It has been a long time since any posting activity. In 2005 I took a job back in the engineering world managing a group that makes blood collection sets. It was fun and enjoyable, but a long commute was really not working with our family and it didn't jive with my belief in ELP (Economize, Localize, Produce) as how to live in accord with a post Peak Oil world. I have avidly followed the PO debate on www.TheOilDrum.com ever since it was a smaller blog and I believe the evidence clearly points to us being either post peak now or at the bumpy top of the peak.

I've been doing a lot of thinking, reflecting, and meditating on how I should get my life back in closer alignment to my values and beliefs. Listening to Caroline Myss' latest book, "Entering the Castle" helped push me over the edge of thinking into action. What I did was resign from my job as engineering manager, walking away from a re-started professional career and the associated six-figure income and benefits. I didn't decide this lightly, and it took a week of thoughtful discussions with my wife to come to this conclusion. I gave 4 weeks notice so as to smoothly transition others to pickup what I will be leaving unfinished, and come August I will be once again a "home husband'. Unlike last time I did the "stay-at-home" gig, this time it will be consciously chosen, and I plan to do all the simpler small tasks of feeding, maintaining and organizing our life with a contemplative spiritual intent and awareness.

Thus begins a new chapter in my life and one big step toward really living the ELP model. I'll start back with more frequent posts, and will move away from the anxiety producing world event reporting that I last was turning to. Look for more updates beginning in August...

The Military Buildup in Asia Over Oil
This summer I read an excellent book Resource Wars: The New Landscape of Global Conflict (by Michael T. Klare ) about how all recent wars have been fought over resources, be they oil, water or diamonds. It was an enlightening read particularly since it was published in 2001, well before we entered Iraq. In a very prescient chapter on oil he saw the upcoming Iraq invasion well before most of us had even heard of neocons or WMD. The following chapter on emerging resource conflicts over oil and gas in the Asian Pacific is worth the read alone. To find signs of growing anxiety over energy access in Asia just look to China & Japan: Japan Suspects China May Be Drilling Gas in East China Sea . China & Japan have been heating up their rhetoric over the past month with protests in China over Japan war crimes and Japan reasserting their territorial claim to these gas fields.

The latest twist in the political and military jostling for position is the rapidly tightening bonds between the new Asian oil axis. On one side we have the USA, India, Taiwan, and Japan being positioned against Russia, China and Iran. Make no mistake, the new budding Asian alliances may be more significant than any current political events in the Middle East, even overshadowing the Israel vs. Islamic Middle East. It's all about the users of cheap oil maintaining their access to it.

Just in the past week these are a sampling of head lines on this topic. Taiwan Holds Military Drill Ahead Of China-Russia Wargames and Pentagon Team To Visit India and US, British, Asian Navies Stage Anti-WMD Exercise In The South China Sea and Russia Plans Sharp Military Spending Hike and Former red armies in war games challenge to America

Lastly, in the direct India & USA vs. China & Russia category. Check out the latest news on Aircraft Carriers. India has one and is looking to buy F-18 aircraft from the US for it. And China is apparently trying to (re)build one. The oceans connecting Asia to shipments of oil are of vital national interest to all. Watch for ever more military build up in the area.

China's oil crisis seems to deepen.
A continuing stream of reports on China's energy shortages. This National Geographic picture is priceless! (hat tip: 321energy) Gas Thief Escapes on Tricycle!
"Speeding from the scene of the crime, a Chinese boy tows a floating plastic bag of stolen natural gas last week. Flouting a government ban, farmers around the central Chinese town of Pucheng frequently filch gas from the local oil field. "

Another good article is in The Financial Times: Beijing under pressure to tackle oil shortages

How I read this is when China fixes their Yaun valuation and their socialist gasoline pricing problems, they will be buying EVEN MORE oil in the future. In the short term they may be experiencing shortages but I bet the Chinese government will work even more aggressively to secure more fuel oil and to prevent their economy from stalling due to energy shortages.

