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Apologies for the paucity of posts in recent weeks. I’ve become rather overstretched and the blog has been a casualty as a result. Anyway, here are some links that have caught my eye in recent weeks:

• Tamino in his Open Mind blog looks at the much-loved-by-skeptics 15-year hiatus period from 1998 to 2012 in temperature rise. Contrast and compare the 98-12 period with that of 92-06 and be enlightened.
• Paul Krugman has a very perceptive piece in the op-ed section of The New York Times called “Addicted to the Apocalypse”. In it, he takes issue with all those financiers, economists and commentators who have been arguing that “the sky is falling down” (for a taste of this meme read the blog Zero Hedge). Given my own blog, whilst not apocalyptic over the short term, is certainly pessimistic, Krugman’s criticisms apply equally to me. My view has changed a little recently, and I accept that the post credit-crisis period has seen a complete victory for monetarism: we have not all died of debt and Krugman is right to point this out. Restated, central banks have put into practice never-tried-before text book theory – and this ‘theory into practice’ has worked. Whether such a policy can work over the longer term, given that the underlying lack of economic growth hasn’t improved at all, is a completely different question. So I remain a worried parent with regard to my children’s future.
• Staying with Krugman, I am always astonished, and a little jealous, of how he can be so prolific but at the same time maintain such quality. Here he is in The New York Review of Books reviewing William Nordhaus’ book “The Climate Crisis: Risk, Uncertainty and Economics for a Warming World”. Nordhaus is probably the world’s leading economist writing on climate change today, and Krugman has a lot to say about Nordhaus’ approach to the problem.
• Of the UK political weeklies, I dip into both the left-learning New Statesman and the right-leaning Spectator on occasion. Here is a nice piece by Felix Martin of The New Statesman looking at the natural scientist’s approach and social scientist’s approach to global population limits.
• The US Energy Information Agency has an interesting analysis of why rig count is no longer a good forecaster of natural gas and oil production. I take on board the technical point that new rigs have different capabilities than those of the past, but still flag that US natural gas production has plateaued and, without new investment, looks on the verge of falling back. Note the comments of the outgoing CEO of Shell on how he regrets his big bet on shale (see here in The FT) and a separate FT article entitled “US Shale Is a Surprisingly Unprofitable Miracle”. This blog has been flagging the non-existent miracle in shale for a long time and also calling out academics like Dieter Helm who believe that the energy policy of most advanced countries could be built on a foundation of shale. Even the mainstream press appears to be realising the view of Helm and his fellow travellers is nonsense.

On September 30th, the U.S. government agency The Energy Information Administration (EIA) announced provisional U.S. crude oil production figures for July 2013. Key points:

• July crude oil production was 232.1 million barrels, equivalent to 7.7 million barrels per day (bpd)
• Change over July 2012 on a barrel-per-day basis: +17.3% y/y
• July total crude oil plus natural gas liquids reached 311.1 million barrels, equivalent to 10.4 bpd

As can be seen from the chart below (click for larger image, link to original data here), the fracking of tight oil formations in the U.S. has made a major impact on U.S. crude production over the last few years. The critical question is whether the current large year-on-year percentage growth rates in oil production can be sustained.

Growth rates for both crude oil production by itself and crude plus natural gas liquids remain robust, continuing to track in the high teens. The situation for oil is in marked contrast to that of U.S. natural gas, where production growth has stopped.

The differentiator here is price. Both tight gas and tight oil are expensive to produce compared with the conventional alternatives. Accordingly, production investment requires a high product price to remain feasible. U.S. natural gas prices are down roughly by half from their average level in the 2005 to 2008 period (removing the temporary 2008 spike). By contrast, the price of West Texas Intermediate, the U.S. benchmark oil price, remains near all-time highs (again excluding the very short-term 2008 spike).

Given crude oil is a globally traded commodity, U.S. production numbers need to be placed in the context of world supply and demand. In its latest Oil Market Report dated 12 September 2013, the International Energy Agency (IEA) recorded global ‘all liquids’ production of 91.6 million bpd for August 2013, down 0.8 million pbd from the previous month.

Full quarterly IEA world supply-and-demand figures, including Q2 2013 estimates, can be found here. The preliminary estimate for Q2 2013, shows a 0.5% rise over Q2 2012. The lacklustre increase in supply accounts for why world oil prices remain strong despite a slowdown in global GDP growth.

Geopolitical instability remains a major obstacle on the supply side, with Libya the latest country to show a steep fall in output against the background of labour disputes and civil unrest. Increasing sectarian strife is also putting a question mark over Iraq’s ability to hit ambitious production growth targets.

The U.S. government agency The Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on August 30 and covers the period up until end June 2013.

