in turn has significant effects on human health. Flaring releases NOx, CO2, CO, unburned hydrocarbons, particulate matter, polycyclic aromatic hydrocarbons and volatile organic compounds. <a href="http://siteresources.worldbank.org/EXTGGFR/Resources/578068-1258067586081/FlaringQA.pdf" target="_blank">According to the World Bank</a>, “Many of the substances emitted by flaring, incineration and venting can affect humans, animals, plants and the environment... there is no question that high enough concentrations of petroleum-related emissions could affect the respiratory health, vision and skin of humans and animals. Exposure to some VOC and PAH substances increases the likelihood of cancers. VOCs, NOx and particulate matter can cause smog. Sulphur dioxide and oxides of nitrogen can acidify soils and lakes and affect the growth of crops and forests.”</div>
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<span style="white-space: pre;"> </span>Earthquakes are another concern. In the scientific world, man-made earthquakes are known as “<a href="http://en.wikipedia.org/wiki/Induced_seismicity" target="_blank">induced seismicity</a>”, and it is generally agreed-upon by scientists that <a href="http://www.nature.com/news/method-predicts-size-of-fracking-earthquakes-1.9608" target="_blank">hydraulic fracturing can lead to induced seismicity</a>. More recently, empirical evidence has begun proving the link. A government report by the Oklahoma Geological Survey, found that there is <a href="http://www.ogs.ou.edu/pubsscanned/openfile/OF1_2011.pdf" target="_blank">evidence linking 50 earthquakes</a> in Garvin County, Oklahoma to hydraulic fracturing taking place there. Another study of hydraulic fracturing in the Bowland shale in the United Kingdom found that there is <a href="http://www.cuadrillaresources.com/wp-content/uploads/2012/02/Geomechanical-Study-of-Bowland-Shale-Seismicity_02-11-11.pdf" target="_blank">“strong evidence” that the earthquakes experienced in this region were the result of hydraulic fracturing</a>. Recently, the city of Basel, Switzerland experienced a large earthquake linked to fracking. The city is particularly concerned with earthquakes as in 1356, it was hit by a 7.1 magnitude event, <a href="http://en.wikipedia.org/wiki/1356_Basel_earthquake" target="_blank">the largest recorded earthquake in Central European history</a>, which destroyed most of the city. A report by the National Academies found that as drillers were hydraulically fracturing an underground rock formation for a geothermal project in 2006, “<a href="http://download.nap.edu/cart/download.cgi?&record_id=13355&free=1" target="_blank">more than 10,500 seismic events were recorded</a>”, culminating in a 3.4 magnitude <a href="http://esd.lbl.gov/files/research/projects/induced_seismicity/egs/baselfullriskreport.pdf" target="_blank">earthquake</a> that was “clearly felt by the local population”. These earthquakes can cause expensive structural damage to people’s homes and businesses and are the basis for further opposition to hydraulic fracturing.</div>
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<span style="white-space: pre;"> </span>Climate change is also a major concern of hydraulic fracturing. In the fall of 2011 I had lunch with Robert Howorth, a Cornell professor of Ecology and Environmental Biology, and discussed this issue at length with him. Howorth has recently become rather famous for his 2011 research paper, titled “Methane and the greenhouse-gas footprint of natural gas from shale formation”, which found that <a href="http://www.springerlink.com/content/e384226wr4160653/fulltext.pdf" target="_blank">electricity produced by natural gas derived from hydraulic fracturing is more damaging to the climate than electricity produced by coal</a>. This is due to the fact that methane is a far more potent greenhouse gas than carbon dioxide, and during the drilling, hydraulic fracturing and transportation of natural gas by pipeline, a large percentage of the methane is vented into the atmosphere. If the lifecycle greenhouse gas emissions of natural gas from fracked wells are really worse than coal, any future climate legislation will put an immediate halt to such activities.</div>
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<span style="white-space: pre;"> </span>In addition to the environmental concerns over hydraulic fracturing, there are also numerous concerns over the resource use of such activities. <a href="http://www.icis.com/Articles/2011/08/15/9485305/us-shale-boom-fuels-growth-in-proppants-market.html" target="_blank"> Each well requires approximately 5 million pounds of sand</a> and proppants to hold open the well after hydraulic fracturing has taken place. This means that <a href="http://www.wisconsinwatch.org/2011/07/31/sand-mining-surges-in-wisconsin/" target="_blank">11 billion pounds of sand need to be imported each year</a> into North Dakota from places like Wisconsin.</div>
