RE: [asa] $4 gas is here to stay (fwd)

From: gordon brown <Gordon.Brown@Colorado.EDU>
Date: Tue Dec 09 2008 - 22:25:05 EST

Here is another message from Glenn Morton.

Gordon Brown (ASA)

---------- Forwarded message ----------
Date: Tue, 9 Dec 2008 21:04:17 -0600
From: Glenn Morton <>
To: 'Kirk Bertsche' <>,
     'gordon brown' <Gordon.Brown@Colorado.EDU>,
     'ASA Affiliation' <>
Cc: 'Dick Fischer' <>
Subject: RE: [asa] $4 gas is here to stay (fwd)

Kirk, I had seen that article. But thanks for the supporting evidence.
Gordon, can you forward this to the list, as usual. I am sure this topic
will die down soon and I will quit bothering you.

  I want to note some more continuation of the downward adjustments to oil
company budgets. Chesapeake Oil, a major gas producer just announced a 40%
decrease in next year's budget. That means less exploration. I heard today
that in West Texas, rigs are piling up and the drillers being sent home. No
one wants oil right now . Alaska's oil production will fall from 690,000
bbl/day this year to 665,000 per day next year. I am not quite sure where
the Trans-Alaska Pipeline shutdown point is but it comes somewhere around
400,000 bbl/day. The reason? At that slow a rate of flow, the oil will
freeze up in the pipe before it gets to Valdez. As I said, I can't quite
recall the value, it might be 300,000 bbl/day but I think it is 400.
Anyway, if we don't drill ANWR by then, we never will. The pipeline will be
a chunk of asphalt. But we don't want to bother the caribou or emit carbon
into the air-thus we will all get to walk to work.

Does anyone know what the difference between a dieter and a starving man is?
About 1 calorie per day. Michael Phelps lives on about 10,000 calories per
day-he burns them swimming. I live on far too many calories per day and my
waistline shows it, but it is probably closer to 3500 calories perday. A
dieter may chose an 1800 calorie per day diet and he will lose weight. That
is probably about the calories I took in while I was in China-even though I
ate like a pig. Every month my weight dropped. The lowest the average human
can go on a calories per day basis, is somewhere around 1200 calories per
day. If you are tall, that number is a bit higher. If you are a small
person, it is lower. But there is a level for each of us.

Now, if I am average and can live forever on a 1200 calorie per day diet,
But drop to 1199, and no matter that I eat each day, I am dying. I
occasionally have meetings which include a woman who is clearly anorexic. I
don't know how many calories she eats each day but I suspect it is barely
above the level of dying. I am always relieved to get out of those meetings
without her having her heart attack-which will come.

Now, why do I speak of such gruesome topics? Well, the economy uses
calories just like we do. Work equals force x distance. Work is energy.
When a factory makes a hammer in China, energy is required to move that
product to market. If the force to be over come in moving that hammer to the
Ace Hardware store down the street, is only friction of the tires on the
road and the boat against the water, those forces are pretty constant.
Energy must be expended or the hammer doesn't get to my hardware store.

As the economy in the future has, each day, less and less energy with which
to overcome the friction of getting that hammer to market,, fewer hammers
will be moved. And fewer hammers will be forged, as that requires energy as
well. As I said in my 2005 ASA talk on energy at Messiah College,
when peak oil happens it will mark the first time in 10,000 years that
mankind has had less energy tomorrow than he had today. It will be a
historic moment. Right now, July 2008 is the peak of oil production, but
that figure is preliminary and most likely will be revised downward (May
2008, which was the previous 'peak' was revised downward. If July 2008 gets
revised downward, then May 2005 was the peak of world crude oil production!
As the energy available to the world economy becomes less and less,
eventually we will reach a point where the economy moves from the status of
a dieter, to the status as an anorexic. I don't know what level of energy
use that is, but as far as I can see it is coming

I commented last time on how the West, in their unthinking herd mentality,
thinks oil and energy is a curse, because of CO2. That is a debate for
another day, but I think it is one of the most misguided herd mentalities.
The oil crisis is far closer to us than global warming, and it will happen
before the seas rise. (I won't debate this on this list. I will only debate
global warming where I can post pictures). I know energy is a blessing of
immense value. We westerners have the energy equivalent of 50 slaves. My
friend Gordie Simons once remarked to me that the 19th century increase in
energy may be the reason the world no longer has slaves. The only place in
the modern world one finds slaves is in energy poor areas.

Now, the current economic situation has several frightening aspects. As the
price of oil drops, alternative energy gets killed. Investors won't be so
rapid to re-invest in it because they will fear another drop in the price of
oil. That means wind and solar won't come back quickly. But then in
Nature, I saw this

       "The growing difficulties in attracting investment may prevent nuclear
power from playing a significant role in the fight against climate change. A
global energy outlook published on 12 November by the International Energy
Agency, an intergovernmental organization that guides energy policy, called
for an 80% increase in the world's current nuclear capacity by 2030 in order
to keep global carbon dioxide levels from rising above 450 parts per

       "That would require bringing some 25 new reactors online every year
between now and 2030, five times the current rate of construction, according
to Matthew Bunn, a nuclear-policy expert at Harvard University. Given the
bleak financial outlook and the limited production capabilities of
power-plant vendors, "nuclear can no longer support climate-change needs and
targets': he says."

       "The global downturn means that many utility companies will be
"pressing the pause button" on new nuclear plans, says John Gilbertson, who
tracks financing for nuclear projects as a managing director for the New
York-based brokerage firm Goldman Sachs. "Markets right now are less
receptive and capital is more expensive:' he says. "Everyone of these
companies is going through a massive gut-check." Geoff Brumfiel, "Nuclear
Renaissance Plans hit by Financial Crisis," Nature, 456(2008), p. 286

Because every other form of energy is uneconomic with respect to oil, when
oil prices dive, other energy sources get killed. We will never have an
alternative energy for two reasons. As the price of oil goes up, so does the
price of manufacturing alternative energy. But when the oil price plummets,
it cuts off alternative energy investment.

  We are in quite a pickle. The only real replacement for a decline in oil
production is diesel from coal. But fears of CO2 block every effort along
those lines. Heaven help us.

Dick, You are copied on this. You sure were right when summer 2007 you told
me that the subprime mess was going to be big. I wish you had done more

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Received on Tue Dec 9 22:25:40 2008

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