Compared to Him, I'm Eeyore

Reinventing Humanity
by Ray Kurzweil

[All emphasis added] [The] explosion in machine intelligence, and rapid innovation in the fields of gene research as well as nanotechnology, will result in a world where there is no distinction [...] between physical and virtual reality. These technological revolutions will allow us to transcend our frail bodies with all their limitations. Illness, as we know it, will be eradicated. Through the use of nanotechnology, we will be able to manufacture almost any physical product upon demand, world hunger and poverty will be solved, and pollution will vanish. Human existence will undergo a quantum leap in evolution. We will be able to live as long as we choose. [...]

How is it possible we could be so close to this enormous change and not see it? The answer is the quickening nature of technological innovation. In thinking about the future, few people take into consideration the fact that human scientific progress is exponential: It expands by repeatedly multiplying by a constant (10 to times 10 times 10 and so on) rather than linear; that is, expanding by repeatedly adding a constant (10 plus 10 plus 10, and so on). I emphasize the exponential-versus-linear perspective because it’s the most important failure that prognosticators make in considering future trends.

Our forebears expected what lay ahead of them to resemble what they had already experienced, with few exceptions. Because they lived during a time when the rate of technological innovation was so slow as to be unnoticeable, their expectations of an unchanged future were continually fulfilled. Today, we have witnessed the acceleration of the curve. Therefore, we anticipate continuous technological progress and the social repercussions that follow. We see the future as being different from the present. But the future will be far more surprising than most people realize, because few observers have truly internalized the implications of the fact that the rate of change is itself accelerating.

Exponential growth starts out slowly and virtually unnoticeably, but beyond the knee of the curve it turns explosive and profoundly transformative. My models show that we are doubling the paradigm-shift rate for technology innovation every decade. In other words, the twentieth century was gradually speeding up to today’s rate of progress; its achievements, therefore, were equivalent to about 20 years of progress at the rate of 2000. We’ll make another “20 years” of progress in just 14 years (by 2014), and then do the same again in only seven years. To express this another way, we won’t experience 100 years of technological advance in the twenty-first century; we will witness on the order of 20,000 years of progress (again, when measured by today’s progress rate), or progress on a level of about 1,000 times greater than what was achieved in the twentieth century. [...]

[R]esearcher Robert Freitas estimates that eliminating 50% of medically preventable conditions would extend human life expectancy 150 years. If we were able to prevent 90% of naturally occurring medical problems, we’d live to be more than 1,000 years old.

Well, we'd have the potential to live for a thousand years, but most people would die due to accidents long before then.

The full article is much longer, and offers many specific predictions about how the future's miracles will be achieved, and what affect on human society they'll have.

I take issue with the estimate that during the entire 20th century, there was only twenty years' worth of technological advance at the year 2000 rate, and therefore I disbelieve that we'll see advances during the 21st century that will more than eclipse the entire current sum of recorded human history.

For one thing, there's an enormous difference between a lab breakthrough, and full society-wide integration of a working device or technique based on that research.
DVD players, for instance, took a decade to become ubiquitous, and they weren't even a new concept, merely replacing VCRs.

Still, the trend is clearly more, faster, and I expect that the 21st century will see technological change equal to that of between Magellan and now, especially in the biosciences.

I agree completely that virtual reality will become extended reality. It won't just be an escape, or entertainment, it'll be an everyday method of interacting with geographically-dispersed people, machines, and information-gathering sensors, for both fun and work.

While in most cases we'll know whether we're operating in reality or virtual reality, it'll only be backround knowledge, just as we now keep track of day and night, but don't keep our schedules by them anymore.

'No' means no (and after a few martinis, 'yes' means no as well)

From the BBC:

Radio advertisements warning men that having sex without consent could lead to a prison sentence have been launched by the Home Office.

The campaign, which will also use magazine adverts and posters, aims to reduce the number of sex assaults that occur when a woman is very drunk.

It comes amid low conviction rates for rape cases in England and Wales.

The government may also change the law to allow juries to decide whether a woman was too drunk to give consent.

The £500,000 campaign will be followed on 20 March by adverts in men's magazines, stickers on condom machines and posters in pub toilets.

They will say that unless a woman actively says "yes" to sex then men must assume the answer is "no".

And from Microwave Man in the Times:

Caught short in a particularly unappealing city centre, I dodged into a nearby pub and finally came face to face with the most offensive advertising campaign I have ever seen.

Just across from the battered condom machine and above the urinal choked by fags was one of the posters at the heart of the Government’s new “hard-hitting campaign focusing on the issue of consent in rape cases”, the precise focus of which is men who take advantage of women who are drunk.

Scene: the inside of a prison cell, from the perspective of a man who has just walked in. On the top bunk, gazing at the camera with an expression of sexual menace, sits an old lag with rather more than porridge on his mind. Caption: “If you don’t get a ‘yes’ before sex, who’ll be your next sleeping partner?”

The message seems to be that there comes a point when a woman becomes so drunk that she is no longer responsible for her actions — an interesting, if patronising, position that implies a retrospective moral negation of her original decision to get drunk in the first place.

Whilst avoiding the temptation to fall into the ‘they’re all asking for it’ trap, three clear problems immediately arise with this well-intentioned but typically inane New Labour initiative.

Two are practical problems: Firstly, in a court of law it will be impossible to determine how drunk she was at the key moment when the ‘consent’ was given. Secondly, how is the man supposed to judge whether the woman is sufficiently drunk not to be able to give consent? No particular number of units of alcohol is given as a minimum, and even if it were given, should single men be carrying breathalysers to nightclubs with them, in case they get lucky?

Microwave Man hints at the third problem, which is one of principle: how come women are deemed to be incapable of responsibility for their drunken actions, but men can be prosecuted for theirs?

Help Wanted II - The Wait

I submitted the opinion piece to Detroit Free Press this morning. Perfect timing, as it turns out. Just yesterday, the Michigan Supreme Court declined to hear the Angry Left's argument against the referendum signatures.

Thanks again for all your help -- it came out far tighter than it went in.

Given the paper's overt bias against the referendum, though, I doubt it will see the light of MSM day.

_______________________________________


At the moment, despite the Angry Left's best efforts, Michigan will have a referendum on the ballot this coming November to end affirmative action in state hiring and college admissions.

Predictably, the chattering classes have taken a firm stand against such a thing, no matter that they are also taking a stand against the US Constitution. Consequently, the local paper has been inundated with Op Eds opposing the referendum, with scarcely a thing to balance the argument.

This is where I need your help some more -- thanks to some excellent suggestions, and coaching from our resident professional journalist, I have hacked away at the original.

So, with submission to the Detroit Free Press pending, lock and load.

_______________________________________


The Principled Case Against Affirmative Action

Judging from op-ed comments from the Detroit Free Press and Governor Granholm, affirmative action is fairness incarnate, and those who disagree carry something between a whiff and outright stench of racism.

Nothing could be further from the truth. The arguments against affirmative action are based on fundamental notions of fairness, dealing with problems rather than symptoms, avoiding institutionalized racism, and adherence to the Constitution.

In order to gauge the lie of the land, it is important to keep in mind why affirmative action exists in realms such as college admissions and public sector hiring.

The reason is singular and simple: on average, African-Americans' academic and job qualifications significantly trail those of other groups. If the person doing the selecting had nothing else to go on, they would be profoundly under represented in elite universities and public sector employment.

So what has affirmative action's opponents so exercised? How could they be against something so obviously good as diversity without being racists? In fact, the argument against group preferences is both principled and multifaceted.

Affirmative action deals with symptoms, not problems. Taking university admissions as an example, the problem is inadequate academic preparation, not racist admissions boards. By treating the symptom -- acceptance rate -- affirmative action reduces the pressure on fixing the real problem: frequently awful schools that afflict so many African-American children. At the individual level, affirmative action reduces the incentive to gaining the very academic credentials that are at the heart of the problem. Using a metaphor particularly apt for Detroiters, this is like using Bondo to deal with rust. Plastering over the symptoms does nothing to fix the rot below.

Equally galling, group preferences of any kind constitute a governmental spoils system akin to a lottery, where a few rewards are scattered arbitrarily among a larger number of applicants, all of whom are equally "eligible," since the only requirement is the correct skin color. For those who have trouble with irony, this is an excellent example. By requiring governmental racial classification, this very emphasis on skin color causes affirmative action to perpetuate the very racism against which it is ostensibly a bulwark.

What is more, since affirmative action defines diversity racially, it produces results indefensible to anyone not racially motivated. Clearly, the students who manage to graduate from Detroit's schools faced profound obstacles that are a legacy of the institutionalized racism once directed at African Americans. Equally, students who manage to graduate from schools in West Virginia's coal mining country also faced profound obstacles. Affirmative action's proponents, for whom diversity is solely a matter of skin color, would favor the former over the latter. In what way is that fair?

So far, the arguments against affirmative action have focused at the "macro" level. What are the effects on its beneficiaries? Since affirmative action at elite schools lowers the academic bar, unless admission requirements are wholly arbitrary, one might expect those admitted under its auspices to have lower graduation rates. California illustrates the case nicely.

After voters there prohibited group preferences, African-American college enrollment, overall unchanged, shifted sharply away from the prestige universities, just as affirmative action's proponents feared. However, this shift also affected graduation rates. Far more blacks were succeeding at schools like Cal-State LA rather than dropping out of, say, Stanford.

By getting students into schools for which they are academically unprepared, group preferences provide as good an example of unintended consequences as one is likely to find.

Finally, there is the little matter of the Constitution, the gold standard against which to judge affirmative action. The Ninth Amendment’s language and intent could not possibly be more clear: "No state shall make or enforce any law which shall … deny to any person within its jurisdiction the equal protection of the laws." Michigan can either uphold the Constitution, or enforce affirmative action. It cannot do both.

