Jim Kunsler writes on Hope and Fear

This article by Jim Kunsler is a very good summary of all the bad news that we face on the economic front. It is indescribably ugly, but there is nothing here that I have not already said. Jim’s error, if it may be called that, is that he lacks faith in our capability to replace oil as our energy source at a reasonable price. This blog has been an investigation of our options and strategies for side stepping this massive oil industry contraction.

We have been treated to the first sharp oil shock and that popped the sagging credit balloon. The second shock is inevitable although it can be postponed possibly until the first major field fails. We are past the peak and are waiting for the rapid decline that is inevitable.

Until we are able to begin to build out oil’s replacement, credit expansion must be hesitant. The reason is simple. When you evaluate a loan, you will now factor in the impact of $145 oil.

When you lend a million dollars to the local pig farm, you ask how the loan is going to fare if oil is $145. We already know the answer. Everyone is trying to recapture loses while oil is presently around $40.

Read my lips. The party has been halted for a time out to allow us to get our energy act together.

If the solution is EEStor based electric cars, then Kunsler’s concerns about suburbia are misplaced. If the solution is truly solar, then there is a massive job creation program cutting loose that must surely employ several millions directly in the build out. The energy crisis is so large that every technology able to meet a price point equivalent of $100 per barrel will be riding on government guarantees until the problem is fully solved.

Oil as a solution is contracting now and we must run full out just to stay even. July of 2008 was the first shot in that war for modern economic survival and it rang as loud as the shot at fort Sumter.

Obama must organize a response to this threat as soon as possible. The answers are there in my blog. But we must lead the charge because we are on the oil horse and it is beginning to buck. We have only two choices and the worst by far is to let nature run its course. You did not like round one. The next round will be a lock on $100 oil and ferocious rationing been screamed for. All the cars will be forcibly parked. It is coming anyway because we cannot add fresh supply fast enough. Then the real declines will hit.

Freeing up all the alternatives with price guarantees is a good start. Providing guarantees for a national power corridor is necessary. The moment electric cars are really feasible the demand for power on demand will sky rocket. That could be as early as next year if EEStor is right.

The big megawatts are just a matter of building plants already ready to be built. Wind, solar and geothermal are surely the most stable solutions with no fuel pricing vulnerabilities whatsoever. All these can be financed with debt instruments that will get paid of.


This article by jim kunsler
http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/01/hope-and-fear.html
Hope and Fear
Tomorrow at noon, Barack Obama steps into the shoes of Lincoln, FDR, Millard Fillmore and forty other predecessors -- this time as the wished-for Mr. Fix-it of a nation run into a ditch. Surely over the months of transition, someone with a clear head and a fact-laden portfolio has clued-in the new President about the reality-based state-of-the-Union -- as opposed, say, to the Las Vegas version, where Santa Clause presides over a whoredom of something-for-nothing economics, and all behaviors are equally okay, and consequence has been sliced-and-diced out of the game. . . where, in the immortal words of Milan Kundera, anything goes and nothing matters.

Mr. Obama deserves credit for a lot of things, but perhaps most amazingly his ability to see "hope" in a public so demoralized by their own bad choices that the USA scene has devolved to a non-stop Special Olympics of everyday life, where absolutely everybody is debilitated, deluded, challenged, or needs a leg up, or an extra buck, or a pallet on the floor, or a gastric bypass, or a week in detox, or a head-start, or a fourth strike, or a $150-billion bailout. There's a lot of raw material from sea to shining sea, admittedly, but how do you re-shape it into a population guided by a sense of earnest purpose, with reality-based expectations, with habits of delayed gratification and impulse control, and a sense of their own history? That will be quite a trick. Many of us -- myself included -- will be pulling for Barack. Maybe the power of his rhetoric and his sheer buff physical presence can whip this republic of overfed clowns into shape.

He inherits a government of superficially gleaming marble edifices -- all gloriously on view tomorrow -- but full of broken machinery within, infested with weevils, termites, and rats. The USA is functionally bankrupt. We have no money. The pixel "money" being emailed over to the insolvent banks has no basis in reality beyond the quiver in Ben Bernanke's voice as he announces each new injection. Yet all reports so far indicate that President Obama is bent on continuing the process one way or another.

