self-organization and far from equalibrium dynamics

wikipedia |  Stuart Alan Kauffman (born September 28, 1939) is an American medical doctor, theoretical biologist, and complex systems researcher who studies the origin of life on Earth.

In 1967^[1] and 1969^[2] Kauffman proposed applying models of random boolean networks to simplified genetic circuits. These were very early models of large genetic regulatory networks, proposing that cell types are dynamical attractors of such networks and that cell differentiation steps are transitions between attractors. Recent evidence strongly suggests that cell types in humans and other organisms are indeed attractors.^[3] In 1971 he suggested that the zygote may not access all the cell type attractors in the repertoire of the genetic network's dynamics, hence some of the unused cell types might be cancers.^[4] This suggested the possibility of "cancer differentiation therapy".

In 1971, Kauffman proposed the self-organized emergence of collectively autocatalytic sets of polymers, specifically peptides, for the origin of molecular reproduction.^[5][6]Reproducing peptide, DNA, and RNA collectively autocatalytic sets have now been made experimentally.^[7][8] He is best known for arguing that the complexity of biological systems and organisms might result as much from self-organization and far-from-equilibrium dynamics as from Darwinian natural selection as discussed in his book Origins of Order (1993). His hypotheses stating that cell types are attractors of such networks, and that genetic regulatory networks are "critical", have found experimental support.^[3][9] It now appears that the brain is also dynamically critical.^[10]

$50,000 worth of phosphates and/or chalk would have prevented all this spastic, disingenuous political flailing...,

usatoday | Now that the leaching of poisonous lead into the tap water of Flint, Mich., has been declared a national emergency, it might be time to dial back the panic just a notch (or two).

Flint's 8,000 children have not had their lives destroyed. Jesse Jackson can roll up his crime tape. Michael Moore can go back to promoting his latest film. Taken as a whole,  in fact, Flint's kids are better off than the previous generations of Michigander kids in at least one important way. Even after Flint’s disaster, the city’s children have far less lead in their blood than their parents or grandparents did at the same age.

That's of little comfort, of course, to those exposed to higher levels than they should have been because of a nearly bankrupt local government, a scientifically incompetent city water utility, indifferent Michigan environmental regulators and a bumbling federal Environmental Protection Agency. And any lead has a long-terminsidious health impact, even after it has left the blood. But amid the furor, it's important to take a deep breath and put the exposure levels in context.

this useless potatoe head couldn't even get the political ball rolling...,

freep |  Neeley's complaint to the governor came three months before a March 2015 consultant's report that recommended spending $50,000 to add corrosion control chemicals to Flint's drinking water because iron was leaching from the pipes and turning the water brown.

The disclosure of the Snyder e-mail and a second one Neeley to State Attorney General Bill Schuette in September asking for an investigation into the Flint water delivery crisis came two days after Snyder promised in his annual status report to fix the Flint water problem.

Schuette, who declined to investigate last fall, is investigating now.

Could Neeley's complete letter have been omitted because he wrote that "community health could be on the decline as citizens become afraid to even shower or bathe in their homes. The people of Flint bring bottles of brown water full of sediment and other foreign substances to community meetings, asking only to be treated as human beings."

Nobody read that but the press secretary? Michigan deserves to hear those words this week. Flint deserves it.

“It’s really hard to figure out who are the accessories to the crime being committed against this city and who are the allies to fix this massive problem that we facing,” Neeley said. “I think the governor has more to say to the people of Michigan, and he is reluctant to say it.  He’s being selective about what truths he wants to release.”

Understandably, Flint residents and some elected leaders are not sure whom to trust and wonder whether all that needs to be done will be done – for residents and for the children.

"The frustration hasn't subsided yet,” Neeley said. “My frustration has grown with individuals who are very dismissive of the Flint community and their concerns."

The question to be asked now may not be: What did they know and when did they know it?

The question may be:  How could an intelligent, organized millionaire and former businessman have something happening in his state as catastrophic as the Flint water crisis -- and not know about it for 18 months?

