Petroleum, Mining, and Logging Industries

[Parchie]

Business thrives in creating demand or making it appear that there is scarcity in supply. That said, it is for their benefit to paint a gloomy picture of the fuel supply and get richer many times over than if they just kept on silently producing.

On the issue of whether the peak oil has been reached or not, nobody on earth can exactly predict the exact year. See it here.

What are the real numbers?

“The industry has not spent a lot of time correlating and testing their theories using recent data. Every time we take on a project, we are rolling the dice. You can’t ever know the future. The only thing you can do is get your hands on all of the historical data. What we haven’t done in the petroleum industry is look at the numbers. People can’t relate to what is really going on,” continues Simmons. With no “accurate global fuel gauge” to forecast when Peak Oil will occur, and no early warning radar system,” it threatens to strike like a ‘Pearl Harbor event.’ Predicting it accurately becomes impossible.

Although the industry needs better reporting transparency to ensure data reform, notes Simmons, world oil leaders aren’t complying to endorse it. Their reasoning defeats the possibility for transparency with excuses like “it is our confidential data” and “we might suffer a competitive disadvantage.” When the demand for oil outstrips the supply, world peace may be at risk. Simmons suggests we are “totally unprepared” and he insists there are “only a small number of people who understand why data reform is important.”

The solution may lie in enforcing compliance rules for companies. “If we forced the key oil producers to report quarterly production on a field-by-field basis, then we would be able to verify and scientifically graph their production figures. Only 250 producing fields generate 80% of the world’s oil. The Peak Oil concept needs these fields’ production statistics to accurately start to chart the data to be certain of Peak Oil production,” explains Simmons. Unfortunately, an accurate assessment of the situation cannot be made without a global consensus by the energy industry.

It would be safe to say, if it comes, it will be a question on how human behavior adapts to living without the usual things.

[ralfy]

Originally Posted by Parchie

Business thrives in creating demand or making it appear that there is scarcity in supply. That said, it is for their benefit to paint a gloomy picture of the fuel supply and get richer many times over than if they just kept on silently producing.

The problem is that creating demand by making it appear that there is scarcity leads to higher production costs, which in turn works against oil companies. In addition, when prices go up, production has to go up as well in order to gain from the higher produces, but that didn't happen.

On the issue of whether the peak oil has been reached or not, nobody on earth can exactly predict the exact year. See it here.

Actually, Hubbert did. He predicted that U.S. oil production would peak between the late '60s and early '70s, and production peaked in 1970. He predicted that global oil production would peak in 1995, and in 1976 moved it to 2005 due to the previous oil shock. A few months ago, the IEA just confirmed that peak oil took place in 2006.

The best proof of this can be seen in your first point. With high oil prices, companies should be ramping up production right now to meet increasing demand from BRIC. This is also seen in the recent BP report which shows energy demand higher than production from conventional sources. But SA, which insisted that it would be able to breach 100 mb/d, barely reached 90 mb/d. Now, their production costs have gone up to at least $75 per barrel.

Ironically, more proof can be seen in the very article mentioned, which refers to questionable theories like abiogenic oil as well as the use of synthetic oil, which was tried in the past. In general, references to non-conventional sources of energy to replace "easy oil" is the best evidence for peak oil, and also negates claims that oil companies are hiding something.

In addition, the latest BP report shows that increasing energy demand is now being met by the same non-conventional sources of energy, particularly biofuels, which not only contribute to food prices but are also shown to have lower EROEIs than what they are replacing.

Other errors: claims of numbers of barrels refer to what is technically recoverable, which is always several times higher than what is eventually extracted.

What are the real numbers?

Ironically, the reason why there is a debate is because several OPEC members refuse external audits, and yet despite claims that they can easily increase production, has shown not to be able to do so, with Saudi Arabia (SA) being the best example. Further proof of peak oil can be seen in SA's efforts to develop Manifa, which has heavy-sour oil.

It would be safe to say, if it comes, it will be a question on how human behavior adapts to living without the usual things.

That will definitely be the case. But since most know nothing about this problem or believe that governments and big business will come to the rescue, then they will not prepare. Fatih Birol of the IEA already mentioned this (that governments should have prepared at least a decade ago), and a second study reveals that will take decades to retool manufacturing and mechanized agriculture to use less oil.