America's ideals lead, through the imperfect means of human agency, to the kind of society-wide fairness that comes from equal application of the law. Again with respect to college admissions, whether automatically admitting some top percentage of high school graduates, or providing admissions advantage to everyone from economically challenged zip codes, there are non-racial ways of obtaining student bodies with diverse backgrounds. Conversely, group preferences -- a euphemism for racism -- were immoral when directed against African-Americans; they are no less immoral when pointed the other way. It is time to cast group preferences once and for all into the deep blue sea and deal with problems, rather than focusing merely on symptoms.

From the Ridiculous to the Sublime

Daily Duck readers should be well acquainted with my overwhelming sense of dismay over the sorry state of the arts in contemporary society. This weekend I got a chance to experience one of the highest artistic achievements of Western Civilization amidst a setting that juxtaposed that achievement with the aforementioned sorry state that the artistic urge has led our society.

Adjoining the Walker Arts Center in Minneapolis, the very same institution that houses the infamous "Sugar Packet art" of the late notorious committer of artistic crimes Joseph Beuys, is the soon to be demolished and relocated Guthrie Theater. The Guthrie, the brainchild of Sir Tyrone Guthrie, who, being disenchanted with the deleterious effects that the profit motive wreaked upon the artistic integrity of theatrical productions on Broadway, sought to build "a theater with a resident acting company that would perform the classics in rotating repertory with the highest professional standards."

The Guthrie became a prototype for an important new kind of theater in contrast to the commercial environment of Broadway. There, the high costs associated with mounting a production increasingly mandated that shows must be immediately successful at high ticket prices. The Broadway atmosphere was conducive neither to producing the great works of literature, nor to cultivating the artists' talents, nor to nourishing the audience.

The idea of a major resident theater was introduced to the American public in a small paragraph on the drama page of The New York Times on September 30, 1959, which invited cities to indicate interest in Tyrone Guthrie's idea. Seven cities responded: Waltham, MA, Cleveland, Chicago, Detroit, Milwaukee, San Francisco and Minneapolis/St. Paul (which was not only interested but eager). Guthrie, Rea and Zeisler visited the seven cities, but were drawn to Minneapolis/St. Paul because of its location in the heartland of America, the vitality of the cultural community, the presence of a large state university and many small colleges, and the enthusiasm shown by the Upper Midwest for the new theater project.

I had seen two earlier performances of Shakespeare at the Guthrie, "Macbeth" and "King Lear". Both performances were absolutely riveting and inspiring, both for the quality of the acting and production, and, of course, for the artistic brilliance that is the hallmark of Shakespeare, the most sublime artistic genius of our civilization. I had been up to then, like most Americans, rather off-put by Shakespeare, finding his rich, intricate prose inaccessible and unpenetrable. Having learned what I had about his plays from readings in high school English class, which made the experience more a chore than a delight, I had left the Bard to the serious theater enthusiast, and contented myself with the more accessible contemporary fare of movies, novels and television.

But Shakespeare's plays were not intended to be read, but performed. One misses in a reading the pace, the inflection, and the context of the words. In a good performance the viewer gains so much additional context from the emotion, the body language, the interaction of the players, that the words spring to life, and the full brilliance of Shakespeare's vision shines forth.

Yesterday my 18 year old daughter Chantal and I attended the Guthrie's production of "Hamlet". It was a marvelous performance. It was the first starring role for the young actor who played Hamlet, 23 year old Santino Fontana. It was refreshing to see a touch of humor injected into the production, and Fontana was very good at playing the mad Prince as alternately clownish and seriously deranged. It was amazing to see how many laughs they were able to wring out of the audience while holding true to the tragic nature of the play.

On the way out of the theater we passed by a work from one of the Walker Art Center's current exhibitions, "Kiki Smith: A Gathering". It was the sculpure entitled "Born", of a fully adult naked woman being born from the womb of a deer. The sculpture showed very little in the way of expression on the part of the woman or the deer, which seemed to take no more notice of the event than as if it had been passing gas. There is probably some sort of feminist consciousness raising message being expressed that goes straight over my head, but I have to say that such works present an inaccessibility of a much different sort than Shakespeare does, a kind that I don't think can be remedied by repeated contemplation.

Here is the obligatory theoretical justification for Smith's art, from the Walker web site:

Best known for her provocative depictions of the human form, Kiki Smith has explored a range of subjects, from natural science to mythology. By turns intimate, universal, earthy, and fragile, her art renders the figure in frank, nonheroic terms, expressing its dual aspects of vulnerability and strength. Comprising more than 125 works, this Walker-organized 25-year survey reveals the startling symbolic potential in Smith’s choice of both traditional and unexpected materials in sculpture and also features prints, drawings, photographs, editioned objects, films, and installations.

The human body—both in anatomical fragments and in full figure—is at the heart of Smith’s art. “I think I chose it as a subject because it is the one form that we all share,” she says. “It’s something that everybody has their own authentic experience with.” Her earliest works investigated its form and functions, which she articulated through individual parts, suggesting flesh with delicate handmade papers and fashioning internal organs and systems from fragile materials such as glass, papier-mâché, terra-cotta, and plaster. In the early nineties, she gained widespread attention for her life-size figures in wax and bronze depicting naked female bodies in disturbing, visceral poses.

Smith’s work has long addressed the ambiguous and difficult relationship between female artists and feminist issues. In the mid-nineties, she began to engage with themes from literature, history, and folklore, reinterpreting biblical and mythological women as inhabitants of resolutely physical bodies. More recently, her vocabulary has expanded to include animals, the cosmos, and the natural world: “My work has evolved from minute particles within the body, up through the body, and landed outside the body. Now I want to roam around the landscape.” In pieces that merge human and animal, she creates new mythologies, finding in the mortality that has pervaded so much of her process the possibility of rebirth.

Though I am not bright or articulate enough to truly understand and describe the exact nature of the gulf that separates the acievements of William Shakespeare and the products of the Kiki Smiths and Joseph Beuys of this era, it doesn't take much brainpower to recognize that the gulf is indeed vast and unbridgeable. Shakespeare captured the essence of the human psyche in its timeless universality and variety, and reflected it back to us in works of great power, beauty, disturbing brutality and undeniable compassion. One can only gawk at the works of the contemporary artist and scratch one's head in bewilderment. One senses in them not a quest for universals, an attempt to represent and elevate the recognizable experiences of humanity, but a meandering jaunt through bored and alienated psyches in an attempt to lay claim to some distant and unique experience not yet reflected in humanity.

Damn the planners, full sprawl ahead!

As some people like to say, Americans are an anti-intellectual lot. It seems that view is confirmed by our penchant for bursting out of the caged confines of intellectually approved and designed living spaces otherwise known as cities, and plopping down wherever we damn well please. Why the intellectuals complain about, and why the rest of us approve of the resulting unplanned chaotic landscape known as sprawl is the topic of this review by Vincent Cannato of Robert Bruegmann's book "Sprawl: a Compact History".

What is sprawl? Bruegmann, a professor of art history and architecture at the University of Illinois at Chicago, defines it as "low-density, scattered, urban development without systematic large-scale or regional public land-use planning."

Critics charge sprawl with all manner of sin: causing global warming, pollution, and the depletion of natural resources, aiding the nation's so-called obesity crisis, increasing economic and racial inequality, destroying the family farm, and despoiling open spaces, killing off American cities, encouraging "big-box" retailers like Wal-Mart who underpay their workers and kill "mom-and-pop" businesses, and creating conformist communities whose residents neglect the public interest for their own personal "privatopia." On top of that, they argue, suburban sprawl is just plain ugly.

The ideology of the anti-sprawl camp is easy to pare down to basics. Cars and roads are bad, public transportation is good. Low-density development is bad, high density is good. Local government is bad. Regional or metropolitan government is good. Private, "unplanned" development driven by the market is bad. Planned development according to the dreams of urban planners is good. Cities are the apex of American civilization and society. Suburbs and exurbs are drab, conformist, and politically reactionary.

Sprawl: A Compact History tugs at nearly every aspect of the anti-sprawl critique and finds many of the theories wanting. Bruegmann also places the issue within the larger historical context. He attempts to show that dispersal from high-density core areas to low-density outer areas is a phenomenon common not just to modern America, but also ancient Rome and 19th-century England. He also argues that sprawl is not simply a phenomenon found in free-market-mad America, but also in more "noble" societies like Europe, Canada, and South America.
[...]
So what really lies behind the arguments against sprawl? Bruegmann seems to pinpoint the issue. Although suburban sprawl, like any other social or economic trend, creates it own set of issues, "the driving force behind the complaints at any period seems to have been a set of class-based aesthetic and metaphysical assumptions, almost always present but rarely discussed."

Although the current sprawl debate dates back to the mid-1990s, it's really a much older story. The crusade against sprawl is merely the latest saga of the battle against suburbia that began in the 1920s, blossomed in postwar America, and continues with today's jeremiads against sprawl.

It was not until after World War II that suburbia became a mass phenomenon. Thanks to a booming economy, lower down payments, and the Federal Housing Administration and GI Bill, even working-class Americans could afford a suburban home. And that seems to have set off much of the criticism. Lewis Mumford captured the feeling when he wrote that suburbia was not much of a problem when it "served only a favored minority . . . But now that the drift to the outer ring has become a mass movement, it tends to destroy the value of both environments without producing anything but a dreary substitute, devoid of form and even more devoid of the original suburban values."

John Keats published his famous satire of suburbia in 1956 called The Crack in the Picture Window, featuring suburban residents John and Mary Drone. And when counterculture icon and self-styled man of the people Pete Seeger sang about working-class suburban housing, they were "little boxes of ticky tacky."