Or:  What kind of people did he choose to work for him that they would let this problem, which could have been resolved with a $100 additive or a $50,000 anti-corrosion treatment, get this big? And do they still work there?

And here's a third question: How could this happen to Flint? The Rev. Jeffery Hawkins, pastor of Prince of Peace Baptist Church just blocks from the Flint River, had an idea.

“I believe it’s a city that has been kicked so many times, and when it comes to voting, our numbers are not always the greatest numbers … because of that, I think that the governor just doesn’t care about the city,” Hawkins said. “But there are still human rights afforded, and he could have cared far more than he did. There’s no excuse for what he did, at the end of the day."

EPA had a 160 on staff named Miguel Del Toral who called for proper corrosion control

rollingstone |  After the initial lead readings came back, Walters became desperate. She began calling everyone from activists to random people at the regional office of the EPA. She got the attention of an EPA water expert named Miguel Del Toral, who came to her house, ran more tests and came to a startling conclusion. The water Flint used to buy from Detroit contained orthophosphate, a chemical used to control lead and copper levels in the drinking water. Del Toral wrote that once Flint changed to river water, "the orthophosphate treatment for lead and copper control was not continued." Del Toral warned that there was no chemical barrier to keep lead and copper from infiltrating Flint residents' drinking water. In plain English, Flint lacked a corrosion-control plan, something every water system in America has been required to have for years. To make matters worse, the water from the Flint River contained eight times more chloride than Detroit water. Chloride is a corrosive compound that causes pipes to rust and leach. At a time when Flint water needed more corrosion control than ever, it was getting none.

Walters gave the Del Toral document to the Michigan ACLU, which released it to the press, but it only drew attention from Michigan Radio. There was a reason for this: All of official Michigan denied there was a problem. In February, the EPA asked the MDEQ directly if the state was practicing corrosion control. MDEQ staffer Stephen Busch wrote back: "[Flint] has an optimized Corrosion Control Program [and] conducts quarterly Water Quality Parameter monitoring at 25 sites and has not had any unusual results."

This wasn't true; there was no corrosion control. Still, the state of Michigan launched a counteroffensive essentially calling anyone with concerns about Flint water a crank. "Let me start here – anyone who is concerned about lead in the drinking water in Flint can relax," said Brad Wurfel, spokesman for MDEQ. (He later described Del Toral as a "rogue employee.")

Internally, the MDEQ seemed more annoyed than concerned. In July, the ACLU's Curt Guyette pushed for more details, and an MDEQ staffer e-mailed co-workers saying of the Flint situation, "Apparently it's going to be a thing now."

Eventually, the MDEQ admitted the city hadn't been doing any corrosion control with Flint's water, and no one seemed overly concerned. Wurfel essentially said they didn't have to address it for a year. "You know, if I handed you a bag of chocolate chips and a sack of flour and said, 'Make chocolate-chip cookies,' we'd still need a recipe," Wurfel told Michigan Radio. "They need to get the results from that testing to understand how much of what to put in the water to address the water chemistry."

mommy not having it LeeAnne Walters set the entire cascade in motion...,

michiganradio |  “The preliminary draft report should not have been released outside the agency,” Hedman wrote to then-Flint Mayor Dayne Walling after the ACLU’s investigative reporter, Curt Guyette, asked city officials about it. The report was a “preliminary draft” she wrote, adding, “it would be premature to draw any conclusions based on that draft.”

The draft report details hazardous waste levels of lead in Lee Anne Walters’ home. In it, Del Toral raises serious red flags about the lack of corrosion control treatment, something that’s required under federal rules.

These days, Del Toral says he hasn’t been keeping up with all the national news headlines about Flint. Since October, he’s been busy working with a water task force to help resolve Flint’s water problems.

Del Toral was first alerted to Flint’s water problems last spring, when Lee Anne Walters called the EPA to complain about high levels of lead in her tap water and warn officials that her child had been diagnosed with lead poisoning.