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<span style="white-space: pre;"> </span>Getting the produced oil and gas from these fracked wells to market is another major challenge. For example, since there isn’t enough production capacity in the oil pipelines to get the Bakken oil out of North Dakota and the <a href="http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf?Open" target="_blank">Keystone XL Pipeline</a> is currently pending an environmental review, about <a href="http://www.businessweek.com/ap/financialnews/D9LUG0RG0.htm" target="_blank">20% of the oil is being exported by railroad tanker car</a>. The largest railroad in North Dakota, BNSF, is handling most of the traffic, which is <a href="http://www.msnbc.msn.com/id/33599744/ns/business-us_business/t/buffett-buying-burlington-northern-railroad/" target="_blank">benefitting Berkshire Hathaway</a> shareholders handsomely since Warren Buffett purchased the railroad in 2009.<br />
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<b>Decline Rates and the "Fracking Tredmill"</b></div>
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<span style="white-space: pre;"> </span>Perhaps the most important issue for shale wells is their jaw-dropping production decline rates. Unlike conventional oil wells, shale oil wells peak faster and have a faster decline rate after they’ve peaked. <a href="https://www.dmr.nd.gov/oilgas/presentations/ActivityandProjectionsWilliston2010-08-03.pdf" target="_blank">Production from Bakken shale wells falls off a cliff</a> after only the second month of production, <a href="http://peakoil.com/geology/bakken-production-visualization/" target="_blank">losing about 80% of the production capacity by the second year</a>. In June of 2011, <a href="http://www.nytimes.com/2011/06/26/us/26gas.html?pagewanted=all" target="_blank">hundreds of documents were leaked to the New York Times</a>, showing that the depletion rates for shale gas were substantially higher than those used by investors to model the investments and that as a result, “less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old”.</div>
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<span style="white-space: pre;"> </span>In the Bakken shale of Montana, oil production as of the summer of 2012 is <a href="http://business.financialpost.com/2012/08/10/tempering-u-s-shale-potential/" target="_blank">down 38% from its peak in 2006</a>. Bakken fields in Montana peaked just 6 years after they were first drilled and have <a href="http://business.financialpost.com/2012/08/10/tempering-u-s-shale-potential/" target="_blank">declined by a third in the 6 years since their peak</a>. It remains to be seen, but the much-hyped Bakken shale play in North Dakota could follow a very similar trend.</div>
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<span style="white-space: pre;"> </span>As you can see from the production curve of a typical Bakken oil well, the depletion rate is extremely high. Production peaks immediately and within just 6 months the well is running at half of its peak production rate. Within 5 years the well has produced half of its lifetime production and is running at a rate that is only 10% of its peak production rate. </div>
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<b><a href="http://solarplan.org/Research/Mason_Oil%20Production%20Potential%20of%20the%20North%20Dakota%20Bakken_OGJ%20Article_10%20February%202012.pdf" target="_blank">Figure A</a></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjquir5vB5ngcbaQk4digzcgBYIvT0C6WPHyPtWIhlOk9OJqsVr7gOjrJR3X5ho8jrvgaGAMJnDGj6WT11PVxNUtjSHWW5pH1PmHxkt1ytAQk7s25ZRfvL2uZAQ7sDuRrzCscA3kBbRN3I/s1600/Typical+Bakken+Shale+Oil+Production+Curve.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="301" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjquir5vB5ngcbaQk4digzcgBYIvT0C6WPHyPtWIhlOk9OJqsVr7gOjrJR3X5ho8jrvgaGAMJnDGj6WT11PVxNUtjSHWW5pH1PmHxkt1ytAQk7s25ZRfvL2uZAQ7sDuRrzCscA3kBbRN3I/s400/Typical+Bakken+Shale+Oil+Production+Curve.png" width="400" /></a></div>
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<span style="white-space: pre;"> </span>With these extremely high decline rates for wells, in order to keep production from a field up, drilling needs to increase at an ever-increasing pace. This, of course, is unsustainable, and after a certain period of time, overall production for a region will peak and decline.</div>
