mfioretti: peak oil*

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  1. US-Saudi relationship has shown strains in recent years. Saudi anger over Obama-era rapprochement with Iran and unwillingness to go full-Gaddafi on Assad has been met with US threats about exposing "Saudi" terror, including the 9/11 lawsuits and the 28 pages. The recent American shale oil boom has meant that Saudi has seen selling less oil to the US, and China is only too happy to step in and take America's place as Saudi Arabia's most-favored trading nation. And now China is setting up a yuan-denominated oil exchange that could potentially mean that the Saudis and others may be trading oil for yuan in the future.

    This is why the CIA and other outside forces are extremely interested in what is happening in Saudi Arabia right now, and why, by extension, the rest of the world should be as well. After all, by now we know all too well what happens to countries that try to back away from the petrodollar, don't we? Only this time, it's not some "minor" players on the grand chessboard who can be taken out of the game with a simple NATO lovebomb campaign. This time we're looking at the potential of Russia and China backing this shift away from the petrodollar en masse. And we all know what that spells.
    https://steemit.com/news/@corbettrepo...ou-need-to-know-about-the-saudi-purge
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  2. let’s talk about the most seminal moment in recent Saudi history: the key oil-for-money-and-protection deal struck between the Nixon administration and King Faisal back in the early 1970’s.

    This pivotal agreement allowed KSA to secretly recycle its surplus petrodollars back into US Treasuries while receiving US military protection in exchange. The secret was kept for 41 years, only recently revealed in 2016 due to a Bloomberg FOIA request:

    The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending.



    It took several discreet follow-up meetings to iron out all the details, Parsky said. But at the end of months of negotiations, there remained one small, yet crucial, catch: King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database.



    “Buying bonds and all that was a strategy to recycle petrodollars back into the U.S.,” said David Ottaway, a Middle East fellow at the Woodrow Wilson International Center in Washington. But politically, “it’s always been an ambiguous, constrained relationship.”

    (Source)

    The essence of this deal is pretty simple. KSA wanted to be able to sell its oil to its then largest buyer, the USA, while also having a safe place to park the funds, plus receive military protection to boot. But it didn’t want anybody else, especially its Arab neighbors, to know that it was partnering so intimately with the US who, in turn, would be supporting Israel. That would have been politically incendiary in the Middle East region, coming as it did right on the heels of the Yom Kipper War (1973).

    As for the US, it got the oil it wanted and – double bonus time here – got KSA to recycle the very same dollars used to buy that oil back into Treasuries and contracts for US military equipment and training.

    Sweet deal.

    Note that this is yet another secret world-shaping deal successfully kept out of the media for over four decades. Yes Virginia, conspiracies do happen. Secrets can be (and are routinely) kept by hundreds, even thousands, of people over long stretches of time.

    Since that key deal was struck back in the early 1970s, the KSA has remained a steadfast supporter of the US and vice versa. In return, the US has never said anything substantive about KSA’s alleged involvement in 9/11 or its grotesque human and women’s rights violations. Not a peep.

    Until recently.
    Then Things Started To Break Down

    In 2015, King Salman came to power. Things began to change pretty quickly, especially once he elevated his son Mohammed bin Salman (MBS) to a position of greater power.

    Among MBS's first acts was to directly involve KSA into the Yemen civil war, with both troops on the ground and aerial bombings. That war has killed thousands of civilians while creating a humanitarian crisis that includes the largest modern-day outbreak of cholera, which is decimating highly populated areas. The conflct, which is considered a 'proxy war' because Iran is backing the Houthi rebels while KSA is backing the Yemeni government, continues to this day.

    Then in 2016, KSA threatened to dump its $750 billion in (stated) US assets in response to a bill in Congress that would have released sensitive information implicating Saudi Arabia's involvement in 9/11. Then-president Obama had to fly over there to smooth things out. It seems the job he did was insufficient; because KSA-US relations unraveled at an accelerating pace afterwards. Mission NOT accomplished, it would seem.