Flint's 2nd/3rd line inheritor water department didn't know how to handle high pH water, period....,

gregbranchwords | The Recap

1. Flint’s elected leadership makes what is actually a solid, sound decision that will, in the long run, save the city millions of dollars and give it more control over its destiny – and, because it positions Flint as a wholesale supplier of water, possibly enhance revenues for them.


2. Detroit Water Board decides to be spoiled and pissy and leaves Flint with no good options for the two years before its pipeline is built.


3. Flint’s leadership and GOP-appointed EFM make a well-deliberated decision to draw water from the Flint River. 


4. Flint’s water staff – the people in Flint who are the experts on this sort of thing – apparently aren’t up to the task. And the people they count on to oversee and help them


5. The Michigan DEQ, is completely asleep at the switch. And once they discover their mistake, they lie about it and ask Flint to help them lie.


6. US EPA is aware of a problem, but apparently trusted the kids playing in the DEQ sandbox to fix things.

Personally, I think Detroit needs to be held accountable for starting the snowball down the hill. And I think there are people in the DEQ who should be prosecuted for reckless endangerment and fraud.

The Governor? His accountability lies in the creation of the corporate culture that allowed DEQ’s hubris to let it happen.

The Detroit Water Board members, I’m guessing, aren’t Republicans. The Flint water department staff who were in over their heads weren’t Republicans. The DEQ staff is probably a mix.

global unemployment to rise by an additional 3.4 million

theguardian |  More than 3 million people will become unemployed worldwide in the next two years, making existing jobs vulnerable and fuelling potential social unrest as the global economy slows, a report warns.

The International Labour Organization predicts unemployment will rise by about 2.3 million this year to 199.4 million, and that 1.1 million will be added to the global count in 2017, taking joblessness to more than 200 million for the first time on record.

The ILO, a UN agency focused on labour standards and social protection, said the effects of last year’s economic slowdown would play out in higher unemployment in 2016, particularly in Asia, Africa, Latin America and the Middle East.

Developing markets in those areas will bear the brunt of increased joblessness after the prices of oil and other commodities tumbled in response to slowing growth, the ILO said in its World Employment and Social Outlook report for 2016.

The ILO released the forecasts as the global financial elite gathered in the Swiss ski resort of Davos for the World Economic Forum’s annual meeting. The event takes place as oil prices hover near 13-year lows below $30 a barrel, share prices tumble and analysts try to determine the impact of China’s slowing economy.

Raymond Torres, one of the report’s authors, said market turmoil at the start of 2016 meant his already gloomy predictions could prove overoptimistic. The International Monetary Fund cut its global growth forecast on Tuesday.

why oil under $30.00 barrel is a predicament...,

ourfiniteworld |  Things aren’t working out the way we had hoped. We can’t seem to get oil supply and demand in balance. If prices are high, oil companies can extract a lot of oil, but consumers can’t afford the products that use it, such as homes and cars; if oil prices are low, oil companies try to continue to extract oil, but soon develop financial problems.

Complicating the problem is the economy’s continued need for stimulus in order to keep the prices of oil and other commodities high enough to encourage production. Stimulus seems to takes the form of ever-rising debt at ever-lower interest rates. Such a program isn’t sustainable, partly because it leads to mal-investment and partly because it leads to a debt bubble that is subject to collapse.

Stimulus seems to be needed because of today’s high extraction cost for oil. If the cost of extraction were still very low, this stimulus wouldn’t be needed because products made using oil would be more affordable.

Decision makers thought that peak oil could be fixed simply by producing more oil and more oil substitutes. It is becoming increasingly clear that the problem is more complicated than this. We need to find a way to make the whole system operate correctly. We need to produce exactly the correct amount of oil that buyers can afford. Prices need to be high enough for oil producers, but not too high for purchasers of goods using oil. The amount of debt should not spiral out of control. There doesn’t seem to be a way to produce the desired outcome, now that oil extraction costs are high.

Rigidities built into the oil price-supply system (as described in Sections 3 and 4) tend to hide problems, letting them grow bigger and bigger. This is why we could suddenly find ourselves with a major financial problem that few have anticipated.