So much for the "people."
[...]
Just a few of the conclusions that Bruegmann makes about sprawl are: commuting times nationwide have not increased dramatically; Los Angeles, often seen as the epitome of sprawl, is actually one of the densest cities in America; densities in most American cities have either leveled off or are increasing; and automobile use in mass-transit-friendly Europe is quickly catching up to American levels.

Bruegmann reminds us that, for years, planners and reformers complained not of low-density sprawl, but of high-density urban settlements. These overcrowded city neighborhoods were seen as incubators of disease, crime, and poverty by progressive reformers. It is no wonder most residents of these areas left for greener and more spacious pastures.

Bruegmann is also skeptical of the conventional wisdom among historians that federal policies, like the FHA, interstate highway system, and federal homeowner tax deduction, helped favor suburbs over cities. He also downplays racism as a factor, noting that black city residents have been just as interested in moving to the suburbs as their white counterparts. In fact, today, immigrant melting pots are more often found in suburbs and exurbs than in big cities. (I recently visited a strip mall in Rockville, Maryland, a classic sprawl community, where a halal meat shop was next to a flower store owned by Indians and across the street from a Peruvian chicken restaurant.)
[...]
While some critics of sprawl are residents of areas affected by such growth, most of the intellectual and policy critiques are driven by other reasons. The anti suburb and anti-sprawl literature betrays a growing alienation of some of the New Class from modern American society, as it continually bumps up against reality. "Within the past several decades, many of the people who still think of themselves as progressive have turned pessimistic," Bruegmann writes, "and have concluded that things have actually gotten worse rather than better." As a result, they want to limit growth (actual and economic) and wax nostalgic for an older way of life.

There is more to the debate over sprawl than just anti-Wal-Mart hysteria and anger over traffic. At heart, it's about politics, broadly speaking. The decentralizing trends in living and working patterns, first in suburbs and later in exurbs, have been deeply problematic for the Democratic party and the American left. So have the decentralizing patterns of the American economy in the last several decades, and the ongoing decentralization of information and media.
[...]
While suburban sprawl might not be everyone's cup of tea, (including mine) sprawl-like communities seem to afford a large number of people the kinds of lives they wish to lead. Sprawl critics have yet to convince large numbers of Americans that their solutions for engineering private choices about how and where to live and work will result in greater social benefits or happiness.

Sprawl is messy, chaotic, and sometimes annoying. In short, it is everything one expects from a free and democratic society. Leave the neat and clean societies for totalitarian regimes.

I would disagree with the judgment that it is messy and chaotic, unless by "chaos" you mean a landscape that sees frequent changes. I guess it all rests on your tolerance for change. Some people dread change, others need it, like their morning cup of coffee. I'm in the middle, though I lean toward the change side.

I think that the intellectual establishment's biggest gripe stems from the fact that noone is in charge of sprawl. It is unplanned. More accurately, it is not centrally planned. Modern intellectuals are the heirs of Plato. They love the idea of things more than the things themselves. They have an ideal view of society and the people that inhabit it, an ideal that is orderly, symmetrical and aesthetically pleasing. When they zoom in to the atomic level, the level of actual individuals and the choices they make, they are horrified, as if they are seeing germs through a microscope on a surface they believed to be clean and spotless.

This view of society is more comfortable with representative collectives of people rather than individuals. They'd rather that people stay within their class, their collective economic or ethnic identities, as proletarians, or "people of color". Cannato is right to point out that this is a view that aligns nicely with totalitarianism. It is a view that has mostly found itself on the left side of the political spectrum, but it appears that bad ideas have a way of replicating themselves. I'd say that the nascent "Crunchy Conservative" movement borrows much of this longing for a more tidy, collectivized citizenry than what the unruly, individualistic American ethos will give them.

Home Equity had Best Count as "Savings" - 'Cause That's All the Savin' We're Doin'

From the Thoughts from the Frontline newsletter.
[All emphasis added.]

"Central Bankers of the World, Unite!"

That at least seems to be the theme from the central banker's playbook. The US Federal Reserve, The European Central Bank and now even the Bank of Japan all seem to be in a mood to tighten the global money supply. [...]

One of the more important aspects to global growth has been the "quantitative easing" policy of the Bank of Japan. Basically, they have put about Y30 trillion into the world since 1999, with Y20 trillion of that coming since 2003. They have flooded the world with liquidity, at almost exactly the same time as the US Fed was aggressively lowering rates. Japan has been a main source of capital and savings for the world. Now that looks like it is going to change. [...]

[T]he European Central Bank [has] raised interest rates, and optimistically projected European growth to be higher. European Central Bank President Jean- Claude Trichet said, "...projections for the annual average rate of growth are in a range between 1.7 and 2.5% in 2006 and between 1.5 and 2.5% in 2007." While we should note that if the Bush administration made such a proclamation, it would be considered a disaster, this is actually an increase in the estimates for Europe. When combined with his recent and frequent use of the word "vigilant" every time he talks about inflation, it seems to indicate that the ECB is not through with its rate increases. Cheap European money and credit is on its way out the door.

And with the recent strength in the US of the ISM numbers, it appears the US economy is going to turn in a very respectable GDP number this quarter. It makes a rate hike this month a lock, increases the probability of a hike in May and maybe one more in June. I am not alone in that thought. Market expectations (using CBOT futures prices) suggest that there is a 100% chance of a rate hike in March, a 78% chance in May, and a 67% in June. Futures pricing even suggest a better than even chance for a fourth rate hike in August! [...]

In short, all three major central banks, and a lot of smaller central banks, are going to either tighten their money supply or continue to raise rates or both. Yet, investors and banks continue to lend money and demand less risk premium. Such a combination does not usually end in happiness. It reminds me of Mad Magazine's Alfred E. Neuman. "What? Me Worry?"
When central banks tighten simultaneously, bad things can happen. Think of the tightening in 1997 and then the Asian and Russian problems in 1998, or the serious tightening in 1999 and 2000 and the stock market corrections in 2001-2003.

Reduced liquidity and rising interest rates are slowly being translated into higher mortgage rates, slowing the rise in home prices and cash out refinancing. As I wrote last summer, the Fed is clearly bent on stopping a housing bubble in its tracks. They hope to be able to engineer something similar to what has happened in both the United Kingdom and Australia, where both countries experienced an even greater housing price increase than in the US, their central banks raised rates and yet did not see a falling of home prices or a bursting of a bubble. Home prices in those countries simply went flat.

Are higher interest rates having an effect on the housing market? The clear answer is yes. RealtyTrac (www.realtytrac.com), the leading online marketplace for foreclosure properties, [recently] released its January 2006 Monthly U.S. Foreclosure Market Report, which shows 103,540 properties nationwide entered some stage of foreclosure in January, a 27% increase from the previous month and a 45% increase from January 2005. The report shows a January national foreclosure rate of one new foreclosure for every 1,117 U.S. households, continuing an upward trend in which the national foreclosure rate rose in every quarter of 2005.

An interesting series of stories on foreclosures in the Charlotte Observer in North Carolina illustrates the problem. As they report, FHA loans are failing in Charlotte at nearly twice the national level. But the reasons for failure are interesting. Many of the failures are on the lower end of the economic scale. A new mortgage industry grew in the mid-1990s, offering loans at higher interest rates to people who don't qualify for traditional loans. Such loans account for about 10% of all home purchase loans but result in at least 24% of local foreclosures, the Observer found.
More than 40% of failed loans in Charlotte involved an arranged gift from a charity to cover the borrower's down payment. It's a practice the FHA is reviewing because such loans fail 76 percent more often. Further, more than 20% of foreclosures resulted from defaults on loans taken after the home purchase. The cash out financing was at such high interest rates that it pushed the families into economic problems. Let me state that I am all for lenders willing to make home loans to riskier type accounts. The stability of an area is improved when you have more home owners, and I am all for people having a chance to own their own homes. But it will involve more defaults. In certain streets in Charlotte, up to 20% of the homes are in foreclosure. That does not help property values for the remaining home owners.

The Fed is going to get what it wants: home price increases are going to come down and then go flat. [...]
A large number of homes in hot markets have been bought by "investors," using adjustable rate mortgages with little or no equity. They intend to either flip the house or rent them. The increased cost of holding those homes is going to make it difficult for those investors who do not have some deep pockets. Right now, in many of the hot markets like San Francisco, LA, New York, Miami, DC and Las Vegas, it is much cheaper to rent than to buy. According to an article in [the] Financial Times, the extra cost of ownership to renting in those markets is anywhere from 50% to almost 100% more!

Let's recapitulate. Cash out refinancing is dramatically slowing down, and as interest rates rise, will slow down even more. Home price increases are also going to slow down and stop. The Fed is going to continue to increase rates until that trend is well and truly broken. Rising rates make homes less affordable so fewer homes will be sold. Since much of the recent growth in the US economy relates directly to housing, that growth is going to slow down. Consumer spending is also slowing as a result.
And then along comes Japan and suggests they are going to start to take away the world's liquidity punch bowl. They will not do so rapidly, but do it they will. This will eventually have an effect on financing costs world wide. It helped while they were easing and it will have the opposite effect as they take that easing policy away. [...]

This is just one more reason why I think we are going to see a slowdown in the economy that latter part of the year. And it is one more reason why I think the broad equity markets are going to have a very difficult period.

I want to close with this rather troubling survey released this week by the Financial Services Forum. The headline for the press release was "Survey finds that half of all Americans worried about retirement security." There is a good reason for them to be worried. [...]

This is in response to the question "How much did you save last year for retirement, including such savings plans as IRAs and 401ks?" Read it and weep.

[31% of people aged 50 - 64 saved $ 1,000 or less, and an additional 12% saved less than $ 5,000. Among those who had saved $ 25,000 or less, those aged 35 - 49 saved at a rate 50% higher than those aged 50 - 64 did. 33% of those aged 50 - 64 didn't give an amount, for various reasons.]