Mr. Obama's first task taking stage in the lonely Oval Office should be to get right with his own credo of "change," meaning he'll have to persuade the broad American public that the "change" required to salvage this society runs much deeper, colder, and thicker than they'd imagine in their initial transports over hallelujah-Bush-is-Gone. Many of the familiar touchstones of the recent American experience have got to go.

Say goodbye to the "consumer society." We're done with that. No more fast money and no more credit. The next stop is "yard-sale nation," in which all the plastic crapola accumulated over the past fifty years is sorted out for residual value and, if still working, sold for a fraction of its original sticker price. This includes everything from Humvees to Hello Kitty charm bracelets.

It will be a very salutary thing if we stop even referring to ourselves as "consumers." This degrading moniker, used for decades unthinkingly by everyone from The New York Times Nobel Prize pundits to the Econ 101 section men of the land-grant diploma mills has been such a drag on our collective development that it has extinguished the last latent flickers of duty, obligation, and responsibility for the greater good in a republic of broken communities shattered by WalMarts.

The government will not have to do a thing to bring down the chain-stores. History and inertia is already on that case, with the easy credit racket terminated and new frictions arising over global trade, and even Peak Oil waiting to work its hoodoo behind the scrim of deceptively temporarily low pump prices. The larger question for President Obama is: how can we collectively promote the reconstruction of Main Street, including all the fine-grained layers of retail and wholesale trade. High tech "solutions" are not likely to avail in this.

In fact, techno-grandiosity and techno-triumphalism must be be sedulously monitored and guarded-against. They jointly amount to the great mass psychosis of our time and culture. This array of traps -- from proposed flying cars to "renewable" motor fuels -- is the ultimate Faustian "bargain." It will be at the heart of any campaign to sustain the unsustainable, sucking us ever more deeply into the diminishing returns of over-investments in complexity. Hence, the last thing this nation needs now is a stimulus plan aimed at the development of non-gasoline-powered automobiles -- married with extensive rehabilitation of the highway system. What I incessantly refer to as the Happy Motoring fiesta is drawing to a close as we have known it, whether we like it or not. Cars will be around for a while, of course, but as an increasingly elite activity. The owners of cars will be increasingly beset by grievance and resentment on the part of those foreclosed from the Happy Motoring life -- and it could easily degenerate to vandalism and violence, since the "right" to endless motoring was surreptitiously made an entitlement somewhere around 1957.

The "change" we face in agriculture dwarfs even the death throes of Happy Motoring (and is not unrelated to it either). A lot of people are likely to starve in America if we don't get our act together pronto in terms of how we produce the food we eat. Petro-agribusiness faces a set of disturbances that are certain to induce food shortages. Again, the Peak Oil specter looms in the background, for soil "inputs" and diesel power to run that system. But all of a sudden even that problem appears a lesser danger than the gross failure of capital finance now underway -- and petro-agriculture's chief external input is credit. Credit may be in extremely short supply this year, and hence crops may be in short supply as we turn the corner into spring and summer. Just as in the case of WalMart versus Main Street, the reform of farming in America is one of those "changes" much larger than most of us imagine. I'd go so far to say that a large proportion of young people now in college will find themselves not working in office cubicles, but in some way or other in farming or the "value-added" activities connected to it.

I don't see how America can confront the "change" represented by the stark fact that suburbia-is-toast. It is the sorest spot of all in the corpus of a culture beset by disease and debility. The salient manifestation of suburbia's demise is the remorseless drop of housing values in the places most representative of that development pattern. The worst thing the Obama team could do about this would be to attempt to prevent the fall of inflated house prices. Their real value needs to be clearly established before a picture emerges of which places have a plausible future, and which places are destined to be mere ruins or salvage yards.

Americans will have to live somewhere, of course, but the terrain of North America faces a very comprehensive reformation. The biggest cities will contract; the small cities and small towns will be reactivated, the agricultural landscape will be inhabited differently, and the suburbs will undergo an agonizing decades-long work-out of bad debt and true asset re-valuation. Since the loss of so much vested "wealth" is implied by the crash of suburbia, this may be a source of revolutionary political violence moving deeper into the Obama administration.