Unfortunately, what we are facing now is a predicament, rather than a problem. There is quite likely no good solution. This is a worry.

there are levels of survival we are prepared to accept...,

Telegraph |  The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.

"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up," said William White, the Swiss-based chairman of the OECD's review committee and former chief economist of the Bank for International Settlements (BIS).

"Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief," he said.

"It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something," he told The Telegraph on the eve of the World Economic Forum in Davos.

"The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians."

don't panic, just reload...,

declineoftheempire |  For the first time since 2008, pundits are trotting out Irving Fisher's dreaded "debt-deflation" monster (Ambrose Evans-Pritchard, writing from Davos).

The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.

"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up," said William White, the Swiss-based chairman of the OECD's review committee and former chief economist of the Bank for International Settlements... 

Mr White said stimulus from quantitative easing and zero rates by the big central banks after the Lehman crisis leaked out across east Asia and emerging markets, stoking credit bubbles and a surge in dollar borrowing that was hard to control in a world of free capital flows.

The result is that these countries have now been drawn into the morass as well. Combined public and private debt has surged to all-time highs to 185% of GDP in emerging markets and to 265% of GDP in the OECD club, both up by 35 percentage points since the top of the last credit cycle in 2007.

"Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem too," Mr White said...

In retrospect, central banks should have let the benign deflation of this (temporary) phase of globalization run its course. By stoking debt bubbles, they have instead incubated what may prove to be a more malign variant, a classic 1930s-style "Fisherite" debt-deflation.

Mr White said the Fed is now in a horrible quandary as it tries to extract itself from QE and right the ship again. "It is a debt trap. Things are so bad that there is no right answer. If they raise rates it'll be nasty. If they don't raise rates, it just makes matters worse," he said.

There is no easy way out of this tangle. But Mr White said it would be a good start for governments to stop depending on central banks to do their dirty work. They should return to fiscal primacy - call it Keynesian, if you wish - and launch an investment blitz on infrastructure that pays for itself through higher growth.

In short, the solution to a debt crisis is more debt (fiscal stimulus). It pays for itself!

Markets are signalling that the shit has hit the fan, but economists see no reason for panic

Have you found the beginning, then, that you are looking for the end?

politico |  If I asked you what most defines Donald Trump supporters, what would you say? They’re white? They’re poor? They’re uneducated?

You’d be wrong.

In fact, I’ve found a single statistically significant variable predicts whether a voter supports Trump—and it’s not race, income or education levels: It’s authoritarianism.

That’s right, Trump’s electoral strength—and his staying power—have been buoyed, above all, by Americans with authoritarian inclinations. And because of the prevalence of authoritarians in the American electorate, among Democrats as well as Republicans, it’s very possible that Trump’s fan base will continue to grow.

My finding is the result of a national poll I conducted in the last five days of December under the auspices of the University of Massachusetts, Amherst, sampling 1,800 registered voters across the country and the political spectrum. Running a standard statistical analysis, I found that education, income, gender, age, ideology and religiosity had no significant bearing on a Republican voter’s preferred candidate. Only two of the variables I looked at were statistically significant: authoritarianism, followed by fear of terrorism, though the former was far more significant than the latter.

Authoritarianism is not a new, untested concept in the American electorate. Since the rise of Nazi Germany, it has been one of the most widely studied ideas in social science. While its causes are still debated, the political behavior of authoritarians is not. Authoritarians obey. They rally to and follow strong leaders. And they respond aggressively to outsiders, especially when they feel threatened. From pledging to “make America great again” by building a wall on the border to promising to close mosques and ban Muslims from visiting the United States, Trump is playing directly to authoritarian inclinations.

Not all authoritarians are Republicans by any means; in national surveys since 1992, many authoritarians have also self-identified as independents and Democrats. And in the 2008 Democratic primary, the political scientist Marc Hetherington found that authoritarianism mattered more than income, ideology, gender, age and education in predicting whether voters preferred Hillary Clinton over Barack Obama. But Hetherington has also found, based on 14 years of polling, that authoritarians have steadily moved from the Democratic to the Republican Party over time. He hypothesizes that the trend began decades ago, as Democrats embraced civil rights, gay rights, employment protections and other political positions valuing freedom and equality. In my poll results, authoritarianism was not a statistically significant factor in the Democratic primary race, at least not so far, but it does appear to be playing an important role on the Republican side. Indeed, 49 percent of likely Republican primary voters I surveyed score in the top quarter of the authoritarian scale—more than twice as many as Democratic voters.