Data is reported in billion cubic feet (bcf). Key points:

• June 2013 natural gas dry production: 1,989 bcf, plus 1.4% year-on-year
• Average monthly production for the 12 months to June 2013: 2,009 bcf, +1.6% over the same period the previous year

Since the end of 2011, the rate of production increase has rapidly decreased (click chart below for larger image) and on current trend should go negative over the next few months.

The rapid deceleration in natural gas production growth has led to an uptick in prices over the last 12 months. Prices paid by electricity utilities have now reverted to between $4 and $5 dollars per thousand cubic feet from a low of less than $3 in April 2012. At some stage, rising prices should lead to a further investment in shale gas production, but this has yet to be seen.

Much recent media attention has centred on a so-called shale-gas revolution in the United States and, in particular, the ability of shale gas to boost overall volume of natural gas production. Many claims are made with respect to the prospective expansion in shale gas production in the coming years including the following:

• Shale gas will provide a low-cost source of natural gas, and thus cheap energy, for decades to come. This, in turn, will boost the competitiveness of the U.S. economy.
• The U.S. will move toward an era of energy self-sufficiency, which will help buttress the country’s geopolitical security.
• The scale of shale gas production will be sufficient to allow the U.S. to commence natural gas exports, thus transforming energy markets outside of the U.S. such as those in Europe.
• Increased natural gas production in the U.S. will mitigate carbon emissions through displacing coal and so reduce the risk of dangerous climate change.

I have blogged extensively on these claims (some repeated by President Obama) here, here, here and here.

For these claims to be substantiated, significant year-on-year rises in U.S. natural  gas production will be required over an extended period. Through tracking monthly production of natural gas, a non-specialist can confirm or refute whether large rises in natural gas production are being achieved and, therefore, whether the claims associated with a shale-gas revolution are credible. In short, the monthly numbers allow you to evaluate the hype. Monthly data are currently not showing any material increase in production.

• I have much admiration for those climate scientists who publish cutting-edge research in their respective fields but at the same time feel a moral imperative to engage with a general audience over the dangers of global warming. Professor Andrew Dessler is one such soul, and in this short presentation (via Skeptical Science) he explains the concept of ‘decision-making under uncertainty’ and how it pertains to climate change—a subject close to my heart.
• Last week I mentioned how even The Financial Times was talking up the competitiveness of solar on the back of the steep drop in panel prices (here). In a similar vein, The Guardian just published a lovely article on how sections of the American right were adopting solar as part of the ‘off grid’ movement that seeks independence from big government and big corporations.
• The New York Times published some stunning satellite images onunder the title “Gorgeous Glimpses of Calamity“. Unfortunately, as the the title of the article suggests, all is not well with the planet.
• Earlier this month, The New Scientist carried a special report called “Frack to the Future”. Unfortunately, it’s behind a pay wall, but hunt down a hard copy from a library if you have time. The conclusion of the article is that shale gas will have only a minor role in moderating CO2 emissions and should not be seen as the much-hyped bridge to a renewable future.
• The four main swing producers in the global oil market are Russia, the U.S., Iraq and Saudi Arabia. Production trends in the first two markets are relatively transparent. Iraqi output, by contrast, is difficult to forecast, but a recent article by the The Financial Times article notes that current targets are being missed by a considerable margin. Given instability in a number of smaller producers like Nigeria, Libya and Southern Sudan, the responsibility for keeping the oil market in balance without the need for price spikes rests with Saudi Arabia. Whether Saudi has the spare capacity to carry out this role is a matter for debate, but Stuart Staniford at the Early Warning blog does a great job of tracking Saudi production and rig count.

I haven’t posted monthly CO2 numbers for a while: although atmospheric CO2 concentration is vitally important for climate outcomes, any one particular month carries little meaning. Nonetheless, I think it worth checking in every quarter or so to look for any nascent deviation from trend.

Key numbers relating to NOAA’s August 5th release of July 2013 mean monthly CO2 concentration are as follows:

• July 2013 = 397.23 ppm, +2.93 ppm year-on-year
• Twelve Month Average = 394.53 ppm, +2.56 ppm year-on-year
• Twelve month average over pre–industrial level = +41.2%

Atmospheric CO2 concentration is the world’s leading risk indicator. Every month, the National Oceanic and Atmospheric Administration (NOAA), a U.S. government federal agency, releases data on the concentration of atmospheric CO2 as measured by the Mauna Loa Observatory in Hawaii. The official NOAA CO2 data source can be found here.

This is the longest continuous monthly measurement of CO2 and dates back to March 1958, when 315.71 parts per million (ppm) of CO2 was recorded. The Intergovernmental Panel on Climate Change (IPCC) uses the year 1750 as the pre-industrialisation reference point, at which date the atmospheric concentration of CO2 was approximately 280 ppm according to ice core measurements.

