Oil prices are down 40%–good, or bad?

oil-well-art-d0e8499fbec07478You may not realize it, but we are living through an energy revolution. Thanks to new production methods, the past five years have yielded a phenomenal increase in domestic oil and gas production. U.S. crude oil production, which had averaged around 8 million barrels per day (bpd) in the 1980s, declined a low of less than 4 million bpd by October 2005. Since then, production has soared to 10 million bpd as of November 2014. About half of this total comes from only three mega fields in the lower 48 states: the Permian Basin (centered domestic prodaround Midland, Texas), Eagle Ford (West Texas and New Mexico), and the Bakken formation (North Dakota and Montana). The result is a dramatic reduction in foreign imported oil from 60% of U.S. consumption in 2005 to about 27% by late 2014.

The cost to release this crude oil from underground reservoirs ranges from about $50/barrel to $80/barrel, with an average of about $65 prod bpdto $70/barrel. With oil currently trading in the neighborhood of $60/barrel, domestic producers are feeling pressure. If prices do not rise, there will be a reduction in U.S. production—it’s a simple matter of dollars and sense.

However, oil is a global commodity, meaning that crude oil trades at about the same price (excluding shipping costs) everywhere in the world. Low oil prices reduce margins for both U.S. producers and foreign producers. Many of these foreign producers (e.g., Libya, Iran, Venezuela, and Algeria) have seen dramatic declines in crude oil production between 2008 and 2013. This, combined with the fact that many countries that are overtly and covertly hostile toward the U.S. maintain their current leadership with the help of petrodollars, makes for a volatile combination.

Low oil prices contribute to reduced gasoline and diesel prices at the pump, certainly beneficial to consumers. Plus, the average cost in the U.S. of all types of energy is significantly lower than in European countries and Japan, which equates to an economic advantage to American consumers and companies.

The dark side of low oil prices is that not everyone likes them, and oil prices are very sensitive to international unrest and uncertainty. Russia, a major oil and gas exporter (and member of OPEC), would stand to gain handsomely from higher oil prices. With Putin’s forces North Sea Brent crude oiloccupying portions of Ukraine, and threatening control over larger regions extending west to Transnistria and Moldova, it is easy to imagine a regional conflict that disrupts energy flow to Europe, driving up prices. The Russian economy would benefit as would Putin’s political standing.

In the Middle East, ISIS (or ISIL if you’re running around the inner circles of the Obama administration) generates substantial income from the sale of oil. The same can be said for Venezuela, Libya, Iran, Iraq, and Saudi Arabia. Like Russia, the domestic economy—and domestic tranquility—of these countries improves with increasing oil prices.

Are low oil prices good or bad? No doubt consumers benefit from reduced energy prices. However, in a global environment already fraught with tensions stemming from bitter political and religious differences, low oil prices only provide another reason for regional conflict.

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This is not what I expected from global warming!

iceberg and mountainAs we emerge from a bitter cold-snap that lasted about a week here in Bend, Oregon (my home town), the thought crossed my mind that we need more global warming–literally. You see, I don’t care much for cold weather anymore. And by cold, I’m talking single-digit cold. I know, I know… the hardy folks who live farther north may consider me a sissy, and that’s okay. I’m at that point in my life where my desire to be comfortable takes precedence over third-party opinions of my manliness.

I’m not ready to say that our start of winter is harsher than normal—after all, when we talk about the weather what is “normal”? I certainly recall some winters in Bend, most especially back in the late 1980s, when we had prolonged stretches of very cold weather with night-time low temperatures in the single digits and even below zero. That’s when I learned not to set the parking brake on my Toyota pickup for fear that the brake may freeze and lock the wheels, and I’d not be able to release it. I also learned how to keep the pipes in my house from freezing (tip: close the foundation vents).