Assuming the 33% that did not respond breaks out more or less in the same percentages as those who did respond, we find that 67% of the people aged 50-64 saved less than $10,000 last year. Over 40% saved less than $1,000!!! [...]

Interestingly, only 51% of those age 50-64 are worried about retirement. This tells me that a lot of people are not really focused on their retirement, or have some very unrealistic expectations about how well they will live on Social Security. This squares with other surveys I have written about. A majority of Americans expect to work either full-time or part-time after retirement. The above data suggest they will not have a choice, as their savings will not be there.

~ John Mauldin

Same source, different week:

Americans are clearly the richest people on earth. Or are they? With some $50 trillion in stocks, bonds and real estate, we are watching our net worth grow each year. Some argue that the low US saving rate is not a problem as real net worth is growing fairly rapidly. But not for the average family.
A survey by the Federal Reserve Board's Survey of Consumer Finances offers us the most detailed recent look at the balance sheet of U.S. households. The median family has about $3,800 in the bank, do not have a retirement account, has a home worth $160,000 with a mortgage of $95,000. No mutual funds, stocks or bonds populate their investment portfolios. They make (jointly) $43,000 and struggle to pay off their $2,200 in credit card debt. That means 50% of Americans are in worse shape than the above. It is not a pretty picture.

Stringed along

From ‘Myths of Iraq’ by Ralph Peters:

During a recent visit to Baghdad, I saw an enormous failure. On the part of our media. The reality in the streets, day after day, bore little resemblance to the sensational claims of civil war and disaster in the headlines.

No one with first-hand experience of Iraq would claim the country's in rosycondition, but the situation on the ground is considerably more promising than the American public has been led to believe. Lurid exaggerations and instant myths obscure real, if difficult, progress...

...the real story of the civil-war-that-wasn't is one of the dog that didn't bark. Iraqis resisted the summons to retributive violence. Mundane life prevailed. After a day and a half of squabbling, the political factions returned to the negotiating table. Iraqis increasingly take responsibility for their own security, easing the burden on U.S. forces. And the people of Iraq want peace, not a reign of terror.

But the foreign media have become a destructive factor, extrapolating daily crises from minor incidents. Part of this is ignorance. Some of it is willful. None of it is helpful.

The dangerous nature of journalism in Iraq has created a new phenomenon, the all-powerful local stringer. Unwilling to stray too far from secure facilities and their bodyguards, reporters rely heavily on Iraqi assistance in gathering news. And Iraqi stringers, some of whom have their own political agendas, long ago figured out that Americans prefer bad news to good news. The Iraqi leg-men earn blood money for unbalanced, often-hysterical claims, while the Journalism 101 rule of seeking confirmation from a second source has been discarded in the pathetic race for headlines.

To enhance their own indispensability, Iraqi stringers exaggerate the danger to Western journalists (which is real enough, but need not paralyze a determined reporter).

Dependence on the unverified reports of local hires has become the dirty secret of semi-celebrity journalism in Iraq as Western journalists succumb to a version of Stockholm Syndrome in which they convince themselves that their Iraqi sources and
stringers are exceptions to every failing and foible in the Middle East. The mindset resembles the old colonialist conviction that, while other "boys" might lie and steal, our house-boy's a faithful servant.

The result is that we're being told what Iraqi stringers know they can sell and what distant editors crave, not what's actually happening.

While there are and have been any number of courageous, ethical journalists reporting from Iraq, others know little more of the reality of the streets than you do. They report what they are told by others, not what they have seen themselves. The result is a distorted, unfair and disheartening picture of a country struggling to rise above its miserable history.

Two unvarying laws of mainstream news reporting:

1) All editors prefer bad news to good news.
2) For some reason, people are far more likely to believe bad news unquestioningly, however exaggerated or far-fetched it may be.

Totally Unconnected

The Mortgage Bankers Association expects mortgage originations to drop off by 20% this year, and it says refinancing should fall by 40%.

"Too many consumers have been attracted to products by the seductive prospect of low minimum payments that delay the day of reckoning, but often make ultimate repayment of growing principal far more difficult." Speaking was U.S. Comptroller of the Currency John C. Dugan, and what he was speaking of, specifically, was the way in which consumers took out interest-only or negative amortization mortgages. "In the last two years" Dugan continued, "we have seen a spike in the volume of payment-option ARMs, which are no longer confined to well-heeled borrowers who can clearly afford them. Increasingly, they are being marketed as 'affordability products' to borrowers who appear to be counting on the fixed period of exceptionally low minimum payments - typically lasting for the first five years of the loan - as the primary way to afford the large mortgages necessary to buy homes in many housing markets across the country."

We already know what will happen. We see the signs before us. Foreclosures are rising. Households which bought more house than they could really afford are going broke. Consumer spending has become a little wobbly. The expected effects on the housing market itself are starting to show up. Sales of homes are down. Inventories are rising.
In California, the housing boom has raised prices to the point where the median wage earner in L.A. County can only afford one out of every 35 properties on the market. We wonder who, then, will buy the other 34?
Other people are beginning to wonder, too. Transactions in January fell 24% from the year before.

Speaking of prices, "I would expect a general decline of 5% to 10% throughout the country, some areas 20%...and in areas where you have had heavy speculation, you could have 30%," says Angelo R. Mozilo - a man who ought to know. Mr. Mozilo is the CEO of the nation's largest mortgage lender, Countrywide. While we have no reason to doubt Mozilo's words on the subject, it is his actions that we'd bet on.
According to Grant's Interest Rate Observer, Mozillo "has been a steady and heavy seller of Countrywide common stock for two years."

Fully 40% of the job growth since 2001 is said to be the fruit of the housing boom...

~ Bill Bonner

A copy of Humberto Ortega's history of the Sandinista revolution was sent
to us by a friend from Managua. Humberto Ortega, along with his brother
Daniel, was a leader of the Sandinistas.

Senor Ortega begins by giving us a history of Nicaragua and the role
played in it by his own family. The impulse to improve the world, we
notice, may be genetic. Ortega, the elder, was also an activist and an
admirer of Madame Blavatsky, the Russian émigré to the United States who
founded the Theosophical Society. He was also a supporter of the original
Sandinista, Augusto C. Sandino, who had begun a revolutionary movement in
the '20s and 30s. Sandino's goal was to get the U.S. marines, who had been
sent to meddle in Nicaraguan affairs by William Howard Taft, out of the
country. Sandino figured the country would be better off without them.
Others figured the country would be better off without Sandino, so they
killed him. And then, the policia put Ortega in jail when they realized he
was a Sandino supporter. "I long to be at your side and fight for our
country, liberty and national honor," Ortega senior had written to
Sandino.

We read Ortega's history with a mixture of boredom and despair. It is a
long recitation of people making remarkably naïve and idiotic decisions
that had predictably preposterous and disastrous consequences in the
course of a long war of terror. But most of all, it is the story of a
frightfully tedious revolution. Ortega tells of many trips back and forth
to Cuba, endless meetings and rendezvous, and long periods spent in jail.

Even though by the 1970s Marxism was already démodé as a model for
democratic liberation, the brothers Ortega and their fellow world
improvers still traveled around the world - taking advice and arms from Ho
Chi Minh, Che Guevara and other homicidal dreamers.

At first, the Sandinistas organized a war of terror against the Somoza
regime. Somoza may have been a pig, but according to Ortega's account, his
regime was - like the Tsarist regime overturned by the Bolsheviks -
surprisingly restrained in its treatment of potential revolutionaries.
Humberto Ortega must not have been a very good revolutionary. He was
always getting arrested. Yet, somehow, he always regained his liberty and
went back to work trying to undermine the government that let him get
away. Stalin wouldn't make the same mistake. His enemies never got a
second chance. By some accounts, the Ortega's enemies didn't either. After
the wars were over, as many as 14,000 cases of torture and murder by the
Sandinista police forces were alleged. [...]

Nicaragua was richer per capita than Costa Rica before the terror wars began.
When they were over, it was the poorest country in Latin America.

~ Bill Bonner

Them Businesspeople is Crazy, I Tells Ya, Crazy !!

This is from Share The Worlds Resources.

George Soros, irrationality and contrarian activism
By Max Keiser

The typical activist approach of trying to get rich countries and companies to 'share the world's resources' fails to take into consideration how the individuals in these countries and companies got rich to begin with. What activists don't understand is that the process of accumulating wealth is rarely a rational, direct path. Trying to appeal to the rich to act rationally is therefore, in most cases, folly. [...]

Financiers and speculators call this form of antagonism-for-profit 'contrarianism' and it forms the basis of an entire school of finance that attempts to figure out where the 'crowd' is heading, and then do the opposite. Some quick examples of how this works:
1) the put-call ratio in the options markets. What this number tells contrarians is where most of the speculators are making bets in the markets, and as most speculation ends up in losses it makes sense, according to the contrarian doctrine, to bet the other way.
2) Another contrarian speculating strategy is to look at where professional money managers are placing their bets with their professionally managed funds. Again, since most professional money managers fail to 'beat the market,' it makes sense to do the opposite of whatever they're doing.

Probably the king of contrarianism is the most successful investor in the history of Wall Street: George Soros.
He's taken the contrarian concept and developed it even further into what he calls his theory of 'reflexivity' or the 'human uncertainty principle'. What Soros has observed about markets is that contrarianism itself can breed second and third generations of contrarianism that is self referential or 'reflexive' that, instead of doubling back and ending up where it started, has the power to change the underlying market fundamentals in ways that make the contrarian assumption the de factor market norm. When such situations develop, it's only a matter of time before [...] we get what Soros calls a 'return to equilibrium', i.e., a crash. [...]