Political pollsters have missed this key component of Trump’s support because they simply don’t include questions about authoritarianism in their polls.

we're at the second red arrow again...,

alhambrapartners |  The only difference relevant in this overriding conception is that the eurodollar in 1969 was ready to break free of the shackles of hard money.  Its very existence owed to the fact that central banks were repeating the same processes that they had experimented with in the 1920’s and thus felt that they had learned from those mistakes (they didn’t; blaming gold the whole time when economists, deep down, care little for gold so much as power and control).  The eurodollar imbalance of 1969, which led to the great interruption of the 1970’s, was a faction, the majority faction, of banking following along the lines of monetary flexibility; in short, economists thought they would be replacing gold with themselves when even in 1969 it should have been readily apparent thatbanks were replacing gold with their own designs.

One final note, a haunting warning that was echoed in 1979 (itself an echo of 1964) and seemingly destined to be unheeded and thus the source of our great repetition.  If we are doomed to repeat history, it is because the self-selected “best and brightest” are more enamored with their own credentials than their abilities as critical thinkers in a truly enlightened, scientific discipline.  Mr. Coombs’ words from April 1969 would find application in August 2007, again in August 2011 and in increasing regularity since June 2014 and this renewed “rising dollar.”

European central banks remained apprehensive, however, that a serious crunch in the Euro-dollar market might suddenly develop if intensified U.S. and European competition for Euro-dollars suddenly revealed some vulnerable positions. The situation could be particularly serious because the Euro-dollar market had become an increasingly important source of financing for industrial and commercial enterprises not only in Europe but in the whole world. One bankruptcy could attract a lot of attention, and if it led the European commercial banks that had been supplying funds to the market to reassess the credit risks they faced, the result might be a sudden scramble for liquidity. The chances of such a development were enhanced by the fact that no central bank had formal responsibility for the behavior of the Euro-dollar market; what had been accomplished in that connection had been done through informal central bank cooperation.

As noted through this whole discussion, that “informal central bank cooperation” doesn’t really amount to anything.  That lesson could be applied to the Bundesbank “selling dollars” in 1969, the PBOC “selling UST’s” in 2015 or the worthless, useless Federal Reserve RRP in 2016.  They really don’t know what they are doing, they never have and it truly doesn’t matter fixed or floating.  Adjust accordingly because we know how this ends; we’ve already seen it.

when the trucks stop running...,

resilience |  Ships, trucks, and trains are the backbone of civilization, hauling the goods that fulfill our every need and desire. Their powerful, highly-efficient diesel combustion engines are exquisitely fine-tuned to burn petroleum-based diesel fuel. These engines and the fuels that fire them have been among the most transformative yet disruptive technologies on the planet. This is a dependency we take for granted.

Since oil reserves are finite, one day supplies will be diminished to where the cost of moving freight and goods with our present oil-fueled fleet will not pencil out. We have an oil glut in 2016 and a corresponding lack of urgency. Yet, inevitably the day will come when oil supplies decline. What will we do? What are our options? That is the sobering reality my book explores.

Consider just how dependent we are on abundant and affordable oil, which fuels commercial transportation: Grocery stores, service stations, hospitals, pharmacies, restaurants, construction sites, manufacturers, and many other businesses receive several deliveries a day. Since they keep very little inventory, most would run out of goods within a week. When trucks stop, over 685,000 tons of garbage piles up every day in the U.S., sewage treatment ends as storage tanks fill up, and in two to four weeks water supplies would be imperiled as purification chemicals were no longer delivered. That is just the tip of the iceberg.