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<span style="white-space: pre;"> </span>A recent report by geologist David Hughes entitled “Will Natural Gas Fuel America in the 21st Century?” found that “Conventional gas wells typically decline by 25% to 40% in their first year of production, whereas <a href="http://www.postcarbon.org/report/331901-report-will-natural-gas-fuel-america" target="_blank">shale gas wells decline at much higher rates</a>, typically between 63% and 85%. The initial productivity of shale gas wells can be very high... However, their steep production decline rates suggest that relying on shale gas for a large proportion of U.S. gas production will only exacerbate the ‘exploration treadmill’ problem of the number of wells that must be drilled to maintain production.”</div>
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<span style="white-space: pre;"> </span>To explain this visually, if we assume that oil companies are fracking the most productive wells first, then the initial production of new wells drilled will decline over time. If oil companies wish to increase production over time, for example to offset the decline from peaking conventional fields worldwide, then they will need to increase the number of rigs drilling in the region every year. Since the depletion rates are so high, however, this linear declining initial production curve combines with this linear increasing overall production curve to create an exponentially increasing rig count. If drillers wish to increase overall production at an exponential rate, by say 5% each year, the exponential rig count curve will rise even more steeply.</div>
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<b>Figure B</b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrAQkyeniLPK1gx_izHndGQo5QLSeeaAH_Um3qlVnYs_BPxzR3YaCHlS5eP6tHl78jGM-aS9X7BzKwY9lamRUH4n_n7ns_c8jbO8rXqZlJrAC_cC83J5A5XJIdZyFBdwbNE4r4EzkKUVA/s1600/The+Fracking+Tredmill.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrAQkyeniLPK1gx_izHndGQo5QLSeeaAH_Um3qlVnYs_BPxzR3YaCHlS5eP6tHl78jGM-aS9X7BzKwY9lamRUH4n_n7ns_c8jbO8rXqZlJrAC_cC83J5A5XJIdZyFBdwbNE4r4EzkKUVA/s400/The+Fracking+Tredmill.png" width="350" /></a></div>
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<span style="white-space: pre;"> </span>Of course operating an exponentially increasing number of rigs in a finite location is impossible. You would run out of available fresh water, you would run out of available skilled labor, such as drillers and engineers, you would run out of places to dispose of fracking fluids and finally if growth continued exponentially you would run into the logistical impossibilities of cramming more and more drilling rigs onto a finite number of now congested country roads. Along the way to hitting each one of these limits, local opposition would grow louder and louder. Nevertheless, companies will likely continue to increase their operations in these areas until they reach these limits.</div>
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<span style="white-space: pre;"> </span>Since 2005, oil production from the Bakken Shale has been growing exponentially as a result of shale fracking. This exponential increase in production rates, however, has only been possible with the exponential increase in drilling rates. When we chart the production rate in the Bakken formation against an exponential trend line, we see that it has an R-squared of .99, meaning that the curve is almost perfectly exponential.</div>
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<b><a href="https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf" target="_blank">Figure C</a></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_PwVga31Y-GM2Cz2nh-uI7500WpChEwOAPGCifdaeFLfXM96aljqCqFl7vhlJVykReJIZdQa3YftdvbgEiTopiig65v7Gdbd-HlmpY0R6xHsgkaY6uK2vtkw4WtXiE1zpnQDLsfAseyY/s1600/Bakken+Production+&+Drilling+Are+Growing+Exponentially.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="301" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_PwVga31Y-GM2Cz2nh-uI7500WpChEwOAPGCifdaeFLfXM96aljqCqFl7vhlJVykReJIZdQa3YftdvbgEiTopiig65v7Gdbd-HlmpY0R6xHsgkaY6uK2vtkw4WtXiE1zpnQDLsfAseyY/s400/Bakken+Production+&+Drilling+Are+Growing+Exponentially.png" width="400" /></a></div>
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<span style="white-space: pre;"> </span>Hydraulic fracturing has allowed oil producers in North Dakota to increase the production per well from under 20 barrels per day before 2005 to an average of about 140 barrels per day now.</div>
