Peak Oil

Blood and Oil

2011-06-27T23:07:00.000-07:00

As long as Saudi Arabia and the OPEC nations ... provide the bulk of the energy that is needed to turn the wheels of industry in the western world, there is no way that we can stand by and see that taken over by anyone that would shut off that oil.

President Ronald Reagan

Our jobs, our way of life, our own freedom, and the freedom of friendly countries around the world would all suffer if control of the world's great oil reserves fell into the hands of that one man Saddam Hussein.

President George H.W. Bush

You can watch our former presidents speak those words yourselves in this documentary called Blood and Oil. I have included part 3 of 6 below. President Reagan speaks starting at the 2:45 mark in describing the Central Command. President George H.W. Bush speaks starting at the 6:27 mark in a campaign to drum up support for sending troops into Saudi Arabia after Saddam Hussein invaded Kuwait in 1990.

The entire 6 part series is here: http://www.youtube.com/user/deja035#p/u/10/cZh7c29QHS8

How much is left?

2011-03-18T23:18:00.000-07:00

On September 1, 2009 I posted an article called "How Long Will It Last?" I quoted an article from New Scientist which investigated how much of the world's rare minerals are left given the current rate of consumption. There are nice info graphics showing copper reserves (and many other elements).

Scientific American magazine has a similar article entitled "How Much Is Left?" It was published on August 24, 2010. The SA article lists the reserves of other elements besides minerals. It actually dared to show that Peak Oil will happen around 2014.

Even more important than oil, we also have a serious problem with fresh water. Lack of fresh water in countries like Egypt and India and Pakistan will lead to revolutions. Fresh water is necessary for survival. Farmers turn fresh water into food. Without fresh water there is no food.

It is very hard for people to understand the concept of years of reserves left and peak production. If we have 40 years of oil left given the current rate of consumption, the vast majority will think that we'll be fine for the next 40 years. After all, we have 40 years of the stuff left! What me worry!?

What people do not realize is that the extraction profile of every non-renewable resource follows a bell shaped curve. Production rate rises to a peak and falls from that peak. If the consumption rate remains constant at the peak year while the production rate falls, the price will rise. And it will rise each year until the price is high enough to destroy demand and force the consumption rate to go down.

Basically it means that the price will zigzag making higher highs and lower highs. Each higher high will bring consumption rate down to match the lower production rate. Price will fall temporarily when an equilibrium is reached. But it will go up again as the rate of production drops further.

We may have 40 years of oil left. But we will be consuming less and less oil as price rises. Understand that rate of production is just as important as years of reserves left.

"This is a fight to the death"

2011-02-05T00:18:00.000-08:00

One of my favorite movies is Syriana written and directed by Stephen Gaghan. It came out in 2005 when crude oil prices first spiked. The movie was not a big hit and I can understand why. It is a very complicated movie. The geopolitics of oil is a difficult subject to understand. The movie weaves three separate stories into one:

The story of Wasim, the Pakistani oil worker who loses his job. This subplot deals with the role of radical Islam.
The Emir and the oil analyst played by Matt Damon. This is my favorite storyline. We see the young Emir desperately wanting to change his country for the better but is held back by pressures within his country and foreign influence from the United States.
Assassination attempt by the CIA agent played by George Clooney. The dark side of US foreign policy in the Middle East is presented here.

Here is one of my favorite quote from the movie:

They're thinking that it's running out, it's running out and 90% of whats left is in the Middle East. Look at the progression, Versailles, Suez, 1973, Gulf War 1, Gulf War 2. This is a fight to the death.

I.O.U.S.A The Solution

2010-08-28T22:42:00.000-07:00

Back on October 18th, 2009 I wrote about the documentary I.O.U.S.A. The Peter G. Peterson Foundation has produced a follow up documentary called IOUSA Solutions. As the title suggests, this sequel proposes solutions to the national debt.

The solutions involve both spending cuts AND tax increases. Some of the specific proposals include:

1. Increasing the retirement age for social security recipients
2. Means testing social security
3. Letting the Bush tax cuts expire
4. Reforming Medicare and Medicaid

And many others. The entire film is on YouTube in 5 parts. This is a must watch documentary.

Economic Growth By Any Means Necessary

2010-07-21T22:38:00.000-07:00

Lu Guang Pollution in China

That picture is from China Hush. In Haimen city, Jiangsu province Chemical Industrial District sewage treatment plant discharges waste water into Yangtze River. June 5, 2009.

Water is life.

Without water, there is no life.

With polluted water, there is much pain and suffering in life.

Economic growth by any means necessary is the reason why the water is polluted and why life is unbearable in certain parts of China. That is what you get when you measure your country’s success by GDP growth.

China, of course, is not the only country that obsesses over GDP growth. The United States leads the world in this obsession with GDP. Politicians in this country cannot win elections by promising Zero Growth. They always promise more growth.

More cars.

More roads. More highways.

More jobs.

More houses. More swimming pools. More shopping malls. More golf courses.

More oil. More coal. More natural gas. More copper. More plastics.

More of everything.

It seems most people want more of everything. Very few people want less. The world will be a much cleaner place if more people wanted less.

Google Insights into Peak Oil

2010-06-04T22:35:00.000-07:00

Google Insights for Search is a tool that allows you to find out about search volume in different regions of the world. The data goes back to 2004. The following is a volume chart of the search term “peak oil”.

As you can see, searches for “peak oil” peaked in 2005 when oil prices first spiked. Searches for “peak oil” again shot up in the summer of 2008 when crude oil traded for nearly $150 a barrel.

We can also look at where in the world people are searching for “peak oil”. Since it is an English term, we expect to see searches mostly from the English speaking world. What surprises me is that there are more searches for “peak oil” in New Zealand than in the United States. New Zealanders are more “peak oil” aware than Americans.

The tool can further break down the popularity of the search term within United States by state, metro, and city.

