Tag Archives: Peak Oil

Food Cost Inflation, and a Solution

The current disturbance in the Middle East has its origins in rising unemployment and food costs.

Here’s The Real Cost Of Food Inflation In America

Global Macro Monitor | Feb. 2, 2011, 5:50 AM 
Take a look at the chart we’ve constructed from the Bureau of Labor and Statistics 2009 Consumer Expenditure Survey.  It conveys a sense of how Egypt’s poverty combined with the sharp rise in food prices sparked the political revolt against the Mubarek government.  Read more

We are not immune from these pressures here. Just because food and fuel are stripped from general inflation rates does not mean they have no effect. The rubbah slippah folks all know this.

  • Can we lower food costs and increase employment in Hawai‘i?
  • Can we have prosperity in the face of declining world oil supplies?
  • Do we dare think outside of our individual spheres?
  • Can we have a uniquely Hawaiian solution to the world situation?
  • Can we imagine Hawaiian society where giving is more important than receiving?

My pop always used to say: “There are a thousand reason why ‘No can.’ I am looking for the one reason why CAN!”

Using geothermal as a base, we can have proven technology and low-priced, stable, clean electricity.

Not “no can.” CAN!!

‘Train Wreck In Very Slow Motion’

Jeremy Grantham, Chief Investment Officer of GMO Capital, gets it! He would be appalled that Hawai‘i, in the middle of the ocean, seems to feel no vulnerability.

For 20 to 30 years, the world has been using twice as much oil as it’s been finding. The world has fundamentally changed and soon we will pay dearly. Hawai‘i is very vulnerable.

One idea for a solution is biofuels, but that is about feed stock, which involves farmers farming –- and farmers won’t do it for the low payment that is expected.

“Base power” is potentially 85 percent of electricity’s cost, and so we need to concentrate on “base power” in order to get bang for our buck.

Geothermal is a cheap, stable, proven technology “base power.” We need to maximize geothermal for the benefit of all our people, or we will have wasted a valuable resource.

Farmers and other “rubbah slippah folks” clearly understand this. They know that the folks on the lowest rungs of the economic ladder get their lights turned off first.

They also know that folks with money will leave the grid if electricity rates go too high, leaving the rest to pay more.

We should not choose an energy policy that separates us into the “haves” and the “have nots.”

Jeremy Grantham is the Chief Investment Officer of GMO Capital (with over $106 billion in assets under management). He is one of the world’s largest asset managers and articulates the same themes that have been debated on The Oil Drum for the past 6 years.

In his Fall 2008 GMO newsletter, he commented on the underlying causes of the world credit crisis that had just taken place. This article is significant for its content and especially because of who is saying it:

“I ask myself, ‘Why is it that several dozen people saw this crisis coming for years?’ I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke — none of them seemed to see it coming.

I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained — but we end up with an army of left-brained immediate doers (emphasis added).

 So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored. . . .

So we kept putting organization people — people who can influence and persuade and cajole — into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don’t have those skills….”

Read the rest here

How Do We Know The Oil Field is Depleting?

How do we know that the mega-giant oil field in Saudi Arabia is depleting?

Do we need to know beyond the shadow of a doubt? Even small kids know that when you are in a pasture and you hear hooves, it’s time to run.

An article at the Oil Drum presents a movie on the drilling of Uthmaniyah.

Using a set of wells in a productive (but now rather depleted) slice of this part of the Saudi oil field of Ghawar, it is possible to deduce to drilling sequence of these wells using the identifiers assigned to the wells as they are drilled. Given a few known dates for well placement, a timeline for overall development can be constructed and displayed as an animation. 

The Making of the Movie

Until the early 1990s, all wells (oil, water injectors, gas, etc.) in Saudi Arabia were assigned a numerical ID with the same sequence of numbers for a given field or area. The Ghawar areas are all numbered independently, such that the discovery well in Uthmaniyah is UTMN-1 and the tenth well in ‘Ain Dar is ANDR-10, etc. Under this assumption, a map showing both the locations and IDs of the various wells also gives the drilling sequence. Furthermore, if the drilling of a given well (by ID) can be independently attributed to a specific date, the drilling sequence can be anchored at that date. For example, the first well was placed in Uthmaniyah in around 1951 — thus providing the lower anchor for the sequence. Of course, this depends on the wells used being representative of the entire Uthmaniyah area. Fortunately, this appears to be true in this case. I will discuss below the sources of information and the assumptions made when assigning dates for the various wells.