    In 2017, KSA accused Qatar of nefarious acts and made such extraordinary demands that an outbreak of war nearly broke out over the dispute. The Qatari leadership later accused KSA of fomenting ‘regime change’, souring the situation further. Again, Iran backed the Qatar government, which turned this conflict into another proxy battle between the two main regional Arab superpowers.

    In parallel with all this, KSA was also supporting the mercenaries (aka "rebels" in western press) who were seeking to overthrow Assad in Syria -- yet another proxy war between KSA and Iran. It's been an open secret that, during this conflict, KSA has been providing support to some seriously bad terrorist organizations like Al-Qaeda, ISIS and other supposed enemies of the US/NATO. (Again, the US has never said 'boo' about that, proving that US rhetoric against "terrorists" is a fickle construct of political convenience, not a moral matter.)

    Once Russia entered the war on the side of Syria's legitimate government, the US and KSA (and Israel) lost their momentum. Their dreams of toppling Assad and turning Syria into another failed petro-state like they did with Iraq and Libya are not likely to pan out as hoped.

    But rather than retreat to lick their wounds, KSA's King Salman and his son are proving to be a lot nimbler than their predecessors.

    Rather than continue a losing battle in Syria, they've instead turned their energies and attention to dramatically reshaping KSA's internal power structures:

    Saudi Arabia’s Saturday Night Massacre



    For nearly a century, Saudi Arabia has been ruled by the elders of a royal family that now finds itself effectively controlled by a 32-year-old crown prince, Mohammad bin Salman. He helms the Defense Ministry, he has extravagant plans for economic development, and last week arranged for the arrest of some of the most powerful ministers and princes in the country.



    A day before the arrests were announced, Houthi tribesmen in Yemen but allied with Iran, Saudi Arabia’s regional rival, fired a ballistic missile at Riyadh.



    The Saudis claim the missile came from Iran and that its firing might be considered “an act of war.”



    Saudi Arabia was created between the two world wars under British guidance. In the 1920s, a tribe known as the Sauds defeated the Hashemites, effectively annexing the exterior parts of Saudi Arabia they did not yet control. The United Kingdom recognized the Sauds’ claim shortly thereafter. But since then, the Saudi tribe has been torn by ambition, resentment and intrigue. The Saudi royal family has more in common with the Corleones than with a Norman Rockwell painting.



    The direct attack was undoubtedly met with threats of a coup. Whether one was actually planned didn’t matter. Mohammed Bin Salman had to assume these threats were credible since so many interests were under attack. So he struck first, arresting princes and ex-minsters who constituted the Saudi elite. It was a dangerous gamble. A powerful opposition still exists, but he had no choice but to act. He could either strike as he did last Saturday night, or allow his enemies to choose the time and place of that attack. Nothing is secure yet, but with this strike, there is a chance he might have bought time. Any Saudi who would take on princes and clerics is obviously desperate, but he may well break the hold of the financial and religious elite.
    http://www.zerohedge.com/news/2017-11...-worry-you-youre-not-paying-attention
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  3. Earlier studies on this issue, Brandt points out, have highlighted the risk of a “net energy cliff”, which refers to how “declining EROI results in rapid increases in the fraction of energy dedicated to simply supporting the energy system.”

    Axiom: So the more EROI declines, a greater proportion of the energy being produced must be used simply to extract more energy. This means that EROI decline leads to less real-world economic growth.

    It also creates a complicated situation for oil prices. While at first, declining EROI can be expected to lead to higher prices reflecting higher production costs, the relationship between EROI and prices begins to breakdown as EROI becomes smaller.

    This could be because, under a significantly reduced EROI, consumers in a less prosperous economy can no longer afford, energetically or economically, the cost of producing more energy — thus triggering a dramatic drop in market prices, despite higher costs of production. At this point, in the new era of shrinking EROI, swinging oil prices become less and less indicative of ‘scarcity’ in supply and demand.

    Brandt’s new economic model looks at how EROI impacts four key sectors — food, energy, materials and labor. Exploring what a decline in net energy would therefore mean for these sectors, he concludes:

    “The reduction in the fraction of a resource free and the energy system productivity extends from the energy system to all aspects of the economy, which gives an indication of the mechanisms by which energy productivity declines would affect general prosperity.