Portland, Oregon is the most “peak oil” aware metro area in the United States. That is not a surprise to me. The Portland City commissioned an 86 page report on peak oil in 2007. Seattle-Tacoma region is second. Number ten on the list of top metro regions searching for “peak oil” is Phoenix, Arizona. The American Southwest will most likely see large out-migration as peak oil takes hold. The region’s lack of fresh water and overt reliance on automobile for personal transportation pose serious threats. I believe the residents of the Phoenix metro area are concerned about their own long term survival prospects.

United States military on peak oil

2010-04-17T22:29:00.000-07:00

For the first time ever, I believe, the United States military publishes a report that contains the word “Peak Oil”. The United States Joint Forces Command (USJFCOM) publishes the Joint Operating Environment (JOE) report each year. The report is “a strategic framework that forecasts possible threats and opportunities that will challenge the future joint force.” The full report is here. I have included a copy of it below.

The report is a boiler plate of the usual trends that will affect United States security. Forces like economic challenges, climate change, globalization, demographics, etc can all have an effect on the US military. The interesting part is on page 26 of the report:

To meet even the conservative growth rates posited in the economics section, global energy production would need to rise by 1.3% per year. By the 2030s, demand is estimated to be nearly 50% greater than today. To meet that demand, even assuming more effective conservation measures, the world would need to add roughly the equivalent of Saudi Arabia’s current energy production every seven years.

Really? We need to add a new Saudi Arabia (10 million barrels per day) every seven years? We are barely keeping up with demand. That is why oil is still trading above $80 a barrel while the world is recovering from a severe recession. The energy summary is on page 31:

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.
During the next twenty-five years, coal, oil, and natural gas will remain indispensable to meet energy requirements. The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.
…
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.

Think about what was just said there. We need to add 1.4 million barrels per day to keep up with demand. But we’re not doing that. And by 2015 we could be short 10 million barrels per day. The supply and demand curve ALWAYS match. We cannot consume more oil than we can produce. To maintain current oil prices, new oil must be brought online. If the new supply just is not there, the price will rise dramatically to bring down demand.

Mainstream media on Mexican oil production

2010-03-19T22:18:00.000-07:00

The mainstream media always try to explain the fall in Mexican oil production due to political and technological reasons. A typical story is this one from the NY Times by Clifford Krauss and Elizabeth Malkin. Here is a quote:

Mexico probably still has plenty of oil, especially beneath the deep waters of the Gulf of Mexico, but Pemex lacks the technology and know-how to get it out. Inviting foreign companies into the country to help is one of the touchiest propositions in Mexican politics.

This explanation is pure nonsense. Pemex already has access to foreign technology. One does not need to design and build a high tech offshore drilling platform. One can lease a drilling platform from companies like Transocean for $500K/day. A lot of foreign technology is already in use everyday. We can blame lack of funding because the Mexican government uses Pemex as a piggy bank. But we cannot blame lack of technology.

A simpler explanation is that Mexican oil production peaked in 2004-2005 and has gone into irreversible decline. The following chart is from Greg Macdonald’s blog gregor.us. He writes extensively on Mexico. Cantarell is Mexico’s largest oil field. And as you can see below, production peaked in 2004-2005 and is in sharp decline.

Cantarrel peaked in 2004-2005

Mexico will not be an oil exporter in another 5 years. It will be an oil importer. What will happen to the Mexican economy as the government can no longer subsidize the price of oil for its citizens? What will happen to the Mexican government budget as oil export revenue dries up?

Rare Earth Extraction

2010-02-25T22:14:00.000-08:00

Lindsey Hilsum is a reporter for Channel 4 News in the United Kingdom. Her reports on China’s rare earth mining industry show that wind turbines and hybrid cars are not green at all. Rare earth extraction is extremely dirty. Here is her article on the Channel 4 blog “The non-green processes behind green technologies”:

Two weeks in China have shown me the environmental cost of saving the planet.

It’s all about rare earths, elements with magnetic properties and high conductivity, which are the key to new green technologies such as wind turbines and hybrid cars. I’ve just seen how they’re extracted and processed, and it’s not pretty.

In Jiangxi, in south-eastern China, mafia bosses collude with local Communist Party officials to extract the valuable elements from the hillsides by pumping acid into the earth. The villager who took us around wore a motorcycle helmet in case anyone saw her – she was terrified.

The central government ordered the plants to close, because of the environmental damage they were doing, but she said they operate under cover of darkness, protected by armed guards.

Her husband has been in prison since September because he and other villagers blocked the roads to stop truckloads of acid and toxic chemicals.

They used to live off rice and ducks, she said, but now the rice withers and the ducks grow to only half their normal size. The land has been poisoned.

It was a similar story in Baotou, in Inner Mongolia, where the majority of rare earths are mined and processed.

Rarely have I been somewhere so polluted and miserable. (The fact that it was below freezing didn’t help).

But the story’s bigger than that. The demand for rare earth is rocketing, as the world tries to move to a low carbon economy. Suddenly people are waking up to the fact that we’re dependent on China for these essential elements.

They exist elsewhere, including the USA, Canada and Australia, but for the past 10 years no one has been able to compete with China on price.

So rare earths are hot, I learnt, when I went to the 5th International Metal Events rare earths conference in Hong Kong. China is restricting export and investors who last year wouldn’t part with their cash for a rare earth project in Australia are now more than keen.

The price is going up, western governments are beginning to understand that they need to guarantee supply, and many say a shortage is inevitable.
So much for the low carbon future.

According to her report, a Toyota Prius uses 1 kg of neodymium and each battery use about 10 kg of lanthanum. Compact fluorescent light bulbs use europium, terbium and yttrium. The permanent magnets used in a wind turbine need about two tonnes of neodymium and other rare earths.

And of course, it takes diesel fuel to mine and extract the rare earth elements, to manufacture the hybrid vehicles and wind turbines, to transport the hybrid vehicles and wind turbines around the world, and to operate the cranes used to install the wind turbines.

The only way to be “green” is to reduce the amount of resources that we use. That means taking public transportation is better than driving a Prius. Buying a small home instead of a gigantic McMansion to reduce heating/cooling cost. And there is no dancing around the issue: reduce human population. Not just slow the growth but reduce the overall numbers.

Below is her must see video on the rare earth extraction process in China.