Although ships move roughly 90% of cargo and made globalization possible, it is hard to think of a single thing that isn’t transported on a truck at some point, if only for the last mile. Equally important are other kinds of “trucks” and equipment used in farming, logging, mining, construction, garbage, and countless human endeavors. Certainly it would be better to deliver goods by rail, which are four times more fuel efficient than trucks, or by ship, which can be up to 80 times more efficient than trucks. But there are only 95,000 route miles of railroad track, and 25,000 miles of inland and coastal waterways in the U.S. That’s compared to over 4 million miles of U.S. roads. Just why we are so reliant on trucks and under-utilize more efficient ships and trains is explored in my book.

the fracking year 2015

aleklett |  On New Year’s Eve the players in the fracking industry popped their champagne corks but it was not to celebrate wonderful success as they had done the year before. Rather it was to drown their sorrows. The USA’s Energy Information Administration (EIA) has now released this year’s first Drilling Productivity Report so we can now summarise what happened with fracking for shale oil and shale gas during 2015.

One the map you can see the areas in the USA that accounted for 92 % of the increase in oil production and 100 % of the increase in natural gas production during 2011-2014. These are the areas included in theDrilling Productivity Report . The other areas can make only small contributions to increased production and when we look into the future there are no new large areas that can begin to contribute large production volumes.

To give a complete picture of the areas with fracking I will also show this map from the EIA. The Barnett Shale in Texas is a big producer when it comes to shale gas but its production is not growing. Fracking exists in these areas today and it will exist in them tomorrow.

Shale oil was produced first from the Bakken Shale and then came Eagle Ford. Oil production in the Permian basin is a mixture of shale oil and conventional oil production and this is an area where shale oil production began later. There are not as many wells in the Permian that can rapidly deplete. When I wrote the chapter on fracking in my new book, “A world addicted to oil” I asserted that production from wells in Eagle Ford decline faster than for wells in the Bakken Shale. Visible evidence for this is that production in Eagle Ford has declined more in percentage terms than in the Bakken. The smaller shale area Niobrara has a mid-level production rate. We will now focus especially on the Bakken and Eagle Ford shales.

 If we look at the number of drilling rigs that are active in the Bakken shale then we can see that activity has contracted dramatically during 2015. In the beginning there were around 200 rigs and now the number is under 50. In Drill, Baby Drill David Hughes showed that production from the Bakken would decline by 40% during one year if no new wells were drilled. The figure shown here does not show production per well but, rather, how efficiently oil producers can utilize individual drilling rigs. It will be interesting to see what happens with future production from the Bakken shale.  

why is citibank tryna hide its investment grade fracking rig junk exposure?

zerohedge |  Earlier we reported that Wells Fargo may have an energy problem because as CFO John Shrewsbury revealed, of the $17 billion in energy exposure, "most of it" was junk rated.

But, while one can speculate what the terminal cumulative losses, cumulative defaults and loss severities on this loan book will be, at least Wells was honest enough to reveal its energy-related loan loss estimate: it was $1.2 billion, or 7% of total - as Mike Mayo pointed out, one of the highest on the street. Whether it is high, or low, is anyone's guess, but at least Wells disclosed it.

Citi did not.

Yes, the bank did disclose its holdings to the oil and gas sector at $21 billion funded and $58 billion which included unfunded (watch that unfunded exposure collapsing and shrinking the available pool of shale company liquidity in the coming weeks), and it did announce that it "built roughly $300 million of energy-related loan loss reserves this quarter", but paradoxically one thing it did not disclose was its total reserves to energy.

Note the following perplexing exchange between analyst Mike Mayo and Citi CFO John Gerspach:

Can we move to energy, though? I don't want you being the only bank not disclosing reserves to energy - oil and gas loans. I mean, I think most others have disclosed that who have reported so far. And I mean, your stock's down 7%. The whole market is down a whole lot, but I don't - even if it's a low number, it can't hurt too much more from here. And so can you - how much in oil and gas loans do you have, and what are the reserves taken against that? I know you were asked this already, but I'm going back for a second try.

