The Scent of Peak Oil  

BP and DuPont got quite a lot of press yesterday with their announcement that they will begin production of a biofuel called biobutanol.

Drivers may soon have a third option for fuel produced from plants: biobutanol. Butanol from petroleum has been used for decades as an industrial solvent, but two companies say they are close to commercializing a process for creating the fuel from corn, sugar beets, or even grasses. BP and Dupont today announced that they will begin selling Biobutanol in the United Kingdom next year.

The companies co-developed a fuel that can be combined with gasoline and ethanol. Biobutanol is superior to ethanol because it has a higher energy value and is less water soluble and evaporative than ethanol, so it is safe to transport via existing gasoline pipelines.

BP says Biobutanol is complementary to ethanol. Initially the fuel will be produced from sugar beets, but the companies are also developing cellulosic materials as well. Here in the U.S., company Environmental Energy claims it has patents on similar technology, but it calls the fuel butanol. EEI says it is building a prototype production plant, and that its fuel can be used as a 100 percent gasoline replacement.

There seems to be some debate about the olfactory qualities of the stuff - though I doubt unpleasant odours are at the top of DuPont's concerns (and no doubt the various lobbies touting the various biofuel alternatives will be putting on a PR battle over the coming years like the nuclear and coal industries currently are).

Like methanol (another oft-touted alt-fuel), even small amounts of butanol absorbed through the skin are toxic, although not as toxic as methanol. It also can be difficult to start in cold weather. Here is a more thorough treatment of the subject.

Gasoline is dangerously flammable but not a terribly large health hazard. Butanol or propanol would make just filling up at the station a hazard. Methanol would be a nightmare.

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Where did you find this out? A quick butanol search on Wikipedia states that it's a perfume base, which seems to imply that your information is bogus.

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If they're talking about n-butanol (AKA 1-butanol), then life will be a lot stinkier. The n-butane family is notoriously stinky, with n-butanol reeking of rancid butter. n-Butanol has an odor threshhold of 20-80 ppb, which means that any spillage at the pump will turn the gas station into the olfactory equivalent of the Land-o-Lakes warehouse during a heatwave. Eww. Not sure how sec-butanol smells but it can't be much better!

With a name like George Orwel as the author, I can't resist linking to this article about the post peak future - "Peak Oil = Urban Ruin" - even if he isn't writing thinly veiled analysis of our political system, and I'm more of the view that green cities are the future for most of humanity.

I have often been reminded of a Chinese saying that basically translates into something like this: Long is not forever. In other words, everything comes to an end; it doesn't matter how long it takes. I've been covering the oil industry for a long time and I often talk with many economists about the status of the market. They are a very optimistic lot. That's good because they deal with issues of wealth creation, except that when they let unreasonable optimism color their thinking in such a sway that their only concern is the short-term financial benefit, they run the risk of losing their credibility.

I say that because something new is happening in the modern world. For a long time, we've been used to classical economics championed by the likes of Milton Friedman. But there is a new breed of what one might call renegade economists whose focus is not based merely on competition alone, but also on community good. These economists, just like scientists, are now debating the consequences of a world with reduced petroleum supplies. They are asking, "Why can't we start preparing for the time when we probably won't have it?" Like geologists who are now calling our attention to an oil peak, these skeptics think the oil industry is taking itself for a ride by being overly optimistic that natural resources will stay abundant. Very soon, we shall see a shift in mainstream economic thinking from unbridled, red-hot free markets to something grayish.

An Eliott wave theorist has an article up at Free Market News Network on peak oil and the commodity boom (FMNN has had a fairly varied range of articles on PO over time - some attacking the idea and some fairly standard fare like this - economic analysis base don PO theory combined with some Austrian economics and goldbug fervour).

The commodity boom currently underway in all areas is due to shortages. Shortages are the result of different circumstance depending upon the commodity. Different commodities will be examined but all stem from a common thread and will only be amplified by its shortages: Energy.

