Malcolm Greave’s THAI toe and heel air injection heats up

It is rare to see a professor come out and cheerlead a new technology, even if he is the father of the process. In this case it seems a well earned right. THAI or toe and heel air injection is proving to be far better than anticipated and making the projected improvements much more probable.

This article was published a couple of months ago and this last week we have also seen the THAI story been told on the national news. I have been keeping a watchful brief on the pilot test from before it got funded. This is actually a remarkable discovery, and its real success infield is wonderful. Personal experience kept me cautious until I saw the early production results. We all can now throw that caution to the wind.

I believe that this will also access huge reserves of conventional oil that is now classified as dead oil. Of course a lot of those fields will have to be dried out. However, any sandstone based reservoir that is reasonably thick should be exploitable. You will notice particularly that they are quoting an amazing 70% to 80% recovery and in well catalytic upgrading to as high as 26 api. Of course, they are now getting a bit over the top. However, I certainly can anticipate resources for which these levels may be possible.

In fact, I suspect that a lot of oil companies will be rather sorry that they ever used water floods at all. For the layman, natural flow will deliver up to perhaps 40% of in place oil. The truth is that this is more like 30 to 35%. Water floods will sweep out maybe another 15%. This means that generally, half of the original oil remains behind. And it is rather unlikely that a wet formation can be made to work with this method, although I reserve the right to be surprised.

The power of this method comes from the fact that the air is under pressure permitting the development of a 600 degree burn zone. This is hot enough to encourage reforming of the oil, to say nothing about its liquefaction. On top of that the combustion product is CO2, CO and steam (H2O) as well as entrained nitrogen. All these gases except H2O dissolve into the oil itself helping to improve its viscosity. These gases also dissolve into the water helping to break the oil free of the sand itself.

The only escape for all this heat is with the production fluid itself or through a very slow leaking into the surrounding non porous sediments. This is also true of the production gases which will tend to penetrate the formation ahead of the burn front speeding the process up.

I expect that it will be possible to set up a 100 well burn front within the formation that will obviate any need for pillars or untreated zones between burns. It also seems that as the burn front gets a fair distance down the formation, it will be good practice to place additional injection wells at the burn front and seal the older wells.

In fact there is little reason not attempt to treat one hundred percent of the formation with a closely managed burn front that is moved slowly along with additional production and injection wells placed as needed.

I am particularly encouraged with the experiments starting with using 3d seismic mapping to follow the location of the burn front. If this works, then it will be possible to almost micro manage the system.

The real payoff with this system is that it uses drilling industry resources which are sufficient and fully in place in Alberta to swiftly add a million new barrels of production every year. Each well pair will pump out 1000 barrels per day. With air injection and a full sand handling system, they are not cheap, but they are not unusual and will certainly meet the industry standard of a three year payback with absolutely no discovery risk.

Since this all works best on oil that is likely below the mining zone, we have likely added all of Canada’s oil sands to the world’s oil inventory. I believe that this will easily exceed one trillion barrels, though up to now measurement has never been much of a priority. I also remember seeing a map once in which the tar sands were shown to extend far north along the McKenzie Valley. I think every one just gave up once they found a trillion. I suspect accurate measurement just became important again.

Toe-to-Heel Air Injection (THAI™) System

Published Thu, 2007-11-29 16:08 Energy

A new method developed in Britain over the past 17 years for extracting oil is now at the forefront of plans to exploit a massive heavy oilfield in Canada.

Duvernay Petroleum is to use the revolutionary Toe-to-Heel Air Injection (THAI™) system developed at the University of Bath at its site at Peace River in Alberta, Canada.

Unlike conventional light oil, heavy oil is very viscous, like syrup, or even solid in its natural state underground, making it very difficult to extract. But heavy oil reserves that could keep the planet’s oil-dependent economy going for a hundred years lie beneath the surface in many countries, especially in Canada.

Although heavy oil extraction has steadily increased over the last ten years, the processes used are very energy intensive, especially of natural gas and water. But the THAI™ system is more efficient, and this, and the increasing cost of conventional light oil, could lead to the widespread exploitation of heavy oil.

“The world needs to switch to cleaner ways of using energy such as fuel cells,” said Professor Malcolm Greaves, who developed the THAI™ process.

“But we are decades away from creating a full-blown hydrogen economy, and until then we need oil and gas to run our economies.

“Conventional light oil such as that in the North Sea or Saudi Arabia is running out and getting more expensive to extract.

“That’s why the pressure is on to find an efficient way of extracting heavy oil.”

THAI™ uses a system where air is injected into the oil deposit down a vertical well and is ignited. The heat generated in the reservoir reduces the viscosity of the heavy oil, allowing it to drain into a second, horizontal well from where it rises to the surface.

THAI™ is very efficient, recovering about 70 to 80 per cent of the oil, compared to only 10 to 40 per cent using other technologies.

Duvernay Petroleum’s heavy oil field in Peace River contains 100 million barrels and this will be a first test of THAI™ on heavy oil, for which THAI™ was originally developed. Duvernay Petroleum has signed a contract with the Canadian firm Petrobank, which owns THAI™, to use the process.

The THAI™ process was first used by Petrobank at its Christina Lake site in the Athabasca Oil Sands, Canada, in June 2006 in a pilot operation which is currently producing 3,000 barrels of oil a day. This was on deposits of bitumen - similar to the surface coating of roads - rather than heavy oil.

Petrobank is applying for permission to expand this to 10,000 barrels a day though there is a potential for this to rise to 100,000.

The 50,000 acre site owned by Petrobank contains an estimated 2.6 billion barrels of bitumen. The Athabasca Oil Sands region is the single largest petroleum deposit on earth, bigger than that of Saudi Arabia.

Professor Greaves, of the University’s Department of Chemical Engineering, said: “When the Canadian engineers at the Christina Lake site turned on the new system, in three separate sections, it worked amazingly well and oil is being produced at twice the amount that they thought could be extracted.

“It’s been quite a struggle to get the invention from an idea to a prototype and into use, over the last 17 years. For most of the time people weren’t very interested because heavy oil was so much more difficult and expensive to produce than conventional light oil.

“But with light oil now hitting around 100 dollars a barrel, it’s economic to think of using heavy oil, especially since THAI™ can produce oil for less than 10 dollars a barrel.

“We’ve seen this project go from something that many people said would not work into something we can have confidence in, all in the space of the last 18 months.”

