In this week's report: (click this link to access an online copy of the attached PDF)

Jet fuel and distillate fuel demand trends. (page 1 )

Is $80 oil a problem for the economy? (page 3 )

Ten years of US gasoline and distillate fuel consumption. (page 4 )

Chinese investing in wind power in Texas???

Dallas Morning News (Oct. 29^th) – "A Chinese-American joint venture has agreed to build the next massive wind farm on the plains of West Texas." Texas would never let China own their oil wells, but the wind, no problem? I wonder why they couldn't get T. Boone in on this one.

Will the Saudi's intervene to keep oil prices down?

Khaleej Times [Reuters] (Oct. 29^th) – "Saudi Arabia might seek to brake any new oil price spike, mainly to protect a fragile global economy and prolong its own role as the world's top oil producer — and if that hurts regional rival Iran, it will shed no tears." The Saudi Arabian government does not want the world economy to slip backwards into recession when it may just be moving out of one. The spector of demand falling and prices slipping back to the $30/barrel levels of last December will keep their minds focused.

The question is how long can they provide that supply when global demand returns to the levels of 2007-08?

Jeff Rubin clearly thinks not for long and said so on James Cramer's show Thursday. He thinks oil will scale triple digit levels within 12 months and put an end to the recovery. If you watch this video it is like all "Mad Money" clips, only with adult supervision and definitely no children should be present. (Cramer thinks we have 200 years worth of natural gas, enough said) Note: I only knew about this interview thanks to a friend, I am proud to say I normally avoid Mr. Cramer.

North Dakota passes Louisiana in oil production.

Associated Press (Oct. 28^th) – "The agency's Energy Information Administration said North Dakota produced 6.38 million barrels of crude in May, edging Louisiana, which had 6.34 million barrels for the month. Oklahoma was ranked fifth, at 5.7 million barrels for that month, according to the most recent figures." Don't get too excited though, North Dakota's total monthly production would only meet about one-third of a single day's demand for oil in the U.S. In addition number five ranked Oklahoma is now producing less oil than in 1913 (page 2). Never forget SCALE when reading oil production statistics.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access an online copy of the attached PDF)

The Economics of Peak Oil from Denver & more. (page 1 )

Oil prices and the economy. (page 2 )

US oil pipelines are huge storage tanks. (page 3 )

Distillate demand still isn't showing any signs of life.

Financial Times (Oct. 20^th) – "A quarterly statement from CSX, the US railway operator seen as a bellwether of the country's industrial and trade activity, points to weak distillates demand. CSX locomotives used 18 per cent less fuel in the most recent quarter than in the same period a year ago." This is not a sign of a robust economy.

Through August US airline jet fuel consumption is down an average of 12.75% year-over-year according to the US Bureau of Transport Statistics report. This drop is on top of a more than 4% decline in 2008 from 2007 levels.

These two fuels are the number two and three uses of oil behind gasoline in the US. If they were not down as much as they are US oil consumption would not have nearly the magnitude of decline given the consistent 9 million barrels per day of gasoline demand.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access online copy of PDF)

ASPO in Denver. (page 1 )

Russia goes into the lead in oil production. (page 2 )

Gasoline and distillate consumption. (page 2 )

Kevin and the Chicken Little's. (page 2 )

Financial Times Must Read – Lunch with the FT: David Swensen

Financial Times (Oct. 10^th) – "…you should invest only in things that you understand. That should be the starting point and the finishing point." He then went on with to make one of the best statements I have heard in a very long-time. "The investment community is hopeful – hopeful's probably too weak a word – wildly optimistic about their particular chances ... Never underestimate the gullibility of large pools of money."

One little surprise from the ASPO Conference.

In Denver at the ASPO conference Jeffrey Brown (aka westexas on The Oil Drum) and I discussed this situation he had found. So on Thursday when I found this posted on The Oil Drum I had to share it.

I recently ran some numbers that surprised me. A recent study put the total cost of driving a Honda Civic at $0.50 per mile, assuming 10,000 miles per year. If we assume $2.50 per gallon and 30 miles per gallon, then 333 gallons per year would be consumed, at about 8¢ per mile, leaving the non-fuel costs at $0.42 per mile.

Let's assume the $20 per gallon number, pursuant to the recent book. The fuel cost per mile would increase by a factor of 8, to about $0.64 per mile, so the total cost per mile would be $1.06 per mile (assuming no other changes, which may or may not be the case).