: When you take a look at the overall portfolio, Mike, we've reduced the amount of exposure. Our funded exposure to energy-related companies this quarter is down 4%. It's about $20.5 billion. The overall exposure also came down about 4%. The overall exposure now is about $58 billion, that includes unfunded. When you take a look at the composition of the funded portfolio, about 68% of that portfolio would be investment grade. That's up from the 65% that we would have had at the end of the third quarter. And the unfunded book is about 87% investment grade. So while we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business. That's just not something that we've traditionally done in the past.

And yet all other reporting banks have done it not only in the past, but this quarter as well.

wells fargo needs to fire this strategist and get ken to hype abiotic rig-optimization magic...,

zerohedge |  When Wells Fargo reported its Q4 earnings last week, the one topic analysts and investors wanted much more clarity on, was the bank's exposure to oil and gas loans, and much more color on its energy book over concerns that Wells, like most of its peers, was underestimating the severity of the upcoming shale default wave.

And while the company's earnings call indeed reveals that things are deteriorating rapidly in Wells energy book, perhaps an even bigger concern for Wells investors, which just happens to be the largest US mortgage lender, should be what is going on with its mortgage book. The answer: nothing. In fact, at $64 billion in mortgage applications in the quarter, this was not only a major drop from Q3, but also the lowest since the first quarter of 2014.

Needless to say, without significant growth in Wells' mortgage pipeline and originations, there can be no upside to Wells Fargo stock, meanwhile one can kiss the so-called housing recovery goodbye for the final time, because now that the US Treasury is cracking down on criminal and money laundering "all cash" buyers, we fully expect the housing industry to grind to a near halt in the coming 2-3 quarters.

That covers the lack of upside. As for the substantial downside, here are the key parts from Wells Fargo's conference call discussing the bank's energy exposure.

your species cannot reboot its civilizational OS without fossil fuels

aeon |  In a world without readily mined coal, would there ever be the opportunity to test profligate prototypes of steam engines, even if they could mature and become more efficient over time? How feasible is it that a society could attain a sufficient understanding of thermodynamics, metallurgy and mechanics to make the precisely interacting components of an internal combustion engine, without first cutting its teeth on much simpler external combustion engines – the separate boiler and cylinder-piston of steam engines?

It took a lot of energy to develop our technologies to their present heights, and presumably it would take a lot of energy to do it again. Fossil fuels are out. That means our future society will need an awful lot of timber.

In a temperate climate such as the UK’s, an acre of broadleaf trees produces about four to five tonnes of biomass fuel every year. If you cultivated fast-growing kinds such as willow or miscanthus grass, you could quadruple that. The trick to maximising timber production is to employ coppicing – cultivating trees such as ash or willow that resprout from their own stump, becoming ready for harvest again in five to 15 years. This way you can ensure a sustained supply of timber and not face an energy crisis once you’ve deforested your surroundings.

But here’s the thing: coppicing was already a well-developed technique in pre-industrial Britain. It couldn’t meet all of the energy requirements of the burgeoning society. The central problem is that woodland, even when it is well-managed, competes with other land uses, principally agriculture. The double-whammy of development is that, as a society’s population grows, it requires more farmland to provide enough food and also greater timber production for energy. The two needs compete for largely the same land areas.

We know how this played out in our own past. From the mid-16th century, Britain responded to these factors by increasing the exploitation of its coal fields – essentially harvesting the energy of ancient forests beneath the ground without compromising its agricultural output. The same energy provided by one hectare of coppice for a year is provided by about five to 10 tonnes of coal, and it can be dug out of the ground an awful lot quicker than waiting for the woodland to regrow.

It is this limitation in the supply of thermal energy that would pose the biggest problem to a society trying to industrialise without easy access to fossil fuels. This is true in our post-apocalyptic scenario, and it would be equally true in any counterfactual world that never developed fossil fuels for whatever reason. For a society to stand any chance of industrialising under such conditions, it would have to focus its efforts in certain, very favourable natural environments: not the coal-island of 18th-century Britain, but perhaps areas of Scandinavia or Canada that combine fast-flowing streams for hydroelectric power and large areas of forest that can be harvested sustainably for thermal energy.