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<b><a href="https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf" target="_blank">Figure D</a></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTYp0tcRZ4Jso0vIkB0PhVYLZZYZ6CRWnIoC-g9b5fnXeQRJAEpoCROT26oQv4s_UB2jkux4AFt-ysut3Xw9cnzHm1OvbP3Um87R8Kcl04Hqv21r8a1fBmI6sQFNmmH4IiCw4xaYZ2pkI/s1600/Bakken+Production+Per+Well+Has+Plateaued+.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="291" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTYp0tcRZ4Jso0vIkB0PhVYLZZYZ6CRWnIoC-g9b5fnXeQRJAEpoCROT26oQv4s_UB2jkux4AFt-ysut3Xw9cnzHm1OvbP3Um87R8Kcl04Hqv21r8a1fBmI6sQFNmmH4IiCw4xaYZ2pkI/s400/Bakken+Production+Per+Well+Has+Plateaued+.png" width="400" /></a></div>
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<span style="white-space: pre;"> </span>When this increase in well productivity is combined with an exponential increase in drilling, we see that oil production growth rates have skyrocketed. In the first few years of hydraulic fracturing, oil production was doubling every few months. Today, oil production is doubling every 12-24 months.</div>
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<b><a href="https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf" target="_blank">Figure E</a></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTMiHOFIeqREaf4u0LubEiwgv5LcBSFmk2NDPqiY7DqZSuNnrFK1_985dOWReTVZyvQAv8iKqiCwjmIRsRD_Gn55k9iOLyqHyZOb1W_LD9avF9t_XUtZB-yZvZL219Aw2V5hs31_CFo9Q/s1600/Bakken+Production+Is+Doubling+Every+1-2+Years.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="312" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTMiHOFIeqREaf4u0LubEiwgv5LcBSFmk2NDPqiY7DqZSuNnrFK1_985dOWReTVZyvQAv8iKqiCwjmIRsRD_Gn55k9iOLyqHyZOb1W_LD9avF9t_XUtZB-yZvZL219Aw2V5hs31_CFo9Q/s400/Bakken+Production+Is+Doubling+Every+1-2+Years.png" width="400" /></a></div>
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<span style="white-space: pre;"> </span>If oil producers wish to continue increasing oil production at these rates - doubling every 12-24 months - they will need to continue to increase the number of wells drilled at an exponential rate. If well production rates remain above 140 barrels per day, the number of wells drilled per month will need to rise from about 170 wells drilled per month to over 500 wells drilled per month in just three years.</div>
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<b><a href="https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf" target="_blank">Figure F</a></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCH4vhdcFkuw_26bZ6zNZ7HCcqItewRFeDRMxp-HzYObTztbmNVD1bzl57BFNNMzYz0cbwwhDd8m47z3196bbSeyP-AUsSyKIZ4pQhrLWjbKz2uSbq5M-S8t3aGRLGx5jD5YehofPsVFU/s1600/Drilling+Must+Increase+Exponentially+to+Maintain+Production+Growth+Rates.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="365" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCH4vhdcFkuw_26bZ6zNZ7HCcqItewRFeDRMxp-HzYObTztbmNVD1bzl57BFNNMzYz0cbwwhDd8m47z3196bbSeyP-AUsSyKIZ4pQhrLWjbKz2uSbq5M-S8t3aGRLGx5jD5YehofPsVFU/s400/Drilling+Must+Increase+Exponentially+to+Maintain+Production+Growth+Rates.png" width="400" /></a></div>
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<span style="white-space: pre;"> </span>This, by itself would be a tremendous increase in drilling activity. However, per-well production rates may not remain at this high of 140+ barrels per day. Because drillers begin with the “low hanging fruit” of highly-productive regions, it is probable that this per-well production rate will decline as drillers move to less attractive drilling locations. If the per-well production rates begin to decline by just 10% per year, the number of wells drilled per month will need to rise from just 170 per month today to 2,000 wells per month in just three years in order to maintain the increasing levels of production experienced today. This would require over 10 times the number of drilling rigs to be operating in North Dakota in just three years. The first limiting factor may be the availability of rigs. <a href="http://gis.bakerhughesdirect.com/RigCounts/default2.aspx" target="_blank">According to Baker Hughes</a>, there are about 178 rigs operating in North Dakota right now. This represents about 10% of all of the rigs operating in the United States. Increasing the number of rigs 10-fold would require us to move every single rig in the United States to North Dakota, abandoning drilling in all other areas. Clearly, this is an impossibility. There are about 1,000 idled rigs in the United States right now. Moving these rigs to North Dakota could help, but most of these rigs are incapable of the horizontal drilling required for shale oil production. Another possibility is for manufacturers to pump out more rigs. According