All this reminiscing and thinking got me wondering, has the pattern of summer and winter temperatures in Bend really changed? To listen to the news media, one is left with the indisputable conclusion that Earth is undergoing a rapid increase in global temperature. Surely, that must be reflected in my home town—so why is it so damn cold?mean T Bend

Since I’m a man of science, I did what all scientists do when they can’t answer a question—I got data. Not just a little data, but a lot. I found historical records of the average January temperature and average July temperature going back to 1902, input that data into a spreadsheet, and then plotted the data. Once done, I wanted to look for trends—specifically, is it getting warmer or colder since 1902. The plot is shown here so you can see what I found. Consistent with my memory, the average temperatures vary considerably from year to year. Now that I had all this data, I wanted to know, is global warming really causing it to be warmer in Bend?

To answer this question, I first fit a straight line to the data. You’ll see the nearly horizontal black line going through the data in the graph—not a very good fit. By this I mean that most of the data is well above or well below the straight black line. Not surprising. So I decided to get more sophisticated and I used a polynomial expression. Big words, and more complicated math compared to a linear expression, but super easy to do in an Excel spreadsheet. Just a few mouse clicks, and this nice wavy (green) line was overlaid on the data. Bingo! I was making progress; this is a much better fit to the data as you can see.

Now, here’s the deal. When the data fits a wavy line, like this 110 years of temperature data, and you look to extrapolate into the near future, whether the temperature is projected to increase or decrease depends on where you are on that wavy line. If we are on an upslope, then temperature is expected to increase in forthcoming years. But if we are on a down slope, just the opposite is expected. And based on my admittedly simplistic analysis, it appears Bend has just reached the peak of the wavy line for both winter and mean T Brocktonsummer seasons. This means that the past 30 to 40 years of gradual temperature increase in Bend is likely to revert and follow a trend of decreasing temperature for several decades.

Rats! Colder winters and cooler summers—not what I wanted from global warming. Time to seriously consider moving south to a location where palm trees are native, the sand and water are warm, and only the beer mean T Brocktonis ice cold.

Oh, just in case you are interested in temperature patterns for other parts of the U.S., here are the results of similar data analyses I conducted for Brockton, MA (a suburb of Boston) and for Dallas, TX.

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Energy supply and an expansionist Russian government

gas flare and pump jackTwo weeks ago the EU and Ukrainian government signed an agreement with Russia to resume natural gas supplies which had been frozen since June. Part of the terms of that deal (totaling about $2.2 billion) includes a prepayment of $760 million for future supply of gas. Roughly 33% of the natural gas used by EU countries is purchased from Russia, and about half of that gas flows through the Ukraine.

Tensions between the West and Russia have not calmed since Vladimir Putin signed a declaration to annex Crimea in March, followed by the downing of the Malaysian Airline flight in July. Now, pipelinewith the onset of winter, Europe must expect Russia to leverage energy supplies to their advantage. Political tension drives up oil and gas prices, which directly serves those countries that export energy. President Putin may also leverage energy supplies to reduce sanctions, or receive closed-door concessions that the EU and NATO will not interfere in Russian expansionist policy.

Putin and pipelineThe annexation of Crimea is only the most recent example of Putin establishing footholds to achieve a Greater Russia, a nation with international borders more closely resembling the former USSR. South Ossetia and Abkhazia were taken from Georgia by invading Russian forces in 2008, and Transnistria (a narrow sliver of land between Moldova and Ukraine) was formally separated from Moldova with the help of the Soviet 14th Guards Army. U.S. General Breedlove has warned that Russia may be seeking to establish a corridor across Ukraine linking Transnistria to Russia.

Combine these recent land grabs with Vladimir Putin’s assertion, which he has repeated often, that Moscow has the right and the obligation to protect Russians anywhere in the world, and suddenly Eastern Europe appears to be a very dangerous place.

Commander James Nicolaou has shared two contributions to this LNG shipblog with the goal of explaining Russia’s aggression and the role that energy plays in facilitating the expansionist and nationalist mindset in the Kremlin. As long as the EU countries are dependent on imported energy from Russia, there is little reason to believe Putin will back down.