Finally, at best adapting will very likely mean localization and using whatever resources are available to meet basic needs. Incredibly resource- and energy-hungry things like a middle class lifestyle (e.g., condo unit or houses, passenger vehicles, computers, cell phones, and other appliances and electronic gadgets, air travel, processed food available in supermarkets, and in general a JIT system) will not be sustainable. As the IEA points out, just to maintain current economic growth, we will need the equivalent of one SA every seven years. And with growing middle classes in BRIC and emerging markets, even more resources will be needed.

[Parchie]

Originally Posted by ralfy

Actually, Hubbert did. He predicted that U.S. oil production would peak between the late '60s and early '70s, and production peaked in 1970. He predicted that global oil production would peak in 1995, and in 1976 moved it to 2005 due to the previous oil shock. A few months ago, the IEA just confirmed that peak oil took place in 2006.

I am sorry. I don't believe in predictions based on 1P data. When you said Hubbert did predict the Peak Oil, he's prediction was a dud! Read here.

• "Hubbert himself put the peak of global oil extraction between 1993 and 2000.
• In 1977 the Workshop on Alternative Energy Strategies forecast the global oil peak as early as 1990 and most likely between 1994 and 1997.
• In 1979 the U.S. Central Intelligence Agency believed that global output must fall within a decade.
• In the same year British Petroleum, the world’s second largest oil company, predicted the world production peak in 1985 and the total output in the year 2000 nearly 25 percent below that maximum. In reality, global oil output in the year 2000 was nearly 25 percent above the 1985 level!
• Some of the latest peak-oil proponents have already seen their forecasts fail: Campbell’s first peak was to be in 1989,
• Ivanhoe’s peak was in 2000,
• Deffeyes had it in 2003 (and now, ridiculously, on Thanksgiving 2005).

But they would argue that this makes no difference as that inevitable event will take place within months or years. Moreover, they claim that matters are now entirely different."

Like I said, there are so many voices, each drowning each others predictions. Uncertainties abound and we will never know if indicators are controlled or falsified.

[FlashCollider]

Sandali lang nasaan na ang sinasabi at pinagyayabang ng Pinakatahimik na Pangulo na si PNoy ang Iraq size oil natin? May nakakita na ba?

[ralfy]

Originally Posted by Parchie

I am sorry. I don't believe in predictions based on 1P data. When you said Hubbert did predict the Peak Oil, he's prediction was a dud! Read here.

• "Hubbert himself put the peak of global oil extraction between 1993 and 2000.
• In 1977 the Workshop on Alternative Energy Strategies forecast the global oil peak as early as 1990 and most likely between 1994 and 1997.
• In 1979 the U.S. Central Intelligence Agency believed that global output must fall within a decade.
• In the same year British Petroleum, the world’s second largest oil company, predicted the world production peak in 1985 and the total output in the year 2000 nearly 25 percent below that maximum. In reality, global oil output in the year 2000 was nearly 25 percent above the 1985 level!
• Some of the latest peak-oil proponents have already seen their forecasts fail: Campbell’s first peak was to be in 1989,
• Ivanhoe’s peak was in 2000,
• Deffeyes had it in 2003 (and now, ridiculously, on Thanksgiving 2005).

But they would argue that this makes no difference as that inevitable event will take place within months or years. Moreover, they claim that matters are now entirely different."

Like I said, there are so many voices, each drowning each others predictions. Uncertainties abound and we will never know if indicators are controlled or falsified.

Hubbert predicted global peak oil at 1995 + 10, or 2005:

http://www.youtube.com/watch?v=ImV1voi41YY

The IEA has now confirmed this:

http://www.youtube.com/watch?v=YK730U0Q4NU

In which case, it's already too late to make predictions about what has already taken place. Even with SA increasing production by 0.5 mb/d, they have yet to reach the 10 mb/d production rate they mentioned months ago:

http://ftalphaville.ft.com/blog/2011...uction-puzzle/

And this is taking place amidst high oil prices (which should lead to a ramp-up of production to take advantage of such, but isn't happening). In fact, SA now admits that the price is right:

http://arabnews.com/saudiarabia/article564187.ece

to cover production costs, which have, not surprisingly, gone up because of high oil prices.

