Five bucks a gallon?

Goldman says oil 'likely' to hit $150-$200 by 2010

Posted by Joseph Romm (Guest Contributor) at 11:28 AM on 08 May 2008

Read more about: oil | energy | economy | business

$5 gas ahead? Goldman Sachs' Arjun N. Murti said this in a May 5 report:

The possibility of $150-$200 per barrel seems increasingly likely over the next 6-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty.

That would mean gasoline prices of $5 to $6 a gallon. Unless, of course, we permanently suspend the gasoline tax, in which case gasoline prices would only be $5 to $6 a gallon.

Why should we listen to Murti? Well, back in 2005, when prices averaged under $60 a barrel, he was one of the few Wall Street analysts who predicted oil could soon hit $105 a barrel -- or higher if we don't take the right actions quickly:

There will be a peak in production earlier than expected, and that post-peak decline will be more dramatic than currently assumed unless there is a sustained increase in investment in oil and gas production, greater consumer efficiency and alternative energy.

That may all seem obvious, but it has come as a big shock to Detroit, D.C. policymakers, truckers, and apparently most of the American public. Certainly the fundamentals of oil supply and demand have changed, probably forever, as I have repeatedly written. And as Bloomberg reports, Murti is not alone:

Deutsche Bank AG Chief Energy Economist Adam Sieminski, who forecasts oil averaging $102.50 next year, today said Asian demand and limited extra supply will keep pushing oil to record levels. There's a "huge risk" that prices will rise to a level, perhaps $200, "when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now," Sieminski said in an April 25 report.

I tend to agree that the price is likely to keep rising over time (with occasional dips) until there is serious demand instruction. Most people, including me, thought that would have happened by now. But obviously prices are going to have to go considerably higher. Key factors include:

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East ...

In Venezuela, production has slumped to about 2.34 million barrels a day from almost 3 million barrels a day in 2002, according to Bloomberg's estimates, before President Hugo Chavez fired almost 20,000 workers who had closed the state oil company in an attempt to overthrow the government.

Iraq's oil production has yet to reach levels attained before the U.S.-led invasion of 2003 as the country struggles with sectarian fighting and attacks on its energy infrastructure.

Mexico's production has fallen below 3 million barrels a day since October as Petroleos Mexicanos, the state-owned oil company, failed to compensate for a 30 percent drop at Cantarell, its largest field, which accounts for 40 percent of output.

And, of course, Russia may have seen peak production (as the Financial Times wrote recently):

Leonid Fedun, the 52-year-old vice-president of Lukoil, Russia's largest independent oil company, told the Financial Times he believed last year's Russian oil production of about 10m barrels a day was the highest he would see "in his lifetime." Russia is the world's second biggest oil producer.

Mr. Fedun compared Russia with the North Sea and Mexico, where oil production is declining dramatically, saying that in the oil-rich region of western Siberia, the mainstay of Russian output, "the period of intense oil production [growth] is over."

But what about OPEC?

Spare production capacity of the Organization of Petroleum Exporting Countries is low and the group's exports may fall because of "lackluster" supply growth and rising domestic consumption in member countries, the Goldman analysts said.

Goldman's bottom line is not pretty:

"The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth" is leading to higher prices, the analysts said. That could result in a "sharp correction in oil demand."

And, by the way, don't blame speculators:

There's a fundamental misperception that so-called speculators are driving prices to unjustified levels, the Goldman analysts said. "Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big bad speculator."

Commodity investors, the Goldman analysts wrote, are "helping to solve the energy crisis" by speeding up the process for oil companies to spend more on energy projects and at the same time encourage efficiency.

I agree. Anybody who is helping to forward price the coming peak in conventional oil production is doing all of us a favor.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

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58 Comments | Post a Comment

Simple solution

40 mpg cars. With half the size of today's motors, even 50 mpg could be normal.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 12:58 PM on 08 May 2008

Bye bye poor people

If this happens, the world's poorest countries will collapse.

Of the 47 poorest countries in the world, 38 are net importers of oil, and 25 are fully dependent on imports.

The UN wrote this, in 2007, when oil stood at $60:

"Recent oil price increases have had devastating effects on many of the world's poor countries, some of which now spend as much as six times as much on fuel as they do on health. Others spend twice the money on fuel as they do on poverty alleviation. And in still others, the foreign exchange drain from higher oil prices is five times the gain from recent debt relief."

We can only begin to imagine what is happening with oil at $120 (e.g. food price hikes and riots, hyper-inflation, etc...).

$200 might well be the Rubicon for these countries, especially those with weak governments.

We need a global fund for oil aid. Else, the consequences could be pretty nasty.

by Jonas at 1:19 PM on 08 May 2008

Try $8 per gallon

That's what we're paying already now in France. Prices for gasoline have long been higher in Europe and Australia than in North America, thanks to much higher gasoline taxes. And the efficiency of the car fleet is, no surprise, much better.

These are only my personal opinions.

by Ron Steenblik at 1:21 PM on 08 May 2008

Jonas is right (partially)

Rich countries need to poor several hundred billion dollars into building (for free) an efficient infrastructure (electric trains, solar heating, solar/wind electric generation) in the world's poorest countries. It'll save money in the long run in stability, climate change adaptation costs, and be a better way to waste money than on military aggression...

A global fund for oil aid would work if it attached green development strings, but I think that would be viewed as very patronizing and not appreciated by poorer countries.

by Grevangelical at 1:53 PM on 08 May 2008

In this case

Market forces should work. Consumers want to save money, so they switch to higher mileage cars, bikes, and mass transit. Demand drops, prices level off.

As plugin hybrids appear in tiny numbers, they will spread a word of mouth buzz. They have the potential to cut demand dramatically, with 66 cent per gallon equivalent electricity and a small fraction of the fuel consumption of a normal car. Even dropping to 10% could be the norm for cars used mainly for commuting.

Plugin bikes could play a huge part too, especially three wheeled bikes.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 1:55 PM on 08 May 2008

To add to Jonas' point

The main problem for really poor people is not gasoline and diesel for vehicles, but kerosene used for cooking. At the moment, people in many developing countries are insulated from the high petroleum fuel prices because their governments are subsidizing or regulating prices to keep them low. But the magnitude and the duration of the price rises have been such that more and more countries are having to face reality: they can't keep this up forever. So the price hikes, when they do come, are all the more dramatic.