There's been plenty of buzz in the blogosphere about the imminent failure of the US "social safety net," including especially the social security program. Retirees are the biggest block of voters. They're not liable to foment riots -- that is best left to the youthful high-testosterone cohort -- but the older folks -- with Baby Boomers now coming aboard -- could be so distressed by the loss of their presumed entitlements that they will elect any maniac promising to bring back something that looked like the 1980s. We haven't begun to hear their war cries, and I hope they do not beat a path straight into some sort of crypto corporate fascism -- as, finally, every last failing scrap of American life is nationalized.

Some natural processes hide in the thickets ahead. A hyper-inflation could take this country in any weird and unappetizing direction, from scapegoating and persecution to a new kind of corporate fascism. But I'm inclined to see our tribulations governed more by weakness in high places than by real power. In a world of declining capital and depleting energy resources, the key to any successful venture will be smaller scale. I'm not convinced that any emergency could make the US government more effective at getting anything done. Our hopes really ought to be vested locally, since that is where the most effective action is likely to be in the years just ahead.

It will be stirring to watch Barack Obama's inauguration, and all the hoopla and balls, and the radiant children, and the exemplary First Lady dancing with the First Partner. Euphoria is a legitimate part of the human condition, though we know it soon passes into the heavy lifting of real life. There are many Americans of good will who would like to see the meaning of real "change" clearly articulated in a way that comports with reality, not just "dreams" and wishes. We'll hear a lot about dreams this week, anyway, of course, but then reality will set in and the heavy lifting will commence. Many Americans of good will also stand ready to face reality, to roll up our sleeves, ditch the video games and the Nascar and the microwaved cheese treats, and the internet porn and all the other noxious, narcolepsy-inducing distractions of our time, and put our shoulders to the wheel to haul this nation into a plausible future. For the moment: a rousing cry of "Good Luck!" To President Obama from this little outpost of Clusterfuck Nation

Commodity Decline

While we have been regaled with the ongoing unraveling and reconsolidation of the massive US mortgage market, the rise and fall of the oil market is delivering another casualty. As my readers know, I called both the price run up past $100 per barrel and the turn at $145 per barrel. This price move was necessary to force the public to pay attention to our serious exposure to the presently inelastic condition of the supply side of the oil equation. We now have a global consensus for shifting out of the fossil fuel business and demand has been visibly throttled. I now expect a return to $65 per barrel.

Prior to the oil price run up we had a huge price lift in commodity prices. This created a huge amount of credit and has thoroughly funded the metals industry in a way not possible for generations. The ongoing oil price decline appears to be collapsing that long lasting bubble.

To give my readers a meaningful standard to work with, I will share one fundamental idea. All commodities are normally sold at a price very close to the real cost of production. The rationale is obvious. Higher prices allow all producers to ramp up production and to invest in technologies and new operations that will bring costs down. The only real constraint to this behavior is the time needed to make this happen. Well, guess what? We have had the necessary two to three years to dust off every mothballed project from the past two generations and blast them through permitting.

And now the credit in the commodity markets is evaporating.

Up to about three years ago, all copper mines worked against a copper price of around $0.70 per pound. This had been the average since the sixties! This had actually driven new mine development out of North America. But all mines worked against an operational break even of around that seventy cent mark.

I address copper in particular because it continues to be the leader in terms of mining innovation and cost cutting. When I first got into the business in 1972, it was still possible to contemplate mining a several million ton deposit carrying twenty pounds of copper to the ton over several years. Today that represents a month’s supply in most major mines. Such scale has permitted mining grades to hang around eight pounds to the ton.

What I learned early on was that this technology ultimately came to every other minable commodity. I know of deposits in certain commodities that would idle every other mine in operation if brought on stream.

Returning to copper, we have a commodity that requires three or four years to ramp up but then can be produced for well under $1.00 per pound. Yet we have been forced to pay $4.00 per pound and now are back at $3.00 per pound. This I see returning to around $1.50 to put everything back in balance.

Of course there are an army of analysts who will argue vehemently that this is not so. Oh well!