This headline turned my head (hat tip to my friend Jim) California diesel/biodiesel hits price inversion, others to soon follow.
"in Hawaii where Biodiesel is consistently about $.40 a gallon cheaper than diesel (due to the fact that biodiesel is made on the island and #2 Diesel is imported). Now it has happened in California. The average price of #2 Diesel in Bakersfield is $3.17 and about $2.80 for 100% biodiesel. The price of #2 Diesel is up over $1.00 in a year, the price of Biodiesel only up about $.50."

Now this seems on the surface to be a good thing and says the market EROEI for biodiesel is positive. But I am not so sure yet. I think this may be a transitory price inversion. I hope it stays and is a real effect. But I can't get out of my head all the hidden price supports built into biodiesel: farming subsidies, tax credits, tons of cheap oil used in fertilizer and transportation costs.... from where I sit, it looks like the supply chain for biodiesel is very long and for the real price to appear at the pump will take a long time. I pray that this price inversion is still there in ten years. For more information on EROEI and the hidden-ever increasing costs of oil extraction check out this excellent rant from the excellent The Oil Drum blog. Oil Prices Also Affect Oil Costs I highly recommend everyone read it because he cuts to the heart of why higher prices won't just create more oil supply, exploration or extraction.

More noise from China about oil and gas supply shortages. In my earlier post below I noted how all gasoline sales are state controlled. They are also heavily subsidised to the tune of about $10-$20/barrel. China: Where has all the oil gone? IEA wonders discusses this but the IEA also denies that China could really be using all the oil they are buying and demand must taper off. I would not trust the IEA on this one.

Also recent headlines: Gasoline stations jammed as fuel crisis deepens and China Rationing Gasoline And Diesel Fuel.
"Asia's largest oil refiner Sinopec relies on imports for much of its crude for refining, so the surging crude prices on the world market have greatly hurt the oil giant's refining business, when the central government still controls the price of domestic refined oil to stabilize the market," a CNPC official was quoted by the China Daily."

"I don't think the situation is that severe," an analyst in Beijing said. "Perhaps the smaller, independent retail gasoline stations may have some problems in getting a stable supply of diesel and gasoline. Car owners, therefore, might have restrictions on the amount of fuel they can pump each time."

Boo! Chavez threatens oil exports to US

"We do not want to break relations with the US government," Chavez said. "It is not in our plans, but if the aggressions continue to increase ... this could put at risk diplomatic relations between Venezuela and the United States."Washington's attacks could provoke "something more serious: These two daily boats full of Venezuelan oil could head another way instead of going to the United States," said Chavez, whose country is the fourth largest provider of oil to the United States."The US market is not indispensable to us," Chavez said before thousands of young people waving Latin American countries' flags in a Caracas arena during a youth festival.Chavez, who has called US President George W. Bush a "jerk" and "Mr. Danger," also joked that he may give the US leader a scare at the Summit of the Americas in Argentina in November."I have something in mind," Chavez said. "I will walk to him very quietly and say 'boo.'"

For an interesting perspective on Iraq and Iran, look at it through China's eyes. They had been working for years to establish strong ties with Iraq to get access to their oil. Establishing access to oil has been part of their long term China oil strategy.

This quote pretty much sums it up:

"With so much competition for assets, China has pursued deals with international pariah states that are off-limits to Western oil companies because of sanctions, security concerns or the threat of bad publicity. CNPC is the largest shareholder in a consortium running much of the oil patch in Sudan, a country accused by the US of genocide in its western region of Darfur. Last year, China signed a US$70 billion oil and gas purchase agreement with Iran, undercutting efforts by the United States and Europe to isolate Teheran and force it to give up plans for nuclear weapons. If CNOOC acquires Unocal, it would have gas fields and a pipeline in Burma, whose operation by the US company has been criticized by human-rights groups.