[I]dentifying these inflection points, where the market suddenly realizes that its assumptions are worth zero, [can lead to] great fortunes [being] made [by] betting the other way. Soros caught the crash in the English pound back in 1992 using this technique and pocketed over 1 billion dollars in one day.

The point I'm making here for activists is that [the] activists' approach to changing the way business treats the environment relies almost entirely on trying to get business people to act more rationally. And yet, to get to where they [are], these business leaders have relied mostly on obeying the voices in their head that the status quo claims are irrational. [...]

So does this mean that NGO's should give up?
No. What it does mean, however, is that NGO's should consider adopting new strategies that will tap into businessmen's love of the irrational.
For environmentalists, I think carbon trading offers a huge opportunity to turn the tables on business and use the power of irrationality for a positive change. Take a group like Greenpeace for example. They have over 100 million dollars sitting in the bank collecting money market interest. For all intents and purposes, this money is what Wall Street would call, 'dead money.' I propose the following. Greenpeace should start organizing a banking crusade with their money and other NGO money (NGO's combined operating budgets are worth 1 trillion dollars) and start buying Carbon Credits in the open market for the current price of approximately 8 dollars a ton. (The EU has started a program of capping carbon emissions for corporations; but giving them the opportunity to go over their cap by buying 'credits' from companies whose carbon output is below the cap).

This would set up an irrational [i.e., contraintuitive to Leftists] chain reaction, each part of which represents a net positive for the environment.
First, the price of carbon credits will be pressured upward thanks to the speculative buying [...]. Corporations who are banking on the price of carbon credits to remain in a certain range will [...] in many cases be forced to buy more credits than they had planned to in the short term to give themselves the kind of hedging protection these carbon credits offer for their carbon abuse. [!!!] This will drive the price even higher. [...]

[H]igher carbon prices will incentivize companies across the business spectrum to put forward various carbon-efficiency schemes as a way to make money with their excess credits. The money a company makes chasing carbon efficiencies could equal if not eclipse the profits made burning carbon. The government in turn, has the ability to lower the carbon caps greasing this contrarian cycle even more by making carbon more expensive, thus providing more incentive to produce greater efficiencies.

On paper, activists will look at this and balk. They don't like the idea of commoditizing nature. They don't understand why a company would engage in such a scheme. They don't like the fact that the whole thing seems irrational, but that's the point. Business today runs on irrationality and until NGO's adapt, they'll always be behind the curve.

You would think NGO's would have already figured this out. They know for example that ExxonMobil's business model is irrational to the bone. ExxonMobil extract irreplaceable natural resources for virtually nothing, sell them for a fraction of their replacement costs and then we burn them without ever having to pay the environmental costs; all this resulting in parts of CO2 per million in the atmosphere breaching the 'can't go back' levels where the species (ours) is put on the extinction watch list.

ExxonMobil's business model is irrational and suicidal. NGO's know this, so why do they insist in trying to get Exxon to act rationally when nothing in Exxon corporate DNA suggests they even understand what that word means.
Exxon is not rational, but they are profitable. For NGO's to attack their rationale is a non-starter because the company knows it's irrational and doesn't care. Environmentalists, to win against this insanity, must tear a page out of the irrational's handbook in order to effectively combat the current trends blighting our futures. The carbon trading scheme mentioned above is a step in that direction. As distasteful as it must seem for NGO's to drink the 'Koolaide' that runs business, not to do so at this point is completely irrational.

###

Well. Where to begin.

Soros is clearly not "the king of contrarianism", nor "the most successful investor in the history of Wall Street", but those are quibbles. He's good at both, even if not the best ever. (Or even of his generation).

I left in the parts about "drinking the business Kool-Aid", ExxonMobil "extracting irreplaceable natural resources" for "virtually nothing" and "selling them for a fraction of their replacement costs", and "parts of CO2 per million in the atmosphere breaching the 'can't go back' levels where the species (ours) is put on the extinction watch list" for their amusement value.

The "GlobalWarming™ leading to human extinction" nonsense is as nutty as it is ignorant; even the global warmers' own models show only a slight increase in temperatures.
If their clearly flawed models were correct, then billions of humans would die, but the species would be in no danger, and we wouldn't end up living only at the planetary poles, or whatever other nonsensical SciFi fantasy is in vogue right now.

The thought that the oil industry expends no money or effort to find and produce crude oil is a likewise puzzlingly ignorant fantasy, one that would take only thirty minutes or less of research to dispel - if one had any interest in being well-informed on the subjects that one writes about.
Sadly, many people find it agreeable to hold strong opinions on subjects about which they know absolutely nothing, even when knowing the basics would take very little time or effort, the recent/ongoing UAE ports deal dust-up being a perfect example.

Also, why would we want to replace crude oil, or refrain from using it, except to avoid air pollution ?
It's not like it's doing anything but sitting there. Trees, for instance, dynamically interact with the environment and with humans, and so it's problematic to use too many of them at one time, but in situ crude is passive.

All that aside, the reason that I posted this is because Mr. Keiser, loon though he may be, is absolutely correct. This is the best approach for NGOs that wish to lower carbon emissions: Get everyone to agree to establishing a market in carbon emissions, and then corner it.

Hie On Over

We were right to invade Iraq

The failures of occupation may be legion, but at least we confronted Saddam at a time of our choosing

By Oliver Kamm
Tuesday March 14, 2006

It is not a vulgar tu quoque to point out that those who supported regime change in Iraq are far from exceptional in having some explaining to do. Mistaken ideas have consequences, even when the inference drawn from them is a counsel of inaction. Had we not overthrown Saddam, Iraq today would be far from tranquil.
Many argue that the absence of WMD shows that western policy had been working. It was in reality unravelling fast, and few opponents of war treated the problem seriously. [All emph. add.]

· Oliver Kamm is the author of Anti-Totalitarianism: the Left-Wing Case for a Neoconservative Foreign Policy

Go to Think of England, and follow the link from Brit's latest post. The article is short but incisive, and well worth reading in entirety.

A Few More Canaries Gently Fall From Their Perches

This from a doctor who currently lives in Key West, Fla.:

"My landlord died two weeks ago."

"There are four apartments and three rooms renting in an old decrepit building he owned. He had it on the market 'for sale by owner,' for $2.8 million.
Last Thursday, his son came down to take care of his estate. The price dropped to $1.95 million.
I know the attorney who is working with the son. The price will soon drop to $1.8 million."

"Across the street, a former homeowner took a similar sized house to the one I am living in. He spent hundreds of thousands to subdivide it into three condos. The cheapest was $900,000, the most expensive was $1.3 million, and the third unit went for $1.15 million."

"Those three condos were on the market for over a year. Four months ago, some guy finally bought one of the two more expensive condos. I found out yesterday that this new owner had already folded his tent. He couldn't make the second or third payments on his new condo. He sold his condo for an immediate $400,000 loss."

"Now he doesn't have a place to live in Key West and he still owes some lender $400,000. Wow!"

"Next door, there are five condotels. They were formerly part of the great White Street Inn, which stayed fully occupied most of the year.
Well, the White Street Inn owners wanted one big payday. So they closed down the nightly rentals, renovated the place into five condos, and opted for the condotel designation, which meant renters had to rent for a week. But the benefit is the new owner of the condotel had to pay no bed taxes to the city for infrastructure in return for not renting the place out nightly."

"A funny thing is happening to all of these condotels: They are not occupied more than 25% of the time. Most of the time, they are dark and vacant."

"Those units initially sold for $1.2 million. Two of those units are on the market now, today, for $750,000 and $800,000, respectively. We can only speculate that the sap investors who were assured that 'Key West is HOT, HOT, HOT and you'll never have a problem keeping this place rented out,' are now deep underwater carrying mortgages that their sparse rentals can't possibly cover, so that they were forced to drop the prices on their places to meet new realities."

"Anybody buying a house in this town at this time is trying to catch a falling guillotine."

"There was a young respected realtor in Key West who last year at this time was quoted as saying, 'You will never see another house in Key West sell for less than $600,000 again.' His reasoning, like most of the herd: Key West is a very tiny island, land is at a premium, real estate prices are finally catching up to 'realtor vision'. Real estate will continue to double every few years."

"Last week, the newspaper resurrected his quotes. There are houses not only under the $600,000 mark, but at this moment, there are 11 houses in Key West under the $500,000 mark.
I looked at two of them yesterday. One was a 'cottage, 284 square feet,' and the other was a 'cute little condo bungalow' of 300 square feet. These two 'investment properties' listed for $390,000 and $395,000, respectively. In former years, they were basically toolsheds. Those two toolsheds will be back to reality before this is all over."

"The MLS listings down here do not include 'for sale by owner' properties, which have sprung up everywhere in Key West. All these homeowners, upside down on fast-depreciating homes, are now trying to save the commissions the realtors would have gotten, by doing it themselves.
If you averaged in the 'for sale by owner' prices, the fastest falling on the island, prices have easily fallen over 25% in six months. But the MLS only averages the MLS listings. They don't want to mess up the cartel pricing with reality. That could cause a bigger rush to the exits than what is just beginning now."

"Things are much worse in Key West real estate than the real estate cartel, i.e., realtors, appraisers, mortgage shop owners, builders, et al., are letting on."

"If you want to buy a Key West home, here's what you do: Keep working. Save your money. Come down here several years from now. Buy while there is blood in the streets."

Another sign:
The St. Joe Corp. (NYSE symbol: JOE) is a giant bellwether of U.S. real estate stocks. The developer is the largest private landowner in the state of Florida.
St. Joe's stock price is having a very bad 2006, sliding to its lowest levels since 2004.

This is either a great chance to buy land cheaply, or a bad sign for Florida real estate.
Long term, I'm guessing the former. 78 million Boomers are going to create a huge demand for southern homes over the next 25 years, even if only winter residences.