The most important source of energy is oil and related products. It is the most compact form of portable energy for easy use. Currently, around 25 billion barrels of oil/year are consumed and with China oil consumption increasing 2% year over year, over 500 million more barrels are required next year. If no other countries decrease their oil consumption, then there will be real felt shortages next year. The more and more I read about oil production and shortages (best book by far is “Twilight in the Desert” by Matt Simmons), this is going to be an extreme event. Current sources of oil are declining and India and China have economies growing at 9-10% per year, so unless more oil is found, prices will rise. There will be some point in the future where oil/gasoline prices will decrease consumption, but peak oil is looming and any decline in consumption will be met with declining production. If this relationship holds for the next 15 years, then oil prices are likely to rise much higher.

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I hope this has provided some further insight into why commodities are going higher. As peak oil hits, countries will continue to nationalize assets to protect their own interests. In the mean time, there is money to be made by companies in politically secure areas of the globe. Once the debt bubble from around the world is popped, make sure bullion and money are stored away from banks.

FN Arena has an article on the unwinding of the yen carry trade as Japanese interest rates head back to positive territory - a topic which inspires bouts of financial collapsism (I don't think I've ever seen a local stockbroker carry an article quoting Lyndon LaRouche before) in some quarters - Steve at Deconsumption did a good post on the topic recently too called "The End of an Easy-Money Era".

FNA also had a series of articles on the rise of the platform company that I found interesting (though the idea that this trend is sustainable strains my powers of imagination - my guess is the trend probably ends in bankruptcy and upheaval if carried on to its logical extreme).

"The entire global financial system is on the verge of disintegration, as the result of the imminent collapse of the yen carry trade." Daily Telegraph (UK), 24th February.

"The multiplier effect of the blowout of the carry trade is going to mean that the crisis hits with a magnitude far beyond any individual nation or currency. This will bring down the whole post-Bretton Woods floating exchange rate system." Lyndon LaRouche, political economist, same day.

Blog after blog on the net, whether respected or otherwise, have gone into overdrive this year in anticipation of events that will see an unwinding of the yen carry trade. As the sample of opinions above attest to, such a development is not being taken with a pinch of salt. What, then, is the yen carry trade?

About three months ago, the Bank of Japan made an historic announcement: it was prepared to start raising interest rates shortly, maybe even as early as June. In the scheme of things, this hardly seems momentous, given just about every nation's central bank, from the US to Australia, through Europe, Asia, South America and beyond, has turned to policies of monetary tightening recently in order to ward off the effects of global inflation. In Japan's case, however, there is definitely a fundamental difference.

It has been described, in fact, as "a pivotal moment in modern financial history". The reason is that Japan is the second biggest economy in the world, and Japan's short term interest rates have been as good as 0% all of this century. It is past Japanese monetary policy that has given rise to the yen carry trade.

Effectively, the Bank of Japan (BOJ) was handing out free money.

Jeff at Sustainablog has a review of "An Inconvenient Truth" up. A couple of links from the comments - Mike Capone says Gore wasn't a stiff back in 2000, he just never showed his true self - and gave this example. Another reader recommends David Attenborough's "Climate Chaos" series for the BBC.

As I mentioned briefly in a comment this morning, Jan and I did go see An Inconvenient Truth yesterday. I want to agree with people like ianqui who said "Go see it even if you know quite a bit about global warming." First, Gore's presentation (and, yes, most of the film is him delivering his famed PowerPoint presentation) does a wonderful job of creating a visual representation of the impact of contemporary global warming: on certain graphs, you can see (as so many deniers have told us) that, yes, the Earth has gone through cycles of warming and cooling -- but what we're seeing now is nothing like those cycles. Secondly, Gore himself presents this information with deep knowledge and passion. This is not the "policy wonk" from the 2000 campaign, but rather a man on a mission who's studied the issue thoroughly, and has considered not just the science that shows global warming is a reality, but also the political, economic and cultural implications that global temperature change will likely bring about in coming years. Finally, it's a story: Gore's story of first being introduced to this concept at Vanderbilt in the sixties by one of the first scientists to identify the phenomenon, and how it shaped his view of the world and, to some degree, his political career. As at least one other reviewer has said (I can't remember who), there likely are a few too many shots of Gore looking thoughtful and pensive, but that's a really minor weakness in a powerful film that makes the science of climate change accessible to a broad audience. Gore himself has never looked better -- I got the sense that he's found his calling, and he's really good at it!