    A clear implication of this work is that decreases in energy resource productivity, modeled here as the requirement for more materials, labor, and energy, can have a significant effect on the flows required to support all sectors of the economy. Such declines can reduce the effective discretionary output from the economy by consuming a larger and larger fraction of gross output for the meeting of inter-industry requirements.”
    https://medium.com/insurge-intelligen...low-burn-energy-collapse-d07344fab6be
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  4. Lord’s thesis is that the kind of art a society makes and values is joined at the hip with the kind of energy that society depends on to keep itself going. He traces the various forms of energy we have known as a species throughout our pre-history — our millennia spent in the Pleistocene — and in our recorded history — sexual energy, without which societies can’t continue; the energy of the body while hunting and foraging; wood for fire; slaves; wind and water; coal; oil; and “renewables” — and makes some cogent observations about their relationship to art and culture. In his Prologue, he says:

    Everyone knows that all life requires energy. But we rarely consider how dependent art and culture are on the energy that is needed to produce, practice and sustain them. What we fail to see are the usually invisible sources of energy that make our art and culture(s) possible and bring with them fundamental values that we are all constrained to live with (whether we approve of them or not). Coal brought one set of values to all industrialized countries; oil brought a very different set… I may not approve of the culture of consumption that comes with oil… but I must use it » if I want to do anything at all.

    (Photo via gettystation.com)

    Those living within an energy system, says Lord, may disapprove of certain features, but they can’t question the system itself. Within the culture of slavery, which lasted at least 5,000 years, nobody wanted to be a slave, but nobody said slavery should be abolished, because what else could keep things going?
    (Sébastien Bonaimé/Getty Images; Viktor Drachev/AFP/Getty Images)

    Coal, says Lord, produced a culture of production: think about those giant steel mills. Oil and gas, once they were up and running, fostered a culture of consumption. Lord cites “the widespread belief of the 1950s and early ’60s in the possibility of continuing indefinitely with unlimited abundance and economic growth, contrasted with the widespread agreement today that both that assumption and the world it predicts are unsustainable.” We’re in a transition phase, he says: the next culture will be a culture of “stewardship,” the energy driving it will be renewables, and the art it produces will be quite different from the art favored by production and consumption cultures.

    What are the implications for the way we view both ourselves and the way we live? In brief: in the coal energy culture — a culture of workers and production — you are your job. “I am what I make.” In an oil and gas energy culture — a culture of consumption — you are your possessions. “I am what I buy.” But in a renewable energy culture, you are what you conserve. “I am what I save and protect.” We aren’t used to thinking like this, because we can’t see where the money will come from. But in a culture of renewables, money will not be the only measure of wealth. Well-being will factor as an economic positive, too.

    Like Barry Lord, Morris is interested in the link between energy-capture systems and the cultural values associated with them, though in his case it’s the moral values, not only the aesthetic ones — supposing these can be separated — that concern him. Roughly, his argument runs that each form of energy capture favors values that maximize the chance of survival for those using both that energy system and that package of moral values. Hunter-gatherers show more social egalitarianism, wealth-sharing, and more gender equality than do farmer societies, which subordinate women — men are favored, as they must do the upper-body-strength heavy lifting — tend to practice some form of slavery, and support social hierarchies, with peasants at the low end and kings, religious leaders, and army commanders at the high end. Fossil fuel societies start leveling out gender inequalities — you don’t need upper body strength to operate keyboards or push machine buttons — and also social distinctions, though they retain differences in wealth.