Shortage of Rare Earth Elements Could Thwart Innovation

2010-02-16T22:10:00.000-08:00

Another story on rare earth elements. I wrote a previous post on the same topic back in September 2009. This time it is from Live Science by Jeremy Hsu. Full article is quoted below. One should be aware that a lot of the “clean” and “green” technology is anything but clean or green. Wind turbines appears to be clean, but when you look inside you will find powerful magnets that are made from rare earth elements. The extraction of of rare earth elements in China is anything but clean or green. I will write more in future posts about the mining of these elements and the environmental pollution that it causes.

Shortage of Rare Earth Elements Could Thwart Innovation
By Jeremy Hsu, TechNewsDaily Contributor
posted: 15 February 2010 10:29 am ET

Silicon may represent one of Earth’s more common elements, but it transformed Silicon Valley into a high-tech corridor and helped usher the world into the Information Age.

Now rare earth elements with exotic names such as europium and tantalum hold the key to hybrid cars, wind turbines and crystal-clear TV displays — that is, if a looming supply shortage doesn’t stop innovation in its tracks.
Rare earth elements, called “rare earths” by those who use and study them, often prove irreplaceable in green technologies and high-tech consumer products. Yet the world’s production of rare minerals relies mainly upon China, and the Chinese government warned last year that its own rising demand will soon force it to stop exporting the precious elements.

“Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths,” said W. David Menzie, chief of the international minerals section at the U.S. Geological Survey (USGS).

China has also encouraged companies that use rare earths to locate their manufacturing facilities in China, Menzie told TechNewsDaily. But some companies fear moving because of concerns about intellectual property protection, he added.

Deposits of rare earth elements exist in the United States, Canada and other countries. But only China’s government supports the mining and refining industries capable of processing the resources from start to finish.

Jack Lifton, an independent consultant for U.S. rare earths, thinks it’s time for the U.S. government to subsidize the creation of such industries to ensure a future supply, lest a shortage of rare earth elements cripple production of high-tech products.

Examples of rare earth elements used by the technology industry include:

Europium: This extremely rare but critical chemical makes the red color for television monitors and energy-efficient LED light bulbs. China is the only country today that produces europium, dysprosium and terbium, which are necessary for either boosting the efficient operating temperature of magnets or for producing red in color displays. In December, USGS scientists discovered Alaskan deposits of europium, but even the few U.S. companies that mine rare earth elements must send the resources to China for processing.

Lanthanum: A primary component of the nickel-metal hydride battery in Toyota’s popular hybrid car, Prius. The Prius also incorporates neodymium, praseodymium, dysprosium and terbium. Lifton estimates that Toyota may use as much as 7,500 tons of lanthanum and 1,000 tons of neodymium per year to build its Prius cars. That dependence on rare earth elements has prompted the company to search for alternative sources outside China.

Neodymium: This represents a main component of the permanent magnets at the heart of the most efficient wind turbines. China’s own wind production efforts could consume all the available neodymium production and leave nothing for the rest of the world’s booming wind industry, Lifton notes in a recent report titled “The Rare Earth Crisis of 2009.” Neodymium is also used in the glass of incandescent light bulbs produced by General Electric, which has unsurprisingly invested in both Chinese and alternative sources of rare earth elements.

While the rare earth elements are crucial to the future of high-tech industries, some of these more basic elements – such as iron and aluminum – remain invaluable to basic infrastructure such as roads and communications needed to build a modern economy.

“If you are a developing country trying to build a manufacturing industry, the traditional ferrous (iron) and base metals can be very important as can construction materials such as cement and crushed stone,” said Menzie of the USGS. “Countries such as China have been developing their manufacturing industries and require large amounts of iron ore, nickel, zinc and other alloying metals, as well as copper and fuels.”

Oil and the End of Globalization

2010-02-02T22:01:00.000-08:00

Jeff Rubin

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization by Jeff Rubin. I decided to read Jeff Rubin’s book after watching his presentation at the Business of Climate Change conference in Toronto. My previous entry has a link to the video on YouTube. I have read many peak oil books already so I was a little skeptical about “yet another peak oil book”. But this one is a little different. Rubin does not spent a lot of time trying to explain oil field depletion or the Hubbert curve. This is not a heavily technical book like Matthew Simmons’ “Twilight In The Desert” or Kenneth Deffeyes’ “Beyond Oil”. This book is more about the social changes that will occur in a world of PERMANENT high oil prices. It is about simple things like getting coffee in the morning or having Chinese food for dinner. Coffee beans are grown all over the world and transported by diesel powered ships and diesel powered trucks to coffee houses all over the world. How much will that coffee cost when diesel fuel cost $10 a gallon? And will you still be having Chinese food when the ingredients have to be transported 5000 miles and the people preparing the food cannot afford to immigrate to your country?

Thomas Friedman thinks that the world is flat. Jeff Rubin does not. Globalization is a brief experiment made possible only with cheap oil. It is an experiment that is coming to an end. Rubin goes into detail explaining the social aspects of high oil prices, from food production to immigration. The latter is an interesting new concept that I have not thought of in the context of peak oil. A society’s tolerance of immigrants is directly related to the health of the economy. If the economy is under a permanent strain of high energy prices, immigration will likely not be embraced.

There will be big macroeconomic shifts in the economy. A whole lot of people currently working in the service economy like serving coffee or processing insurance claims will have to adjust to new lives in the manufacturing or farm economy. We will need toaster repairmen because we simply cannot afford to throw the old one away and buy a new one. We will need more farm hands instead of baristas because there will not be a lot of people drinking expensive coffee. There will be a lot more food produced locally and local farmers need all the help they can get when they cannot afford to operate diesel powered farm equipment.

The world of high energy prices is a much smaller world. It is a world focused on the local community. It is a much better world in my opinion. This is a very good book. I highly recommend it.

Jeff Rubin on Oil

2010-01-17T22:00:00.000-08:00

The world is not running out of oil. The world is probably NEVER going to run out of oil. What the world is running out of is cheap oil. Jeff Rubin’s talk at the The Business of Climate Change Conference 2009 is a must see.