``No matter if it's a rogue's oil or a friend's oil, we don't care,'' said an energy adviser to the central government who spoke on the condition he not be identified, citing the threat of government disciplinary action. ``Human rights? We don't care. We care about oil. Whether Iran would have nuclear weapons or not is not our business. America cares, but Iran is not our neighbor. Anyone who helps China with energy is a friend.''

Pretty tough talk on preserving China's access to oil... sounds just like the Carter & Bush doctrine that access to oil is in the vital interest of the USA. What's good for the US must be good for China too, right?

China is so different econmonically from the US that it pays to consider how they sell & distribute gasoline. It is allocated using rationing coupons. "Sinopec is the largest oil retailer on the mainland. It operates 30,164 petrol stations across the country while its rival, PetroChina, runs 17,403. And in many provinces, Sinopec in fact monopolizes the market.
This leaves consumers no other choice but to buy the coupons if they want to use Sinopec Group's services. Lack of competition, harking back to the old socialist days, maintains this vestigial system. However, sharply fluctuating international energy prices are motivating Sinopec to finally scrap the coupon system - but, again, in an apparent desire to safeguard its own interests."

"despite fundamental changes in the Chinese economy and society over more than the past two decades, Sinopec Group has continued to issue the [gasoline] coupons and its stations only accept such coupons as payment for fuel.
The only difference is that the coupons are no longer allocated by the government, according to budget needs. Instead customers must pay cash to buy them beforehand."

Things are changing fast though in China's energy policy. This just in: China Raises Taxes on Oil and Gas:

"China has increased its resource taxes for crude oil and natural gas for the first time since 1993 to standardize the taxation system and keep up with rising oil prices.
China raised the tax rate for oil at least 75 percent and for gas by at least three times, the State Administration of Taxation said Tuesday.
The rates apply to oil and gas explored and produced locally from July 1. The new rate for domestic firms is between 14 and 30 yuan (HK$13.40 and HK$28.75) for a tonne of oil, and between seven and 15 yuan for a thousand cubic meters of gas"

The humble potato. A true survival food. Here's a Mother Earth News article with more information than you could ask for about setting up your Peak Oil Victory Garden using the reliable spud as your caloric cornerstone.

As oil heats up in price and global investment markets chase opportunities to cash in on the rise in energy costs, keep an eye on sugar. It is viewed by many as an energy source more than a sweetener - thanks to Brazil's successful and expanding ethanol programs.

Tom Whipple at the small Falls Church News in Northern Virginia is paying attention to peak oil and is writing some good articles about how this will transform our future. This positive article points out how the good old US Post Office maybe headed for greater importance in the developing Post-Peak World. I think they are on the right track in predicting how things will play out.

Here's some more good Peak Oil articles from the Falls Church News:
The Peak Oil Crisis: Rationing
The Peak Oil Crisis: The Real Energy Bill
The Peak Oil Crisis: Mid Year-2005
The Peak Oil Crisis: A Bible for Oil Deception

(There are more articles too. Search their site for "Peak Oil")

Here's an interesting Renewable Energy Map that lists renewable energy resources overlaid on the a map of the USA. Not cheap at $475 but could be worth it if you are planning where to set up solar, wind, etc. generation facilities or off-grid communities.

One of the frustrating questions about Peak Oil is "what can I do?" or "How can out community prepare?" here's one such answer. Past the Peak-
How the small town of Willits plans to beat the coming energy crisis
By R. V. Scheide It's a start and I hope it inspires others.

More on Iran and pricing oil in euros... I see a pattern here. Excert below:

"To date, one of the more difficult technical obstacles concerning a euro-based oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil 'marker' as it is referred to in the industry. The three current oil markers are U.S. dollar denominated, which include the West Texas Intermediate crude (WTI), Norway Brent crude, and the UAE Dubai crude. However, since the summer of 2003 Iran has required payments in the euro currency for its European and Asian/ACU exports – although the oil pricing these trades was still denominated in the dollar.[13]