These are only my personal opinions.

by Ron Steenblik at 2:21 PM on 08 May 2008

MadMax Here I Come

Dust off your motorcycle and start hording gas. Because that day is coming. You would be silly to believe one word that came from Big Oil. It's so simple - they woke up. They realized their stranglehold on everyone and have taken complete advantage of it. They have thrown every excuse in the book as to why prices keep rising. Demand is high, they won't let us build a refinery, an obscure North Korean tanker had a missle shot it, it's sunny, it's cloudy, it's a holiday weekend, it's a Wednesday, you name it they've dished it. Any you keep butying it. Geesh. Dig deep enough (like they do) and you'll find the truth. They themselves are the "speculators". A truly smart oil executive would have built a new refinery years ago. Think about it. Oh, another secret...the car makers are in on it. Heed the truth.

by Dragon at 3:35 PM on 08 May 2008

Hmmm ...

I read that the price of diesel fuel and jet fuel are rising faster.

Fortunately, there are places to cut consumption without sacrificing quality of life.

(1) We'll finally see the end of tilling--and the soil erosion that goes with it--to control weeds. Everyone can start growing herbicide-resistant GM crops. That'll reduce CO2 emissions.

(2) We'll see the rise of trains again for long-distance shipping... far more efficient. Folks will just have to be a bit more patient while waiting for their latest internet purchase to arrive.

(3) We'll see a larger interest in relying on local agriculture. No one will want to build subdivisions on agricultural land around urban areas.

(4) No more competition from China and India. We'll manufacture what we need AT HOME. Reduces CO2 emissions and raises wages. China and India, however, are screwed... no longer able to dump cheap products in America. Who will buy all the crap?

(5) When Americans are FORCED to wean themselves from oil, once and for all, our leaders will no longer have to give a damn about what goes on in the Middle East or any other oily region. There will no longer be interest in drilling in Alaska. We'll see an enormous "peace" dividend when we no longer need to project our military power abroad. All that cash can be invested in repairing our infrastructure. We will, however, have to secure our borders... more jobs here as opposed to there.

Just trying to look on the bright side. I'm a bit concerned about how much it will cost to commute, but I imagine even more money will pour into biofuel research and the GMOs we'll need to reach our goals. Perhaps I'll get a raise!!!

Unfortunately, folks in developing countries will probably have to cut down the rest of their trees just to cook their food and stay warm. So long endangered species...

But... hey... this is just what environmentalists have been hoping for... EXPENSIVE GASOLINE to finally kill the American suburb. Yahoo.... whatever...

by wiscidea at 4:39 PM on 08 May 2008

Trucks are more efficient than trains

Wiscidea wrote: trains [...] for long-distance shipping... far more efficient.

That is not true -- and its untrueness is increasing over time as trucks become even-more efficient.

by Nucbuddy at 4:59 PM on 08 May 2008
[ Parent ]

Your car or Earth's life

Six dollar a gallon gasoline will not likely curtail much driving. This generation of Americans has become too psychologically dependent on cars to give them up that easily; they'll just reduce spending in other areas. Even when faced with the end of civilization, and perhaps all life on the planet, if we continue to drive (and use interior climate controls excessively). Our one concession is to use the SUV a little less (gasoline consumption is down a paltry 1% this year).

Face it folks, we must give up on unlimited use of automobiles. We will either reduce our global-warming inducing emissions by 80-90% over the next two decades or we will likely trigger such uncontrollable positive feedback loops as the loss of sea ice (with the release of the methane hydrates sequestered there) and the release of CO2 currently dissolved in the oceans. If we are going to grow food to eat and transport essential goods, like the aforementioned food, we have no room for automobiles.

Also, if I see one more ninny suggest powering oversized wheelchairs with the electricity grid I will scream. Over half of the energy on the grid is from coal, the worst fuel on the planet for GHG emissions. Remember the grid trouble in CA when a few bad actors reduced the power available by very small amounts a few years back? Plugging in cars will make that look like the glory days of stable power. There is just no way to move all that steel with the power available without adding many more coal-burning generators to the mix.

It is time for Americans to burn adipose, our most abundant fuel.

by human power at 8:50 PM on 08 May 2008

Grevangelical, Ron

Grevangelical: I fully agree that highly developed countries should invest in clean technologies in the South. But mobility remains crucial, and technologies are not here yet. Do you see a hydrogen powered fleet in Congo? Or electric vehicles that currently cost $100,000 a piece? I don't.

We better invest in parts of infrastructures that can support both the much needed development of an oil based mobility concept (which, by far remains the most cost-effective in the immediate term, even with oil at $200), while at the same time preparing the post-oil future.

Let's also invest in infrastructures that limit the waste of oil, such as improved roads and improved rural and urban electrification. You know, the countless diesel-generators used by the millions of "wealthy poor" (who make between $2 and $5 a day) are really inefficient. Towns need to be electrified in far more efficient and cost-effective ways (this can be anything, biomass, hydro, perhaps even wind; solar would be a no go, because 20 times too expensive).

Why should we invest in these things in the South? Because it is in our own geopolitical interest: lack of development will increase migration pressures, puts weak states at risk (we can't afford, e.g., the Congo to collapse once again, because that would mean we can't steal their coltan and copper - copper, by the way, needed for our own wind turbines and electric vehicles! and coltan for our communications infrastructures); lack of development will result in ecological catastrophes, like the destruction of ecosystems; lack of development will keep fertility rates skyhigh (7 kids per woman) and perpetuate poverty and the destruction of Africa's environment; etc...

An oil support fund is not paternalistic. The African importing countries have asked for one themselves. They have asked the creation of a global fund, supplied in part by the revenues made in booming oil exporting countries, like Angola, Eq Guinea, etc...

Oil aid is much more effective than debt relief, and than most other forms of non-technical aid.

To Ron: I agree kerosene is a big problem, but luckily there are unsustainable alternatives that can relieve this crisis for the time being (such as cutting down forests for charcoal).