Amusing Ourselves To Death

2010-01-05T21:31:00.000-08:00

Stuart McMillen has done an excellent illustration of Neil Postman’s foreword from “Amusing Ourselves To Death”:

What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions”. In 1984, Huxley added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we hate will ruin us. Huxley feared that what we love will ruin us.

This book is about the possibility that Huxley, not Orwell, was right.

Sun Dried Persimmons Are Ready!

2009-12-11T21:27:00.000-08:00

On November 20th, 2009 I wrote an entry about sun dried persimmons. It has been three weeks and I am here to say that our first batch of sun dried persimmons is a complete success! They are delicious! Here is the before and after picture:

Persimmons enjoying the sun

Dried persimmons

The finished “hoshigaki” (japanese for dried persimmons) may not look as appetizing as fresh persimmons, but they are just as delicious in a completely different way. The “hachiya” variety persimmons are very very sweet. And you eat them when they are completely soft. The dried version is not as sweet, but the persimmon flavor is concentrated. The texture of the dried persimmons is a little like gummy bears.

Here are the step by step instructions on how to make your own sun dried persimmons:

Use only the hachiya variety persimmons. Pick or buy them when they turn orange and are still hard. You cannot use gently soft ripening persimmons. They have to be hard.
Wash them and peel the skin with a regular fruit peeler.
Tie the stem with a rope and hang it onto a cloth drying rack. See the before photo above. It may be hard to tie the stem. If your have your own persimmon tree, I suggest that you clip the stem into a T shape so there’s support for the rope. If you bought the persimmons you’ll have to do the best you can with whatever stem is there.
Leave the persimmons out in the sun in the morning. Bring them back into the house after dark. Try to put the rack next to a heater vent if you can when they are in the house. We leave ours out drying in the front yard in the morning because our back yard is full of squirrels.
When they start to shrivel, gently massage them with your fingers. The purpose of the massage is to facilitate the drying process. Remember they dry from the outside but the inner core is still wet and soft. Massaging them bring the juice out to the outer layer where it can dry.
Do the massage every 2-3 days in the first two weeks. After about three or four weeks of drying your persimmons will be ready! They should be a little hard and rubbery like gummy bears.

That is it! It is a little labor intensive because you have to bring the rack in and out of the house and do a little persimmon massage. But the end product is well worth it.

Don’t Buy Stuff You Cannot Afford

2009-12-10T21:24:00.000-08:00

This is a classic skit from Saturday Night Live. It is funny because it is so true. As of October 2009, the Federal Reserve G.19 Consumer Credit Report shows a revolving debt of 886 billion dollars (revolving is credit card debt).

Food, Inc

2009-12-06T21:21:00.000-08:00

Food, Inc

I heard about the documentary Food, Inc when it was first released. I finally got around to watching it. It is a must see documentary about our industrial food production. I highly recommend it to everybody, especially if you eat meat.

The story of how industrial food production makes people sick, pollutes the environment, exploits workers, and enriches a few is a complex subject. I have read several books on this topic already. But still I learned new things from this documentary.

I read Fast Food Nation by Eric Schlosser years ago so I am keenly aware of his work. Eric Scholosser is a co-producer of this film. Some topics covered by this documentary include:

The mechanized chicken factories and its’ effects.
The role of corn in the entire production chain. Corn subsidies as one of the root causes of this entire problem.
Obesity amongst the poor.
Meatpacking industry and the exploitation of workers and its role in illegal immigration. IBP (now Tyson Fresh Meats) actually run newspaper ads in Mexico looking for workers.
Monsanto and its patented genetically modified (GM) seeds.

The part on Monsanto and its legal tactics thoroughly disgusted me. We see Monsanto suing Moe Parr, a seed cleaner. He has a seed cleaning machine and helps farmers clean seeds so that the seeds can be replanted. Monsanto actively tries to drive him out of business. Why? Because farmers who use Monsanto’s generically modified seeds are not allowed to save seeds. They are contractually obligated to buy the GM seeds each year. If you save seeds and grow a new crop from the seeds, you are in violation of their patent. In addition to investigating and suing farmers, Monsanto also sues the seed cleaner. Keep in mind that Moe Parr is not a farmer. He operates a seed cleaning service.

The film presents the problems and it also shows us the glimmers of hope. We learn about

Joel Salatin from Polyface Farms. Joel shows you how in his farm the cows roam free and eat grass, not corn. The cows move around so that their manure fertilizers the soil.
The story of Stonyfield Farm and its success in the organic yogurt market. We learn about how Walmart became part of the organic movement and its decision not to carry milk produced with synthetic growth hormones.
The story of a soybean farmers who refuses to buy Monsanto’s GM seeds.

The film ties together these complex subjects in an easy to understand way. I hope more people watch this film and become more aware of how your purchase decision have real consequences.

I recommend these other films and books if you want to learn more:

Supersize Me. A popular and funny documentary that you may have hear. Morgan Spurlock eats McDonald’s for 30 days straight.
The Food Revolution and Diet For A New America . Two books by John Robbins.
The Good Life by Scott and Helen Nearing. They are one of the earliest pioneers of the organic farm movement.

If you live in the desert…

2009-11-27T18:26:00.000-08:00

If you live in the desert, why don’t you live like you are in the desert? Why do you try to change the desert into something else? That question can be asked of places in the United States like Las Vegas or Phoenix and also of places like Dubai in the UAE.

Green lawns, backyard swimming pools, golf courses, McMansions. How much fresh water is being wasted here? This is a picture of McMansions in Las Vegas built around the Las Vegas County Club.

Las Vegas County Club McMansions

And here are some of pictures of McMansions in Dubai. They are taken from this great Marketplace story.

We should not be asking whether or not to invest in gray water recycling technology to water the lawns and golf courses. Las Vegas and Dubai already use gray water for that purpose. The question we should be asking is this one: why have lawns and golf courses and backyard swimming pools in the desert in the first place?

The Las Vegas Valley Water District site shows rates as low as $1.16 per 1000 gallons. That is not the true cost of the water. The federal government paid for the water system currently in place. Lake Mead, for example, was formed by the construction of Hoover Dam. The dam was paid for by the federal government.