Even so, an industrial revolution without coal would be, at a minimum, very difficult. Today, use of fossil fuels is actually growing, which is worrying for a number of reasons too familiar to rehearse here. Steps towards a low-carbon economy are vital. But we should also recognise how pivotal those accumulated reservoirs of thermal energy were in getting us to where we are. Maybe we could have made it the hard way. A slow-burn progression through the stages of mechanisation, supported by a combination of renewable electricity and sustainably grown biomass, might be possible after all. Then again, it might not. We’d better hope we can secure the future of our own civilisation, because we might have scuppered the chances of any society to follow in our wake.

oiligarchy - how big oil conquered the world

corbettreport |  From farm to pharmaceutical, diesel truck to dinner plate, pipeline to plastic product, it is impossible to think of an area of our modern-day lives that is not affected by the oil industry. The story of oil is the story of the modern world. And this is the story of those who helped shape that world, and how the oil-igarchy they created is on the verge of monopolizing life itself.

stock prices sink in a rising ocean of oil?

NYTimes |   “The glut is the 800-pound gorilla in the room,” said Steve McCoy, vice president for drilling contracts at Latshaw Drilling, an Oklahoma service company that prospered in recent years from the American shale boom. “The world simply produced too much, and now we have to use it up or many oil-producing countries and some oil companies may drown.”

Just a couple of years ago, producers and petro-states were making vast fortunes drilling and pumping relentlessly to fuel expanding middle classes in Asia, Latin America and Africa. But suddenly they are producing more than anyone needs at a time when China and other rapidly growing economies, once hungry for energy, are pulling back.

The extra oil has sent the price of crude into a tailspin, down more than 70 percent over the last 18 months.

That, in turn, has helped depress stock markets around the world, as investors worry about global growth. The Standard & Poor’s 500-stock index is off around 8 percent in just the first two weeks of the year; European shares are down even more. Chinese stocks have dropped 20 percent from their December peak, putting the market in bear territory.

“What was once viewed as a gift is now viewed similarly to the gift of the monkey’s paw,” said Tom Kloza, global head of energy analysis for Oil Price Information Service. “Global financial damages trump the benefits of cheap oil at anything under $30 a barrel.”

It could get worse.

is the oil glut just about oil?

resourceinsights |  My favorite Texas oilman Jeffrey Brown is at it again. In a recent email he's pointing out to everyone who will listen that the supposed oversupply of crude oil isn't quite what it seems. Yes, there is a large overhang of excess oil in the market. But how much of that oversupply is honest-to-god oil and how much is so-called lease condensate which gets carelessly lumped in with crude oil? And, why is this important to understanding the true state of world oil supplies?

In order to answer these questions we need to get some preliminaries out of the way.

Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry's own engineers classify oil as hydrocarbons having an API gravity of less than 45--the higher the number, the lower the density and the "lighter" the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70. (For a good discussion about condensates and their place in the marketplace, read "Neither Fish nor Fowl – Condensates Muscle in on NGL and Crude Markets.")

Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.

Brown points out that U.S. net crude oil imports for December 2015 grew from the previous December, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. U.S. statistics for crude oil imports include condensate, but don't break out condensate separately. Brown believes that with America already awash in condensate, almost all of those imports must have been crude oil proper.

Brown asks, "Why would refiners continue to import large--and increasing--volumes of actual crude oil, if they didn’t have to--even as we saw a huge build in [U.S.] C+C [crude oil plus condensate] inventories?"

Part of the answer is that U.S. production of crude oil has been declining since mid-2015. But another part of the answer is that what the EIA calls crude oil is actually crude plus lease condensate. With huge new amounts of lease condensate coming from America's condensate-rich tight oil fields--the ones tapped by hydraulic fracturing or fracking--the United States isn't producing quite as much actual crude oil as the raw numbers would lead us to believe. This EIA chart breaking down the API gravity of U.S. crude production supports this view.

Exactly how much of America's and the world's presumed crude oil production is actually condensate remains a mystery. The data just aren't sufficient to separate condensate production from crude oil in most instances.