Meanwhile,

"Saudi Arabia to spend $100bn on 16 nuclear plants"

http://arabnews.com/economy/article545341.ece

[Parchie]

Originally Posted by ralfy

Hubbert predicted global peak oil at 1995 + 10, or 2005:

http://www.youtube.com/watch?v=ImV1voi41YY

The IEA has now confirmed this:

http://www.youtube.com/watch?v=YK730U0Q4NU

In which case, it's already too late to make predictions about what has already taken place. Even with SA increasing production by 0.5 mb/d, they have yet to reach the 10 mb/d production rate they mentioned months ago:

http://ftalphaville.ft.com/blog/2011...uction-puzzle/

And this is taking place amidst high oil prices (which should lead to a ramp-up of production to take advantage of such, but isn't happening). In fact, SA now admits that the price is right:

http://arabnews.com/saudiarabia/article564187.ece

to cover production costs, which have, not surprisingly, gone up because of high oil prices.

Meanwhile,

"Saudi Arabia to spend $100bn on 16 nuclear plants"

http://arabnews.com/economy/article545341.ece

We Are Dealing With Approximations

Nobody can measure oil and gas reserves. The numbers are estimates based on interpretation ---often quite a lot of interpretation ---of sparse data about indirect indicators like well and seismic information.
Yet people who don’t know better see numbers and assume they represent measurements, as if from some geophysical dipstick. Reserves aren’t measurable ….

Tipee, B. Reserves numbers aren’t oil’s only market perplexity.
OGJ. September 25, 2006.

[ralfy]

Originally Posted by Parchie

We Are Dealing With Approximations

Nobody can measure oil and gas reserves. The numbers are estimates based on interpretation ---often quite a lot of interpretation ---of sparse data about indirect indicators like well and seismic information.
Yet people who don’t know better see numbers and assume they represent measurements, as if from some geophysical dipstick. Reserves aren’t measurable ….

Tipee, B. Reserves numbers aren’t oil’s only market perplexity.
OGJ. September 25, 2006.

Unfortunately, the argument works both ways. And what we have seen in the past is that what is technically recoverable is always much lower than what is extracted. That's because of EROEI.

[Parchie]

Originally Posted by ralfy

Unfortunately, the argument works both ways. And what we have seen in the past is that what is technically recoverable is always much lower than what is extracted. That's because of EROEI.

Peak Oil and ERoEI: Still Nonsense
Forbes, by Tim Worstall, Contributor

I wrote recently about how peak oil is a rather nonsensical concept: technology is advancing at such a rate that we’re discovering entire new planets to explore for the stuff.

The latest comment to come back to me on that argues that because of ERoEI (Energy Return on Energy Invested) peak oil really is a serious problem and, essentially, that I’m all wet for disagreeing. The problem with this is that while the math and physics of ERoEI is just fine, indisputable even, it’s just not a very useful conceit except in certain very limited situations.

Basically, what is being said is that as oil gets deeper, more difficult to pump up, perhaps with tar sands we’ve got to use more energy to purify the stuff, then at some point we hit a boundary, a system boundary. We’ll be using more energy to get the oil out than we’ll get energy from the oil we get out. Which, self-evidently, is nonsense, that’s like the internet companies losing money on every transaction and they’ll make it up in volume.

That is, as far as I understand it, the argument. And it does work in certain special situations. It would indeed be self-evidently absurd to use 10 barrels of oil at one site to pump up one barrel of oil. Better, obviously, to use one of the 10 you have and have 9 left over.

However, this doesn’t work as an assumption about the wider world in general. For energy comes in a number of different forms, dispersed, concentrated, at various different times, some of it is directly usuable, other of it has to be transformed to become so and so on.

We have, for example, no problem at all in using tonnes of one form of oil, shipping diesel, to get an aircraft carrier and it’s aviation gasoline close to the Libyan shore so that a few gallons of that avgas can be used to bomb Ghadaffi (OK,so should be past tense there). We’re just fine with using fuel to get fuel to places.