Atmospheric CO2 displays annual seasonality: concentrations decline from the spring during the growing phase of terrestrial vegetation and rise in the autumn as vegetation dies and decomposes. The cycle is dominated by the northern hemisphere growing season since the northern hemisphere contains over 65% of the globe’s land mass. The cyclical pattern can be seen in the following chart (red line). The black line is the adjustment for seasonality.

The peak for atmospheric CO2 concentration is generally in the month of May, as with this year when the average monthly value reached 399.76 ppm. The newspaper headlines reporting the CO2 concentration breaking above 400 ppm refer to the daily values. The rise in annual CO2 is due to fossil-fuel emissions and land-use change. However, there also exists some minor non-seasonal year-to-year variation related to weather, drought, fire, ocean current changes and volcanic eruptions.

A critical concern is whether the annual average mean increase in CO2 is accelerating. For the decade ending the year 2010, the annual average increase was around 2 ppm. The current 12-month moving average increase is now 2.5 ppm, although there is considerable year-to-year variation as the chart shows.

The Copenhagen Accord of December 2009 reached the following agreement with respect to atmospheric CO2 concentrations:

Global food prices are currently on a downward trend since the type of extreme weather events that disrupt production have been largely absent this year as compared to last.

The Food and Agriculture Organisation of the United Nations (FAO) releases a series of monthly price indices for a variety of food commodities (here) at the beginning of each month. The headline FAO Food Price Index is a composite of five food groupings: meat, dairy, cereals, oils and fats and sugar. The base 100 is the indexed averaged price for the 2002-2004 period. The July 2013 index number was released on August 8th. Key points are as follows:

• The FAO Food Price Index averaged 2o5.9 for July 2013, down 4.2 points from the revised value of 210.1 for June
• The index was down 7.1 points from the 213.0 recorded in July 2012, or 3.3 percent
• In inflation adjusted terms, the Food Price Index stood at 136.8 for July 2013 against the 2002-2004 base of 100

Cereal prices have been leading the aggregate index down, with maize in particular showing significant falls in price on the back of good harvests in many producing areas across the globe. The sub-indices can be found here.

At this point, I usually highlight the long-term correlation between food prices and oil prices, but the World Bank recently came out with a report that looked at this relationship in some detail and I intend to post on it over the next few days.

• Just occasionally we get some good news on climate change issues. The Financial Times published a full-page article near the end of the week on the increasing competitiveness of solar versus fossil fuels (free registration with the FT gives access to the article). In short, solar panels have come down their cost curves so quickly that they have reached the point where the economics stack up without government subsidies.
• Much more discouraging is to see PM David Cameron throw his weight behind UK-based fracking in The Telegraph today. A major argument of the pro-fracking lobby is that shale gas CO2 emissions are far lower than those of coal. Accordingly, the substitution of shale gas for coal in electricity generation should allow natural gas to act as a bridge fuel that buys us time until renewable or nuclear technology matures. Unfortunately, the methane leaks associated with fracking make this assertion highly contentious. See, for example, here.
• And Tom Murphy on his excellent “Do the Math” blog sets out in considerable wonkish detail why electric cars still need to get much further down their cost curves before they can compete with internal combustion engine rivals without a swathe of subsidies. Tom (as with myself and my Prius) has still opted for an electric, with the ethical consideration tipping the balance. However, given the strong psychological roots behind the average person’s climate change denial, hybrids and electrics will need to beat gasoline in a straight out financial fight before they can contribute significantly to CO2 reduction.
• In 2000, the political scientist Robert Putnam came out with a landmark book called “Bowling Alone“. The book claimed that the atomisation of American life was destroying civil society. In The New York Times this week, Putnam has a beautifully written op-ed piece chronicling the decline of his home town Port Clinton, Ohio. The article tackles all those themes that have made the achievement of ‘the American Dream’ so much harder in recent decades.
• Putnam’s piece was published as part of an NYT series of articles called “The Great Divide”, which is moderated by Nobel prize winner (economics) Joseph Stiglitz. There is some great writing within this series, much of which touches upon my preoccupation with a possible end to economic growth.