Go see this film. Take someone else with you. Offer to buy tickets for the naysayers you know.

Groovy Green has a post on the release of greenhouse gases by thawing Siberian permafrost.

This is something Dr. Evil would have planned: “Give me one MILLION dollars, or else I will unleash the worst pollution on Earth–the crap frozen in Siberia.” There’s a reason I’m not involved in writing scripts for Hollywood–but nevertheless, this is pretty disturbing. From the article, “Ancient roots and bones locked in long-frozen soil in Siberia are starting to thaw, and have the potential to unleash billions of tons of carbon and accelerate global warming, scientists said on Thursday.”

Supposedly, this vast carbon resevoir (one of the few oil companies are loathe to pursue) is loaded with 75 times more carbon than all that is released into the atmosphere each year through the burning of fossil furls. Covering nearly 400,000 square miles, Siberia has about 500 billion tons of carbon to hand out. “You have anthropogenic (human-generated) carbon that’s making things a little bit warmer, and that causes the permafrost to warm up and carbon is then released from the permafrost,” he said. “It goes into the atmosphere and makes things warmer yet again, so then more permafrost thaws.” So, for those of you that believe nature is causing global warming–hey there may be some actual truth to that. However, whereas thawing permafrost may be the bullet, you can bet sure as hell that we’re the ones pulling the trigger.

George Monbiot's latest article includes the eye opening revelation that there used to be a power plant in Denmark running on fish oil.

at first sight the government’s investigation into the idea of giving fish oil capsules to schoolchildren seems sensible. The food standards agency is conducting a review of the effects of omega-3s on childrens’ behaviour and performance in school. Alan Johnson, the secretary of state for education, is taking an interest. Given the accumulating weight of evidence, it would surprising if he does not decide to go ahead. Already, companies such as St Ivel and Marks and Spencer are selling foods laced with omega-3s.

There is only one problem: there are not enough fish. In March an article in the British Medical Journal observed that “we are faced with a paradox. Health recommendations advise increased consumption of oily fish and fish oils within limits, on the grounds that intake is generally low. However … we probably do not have a sustainable supply of long chain omega 3 fats.” Our brain food is disappearing.

If you want to know why, read Charles Clover’s beautifully-written book The End of the Line. Clover travelled all over the world, showing how the grotesque mismanagement of fish stocks has spread like an infectious disease. Governments help their fishermen to wipe out local shoals, then pay them to build bigger and more powerful boats so they can go further afield. When they have cleaned up their own continental shelves, they are paid by taxpayers to destroy other people’s stocks. The European Union, for example, has bought our pampered fishermen the right to steal protein from the malnourished people of Senegal and Angola. West African stocks are now going the same way as North Sea cod and Mediterranean tuna.

I first realised just how mad our fishing policies have become when playing a game of ultimate frisbee in my local park. Taking a long dive, I landed with my nose in the grass. It smelt of fish. To the astonishment of passers-by, I crawled across the lawns, sniffing them. The whole park had been fertilised with fishmeal. Fish are used to feed cattle, pigs, poultry and other fish – in the farms now proliferating all over the world. Those rearing salmon, cod and tuna, for example, produce about half as much fish as they consume. Until 1996, when public outrage brought the practice to halt, a power station in Denmark was running on fish oil. Now I have discovered that the US Department of Energy is subsidising the conversion of fish oil into biodiesel, through its “regional biomass energy program”. It hopes that fish will be used to provide electricity and heating to homes in Alaska. It describes them as “a sustainable energy supply”

Michael Klare has a great new article out on "The Permanent Energy Crisis".

MJ: The Bush administration calculated in 2001 that a campaign to wean the country from oil dependency wasn't a political winner.

MTK: Right. In 1975 and 1976, we faced an energy crisis, President Carter told everyone they had to tighten their belts and lower the thermostat and wear sweaters. He wore a cardigan on a national TV speech! And at the time people found this to be too depressing and distasteful, and so they voted him out of office. So there is a kind of belief that the public is not willing to undertake any measures that would require them to change.

