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Many more articles are available through the Energy Bulletin homepage
Peak Oil Passnotes: Markets Don’t Work Anymore
Edward Tapamor, Resource Investor
If ever there was a moment when the disconnect between stocks and oil was evident, it was during the downturn in the Dow Jones in the last fortnight. While the equity markets took a serious hit, albeit most likely to be a correction – not a crash, oil carried on firming up and hit $62.
Even those people with a casual acquaintance of the markets should be interested in the way we have seen a multiple change in the way equities and energy inter-react. Normally if stocks went down for a non-energy reason such as panic, the price of energy would follow. The idea is that weaker companies will breed weaker performance, resulting in lower consumption. This is no longer the case.
We also used to see a steep, sharp rise in the price of oil adversely affecting equities. Any oil shock, say, over a war, would mean higher costs passing through to companies, and therefore the market would sell off shares in anticipation of a downturn. Again this is no longer the case. There are several reasons.
Firstly, the market is not logical and those in the know realise this. It no longer sounds convincing to come out with grand resolute theories about the relationship between energy and equity. Instead technical plays and software are much more reliable, making money off of percentage bets, good old Tony Soprano skimming, placed by a computer. The whole process is far more successful. Time and time again we see software setting the pace and computers have their own logic which only studies the now, not the future or the past. ..
(9 Mar 2007)
Nigeria: Energy Infrastructure Firestorm
Jeff Vail, The Oil Drum
When a fire becomes sufficiently intense, its heat creates a rising column of air so strong that surrounding air is drawn into the void, creating a draft that sustains and intensifies the fire. It becomes a self-sustaining, self-intensifying organism: a firestorm.
The violence in Nigeria’s delta region has become a firestorm, and the consequences of this transformation will fundamentally impact that nation’s ability to export oil. Recent events in the delta region have transitioned the violence there from a negative-feedback loop where there was a disincentive to militants to shut in too high a portion of Nigeria’s oil exports to a positive-feedback loop where militants will compete to completely destroy Nigeria’s capacity to export oil.
…Finally, it is worth considering that energy infrastructure was designed to optimize economic performance, not security and defensibility. Economic considerations force an infrastructure design methodology consisting of largely centralized structures with multiple single points of failure, and networks vulnerable to cascading failures.
As a result, even in oil producing states with functional security services, there is a high vulnerability to financially motivated infrastructure attacks. While a Nigerian scenario may seem unthinkable in the United States, consider our nation’s success in interdicting the drug trade. The market for energy is significantly larger than the market for drugs-and so is the incentive to militants to conduct financially motivated attacks on energy infrastructure.
If this analysis is correct, the increasing incentives to attack energy infrastructure will become yet another factor accelerating the rate of decline of global energy production.
(11 March 2007)
Fuel Lines: Oil on the Brain by Lisa Margonelli (review)
Ted Conover, NY Times
…Margonelli, a fellow at the New America Foundation (and recently a guest columnist for The New York Times on the Web), says she got taken with the subject while in Prudhoe Bay, researching a story on new methods for the cleanup of oil spills. She watched a chemist ignite spilled crude with a baggie of napalm, and heard him expound on oil fields’ “ever-changing stew of complex compounds, endlessly unpredictable and absorbing. He began musing about the components of crude, from the light gassy hydrocarbons to the heavy gooey ones: All of them have distinct personalities.” And she was hooked.
The specialized knowledge of those who deal with oil is mainly what Margonelli sets out to channel in these pages. She traces the chain backward, from a San Francisco gas station near her home to the trucks of a jobber, or oil wholesaler, to a refinery south of Los Angeles, and then to a drilling rig in East Texas. Margonelli intrepidly loiters around the gas station at all hours, climbs aboard a tanker truck making oil deliveries and lucks into an emergency during her visit to the refinery, observing carefully and asking lots of questions when sirens sound and production halts. Her approach is quirky but comprehensive, informal but rigorous: Margonelli has a facility with numbers and an easy way with questions of policy, and the narrative passages here, lightly first-person and often funny, help make accessible the facts of our dependence on oil. Visits to the Strategic Petroleum Reserve near the Gulf of Mexico and the New York Mercantile Exchange round out the American half of the book.
She could have stopped there. But 60 percent of America’s oil is now imported, and Margonelli is ambitious: she next visits four petrostates (Venezuela, Chad, Iran and Nigeria) and China, where oil suddenly matters a lot.
(11 March 2007)
The first chapter of “Oil on the Brain” is posted at the NY Times. I checked out other online reviews of the book, as well as the author’s website. Peak oil doesn’t seem to be a major theme.
-BA
Theres also an interview at NPR.