Therefore a potentially significant news story was reported in June 2004 announcing Iran's intentions to create of an Iranian oil bourse. This announcement portended competition would arise between the Iranian oil bourse and London's International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX). [Both the IPE and NYMEX are owned by U.S. consortium, and operated by an Atlanta-based corporation, IntercontinentalExchange, Inc.]
The macroeconomic implications of a successful Iranian bourse are noteworthy. Considering that in mid-2003 Iran switched its oil payments from E.U. and ACU customers to the euro, and thus it is logical to assume the proposed Iranian bourse will usher in a fourth crude oil marker – denominated in the euro currency. This event would remove the main technical obstacle for a broad-based petroeuro system for international oil trades. From a purely economic and monetary perspective, a petroeuro system is a logical development given that the European Union imports more oil from OPEC producers than does the U.S., and the E.U. accounted for 45% of exports sold to the Middle East. (Following the May 2004 enlargement, this percentage likely increased).

Despite the complete absence of coverage from the five U.S. corporate media conglomerates, these foreign news stories suggest one of the Federal Reserve's nightmares may begin to unfold in the spring of 2006, when it appears that international buyers will have a choice of buying a barrel of oil for $60 dollars on the NYMEX and IPE - or purchase a barrel of oil for €45 - €50 euros via the Iranian Bourse. This assumes the euro maintains its current 20-25% appreciated value relative to the dollar – and assumes that some sort of US "intervention" is not launched against Iran. The upcoming bourse will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world - global oil and gas trades. In essence, the U.S. will no longer be able to effortlessly expand credit via U.S. Treasury bills, and the dollar's demand/liquidity value will fall. "

A lot of new headlines today. Here's the connecting arc I see joining a combination of accelerating trends:
1) The reason Iran is so boldly restarting their uranium enrichment program is the backing of China. In exchange, China gets access to Iran's oil and a foothold in the Middle East oil hot bed. (Last year Iran and China signed an ambitious agreement, under which China may buy as much as $70 billion of Iranian liquefied natural gas over the next 30 years, while developing a large Iranian oil field.)
2) Yes Oil prices are rising - topping $65 a barrel today, but the real back story is what does this do to the value of the dollar and the US economy? Read this article from 321energy.com What happens when oil does peak?
3) I have been reading for a while about the risk of global warming becoming a runaway positive feedback loop due to the release of large quantities of frozen methane that is trapped in arctic regions. It appears that this is not theory but fact - as the Guardian reports it is happening on a large scale in Siberia. This news is staggering in its' implications.

Of these news items the financial issues described in item 2) particularly need to be looked at closely. I would suggest that if things get ugly in the market, do NOT put your trust in government bonds. To incite you to read the links above please peruse these excerpts:

"Although the initial effect of higher oil prices is inflationary, ultimately the result is deflation. Deflation in growth forecasts, deflation in stock prices and deflation in jobs. That means overall tax-take will be lower than he expected, which in turn means his budget deficit will remain high.
Consequently, a declining supply of oil must be accompanied by either a declining supply of money or by hyperinflation. In either case, the result for the global banking system is the same: total collapse. This may be what led Stephen Roach, the chief economist for investment bank Morgan Stanley, to recently state, "I fear modern day central banking is on the brink of systemic failure."

Within a few months of global oil production hitting its peak, it will become impossible to dismiss the decline in supply as a merely transitory event. Once this occurs, you can expect traders on Wall Street to quickly bid the price up to the $200 per barrel range as they realize the world is now in a state of permanent oil scarcity.

With oil at $200 per barrel, gas prices will hit about $10 per gallon virtually overnight. This will cause a rapid breakdown of trucking industries and transportation networks. Importation and distribution of food, medicine, and consumer goods will grind to a halt. The collapse will be hastened by the fact that the US national debt will become completely unsustainable once the price of oil gets into the $100 range.