Read the rest

The Kids at Kua O Ka La Charter School

High school students from the charter school Kua O Ka La came to Hamakua Springs the other day on a field trip.

HamakuaSprings30

Richard talked about how great it was to connect with that school, which is located on the ocean at Pu‘ala‘a in Puna, right next to the Ahalanui warm pond. “They are off the grid and all their computers are run by solar,” he said. “They have composting toilets that are very sanitary. They live on, and with, the land. I really like their hands-on learning style. They live sustainability.”

From Kua O Ka La’s website:

Pu`ala`a is an intact ancient Hawaiian village complete with historical sites, fishponds, and native habitat that affords an ideal outdoor learning environment for our project-based curriculum.

Kimo Pa, the farm’s manager, told me that he and his wife Tracy Pa were surprised, and pleased, at how interested the students were.

“We told them about what Richard has been working on,” said Kimo, “wondering how we are going to adapt to the new way of doing business, and to the high cost of oil. I talked about how we looked into Peak Oil, studied it for a few years, to really understand it. And how Richard got to the point of looking at geothermal and how he can help the rest of the community.

“We told them we’ve been looking at our resources here. We had water, so we could make hydroelectric….

“I told them that Richard said, ‘What about our workers, the island, the state? What resources do we have that could help the rest of the people?’ That’s how he found geothermal. Now he’s working with Ku‘oko‘a.

“They were really into that part, and had questions,” he said. “This has to do with their community. They’re next to the warm pond. Why is that water hot? Because of the volcano.”

He told the students that our huge dependence on oil now has to do with the leaders we have picked over the years, and their decisions.

“I told them how important they are as an individual, and that it’s their responsibility to pick the leaders; that their vote counts, because they are the future leaders. That their decision making is for the generations under them.”

He showed the students the farm’s hydroponics system, the tomatoes, and the fish they are raising.

“And I explained that we are working with other farmers, and that we like to employ people from nearby,” he said. “Working with other farmers, we can produce more food. We want to fit into the community and grow food for the area. It’s all about the sustainability – taking care of your neighbor, doing the right thing for your community so in the next generation, and the next generation, things don’t get worse.”

It’s a perfect fit with the school’s vision:

Kua O Ka Lā has adopted the concept of `Ke Ala Pono – The Right Path – to describe our goal of nurturing and developing our youth. We believe that every individual has a unique potential and that it is our responsibility to help our students learn to work together within the local community to create a future that is pono – right.

 

Out Of Business


Tomatoes

Farming is a challenging business, and getting more challenging every day. That this tomato company in Southern California just halted operations is a good example of that.

Oceanside Pole Tomato Sales Inc., the marketing arm of Harry Singh & Sons, is one of the country’s largest tomato suppliers, packing and selling 4.5 to 5 million cartons of tomatoes a year. Harry Singh & Sons was one of nine companies that make up a Fresno-based cooperative that grows about 90 percent of the country’s fresh tomatoes.

It’s noteworthy that they had to shut down operations so suddenly. According to the article in The Packer, it was due to a “perfect storm of issues,” including labor and water costs, competition from Mexico, California’s regulatory climate and urban encroachment.

As I have often said, “If the farmer makes money, the farmer will farm.” As oil prices rise, I am curious to see if other mainland farmers are feeling economic pressures as well.

From The Packer:

Oceanside focuses on 2012 return with tomatoes

Published on 04/14/2011 06:40PM

Southern California’s Oceanside Pole Tomato Sales Inc., one of the nation’s largest suppliers to retail of vine ripe tomatoes, abruptly halted operations April 12, as did grower Harry Singh & Sons because of “a perfect storm of issues” related to costs.

Barbara Metz, a spokeswoman for Harry Singh & Sons, said April 14 that the company had not gone bankrupt. She said “a perfect storm of issues” including costs of labor and water, competition from Mexico, California’s regulatory climate and urban encroachment had caused the shutdown.

“I’ll be closing down the company in the next few weeks,” said Bill Wilber, Oceanside Pole president, on April 13.

Krishna Singh, general manager of the growing company and grandson of its founder, sent a message to that firm’s employees the same day, explaining that the company would not be operating for the 2011 season.

“I regret to inform you that effective immediately, Harry Singh and Sons Farming Partnership will not be in operation for the 2011 season. … We will work diligently and explore all options in our efforts to reorganize and resume farming operations for 2012,” according to the e-mail message.