So what should Europe do? In the early 1980s, then-President Ronald Reagan warned Europe against relying on energy imports from Russia. Those warnings fell on deaf ears. It takes years, possibly decades, to build an extensive international energy infrastructure, so change in Europe will be slow. LNG (liquefied natural gas) is being imported from the Middle East, Norway, and the U.S., and this helps, but is insufficient.

Renewable electrical power from wind, tidal, and solar generation are also positive additions, but again to expand the infrastructure is a huge challenge. Some European countries are considering increasing domestic natural gas production using horizontal drilling and hydraulic fracturing—techniques that have yielded an abundant supply of cheap gas in the U.S., but those governments will need to overcome popular opposition first.

It may be a cold winter in Europe. I wonder how many European governments now wish they had heeded Reagan’s paranoid warnings.

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Cover reveal—Relentless Savage

RS cover web resThis latest installment in the Peter Savage series launches the reader into a fast-paced, action-driven adventure confronting the greater questions of genocide, genetic manipulation, and the tipping point in the balance of world power.

I am excited to share the cover design for Relentless Savage, the sequel to the best-seller Crossing Savage. A lot of hard work and talent from the folks at Light Messages Publishing went into this cover, and I absolutely love it! The symbolism is excellent (what suggestions do you see in the cover?). I’ve also posted an image of the back cover so you can read the short blurb and, hopefully, peak your interest. RS back cover web res

Relentless Savage is scheduled for release  March 25, 2015. Available for pre-order now through Amazon, Barnes & Noble, and other major book sellers.

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Cover selection for Relentless Savage

Book 2 Cover AWith the release date for Relentless Savage (Peter Savage book #2, the sequel to Crossing Savage) fast approaching, Light Messages Publishing is working hard on the cover design. As any reader (and author) knows, the cover design is a very important element of the final product. I’ve been known to walk down the book-store aisle scanning covers and titles until one makes me stop. Then I’ll pick up the book and read the blurb, and more often than not, I buy the book. There is a definite–almost intangible–connection between the title and the cover that tells you what the plot is about. As a huge fan of action thrillers, I’ve become adept at seeing that connection.Book 2 Cover C

But designing a book cover that accomplishes these goals is a difficult task, and one that I have just about zero skill at completing. Fortunately I work with talented professionals who know exactly how to design a compelling book cover. One with subtle, but unmistakable, teasers that hint at key plot elements. A design that has an appealing color pallete, and is eye-catching.

The samples here are the first three cover drafts. None of these really worked for a variety of reasons. If you look carefully at these cover designs you will see that certain visual elements are common, hinting at the story, but still none was quite right. After lengthy conversations with my publisher, a fourth design has been put Book 2 Cover Bforward. I’m not showing this one–not yet. However, I will say that it is stunning! I was completely wowed, and absolutely love what the graphic artist came up with. The design is still being refined, and when it is in final stage I’ll share it here. Stay tuned!

If you haven’t read Crossing Savage, it is on sale through Amazon for $1.99 throughout October.

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Approaching winter plays into Putin’s hand–Interview with Commander James Nicolaou

Gas pipelines across UkraineLast month I had the good fortune to interview Commander James Nicolaou (Strategic Global Intervention Team) concerning the violence in Eastern Ukraine. That interview prompted a large number of responses, including some who claim the aggression by pro-Russian militias in the region is a result of US corporate conspiracies. Hard to imagine how that works, yet the people vocalizing these positions remain adamant.

So, I have asked Commander Nicolaou to review the situation, especially in light of the recent cease fire agreement.

Question: Thank you Commander. What do you say to those who argue that the conflict in Eastern Ukraine is a fabrication of US Corporations to gain wealth from warfare?

Commander Nicolaou: These accusations are expected; they have become a mainstay of modern public dialog, perhaps because the more outlandish the charge the more likely the individual making it will gain a few minutes of notoriety in the morning newspaper. These charges have been made about every conflict the US has engaged in for the past 40 years. The truth is, every situation is a little different, a bit unique. As I stated last time, the conflict over the Crimean Peninsula and now Eastern Ukraine is the result of an ultra-nationalist Russian government under the leadership of Vladimir Putin.