Professor Greaves, who was previously Assistant Professor at the University of Saskatchewan in Canada, and who also worked with Shell and ICI in the UK, is looking at making THAI™ even more efficient using a catalyst add-on process called CAPRI™.

This process was also developed by Professor Greaves’ team at Bath and is intended to turn heavy oil into light while still in the reservoir underground. The CAPRI™ research has recently been awarded funding of £800,000 from Engineering and Physical Sciences Research Council, including £60,000 from Petrobank. The project collaborators are Dr Sean Rigby, from the Department of Chemical Engineering at Bath, and Dr Joe Wood of the University of Birmingham.

Source: University of Bath

The Starter's Gun

I hate playing the role of Cassandra at the great oil party when it is clear that no one wants to hear. It is just that the direct impact on our lives will be so great that it is wrong to not get the message out. We are producing 85 million barrels of oil a day of conventional oil. That means that on average we were able to add 1million barrels of oil production a day every year for the past century. We have been able to do this using resources discovered over forty years ago that have now slid into natural decline. Those resources have not been replaced in the form of conventional oil.

What has replaced them is the equally huge heavy oil resources that are only now been mastered. From them we get perhaps three million barrels of production, now that the price of oil makes it viable. I believe it is possible to add a million barrels a day of heavy oil production per year, provided THAI holds up. Otherwise we are hooped as far as the oil economy is concerned.

The red hot problem is that this is still far too late to avoid a precipitous decline in conventional production. The harsh reality of that developing decline will not be minus one million barrels per day. It will be way faster than that for several years until alternatives kick in and take the pressure off.

Imagine a world two decades from now in which production from current producers is only supplying 55 million barrels a day. That is what happened to US production in the seventies and it has never recovered. The point is that this is going to be incredibly disruptive throughout the globe and will be a true global crisis.

North America is actually best able to add new production thanks to THAI and the Bakken formation which operate within a conventional infrastructure and can actually step up activity now. Elsewhere we are looking at deep sea deposits requiring years of construction. It is going to be one hell of a foot race and no one seems to have heard the starter's gun.

And pretending that rapid decline is not imminent is wishful thinking of the worst kind. I babble about a mere one million barrel decline. The fact is that we will stretch every spare resource to put off the decline until it becomes precipitous. The Saudis both reduced production this past year and suddenly became amazingly forthcoming on their production capabilities. This is a clear sign that it is all going into the crapper.

So what else could go wrong? A supply decline of historic proportions in oil production combined with a massive credit crunch in US currency denominated financial assets that must be sorted out we already have happening in slow motion. How about a crash and burn in the Chinese economy, while we are at it, precipitating a radical remake of the Chinese political system. It is way overdue and would likely be beneficial. Can all these difficulties be worked out in slow motion preventing massive real hardship? I keep thinking it is possible, except that it is not possible to replace a sudden loss oil production except through the aggressive rationing of gasoline which will ground a large segment of the economy.

Five years ago these were all future possibilities. We are living there now. We are entering one of the great transition periods of the global economy and it is all tied to new energy sources.

When is that gun going to be fired?

Oil Dependancy

The one thing that I have been emphasizing with my readers is the onset of something known as peak oil. Although everyone knows that the globe gets the majority of its import oil from the Middle East, most poorly appreciate just how much of our conventional reserves actually reside there. We all know that the largest single conventional reserve is in Saudi Arabia. What few appreciate is that number 2,3,4 &5 are not that much smaller and are all in the same Persian Gulf Basin. This means that the bulk of conventional reserves are in the Persian Gulf.

What is more important, is that they have all been exploited for decades and are all past peak or at least certainly appear to be. They are also easy to exploit, so there should be little recoverable residual oil to go after in depleted fields. The only remaining mystery is to what degree the owners are not disclosing field performance. This is a contentious issue and a serious concern and certainly, no one believes that they are telling the truth, particularly when they change quoted reserves at a whim. However, with the Saudis essentially cutting production, it is a very good bet that increases are now impossible.

Looking at the combined reserves in the Middle East it is hard not to believe that an increase is merely a snap of the fingers away. But it is not. Oil fields must be pumped slowly or they will physically deteriorate. And these wells and fields have been carefully managed for a long time and are certainly maximized.

I am reminded of a very greedy stupid individual that I knew whose brother bank financed the acquisition of a very productive gas well in the USA. He then proceeded to kick his brother out of the deal and then took over management of the well. It was a moment's effort to crank up the production rate to accelerate the payback. It took three days for the the well bore to become sand packed, cutting of all production. There was nothing to say after that.

The only other great exploitable oil resource readily available is the Alberta Tar Sands, similar in scope to the whole Persian Gulf and probably much much larger. I also suspect that we have not heard the last word of the conventional reserves of the related Mackenzie basin. But like the heavy oil reserves in the Amazon, access is a true bitch. Right now you have to be utterly determined and be prepared to operate in conditions similar to the North Slope over road less rugged terrain in the dead of winter.

The Alberta lands are much more accessible and the necessary infrastructure is already in place permitting incremental additions to production. This is why THAI is so utterly important to the future oil supply situation.

It turns an unconventional bitumen resource into a near conventional resource, although I can hear the howls of oil men everywhere. The fact that the successful use of a burn front adds value in terms of upgrading the production fluids while also obviously utilizing the production CO2 to mobilize the oli is an elegant resolution of an impossible problem. That it actually appears to be working is a modern day miracle. When I first saw the proposal, I thought that it was too good to be true. today, the only remaining question is well life and there is only one way to figure that out.

And with a next phase kicking in at 100,000 barrels per day, it is safe to say that the proponents are now total believers.

Thus we are left with an open mystery as to when the Middle East will find its production seriously collapsing, which some see as imminent. The advent of THAI can in time bridge this production shortfall provided the Middle East retains the capacity to maintain current levels. This is an extremely questionable assumption currently shared by no one.

You will notice that I make no suggestion that we can support actual increases in production. We will be extraordinarily lucky if it is possible to sustain current levels while high prices drive THAI production and a slew of alternate fuel sources.

We have high prices now. There is no more encouragement needed. A price burst upward will more reflect a sudden loss of production somewhere than anything else. The fact is is that we are now very vulnerable. And as I have said, our true strategic reserve is the automobile.

20,000,000 Per Day Production Gap Looming

I can understand why almost no one gets it with the approaching perfect storm in the Oil industry.