We have just been through an old fashioned commodity boom and bust carried out over three years. All the producers are flush with cash and are bringing fresh production on stream. This is also happening throughout the global agricultural business. This next year we will be awash with huge surpluses and a rapid global business recovery driven be suddenly lower costs across the board.

Importantly, the market has decisively signaled the need to vacate the carbon business and governments are getting mandates to do just that. This is giving us the time to do it right.

As I have posted, the simple shift now from diesel to LNG in the USA alone will release half of our demand for oil. The advent of THAI will let North America become the globe’s strategic oil reserve with perhaps two trillion barrels of producible reserves booked before we are finished. That is twice all the oil produced to date.

This all means that the economic rebound will be very strong for the next three years.

Politics of CO2

The last two years in particular has seen the steady rise of political pressure in the developed world to progressively reduce CO2 emissions. It is reaching the point were decisions are pending that will cause the economy to shift a great deal of its resources. A good part of this shift was inevitable in view of the advent of peak oil supply market behavior. After all, we have gone from a perennial surplus position to a clearly perennial shortfall situation. The working price range has tripled and is now choking demand and forcing the development of alternatives. True global energy security is gone.

There is plenty of merit in weaning ourselves from the hydrocarbon based energy system as the current price regime makes very clear. The first comments have come out suggesting that this price shock will be worse than that of the seventies. This is regrettably very possible. The economic reality that we are all just beginning to wrestle with is that oil has actually priced itself out of the market. Current levels will force a rapid shift in hardware and behavior and a fair bit of hardship. A price move to $300 will actually shut down economic activity which is an unwanted consequence.

What can make this crisis far worse is a decline in deliveries due to loss of production. Right now the new price regime, which I think is already maxed out, is forcing demand to be curtailed directly freeing up production and in the process rebuilding reserves. This process has only begun. We need $100 oil and the world awash in oil to restore some level of confidence. We can survive that. At twice the price, we are looking at a global economic depression sparing no one.

This makes direct interference in the CO2 end of the business terribly ill timed and actually inappropriate. Everyone in the world is now working at reducing their oil footprint as fast as possible. It hardly needs a push and such steps can be very damaging.

We already know that several strategies now exist to comfortably get us out of the oil business and onto a sustainable protocol. Just read my many posts on the various options. Ethanol from cattail farming is a gimme and the advent of printed solar cells will produce a distributed peak energy supply for transport very soon. Both will be very price competitive.

What I find frustrating is that the current scenario was clearly developing and was certainly obvious to astute observers even several years ago. In fact I personally predicted that the price shift would arrive during the last year of the current president’s term of office. And I was hardly an insider. The industry has known that this day was unavoidable, but they had no answers either. The result has been that no preparation was promoted except a little silliness over corn ethanol.

We now have to move our economy on a dime to avoid the worst effects.

So what about CO2? The argument that CO2 is the causation of the very real phenomena of global warming is likely very misplaced. The science itself has been forcefully challenged and is difficult to actually prove anyway. A warming climate is certainly not a proof. We have a soft theory made up to support the facts on the ground that appears to be independent. Just the temperature experience that we have uncovered for the whole of the Holocene tells us that we had better be a lot better prepared before we attempt to link CO2 levels to apparent global temperatures.

The global economy is now beginning a transition over to an energy regime that will eschew fossil fuels, just as we transitioned out of using wood for fuel. It will not take very long and will be largely done in the next two generations.

That then leaves us with the question of what to do with the surplus CO2 in the atmosphere. Once we stop adding to the inventory, just letting nature take its course is a very viable option. It will surely take centuries but we can expect a steady increase in biomass to offset the surplus CO2.

I personally see a far better answer for humanity. Without question, the addition of elemental carbon to all our soils promotes a vast increase in general fertility and general soil nutrient stability. The argument is also made that is also promotes a sharp increase in biological activity that sometimes releases carbon. It is still easily fixed by the expedient of adding a major surplus of carbon as exists in the original terra preta soils.

It can be easily accomplished using both primitive methods and now with solid technological means.

The one other thing that we need to do is to completely revegetate the Sahara and the Sahel. This is a tall order that is best done over a couple of centuries. The remaining deserts can also be so converted provided we are able to tap atmospheric water. The huge benefit of this is to capture a huge amount of heat and moisture in the northern hemisphere now lost to desert heat as well as all the carbon we ever produced.