But let’s really go wild here and think about something very different indeed.

Take, for example, the humble loaf of bread, the staff of life. We use vastly more energy to create that loaf of bread than we get out of having produced it.

Leave aside the oil use, the fertiliser, the transport, all of that. Consider instead just water. It takes 1,000 tonnes of water to grow a tonne of wheat. That water must be fresh water. Producing fresh water requires huge amounts of energy. The Sun does this very nicely for us, evaporating it from the oceans and sending it back down as rain again.

Now, think of the energy that is required to evaporate 1,000 tonnes of water…..that’s 1 million kilos at 419 kJ per kilo. 419 million kJ.

There’s around 3,000 calories in a kg of wheat. So our tonne of wheat provides us with 3 million calories. 3 million kcal (nutritional calories that is) is 12560400 kJ. A little over 12 million kJ.

So, in producing that staff of life, those grains which keep the entire world turning, we use 35 times as much energy as an input as we get as an output.

[Parchie]

Peak Oil and ERoEI: Still Nonsense
52 comments, 10 called-out + Comment now
PAGE 2 OF 2

And we’re quite happy with this. We don’t think it odd at all. And we most certainly don’t say that it’s unsustainable because it doesn’t pass the ERoEI calculation.

The reason we’re not worried about it is because we’ve got vast amounts of energy coming to us as sunlight. Huge, massive, great big gobs of it. And we’re entirely happy to use it copiously, waste huge amounts of it, because there is so much. We want that energy in a form that can be used by our bodies and we’re just delighted to waste 97% of the energy in order to get a bit in the form we can use.

ERoEI just isn’t a binding constraint on our system, not at any human scale.

Sure, the entire world cannot use more energy than there is available to the entire world, that’s true. And it is pretty silly to use more of one form of energy to produce less of that same form of energy. But outside those two special cases, ERoEI just doesn’t mean very much.

And the reason that ERoEI doesn’t mean very much is that we’re not, an any kind of human scale, limited by the availbility of energy. The Sun simply pumps in so much energy that total energy availability simply isn’t a binding constraint upon us. What we’re interested in is usable energy and we’re quite happy to waste total energy in order to get usable. As in the growing wheat example, there’s 35 times more energy going into the system than energy we get out of it and yet we’re all just entirely delighted with said system.

So no, I’m sorry, ERoEI does not in fact mean that peak oil is inevitable or even a problem even if it is. For the math and the physics of the idea only apply in certain very specific circumstances, not as a general rule across life or the planet.

[ralfy]

Originally Posted by Parchie

Peak Oil and ERoEI: Still Nonsense
Forbes, by Tim Worstall, Contributor

I wrote recently about how peak oil is a rather nonsensical concept: technology is advancing at such a rate that we’re discovering entire new planets to explore for the stuff.

The latest comment to come back to me on that argues that because of ERoEI (Energy Return on Energy Invested) peak oil really is a serious problem and, essentially, that I’m all wet for disagreeing. The problem with this is that while the math and physics of ERoEI is just fine, indisputable even, it’s just not a very useful conceit except in certain very limited situations.

Basically, what is being said is that as oil gets deeper, more difficult to pump up, perhaps with tar sands we’ve got to use more energy to purify the stuff, then at some point we hit a boundary, a system boundary. We’ll be using more energy to get the oil out than we’ll get energy from the oil we get out. Which, self-evidently, is nonsense, that’s like the internet companies losing money on every transaction and they’ll make it up in volume.

That is, as far as I understand it, the argument. And it does work in certain special situations. It would indeed be self-evidently absurd to use 10 barrels of oil at one site to pump up one barrel of oil. Better, obviously, to use one of the 10 you have and have 9 left over.

However, this doesn’t work as an assumption about the wider world in general. For energy comes in a number of different forms, dispersed, concentrated, at various different times, some of it is directly usuable, other of it has to be transformed to become so and so on.

We have, for example, no problem at all in using tonnes of one form of oil, shipping diesel, to get an aircraft carrier and it’s aviation gasoline close to the Libyan shore so that a few gallons of that avgas can be used to bomb Ghadaffi (OK,so should be past tense there). We’re just fine with using fuel to get fuel to places.