Just as we find it difficult to understand compound interest, it is difficult to imagine the collapse of an industry built on a declining resource, even when everyone is in it. Grand banks cod was destroyed for that same reason as was the whale oil business. Yet everyone operated with a business as usual stance to the day it ended.

I hate scaring people, and it is clear that the political leadership is tiptoeing around the issue in every way it can. No one wants to say 'hey guys, the crap is going to hit the fan like it never did before'. I am certain that George Bush is hoping to be long gone before the shoe drops. 'just give me eleven more months, lord, so that I don't get blamed for that too!'

When the first oil crisis occurred in 1975 or so, there was no mystery were the oil was going to come from. There were ample supplies in Saudi Arabia for the turning of the tap.

Today there is no tap to turn and the Saudis know that they are now facing decline if it has not already commenced. Yet even they are pretending business is as usual.

No matter. Our current annual production level of 85,000,000 barrels per day is about to decline at around 4,000,000 barrels per day per year for several years. We have to to be ready to open up new production at this level each year to just stand still. Right now we simply cannot do it.

Accelerating current production of established operations simply will not be possible and has never been possible in the oil business. In fact, you maximize production volumes by slowing the actual lifting rate. For sure, that is why the Saudis have already lowered their output levels.

Recall that thirty five years of very high relative oil prices has not halted the decline in US oil production.

Right now the THAI pilot operation in Alberta is ramping up to 100,000 barrels per day as fast as humanly possible. That will take at least two years to commence and about two years to build out. Accelerated permitting can then build out an additional 900,000 barrels over the next three years. So in my most aggressive back of the envelope scenario, THAI can hit 1,000,000 barrels per day by 2012 at the earliest. At the moment we still do not know what a real world depletion and decline curve looks like for the THAI well pairs. We will though by 2012.

However, once that is well underway, it should then be easy to add an additional 1,000,000 barrels per day per year for a long time. It may even be possible to ramp up to 4,000,000 barrels per day per year over the succeeding five years so that by 2017 we are recovering back to current levels of production.

In my most optimistic scenario, which is becoming available to us thanks only to THAI, we will lose about 20,000,000 barrels per day of production and then slowly creep back to current levels by 2018. That is a pretty ugly swing however stated.

And yes, throughout this transition, it will be possible to scramble in resources, including a lot of oil that will also alleviate the pressure.

This scenario suggests that Alberta must achieve production levels of an unbelievable 20 to 30 million barrels per day within the next two decades. This is a billion barrels or so per year. And strangely enough, from what I know of the actual resources, this can be sustained for a thousand years at least although the rest of the world will dry far sooner.

I also suspect that undiscovered mega fields may exist in the remaining valley of the MacKenzie although most folks would rather go to the middle of the Amazon.

In other words it is impossible to understate the importance of the successful pilot test of the THAI system. All the major problems associated with heavy oil disappear, including maximizing recovery. For the record, I have been watching this pilot since before they got the money to do the pilot test, and so far it has succeeded as advertised with only the usual predictable problems. Expect engineers to skimp on sand handling when you don't quite believe that the underlying premise is going to work. The courage to immediately permit a next stage to 100,000 barrels per day is a huge internal vote of confidence that the technology is licked and is truly working.

Let us hope that my optimistic scenario ends up been the global production floor. This still means that the personal automobile is almost going to be banned as that is the only place that we can remove 20,000,000 barrels per day of production. There is no other source until THAI and even replacement technologies kick in.

I personally hate to write posts about the developing economic situation, but shared knowledge is the only way to be able to position yourself in the middle of a pending economic transition crisis. Otherwise one freezes up in the face of rapid changes which rather obviously have already begun.

You need only imagine the post that I would have to write if THAI was not working, particularly since few comprehend the lead times necessary to bring on new technologies like algae oil and methanol at the scale necessary.

Major THAI Expansion

Today, I am going to share with you an extract just published by PetroBank Energy (PBG.TO). The reason is that this company who is pioneering THAI production has just decided to really reach in terms of their expansion. Obviously they are very happy with results to the present and production bottlenecks have been eliminated.

The most important thing that this all tells us is that they can go to 100,000 barrels per day very easily. This means that the step to 1 million barrels per day is just as easy and the next several million barrels per day is very feasible. This implies that Canada' s two trillion barrels of heavy oil reserves will soon become measured reserves.

More importantly, the oil resource requires a negligible amount of input energy unlike the mined surface deposits. In fact the technique will likely find its way into conventional oil fields because of its ability to reform oil in place and thus mobilize it. I am still a little amazed that this is possible.

There are huge amounts of conventional oil in place that was unrecoverable equal to all the oil ever recovered. This may access a lot of it.

So while we are surely sweating the developing production shortfall faced globally, this is a true light at the end of the tunnel for the long interim we need to bring alternative sources on line.

Heavy Oil Business Unit

Whitesands

Recent operations at the Whitesands site have focused on the installation of the new sand-handling system which became operational for all three wells late in December 2007. This system has increased on-stream time and enhanced our ability to manage produced sand and ultimately flow the wells to their target capacity. In conjunction with the new sand-handling system, upgrade modifications to other plant operations were made to facilitate the addition of the planned three well expansion. Another key upgrade was further enhancement to our H2S treating facilities, which are installed and ready to operate, however regulatory approval to operate this system has been delayed and is now not expected until early February. This delay has limited our ability to increase air injection and therefore increase production levels in the short term.

As previously discussed, our three well expansion project is also waiting on regulatory approval which is delaying the drilling of the next three THAI(TM)/CAPRI(TM) wells. Because of this, we have decided to drill at least one additional well on the current plant footprint which will be our first THAI(TM)/CAPRI(TM) well. As this well is located on the existing plant footprint, the regulatory process is more streamlined. This will also enable us to advance the testing of our CAPRI(TM) completion design and our revised slotted liner designed for improved downhole sand control. In addition, we can start producing from this well sooner, using the existing combustion zone, which should allow us to avoid the pre-ignition-heating cycle. Advancing this well provides an opportunity for continued optimization of our project design and reduction of execution times for future projects.

In December 2007, we also completed a 4D-seismic survey over the current project site, which we believe will provide valuable information on the morphology of the combustion zone. We have also completed five additional stratigraphic evaluation wells, the results of which will be included in the updated resource evaluation being conducted by our independent reserve auditors. We plan to drill up to an additional 23 oil sands exploration wells during our 2008 drilling program.