MJ: Do you see any sign of a shift on that score?

MTK: Yes, I do. I think, beginning with Katrina and continuing to the present—gaining momentum even—the public is now moving ahead of politicians. There are many signs, polling data in particular, that the public does grasp the magnitude of the problem and is now prepared to make sacrifices and changes. And this, I think, is going to have a significant political effect in the coming elections.

MJ: One possible response to the permanent energy crisis is to diversify, meaning getting oil from a range of different areas, to reduce the dependency on oil from the Persian Gulf. But you don't buy that.

MTK: This was part of the strategy adopted by the administration in 2001. They recognized the U.S. would become more dependent on imports if we were going to continue to rely on oil as our main source of energy, but to try to reduce vulnerability to crisis in any one area they favored the strategy of diversification. The problem is that all the alternatives to the Middle East are just as dangerous. They include Africa, the Andean region of Latin America, Central Asia, North Africa—all places prone to corruption, internal warfare, and conflict. And so the logical conclusion of this strategy is what I call the globalization of the Carter doctrine, the notion that the United States has to send troops all over the world to protect oil—not only in the Middle East, but in Latin America, Africa and Central Asia. And that's the policy the administration has carried out.

MJ: And anyway, isn't it the case that no matter how much the U.S. diversifies, we'll still be largely dependent on Persian Gulf oil?

MTK: That’s absolutely right, because nowhere else has that much oil. And even if the U.S. doesn’t get it’s own oil from the Persian Gulf, we’re still dependent on Persian Gulf oil because that’s the major source of supply for Japan and Western Europe. If they weren’t able to get more oil from the Persian Gulf, then they would be coming to the places that we rely on—Nigeria, Latin America and so on, and that would hugely increase the competition and the price. So, for world oil prices to remain relatively low—they seem high today, but they could get a lot, lot higher—is for the Persian Gulf to churn out more and more and more oil every year.

MJ: It’s also hard to imagine that the US would have gotten involved in Iraq if there didn't happen to have massive oil reserves.

MTK: Absolutely. But bear in mind that the invasion of Iraq was not an unprecedented event; it really was the natural extension of a conflict with Iraq that began on August 2, 1990, when Iraq invaded Kuwait and occupied Kuwait, which was a major oil supplier to the United States, and threatened Saudi Arabia, the leading foreign supplier to the United States. So when George Bush, Sr. announced U.S. intervention in the Persian Gulf conflict in 1990 it was explicitly to protect oil, the oil of Saudi Arabia. And that lead to a massive deployment of American forces to the region, to the acquisition of more military bases, and later to the quarantine of Iraq. The invasion can’t be separated from all of that broader conflict, which is a conflict, at its root, about oil—not just about the oil of Iraq, but about dominance of the entire Persian Gulf region.

MJ: What role do you think oil and energy are playing in U.S. policy toward Iran?

MTK: You have to view Iran, like Iraq, as part of the large Persian Gulf region. Under U.S. policy—[enshrined in the Carter doctrine]—stability in the greater Persian Gulf region is essential to U.S. national security, because of its oil supplies, so anything that threatens stability in the Persian Gulf is a threat to America’s national interests. That's how Iran is seen in Washingto—as a potential threat to American dominance of the Persian Gulf. We’re really talking about a geopolitical contest in which oil is the ultimate prize.

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MJ: How do the same dynamics that apply to oil relate to natural gas?

MTK: There’s a great deal of similarity between oil and gas in the sense that it’s a finite commodity. And increasingly the United States and other users are going to have to go to the few sources that remain, and those include primarily Russia, Iran and Qatar. These countries between them have about 50 percent of the world’s natural gas supplies, which obviously makes them very important from a geopolitical standpoint. The U.S. has established very close ties with Qatar; we have military bases and troops there. The Europeans are becoming very dependent on Russia, and now India and China want to draw on Iran’s natural gas. And that enters into this great game we were talking about before, the jockeying for position.