But let’s really go wild here and think about something very different indeed.

Take, for example, the humble loaf of bread, the staff of life. We use vastly more energy to create that loaf of bread than we get out of having produced it.

Leave aside the oil use, the fertiliser, the transport, all of that. Consider instead just water. It takes 1,000 tonnes of water to grow a tonne of wheat. That water must be fresh water. Producing fresh water requires huge amounts of energy. The Sun does this very nicely for us, evaporating it from the oceans and sending it back down as rain again.

Now, think of the energy that is required to evaporate 1,000 tonnes of water…..that’s 1 million kilos at 419 kJ per kilo. 419 million kJ.

There’s around 3,000 calories in a kg of wheat. So our tonne of wheat provides us with 3 million calories. 3 million kcal (nutritional calories that is) is 12560400 kJ. A little over 12 million kJ.

So, in producing that staff of life, those grains which keep the entire world turning, we use 35 times as much energy as an input as we get as an output.

His claim about peak oil being a concept is wrong because U.S. oil production peaked in 1970, two-thirds of oil-producing countries have passed or have reached peak, and oil discoveries peaked in 1964. Evidence can be seen in reports released by the IEA, BP, and Exxonmobil.

Ironically, the first half of his message not only acknowledges but even illustrates EROEI, i.e., the resources and energy to make bread.

The only evidence (if it can be called that) that questions EROEI can be seen in the fifth-to-the-last paragraph of the article, where he refers to sunlight. But he does not connect the first half of his article with his second, i.e., considering what's needed to capture, store, and use energy from sunlight requires oil, from petrochemicals to various minerals that are extracted and processed using oil.

He tries to defend himself further in his comments by arguing, for example, that there are millions of tons of rare-earth elements available, but he doesn't note the amount of energy and even various resources needed to extract, process, and distribute them. He makes the same mistake for copper and other necessities.

To make matters worse, the same argument--that there are lots of resources available and that we should not be concerned with the energy needed to use them--ironically works against the need to resort to sunlight. Put simply, since there is lots of oil available and we shouldn't care about the cost of extracting it, then we should not have to be concerned with sunlight or rare-earth elements!

[ralfy]

Here's some info on the author:

http://seekingalpha.com/author/tim-worstall

You mentioned earlier that you prefer peer-reviewed journal articles and reports. Might this help?

http://www.mdpi.com/journal/sustaina..._Studies_EROI/

[Parchie]

So, did you believe we need to spend energy 35 times over to produce what energy a single loaf of bread gives? Per ERoEI calculations?

Does it make sense spending that much? 35:1 ERoEI?

Fast-forward to the Philippine setting: do we spend more energy today on growing rice than what energy we get from eating rice? If so, how much is the ERoEI? I am asking this so that we will plan our future using your ERoEI. If the computed ERoEI is over the standard ERoEI level set by your ERoEI scientists, what food do you suggest that needs to replace rice?

[hakz2007]

Small-scale gold mining in the Philippines uses mercury and cyanide to extract elemental gold from ore extracted from mines and pits dug by hand. Sometimes, very young children are put to work at less dangerous but still rigorous tasks in the gold mining areas. These include panning in streams or rivers and hauling ore sacks that can weigh up to 60 pounds. The high price of gold and the poor economy in many developing countries has led to an increase in small-scale gold mining throughout the world.

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

[hakz2007]

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

[Parchie]

Originally Posted by hakz2007

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

image hosted on flickr

Larry Price-Philippines Gold Mines by getolympus, on Flickr

Iyan ang epekto nga tinatawag na "small-scale mining"! Ayaw daw ibigay sa mga responsabling kompanya kesyo mga mayayaman lang ang nakikinabang. Tama naman. Kaya lang, hindi naman tinutulongan ang mga tao upang turuan kung ano ang bawal at ano ang tamang mga paraan ng pagmimina. Pati ba naman mga bata na dapat ay nag-aaral, napasubo na sa trabahong dapat ang mga magulang ang gumagawa. Kakahiya!

[ralfy]

Originally Posted by Parchie

So, did you believe we need to spend energy 35 times over to produce what energy a single loaf of bread gives? Per ERoEI calculations?