May River

Our earlier plan at the Whitesands site was to have filed a 10,000 barrel per day project application by the end of 2007. This plan has been modified as we have enhanced our process design to allow for a larger central facility with ultimate capacity for 100,000 barrels per day, as well as other facilities improvements based on data from our current operations. This new project will be known as May River. The central facility design will lower the overall environmental footprint of the project and requires a different surface location than previously planned. We now expect to file the first phase application for the initial ten to fifteen thousand barrel per day stage of the project by mid-2008, which will include pre-development for the larger overall development. This approval will require additional environmental fieldwork to accommodate the larger initial scope of May River.

To facilitate the application process for the overall project design, we have released our public disclosure document ("PDD") for the May River project describing our 100,000 barrel per day THAI(TM) development plans for the Whitesands leases. The PDD is the first step in the public consultation process and is a key aspect of the overall project approval process. The PDD will allow us to consult on our full development plan, thereby potentially shortening the overall approval process, rather than undertaking a detailed public consultation for each separate phase. The rationale for initiating this full-scale development plan with a ten to fifteen thousand barrel per day initial stage, is that while the overall project will require a comprehensive environmental impact assessment ("EIA"), the first phase will only require a localized environmental assessment that we can commence immediately. We will also initiate the full scale EIA in the first quarter of 2008.

Aubie Baltin on US Credit Contraction

After my cheery note yesterday on the looming stress of very expensive oil, I realized that I forgot to mention the one other way in which it will be partially resolved. By a global slowdown in general demand while the economy retools for other energy resources.

I share with you this investment letter by Aubie Baltin which makes the case of how bad it will get. It is meant to scare the hell out of you, so do not take it to heart.

Without question the US economy has to unwind a lending spree that was huge. The good news is that the rest of the world was simply not so stupid and retains a sound currency and credit system and will inject the necessary equity to clean up the mess. And yes they will extract their pound of flesh as well they should. And the rest of the world is now big enough to do this.

However, it means that equity will be king for a decade in the US as the banking system goes back to behaving like banks. The credit balloon is gone having been stolen, leaving the banks with the fallout.

In the meantime, it is wise to recall that what happens in the wrong neighborhood in Cleveland to mortgage debt is simply the absolute extreme worse case and does not reflect what is really happening in the rest of the country which will ride through this storm very nicely.

The only damage most will incur is a lowering of their expectations. And the need to not drive the car so much.

Also, let us not forget that THAI oil production promises to deliver the necessary crude to our refineries and could do it easily within the current price regime.

We are in the early days of a global transition out of the oil economy and massive volatility is a natural part of this unpleasant process.

YOU HEARD IT HERE FIRST - RECESSION 2007

In my letters dating back to the beginning of 2007, I selected a credit spread between Junk Bonds and Treasuries (buy Treasuries, short Junk Bonds) as my #1 best, lowest risk SURE THING trade. The spread has increased from a near all time low of 3% to a current spread approaching 7.5% and “you ain’t seen nothing yet.”

But that was just a trade, why should you have listened? But that trade was not the only thing that you heard here first. Month after month, there has been a total barrage of optimistic projections from all avenues calling for a continuing Goldilocks Economy, leading to accelerating earnings and an ever rising stock market not only here in the USA but around the world as well, especially in the emerging markets. They were right about the rest of the world, but I stood front and center against this constant harangue of optimism, pointing out the expanding cracks in the dam that everybody else either refused to see or actually did not notice. The seeds of a MAJOR BEAR MARKET were being sown. And it would not be just an ordinary Bear Market like we had in 1998 or 1994 or 1990, but more along the lines of a 50% 1973-74 breakdown and quite possibly a 15 to 20 year 30’s type Depression.. Not very many, if any, analysts agree with me yet, but I no longer hear any of them laughing.

RECESSION 2007

We can never know in advance the actual start date of a recession. It is only after all the numbers, that everyone waits for with baited breath, have been revised 3 or 5 times can we know for sure when a recession started; it won’t be too much longer before my call that we started the recession in the 4^th quarter of 2007 is confirmed. And yet the Government, the FED, Wall Street and the Media keep insisting that, at worst, we will just have a slowdown in the first half of 2008 with a resumption to 4% plus growth by the second half of the year. The drop in housing prices is now over 18 months old, the longest sustained drop in history, but we still have no recession? The first people laid off were the illegals, so they didn’t show up in the unemployment figures. What do you think the numbers will show next quarter after the carnage in the financial sectors hits? And I always thought smoking dope was illegal!

MARGIN CALLS

All modes of deals that appear like sure things must and will fail for one or both of two reasons. The takeover and buyout private equity craze always sows the seeds of its own destruction as more and more money chases fewer and fewer good deals. They become overpriced and making the deal becomes of prime importance as they worry about the workout later. After all, the deal makers like the Hedge Fund managers, take their money up front and the Banks always are left holding the bag, Secondly, interest rates are so low that risks are no longer being taken into account. Underestimating risk is the surest road to doom and we are already witnessing the consequences. Here too “we ain’t seen nothing yet” as the margin calls begin to fly and there is a scramble to rob Peter to pay Paul, as one deal after another gets into serious trouble and collapses since no provisions at all were made for a possible recession. We are now witnessing what can happen to the biggest and best such as C, CFC, MER and BSC and how many more shoes are yet to fall?

IT WAS THE EXPANSION OF CREDIT THAT LIFTED ALL BOATS AND IT WILL BE THE CONTRACTION AND THE ALMOST COMPLETE DRYING UP OF CREDIT, THAT WILL BRING THEM ALL BACK DOWN TO REALITY.

CREDIT AND LENDING

Most everyone still refers to the sub-prime loans as being the problem. But nothing could be further from the truth. The mere fact that the President, Congress and all of the presidential hopefuls are coming up with plans to solve the effect and not the problem is proof positive that sub-prime is not the real problem. It is the massive 5 to 10 year overhang of unsold homes brought about by the massive over building that five years of 25% plus per year compounded price increases that fueled massive speculation and was exacerbated by the 1% zero down ARMS that allowed even poor people to speculate and rich people to over speculate. Sub–prime was just the beginning as it has already spread to Alt 1-A and prime loans as people walk away from their negative equity, overpriced homes.

In the 4^th quarter of 2007, we saw the biggest increase in auto loan delinquencies in 8 years, in conjunction with $350 million loss to Sally May and a suspension of all types of securitization sales by 1^st Marblehead Corp. And don’t forget the 26% increase in credit card delinquencies. THE DOMINOS HAVE JUST BEGUN TO FALL.