I do think the importance of low-cost mobility should not be underestimated, though: the few farmers that succeed in selling surpluses to markets all heavily rely on liquid fuels for their farm and marketing operations. And we know that agriculture is the sector that needs most support right now. Without mass investments in African agriculture (which implies investments in affordable liquid fuels), we might witness a true catastrophy.

In any case, I think the effects of disastrously high oil prices on the poorest countries, are seriously underreported in the media. We need to focus more attention on this subject.

by Jonas at 7:48 AM on 09 May 2008

Biodiesel is $5.65/gallon now

in parts of Seattle.

In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world

by biodiversivist at 7:55 AM on 09 May 2008

Jonas --

I find it mind-boggling that you are sitting there in Belgium, one of the most public-transit-drenched spots in the world, and you're still insisting that the developing world spend some of its precious capital on a soon-to-be outmoded form of transport, cars.

Wiscidea, this "environmentalists-want-go-kill-suburbia" thing is like the "liberals-want-to-take-your-guns" thing, it's a straw man. As far as I can tell, the big enviros have been twisting themselves into knots to figure out a way to keep cars running, and they insist on ignoring public transit (like our friend Jonas).

by Jon Rynn at 8:15 AM on 09 May 2008

Marxism can look different, first-hand

Jon Rynn wrote: Jonas -- I find it mind-boggling that you are [...] in Belgium, one of the most public-transit-drenched spots in the world, and you're still insisting that the developing world spend [...] capital on [...] cars.

Perhaps, as with Canadians and socialized-medicine, his first-hand knowledge of socialized-transport affords him valuable perspective.

by Nucbuddy at 8:44 AM on 09 May 2008
[ Parent ]

Peak oil doom

The fantasy of peak oil is not gloomy. Think about it.

It is good for our side. Mother earth's side.

The fear and gloom sets everything up for real GHG solutions. Peal oil? Bring it on!

Sure it will concentrate wealth in the wrong hands, but that was happening all along anyway. So now we have to have a low budget revolution, no problem.

A do-it-yourself local energy revolution that feeds off the detritus of the old energy economy is just fine. Let the corporate society play peak oil as long as they want to. Just don't play along. It's just that simple. Non-violent, non-participation.

A general strike. Let them try and keep going without us. It will gradually grind to a halt. Then corporate culture will take to mass producing what we are already doing on our own and pretending they invented it. So it goes.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 8:54 AM on 09 May 2008

OK, cars = freedom,

public transit = marxism, I guess nukes = freedom, solar = ....hippies?

by Jon Rynn at 8:58 AM on 09 May 2008

Hehey

Right arm Jon! Nuclear power=France=commie (french nukes are state owned/operated)rat bastards who told bush to go eff himself when he wanted to invade Iraq.

So nuclear advocates want the government to own/operate the 100% nuke-you-ler power grid?

These nuclear fellers are at least as helpfull as GM and OPEC and the exxonmob at impelling eco-revolution. Awesome show, good job!

The bushco status quo, the ultimate agents of change. They have made everything go straight to hell so fast, our revolution is now inevitable. We even have our grassroots leader now.

Barack is winning thanks to the corporate funded swiftboat ad attack machinery. The worse the attacks, the more people realize he is right (not Wright). Hehey.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 9:10 AM on 09 May 2008

solar = freedom

Everyone off the grid.

Once you have your solar energy system installed you are no longer dependent on corporations for your energy. You are no longer dependent on foreign countries for you energy. You are no longer subject to sudden increases in prices that put a dent in your already battered budget.

Furthermore, it is better for national security. The "terrorists", "communists", or whatever the enemy of the day happens to be cannot blackmail a nation or arrange for widespread blackouts. There's no threat of a oil embargo. There's no need to "stabilize" certain regions to ensure a steady flow of crude, thereby alienating the rest of the world.

I think the Republican Party realizes this. Real American independence, real freedom, real ingenuity, real efforts to reduce dependence on oil undermines the whole military/industrial complex and takes away the one stick they use for rallying the party faithful... FEAR.

I wish Democrats would drive this message home to the average voter.. Real patriotic Americans who care about those willing to risk their lives to preserve our freedom invest in alternative energy, especially means of removing people from the grid, not in finding more fossil fuel. Real patriotic Americans WHO CARE ABOUT PRESERVING FAMILY VALUES invest in alternative energy.

by wiscidea at 9:20 AM on 09 May 2008

Marxism - transport in the hands of the state

Jon Rynn wrote: public transit = marxism

Indeed.
greaterthings.com/Constitution/Associates/10Marx_planks.htm

THE TEN STEPS OF KARL MARX [...] Taken from the Communist Manifesto
[...]
6) Centralization of the means of communication and transport in the hands of the state.
Communists, Socialists and Liberals [...] are very anxious to force us all to use state run mass transit trains, subways and car pooling schemes. Thus we can see how the enemies of liberty have very nearly achieved their goal of fully implementing the sixth plank of the communist manifesto.

by Nucbuddy at 9:23 AM on 09 May 2008
[ Parent ]

freedom

I'm starting to wonder whether Republicans believe that "freedom" really is just another word for nothing left to lose. If so, it looks like they're doing a great job of preserving it.... won't be long before Americans have more "freedom" than they ever hoped for.

by wiscidea at 9:25 AM on 09 May 2008

Well, wiscidea,

it would be easier if people didn't mind driving neighborhood electric vehicles, which are available now. The "problem": they get around 30 miles range, and about 30 mph -- and they're fairly cheap. The speed is actually a good one for pedestrians, and apparently in most states you can drive them as long as the roads are 35 mph or less. But its only usable in a fairly dense area -- but that still makes it possible in much of the U.S.

by Jon Rynn at 9:28 AM on 09 May 2008

Nucbuddy,

I'm not as familiar with the Communist Manifesto as the author you refer to is -- I guess libertarians are good sources on Marxism, for whatever that's worth. So somehow public transit is Marxist, but spending billions more than public transit on highways is not...and how about that Price-Anderson act? and all the subsidies and R&D for nukes? I smell some marxism there too!

by Jon Rynn at 9:35 AM on 09 May 2008

Jon Rynn to visit Congo soon

I find it mind-boggling that you are sitting there in Belgium, one of the most public-transit-drenched spots in the world, and you're still insisting that the developing world spend some of its precious capital on a soon-to-be outmoded form of transport, cars.