The hemisphere will become even more suitable for agriculture and we may even make the boreal forest partially productive for agriculture.

The problem we all face is how to guide the political drive to rein in the CO2 production problem into beneficial protocols such as I have described. The technical problem is thought daunting and my proffered solutions are also thought daunting. That means that most minds simply cannot comprehend the actual scale of what they want. Yet I think that it can all be done be the simple expedient of modestly empowering and educating every individual agriculturist on the globe. We only have to recall the organizational achievement of micro finance by Muhammad Yunis.

Costing the Algae Economy

Dug made the following comments on how little we know as to the operational costs at the moment.

Could you reference your statements with the final costs per storeable gallon of fuel. I notice you make no mention of fertilizer, extraction, separation, filtration and stablization costs and without addressing them - you haven't produced usable or a cost efficient fuel. As we all know, producing algae is the easy part. Also your production units need to referenced with a time unit. i.e. - X gallons/acre/year.

While we all appreciate enthusiasm and optimism, but you might also want to point out, that to date no one has produced one gallon of algae oil that is competitively priced to petroleum sourced diesel fuel. Competitively priced means that OPEC can't drive the would be producers out of business as they have at least twice over the past 40 years.

The truth is, any cost figures that get thrown out now are early days and must be suspect. I prefer to not bandy them about except to use them as magnitude checks. The company's announcement did spell out that their production system (do look at the pictures) supported a annual through put of 276 dry tons per acre that however calculated is very likely accurate.

It was apparent from the visuals and the obvious design parameters that their input costs will compare favorably to those of commercial greenhouse operations. To say more than that at this stage is speculation and misleading at best. The protocols need to be finessed and even the working algae species have to be successfully worked out. I simply do not believe we are anywhere close today nor will we for a long time.

What we have though is an industrial production platform that is obviously scalable and can be operated in reasonable isolation from wild species. Hopefully they do not have to maintain negative atmospheric pressure.

It is also a platform that promises low capital costs for setting up with mass production techniques which is critical as was critical for the expansion of the green house industry.

Of course fertilizer, extraction, separation, filtration and stabilization are critical but are subject to scaling issues and are not to likely to be fully addressed as yet. We all can imagine a rotory filter press hard at work, but there are many options and such a system has to be optimized around a scale choice.

I personally suspect that the key issue will turn out to be the utility of the deoiled byproduct. I simply cannot believe that this will not make a viable cattle feed, but this is a long way from been sorted out. If that works, then this technology can be quickly integrated with feedlot operations and the oil becomes a shippable byproduct of an operation set up already to deal with similar issues.

As in green house operations the nutrients must be provided, but then there is little wastage unlike most open field agriculture. If those same nutrients end up feeding cattle then we have created a viable link in a meritorious system.

Another option for the usage of the algae meal may be fish food for vegetarian fish at least. No one has gone there yet. The real point here is that there is a need for innovative food stocks for all animal husbandry industries as traditional supplies have been inadequate. I may be possible to blend the needs with the production of oil.

I do not want to dive into the economic practices of the oil industry, except to say that conversion to this source is inevitable in the long term, but postponable in the short term by the advent of additional sources of petroleum. The political will must exist to say that we want to be totally independent of petroleum and we are prepared to support an appropriate premium. I suspect that square mile sized algae oil facilities producing in excess of 80,000 tons of bio diesel (around 20,000,000 gallons) is an attractive option to those tired of been whipsawed by a politicized oil supply industry that is no longer truly based in the homeland.

In the meantime, we have a model greenhouse pumping out 256 tons of biomass per acre per year as a threshold. That will require a predictable amount of fertilizer per ton and associated costs. It is a good start. The rest is subject to incremental increases in efficiency by species selection and management. Hopefully the will, the money and the time exists to complete the job.

By the way, no other source of oil will ever be competitive with petroleum on a cost basis. It has already been manufactured and there are many places were it can be lifted for pennies. So that is an unfair question. It is like mining gold in competition with the US mint. The problem is that petroleum imposes huge indirect global economic costs that are how becoming unbearable that can be completely mitigated by transitioning over to algae bio diesel. And with the prospect of cattle feed, I am trying to show that it can be better than that.