    The second part of his argument is more pertinent to our subject, for he postulates that each form of energy capture must hit a “hard ceiling,” past which expansion is impossible; people must either die out or convert to a new system and a new set of values, often after a “great collapse” that has involved the same five factors: uncontrolled migration, state failure, food shortages, epidemic disease, and “always in the mix, though contributing in unpredictable ways–- climate change.” Thus, for hunting societies, their way of life is over once there are no longer enough large animals to sustain their numbers. For farmers, arable land is a limiting factor. The five factors of doom combine and augment one another, and people in those periods have a thoroughly miserable time of it, until new societies arise that utilize some not yet exhausted form of energy capture.
    https://medium.com/matter/it-s-not-cl...e-it-s-everything-change-8fd9aa671804
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  5. Although the analysis above has much room for refinement and development in context and household specific ways, it has been demonstrated that what we have called low-tech options have the potential to significantly reduce the energy intensity (and water intensity) of our ways of living. Our personal experience practising all of these low-tech options at times, many of them often, and some of them always, also gives us confidence that the results above are broadly correct. Indeed, when low-tech ‘demand side’ strategies are applied in conjunction with hi-tech ‘supply side’ strategies (e.g. solar PV), our personal experience confirms that people can be net-producers of renewable electricity, provided ordinary consumption of electricity is significantly reduced. Moreover, we know that this can be done without diminishing quality of life, although low-tech practices do often demand a greater time investment than their conventional alternatives, which can call for broader lifestyle changes to accommodate this increased time commitment.
    http://www.resilience.org/stories/201...sponse-to-climate-change-and-peak-oil
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  6. A decline in oil and gas production would mean a decline in energy inputs into society, a decline in productivity and, hypothetically, a decline in population. If population growth were related to oil production and oil production is beginning to decline, Oil Population will also decline – in other words, its growth curve may change from a slowing logistic curve, to a declining parabolic curve - and therefore a large component of global population will decline more quickly than most people anticipate.

    Mortality rates may increase, as a population grown large through dependence on high quality energy sources now must allocate scarcer resources per person. This is evident in agriculture’s dependence on fossil fuel based fertilisers 15 » . Without them, agricultural productivity decreases and less people can be fed. Human carrying capacity decreases.

    Figure 14 depicts projected world oil production to 2020. These figures are based on conventional crude oil resources and natural gas liquids (CO + NGL). They do not include unconventional oil resources such as shale oil, oil from tar sands, ultra-deep water oil or polar oil. These oil sources are not included because they are much more expensive to extract, in monetary terms but also in energy terms. In other words, a large amount of energy inputs are required to extract energy outputs from say, tar sands in north western Canada. Hence the net energy gain is lower, and these energy sources may not be as important in raising productivity and population ceilings.

    Based on these projections, the 3.2 billion people that are dependent on oil in the sum-of-energies population model are in serious jeopardy in the next fifty years as the world’s remaining oil resources are consumed, and world population could suffer a precipitous decline.
    http://www2.energybulletin.net/node/48677#_Toc227469792
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  7. Replacements for oil need to be profitable and be able to pay taxes, at currently available price levels–low $40s per barrel, or less.

    We need to be careful in aiming for high-tech solutions, because of the complexity they add to the system. High-tech solutions look wonderful, but they are very difficult to evaluate. How much do they really add in costs, when everything is included? How much do they add in debt? How much do they add (or subtract) in tax revenue? What are their indirect effects, such as the need for more education for workers?

    We need to be alert to the possibility that solar PV and most wind energy may be energy sinks, rather than true energy sources. The two hallmarks of providing true net energy to society are (1) being able to provide energy cheaply, and (2) being able to provide tax revenue to support the government. When actually integrated into the electric grid, electricity generated by wind or by solar generally requires subsidies–the opposite of providing tax revenue. Total costs tend to be high because of many unforeseen issues, including improper siting, long-distance transport costs, and costs associated with mitigating intermittency.

    Unless EROI studies are specially tailored (such as this one and this one), they are likely to overstate the benefit of intermittent renewables to the system. This problem is related to the issues discussed in my recent post, Overly Simple Energy-Economy Models Give Misleading Answers. My experience is that researchers tend to overlook the special studies that point out problems. Instead, they rely on the results of meta-analyses of estimates using very narrow boundaries, thus perpetuating the myth that solar PV and wind can somehow save our current economy.
    https://ourfiniteworld.com/2016/08/08...updated-version-of-the-peak-oil-story
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  8. For decades, the country’s leadership pursued a consistent political-economic business plan: sell as much oil as possible and use the proceeds to enrich the numerous princes and princesses of the realm; provide lavish social benefits to the rest of the population, thereby averting popular unrest of the “Arab Spring” variety; finance the ultra-conservative Wahhabi clergy so as to ensure its loyalty to the regime; finance like-minded states in the region; and put aside money for those rainy-day periods of low oil prices.