The story is the same in Dubai. The desalination plants necessary to turn Dubai into a city of high rise condos, McMansions, and shopping malls were paid for by the government. The plants’ true costs are not passed onto the end users.

The price of water should reflect its value. Water should be priced as the life sustaining resource that it is. If we price tap water at the same rate as bottled water (about $1 a gallon) there would be no lawns and no backyard swimming pools. And playing golf in the desert would be a very expensive hobby (as it should be).

Water demand is elastic up to a certain point. It is a basic necessity after all. The cost of water should not be a regressive tax. For low income residents, this cost can be subsidized based on income in very much the same way as Section 8 housing and food stamps.

Water is life. The only way to stop waste is to raise prices.

Ginkgo Seedlings

2009-11-24T18:16:00.000-08:00

Ginkgo Trees in Tokyo

I love ginkgo trees. Especially in the fall when their leaves turn into gold. This is a picture from a street in Tokyo that I grabbed from Flickr.

I love the tree so much that I have more than fifty (yes fifty!) little ginkgo trees growing in containers in my backyard. I hope to find a permanent home for them in the near future.

I grow the trees from seed. And the seeds come from female ginkgo trees of course. Most people find the smell of ginkgo fruits quite unpleasant. I happen to like the distinct smell.

The Ginkgo Pages is a site in the Neatherlands that has a lot of information about the history and methods of growing the tree. I learned how to grow the tree from seed from that site. This is a picture of my seedlings when they just sprouted.

Ginkgo Seedlings

The process of growing ginkgo trees from seed is not complicated but it is a little labor intensive if you grow as many as I do. Separating the fruit from the seed is the hardest part. The seeds can also be eaten. I love to add them to rice porridge. The texture of the seeds makes porridge taste even better.

Sun Dried Persimmons

2009-11-20T18:11:00.000-08:00

Persimmons are in season. We have a big persimmon tree, a “hachiya” variety tree. The fruit ripens completely soft. You have to wait until it is completely soft otherwise it will taste very astringent. They are very sweet!

Drying persimmons

This year we will try something different. We are in the process of sun drying about 25 persimmons. This is a very old traditional preserving process in Japan. I found some information about it here on slowfoodusa.org

From the slow food web site you can find a link to the Otow Orchard in Granite Bay, CA. They specialize in these “Hoshigaki” sun dried persimmons.

Sun drying fruits is a lot easier during the summer than during winter. Persimmons ripen during October, November, December. We will have to do our best with the winter sunshine. At night we bring the hanging fruits into the house and keep them next to the heating vents. That way the drying process continues even during the night.

If this experiment is successful, we will sun dry a bigger batch next year.

Jason Bradford over at The Oil Drum has written a few articles on food preservation. This article is one of them. Sun drying is less labor intensive than canning. And it also uses less water and energy. There is no need to boil water and the energy comes directly from the sun. Here is a picture of our persimmons hanging on a cloth rack enjoying the sun.

How To Prevent Another Housing Bubble

2009-11-07T18:05:00.000-08:00

There is a very simple way to prevent housing bubbles. This idea is not mine and it certainly is not new. In fact, this was the way most real estate transaction occurred prior to the 1980s. We will visit the reasons why things changed in the 1980s in another article. First, let’s talk about underwriting.

Underwriting is the process by which a loan gets qualified. The underwriters have a checklist of conditions that they go through. One of the most important condition is the verification of the buyer’s income, debt, and employment. Or at least they are supposed to verify income and debt and employment prior to the advent of “NINJA” loans. Most of this process has been computerized. If you want to find out more about computerized underwriting try searching for “Fannie Mae Desktop Underwriter”. Whether it is done manually or with the help of a computer, the end goal is the same: underwriting should be the gatekeeper on preventing bad loans from getting approved.

The DTI (Debt-To-Income) ratio criteria should be 28% front-end and 36% back-end. What that means is that your total housing expense (mortgage plus property tax plus insurance) must not exceed 28% of your total monthly income. And your total debt obligation (all housing plus credit card debt or alimony or child support etc) must not exceed 36% of your total monthly income. And the down payment must be 20%. No exceptions.

Here is an example using data for Cupertino, California. According to the Census Bureau, the median family income in Cupertino in 2008 is $139,254. The mean is higher at $165,798. These numbers are estimates from the Census Bureau. For 2009, the income figures are probably lower given the high rate of unemployment in California. Let’s assume a 30 year fixed rate mortgage at 5%. Property taxes at $8,000 and homeowner’s insurance at $1,000. And the family has no other debt. These are very low estimates; actual numbers are likely much higher as we shall see later when we look at the actual median price of a home in Cupertino.

Cupertino 2008 Median Income

Using Yahoo Real Estate’s “How much house can I afford?” calculator, I arrive at the following numbers. For the down payment I deliberately put in zero. I want to calculate the maximum mortgage amount without the down payment.

Cupertino Median Income Mortgage

The no more housing bubble underwriting criteria is that the DTI ratio must be the lower of either the front-end ratio (28%) or the back-end ratio (36%). For the median income family, that means that the total housing expense must be $3,249 per month or lower in this scenario. Using 5% interest and a monthly payment of $3,249, the maximum mortgage allowed is $465,566.

With a 20% down payment, the maximum purchase price is $581,958. Let’s round this to $582K. Our median income family must save at least $116,400 (20% of 582K) in order to buy the house at $582K and carry a mortgage of $465,600.

That is the no more housing bubble, old school underwriting criteria. But back in bubble country, the data shows something quite startling. According to Trulia.com, the median sales price for a home in Cupertino is $895,000 from August through October 2009. It is down more than $100K compared to 2008.

Cupertino Median Home Price Oct 2009

Our median income family must have won the lottery in order to come up with the $400,000+ down payment. Or not. How about if our family got a windfall in stock options? Maybe. The median income figures already account for the stock sales and bonuses of the city’s residents.

The real reasons why Cupertino is still in bubble territory are the following:

Lenders are not enforcing the 28%/36% DTI ratio.
The purchases are made by move-up buyers, not first-time buyers. Our median income family sold their existing starter home that they purchased years ago and used the proceeds as down payment for the more expensive home.