This is so far the only 'business plan' that has any reasonable prospect of keeping our oil based civilization working on a sustainable basis as an oil based economy forever. I also suspect that all other alternatives will usually be too little too late.

Algae Production Pilot Plant operational

I am posting this news release by a company that is doing a fine job of tackling the algae oil problem. As you know from earlier posts, we concluded that the only viable replacement for transportation fuel would be biological oil produced from algae. Other sources had no hope of producing enough oil and besides, required the diversion of high quality agricultural land. somehow, we would all use bicycles long before anyone starved to death.

Open pond production of algae can be expected to be ten times more productive of oils than the best oil seed. The question remaining to be answered is: was it possible to develop an economic protocol for industrial style production? This news release goes a long way to answering that question.

They have tackled the first problem of maximizing controlled algae production with the use of racked transparent plastic flow channels that obviously can absorb the ambient light rather well. They have achieved a through put rate in a three month pilot operation that is three times as productive as the open field model.

This at least supplies a threshold and a robust working model that can now be progressively improved upon. And let us not underestimate the difficulties. The best algae blend will likely be uncooperative in working with such a system and will provide plenty of headaches. But I do not see anything that may not be overcome.

We are looking at the building of greenhouses to operate these production facilities and we are also looking to build them in proximity to CO2 producers like power plants. At least at the beginning.

What we have here is a really good start at producing huge amounts of algae with a very low labor and energy input. It would really be wonderful to use the waste heat(hot water) and the CO2 of a coal fired power plant to operate a facility such as this. They are at least the first and best customers.

NEWS RELEASE - VALCENT

December 12, 2007 OTC BB: VCTPF; CUSIP: 918881103

INITIAL DATA FROM THE VERTIGRO FIELD TEST BED PLANT REPORTS AVERAGE PRODUCTION OF 276 TONS OF ALGAE BIO MASS ON A PER ACRE / PER YEAR BASIS

El Paso Texas: The Vertigro Joint Venture has released initial test results from its high density bio mass (algae) field test bed plant located at its research and development facility in El Paso, Texas.

During a 90 day continual production test, algae was being harvested at an average of one gram (dry weight) per liter. This equates to algae bio mass production of 276 tons of algae per acre per year. Achieving the same biomass production rate with an algal species having 50% lipids (oil) content would therefore deliver approximately 33,000 gallons of algae oil per acre per year.

The primary focus of the 90-day continuous production test was determining the robustness of the field test bed. Other secondary tests were also conducted including using different ph levels, C02 levels, fluid temperatures, nutrients, types of algae, and planned system failures. It is important to note that the system has not been optimized for production yields or the best selection of algae species at this time. The next phase of development will include increasing the number of bio reactor units from 30 to 100 and then continuing a number of production tests that may further increase production as well as initiating various extraction tests. The results released today are in keeping with data previously announced from the Joint Venture’s laboratory proof of concept test bed. Subsequently, the joint venture intends to build out a one acre pilot plant with engineer design work underway at this time.

As a comparative, food crops such as soy bean will typically produce some 48 gallons oil per acre per year and palm will produce approximately 630 gallons oil per acre per year. In addition, the Vertigro Bio Reactor System is a closed loop continuous production system that uses little water and may be built on non arable lands. Glen Kertz and Dr. Aga Pinowska, who head the research and development program, commented “This is a major milestone for us as we have demonstrated the robustness of the Bio Mass System with satisfactory production results from a system that has not yet been optimized for algae production, which will become part of the next phase of testing” They also noted “We have learned how to produce a very large algal bio-mass under varying environmental and operating conditions in our continuous process photo bioreactors. We believe these initial results are amongst the best achieved to date, and we are confident we can now increase the productivity.”

“We are extremely pleased with the robustness and performance of the Vertigro technology in sustainably producing commercial quantities of algae biomass,” states Doug Frater, Global Green Solutions CEO. “Over the coming months we will further optimize the technology and demonstrate economic algae production for biofuel feedstock purposes.”