The closures of Oceanside Pole and Singh’s growing operation could put a dent in the upcoming season’s vine-ripe category.

Read the rest

$100 To Fill Your Car With Gas?!

The Star-Advertiser just ran an article about peak oil, using gasoline prices as an example of some of the stark realities ahead of us.

The writer characters a switch to geothermal energy as a “a tough sell, but one that will become easier the first time it costs you $100 to fill up.”

Believers in ‘peak oil’ preparing for when a fill-up costs $100

By Richard Borreca 

POSTED: 01:30 a.m. HST, Apr 12, 2011

Standing in the state Capitol basement is a new symbol that times have changed: an electric vehicle charging station.

Hawaii may have only a few electric cars so far, but state law requires large public parking structures to have at least one charging station. As many as 320 of the 2-foot-tall systems are expected to be installed across the state.

It is part of the answer to the looming crisis of peak oil, which is defined as the time when global oil extraction reaches its maximum rate and the rate of extraction declines….

Read the rest

How much does it cost you these days to fill up your car? Leave a comment and let us know.

Pahoa Holds a Forum on Geothermal

I attended a geothermal energy forum at the Pahoa Community Center on Saturday, and the seats were all taken.

Patbrandt

Pat Brandt is CEO of Innovations Development Group, which hosted the forum

This article, which ran in the Honolulu Star-Advertiser the day before the forum, gives some background:

Forum on geothermal energy to include Hawaiian leaders

By Alan Yonan Jr. 

POSTED: 01:30 a.m. HST, Apr 08, 2011

A Honolulu-based company that has developed geothermal energy projects on Maori trust lands in New Zealand will lead a community forum on the Big Island tomorrow to discuss the pursuit of geothermal energy there.

Innovations Development Group, which specializes in socially responsible development, said the forum will include presentations by six native Hawaiian leaders who will offer their views on how development of geothermal energy can be done in a way that protects cultural and resources…. Read the full article here

By my quick count, I would say 60 people attended.

I was there to hear people’s points of view, and there were many. I was very encouraged because we had the opportunity to talk story and bridge gaps. The overriding sentiment, which I heard over and over, was that we were talking about benefits to the community – not just the Hawaiian community but the whole community!

This made me very happy. It is truly about all of us!

The second thing that rose to the top was that we could have moved further forward if not for a historical lack of transparency. For example, 10 percent of geothermal revenues right now are royalties paid to the state of Hawai‘i, and 50 percent of that goes to the Department of Land and Natural Resources. People ask: How is that money used? There is no answer, though, because it merely goes into a general fund.

The same question is raised about the 20 percent that goes to the Office of Hawaiian Affairs (OHA). Where exactly does it go? No answer. To the credit of OHA Trustee Robert Lindsey, he knows this is unacceptable and has said that it needs to be fixed.

People also want to know why geothermal is available on the Big Island, and yet we have the highest electric rates in the state. How come? Had the utility been more transparent about its cost structure, this would not be an issue. But the people are often told, “We cannot tell you the cost; it is proprietary information.” That just breeds distrust. People feel that transparency should be the trade-off for having a monopoly!

Wally Ishibashi and I agree wholeheartedly. We were joint chairs of the Geothermal Working Group, and agreed that we would make the process transparent. We know about people’s concerns.

Moanikeala Akaka was there. She is a community watchdog, and told the IDG people, “I have not made up my mind. You guys may be Hawaiian developers, but I’m watching you, too.” I’m glad she’s watching. There’s nothing to hide.

A young girl had the most impact on me. She said, “We need to move on. I worry about the world my daughter will grow up in. I don’t want to come back here 20 years from now and be having the same discussion.”

That was a very powerful statement and I feel it resonated with everyone there. And that’s what makes things very hopeful.

People do know that “one day the boat not going come.”

This was a heavy-duty meeting, and I will be writing more about it in the coming days.

Hawaii’s Triple Whammy

Hawai‘i is facing a triple whammy of declining world oil supplies.

The net energy left over from our efforts to produce that oil is decreasing as it becomes more difficult to get.

We are near to, or maybe past, the peak of world oil production.

Past the peak, we face a steady decline in net energy on top of the decline in gross volume. In addition, oil-exporting countries will need to divert oil to subsidize their own populations, or their politicians will get thrown out of office.