Once this mark is passed, the nations of the world will have no choice but to pull their investments out of the US while simultaneously switching from the dollar to the euro as the reserve currency for oil transactions. Along with the breakdown of domestic transportation networks, the global financial shift away from the dollar will wholly shatter the US economy.
Every dollar increase in the price of a barrel of imported oil increases the size of the U.S. trade deficit, which puts more pressure on the value of the U.S. dollar, which leads to a weaker dollar, which makes OPEC countries want to raise the dollar-denominated price of a barrel of oil to make up for the dollar’s fall, and so on." -Joel Bainerman

And this from Richard Heinberg at MuseLetter.com about the value of the dollar.

"To understand why the dollar is America's Achilles heel, a metaphor is useful. Imagine being able to write checks and then convince the people you give them to not to cash them. Perhaps they find the checks themselves comforting to hold onto; or maybe you have a friend who agrees to sell groceries or gasoline for your checks only, and then happily stockpiles and re-circulates them. In either case, you may be tempted to write checks for much more than you have in your bank account. As long as the checks themselves are regarded as valuable and not cashed, you get a free ride. But if people stop finding your checks comforting to hold onto, or if your friend starts selling groceries for other people's checks or for gold or silver, then the game is up. It will be revealed that your account is overdrawn and you will be in trouble.

The metaphor is not perfect. In fact, every nation in the world is attempting to write checks beyond its means. But the US has managed to do by far a better job of it than any other nation. The checks we are not talking about are not just hoarded paper dollars (though there are billions of these stuffed in mattresses around the world) but dollar-denominated investments and securities, including T-bills, stocks, and mortgages. Currently the US is running a $700 billion per year trade deficit, this on top of trillions in government debt and trillions more in consumer debt. No other nation in the world comes remotely close to this level of bad-check writing, on either a total or a per-capita basis.

If a run on the US dollar were to occur, then the only financial solution would be to create even more dollars (presumably through government borrowing), which of course wouldn't actually solve the problem and would in the long run make matters worse. The currency would become almost worthless, and in the process real wealth (land, factories, and natural resources) would be confiscated and turned over to creditors.

What could cause this to happen? A decision by OPEC to openly sell oil for euros could be a trigger. Some oil is already quietly being sold for euros, and several countries including Iran and Saudi Arabia have floated the possibility of valuing oil against a basket of currencies (meaning, effectively, dollars and euros). The Arab OPEC states have also toyed with an idea that must be equally worrisome to Brussels and Washington: to sell oil for gold (the gold dinar). If and when this happens, the full wrath of America will descend upon the Arab Middle East - and that's why it hasn't happened yet."

Some notes on alcohol production and biofuels:
I got into a discussion with my friend Jim over the energy efficiency of alcohol production. He pointed out that common perceptions about Ethanol production being a net looser is based on the oil industry financed and discredited research. The site http://www.ncga.com/ethanol/debunking/ (funded by corn growers) does a good job of summarizing several research studies about ethanol and shows it does produce a net energy gain.

I never expected ethanol to have a negative net energy. It does look like the true net energy gain is in the 1.2 -1.6 range. But for all the labor and energy expended to make it, 20% -60% return seems really small to me. It helps but it seems more like “hamburger helper” in making the expensive oil go a little further. Cars that are 20% -40% more efficient seem like a better investment of money.

And like the oil-industry funded studies are biased to show a negative energy return I believe the “Corn Growers” association study is also biased in their favor.

The best new information on alcohol I read about yesterday involves using switchgrass, a native prairie species, to make alcohol using a new bacteria that eats the woody fibers and produces alcohol. The energy return ratio here is around 4.4! http://www.westbioenergy.org/july98/0798_01.htm Which is a real return on investment (440%) to me. I don’t see how anyone can make a profit from all the energy inputs to corn ethanol production only getting a 20% return. The switchgrass process could also be used on the corn & wheat stalks… taking a waste product and making energy from it.

Lastly, take a look at this conference in September covering how to turn organic farm waste into energy: http://www.focusonenergy.com/data/common/calendarfiles/Conference%20Brochure.pdf sponsored by BioCycle Journal (that might be worth subscribing to - energy production from agriculture waste)