Question: With the ceasefire apparently holding, more or less, does this mean the fighting is over?

Commander Nicolaou: The halt in fighting is temporary. Europe and the US have levied a collection of sanctions on Russian and many of Putin’s inner circle of advisors. In addition, the Ukrainian armed forces have fought well, probably to the surprise of the pro-Russian militia leaders. But our analysts believe the worst is yet to come.Cold no natural gas

Question: What makes you say that? Why do you believe the conflict will heat up again rather than following a political solution?

Commander Nicolaou: Simple. Winter is approaching. Europe receives 38% of its natural gas from Russia, most of that gas flows through pipelines stretching across Ukraine. As cold weather settles in, expect Putin to turn off the gas. Then he will press his offensive again, and when he does we expect he will not bother to offer any weak lies that Russian troops are not engaged. We expect he will openly commit Russian forces to achieve a quick victory and occupation, followed by annexation based on local popular vote, as he did with Crimea.

Question: So you are saying that Putin will use energy as a weapon, by withholding supply to homes, schools, and factories across Europe. You seem confident with this prediction.

Commander Nicolaou: Yes, my analysts at SGIT, supported by the DIA, CIA, and NSA all agree. Today Russian announced that it was cutting exports by up to 60%, and we’ve seen this before, many times. Not only Russian gas exports to Europe, but you may recall that in the 1970’s, OPEC drastically cut oil exports to the US to protest US support for Israel. Energy supply is, and will remain, a weapon. That is why energy independence remains an important goal—not only for the US but for all nations.

Question: Thank you Commander for sharing this perspective.

Commander Nicolaou: Certainly, thank you.

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Influential books and recommended reading

odyssey and iliadAlthough I have always loved to read, there are a few novels that are indelibly etched into my brain as exciting, thrilling, and thoroughly entertaining. Listed here are seven books that have had a profound impact on me as a reader and as a writer. I’ve listed them in chronological order as to the date when I first read each book.

Homer: The Iliad and Odyssey—Ever since I was old enough to read, I’ve enjoyed Greek and Norse mythology. The stories move and are packed with action and adventure, heroic deeds, and tragedy. By far my favorite is Homer’s Iliad and Odyssey, relating the tales of Ulysses and other great heroes as they carry out the siege of Troy and then struggle to return home, having pissed-off the gods. A two volume hard-bound copy has a prominent location in my library.

rtt-usfirst-pbClive Cussler: Raise the Titanic—Anyone who has read my interview by Chris Graham knows that Clive Cussler was the first modern author who hooked me on the action-thriller genre. Raise the Titanic was the book, and I first read it in about 1980. Since that introduction to Dirk Pitt, I’ve read all his adventures, and I still enjoy Pitt’s wit and resourcefulness.

alpha deceptionJon Land: The Alpha Deception—Jon Land created a fascinating character named Blaine McCracken. Along with his trusty sidekick—Johnny Wareagle—McCracken led thrilling adventures against some really despicable antagonists. Darker than the Dirk Pitt series, but equally exciting, these novels added high-tech mystery to gun-blazing action.

Michael Crichton: Jurassic Park—A master at his craft, Crichton blended science fact with science fiction better than any other author. And Jurassic Park is the best example of a seamless merging of fact and fiction. The use of amphibian DNA to fill the gaps in the aged dinosaur DNA is simply brilliant, and forced me to research the science of DNA jurassic parkand cloning to understand what was real and what was speculation. With a fast pace and loads of cliffhangers, this is a must-read for any thriller fan.

Matthew Reilly: Ice Station—I was lured into Ice Station by the back-cover blurb, and quickly became a huge fan of Reilly. Ice Station is the first of the Scarecrow series, and marked a new sub-genre of action-thrillers for me—I call this the ultra-action thriller. This book is the prototypical example of the phrase “can’t put down.”