Jon, first off, I spend a good part of the year in Congo, so I can compare things.

Don't get me wrong, I'm all for renewables-powered mass transit and superconductivity-powered maglev. This is feasible in areas with a high population density, like Belgium or Tokyo.

But please have a look at the population map of Central Africa, and then think of the development needs there.

Countries there are made up of 70% farmers who live in the country-side, dispersed in villages.

These people do not need let alone can afford solar-powered superconductivity-fed maglev trains. They need $5000 a piece Soviet trucks and cheap liquid fuels to get their products to market. They need $10,000 Ukrainian second hand tractors with diesel engines. Not hydrogen-powered autonomous harvesting robots coupled to GPS.

I invite you to take a step into the world to do a reality check.

Mind you, I'm the first to recognize the value of concentrating people in (high-rise) cities, because these allow for multiple efficiencies. And nothing is more urgent in the vulnerable ecosystems of Central Africa.

I would even go so far as to suggest that we could use an initiative to encourage and streamline urbanisation and population migration in Central Africa. Architects, urbanists, sociologists, tiermondists, and economists should be funded to design Curitiba-like cities across this region.

But the reality today is that you have large rural populations, dispersed across the continent, much needed to provide basic food, fodder and forest products to the vast slum-dwellers in the growing mega-cities. To better the lives of these people, you need Soviet trucks and (bio)diesel.

Unless you are willing to hand over 30% of your yearly income to help these countries leapfrog and built next-generation hyper-efficient mobility infrastructures that even we can't afford.

by Jonas at 9:41 AM on 09 May 2008

By the way

By the way, Jon, I haven't mentioned the word "car" in any of my replies. Not once.

Please read them again.

I differentiated between reality and fantasy, that's all. I said: these people can't afford to buy $250,000 electric trucks for which a $5 billion dollar infrastructure is needed.

They can't, because they make $300 a year.

It's much more sensible and realistic to help them get their products to market in the first place. And you do so, again, with cheap ICE-powered vehicles.

People are dying, you know. They need food and fuel. If you ask me, fantasies about electric or hydrogen powered mass mobility concepts in these regions are quite obscene in this context. They might be a reality in the year 2075, when they make economic sense. But not today.

This is all a rather basic exercise in development economics - can be done with a piece of paper and a pencil. And a grip on reality.

by Jonas at 9:51 AM on 09 May 2008

I know of one truck fleet that has abandoned

biodiesel. I'm guessing because of its high price. They have even removed the biodiesel stickers from the sides of the trucks. It is all about cost. If biodiesel costs more than other fuels, it won't be used in place of them. If they are inherently cheaper than other fuels, why are they not already being used in place of them? Why the need for government mandated use of them? Why is the price of biodiesel rising faster than the price of oil? The biodiesel distributor here has lost half of his business this year because of high prices.

Energy costs have nowhere to go but up. The only way out is through efficiency gains.

In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world

by biodiversivist at 9:56 AM on 09 May 2008

Jonas, I'm hardly talking maglev...

...which may never pan out, even for rich countries. I'm thinking more of augmenting what I understand is a decent rail system that is already up and running in Africa, but I'm sure you have a better perspective on that than I.

I would also like to point out that the U.S. built up a huge agricultural system with the help of steam-based rail. Maybe it was necessary to use horses to get to the rail stations, but it would seem to me that there might be potential to get some rail -- cheap rail -- out into the rural areas. This would have the important effect of making it easier to use mass produced cheap electric cars, some that would be close to bikes, because they wouldn't have to travel hundreds of miles since a rail head would be available.

I haven't kept up on the possibilities for hydro in southern Africa, whether that would be possible or environmentally destructive, but it seems to me that there are some relatively cheap solar alternatives -- concentrated solar power for example -- that would be something to shoot for.

Unfortunately, even electric vehicles, if not run with solar/wind power, need coal for electrical generation -- although that would probably still be better than putting in an entire oil-based system. The good thing about electricity is that a number of devices/fuels can be used to generate it, while an oil-based system is pretty much stuck with oil -- or with a biofuel based system that can not be expanded past a certain point.

I would much rather have my tax money going into helping the developing world through this period than wasting it on the military. And I also agree that curitaba-type cities would be a great idea -- in all societies.

by Jon Rynn at 9:56 AM on 09 May 2008

Private toll-roads and taxies are not state-owned

Jon Rynn wrote: somehow public transit is Marxist

Yes, but not merely somehow.

Jon Rynn wrote: but spending billions more than public transit on highways is not

en.wikipedia.org/wiki/Natural_monopoly
en.wikipedia.org/wiki/Toll_road
google.com/search?q=%22toll+roads%22+privatize

by Nucbuddy at 9:57 AM on 09 May 2008
[ Parent ]

Or stronger bicycles

Picture of an every day scene:

Bicycles have become the primary means of transport for most Congolese ruralites.

But when they want to produce a surplus of goods or food, they need a motorcycle or a truck to transport that surplus over tertiary roads, to secondary roads, and then to a train or river boat. They will also carry a supply of diesel or gasoline with them (they will never carry batteries and a supply of electricity with them - no matter what Jon hopes).

I don't see TGV trains spanning 1000 kilometres, carrying grain and people up and down the country. Not here. Not now. Maybe later.

by Jonas at 9:59 AM on 09 May 2008

How about diverting oil to developing

countries, instead of using it for developed ones? The developed countries have the resources to move away from oil-dependence pretty quickly, it would make more sense to use whatever oil is left to move toward a sustainable economy, including building a sustainable infrastructure in developing countries. If developing countries need oil to get through this period, while at the same time building a long-term solution, then that would be a much better use of the substance than traveling hundreds of miles a day to a huge house in the suburbs. But that means changing the viewpoint of people in the developed world.