Debunking the "Abiotic" Theory of Petroleum Formation

This is from the always-interesting Whiskey and Gunpowder.

It's a heavily edited adaptation of two articles that can be found here in entirety:

Peak Oil, Deep Oil: Part I
Peak Oil, Deep Oil: Part II

By Byron W. King


SOME PEOPLE ARE just plain skeptical of the entire Peak Oil thesis. They believe that the deep crust of the Earth may hold untold quantities of oil and gas. The theory is that, at great depth, there are immense hydrocarbon resources just waiting for the driller's bit to find and deliver to the surface. It goes back to some scientific work that the Soviets performed in the 1930s, and more recently to the work of the late Thomas Gold, a former professor of astronomy at Cornell University.

The first principle in all of this is that the most abundant element in the universe is hydrogen. (The late Frank Zappa used to say that the most abundant element in the universe was stupidity, but this gets away from the subject).
This abundant hydrogen, goes the thinking, was the direct precursor for the petroleum that we find today in the crust of the Earth. The theory states that when our planet formed from primordial dust about 4.5 billion years ago, a large measure of elemental hydrogen was incorporated throughout its composition.

The sun is a big ball of (mostly) constantly fusing hydrogen. At its surface, the sun is exploding with the intensity of about a bazillion hydrogen bombs every second. (Somebody has surely figured out the exact number. For now, just assume it is a bazillion.) But the sun's own immense gravity keeps it all in some semblance of spherical balance, so all we receive here on Earth is the sun's light and heat radiation, plus certain other particles and waves.

The inner planets of the Solar System -- Mercury, Venus, Earth, and Mars -- are composed primarily of metals like iron and nickel and other forms of complex minerals and rock. (The mantle of the Earth is mostly olivine, in case you are wondering.)
The outer planets -- Jupiter, Saturn, Uranus, and Neptune -- are what are called "gas giants," with substantial components of hydrogen making up their composition. (Forget about Pluto and Planet X, which are not relevant just now.)

The cosmological theory is that, when the solar system was being formed, the gas from the inner regions was pulled by gravity inward toward the center to form the sun. Thus, the heavier matter, which did not get pulled inward, was left to form the inner planets that orbit the sun on the same planetary plane. The result is the four rocky inner planets, with their metal cores. The gas in the outer regions of the solar system was, over time, swept up by gravitational forces into the gas giants.
Enough of this. If you want more, watch Star Trek.

So according to the theory, a not insignificant amount of hydrogen was also incorporated into the formation of planet Earth. Over the intervening 4.5 billion years, this hydrogen has chemically reacted with metals and carbon, in various forms and at great depth within the Earth, to form methane gas and even more complex hydrocarbons, like oil. These volumes of gas and oil are supposed to have seeped upward into the continental crust over time, to where mankind now has accessed these oil and gas deposits by drilling.

The famous Russian chemist Dimitri Mendeleev, whose pioneering work led to the creation of the periodic table, was the first to propose what has been named the "Carbide hypothesis" to explain the origins of petroleum. Mendeleev's science makes a lot of sense, as far as it goes.
His assumption is that deep within the Earth there are compounds called metal carbides, which react with water in the form of hydrothermal solutions. In the most basic case, iron carbide plus water reacts to form iron oxide (better known as "rust") plus acetylene, the well-known industrial gas.

The acetylene molecule is composed of two carbon atoms and two hydrogen atoms. The two carbon atoms are tightly connected by three powerful electron bonds, hence the rather high energy state of acetylene. (This is why people use acetylene for metal-cutting purposes. Many years ago I worked as a welder and metal cutter. I know firsthand how hot acetylene can burn, particularly when a drop of molten steel falls down into your boot).
At elevated temperatures, such as are found deep within the Earth, acetylene polymerizes to form benzene and a complex mix of other "long-chain" and "aromatic" hydrocarbons. Presto, petroleum, goes the theory.

Cornell's Gold referred favorably to the Mendeleev work, and also proposed the well-known "Fischer-Tropsch reaction" as an additional mechanism for the formation of complex hydrocarbon molecules at depth. The chemistry is pretty straightforward. Carbon dioxide and hydrogen react to form carbon monoxide and water vapor. Add more hydrogen to the carbon monoxide, and the reaction creates methane gas and water vapor. Again, presto, methane.

Both of these chemical reactions, "metal carbide" and "Fisher-Tropsch," have been successfully demonstrated countless times under laboratory conditions. This type of chemistry is what backs up the claims by some people of the so-called "abiotic" origin of oil and gas. That is, goes the argument, oil and gas are not the highly refined organic remains of ancient life forms such as the well-known "dead dinosaurs." Instead, oil and gas are substances of almost primordial origins, rooted in the elemental hydrogen cloud out of which Earth formed 4.5 billion years ago.

In essence, according to the abiotic theory of origins for oil and gas, humankind can have almost unlimited amounts of hydrocarbon resources, if the oil industry could or would just drill deep enough wells. It all sounds so cracking good, but maybe we had better look into the properties of oil and gas and get into some of the science of geology.

True to prediction, deep Earth actually does produce abiotic methane. You can detect methane gas, in minute but measurable trace quantities, discharging from the world's midocean ridges, which are connected by volcanic vents to the Earth's upper mantle. Methane gas also can be found venting from some volcanoes, which are a connection between the Earth's surface and the high-temperature zones within the Earth's deep crust, if not its upper mantle. And there is even some small amount of methane gas in some hard rock deep mine shafts.
I do not mean coal mines, which tend to accumulate gas that vents from the coal seams. I mean hard rock mines dug into the deepest, hardest, and oldest granites, gabbros, and metamorphic rock facies you can imagine. There are no "dead dinosaurs" in these rocks, so something else is going on.

Obviously, the methane from midocean ridges, volcanoes, and hard rock mine shafts has to come from somewhere. And at least some of the evidence is that it comes from "down there," from deep within the Earth. So no one is denying the chemical possibility of the existence of abiotic methane welling upward from within the Earth. The dispute is whether or not there is evidence that abiotic methane is, or has ever been, produced in sizable quantities.

As with most things that are part of the oil business, you have to be ready to "think big." But at the risk of getting ahead of the story, the best evidence is that the amount of methane generated from deep sources within the Earth is exceedingly minor. It is certainly minor when compared with what one finds in what are considered commercial hydrocarbon deposits.

In addition, while there is some evidence of abiotic natural gas in the form of methane, there is next to no evidence to indicate the abiotic creation of the literally tens of thousands of complex hydrocarbon molecules that are found in crude oil.
It is one thing to perform a "Fisher-Tropsch" transformation and turn carbon dioxide and hydrogen into water vapor and humble methane gas. It is quite another thing for the chemistry behind the "metal carbide" and "Fisher-Tropsch" reactions to occur on a massive scale, if not on a planetary scale, creating vast quantities of abiotic natural gas, let alone oil, that seeps upward from the Earth's mantle or deep crust.

One good test to discriminate between an abiotic origin for hydrocarbon molecules, versus an organic origin ("dead dinosaurs," as noted above), gets into the field of stereo chemistry. If you took a decent high school biology class, at least before most U.S. high schools dropped such material from the curriculum because it took resources away from football programs, you may remember that most organic biological compounds are optically active.
That is, when you view optically active substances through a microscope, they tend to rotate a beam of polarized light. This has to do with a chemical concept called "chirality." Two molecules can have the exact same chemical composition, and include almost all other physical properties, but they are mirror images when it comes to the structure of the atoms that make up the molecules. The two mirror image compounds are called "enantiomers" of each other.

Biological synthesis almost always forms compounds that are "left handed" or "levorotary," and which rotate polarized light to the left. Whereas abiotic synthesis tends to produce samples of organic molecules that are equally "levorotary" ("left-handed") or "dextrorotary" (that is, the latter substances rotate polarized light to the right). Got it?

So with this bit of chemistry as background, what do we find out in nature? If oil or gas were truly of abiotic origin, samples viewed under a microscope with polarized light would tend to be half levorotary and half dextrorotary, because that is what happens under conditions of abiotic origin. But that is not what we find. Almost every sample of oil and gas ever analyzed has demonstrated levorotary properties, a statistic that leans decidedly toward ancient biological origin. That is, "dead dinosaurs."

What about those samples from the midocean ridges, volcanoes, and deep mine shafts? They too are almost all levorotary, although, in fairness, there are a few samples that have surprisingly large amounts of "dextrorotary" molecules as well. What is this telling us? Probably that while some of the carbon compounds that come from the deep regions of the Earth's crust or upper mantle are abiotic, most are recycled carbon from the surface. The mechanism for recycling the carbon is most likely subduction of the Earth's crust (a key concept in the field of plate tectonics) or deep penetration by hydrothermal solutions that carry down organic matter from above.

How deep into the Earth can material penetrate if it originated on or near the surface?
By way of answer, there was a recent article in Science magazine, concerning garnet intrusions in diamonds. Diamonds are found in a type of geologic feature known as kimberlite pipes, named after a location in South Africa. These pipes are corridors of an utterly unique type of rock that cooled from a molten state, and which originated far down in the Earth's mantle. Some researchers have estimated the depth of origin of the kimberlite mantle as being near 150 miles below the Earth's surface, or dozens of miles below even the deepest portions of the Earth's crust. Yet some diamonds, which are a form of pure carbon, have small inclusions of garnet in them.

How did the garnets get there? What is going on? The geochemistry is complex, but the short version is that these garnets could only have originated from shallower crust that was pulled down deep into the Earth's mantle and incorporated into the mantle material that erupted through the kimberlite pipe.