Matthew Reilly: Scarecrow—Once I became a fan of our ice stationleatherneck warrior, code name Scarecrow, I kept reading the series as fast as the books were released. Scarecrow makes my list of influential books in part due to the intense plot and non-stop action characteristic of the author, and in part due to the non-conventional way Reilly handles some of the main characters. I won’t say too much (no spoilers), but suffice it to say this is one damned good book and full of surprises.

scarecrowJames Rollins: Map of Bones—Another great franchise is the Sigma Force, with characters and stories from the imagination of James Rollins (pen name). Map of Bones is not the first Sigma Force novel, but it was the one that hooked me. To this day, Rollins’ writing of the Sigma Force novels has had more influence on my writing than any other single author.map of bones

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An interview with Commander James Nicolaou on the Ukraine-Russian conflict

With tension in Ukraine still very high, I am fortunate today to share this interview with Commander James Nicolaou, Strategic Global Intervention Team (SGIT).

Russian armored carriersQuestion: Thank you Commander for taking time from your busy schedule for this interview. What can you share with us about the full extent of Russian military involvement in Eastern Ukraine?

Commander Nicolaou: Well, to begin, let me point out the obvious—there is much information that I cannot share due to national security interests. However, as the international press has reported, a Russian military convoy numbering about two dozen armored vehicles—mostly armored personnel carriers—crossed the border and entered Ukraine sovereign territory two days ago. This is not new, and the Russian military has repeatedly violated the eastern border. For example, you may recall press photos of Russian surface-to-air missile launchers retreating back to Russian in the day following the downing of the Malaysian airliner. NATO has confirmed many of these illegal incursions into Ukraine. Following the most recent invasion of an armored Russian convoy, Ukrainian artillery shelled the convoy, destroying many of the vehicles and forcing the convoy to retreat.

Question: Do you believe that an invasion of Ukraine is imminent?Troops on border

Commander Nicolaou: That’s a difficult question to answer for the simple reason that we are dealing with the psychology of President Vladimir Putin. He is without doubt insecure, and he has a strong nationalist ideology. This is bolstered by a very high domestic approval rating topping 85%. Putin and many in his government covet the former Soviet Bloc countries of Eastern Europe. The sanctions imposed by European countries and the US have done little to put pressure on Putin or erode his support within Russia. Now consider that he has placed 20,000 troops on the border, plus he has sent smaller military units and equipment across the border regularly since the Crimea was unlawfully annexed by Russia, and I’d suggest there is only one conclusion that makes sense.

Question: Do you think that the Russian aid convoy is legitimate? That Russia genuinely wants to help achieve a peaceful resolution?

Commander Nicolaou: Look, the so-called aid convoy of about 200 trucks is manned by young men, all of fighting age. These young men have been photographed by international members of the press all wearing the same clothing, khaki shorts. The trucks are not fully loaded, which begs the question, why have so many partly filled tricks? And why do we not see a normal cross section of men and women of varying age if these are aid workers rather than soldiers? If President Putin truly wants to see a return of peace to the region, all he has to do is remove Russian military support and the rebels initiative will collapse. That he has not done so signals his intentions; take control of Eastern Ukraine—as he did the Crimean Peninsula—under false pretense of preventing harm to ethnic Russians.

Question: If the convoy is not to distribute humanitarian aid, why go to the trouble? What is the purpose of the convoy?

Commander Nicolaou: That’s a good question and one that the intelligence community has considered carefully. My own analysts at SGIT have put forward three reasons. Normally, I would not be allowed to go to this level of detail in a public briefing, but the military brass has made the decision that this is one case where secrecy is not helpful. Reason one—Russian is cultivating a public image of the peacemaker. Although this image does not sell to the general public in the US, it is appealing in many other countries, especially those that do not care much for the US. Reason two—intelligence. Driving a large convoy into Eastern Ukraine is a good cover for on-the-ground intelligence that would be extremely useful to the invasion force. And reason three—smuggling arms and ammunition into Ukraine for the benefit of the pro-Russian militia.

Question: Do you expect NATO to engage in any significant way if Russia does invade?