Electric vehicles can be just as cheap as ICE ones, or nearly so, as far as I can tell.

by Jon Rynn at 10:01 AM on 09 May 2008

Ah biodiesel

I know of one truck fleet that has abandoned biodiesel. I'm guessing because of its high price.

And I know of at least one country where farmers are pouring pure waste palm oil that is just filtered, into their diesel trucks, because it is 5 times cheaper than imported diesel that has to be hauled in across rivers deep into the interior of the country. 5 times cheaper.

And I know of at least one country where biofuels and bioenergy have now become the second largest primary source of energy - as Brazil's EPE just announced yesterday. Bioenergy and biofuels are now just ranking below petroleum, bypassing hydropower, all other fossil fuels, and all other renewables. And no, Brazil isn't going to utilize electric trucks anywhere soon. And neither are African countries.

And I predict that with oil at $200 (what this article is about), the world's farmers and truckers will be scrambling for biodiesel.

by Jonas at 10:05 AM on 09 May 2008

what about tricycles? quadricycles?

this is partly an information question, those would be much easier, it seems to me, than bicycles for transporting goods, and they could be fairly easily electrified, if the resources are there to do that. And, a developing nation can produce its own bicycles -- they don't have to be state-of-the-art -- and use that knowledge to go onto bigger and better things -- a strategy that worked successfully in Japan, which started by simply having workshops that repaired bikes, moved on to making parts for bikes, and then making them.

I'm not talking TGV either. Just a basic diesel or electric train system that isn't fancy, but that's cheap and dependable.

by Jon Rynn at 10:05 AM on 09 May 2008

Let's not confuse things

I'm thinking more of augmenting what I understand is a decent rail system that is already up and running in Africa, but I'm sure you have a better perspective on that than I.

Look Jon, obviously rail infrastructures are key to Africa's development.

But that doesn't do away the fact that you need to get goods and farm products from tertiary roads to secondary roads to, yes, a train or a river barge.

If you can electrify part of this infrastructure and couple that to rural electrification, via whatever renewable source, then all the better. I just don't think this scenario is for tomorrow.

All the while, we are dealing with oil prices that are truly catastrophic for these countries.

And that's where an urgent intervention is needed.

Let the West develop dirt-cheap and hyper-efficient vehicles for the future. Then transfer them to the South. That's much more realistic than the idea of "leapfrogging".

Just my two francs (taking into account a 200% inflation resulting from disastrous oil).

by Jonas at 10:13 AM on 09 May 2008

Curitiba; "tiermondist"

The city in southern Brazil does not seem to be all that interesting in itself, i.e. not a top-rank tourist destination, but nevertheless is celebrated for its urban planning, and is probably therefore a comfortable place to live:

http://en.wikipedia.org/wiki/Curitiba.

Several months ago, there was a story about it in the New York Times (the Magazine, I think). The story made the place look rather boring and charmless, so it was all the more depressing to learn that that is the kind of place which is on the cutting edge. Oh well.

"Tiermondist" is not a term that I am familiar with, and I am having a hard time researching it. Presumably it is derived from French "tiers monde," "third world"; and therefore it probably refers to an ideology of identifying the peculiar interests of the developing countries and favoring them over the interests of the developed countries. But that is just a guess.

Oddly, most of the articles in which the term is used which popped up in a Google search just now are in Romanian.

Chickens deserve our true friendship! So do fish! So do other sentient beings! Let us learn to be kind.

by caniscandida at 10:18 AM on 09 May 2008

Horses for courses

Jonas, could you be more precise about the "waste palm oil" to which you are referring? If you mean waste cooking oil from palm, that's great, and more power to them. But I imagine the volume of waste cooking oil that country, as elsewhere, is pretty limited. Still, the point is valid: locally produced biofuels are most likely to find a local market first in remote, land-locked countries, where the cost of importing and transporting petroleum products is expensive.

Brazil is a special case, meriting a longer response. But let's not forget that: (a) Brazil's sugar cane industry is, and has long been, by far the most efficient in the world (it truly is the Saudia Arabia of sugar); (b) even so, ethanol benefits from significant excise-tax preference compared with gasoline; (c) the blending of ethanol is mandated by the government (between 20% and 25%); (d) private diesel cars are prohibited; (e) the production of biodiesel in Brazil is subsidized, and its consumption is mandated; the program is a nicely designed social program, but most of the vegetable oils being converted into biodiesel there come from big soybean producers, or imports.

These are only my personal opinions.

by Ron Steenblik at 10:23 AM on 09 May 2008
[ Parent ]

by Ron Steenblik at 10:24 AM on 09 May 2008
[ Parent ]

Jonas --

Even though I would welcome an oil-free world, I feel terrible that the inevitable escalation of oil prices is turning into such a disaster, all over the world. We have a situation in the U.S. where gas prices might be the number one issue, and this is in the rich U.S.

An ounce of prevention would have been worth much more than a pound of cure in this case, so now we will be left with all kinds of band-aid solutions so that people can get through the short-term. When faced with short-term catastrophe, people do what they have to do to survive.

The choices don't look very good now, and we need a global movement that would handle these problems in a global fashion, a Marshall Plan for the developing world that would fit in with a plan to transform the developed world. But that is obviously a long-term proposition as well.

The best I can come up with right now is to extend the idea of the Soviet-era trucks, which I imagine were simply designed to be able to be mass-produced, and to be reliable for a long time. Maybe bike-type technologies along those lines would help -- I don't know that they need to be hyper-efficient, which might get high-tech, as much as easy to manufacture, using easy to make parts from fairly cheap materials. My two devalued cents worth, as well.

by Jon Rynn at 10:26 AM on 09 May 2008

Tiersmondist

Tiermondist is the anglicisation of the french word "tiersmondiste" - so don't leave out the "s" and the "e". Tiersmondiste is itself the substantivation of another French substantive, namely "tiersmondisme".

Which yields more references in Google.

Google results for tiersmondisme.

The word is most often used in combination with prefixes like "post-" or "anarcho-".

Post-tiersmondisme, because tiermondism ("third-worldism") is a particular ideology dating from the seventies, that is now resurging. Partly because of Latin America's turn to the left.