to National Oilwell Varco’s Rig Census, 2011 was a record year for rig manufacturing with <a href="http://www.nov.com/RigCensus.aspx?id=5664&langtype=1033" target="_blank">158 new rigs added to the US fleet</a>. These additions, however, were not enough to offset the number of older rigs being retired and in 2011 the total number of rigs drilling in the United States actually shrunk. According to NOV, “<a href="http://www.nov.com/RigCensus.aspx?id=5664&langtype=1033" target="_blank">the number of newly built and rebuilt units could not keep up with those being retired</a>.” If drillers were somehow able to completely halt the scrapping of old rigs and if they were also able to send every single newly manufactured oil rig to drill in the Bakken shale, this would only get them another 1/4 of the way to the ultimate goal. The number of rigs available seems to be the most immediate impediment to the continued increase in Bakken oil production.</div>
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<b>2 Million Truckloads Per Month</b></div>
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<span style="white-space: pre;"> </span>When you consider that <a href="http://www.businessweek.com/news/2012-06-05/fracking-trucks-hauling-sand-subject-to-workday-limit-u-dot-s-dot-says" target="_blank">each well can require 1,000 truckloads of water and sand to drill</a>, this increased rate of drilling would increase the number of truck trips on local roads from 170,000 per month today to over 2 million truckloads per month in just three years. The first limiting factor may be the capacity of rural roads. Two million truckloads per month could result in severe truck traffic congestion. Since <a href="http://www.fmcsa.dot.gov/rules-regulations/truck/driver/hos/fmcsa-guide-to-hos.PDF" target="_blank">federal law limits the number of hours truck drivers can work per day</a>, it might be impossible to simply find enough truck drivers. With <a href="http://www.mitchellrepublic.com/event/article/id/72582/group/homepage/" target="_blank">local residents already angry at the increasing number of trucks on their rural roads</a>, public outcry may also limit the drilling by limiting the number of trucks driven on local roads.</div>
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<span style="white-space: pre;"> </span>At these drilling rates, water becomes another major issue. Because each well requires 2.5 million gallons of water, drilling 2,000 wells per month would require 5 billion gallons of fresh water per month. Already <a href="http://www.mgwa.org/meetings/2012_fall/plenary/shaver.pdf" target="_blank">the water table in North Dakota is declining by about 1.2 feet per year</a>. Increasing the amount of water use 10-fold by increasing the amount of drilling 10-fold would deplete the groundwater reservoirs at a significantly increased pace.</div>
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<b>Is Shale Oil A Ponzi Scheme?</b></div>
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<span style="white-space: pre;"> </span>The gold rush mentality around shale gas has caused companies to rush into drilling as many wells as possible, regardless of the economics. When asked about shale gas drilling, <a href="http://www.nytimes.com/2012/10/21/business/energy-environment/in-a-natural-gas-glut-big-winners-and-losers.html?pagewanted=all" target="_blank">ExxonMobil's CEO Rex Tillerson responded “We are all losing our shirts today, We’re making no money</a>. It’s all in the red.”</div>
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<span style="white-space: pre;"> </span>Most lease agreements signed by natural gas companies have a <a href="http://www.exxonmobilperspectives.com/2011/03/17/lose-the-use-it-or-lose-it-rhetoric/" target="_blank">“use it or lose it” clause</a>, requiring them to drill and produce gas from the fields within the first few years or lose the lease. Such clauses make drilling unprofitable wells potentially advantageous in order to create “real options” for the companies and maintain reserve numbers, which allow companies to keep their reserve replacement ratios up, thereby keeping their stock prices up.</div>
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<span style="white-space: pre;"> </span>This exponentially increasing rig count requirement and current uneconomic drilling have caused some industry experts to call the practice of <a href="http://www.nytimes.com/interactive/us/natural-gas-drilling-down-documents-4-intro.html" target="_blank">shale fracking a “Ponzi Scheme”</a>. Others have compared the practice, which generates negative cash flow but makes for a great “wall street story”, to the types of activities that <a href="http://www.slate.com/blogs/breakingviews/2012/05/23/did_chesapeake_miss_enron_lessons_.html" target="_blank">Enron</a> was engaging in. Clearly there are some questions about the sustainability of shale fracking, but it remains to be seen if the shale industry will implode in on itself.</div>