    Saudi leaders have recently come to recognize that this plan is no longer sustainable. In 2016, the Saudi budget has, for the first time in recent memory, moved into deficit territory and the monarchy has had to cut back on both its usual subsidies to and social programs for its people. Unlike the Venezuelans or the Nigerians, the Saudi royals socked away enough money in the country’s sovereign wealth fund to cover deficit spending for at least a couple of years. It is now, however, burning through those funds at a prodigious rate, in part to finance a brutal and futile war in Yemen. At some point, it will have to sharply curtail government spending. Given the youthfulness of the Saudi population -- 70% of its citizens are under 30 -- and its long dependence on government handouts, such moves could, in the view of many analysts, lead to widespread civil unrest.

    Historically, Saudi leaders have been slow to initiate change. But recently, the royal family has defied expectations, taking radical steps to prepare the country for a transition to what’s being termed a post-petroleum economy.
    http://www.tomdispatch.com/post/17614...chael_klare%2C_the_oil_world_in_chaos
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  9. Debt is a key factor in creating an economy that operates using energy.

    A generally overlooked problem of our current system is the fact that we do not receive the benefit of energy products until well after they are used. This is especially the case for energy used to make capital investments, such as buildings, roads, machines, and vehicles. Even education and health care represent energy investments that have benefits long after the investment is made.

    The reason debt (and close substitutes) are needed is because it is necessary to bring forward hoped-for future benefits of energy products to the current period if workers are to be paid. In addition, the use of debt makes it possible to pay for consumer products such as automobiles and houses over a period of years. It also allows factories and other capital goods to be financed over the period they provide their benefits. (See my post Debt: The Key Factor Connecting Energy and the Economy.)

    When debt is used to move forward hoped-for future benefits to the present, oil prices can be higher, as can be the prices of other commodities. In fact, the price of assets in general can be higher. With the higher price of oil, it is possible for businesses to use the hoped-for future benefits of oil to pay current workers. This system works, as long as the price set by this system doesn’t exceed the actual benefit to the economy of the added energy.

    The amount of benefits that oil products provide to the economy is determined by their physical characteristics–for example, how far oil can make a truck move. These benefits can increase a bit over time, with rising efficiency, but in general, physics sets an upper bound to this increase. Thus, the value of oil and other energy products cannot rise without limit.

    Research involving Energy Returned on Energy Investment (EROEI) ratios for fossil fuels is a frequently used approach for evaluating prospective energy substitutes, such as wind turbines and solar panels. Unfortunately, this ratio only tells part of the story. The real problem is declining return on human labor for the system as a whole–that is, falling inflation adjusted wages of non-elite workers. This could also be described as falling EROEI–falling return on human labor. Declining human labor EROEI represents the same problem that fish swimming upstream have, when pursuit of food starts requiring so much energy that further upstream trips are no longer worthwhile.

    If our problem is a shortage of fossil fuels, fossil fuel EROEI analysis is ideal for determining how to best leverage our small remaining fossil fuel supply. For each type of fossil fuel evaluated, the fossil fuel EROEI calculation determines the amount of energy output from a given quantity of fossil fuel inputs. If a decision is made to focus primarily on the energy products with the highest EROEI ratios, then our existing fossil fuel supply can be used as sparingly as possible.

    If our problem isn’t really a shortage of fossil fuels, EROEI is much less helpful. In fact, the EROEI calculation strips out the timing over which the energy return is made, even though this may vary greatly. The delay (and thus needed amount of debt) is likely to be greatest for those energy products where large front-end capital expenditures are r
    https://ourfiniteworld.com/2016/05/12...s-story-what-other-researchers-missed
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  10. The so-called US shale oil revolution got stuck in 2015. The longer oil prices remain low, the more the 2015 peak will establish itself. There are no free-bees here. Pay less for oil and you will get less oil.
    http://crudeoilpeak.info/us-shale-oil-peak-in-2015
    Tags: , , by M. Fioretti (2016-04-13)
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