So, if fuel prices went up eight-fold, total driving costs, pursuant to above assumptions for a Civic, would be only about twice as much. Of course, not everyone drives a Civic, and other costs would ripple through the economy, especially food related costs.

However, if our driver cut his miles driven by half, based on the above assumptions, his total driving costs for 5,000 miles at $20 per gallon would be about the same as 10,000 miles at $2.50 per gallon.

It would be interesting to see what would happen if cars came with a cost per mile gauge instead of the rapidly spreading GPS displays. It might change many behaviors when driving your car started to look more like riding in a taxi and watching the meter run.

It will also surprise many people with much larger and more expensive vehicles how close they are to the magical $1/mile. But then again we all know a dollar isn't what it used to be.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access online copy of PDF)

My Peak Oil journey started six years ago. (page 1 )

I was wrong about potential airlines cost saving efforts. (page 1 )

Poor Boeing, they can't get out of their own way. (page 1 )

Gasoline and distillate consumption. (page 3 )

Shell plans to build the world's largest ship. (page 4 )

UKERC – Peak Oil before 2020.

The Daily Telegraph (Oct. 8^th) – "The most recent estimation from the International Energy Agency, that advises Governments around the world, said conventional oil would not peak until after 2030.

However an authoritative new study from the Government-funded UK Energy Research Council called this prediction "at best optimistic and at worst implausible". The peer-reviewed research looked at 500 studies from around the world and took into account the difficulty of accessing new oil fields as well as growing demand. It predicted oil will begin running out before 2030 and there is a "significant risk" peak oil will be reached before 2020."

It is difficult to reconcile the UKERC's report implications and those put forth in another report by Deutsche Bank which is also covered in this week's report. The boys at Deutsche appear to be in the optimistic camp.

More on the UKERC report and a link to the original in this week's Master Resource Report.

Batteries or Fuel-Cells?

Bloomberg (Oct. 9^th) – "General Motors Co., Toyota Motor Corp. and other automakers want to sell consumers electric cars powered by hydrogen within six years. Their plans clash with the U.S. government's infrastructure priorities." Since I have driven a fuel-cell car and an electric car I admit I prefer the fuel-cell. The issue will be which of these two systems can manage the infrastructure issues. Remember both hydrogen and batteries are just storage forms, they are not primary energy sources like fossil fuels or solar energy. They also have and energy density problem which continues to be improved. Stay tuned the outcome will be both interesting and critical to the transportation world ahead.

This is about the same relationship the U.S. has for oil consumption to reserves.

Economist (Oct. 3^rd) – "China has the busiest railways in the world, according to the World Bank. It carries a quarter of the world's traffic on 6% of its track." There is going to be plenty of tracked laid in China.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access PDF)

Norway's arctic potential, it won't be easy? (page 1 )

Mexico's production and exports. (page 1 )

What in the world is "Boomerang Trade"? (page 3 )

Water and Energy cannot be separated. (page 4 )

238 mph by train. (page 5 )

Saudi oil giant Aramco looks to Brazil.

Upstream (Sept. 29^th) – "Saudi Aramco is interested to explore for oil in Brazil's pre-salt basin, Brazilian Chief of Staff, Dilma Roussef said." They don't have enough of their own oil?

The action is in deep water.

Upstream (Sept. 29^th) – "There will be increasing reliance on deep-water drilling for supply," he said, adding that the company forecast around 12% of total global demand will be supplied by deep-water drilling by 2015." Remember that this is not cheap, easy flowing oil production.

Upstream also reported that Steve Robertson, the director of Douglas Westwood, told the Trends in the Offshore Drilling Industry conference in London that if "… China follows Korea's path - as it has largely to date - oil demand will more than double in the next decade".

Robertson questioned whether supply could meet this demand, with 66 out of 99 producing countries having reached their peak production by 2008. "Peak oil is not a myth or a scare tactic, in our view it is very much a reality…"

Lithium price drop announced.

SQM (Sept. 30^th) – "SQM announced that prices for lithium carbonate and lithium hydroxide will be reduced by approximately 20% from current levels for the renewal of all its supply contracts." Since SQM is the world's largest producer of lithium it by default sets the global price. So the concern is why with the prospect of rapidly expanding demand from the auto industry is the company compelled to lower its prices? Until more is know this probably should be viewed as a negative indicator of the demand for battery grade lithium carbonate. Lithium battery hype may be way ahead of reality, stay tuned.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.