I will use more enigmatic words in the future. Just because they can be Googled.

by Jonas at 10:31 AM on 09 May 2008

Merci bien,

M. Jonas, qui aurez 33 ans (je suppose) en l'an 2008. (Oh!, l'age de Jesus-Christ quand il est mort!)

But it was you who dropped the "s" and the "e":

<<
Architects, urbanists, sociologists, tiermondists, and economists should be funded to design Curitiba-like cities across this region.
>>

Neanmoins, by all means be as enigmatic as you like.

Chickens deserve our true friendship! So do fish! So do other sentient beings! Let us learn to be kind.

by caniscandida at 10:44 AM on 09 May 2008

Ron, it is palm oil from the tree, not the pot

Ron, the case in question is the Equator Province of the DRC.

Palm oil production there is artisanal. Only 30% ends up on "formal markets"; another 30% is used locally; and 30% is considered spoiled, because of the highly inefficient processing technique (manual press above a fire).

It is this spoiled fraction, which is now being used by the Centre de Développement Intégral Bwamanda.

CDI Bwamanda is an integral development project dating back to early post-colonial times. It now is a "state within the state", with hundreds of thousands of farmers in the Province as members of the cooperatives, the well organised agricultural initiatives and the mutualité (not sure how you call this in English, but it's a kind of collectively organised health care system).

The people living under CDI Bwamanda are the only ones in Congo to have come out of the most deadly war since WWII, which raged there for 10 years. They did so in part because this is the only functioning region in the entire Congo.

As you may recall, the founder of CDI Bwamanda, Leonard Van Baelen, was called one of Time Magazine's men of the year in 2003, because of this project. His organisation really knows what it's doing; it knows how to organise social and economic justice. Part of that is using palm oil for development.

CDI Bwamanda now uses filtered palm oil, waste from the many farmers who harvest and process it, in diesel engines. So it is not waste cooking oil.

They fully acknowledge that they don't want to turn this into an industry, and that the palm oil is only used because hyper-high oil prices are problematic.

However, they see the planting of palm oil trees as a great option to prevent the encroachment of the savannah. And they are planting lots of trees, as well as taking the huge decayed old plantations back into operation (these date back from colonial times).

An interesting technical report shows that palm oil can be used straight into diesel engines, without much problems.

I can imagine this makes sense in such local contexts.

It also shows that not all palm oil is as destructive as it is often portrayed.

It's only when you scale things up to a mad level that you get into trouble. And that's where fear is legitimate, because the Chinese have already bougth licences for a few million hectares of palm oil land in Congo.

by Jonas at 10:47 AM on 09 May 2008

Market Strategy

Scare them with high crude prices.

Post downward looking quarterly results.

Force stock down.

Buy stock.

Drop price of oil.

Release good news.

Make money.

Texeme.Construct(Participant)

by jabailo at 10:54 AM on 09 May 2008

Oh heaven

M. Jonas, qui aurez 33 ans (je suppose) en l'an 2008. (Oh!, l'age de Jesus-Christ quand il est mort!)

How did you know I did recently turn 33?

And: are you wishing to see me crucified?

No problem, if you check some of the discussion here, you'll see that I get nailed on the cross by brutal Roman imperialists on a continuous basis.

Lord, forgive them, they don't know what they do.

Despite the pain and the suffering, I still represent the Truth. Like biodiesel.

by Jonas at 10:55 AM on 09 May 2008

nice article on CDI Bwamanda in Time

here.

Jonas, you should write this up somewhere (the Nation?)

by Jon Rynn at 11:01 AM on 09 May 2008

Horses

By the way: you mention horses.

Sometimes I don't understand what all the fuzz about biofuels is about.

In the past, we fed huge amounts of biofuels to horses. I once read that up to a quarter of all agricultural output went to feeding inefficient traction animals (both for use in agriculture and for transport).

Only today, internal combustion engines and the processing of biomass into biofuels is far more efficient than feeding horses. Or electric cars powered by 90% efficient cogeneration biomass plants are also more efficient than these poor animals.

The Congolese go hungry, not because they don't have enough room to grow food, but because they don't have trucks (horses) and fuels with which to import basic inputs for farming and with which to bring their products to local markets.

by Jonas at 11:01 AM on 09 May 2008

yes, that's what I was trying to say...

electric cars powered by 90% efficient cogeneration biomass plants

by Jon Rynn at 11:17 AM on 09 May 2008

Communism suggested as cure for Africa

Jonas wrote: I would even go so far as to suggest that we could use an initiative to encourage and streamline urbanisation and population migration in Central Africa. [...] tiermondists [...] should be funded to design Curitiba-like cities across this region.

en.wikipedia.org/wiki/Third_worldism

Among the New Left groups and movements associated with Third Worldism were Monthly Review and the New Communist Movement.
[...]
Third worldism is also closely connected to movements such as [...] Maoism [...] African socialism and the variety of Communism associated with Fidel Castro. National liberation movements such as the Palestinian Liberation Organisation, Sandanistas and African National Congress have been cause celebres of the movement.

It at least seems to be a popular idea, Jonas. Would you specifically suggest Cuba as the optimal development model for sub-Saharan Africa?

by Nucbuddy at 11:24 AM on 09 May 2008
[ Parent ]

Actually, nucbuddy

Cuba is an interesting example of a society that has become post-oil, out of necessity, because they used to get all of their oil from the USSR -- no USSR, no oil. So they instituted a program of urban gardens, cut down on car use, etc., and they are now doing quite well. There's a nice article about it here.

I still don't know why you're worried about Marxism, but thanks for the links.

by Jon Rynn at 11:50 AM on 09 May 2008

Getting food to market

I thought some people might find this interesting:

The hauling fee on a trailer load of vegetables can cost a grocery store $1,000. That store can be billed an extra $400 to cover higher diesel prices.
Easson said his customers plead for discounts, but he can't run his 150 trucks without that money. He said a smaller firm in New Brunswick has already parked its trucks after explaining the choice to its main customer.
"They said I'm going to withdraw service for three weeks while you think about whether to pay the fuel surcharge or not, and if you pay I'll open up, and if you don't I'll stay closed," he said.

by dissociated at 12:03 PM on 09 May 2008

Horses

I have this vague notion lodged in my brain -- I don't know where I read about it -- but I don't believe horses are suitable for a tropical climate.