More importantly is the fact that banks must shrink lending 20% to 25% and call in loans in an effort to return their capital ratios to their mandated levels. Brokers and Hedge Funds must also curtail their borrowing at somewhere between $18 to $25 for each $1 lost.

THE PSYCHOLOGICAL FOUNDATION OF LENDING AND THEREFORE LIQUIDITY IS CONFIDENCE. When confidence is lost and the credit spigot is shut off, it ties the hands of the FED so that they can do nothing about increasing the money supply and all the rate cutting has and will go for naught: Except to weaken the Dollar.

RETAIL SALES

In 2007, the consumer represented 72% of GDP and in the face of a crashing real estate market, which involves an all time high 70% of the population, THEY kept on insisting that consumer sales would not be affected even in the face of $100 /bbl oil. Be careful to whom you are listening to. Go back and check what your favorite analysts have been saying over the last 6 months to a year or so. If they could not see the 10 foot high writing on the wall then, what makes you think that they can do anything else but follow the crowd in the future as they all continue in their myopic ways all the way down to the eventual bottom If you want to stay abreast or even ahead of what is coming, don’t forget to mail in your subscription to “UNCOMMON COMMON SENSE.”

INFLATION

Last month, we were hit with a 0.8% per month inflation number, which annualized comes out to an inflation rate of over 9.6% per year and they claim it was only a one month aberration, that there is no inflation. If everyone is still insisting that inflation is not anything to worry about, then why is Bernanke not cutting interest rates by at least 50 basis points if not a full 100 basis points in order to get ahead of the curve? What is wrong with all these so called experts? Are they still living in a dream world refusing to admit to themselves that the party is over? INFLATION is, despite all the manipulation, beginning to roar. Don’t they realize that rampant inflation always leads to a crash?

WHAT DO WE DO NOW?

.The first thing that you must do is to GET OUT OF DEBT, especially margin debt. Those of you who have been following me are now sitting comfortably in cash and have sold into the December rally. Although it did not make the new all time high that I was hoping for, it was nevertheless a good enough rally to have allowed you to get OUT of all your long positions in great shape. If you were smart enough to have gone short, it is time to take your profits and wait for the coming bounce to re-establish your shorts.

SPECIFIC STOCK RECOMMENDATIONS ARE RESERVED FOR SUBSCRIBERS.

GOLD AND SILVER

For those of you who have been long time readers of my letters, you should have at least 1/3 to 1/2 of your liquid assets in Gold and Silver Bullion as well as their underlying stocks. For both old and new fans, you can start accumulating the higher quality Juniors and buy Bullion and the Majors on any $45 to $75 pullback in the price of Gold. THERE IS NO RUSH. The first major Wave I has probably just been completed even if only at the lower end of my target range. But have no fear, we still have up Waves III and V to look forward too. DO NOT TRADE YOUR CORE GOLD POSITIONS.

SPECIFIC BUY AND SELL RECOMMENDATIONS WHICH I HAVE NEVER GIVEN IN THE PAST ARE RESERVED FOR SUBSCRIBERS ONLY.

INTERIM LETTER

Pardon the shortness of this letter, but it is only an interim letter that I don’t usually write. I just thought that, given the situations in the markets, a little hand holding was in order. Even I would not mind a little hand holding from time to time. As far as my own portfolio is concerned, I had a terrific month so far: I covered most of my shorts yesterday (Tuesday) into the close and I sold a few calls against some of my Gold positions on Monday. I know that I don’t have a crystal ball, but maybe I have a crystal eye or better yet, a little good luck. I’ll take luck over brains any time. Next week, my letter will be all about how to make the most money out of a MAJOR BULL MARKET IN GOLD. For those of you who are not lazy and would like a head start, go back into the archives at gold-eagle.com and re-read “RIDING THE GOLDEN BULL and 21^st Century Gold Rush.

GOOD LUCK AND GOD BLESS January 16, 2008

UNCOMMON COMMON SENSE:. Start date is February 1st Subscribers will be receiving it two weeks early and it will contain specific buy and sell (sell short) recommendations. The fee is $199 per year and there is a 100%, satisfaction guarantee

Aubie Baltin CFA. CTA. CFP. PhD

2078 Bonisle Circle

Palm Beach Gardens FL. 33418

aubiebat@yahoo.com

561-840-9767

Great Oil Crisis Deepening

As me readers know, I have been very pessimistic about the real future of our century old oil economy. We are confronting one of the great crisis of history. It is necessary to transition to a non oil energy regime for the all critical transportation sector.

Current production is sort of cruising around 85 million barrels per day. Projected demand increase over the next twenty years is about 30 million barrels per day. Anticipated decline of current production is another 30 million barrels over the next twenty years.

We need to discover at least six Saudi Arabias to plug this hole. In the past 100 years we have discovered exactly one. It is simply not going to happen.

We will add a million barrels per day, here and there. The tar sands is good for a couple, and several deep sea projects are good for several million more.

The fact is someone has put pencil to paper to estimate how much must be invested and it is several times the entirety of the US gnp. We must do a centuries worth of capital investment in the next decade or two.

The only glimmer of hope in this ugly oil picture is the nascent advent of THAI technology. It is now in early days in the tar sands. It works by injecting air at high pressure into the oil bearing formation at the toe of a horizontal production well. Spontaneous combustion ensues at 600 atmospheres achieving a 600 degree burn front. This liberates oil that is also upgraded to about 15 gravity oil that then flows easily into the production well. It appears to work, and quite frankly, it has to work.

This technology should unleash most of the global tar sands for high yield production. It is believed that Canada has about 2 trillion barrels of such reserves in place and our friend, Mr Chavez, has another trillion. It may even do something for the infamous Green River shale in the Western USA.

The point that I am remaking is that we have to resolve a potential 75% swing in global oil production in the next two decades starting yesterday as tightening supplies and rising prices are confirming.

The first fix will be to drive the personal automobile off the road, and as I posted earlier, this means $300 per barrel oil. This will be able to offset the first decade of production decline.

The second fix is to use THAI to ramp up tar sand production to the levels necessary. The good news there is that the capital roll out will be fairly fast.

If we are really lucky, we may even get to drive our cars once in a while. D0es anyone still recall world war II gasoline rationing? Coupons anybody?

In any event, the new price regime should make oil non competitive against various renewable options. And that is the third and permanent fix.

In the meantime, we all need to take stock on how we will cope if the automobile abruptly ceases to be available regardless of price and hope it is not necessary, because that will be the break point. That gasoline is our real strategic reserve.