• Lots on climate change in my links this week. Methane is the biggest “known, unknown” in climate change science and this comment by Whiteman, Hope and Wadhams in Nature has caused a huge stir and push back from a variety of climate scientists, such as Gavin Schmidt, who I have a lot of respect for (see here for a summary of riposte’s). Here is a defence of the comment by Peter Wadhams. As a reminder, risk is probability  times effect. So even if the probability of a methane burst is small, the harm it would cause could be massive. Accordingly, regardess of the comment in Nature, methane is a major risk that needs to be tracked constantly.
• Just occasionally, some Republican supporters stand up and say something sensible about climate change, such as this from four Environmental Protection Agency heads who were appointed by the Nixon, Reagan, Bush I and Bush II administrations. How I yearn for the days when action on climate change was a bipartisan non-wedge issue—before the insidious influence of extreme right-wing think tanks and lobby groups took hold in the late 2000s. Conservative parties should be natural allies of action to conserve the planet, not to trash it.
• On a less positive note is the attitude of U.S. farmers toward climate change. Ricky Rood blogging at Weather Underground quotes an academic paper by Arbuckle et al showing that only 10% of Iowa farmers believe humans are causing climate change. A bit more encouraging was the fact that only 5% thought that climate was not changing. The majority, 58%, believed climate change was either a natural process or  a combination of human and natural factors. To me, this is classic denial from those likely to be most hurt by human-induced climate change.
• On Friday, a lacklustre jobs report was reported in the U.S. But the inability of almost all developed countries to create jobs in what should be the  recovery-portion of the economic cycle remains pronounced as a Floyd Norris article in The New York Times shows. Something different is going on this time around.
• Gail the Actuary over at the blog Our Finite World has a nice post linking the issues of quantitative easing (QE) and resource constraints. It basically argues that the post-war economic model is grinding to a stop as resource depletion caps growth. I would argue that the nature of technological change and demographics are also important in the mix, but broadly agree with the main thread of her argument.
• I often talk about the link between the oil price and food prices. The World Bank has a timely study showing this link more formally. This is such an important topic that it deserves a post of its own: so little time, so much to write about!

• The Wall Street Journal’s Alison Gopnik asks the question “Does Evolution Want Us to Be Unhappy?” The short answer is “no”, but then again evolution doesn’t want us to remain permanently happy either, since this hinders our fitness to compete. For a much more thorough treatment of this topic read David Buss’ paper “The Evolution of Happiness” in the January 2000 edition of the journal American Psychologist. I am a firm believer that every ‘thinking’ person should know something of the happiness literature. It is easier to deal with what life throws at you with an understanding of what drives happiness.
• A common theme of many posts in this blog is the declining share of labour and the increasing share of corporate profits in the national income of developing economies. The International Labour Organisation (ILO) devotes a whole section of its latest Global Wage Report to this issue (Executive Summary here, full report here). Part II of the full report is well worth reading as it highlights the role financialisation has had on skewing income from workers to corporations.
• A recent post by Neven at the Arctic Sea Ice Blog rightly highlights the climatic threat posed by the collapse in sea ice extent. I certainly feel very uneasy that global warming has the potential to unleash large releases of methane through processes that we have very little understanding of at the present time. Mankind is making an extraordinarily reckless gamble that methane releases will come in at the low end of the probability distribution.
• Many organisations concerned with resource depletion and climate change, such as the Transition Network, contain an uneasy alliance of  socially aware scientists and anti-science “new agers”. No-where are their differing world views more apparent than on the issue of Genetically Modified Organisms (GMO). The New York Times has an excellent article on the citrus greening bacteria that threatens to devastate world orange production and the potential for GMO technology to provide a solution. The article highlights the difficult choices society will need to take with respect to the application of GMO.
• It is an open topic as to how much we will require GMO to help us deal with the problem of food production in an era of climate change.  An op-ed in the New York Times details some of the challenges we face in feeding mankind as the planet heats up.

Apologies for the lack of posts over the last couple of weeks: I have had to spend time with my elderly mother down in Dorset, UK; and for the last 10 days I have been in Greece studying their economic and political crisis through meetings with government ministers, opposition politicians, large and small businesses, NGOs and ordinary people. Meanwhile, the world moves on (and many of the developments are negative for both Greece and for the world economy).

• Much of the intellectual underpinning of the Fed’s unconventional monetary policy can be found in a 2003 paper by Eggertsson and Woodford. Unconventional monetary policy is justified through a model of the inflationary expectations of economic actors. For a non-technical treatment for a general audience see a paper by the Richmond Fed here. In a stunning development, Bernanke appears to have dumped this approach. Ambrose Evans-Pritchard has a good summary of this seismic shift in the Telegraph.
• Meanwhile, the EU has reached a banking agreement that bails in depositors to any bank recapitalization (see the FT here). To me, this will guarantee bank runs at some future time.
• And also in the FT, Trevor Maynard, Head of Exposure Management at Lloyd’s of London, talks intelligently about other kinds of risk, including climate risk. Well worth a read.
• Staying on climate, there is much comment in the general media to the effect that global warming has slowed. This post in Skeptical Science brings out the difference between earth system warming and atmospheric warming — without understanding this difference (and most journalists don’t), it is difficult to put the climate sensitivity debate into perspective.
• Over in Ireland, tapes have come to light showing how bank executives mocked the naivety of the state bail-out at the height of the crisis. Reuter’s summarizes the story here. It is extraordinary that the blatant lies extended by senior bank executives to the government have not resulted in jail sentences. You can listen to the tapes on the website of the Irish Independent, the newspaper that broke the story, here.