Anyone know about this?

Once again, perhaps, an example of one culture failing to think outside the box when trying to help another culture solve a problem.

And whatever happened to efforts to distribute small solar ovens to people to reduce their need for cooking fuel?

by wiscidea at 12:16 PM on 09 May 2008

Horse sense

Jonas, you really can't believe we'd let this response by without comment:

Sometimes I don't understand what all the fuzz about biofuels is about.
In the past, we fed huge amounts of biofuels to horses. I once read that up to a quarter of all agricultural output went to feeding inefficient traction animals (both for use in agriculture and for transport).

If you don't understand what the fuss about biofuels is all about, then you clearly have absorbed nothing of what people have been saying here. First and foremost, the fuss is about current biofuel policies, especially in the industrialized countries -- how they have been designed and implemented.

Second, when people in the industrialized north were last growing feed for work horses, the populations of North America and Europe were much smaller than they are today. And horses were usually given pasture to graze in. Pasture = grass, which is a good land use from a carbon-balance perspective (not a concern a century ago).

But, for what it is worth, the Land Institute did an interesting analysis a few years ago that included a comparison of traditional Amish and conventional agricultural systems in the United States.

Towards the end of the article the authors compare two "sustainable" sources of farm power: horses and biofuel-fueled tractors. They conclude that:

"corn-based ethanol and horse feed would require roughly the same area of cropland for traction to farm the nation's cropland, but on a net energy basis, the former area [i.e., for ethanol] would be more than twice the latter."

These are only my personal opinions.

by Ron Steenblik at 12:16 PM on 09 May 2008

On animal power in the tropics

GlobeScan_survey_results

Wiscidea: I'm not sure whether horses are unsuitable for tropical climates, but they are used. Oxen are also used, as shown in the accompanying photo of an ox-drawn cart in Madagascar, for example.

For more info, see the web page of the World Bank's Sub-Saharan Africa Transport Policy (SSATP) Program.

These are only my personal opinions.

by Ron Steenblik at 12:33 PM on 09 May 2008

wiscidea - solar ovens

I've looked into this a little bit too, because I thought I'd read solar ovens were cheap, but then I came across several people selling them for prices comparable to conventional ovens. I've heard they've been widely distributed in Darfur to increase safety of women, preventing them from needing to travel far from home in search of fuel. If someone knew what they were doing they might be able to start a program to distribute them and get funding from an GHG offset company. It seems like there are a lot of areas where providing funding or other types of assistance to developing countries could provide far greater returns per dollar in terms of GHG reductions than in the developed world where we have more efficient technology. Also in terms of the way food is produced, this might be a factor, preventing deforestation for both food and fuel amongst desperately poor and hungry people. And then there's the added bonus of building up social capital and good will, preventing the need for mass migrations..

by dissociated at 12:42 PM on 09 May 2008

and also offsets..

On the topic of funding from offsets, has anybody heard of this for funding better public transportation, or augmenting it in ways to make it more attractive, increasing ridership? I suppose the accounting would be far trickier, so maybe that's why it's not an obvious choice.

by dissociated at 12:44 PM on 09 May 2008

Animal traction and efficiency

Ron, thanks for this interesting comparison.

I would make a few remarks, though:

the study states: the fuel efficiency for diesel tractors is four times that of workhorses. Since this is an old study (with data from the 80s and early 90s), I think it is safe to say that this difference has only grown. Bioengineers and farmers may up the feed conversion efficiency amongst traction animals in the future.
then the study looks at the net energy basis, but here's the problem. It only takes the biomass conversion efficiency for ethanol into account in as far as it concerns the grain yield; the far larger fraction of biomass that is produced and can be used for energy, is not taken into account. The feed conversion of animals on the contrary cannot be improved upon so radically, and the study already takes an unalterable efficiency into account; on a net energy basis, I would therefor at least double the energy yield of crappy corn biofuels, if all the biomass is used.
I would not consider a corn-grain-only biofuel to be efficient and would refer to the Brazilian practise of utilizing the large fraction of waste biomass to power part of the production process. I would also simply consider Brazilian ethanol to be the benchmark for any type of future biofuel (this implies a trade scenario: if US/EU farms don't succeed in producing a biofuel with an 8 to 1 energy balance, then they should stop trying and import fuels from Africa and Latin America).
The point about liquid fuels used in ICE's is their versatility: they can be used not only in tractors, but to power trucks, ships, cars and airplanes. As grass, the grass eaten by horses remains stuff for their stomachs only.
Speed: the horse mobility concept is rather slow, in comparison with that based on liquid fuels used in ICEs. I'm not saying that slowing down our just-in-time economies isn't interesting, I'm only saying it can take a while, and it might lead to new inefficiencies.
Besides speed, there is also the problem of sheer traction power. Hauling 20 tonnes of food to a distant market in 1 big truck, is more efficient than hauling the same 20 tons, for which you need 80 horses. But again, this is a matter of modern logistics; I'm not against creating a more localist universe in which distances traveled by goods are radically shortened.
An interesting advantage of traction animals would be their continuous production of organic fertilizer. In an era of ultra-high mineral fertilizer prices, this could be a bonus. But on the other hand, most biofuel production processes yield copious amounts of animal feed (mollasses, dried distillers grains, etc...), which support the meat industry; the organic fertilizer produced by the animals of this sector would do the same trick.

With regards to your comment about the wrong biofuel policies, I cannot agree more. Biofuels should only be produced from efficient crops, grown in a sustainable manner, and be socially beneficial to people who are making the transition from human power (and animal traction), to modern mobility - that is: they should be produced in Africa and Latin America (for first generation fuels), and from wood and grass everywhere (for second generation fuels).

Today's policies in the EU and the US are not efficient.