Does it make sense spending that much? 35:1 ERoEI?

Fast-forward to the Philippine setting: do we spend more energy today on growing rice than what energy we get from eating rice? If so, how much is the ERoEI? I am asking this so that we will plan our future using your ERoEI. If the computed ERoEI is over the standard ERoEI level set by your ERoEI scientists, what food do you suggest that needs to replace rice?

It makes sense because we never calculate the actual cost of producing things in terms of energy, resources, and even damage to the environment. Also, we assume that there will always be more than enough resources, or that we can easily solve environmental damage. In short, we never use EROEI or ecological footprint calculators to measure cost. We use money, which we can create easily. And since we can more money, then we can spend more money to come up with these solutions.

But no amount of money creation solves these problems. We can increase money supply many times more (we've actually done that, as we have between $600 trillion and $1.7 quadrillion in unregulated derivatives worldwide) but that will not change the amount of energy needed to extract and process more resources or even minimize pollution.

About the EROEI for food, from what I remember, we need to expend the equivalent of around 8 calories to produce a calorie of food. We never noted that simply because for many decades oil was very cheap. That is, by consuming only around a barrel of oil we could get a hundred barrels from the ground. That is no longer the case.

Finally, we (that is, PH society) cannot plan for this because, as stated earlier, we use money to measure the economy. In addition, the economy has to keep growing because more want a middle class lifestyle (e.g., passenger vehicles, houses or condo units or flats, appliances, etc.), which means we need to consume even more energy and resources. That is why resource consumption in Asia has been growing and is offsetting demand destruction in OECD countries brought about by increasing debt.

Ultimately, a combination of resource shortages, increasing debt, and the effects of environmental damage (including climate change) will force people to localize and to let go of a middle class lifestyle. That will mean, among other things, growing food, including potatoes.

[Parchie]

So, for all the discussions we've done, it is really an accepted fact that this ERoEI is just useless because it simply is not used. Not playing with semantics there. (No pun intended)

BTW, it seems to me you skirted away from my question. You discussed the monetary system instead, though just the skin of it. FYI, our Central Bank cannot just print money just because it wants to. Please read what is written at the back of every bill on your wallet and you'll know how it is.

[ralfy]

Originally Posted by Parchie

So, for all the discussions we've done, it is really an accepted fact that this ERoEI is just useless because it simply is not used. Not playing with semantics there. (No pun intended)

It's not used because corporations, governments, and citizens expect the economy to grow. Obviously, it will grow as more money is created.

BTW, it seems to me you skirted away from my question. You discussed the monetary system instead, though just the skin of it. FYI, our Central Bank cannot just print money just because it wants to. Please read what is written at the back of every bill on your wallet and you'll know how it is.

Only around three pct of total money supply consists of money printed by central banks. Most money consists of numbers generated whenever commercial banks extend credit. The largest component is unregulated derivatives, estimated at between $600 trillion to more than a quadrillion dollars. Unregulated derivatives hardly involve interest rates or even fractional reserve banking.

There's a liquidity chart of total money supply linked here:

http://www.greatcreditcontraction.com/

[Parchie]

Originally Posted by ralfy

It's not used because corporations, governments, and citizens expect the economy to grow. Obviously, it will grow as more money is created.

I guess there are some issues with how you understand economic growth and the idea of money here. Are you trying to tell us that creation of money a causal factor to economic growth? Is it that easy to improve our economy? Just creating more money? Enlighten us on that please.

Originally Posted by ralfy

Only around three pct of total money supply consists of money printed by central banks. Most money consists of numbers generated whenever commercial banks extend credit. The largest component is unregulated derivatives, estimated at between $600 trillion to more than a quadrillion dollars. Unregulated derivatives hardly involve interest rates or even fractional reserve banking.

There's a liquidity chart of total money supply linked here:
http://www.greatcreditcontraction.com/

Still, banks are required to back those loan extensions with cash by the Central Bank. Those "numbers generated whenever commercial banks extend credit" are written on an instrument, the money will follow when the instrument is brought to the bank for encashment, right? Whatever instruments the banks execute, there is an equivalent money backing that instrument else, the banks get penalized big. Besides that, banks are required to maintain a certain level of money for liquidity purposes. Therefore, the amount of printed money was already there, else, banks will reject any requests for loans. Please don't get money confused with financial instruments, will ya?