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MJ: The trends are pointing toward greater and deeper and more problematic U.S. involvement, often military involvement, in all sorts of parts of the world. Can we expect evermore U.S. basis in these parts of the world, ever-closer military ties with these countries?

MTK: Yes to all of the above. The U.S. is already well established in the Persian Gulf. We have a very elaborate military infrastructure there. We have a growing military infrastructure in Central Asia in the Caspian. And Secretary of Defense Rumsfeld is talking about acquiring more bases in that area, possibly in Azerbaijan, Georgia or Kazakhstan. So there it’s well underway.

The place I think is the most interesting in this discussion, and that hasn't received the attention it deserves, is Africa. The world is becoming very dependent on oil from Nigeria and Angola and Equatorial Guinea, and now from Libya. And this is an area of great instability—ethnic, religious, political. It’s mixed up in places with Islamic fundamentalism. But the greatest threat comes from ethnic unrest, particularly in southern Nigeria where the local people, who are the victims of oil production, of all the oil spills and environmental damage, receive virtually none of the benefits of the oil production. All that goes to the elites in Abuja, the capital. And they’re now fighting a low-level insurgency against the central government. In the process they're seizing oil facilities, they’re sabotaging oil facilities, they're kidnapping oil workers, including Americans. The U.S. is looking at creating a capacity for intervention in Nigeria and in other parts of Africa, looking at the establishment of bases, training with Nigerian and other local forces, providing military aid, developing military ties.

MJ: In the book you propose an alternative energy strategy to the one we're operating under, one you call a strategy of "autonomy and integrity." What do you mean by that?

MTK: The phrase that is most often used in this discussion is "energy independence." And the administration talks about ‘energy independence’ from the Middle East, by which they seem to mean, exclusively drilling in Alaska and other protected environmental sites. So, I want to avoid that word, because I think it’s become a sham expression to cover up a failed policy.

So by ‘autonomy’ I mean having the freedom to say no to the Saudi Royal family when they ask for more American troops; having the power to say no to military intervention; and the ability to repudiate the Carter doctrine—the commitment to use force to protect oil—which has to be our ultimate objective. The only way to achieve this is by diminishing our reliance on petroleum altogether.

Crooked Timber has a post pointing to Ron Suskind's latest tale of Bush administration lunacy - "The kind of thing you wish were false". I sometimes wonder if I should invoke the old maxim of "Never attribute to malice that which can adequately be explained by stupidity" more often when I'm pondering the antics of these clowns.

One example out of many comes in Ron Suskind’s gripping narrative of what the White House has celebrated as one of the war’s major victories: the capture of Abu Zubaydah in Pakistan in March 2002. Described as al-Qaeda’s chief of operations even after U.S. and Pakistani forces kicked down his door in Faisalabad, the Saudi-born jihadist was the first al-Qaeda detainee to be shipped to a secret prison abroad. Suskind shatters the official story line here.

Abu Zubaydah, his captors discovered, turned out to be mentally ill and nothing like the pivotal figure they supposed him to be. … Abu Zubaydah also appeared to know nothing about terrorist operations; rather, he was al-Qaeda’s go-to guy for minor logistics—travel for wives and children and the like. That judgment was “echoed at the top of CIA and was, of course, briefed to the President and Vice President,” Suskind writes. And yet somehow, in a speech delivered two weeks later, President Bush portrayed Abu Zubaydah as “one of the top operatives plotting and planning death and destruction on the United States.”…

Which brings us back to the unbalanced Abu Zubaydah. “I said he was important,” Bush reportedly told Tenet at one of their daily meetings. “You’re not going to let me lose face on this, are you?” “No sir, Mr. President,” Tenet replied. Bush “was fixated on how to get Zubaydah to tell us the truth,” Suskind writes, and he asked one briefer, “Do some of these harsh methods really work?” Interrogators did their best to find out, Suskind reports. They strapped Abu Zubaydah to a water-board, which reproduces the agony of drowning. They threatened him with certain death. They withheld medication. They bombarded him with deafening noise and harsh lights, depriving him of sleep. Under that duress, he began to speak of plots of every variety—against shopping malls, banks, supermarkets, water systems, nuclear plants, apartment buildings, the Brooklyn Bridge, the Statue of Liberty. With each new tale, “thousands of uniformed men and women raced in a panic to each . . . target.” And so, Suskind writes, “the United States would torture a mentally disturbed man and then leap, screaming, at every word he uttered.”