The Vertigo system may be a solution to the renewable energy sector’s quest to create a clean, green process which uses mainly light, water and air to create fuel. The Vertigro technology employs a proprietary highdensity vertical bio-reactor that produces fast growing algae which may yield large volumes of high-grade algae oil. This oil can be refined into a cost-effective, non-polluting diesel biofuel, jet fuel and other applications. The algae derived fuel may be an energy efficient replacement for fossil fuels and can be used in any diesel powered vehicle or machinery. In addition, 90% by weight of the algae is captured carbon dioxide, which is “sequestered” by this process and so contributes significantly to the reduction of greenhouse gasses.

Valcent: OTC BB VCPTF (www.vacent.net), together with Global Green Solutions Inc: OTC BB GGRN (www.globalgreensolutions.com are each 50% partners in the Vertigro Joint Venture that has developed a pilot plant in El Paso which became operational in March 2007 and is the primary research and development site for the Vertigro technology. Valcent’s primary responsibility is research and initial development with Global Green’s responsibilities including final engineering and commercialization of Vertigro. For more information, visit: www.valcent.net

Algae Trial in New Zealand

Hamish Macfarlane has introduced me to a company that he has had involvement with named Aquaflow bionomic corporation out of New Zealand. What these folks have done is to tap municipal sewage settling ponds that are already producing algae for their feedstock.

They do not describe all the details of their process, but it is obvious that their first step has to be to run the algae rich water through a filter press. They are then able to harvest the contained lipids from the concentrated algae. No one is talking about yield which must be quite low since we are dealing with a mix of wild algae at this time.

Since the initial feed stock is sewage, it also suggests that the de-oiled dry mass may be unsuitable for cattle feed. This does beg the question of what to do with the substantial dry mass in any attempt to create a commercial industry.

What is important, is that these sewage settling ponds are nutrient rich and need to be biologically reprocessed before the fluids can be reused in whatever manner. Maximizing algae production while capturing the bio available nutrients is a very good intermediate step that preserves the nutrients.

Separating the algae from the grey water is simple, economic and easy with a rotary filter press, and if that produces a product that can then be used as a feed stock for further processing, we may have an economic basis for doing all this.

This harvesting of an algae feed stock from sewage settling ponds can be maximized and be an important contributor to the bio remediation of the sewage cocktail. The algae will not likely be a collector of toxins that it cannot handle or even break down. This means, that by and large this process separates the sewage feed stock into two separate feed stocks.

Through aeration and stimulation the settled and dissolved components will lose a lot of their reactivity and become usable even as high quality crop dressing. The surplus nutrients will end up been carried away in a living algae biomass that can then be perhaps used in further processing.

So far the New Zealand company has been able to collect the lipid content of a natural blend of wild algae. I suspect that the yield is at best a trivial amount of the total bio mass but will at least establish a threshold. We will discover what percentage of oil is retained regardless of processing energy and input. Anything over that may be deemed as potentially recoverable.

Then the interesting question is whether it is possible to selectively stimulate the growth of superior oil bearing strains, and just as important to keep them in suspension. We know that the most important oil algae species likes to sink to the bottom which is not very good in a sewage settling pond.

A simple fix might be the installation of a secondary pond that is fed by a surface waters only drawn off by a skimming barrier and packing the dissolved nutrients and micro organic particulates. Then the algae can grow out primarily in the secondary pond and be aggressively harvested there with pumps.

In a perfect world, the grey water then exiting the secondary pond would be totally spent with all the nutrients absorbed into the algae byproduct.

This would also allow a stimulation of algae populations to improve oil yields.

The other question is if it will be possible to treat the pressed algae in anyway that could make it fit for cattle feed. There is only so much molasses can do, but if the algae mix can sponge up the unpalatable components during the growing phase, then this becomes a very effective way to produce rich fodder for cattle and the oil yield is not necessarily the most important part of the process.

This is a lot of speculation, but at least someone has a working prototype system to explore the possibilities. We will have to keep watching.

In the meantime others will experiment with a mono culture approach fed by chemical feeds.

I personally like the idea of been able to use a wild algae blend, but must admit that I am not optimistic that economic yields of oil can be achieved that way.