This is shaping up to be a revisit of the first oil crisis, even to the housing crash and reckless banking. The only thing we are missing is a run up in interest rates to 18%. They are not that stupid this time around.

Transition to THAI oil production

Now that Thanksgiving is over, I think that we are facing a true winter of discontent. The global economy has to absorb and adjust for several uncomfortable changes over the next year. I am personally a perennial optimist but also a realist.

We have to overcome a shrinkage in US purchasing power known also as credit, brought on by the unraveling of the sub prime lending business, while the global economy is now eating an energy tax in the form of much higher fuel costs. This is not funny.

What is more, there is little reason to think that the credit decline will not be felt globally. Institutions are taking hits everywhere and they simply will not have as much liquidity. Remember that it was excess liquidity looking for a home that created this mess in the first place. And real estate price inflation took place just about everywhere.

We can thus expect a rolling squeeze on borrowers lasting about three years or more as inventories are unwound. I personally think that there is enough global liquidity slopping around to sponge up the excess housing inventory in the US within three years or very quickly.

Higher energy costs will impact everywhere, but in the US in particular. There is plenty of room for a recession style contraction in the economy that cannot be bailed out this time with cheap money. It is already dirt cheap.

The best scenario is for the oil price regime to stay generally neutral over the next three years while the credit markets work through their problems. In spite of the heated press. the credit situation will work itself out because the global economy will continue to expand for at least another generation or two simply because of the transition to a global middle class modern economy.

A shift in the price of oil to $200 per barrel will surely precipitate a serious recession. The problem is that looks as likely as a decline back to $60 per barrel. In the meantime, the industry and the users are all in denial. New discoveries now are still far too few, although they are been made, and they all need decade long lead times to become productive. The necessary wells that should have been discovered over the past fifteen years were not made.

The only technical fix that is even on the horizon and looks like it may be implemented is the THAI production protocol. It actually looks like the second coming of the oil business. although few have heard of it.

Right now it is been successfully tested on the deep tar sands in Alberta. Three well pairs are now sustaining 2,000 barrels of fluid per day with a water cut of around 50%. They have all started in the past eighteen months. They are currently shaking out the sand handling problems and perfecting the process. Two more years of production should see theses wells paid for. I do not know how long the wells will operate until the available resource is properly depleted and I am sure that the operators do not know either.

The real payoff, however, is that this protocol can be rolled out on thousands of wells just on the tar sands. And there are negligible inputs required unlike the mining protocol. And it can really be done very quickly in Alberta.

This exact same technology can be applied in theory in every other oil resource in the world and can lead to the recovery of huge amounts of left behind oil.

The creation of a pyrolysis front in the oil bearing formation upgrades and mobilizes the bulk of the remaining oil all0wing it to flow readily to the production well. If the oil cannot escape, it is likely to be burnt providing process energy.

Unheard of seventy percent recoveries are been touted by the project promoters.

If THAI fails, then the oil option will continue to evaporate and quickly. Right now, we are trying to get through the next several years while facing pending production declines.

Good news on midterm Oil Production

The world is currently pumping around 85,000,000 barrels of oil per day. Global demand is increasing as the global urban middle class triples in size from a base set in 1980. They have the money to own a car. The natural decline curves tell us that just to maintain current levels of production, we must add 30,000,000 barrels of new production over the next twenty to twenty five years.

If production cannot grow, the supply must be rationed by price. We are now seeing the first sniffs of that with oil at $90.00 per barrel. As I have been posting, price rationing will not really set in until oil climbs into the $150 to $250 range. And since it is not possible to maintain supply in the short term, this is about to happen. The next oil shock will most likely be triggered by the recognition that deliveries are persistently falling.

The fact that the Saudis finally went for full disclosure of their production capabilities is a major defensive action. Their production has been 2,000,000 barrels per day lower over the past couple of years and back in line with earlier rates after several years at at the higher rate. This is a recognition that secrecy will be dangerous in the face of oil at $200 per barrel when everyone will be demanding that they fix the problem.

The fact is is that the Saudis are saying 'don't look to us to fix this'.

We already know that further expansion of global oil production is not in the cards. The real problem is that we are just as ill placed to handle global contraction. The only strategic reserve is the oil used for the private automobile. It is even enough to perhaps carry us over.

So the question really is, can the oil industry replace 30,000,000 barrels of production over the next two decades so that we can make the adjustment and transition into an alternate fuel regime? We know that it is going to be touch and go for the duration simply because of natural lead times. And the Oil industry has to a large degree failed to find the new reserves fast enough, let alone develop them.

Another problem that must not be discounted is the sheer political orneriness faced by the Industry. I personally am aware of a billion barrel prospect onshore. I just need the screaming eagles to give me a hand. And other projects have come across my desk over the years that are also attractive geologically but impossible politically. There is just too much money for human greed not to run amok.

I am heartened however by the announcement of a major multi-billion barrel field in deep waters off Brazil. These basin remnants have always been very prospective and promise a number of major fields around the globe. The much more important observation is that they were actually able to do it.

That opens the door to a number of coastal prospects that may be as attractive. The bad news is that it will require one such field each year for the next thirty years just to maintain current production levels. The boys are good but that is a tall order.

The tar sands can increase by another two million barrels per day within the current mining regime. To do more than that will require extensive reserves of non existent natural gas. This is not a happy prospect when we are now facing a real shortage there also. The only viable alternative is the gasification of some of the bitumen to produce the necessary process energy.

Other issues will constrain the mining rate to these levels for the foreseeable future. However, that gives us a comfortable 300 hundred year reserve of this particular feedstock.

The really good news comes from the apparent success of the THAI test in Alberta. They now have three well pairs in operation for months and this can be expected to be sustained for some years.

You may recall my earlier postings on this subject. The technique consists of drilling a horizontal production well along the base of the tar sand for a distance of at least a thousand meters. A second vertical well is drilled to communicate with the end or toe of the horizontal well. Air is pumped down under pressure to initiate spontaneous combustion. This creates a flame front migrating along the the horizontal well impacting on a cross section that will reach the top of the formation and extend out to the sides. I do not know the actual area of the flame front at this time and so can not really predict the total capacity of the well. The flame front produces some char and hot bitumen and pyrolysised bitumen as process fluids. These drain the flame front and end up in the production well from which they can be pumped. We can expect a remarkable recovery rate of 70% of the oil in place using this process with all the process gases such as carbon dioxide and nitrogen been dissolved in the oil improving viscosity or exiting through the production well. This process has the effect of directly improving the gravity of the oil by at least five so that typical 12 gravity oil becomes 17 gravity oil, making it eminently transportable unlike the original bitumen.