On your claim that derivatives are unregulated here in our country, am really sorry, I don't believe what you are saying there. I know there are banks trading derivatives but I know they are regulated by our CB. IDK where you get your data but here's what Mr. Tetangco once said in 2009 IIRC:

"Philippine financial institutions have relatively limited exposure to structured credit and related derivative products which were the main cause of the large losses of crisis-affected international banks. It is helpful to point out that derivatives licenses in the Philippines have been given out prudently."

I do know that oil prices has nothing to do with Oil Peak or supply issues but on these derivative markets that handles how oil are traded:

The price of crude oil today is not made according to any traditional relation of supply to demand. It is controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

First, the role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the Intercontinental Exchange (ICE) Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil - West Texas Intermediate and North Sea Brent.

READ HERE

[ralfy]

Originally Posted by Parchie

I guess there are some issues with how you understand economic growth and the idea of money here. Are you trying to tell us that creation of money a causal factor to economic growth? Is it that easy to improve our economy? Just creating more money? Enlighten us on that please.

The idea is painfully obvious: we have increasing production and consumption of goods needed to have continuous economic growth. Both are funded through increasing credit. Some soon move from manufacturing and agriculture to finance, where even more profits can be earned through financial speculation, and this increases credit further. That is why the largest component of money supply is unregulated derivatives.

But that's the easy problem, as money can be created and be vaporized easily. Remember, much of it consists essentially of numbers in accounts. The hard part is the effect of increasing production and consumption, which is a resource crunch. On top of that are the effects of pollution, including climate change. No amount of funny money will solve these problems.

Still, banks are required to back those loan extensions with cash by the Central Bank. Those "numbers generated whenever commercial banks extend credit" are written on an instrument, the money will follow when the instrument is brought to the bank for encashment, right? Whatever instruments the banks execute, there is an equivalent money backing that instrument else, the banks get penalized big. Besides that, banks are required to maintain a certain level of money for liquidity purposes. Therefore, the amount of printed money was already there, else, banks will reject any requests for loans. Please don't get money confused with financial instruments, will ya?

No, because of fractional reserve banking, and the ability of banks to bypass that by borrowing from each other. There's also the fact that money doesn't simply consists of "printed money" but stocks, bonds, contracts, etc. In fact, the largest component of money supply worldwide is the latter, and it's largely unregulated.

On your claim that derivatives are unregulated here in our country, am really sorry, I don't believe what you are saying there. I know there are banks trading derivatives but I know they are regulated by our CB. IDK where you get your data but here's what Mr. Tetangco once said in 2009 IIRC:

"Philippine financial institutions have relatively limited exposure to structured credit and related derivative products which were the main cause of the large losses of crisis-affected international banks. It is helpful to point out that derivatives licenses in the Philippines have been given out prudently."

I do know that oil prices has nothing to do with Oil Peak or supply issues but on these derivative markets that handles how oil are traded:

The price of crude oil today is not made according to any traditional relation of supply to demand. It is controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

I'm not referring to derivatives in PH but a global market of around $600 trillion to over a quadrillion. PH banks are not exposed to that but it's exposed to an PH economy that's dependent on overseas work and export markets, in turn affected when financial crisis takes place. That's why exports have been weakening for several months.

The second part of your paragraph proves my argument about the irrelevance of oil prices as a factor in determining the cost of oil. As you yourself have shown, it's an "elaborate financial market system" which ironically also challenges what you wrote in your first paragraph.

Thus, the only way to determine the cost of oil is to see how much oil and other resources are needed to extract oil, or EROEI. And ExxonMobil, BP, and the IEA have shown that the amount of energy needed to get more oil and other resources has been increasing for several years. And that will definitely affect oil prices with or without financial speculation.

First, the role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the Intercontinental Exchange (ICE) Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil - West Texas Intermediate and North Sea Brent.

READ HERE

Exactly my point. And the same "game" is seen in much of casino capitalism.

Apparently, there's no need for me to enlighten you about this.