Market Shivers

The one thing that I learned decades ago about markets is that over the long term, the bulls win. The bears may be right on selecting the losers but over time the winners eat up the garbage left over by the losers and the only real losers are those holding stock in the losers. A certain amount of cash is disappeared but the expanding credit system easily produces more.

The tragedy of 1929 is that the banking system did not understand this and over reacted to a bad market break by cutting of credit and savagely reducing the money supply. It took years for the global economy to claw back to the economic levels of 1929 and we have not made that mistake twice.

The difficulty we have today is that our money supply is not a true fiat currency. It is linked inexorably to oil, since oil still represents over ten percent of the global economy. This means that continued economic expansion will be stifled by tight oil supplies. And a real contraction in the daily oil output will have the same massive effect as a contraction in the money supply.

Hello Houston, we have a problem. In this blog we have investigated and discovered alternate strategies to replace this pending oil shortfall. I know and if you have followed my reasoning, you know that we can completely free ourselves of using any geological oil by making agriculture our principal partner in the solution. It will still take time. But once done our economy will never again be dependent on a finite resource and we will be good for a million years.

In the meantime, the market is slowly waking up to the nasty fact that we are unable to expand oil production significantly anywhere in a hurry. After all we have now had almost five years of high prices to encourage expansion and it simply is not happening fast enough. That is why the overall market is starting to adjust downward with a series of 300 point breaks and consolidations. This is a good time to assemble cash and to learn patience.

Right now the market is waiting for the other shoe to drop. That would be a 2,000,000 barrel drop in production somewhere. There are candidates and it is inevitable somewhere. Saudi Arabia would be the most dramatic. It would end all denial.

This type of very bad news will induce a deep market break and take a long time to overcome. As should be clear, however, the probability of bad news like this is steadily increasing while the probability of good news is declining.

In fact the only source of commensurate good news on oil can only come from the drilling rigs out in remote difficult basins. There may be another Saudi Arabia out there that can give us another fifty years to get our energy act together. After all my readers have seen the future. Fifty years of progressive scientific development will make the implementation of these ideas easy.

On an optimistic note, I suspect that the one great untapped trillion barrel oil resource will turn out to be conventional oil in the Mackenzie delta and the Beaufort Sea. Discoveries have been made and anyone who has worked through the geological logic described in my article titled Pleistocene Nonconformity can figure it out. This oil was produced in the last million years and has not had millions of years to escape. At least there is little evidence that it has with the exception of the trillion barrel tar sands.

There may also be others. Most people do not realize how hard it is to understand the geology of an oil basin or how much has to be spent to get lucky. I never forget the 100 hundred dry holes in Alberta before Leduc #1. You look at the map today and you wonder how they ever missed.

In the meantime, there is a real Sword of Damocles hanging over the market and the market will be unsettled for a long time.

Oil trend

Oil is now trading quietly over $80.00 a barrel. Part of that reflects the downward shift in the US dollar against other global currencies. Part reflects the decline in inventories and the unrelenting erosion of energy security. We can expect a decline in global production to set in over the next couple of years. We cannot expect an increase in production.

As I posted earlier, the only thing that will bring consumption back in line with either flat lined production or even declining production is a move to a punishing price regime obviously we are about to break a $100. And any shock will hand us our heads with a quick move to $200. If I were wrong this year, the price would have cooled of for the fall and be trading at least $10 cheaper.

Of course, trying to massage market direction from a maze of statistics, some very doubtful, is at best a mug's game. Oil represents perhaps 10% of the global economy. This is a guess since it once represented 12%. In any event, it is the one commodity that truly dominates the global economy, and because of that the only proper way of looking at it is in reverse.

In simpler terms, how much oil currency is needed to transact business. This ratio has been in decline for several years now and it is not getting better. The producers are slowly been flooded with foreign cash that they are finding harder and harder to get rid of. Just how much do you think that the cash holders want to be invested in derivatives backed by sub prime mortgages.

It is getting harder and harder to place this sea of cash. It was exactly this scenario that created the great inflation of the late seventies. Right now our central bankers have got to be holding their breaths.

Right now we need a monster multi billion barrel oil field to give us a break. All I know for sure is that we all are about to get our collective asses kicked. The alternate solutions will take years to implement.