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<span style="white-space: pre;"> </span>These issues aside, public sentiment may kill fracking before the economics do.<span class="Apple-tab-span" style="white-space: pre;"> </span> Given all of the public concerns with hydraulic fracturing, the practice has already been banned in both <a href="http://blogs.scientificamerican.com/observations/2011/06/30/france-becomes-first-country-to-ban-extraction-of-natural-gas-by-fracking/" target="_blank">France</a> and <a href="http://www.businessweek.com/news/2012-01-19/bulgaria-bans-gas-fracking-thwarting-chevron-drilling-plan.html" target="_blank">Bulgaria</a>. Hydraulic fracturing has also been banned in <a href="http://www.ibtimes.com/articles/324173/20120404/fracking-studies-quebec-regulations.htm" target="_blank">Quebec</a>, Nova Scotia, <a href="http://www.ibtimes.com/articles/341956/20120516/hydraulic-fracturing-natural-gas-vermont-government-ban.htm" target="_blank">Vermont</a>, New Jersey and in <a href="http://media.straffordpub.com/products/shale-gas-and-hydraulic-fracturing-defending-or-pursuing-private-tort-actions-2012-07-12/presentation.pdf" target="_blank">50 local communities in New York</a>. Given the increasing impacts on local citizens from exponentially increasing drilling rates, this trend of banning shale fracking may continue to grow.</div>
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-9089397731640789782012-09-06T19:29:00.001-07:002016-11-14T11:05:32.221-08:00Upcoming Speaking Event at 2012 ASPO-USA Conference<script type='text/javascript'>
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For the past 9 months I've been exhaustively researching and writing a book that I've tentatively titled "Investing for the End of Cheap Oil".<br />
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In my book I summarize the current state of peak oil and "peak everything" and I analyze how these megatrends will affect various countries, industries and companies. I look at the arguments against peak oil, the corroborating reports confirming peak oil, the economics that are at play behind the scenes, the limits that exist to alternative energy sources, and the various scenarios that may play out in the future. Finally, I finish the book with a few examples of diversified portfolios that can be easily constructed by individual investors to profit from peak oil and peak everything.<br />
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If you're interested in being notified when the book is published, you can sign up for updates <a href="http://www.peakoilproof.com/p/book.html" target="_blank">here</a>.<br />
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<a href="http://www.peakoilproof.com/p/book.html" target="_blank"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiX9GMmbnx1gNSbDSfiCtR787JSx321Y6QNDRmlKMW9uwVYm1iZSoQXaCHnTW-kQ_iE6YQgINd9MGxbCaLxR3Opuq7SOysxq-4ZrAOGntLwpXjP6Rkke0MjWHN9dvHyI7iE7h4R2cn14Q8/s320/Cover_Cropped_More_Small.jpg" width="255" /></a></div>
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I haven't yet started looking for a publisher, but I want to start getting some of my ideas out for discussion, so I'm going to be doing more blog posts and videos in the near future. I'm also working to do some more public speaking to get my ideas out to a broader audience.<br />
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I just confirmed that I'll be giving a presentation on investing for peak oil at the 2012 Association For the Study of Peak Oil ASPO-USA conference in Austin, TX on December 1st. The schedule of events can be viewed <a href="http://www.cvent.com/events/the-next-oil-crisis-is-the-boom-just-another-bubble-/agenda-11a8c07f60dd41a2a53842ecdf190d3f.aspx" target="_blank">here</a>.<br />
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I attended the ASPO-USA conference last year in Washington DC and I found it to be an extremely beneficial experience. I got to meet a lot of great people and I found the lectures to be extremely helpful. I'd highly recommend the conference to anyone who is interested in the topic of peak oil. Registration is open now <a href="http://www.cvent.com/events/the-next-oil-crisis-is-the-boom-just-another-bubble-/fees-11a8c07f60dd41a2a53842ecdf190d3f.aspx" target="_blank">here</a>.