Billmon is also quoting Ron Suskind - and he's wondering if Osama is working for Karl Rove's team of political consultants.

They say great minds think alike, but it appears second and third-rate ones do too:

BLITZER: You're saying the CIA formally concluded that bin Laden wanted Bush re-elected.

SUSKIND: Well, look -- absolutely true. And that day at the meeting John McLaughlin says, well, you know, bin Laden certainly did Bush a big favor today. And the analysis flowed essentially along those lines. The question, the key question, is what it is it about America's war on terror that is such that bin Laden would want it to continue and Bush to continue conducting it? That's the bigger question that was not examined by the CIA, because many of these people there were soon to be pushed out.

From the Whiskey Bar, October 29, 2004:

If anyone had any doubts about which candidate al-Qaeda prefers in this election, I think you can put them to rest now . . . Osama's no slouch at information warfare. I'm sure he understands that the impact of a tape like this one on the mass mind is mainly subliminal, if not hormonal. By plastering his face over every TV in America for the next couple of days, he's given Bush a priceless gift -- a boogeyman with which to frighten that last sliver of undecided voters into rejecting change. Al Qaeda, it seems, has evolved into one hell of an effective 527 organization.

And no, I don't work for the CIA.

Considering the narrowness of Bush's margin in the electoral college -- a 60,000 vote swing in Ohio, and we're talking about President Kerry's failed Iraq War policies right now -- it doesn't seem unreasonable to argue that Osama bin Ladin did more to perpetuate Shrub's reign of error than Karl Rove and the RNC propaganda machine from hell put together.

I quite enjoyed this US soldier's prediction about the ultimate conclusion of Cheney's war for oil in Iraq - once freedom and democracy have been fully embraced by the grateful locals, everyone will get a puppy.

Now I understand why the Republicans hate the troops. Interesting little story on The War Tapes, and allied documentaries, buried in the Times business section:

Specialist Mike Moriarty is filming his squad leader, Staff Sgt. Kevin Shangraw, as they bounce along in a Humvee. He asks his leader for his take on the broader mission, and Sergeant Shangraw comes straight off the dome with a government-issue rationale.

“Well, I think it’s a fantastic opportunity for the Iraqis to establish a new history in the country and be able to be a free and democratic society, which in turn should stabilize the whole Middle East and create a freer and more stable earth as we know it.”

“Tell me how you really feel,” an unseen Specialist Moriarty prompts.

Wait for it…

Sergeant. Shangraw waits a beat as the bleak landscape flies by in the window before answering.

“Then, after that happens, maybe we can buy everybody in the world a puppy.”

Given that I started tonight's rant with some quotes about butanol and perfume, I might throw in a couple of book recommendations to close - first Tom Robbins' Jitterbug Perfume (probably his best book - and it seems I'm not alone thinking that).

Robbins calls Jitterbug Perfume "an epic". It is also a saga, and a saga must have a hero. The hero of this one is a janitor with a missing bottle. The bottle is blue, very, very old, and embossed with the image of a great-horned god. Some people actually believe that the liquid in the bottle is--the secret essence of the universe...

And Patrick Suskind's "Perfume : The Story of a Murderer" (which I haven't read - however my wife has and she enjoyed reading me some of the more gruesome passages on a long flight in the distant past).

Set in eighteenth century France, it tells the story of a man who is born with a supernatural sense of smell, so acute that he can distinguish between thousands of smells around him at any one time. But he is abused and neglected as a child, and so he grows up bitter and twisted, determined to have his revenge - on the whole of humanity. He becomes the best perfumer in the world, able to make the most beautiful scents known to man - but this is not his goal. His goal is far more horrifying - to make the ultimate scent with which to control the world - but its ingredients are terrifying...