What's more, I'd rather see all biofuel money spent on biomass electricity instead, coupled to investments in the electrification of our vehicles. Then we have a reliable and efficient green baseload (biomass cogen plants), and plenty of other renewables to add.

by Jonas at 3:04 PM on 09 May 2008

Trolleys, rocket stoves, concentrating solar

I read through this whole thread and didn't see a single reference to electric trolleys. In 1900 in the US these were widely used in rural areas to collect the days milk and eggs from whistlestops and bring them to urban centers. Hence the term "milk run." The basic electric trolley is a very cheap beastie and doesn't need to be built along the lines of the modern urban transit vehicle.

In rough terrain areas pole or tripod mounted suspended-monorails can carry extremely large loads while avoiding grading hassles. Since I know what a hassle grade maintenance can be this can be a major energy/cost savings in hilly areas.

Rocket stoves are being produced and plans distributed around the world as fast as the UN and various volunteer agencies can spread the word. They use much less fuel than conventional biomass cooking stoves, burn cleaner and provide some charcoal byproduct for use as biochar soil improvement.

Concentrating solar power could be widely available in the global south since the focal point need not be perfect to be useful. Once you have your mirror array anything from soup to chemical reactors to high-temp. PV can be placed in the focal point. You have to have the mirrors in place first though.

Finally transportation of massive tonnage of goods can be done by bicycle as Ho Chi Minh demonstrated. The example set by http://www.worldbike.org/ should be followed widely. These bikes can carry up to 300 lbs and require no fuel at all. They can also be modified with small electric engines and power tool batteries for rechargable power assist.

Put the Carbon Back

by Pangolin at 4:31 PM on 09 May 2008

$5.00 Galloon ...was $3.50 ..where's that Gas Tax?

Price keeps going up(predictably)..not hard to predict actually.

We're all dupes I'm afraid. When are folks going to wake up to realize that a small 5cent to 10cent tax equivalent per gallon will help more than hurt this 'once in America's lifetime' situation?? to invest in new side industries in alternatives? and reduce demand and get speculators going into alternatives besides oil in bigger ways?

By 'rethinking' how we levy taxes in this situation, we (the 'non-oil rich' ) taxpayers could be making getting a tax break for a change, while cleverly funding alternatives. Reverse logic ..get it? It's all investor psychology.

But, unfortunately..it will be way too late before folks realize this...as they argue over nickel tax increases as too burdensom, all the while dollars deflate, real-estate sinks in valuation, and gas hits $200/barrel. A correction will then be in order. But until then will tax payers benefit ..at all?

The price has already climbed way past the 5cent a gallon increase several smart economists suggested back when it was $2.80/gallon. Has anything new federal funding (not borrowed from existing programs) gone into alternatives yet?

Think about that one.

I'de like to be optimistic, but the tax structure needs a big rethink in my opinion. It will happen. One way or the other I'm afraid.

-JChan

by JChan111 at 5:45 PM on 09 May 2008

Cuba: "post-oil" child-sex-slave utopia

Jon Rynn wrote: Cuba is an interesting example of a society that has become post-oil, out of necessity, because they used to get all of their oil from the USSR -- no USSR, no oil. So they instituted a program of urban gardens, cut down on car use, etc., and they are now doing quite well.

There is more to the story of Cuba, Jon.
cia.gov/library/publications/the-world-factbook/geos/cu.html

[Cuba] is now slowly recovering from a severe economic downturn in 1990, following the withdrawal of former Soviet subsidies, worth $4 billion to $6 billion annually. [...] Illicit migration to the US - using homemade rafts, alien smugglers, air flights, or via the southwest border - is a continuing problem. The US Coast Guard intercepted 2,864 individuals attempting to cross the Straits of Florida in fiscal year 2006.

If Cuba is "doing quite well", why are Cuban citizens trying to leave? Perhaps they know something about Cuba -- from actually having lived there -- that you do not.

Economy - overview:
[...]
Since late 2000, Venezuela has been providing oil on preferential terms, and it currently supplies about 100,000 barrels per day of petroleum products. Cuba has been paying for the oil, in part, with the services of Cuban personnel in Venezuela, including some 20,000 medical professionals.

If Cuba is post-oil, why is it lending out enslaved doctors in exchange for oil?

GDP - composition by sector:
agriculture: 4.6%

That would not be too bad, except that...

Labor force - by occupation:
agriculture: 20%

...in light of the former figure indicates production inefficiency. Additionally, Cuba has $17 billion in debt, not including the $15-20 billion it owes Russia. Let's see how else Cuba feeds itself, and otherwise props up its economy:

Transnational Issues
Trafficking in persons:
Cuba is a source country for women and children trafficked for the purposes of sexual exploitation and forced child labor; Cuba is a major destination for sex tourism, which largely caters to European, Canadian, and Latin American tourists and involves large numbers of minors; there are reports that Cuban women have been trafficked to Mexico for sexual exploitation; forced labor victims also include children coerced into working in commercial agriculture

So, not only is one-fifth of the labor-force working in agriculture -- as opposed to less than one percent in the United States -- but in order to maintain output, Cuba uses agricultural slaves. Cuba does not seem to be interested in rectifying the slavery situation, either:

tier rating: Tier 3 - Cuba does not fully comply with the minimum standards for the elimination of trafficking and is not making significant efforts to do so

Now, did you not actually know these revealing things about Cuba, Jon, or were these the very types of things that you had in mind when stating that Cuba was "doing quite well"?

by Nucbuddy at 6:33 PM on 09 May 2008
[ Parent ]

What if it reached $240 a barrel

King of the Oil Beasts: In Petroleum We trust!
http://feww.wordpress.com/2008/05/10/king-of-the-oil-beas ...

by LGT at 6:44 PM on 09 May 2008

Nucbuddy,

Thanks for the info. I certainly wasn't arguing that Cuba is a paradise -- and you didn't even mention the biggest problem, that it's a military dictatorship (which, in addition to the fact that the US is simply richer, are probably the main reasons for the immigration).

However, the fact that 20% of the population is not so terrible. As I tried to argue here, it is quite possible that when we have a sustainable agricultural system, a large percentage of the population will be engaged in high-skill, permaculture type gardening/farming.

by Jon Rynn at 6:59 PM on 09 May 2008

ADVERTISING POLICY

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