Commander Nicolaou: I really can’t speculate on what military response might be forthcoming from NATO. But I will remind you that Ukraine is not a member of NATO, thus there is no treaty obligation on the part of Europe and the US to offer military support.

Question: It sounds like this would be an ideal mission for Special Forces. Any expectation that SGIT will be on the ground in Eastern Ukraine.

Commander Nicolaou: Again, I can’t answer that.

Question: I understand. Thank you Commander, for sharing your insight.

Commander Nicolaou: Certainly. Thank you.

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Author reading from Crossing Savage

Planning to be in Bend, Oregon on Sunday August 10? I’ll be reading a passage from Crossing Savage at the Know Your Local Authors event, sponsored by the Deschutes County Library System.

Celebrate local writers at the Downtown Bend Public Library at Second Sunday on August 10, 2014 at 2:00 pm. The event is free and open to the public and will feature 13 of Central Oregon’s finest local authors. Books will be available for sale before and after the event.

Hope to see you there!

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It’s time to take a stance, or admit we don’t give a damn.

RUSSIA-US-POLITICS-DIPLOMACY-JUSTICE-MAGNITSKYIn the days since Malaysian Airline Flight 17 was shot down over Eastern Ukraine, we have witnessed Western Governments express moral outrage, and families of those murdered publicly convey their grief. We have stood by while the pro-Russian militia—acting like drunken thugs—delayed international inspection teams, delayed removal of the bodies, and apparently looted any personal belongings of value.

What we have not seen is a public expression of outrage from Russia or, more correctly, from Vladimir Putin (since his will is Russian foreign policy). We have not heard Putin demand that the pro-Russian militia cease using surface to air missiles of the type used to down MH17. In fact, only days later the militia used surface to air missiles to shoot down two Ukrainian military aircraft, and they had previously shot down a Ukrainian transport plane.

Putin has publicly stated that Russia has the right to directly and indirectly defend ethnic Russians living in other sovereign countries, whether or not they are in fact Russian citizens. No doubt this sells well to the homeland, but it cannot be taken seriously. Think about it. If this position justified military intervention, the world would dissolve into total anarchy overnight.

The tragedy of MH17 goes beyond the 298 murdered civilians—it includes the lack of Western Governments to hold Putin and Russia accountable. The cover story in the August 4, 2014 issue of Time Magazine (Cold War II, by Simon Shuster) says it well in reporting President Obama’s July 21 statement that the least Putin could do is exert his influence on the militia to cooperate with the investigation: “The least Putin could do was the most Obama could ask for.” And European leaders have done no better. Following the MH17 tragedy France announced that would proceed with selling a warship to Russia, and Italy has lead the resistance to further sanctions against Russia.

The message to Putin from both the US and Europe is “Please don’t do that again.” For a nationalistic leader like Putin, who enjoys an 86% approval rating at home, why should he care what Europe and the US want? Indeed, Putin has made it clear that his goal is a greater Russia (read this to mean territory and influence).

Having already annexed the Crimean Peninsula, formerly a portion of Ukraine, President Putin is poised to invade Eastern Ukraine, probably on the pretense of protecting ethnic Russians who are citizens of Ukraine. Putin has made it absolutely clear that he is not concerned that it was the pro-Russian militia he has trained and armed that murdered 298 civilians.

I grieve with the families of the victims, and I find the rhetoric of moral outrage and condemnation coming from the European leaders phony. Europe does not want to upset trade with Russia (including energy imports from Russia). So Putin may annex and invade sovereign nations on the thinnest of pretense, and provide weapons and training that allows his proxy militia to shoot down a civilian airplane, all with impunity.

It is time for Europe’s leaders to put up or shut up. If they do not want to take a stance against Russian aggression, then they need to say so and stop with the cheap stage acts. On the other hand, if they want to make it clear that this aggression will not be tolerated, the course is simple. With UN backing send ground troops with all necessary support into Ukraine to destroy the surface to air missiles and secure the border with Russia. Anything less is telling Putin he is free to continue this lawless path to a greater Russia.

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