If large quantities of hydrocarbons were originating within the deep Earth, as the "abiotic" oil theories suggest, then let me ask the next question: Is there any significant amount of oil and gas associated with places where the surface of the Earth is closely connected with the Earth's deep interior?
There are no oil seeps in Hawaii, nor in Yellowstone Park, for example. In both of these very fascinating places (and there are many more on the face of this Earth) there is what is called a "mantle plume" or a hot spot straight down beneath your feet. That is, the "hot spot" is an essentially vertical corridor in the crust of the Earth.
Through this corridor, rock is being heated to a molten state and pushed toward the surface, directly up from the Earth's mantle or at least from the base of the crust. In other words, in places like Hawaii and Yellowstone, you have a very "shallow" connection between the surface of the Earth and its hot, molten interior.

In Hawaii, you have the great basalt volcanoes, particularly what we see today on the Big Island of Hawaii. These volcanic vents on Hawaii are connected directly to the deep Earth, from which comes the heat energy that melts the rock into molten lava that you have probably seen in videos, if not in person. (And believe me, it is very impressive if you are up close and personal.)
As you move to the northwest from the Big Island, the other islands of the Hawaiian chain are older, have eroded down over millions of years, and have settled downward into the Pacific tectonic plate. Still, these islands too are remnants of volcanism that originated in the deep Earth above the hot spot. So where is the oil and gas? The answer is that there is none. All you see in Hawaii is a heck of a lot of magnesium-iron basalt, with very minor amounts of carbon dioxide and trace amounts of methane being detected in occasional lava flows.

In another example, Yellowstone Park sits atop an immense volcanic caldera, meaning a volcanic crater of immense size. The Yellowstone caldera is about 40 miles by 50 miles in surface dimension, more or less. And out of this caldera has poured, over many millions of years, many massive series of volcanic flows.
Technically, the earliest flows are called basalt, similar to the rock type that we find in Hawaii. Later flows were a rock type called andesite, named after the kind of rock that is common in the great Andes Mountain chain of South America. (This phenomenon is closely related to what is called "seafloor subduction.")
And the most recent volcanic flows at Yellowstone were a rock type called rhyolite, which is chemically equivalent to granite, except that granite is what you get if the rock cools and crystallizes at depth. That is, in a few million more years, the subterranean source of this molten material at Yellowstone might cool to become what we call granite. Then again, Yellowstone could also erupt upward in one of the largest volcanic explosions in geologic history. We will just have to wait and see.

But what we do not find in Yellowstone is oil or gas. Despite the connection to a "hot spot" in the Earth's crust, there is nothing that even remotely could be called an oil or gas deposit. And the best science is that whatever is down under the ground at Yellowstone will never become oil or gas.

A reader named Thomas, from New Mexico, e-mailed as follows:

"I have seen Web sites that discuss 'super wells' in Russia. The Russians drilled many miles into the Earth, and found large quantities of oil and gas. Isn't this evidence of oil forming deep in the Earth?"

If you follow the lead of Thomas and perform a Web search for "super wells" or try the term "Peak Oil scam," one of the sites you will find refers to a number of Soviet and, later, Russian wells that were supposedly drilled to depths of 40,000 feet and more. If the Russian drill bits penetrated this far, it was first and foremost a truly remarkable technical achievement.

That depth approaches the bottom of the Earth's crust in parts of Russia, and may even get into the upper mantle. What did the Russians find? Good question. The Web sites claim that these are some sort of Russian "super wells" that produce immense quantities of oil. Supposedly, this is why Russia is one of the leading oil producers in the world today, rivaling Saudi Arabia in total daily oil output.

In all candor, we in the West know surprisingly little about these deep Soviet and Russian wells. During the Cold War, the Soviets diverted a significant amount of resources to drilling a number of very deep wells. The details of these drilling projects were considered a state secret, although there was good evidence that the Soviets were attempting to do exactly what one might think. That is, they wanted to discover what were the types of rocks in the stratigraphic column beneath the drill rigs. This kind of stratigraphic information would normally be useful for both geological research and further geophysical prospecting.

There was a school of geological thought in the Soviet Union that did buy into the "abiotic" theory of the origins of oil. This was, in no small measure, because one of the originators of the "abiotic" oil theory was the great Russian chemist Dimitri Mendeleev.
There were rumors in the geological community, as well as in the Western community of defense analysts, that if the Soviet deep wells encountered any significant hydrocarbon resources, they would use nuclear explosions to shatter the rocks and increase the flow of any oil or gas to the well bore.
Did the Soviets ever find oil, let alone nuke a well? Not that we are aware.
Even in the post-Soviet era, the contemporary Russians are taciturn about the purpose, let alone the output, of their known deep wells. One thing that we know for certain is that there are no massive pipeline systems around these wells.
Pipelines would ordinarily be necessary to move any large amounts of oil away from the hole in the ground.

Another thing that we know is that most former Soviet, and current Russian, oil production has come from giant oil fields such as Samotlor and Romashkino. These are conventional oil fields, with well-understood geological control over the oil, such as identifiable source rocks, host rock formations, and structures and other traps that contain and confine the oil in places where it can be accessed by drilling. The origins of these identified oil fields have nothing to do with deep Earth, "abiotic" genesis.

And looking forward, through a process called "Hubbert linearization," which I have discussed in other Whiskey articles, it is apparent that Russia is about to enter its own version of Peak Oil. That is, based upon the production trends from its known oil fields, Russian oil production is on the verge of a significant, irreversible decline. Some analysts are predicting a rather precipitate collapse in Russian oil production over the next 10 years.

A young student named Amelia from the Philippines sent an interesting e-mail that touched on these types of arguments as well. Amelia said:

"Just offshore Vietnam is a big oil field in the South China Sea. The field is producing large amounts of oil from Precambrian rocks, more than 1 billion years old. If, as you have said in your articles, oil is of more recent origin than the Precambrian Era, how do you explain this? Hasn't the oil been in these Precambrian rocks for a long time? Or could the oil be coming up into the Precambrian formations from deeper sources?"

This is a great point from Amelia. Her question embodies much of the argument of the deep Earth hydrocarbon side of the "abiotic" oil debate. If there is oil and gas of deep Earth origin, it must be migrating upward into the crust, where it is trapped by other geological controls. And it may have been doing so for a period of time that could reach back into the Precambrian Era. So what about this Vietnamese oil field in the Precambrian rocks?

To reach the best understanding, we will have to discuss some geology. The region to which Amelia refers, offshore southern Vietnam, lies beneath the relatively shallow, and utterly beautiful, turquoise-blue waters of the South China Sea. Despite the present flat appearance, this area has a very complicated and truly complex geological history. The rock sequence in this area has at its basement Precambrian rocks that are, as Amelia mentioned, more than 1 billion years old. (Technically, they are called granulites and gneisses.)

Geologists who have studied the area believe that during the Paleozoic Era (Cambrian through Permian periods, about 550 million to 250 million years before present), this chunk of the planet was part of an ancient, exposed continental landmass. It would be similar to what we see today in northern Canada or northeast Brazil, where vast expanses of Precambrian Shield are exposed at the surface.
During this period of time, the exposed Precambrian surface was heavily weathered, and eroded down by the elements of that time. There are few, if any, sediments of any time frame of the Paleozoic Era on top of the Precambrian basement rock that is offshore Vietnam.

The rock record suggests that the region that is now offshore Vietnam began to submerge during the Jurassic Period (about 210 to 160 million years ago), due to subsidence of the Earth's crust. Thus did this region begin to accumulate deposits of sedimentary rocks.
This subsidence and deposition of sediments continued until about 65 million years ago. So the rock record is that this area had about 150 million years of geological history during which to accumulate sediments, which formed into a wide variety of different kinds of rock formations.
As these sediments were accumulating so many millions of years ago, in what would become the area offshore Vietnam, to the north, there was an episode of what is called "mountain building." That is, from southern China to southwest Borneo, an ancient mountain range was being pushed upward by forces associated with plate tectonics.

These rising mountains were the source for much of the sediment that poured into the area in which we are now interested. This mountain chain was similar to what we see today in the Andes, for example.
During all of this geological history, the Precambrian rocks, and the much younger sediments above the Precambrian basement, were intruded by deep magmas that were working their way up from the bottom of the Earth's crust, if not the upper mantle. At the surface of the Earth, one would have seen extensive volcanism, again of the type associated with what we see today in the Andes Mountains.
After a very long and complicated sequence of geological events, the volcanism halted about 60 million years ago. The area began to submerge again, as the crust of the Earth subsided, resulting in more sediment deposition up to the present day.

There is absolutely solid evidence that the rocks in which the Vietnamese hydrocarbons formed were rich in algae and were, in fact, the equivalent of an oxygen-poor lake environment. As the algae-rich sediments were buried and subsided over time (Oligocene to Miocene epochs, about 35 to 10 million years ago), the organic matter in the rocks began to transform into what we see today as oil and gas. Later in the sequence, the sediments that were laid down in late Miocene time created a very tight shale "cap" on top of the entire rock body, sealing the hydrocarbons beneath.
So here is what we have today. There are relatively young Miocene-age (20 to 10 million years) sedimentary rocks lying above folded sedimentary rocks of Jurassic age. These Jurassic sediments were intruded by later magmas (technically, called granitoids). And all of it lies atop fractured basement rocks of Precambrian age.

Complicating the geology of the area, the rocks beneath the waters offshore Vietnam are crossed and broken by numerous faults, or relative Earth movements. These faults and fault systems are among the most complex one will find in any oil province in the world. Over long periods of time, the faults have opened and closed, and moved one way and then the other.
This relative movement has occurred several times during various tectonic episodes. That is, the faults have been compressed and then extended. They have compacted due to differential loading of sediments above them, and then decompacted due to erosion of the sediments. It takes a lot of very good geology and geophysics just to begin to understand what is going on. And then you have to drill for oil and find it. It ain't easy. And it is not for amateurs.