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Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-34586841294902808262012-04-21T08:06:00.001-07:002016-11-14T10:49:20.425-08:00Peak Oil & Peak Everything Lecture at Cornell<script type='text/javascript'>
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<a href="http://www.youtube.com/watch?v=0HeEHKJxSA8">http://www.youtube.com/watch?v=0HeEHKJxSA8</a></div>
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/0HeEHKJxSA8?feature=player_embedded' frameborder='0'></iframe></div>
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I gave this lecture on Peak Oil and Peak Everything on April 19th, 2012 to the students of Professor Bill Schulze's Sustainable Business class in Cornell University's school of Applied Economics and Management.<br />
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The lecture covers peak oil, the economics behind peak oil, the current state of our energy markets, the substitution to unconventional oil that is taking place and the future of "peak everything".<br />
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A copy of the slide deck is posted here: <a href="http://www.slideshare.net/WJMartin/peak-oil-peak-everything-lecture-at-cornell">http://www.slideshare.net/WJMartin/peak-oil-peak-everything-lecture-at-cornell</a></div>Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.comtag:blogger.com,1999:blog-967685008339618341.post-71790689321892636272011-11-08T05:23:00.000-08:002016-11-14T10:45:54.081-08:00Top 10 Quotes from the 2011 ASPO-USA Peak Oil Conference<script type='text/javascript'>
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This past week I attended the 7th annual ASPO-USA Peak Oil conference in Washington DC. All of the talks were very interesting, and I was happy to see that at least two members of our congress, Congressman Mike Honda (D-CA) and Congressman Roscoe Bartlett (R - MD), are aware of the peak oil challenge we face. For me, the best part of the weekend was the time I spent between talks discussing peak oil investing with a number of people who whose entire investing strategy revolves around peak oil.</div>
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I tend to take a lot of notes and when I hear interesting quotes, I write them down verbatim. So here are the top 10 interesting quotes from my note pad:</div>
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<li># 10) "Place a peak oil filter on top of your investment strategy" -Jim Hansen of Ravenna Capital Management</li>
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<li># 9) "No politician wants to admit that we have grown more than this planet can sustain" - William Catton</li>
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<li># 8) "I make my decisions based on information, but I'm unusual" -Chris Martenson on the public narrative problem with peak oil</li>
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<li># 7) "I'm a mac guy" -Robert Hirsch, author of the famous <a href="http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf">Hirsch Report</a>, during some technical difficulties</li>
</ul>
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<li># 6) "If they had to run on their own production, it would fall apart"- Robert Rapier describing the EROEI problem of corn ethanol</li>
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<li># 5) "We're in a zero-sum world" -Jeff Rubin</li>
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<li># 4) "Soil is more important than oil"..."the date will come when we stop treating soil like dirt" -Wes Jackson</li>
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<li># 3) "I think the peak oil situation will come very quickly" -Charles Schlumberger, Lead Air Transport Specialist at The World Bank</li>
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<li># 2) "Since oil is a finite resource, the oil industry is a finite industry" -Andy Buckingham, an oil industry wildcatter</li>
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<li># 1) "It is not the strongest of the species that survives, nor the most intelligent, but rather the one most adaptable to change." - Angelina Galiteva quoting Charles Darwin</li>
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</div>Will Martinhttp://www.blogger.com/profile/04834820561804999036noreply@blogger.com