At this time, making allowances for barriers which may not be necessary, the deeper tar sands are producible using conventional techniques with THAI at a recovery level of at least fifty percent. Most of these deeper reserves are actually fairly shallow and are simply outside the scope of mining.

All of a sudden, The Alberta tar sand reserve jumps to a trillion barrels as does the known reserves in the northern Amazon. And the environmental and other costs are already largely contained, particularly if little of the process gas escapes into the atmosphere.

This technology can also be implemented as fast as conventional oil and can also be applied to partially depleted conventional oil fields anywhere in the world. I suspect that the cost per produced barrel will be very similar to that of conventional oil. Maybe twice as much.

In other words, THAI turns two trillion barrels of heavy oil and a trillion barrels of remaining non productive light oil into a viable resource. At least that is the promise. So with this technology actually working, we have a accessible working reserve that is good for a century or two.

This does not solve the CO2 problem, but it allows high oil prices to shift us onto alternative options that are CO@ neutral.

Michael Klare and Oil Insuffiency

This rather excellent article can be found at:

http://www.alternet.org/audits/66625/

Preparing for Life After Oil

By Michael T. Klare, The Nation. Posted November 8, 2007.

Welcome to the Age of Insuffiency: As oil prices hit new highs and supplies sink, our way of life will drastically change.

This past May, in an unheralded and almost unnoticed move, the Energy Department signaled a fundamental, near epochal shift in US and indeed world history: we are nearing the end of the Petroleum Age and have entered the Age of Insufficiency. The department stopped talking about "oil" in its projections of future petroleum availability and began speaking of "liquids." The global output of "liquids," the department indicated, would rise from 84 million barrels of oil equivalent (mboe) per day in 2005 to a projected 117.7 mboe in 2030 -- barely enough to satisfy anticipated world demand of 117.6 mboe. Aside from suggesting the degree to which oil companies have ceased being mere suppliers of petroleum and are now purveyors of a wide variety of liquid products -- including synthetic fuels derived from natural gas, corn, coal and other substances -- this change hints at something more fundamental: we have entered a new era of intensified energy competition and growing reliance on the use of force to protect overseas sources of petroleum.

________________________

This article gets all the numbers and facts on the record without been hysterical about it. That option is left to us. I think that we all know that we will not be adding major new production let alone replacing declining production, anytime soon. What has actually happened is that the declines have finally caught up to the oil companies' scramble to produce new oil. When a wolf pack finally runs down a deer, it is silly to think that there is anything left in the tank to fix the problem.

Astonishingly the public is still in total denial as are the political leaders. And perhaps why not. They will face a massive readjustment and it will be uncomfortable and there will be a real struggle to adjust priorities. But in practice it is going to mean that sooner or later, you are going to park your car and utilize alternative transportation.

Those who have followed my carping on the eminence of this painful transition can work their way through the five page article and get fully briefed. The bad news is that it is all true and cannot be fixed.

Everyone forgets that the first oil crisis came about with the peak of US oil production and was actually fixed because Middle East Oil could quickly match demand at $20.00 per barrel.

Today, it is theoretically possible to match demand at $100 to $200 per barrel but not quickly.
That is a huge difference from the seventies when OPEC was showing their strength but their capacity to produce was never in question. Today it is very much in question. In fact, they are likely lying to boot.

Strangely enough there is one possible way that we may be able to extend the age of conventional oil very quickly, although I am loathe to promote it to loudly. I am rather inclined to see the massive conversion to successful carbon neutral bio fuel technologies in my lifetime because it is important that this happens.

Readers are invited to read the recent disclosure statements of Petrobank(PBG.TO)

The company is operating a clearly successful pilot test of the THAI process on deep bitumen based oil. In a nutshell, it has become possible to use a well pair to consistently drain a reservoir at the rate of 1000 upgraded barrels per day. 7api is delivered as 16api which is a huge break. And all the process energy is produced underground with no significant additives.

The reserves available to this new technology is likely almost all the tar sands not now declared as reserves. Since the declared reserves are around 375 billion barrels out of a resource that is thought to be 1600 billion barrels, we are saying that over one trillion barrels needs to be reevaluated.

Since this type of production is not needing any additional natural gas or the like to be built out, the actual roll out can be almost as quick as conventional oil in Alberta. Recall that the three well pairs currently been operated have only been in the ground for about a year. The placement of proper sand handling equipment will allow capacity production. This is under way.

Thus a mere 1000 well pairs draining very small acreage can establish sustained 1000 barrel per day production each which is a million barrels per day. This is completely within the current capacity of Alberta's oil industry. And it can be done year after year displacing the anticipated 30,000,000 barrel global shortfall over the next thirty years.

Of course, at that rate of depletion, even the Athabasca tar sands can be fully depleted within this century. Of course we will still have the same type of resource in South America and there are many additional forgotten strat traps holding this stuff around the world. The method may even work on the Green River oil shales though I am not very optimistic. In the meantime, the tarsands will always be better, particularly since we are mastering them.

Rise of Tar Sands and new Energy regime.

While the press has slept over the past year. the prices of oil has rather quietly risen from $60 per barrel to the current $95 per barrel. It has happened without geopolitical excuses or a catastrophic drop in specific production anywhere. It has happened because no single producer can ramp up production to take advantage of this rising demand.

This past two months, the price has been moving against the historical seasonal trends and just yesterday the projected inventory gain of 500,000 barrels turned out to be a 3,800,000 barrel deficit. Obviously everyone has accepted the fact the price of a tank of gas is going up. It is also going to be costlier to keep the house warm this winter. This should begin the first gentle wave of oil usage contraction.

I started reporting on this story back in July because all the evidence that was available strongly supported the emergence of a production crisis. It could no longer be increased to make up even for declines. It has been called global peak oil and will certainly be remembered as such. More importantly, the only government in the world that has moved forcefully in an attempt to stay ahead of the problem has been the Canadian Government, and that only because they could with the tar sand resource.

The massive long term investment cycle needed began with the first oil crisis in the late seventies. The government and its industry partners committed the huge financial resources necessary to solve the production problems. Thus while Canada's conventional production peaked at around 1,000,000 barrels per day and has since declined, the production of synthetic crude from the tar sands has moved Canadian production to a current plus 3,000,000 barrels and a projected 5,000,000 barrels of production as our likely optimum production rate.