The petroleum in the offshore area of Vietnam is thus of Oligocene and Miocene age, and it originated in very much biological fashion. One can actually trace the oil from its current reservoirs, back to the source rocks that are located only a few dozen miles away at most. As things happened, the oil migrated from the Miocene rocks where it originated, and is now filling the available fractures and pores in, among other rock formations, the Precambrian basement.

So Amelia correctly noted that the waters offshore Vietnam are producing oil from Precambrian rocks. But what Amelia did not understand is that the oil originated relatively recently in geological history and migrated into the far older Precambrian rocks, as well as into rocks of Jurassic age.
Today, there are seven significant oil fields located offshore Vietnam, with estimated reserves of almost 2 billion barrels of oil. Much of the oil that is being lifted from these fields comes from granite-like Precambrian rocks. But the oil is not "abiotic," and it did not form in Precambrian time. The best science is that the hydrocarbons from the Vietnamese waters originated in the algae-rich, oxygen-poor lake beds of Miocene time.

The algae-rich, oxygen-poor lake beds of Miocene time in the part of the world that is now offshore Vietnam were quite similar to the environment in which the so-called "oil shales" of Utah and western Colorado originated.
The big difference is that the oil offshore Vietnam has had more of what is called a "thermal history." That is, the organic material has been, in essence, buried, heated and "refined" within the crust of the Earth such that it has become a valuable grade of petroleum -- whereas the oil shales of the U.S. West are still rather "undercooked."

Chemically, the "oil" in the shales of the American West should be called "kerogen." This is a type of substance that could have used a few million more years of burial, subsidence and thermal history. Had this occurred, the kerogen would probably have been upgraded to a lighter, more valuable, and easier-to-produce form of oil through the input of what I call the "tectonic energy" within the Earth.
The United States is certain to develop and utilize its kerogen resources one of these years. My colleague Dan Denning has reported extensively on a project in western Colorado that is being sponsored by Shell Oil Co., and using some very innovative technology to produce kerogen and upgrade the product to a type of fuel oil.

But even in the best of circumstances, the United States is just plain decades behind where we, as a nation, need to be. America will not see more than a few thousand token barrels per day of "oil from shale" for many more years.
Meanwhile, the Earth's reserves of conventional oil are depleting. And a new global struggle is already in progress, in which the nations of the world are scrambling to secure energy resources for the 21st century.

With this in mind, the time for the United States to be making the required investment in "oil shale" development is now, today, immediately, with a "what-are-we-waiting-for" sense of urgency. America should be approaching the issue of its future energy needs with the intensity of the Manhattan Project of the Second World War, or if that is too harsh a comparison for you, then with the same full-bore level of effort that went into Project Apollo of the 1960s.

Advertizing Cliches

I've been meaning to post on this topic for awhile. I'm referring to those verbal or visual devices, used in commercials, that after being invented by some clever producer, are borrowed and repeated by other producers ad nauseum. Here are my top five most repeated, and most irritating cliches.

1. The multi person stutter - This is where the dialogue moves from one person to another in rapid succession, generally repeating (three-peating) one key phrase. It goes like this:

Person 1: Im in charge..(cut to person 2)
Person 2: in charge...(cut to person 3)
Person 3: in charge of my health.

2. The solitary island of color - everything in the world is black and white except for the advertiser's product.

3. The multi-lationship - this is where someone enumerates every relationship that they participate in. It goes something like this: "I'm a father, a son, a husband, a brother, an organ donor, a caddy,.. (blah blah, blah)."

4. The cinema-verite bobbing frame - where the camera simulates a first person viewpoint by bouncing all around the subject, usually another person dispensing some "tough love" about drugs or acne.

5. The rotating perspective - not seen much anymore. A neat camera trick where a scene in motion is stopped, the perspective of the scene is rotated 90 degrees or so, then the action continues.

Please add your own least favorite advertizing cliches (not to be confused with movie cliches, I will post on that in the near future).

The economics of ethanol

Ethanol as an alternative fuel continues to spark controversy between those who see it as a real alternative to oil and those who believe that it is a net energy sink and a ploy to prop up agricultural subsidies. I decided to do some research this morning to answer the net energy question once and for all. Based on a 2005 study by the US Department of Agriculture, using 2001 data, the net energy balance of ethanol, applying energy credits for byproducts, is a positive 1.67. Not taking byproducts into account, the net energy balance is 1.06. So as a pure conversion process, ethanol production was only barely net energy positive in 2001.

The real promise of ethanol will come with the production of celluosic ethanol, which is just now on the verge of commercial viability.

Cellulosic biomass, dubbed the most abundant material on earth, holds tremendous promise as a feedstock for ethanol production due to its widespread availability and potential for high fuel yields. Examples of sources for cellulosic ethanol include corn stover, cereal straws, sugarcane bagasse, sawdust, paper pulp, small diameter trees, and dedicated energy crops such as switchgrass.

As with producing ethanol from grain, processing cellulosic sources extracts the fermentable sugars from the feedstock for distillation into alcohol. Unlike grain, the sugars in cellulose are locked in complex carbohydrates called polysaccharides, or long chains of simple sugars. Separating these complex structures into fermentable sugars is essential to the efficient and economical production of cellulosic ethanol.

[...]

How Much Ethanol?

A report from the U.S. Departments of Agriculture and Energy, “Biomass as Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply,” finds that biomass – any organic matter available on a renewable or recurring bases – has surpassed hydropower as the largest domestic source of renewable energy, and much potential remains.

The study outlines a national strategy in which one billion dry tons of biomass would displace 30 percent of the nation’s petroleum consumption for transportation. Last year’s production of ethanol rang in at 3.4 billion gallons, but that total could reach upwards of 80 billion gallons under the scenario drawn here.

Looking at just forestland and agricultural land, the two largest probable sources for biomass, the report found potential exceeding 1.3 billion dry tons per year. The Departments estimate this is enough biomass to meet more than one-third of this country’s current demand for transportation fuels.

[...]

Efficient, Economical Enzymes

Reducing the cost and improving the efficiency of converting cellulosic materials into fermentable sugars is one of the keys to progress. The Department of Energy’s National Renewable Energy Laboratory (NREL) has partnered with private biotech companies to make significant strides in this area.

Novozymes, a biotech company based in Denmark with operations in the U.S., began collaborative research with NREL in January 2001 to cut the cost of converting corn stover into sugars for the production of ethanol.

Last month the research partners announced that a thirty-fold reduction has been achieved in the cost of enzymes needed to produce ethanol from cellulosic sources. Now at a cost of 10 - 18 cents per gallon in laboratory trials, the company says that enzymes are no longer the main economic barrier to the commercialization of
this technology.

[...]

Another Avenue: Engineered Bacteria

A University of Florida researcher has developed a biotech “bug” that is capable of converting cellulosic biomass to ethanol.

Lonnie Ingram, Director of the Florida Center for Renewable Chemicals and Fuels, has developed genetically engineered E. coli bacteria that can convert all types of sugar found in plant cell walls into fuel ethanol. The bacteria produce a high yield of ethanol from biomass such as sugarcane residues, rice hulls, forestry and wood wastes, and other organic materials.

Ingram says he genetically engineered the E. coli organisms by cloning the unique genes needed to direct the digestion of sugars into ethanol, the same pathway found in yeast and higher plants. With the ethanol genes, he says that bacteria produce ethanol from biomass sugars with 90 to 95 percent efficiency.

[...]

Ready for Commercialization?

Bob Perlack of the Oak Ridge National Laboratory (ORNL) describes the industry as being in the early stages of commercialization. “There are many technical hurdles that must be overcome to make cellulosic ethanol production competitive. The recent increase in oil prices certainly helps improve the economics,” Perlack said.
He recommends the continuation of research and development, coupled with energy policy initiatives and incentives, to drive the process.

Joel Cherry from Novozymes believes that most of the pieces are in place. “We have what we need now to produce ethanol from cellulose. The key is to integrate the pieces into an economically competitive process and commercialize it.”
He says that Novozymes is working to address some barriers that remain, such as identifying enzyme mixes that work with other substrates and with other pre-treatments.

Abengoa Bioenergy, an ethanol producer in Europe and in the U.S., says they expect to initiate testing of Novozymes’ enzymes next year at their biomass fractionation process development pilot plant in York, Nebraska.

Ingram’s University of Florida technology has become Landmark Patent No. 5,000,000 through the U.S. Department of Commerce. It is being commercialized with assistance from the Department of Energy, and BC International Corp., based in Dedham, Massachusetts, holds exclusive rights to use and license the engineered bacteria.
Iogen Corporation, headquartered in Ottawa, Canada, is also planning their first full-scale facility to produce ethanol from cellulosic biomass sources. EcoEthanol™ is the patented name of Iogen’s cellulose ethanol process which uses enzyme hydrolysis to convert the cellulose into sugars.

The company is considering sites for the facility in Idaho or in Canada, and has been meeting with Idaho farmers to see if they can contract enough wheat and barley straw to make that location feasible. Iogen officials say the proposed plant could produce between 30 million to 50 million gallons of cellulose-based ethanol annually and would add a considerable revenue stream to the local area for the 500,000 tons of straw needed.

Next Step: Biorefineries

NREL and its partners say that the research conducted in this area is an important step toward realizing the potential of biorefineries. Biorefineries, analogous to today’s oil refineries, will use plant and waste materials to produce an array of fuels and chemicals – not just ethanol. Biorefineries will extend the value-added chain beyond the production of renewable fuel only.

Progress toward a commercially viable biorefinery depends on the development of pilot-scale, real-world processes for biomass conversion. With these new technologies for the production of cellulosic ethanol, its promise becomes closer to reality with each passing day.

Obviously large scale production of ethanol in quantities that can have a real impact on the supply side of the equation are several years off, but it seems that etanol's eventual place as a major source of energy is assured.