The housing bubble has burst. The low and mid-priced homes always falls first. Its effects will slowly work its way up to the high end homes. These high prices in Cupertino are only sustainable if there are buyers propping up the low and mid-priced homes AND the lenders choosing not to enforce strict DTI ratios.

I highly doubt that the buyers of $895K homes have a mortgage of $465K. If they did, the median price wouldn’t be $895K and we would not have had this gigantic housing bubble.

I.O.U.S.A

2009-10-18T17:18:00.000-07:00

“I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility.” David Walker

David Walker, former Comptroller General of the United States, telling the truth that most Americans cannot handle. CBS 60 minutes aired a segment on him back on March 4th, 2007. He is on a crusade to educate the public on the problem of our national debt. The documentary I.O.U.S.A. is a full length feature that expands on this subject. It breaks down the problem of our deficit into four categories:

budget deficit
savings deficit
trade deficit
leadership deficit

The program has many easy to understand charts and graphs. It does a good job of making a difficult subject interesting (at least for me). The film is 80 minutes long. There is an abridged 30 minute version of the film on the I.O.U.S.A web site. It is embedded here below:

Are there solutions? Yes there are. The solutions involve raising taxes AND cutting spending. Will the solutions be implemented? I do not think so. Nothing will change unless young people (everybody under the age of 40) start voting in massive numbers or until there is a Second American Revolution.

I used to think a real crisis will force our elected leaders into making the difficult but right choices. The great financial crisis of 2008 proved me wrong. In a real crisis, our leaders made all the wrong choices. They made, and continue to make, decisions that benefit the powerful elites that helped them get elected. Self-preservation of elected officials, not representative democracy, best characterize our government today.

Here is the 60 minute segment on David Walker.

How Long Will It Last?

2009-09-01T16:51:00.000-07:00

The “it” in question refers to rare earth elements. I came across the following article originally published in New Scientist magazine and reproduced here. I am quoting the entire article below.

Earth’s natural wealth: an audit
23 May 2007
NewScientist.com news service
David Cohen

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“I get excited every time I see a street cleaner,” says Hazel Prichard. It’s what they collect in their sacks that gets her juices flowing, because the grime and litter they sweep up off the streets is laced with traces of platinum, one of the world’s rarest and most expensive metals. The catalytic converters that keep exhaust pollutants from cars, trucks and buses down to an acceptable level all use platinum, and over the years it is slowly but steadily lost through these vehicles’ exhaust pipes. Prichard, a geologist at the University of Cardiff in the UK, reckons that tonnes of the stuff is being sprayed out onto the world’s streets and highways every year, and she is hunting for places where it is concentrated enough to be worth recovering. One of her prime targets is the waste containers in road-sweeping machines.This could prove lucrative, but Prichard is motivated by something far more significant than the chance of a quick buck. Platinum is a vital component not only of catalytic converters but also of fuel cells – and supplies are running out. It has been estimated that if all the 500 million vehicles in use today were re-equipped with fuel cells, operating losses would mean that all the world’s sources of platinum would be exhausted within 15 years. Unlike with oil or diamonds, there is no synthetic alternative: platinum is a chemical element, and once we have used it all there is no way on earth of getting any more. What price then pollution-free cities?

It’s not just the world’s platinum that is being used up at an alarming rate. The same goes for many other rare metals such as indium, which is being consumed in unprecedented quantities for making LCDs for flat-screen TVs, and the tantalum needed to make compact electronic devices like cellphones. How long will global reserves of uranium last in a new nuclear age? Even reserves of such commonplace elements as zinc, copper, nickel and the phosphorus used in fertiliser will run out in the not-too-distant future. So just what proportion of these materials have we used up so far, and how much is there left to go round?

Perhaps surprisingly, given how much we rely on these elements, we can’t be sure. For a start, the annual global consumption of most precious metals is not known with any certainty. Estimating the extractable reserves of many metals is also difficult. For rare metals such as indium and gallium, these figures are kept a closely guarded secret by mining companies. Governments and academics are only just starting to realise that there could be a problem looming, so studies of the issue are few and far between.

Armin Reller, a materials chemist at the University of Augsburg in Germany, and his colleagues are among the few groups who have been investigating the problem. He estimates that we have, at best, 10 years before we run out of indium. Its impending scarcity could already be reflected in its price: in January 2003 the metal sold for around $60 per kilogram; by August 2006 the price had shot up to over $1000 per kilogram.

Uncertainties like this pose far-reaching questions. In particular, they call into doubt dreams that the planet might one day provide all its citizens with the sort of lifestyle now enjoyed in the west. A handful of geologists around the world have calculated the costs of new technologies in terms of the materials they use and the implications of their spreading to the developing world. All agree that the planet’s booming population and rising standards of living are set to put unprecedented demands on the materials that only Earth itself can provide. Limitations on how much of these materials is available could even mean that some technologies are not worth pursuing long term.

Take the metal gallium, which along with indium is used to make indium gallium arsenide. This is the semiconducting material at the heart of a new generation of solar cells that promise to be up to twice as efficient as conventional designs. Reserves of both metals are disputed, but in a recent report René Kleijn, a chemist at Leiden University in the Netherlands, concludes that current reserves “would not allow a substantial contribution of these cells” to the future supply of solar electricity. He estimates gallium and indium will probably contribute to less than 1 per cent of all future solar cells – a limitation imposed purely by a lack of raw material.

To get a feel for the scale of the problem, we have turned to data from the US Geological Survey’s annual reports and UN statistics on global population. This has allowed us to estimate the effect that increases in living standards will have on the time it will take for key minerals to run out (see Graphs). How many years, for instance, would these minerals last if every human on the planet were to consume them at just half the rate of an average US resident today?

The calculations are crude – they don’t take into account any increase in demand due to new technologies, and also assume that current production equals consumption. Yet even based on these assumptions, they point to some alarming conclusions. Without more recycling, antimony, which is used to make flame retardant materials, will run out in 15 years, silver in 10 and indium in under five. In a more sophisticated analysis, Reller has included the effects of new technologies, and projects how many years we have left for some key metals. He estimates that zinc could be used up by 2037, both indium and hafnium – which is increasingly important in computer chips – could be gone by 2017, and terbium – used to make the green phosphors in fluorescent light bulbs – could run out before 2012. It all puts our present rate of consumption into frightening perspective (see Diagram).