Income Up, Disposable Income Down

Hundred dollar oil has been expected to have a recessionary effect.

On television last night, the Hawai‘i State Department of Taxation’s Council of Revenue gave a supplementary report on the effect of the Japan earthquake and resulting calamities on Hawai‘i’s economy. Chairman Paul Brewbaker said that there was an effect, but that a surprising general decline in tax collection had a larger effect. He said we should be aware of the decline, although he also pointed out that one month does not a trend make.

Two days ago, a Christian Science Monitor article explained that although there was a general rise in income during the last quarter, disposable income dropped due to a rise in fuel and food prices. The reduction in disposable income is close to wiping out the recent gains in income, and threatens our ongoing economic recovery:

US incomes rise, but disposable income drops. Blame oil prices.

A new report from the Department of Commerce shows average US incomes rising, but with rapidly-climbing fuel and food prices, ‘real’ disposable income is down.

By Mark Trumbull, Staff writer / March 28, 2011

American incomes continued to rise in February, but not enough to offset rising prices at the gas pump and grocery stores. The unwelcome shift points to a potential danger spot in the economic recovery – the risk that inflation could chip away at consumer well-being.

Overall, income from employment and other sources rose 0.3 percent in the US in February, on par with the trend over the past half year or so, according to a report released Monday from the Commerce Department. Consumer spending rose even faster, by 0.7 percent – partially due to growing confidence in the staying-power of an economic recovery.

But as the recovery has taken hold, so has an upward trend in prices for basic commodities like grains and gasoline. In February, US consumers were basically forced to spend more because of rising prices for groceries and fuel. Adjusted for consumer-price inflation, the gains in household earnings disappeared, with “real” disposable personal income actually falling 0.1 percent for the month…. Read the rest here

Gail Tverberg explains what is going on at the Oil Drum:

WSJ, Financial Times Raise Issue of Oil Prices Causing Recession

Posted by Gail the Actuary on March 28, 2011 – 10:39am

The idea that high oil prices cause recessions shouldn’t be any surprise to those who have been following my writings, those of Dave Murphy, or those of Jeff Rubin. Last month, though, the Wall Street Journal finally decided to mention the idea to its readers, in an article called “Rising Oil Prices Raise the Specter Of a Double Dip“. The quote they highlight as a “call out” is

When consumers spend more at the pump, they often cut back on discretionary purchases.

The WSJ shows this graph, linking oil price hikes to recessions:

 

Figure 1. Wall Street Journal graphic showing connection between oil price rise and recession.

Having been to three national Peak Oil conferences, I am not surprised to see a decline in economic activity associated with the recent rise in oil prices. It’s the new normal.

What Color Malo Shall I Wear Today?

I wrote this post in October 2007 about a Food Summit I spoke at. Now that oil supplies are getting tighter, it’s a lot clearer and makes even more sense.

My assessment of how we came to be here and where we need to be in the future is this: In the beginning, one hundred percent of the energy for food came from the sun. The mastodons ate leaves, the saber tooth tiger ate the mastodon and we ate the tiger and everything else.

The earth’s population was related to the amount of food we could gather or catch. And sometimes the food caught and ate us. So there were only so many of us roaming around.

Then some of us started to use horses and mules to help us grow food. As well as the sun, now animals provided some of the energy for cultivating food. We were able to grow more food, and so there were more of us.

About 150 years ago, we discovered oil. With oil we could utilize millions of horsepower to grow food—and we didn’t even need horses. Oil was plentiful and cheap; only about $3/barrel. We used oil to manufacture fertilizer, chemicals and for packaging and transportation.

Food became very, very plentiful and we started going to supermarkets to harvest and hunt for our food. Hunting for our food at the supermarkets was very good—the food did not eat us; and now there are many, many, many of us.

But now we are approaching another change to the status quo—a situation being called “Peak Oil.” That’s when half of all the oil in existence is used up. Half the oil will still be left, but it will be increasingly hard to tap. At some point, the demand for oil—by billions and billions of people who cannot wait to get in their car and drive to McDonalds—will exceed the ability to pump that oil.

I told the Food Summit attendees that we farmers need to grow plenty of food so that others can do what they do and so we continue to have a vibrant society. If we don’t plan ahead to provide enough food, and as a consequence every family has to return to farming to feed themselves, it would be a much more limited society. People would not be able to pursue the arts, write books, explore space. We would have way fewer choices – maybe only, “What color malo (loincloth) should I wear today?”