We say optimum under current technology which uses up an unsustainable amount of natural gas. I personally think that the advent of THAI technology, now been proven out will completely change everything. This is toe and heel production which I described in an earlier post. This method also skips the massive impact on the environment of tar sand mining and hot water/surfactant separation.

The real payoff for those who do not understand the tar sands is that the real geological reserve is estimated at 1.6 trillion barrels of oil or more than the rest of the world combined. We have burned about 1 trillion barrels over the past 100 years, so 1.6 trillion barrels of new oil would tide us over very nicely into the next few decades. In addition, there is another trillion barrels of tar in Venezuela with our friend Hugo should we run out in fifty years or so. And of course there are many strat traps around the world loaded with heavy oil that was simply walked away from. Perfected THAI will access all these resources.

Yet Canada is still the only country that has had the foresight to spend the money and years to advance the necessary technology. And even if it were already possible to tap this total resource, Canada would have to achieve production levels of 50,000,000 barrels per day over the next two decades to replace the pending shortfall in global oil production let alone needed growth.

At that production level, the annual depletion will hit 18 billion barrels per year and it will take around a hundred years to clean out the tar sand reserve and perhaps another hundred years to clean out Venezuela and the other smaller reserves we know about. What I am saying is that is possible, though obviously undesirable to sustain a form of our hydrocarbon based civilization for another two centuries at least.

The real long term difficulty is that this is expensive fuel. It compares fairly directly with the expected cost structure of a wood chip sourced fuel which is vastly preferable.

Since a massive new investment in the production of transportation energy is now eminent when the other shoe drops with the rapid decline of global production, it is now that policy makers can redirect that investment energy into the reforming of the global agricultural and forest paradigm.

$300 oil and all that

Our current global oil production and consumption is running at 88,000,000 barrels per day. In 2015 we will need 98,000,000 barrels per day. In that seven year period we know that current production is likely to decline, perhaps by as much as another 10,000,000 barrels per day. This is what global peak oil looks like folks. Nobody is able to add significant new production anywhere and they are trying hard.

This is a 20,000,000 barrel per day volume swing that must now be accommodated by forced rationing through the market. Global production must stabilize at a level were replacement remains possible. There is no evidence to suggest that the current levels of production can be replaced. The Tar sands are good for a portion of this shortfall but still only a fraction of it. All other new production is very deep and very expensive and cannot be delivered for years.

If the oil industry spent every dime they ever had on new oil, they could not catch up. It took us a hundred years of full out investment to establish 88,000,000 barrels of daily production. We must now create 20,000,000 barrels of daily production in seven years.

The only place it really can be done is in the squeezing of the last oil out of the major historic fields through the application of massive capital. THAI (toe and hell air injection ) will come into its own in this environment. But this all takes a price regime that supports such a massive jump in capital investment.

That is why we are going to see $300 oil very soon. The market only requires an excuse now.

The modern automobile must come off the road as quickly as possible. $300 oil will do very nicely in changing peoples habits. And I hate to even say it, but rationing will become necessary. There simply will not be enough oil available at any price to allow luxury transportation. Goods transportation must take priority.

We could maintain our consumption rate if the the daily volume can be stabilized and we let the market slowly prioritize usage. With heavy capital investment, this current level could be sustained for another 10,000 days before all the difficult oil is pumped out or mined and used. It remains that we will be doing economic handstands while this is happening since every addition to oil production must now be planned years in advance, while every reduction will be 'unexpected'.

I am in charge of the permitting of a very deep wildcat gas and oil test up in the mountains of Utah. It is one of the last untested bits of the huge Uinta Basin. The lease was available because it was part of the Ashley National Forest. The cycle will take a minimum of three years to complete before a drill can hit the ground. If we desperately needed that resource next year I could not help at all. Yet the information that I am looking for could be proven out in four months of work with a drill and a drilling bond for restoration.

I also know of a highly likely onshore billion barrel oil field. Without a proper deal and guarantees it will stay in the ground. I do not think any of this will change with $300 oil.

The major point that I want to make is that we are shaping up for a repeat of the 1978 - 1982 oil crunch that distorted the global economy and we are far less well positioned for this. There is no Saudi Arabia able to increase production at will. We have conversation and lies instead.

This is also likely to trigger a major downdraft in securities markets as investors try to figure out who the winners and losers are. It will take the auto industry around four years to retool to adjust to the new price regime. The baby boomers retirement is likely to be on hold.

THAI proclaimed a success

A couple of bits of rather interesting news on the energy front lately.

Algeria is building out a solar energy plant in the Sahara that will be able to supply power to 4,000,000 homes. The method will be parabolic trough mirrors concentrating the energy on a fluid holding tube. This is very conventional and will be combined with a natural gas plant, obviously to even out the energy flow. The field will cover 45 football fields.

The output will also be tied into the European grid. There is plenty of room for expansion and the project is big enough to induce a drive for maximum efficiency.

Much more interesting on the oil front, is that the operators of the THAI pilot test in the Oilsands of Alberta have proclaimed it a success. It has been operating for a year now and many problems have been worked out. The method consists of running a horizontal production well along the bottom of the formation for perhaps a thousand meters and then drilling an air injection well vertically to the toe area or end of pipe. Air is injected under pressure until ignition is achieved. This creates a char front that releases the remaining oil into the production well. I have been watching this with interest for two years.

Its success opens the door for the exploitation of all the deeper oil sands without the need to burn natural gas to produce hot water or steam. And a production rate of 1000 barrels per day suggests that we can go quite deep.

Up to now, published reserves have been limited to oil available to mining and shallow SAGD prospects. We can expect the SAGD prospects to be converted to THAI prospects and a major increase in suddenly economic deeper reserves to be added.

Canada may turn out to have (a fair guess only) a trillion barrels of recoverable oil because of this technique. It will still take decades to roll out. Also there are a lot of abandoned heavy oil discoveries around the globe that can now be revisited with this technique.

We know that oil supply is getting visibly very tight and that we cannot alleviate it any longer by simply pumping faster. This means however, that at least North America can engineer a soft landing. The bad news is that most of those other global resources are in decline or at least on the edge of decline. If you want to scare yourself to death, look at the decline of North American production after the peak in 1972.

Investing full out we might be able to stand still in the current regime. Yes folks, we need to lick the algae problem.