Our hunger for metals and minerals may not grow indefinitely, however. When Tom Graedel and colleagues at Yale University looked at figures for the consumption of iron – one of our planet’s most plentiful metals – they found that per capita consumption in the US levelled off around 1980. “This suggests there might be only so many iron bridges, buildings and cars a member of a technologically advanced society needs,” Graedel says. He is now studying whether this plateau is a universal phenomenon, in which case it might be possible to predict the future iron requirements of developing nations. Whether consumption of other metals is also set to plateau seems more questionable. Demand for copper, the only other metal Graedel has studied, shows no sign of levelling off, and based on 2006 figures for per capita consumption he calculates that by 2100 global demand for copper will outstrip the amount extractable from the ground.

So what can be done? Reller is unequivocal: “We need to minimise waste, find substitutes where possible, and recycle the rest.” Prichard, working with Lynne Macaskie at the University of Birmingham in the UK, has found that platinum makes up as much as 1.5 parts per million of roadside dust. They are now seeking out the largest of these urban platinum deposits, and Macaskie is developing a bacterial process that will efficiently extract the platinum from the dust.

Other metals could be obtained in equally unorthodox places. Cities are huge stores of metals that could be repurposed, Kleijn points out. Replacing copper water pipes with plastic, say, would free up large quantities of copper for other uses. Tailings from worked-out mines contain small amounts of minerals that may become economic to extract. Some metals could be taken from seawater. “It’s all a matter of energy cost,” he says. “You could go to the moon to mine precious materials. The question is: could you afford it?”
These may sound like drastic solutions, but as Graedel points out in a paper published last year (Proceedings of the National Academy of Sciences, vol 103, p 1209), “Virgin stocks of several metals appear inadequate to sustain the modern ‘developed world’ quality of life for all of Earth’s people under contemporary technology.” And when resources run short, conflict is often not far behind. It is widely acknowledged that one of the key motives for civil war in the Democratic Republic of the Congo between 1998 and 2002 was the riches to be had from the country’s mineral resources, including tantalum mines – the biggest in Africa. The war coincided with a surge in the price of the metal caused by the increasing popularity of mobile phones (New Scientist, 7 April 2001, p 46).

Similar tensions over supplies of other rare metals are not hard to imagine. The Chinese government is supplementing its natural deposits of rare metals by investing in mineral mines in Africa and buying up high-tech scrap to extract metals that are key to its developing industries. The US now imports over 90 per cent of its so-called “rare earth” metals from China, according to the US Geological Survey. If China decided to cut off the supply, that would create a big risk of conflict, says Reller.

Reller and Graedel say urgent action is required. Firstly, we need accurate estimates of global reserves and precise figures for consumption. Then we need to set up an accelerated programme to recycle, reuse and, where possible, replace rare elements with more abundant ones. Without all this, any dream of a more equitable future for humanity will come to nothing.

Governments seem, at last, to be taking the issue seriously, and next month an OECD working group will be convened to come up with some of the answers. If that goes to plan, we will soon at least have a clearer idea of the problem. Whether any solution to looming global shortages can then be found remains to be seen.

From issue 2605 of New Scientist magazine, 23 May 2007, page 34-41

Take a few minutes to digest that article. Think about the implications. And then read this article on the Toyota Prius hybrid car. It is a Reuters article by Steve Gorman.

As hybrid cars gobble rare metals, shortage looms
Mon Aug 31, 2009 8:07am EDT
By Steve Gorman

LOS ANGELES (Reuters) – The Prius hybrid automobile is popular for its fuel efficiency, but its electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods.

That makes Toyota’s market-leading gasoline-electric hybrid car and other similar vehicles vulnerable to a supply crunch predicted by experts as China, the world’s dominant rare earths producer, limits exports while global demand swells.

Worldwide demand for rare earths, covering 15 entries on the periodic table of elements, is expected to exceed supply by some 40,000 tonnes annually in several years unless major new production sources are developed. One promising U.S. source is a rare earths mine slated to reopen in California by 2012.

Among the rare earths that would be most affected in a shortage is neodymium, the key component of an alloy used to make the high-power, lightweight magnets for electric motors of hybrid cars, such as the Prius, Honda Insight and Ford Focus, as well as in generators for wind turbines.
Close cousins terbium and dysprosium are added in smaller amounts to the alloy to preserve neodymium’s magnetic properties at high temperatures. Yet another rare earth metal, lanthanum, is a major ingredient for hybrid car batteries.

Production of both hybrids cars and wind turbines is expected to climb sharply amid the clamor for cleaner transportation and energy alternatives that reduce dependence on fossil fuels blamed for global climate change.
Toyota has 70 percent of the U.S. market for vehicles powered by a combination of an internal-combustion engine and electric motor. The Prius is its No. 1 hybrid seller.

Jack Lifton, an independent commodities consultant and strategic metals expert, calls the Prius “the biggest user of rare earths of any object in the world."

Each electric Prius motor requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum. That number will nearly double under Toyota’s plans to boost the car’s fuel economy, he said.
Toyota plans to sell 100,000 Prius cars in the United States alone for 2009, and 180,000 next year. The company forecasts sales of 1 million units per year starting in 2010.

As China’s industries begin to consume most of its own rare earth production, Toyota and other companies are seeking to secure reliable reserves for themselves.

Reuters reported last year that Japanese firms are showing strong interest in a Canadian rare earth site under development at Thor Lake in the Northwest Territories.

A Toyota spokeswoman in Los Angeles said the automaker would not comment on its resource development plans. But media accounts and industry blogs have reported recently that Toyota has looked at rare earth possibilities in Canada and Vietnam.

(Editing by Alan Elsner and Mary Milliken)

There are not enough rare earth elements to replace every car on the road with a hybrid car! I seriously looked into buying a Prius. But after reading these two articles I decided not to. It is more environmentally friendly to buy a USED two door Toyota Yaris subcompact and drive it as little as possible than it is to buy a Prius and drive it to work every day. You use less crude oil when driving a Prius, but you sure used a lot more rare earth elements. There are alternatives to oil but there are no alternatives to lanthanum or lithium. Once we use them all up, it’s GONE.

Liquid Assets

2009-07-22T16:47:00.000-07:00

Liquid Assets: The Story of Our Water Infrastructure is a documentary aired on PBS about water infrastructure. I saw it and got hooked! The last time I got this excited about a documentary was when Commanding Heights first aired.

The program is 90 minutes long. It goes through the three systems of water:

drinking water
waste water
storm water

I have done quite a bit of reading on the drinking water and waste systems already so I knew a lot of the material. But still I was fascinated by the history of the water infrastructure in New York and Philadelphia. What I was most interested in was the storm water system.

Los Angeles River

The case study is Los Angeles, the city I grew up in. Growing up in LA I didn’t think much about the storm drains and the concrete flood control channels. Most people have seen Los Angeles River in movies. Lots of action movies like Terminator 2 have scenes filmed there. The Los Angeles River’s sole purpose is to carry storm water out to the ocean.

Why is so much water going into storm drains and the runoff channels in the first place? Because the city full of concrete! Sprawl creates need for paved road and parking lots and strip malls. With so much concrete and pavement, very little water goes back into the ground. If a big storm dumps a lot of rain, flood happens. That is why Los Angeles created this huge network of storm drains.

The city avoids floods but the ocean becomes a dumping ground. Along with the storm water, it also carries all the wastes and pollutants throughout the city into the ocean. Soil and rock in the ground act as a natural filter. If rain water is absorbed by the ground, underground aquifers are recharged. That is not happening because the way the city developed.

This is a fascinating program on water infrastructure. I highly recommend that you buy the DVD if your PBS channel is not airing reruns of the program.

Water is life. The more you know about it, the more you will value Earth’s most precious resource.

The Joys of Worm Composting

2009-07-18T16:37:00.000-07:00

I have kept a worm compost pile for over ten years. I first learned about composting in college through my friend Paul. He started a compost pile in the backyard of the co-op where we lived. That particular compost was a big failure due to other residents dumping random garbage into the compost bin. It was an “aerobic” compost pile, meaning a compost that mixes the right amount browns and greens and water in order to produce heat to break down the waste. If you change the mixture, the pile will not heat up and nothing will happen. That was my introduction to composting. I learned what not to do.

We eat a lot of fruits and vegetables every day so we have a lot of kitchen scraps. Banana peels, apple cores, cucumber peels, watermelon skin, etc, etc, etc. If all this waste goes into the garbage bin directly it will probably never be reused again. Think about it. The waste goes into a plastic bag. The garbage truck hauls it to the dump where it is buried along with other non-organic garbage like plastic or styrofoam. How can my banana peel decompose and become part of the soil again? It can’t. That is why I started a worm composting bin. So that our food waste can biodegrade in our backyard and become fertilizer for other plants.

My compost bin is the “Biostack” made by Smith & Hawken. Unfortunately the parent company of Smith & Hawken, Scotts Miracle-Gro, has dropped the brand and closed all Smith & Hawken stores. The Biostack has been discontinued. Don’t worry, there are many other types of compost bins out there.

Compost Bin

The big advantage of worm composting over aerobic composting is that there is less maintenance. You do not have to worry about composting failures due to improper mixture of browns and greens. With a worm compost pile, just dump your kitchen scraps in. The worms will eat them and do the rest.

The City Farmer web site has the best step-by-step instructions on how to start a worm composting bin. There is a photo slide show also.

I purchased the red wiggler composting worms online. They are sold by the pound and there are hundreds of worms in a bag. The worms can survive the trip through the US Postal Service system just fine. You only have to purchase a couple of pounds of worms once to start your pile. If you feed them well, they will multiple!

I put in about three pounds of kitchen scraps into the pile every day. Below is a picture of what it looks like inside. You should only put plant matter into the pile. Do not put in cooked leftovers or any animal by product.

Compost Bin Inside

If you add that much organic matter into the pile every day, the pile will become soggy and the worms will not be that effective at eating the scraps. To balance the mixture, add dry brown material like dry leaves or shredded paper. Newspaper or plain paper; no glossy paper though.

Because my compost pile is big, I use a pitch fork to churn the pile around once a week. If you have a smaller bin, you should still churn the pile with a small garden shovel. The worms need fresh air. Worm composting works best if the pile is churned. Here is a close up look at my little red worms. Click on the image for a larger picture.

Red Worms

I never follow the “harvesting” instructions. Trying to separate the worms from the compost is a very messy business. Instead when my pile gets too full, I start putting scraps into just one side of the bin. The worms will figure out where the food is and move to that area. After a week, I scoop out the compost material on the other side and add it to my container plants directly. Some worms will get caught. But that is okay. There are plenty of worms left in the bin. And there will be more if you keep adding food every day.

Chickenpox Foreclosure Map

2009-06-15T23:07:00.000-07:00

Google Maps has a real estate search feature. It can show you houses that are in foreclosure or will be in foreclosure because the owner has missed at least one payment. I could not find a direct link that activates the feature. Use the following procedure:

Go to maps.google.com.
Click on “show search options” on the right hand side of the search box.
A pull down menu will appear next to the search box. Click on it and select “Real Estate”.
Now enter any city name or zip code like 90210.
The left hand side will have search options. Click on “For sale” for remove the option and click on “Foreclosure” to select that option. Then click on go.

A chickenpox map of foreclosures. Click on the image for larger view.

Los Angeles Chickenpox Foreclosure Map

As you can see foreclosures are never evenly distributed. There are pockets of outbreaks. We can zoom in around Redondo Beach and Santa Monica and Beverly Hills.

Redondo Beach Chickenpox Foreclosure Map

Santa Monica Chickenpox Foreclosure Map

Look at the chickenpox outbreak that is Santa Monica and Beverly Hills. Never before has so many people become so poor trying to look rich.