
("Aramco derrick at Abqaiq. Bedouin caravan to oblivion, [Saudi Arabia, 1947]." The World of Allah, p. 173. Photo by David Douglas Duncan. What a gorgeous, evocative shot.)
Two stories from last week passed almost unnoticed, but both have a lot to say about what is going to happen to our country and what kind of life we are going to have beginning less than a decade from now.
The first of these is in an article from the Oil Drum Saudi Arabian oil declines 8% in 2006. This is truly momentous. Now some of this decrease may be voluntary but probably not all. Saudi Arabia means oil to most of us, and if production begins to decline there, then the SUV you have now may be the last you ever will have.
Once an oil field goes into decline the trend is usually both inexorable and rapid. And in the aggregate this appears to be what is happening or near to happening in Saudi Arabia.
This is consistent with other stories that the Saudis have increased the number of drilling rigs they are using. These are not to increase production but are in anticipation of and to slow the process of decline. However, the kicker is that this type of new production comes from smaller, less accessible, more expensive to develop, and shorter-lived fields. In other words, more resources go into producing less oil from fields that are more quickly exhausted.
This does not mean you should sell your SUV tomorrow. The Saudis will not run out of oil to sell us next year or the year after and we will not quickly lose our desire to buy it. Still the era of cheap energy is ending. Oil has been trading recently in the $61-62 per barrel range. Weather, recession, fears of recession, and the occasional speculative play may send the price lower temporarily, but in a few years, $60/bbl will look like a bargain.
Marion Hubbert predicted this back in 1956. Oil is a valuable, finite commodity. There is an incentive to exploit it but at some point the production of cheap, easily extractable oil will begin to decline and attempts to replace it from more expensive sources will not make up the shortfall. Oil production will hit a peak and begin to decline. Hubbert’s timeframe was 50 years. He does not appear to have been far off. Mexico, the North Sea, and now Saudi Arabia are in decline. Iran will likely join them in the next few years. Future Iraqi production will not reverse, although it may slow for a while, the decline.
Technically, peak oil may still be 5 or so years away but that rumbling we can already hear isn’t thunder. So you might start thinking about what your life will be like after the gasoline age because most of you (if you’re planning on being around for the next 30 years) will live to see it.
Now some of you may think that this is good news for global warming. We could simply run out of carbon based fuels before the environment goes completely off the rails. Unfortunately, this isn’t the case.
The New York Times has an article on the government’s most recent Climate Action Report (the last one was from 2002).
According to the new report, the administration’s climate policy will result in emissions growing 11 percent in 2012 from 2002. In the previous decade, emissions grew at a rate of 11.6 percent, according to the Environmental Protection Agency.
In other words, the current Administration’s strategy has been and continues to be to do nothing. This is typical but not acceptable. As James Hansen (the NASA climatologist who came to national attention when a 24 year old fundamentalist Bush political appointee George Deutsch tried to restrict his access to the press for his views on climate change) has pointed out here we don’t have the time to mess around with this and hope it all goes away.
we have at most ten years—not ten years to decide upon action, but ten years to alter fundamentally the trajectory of global greenhouse emissions.
Hansen’s argument, like that of Al Gore’s An Inconvenient Truth, is that global warming is here. Its effects can mitigated if we act now.
Yet because of the global warming already bound to take place as a result of the continuing long-term effects of greenhouse gases and the energy systems now in use, the two-degree Fahrenheit limit will be exceeded unless a change in direction can begin during the current decade.
The danger with dithering (the Bush plan) is that the environment will reach a tipping point where even major action will have little effect.
The gathering energy crisis and global warming demand decisive, clear headed, farsighted leadership of a kind that has not been seen on the American political scene since the days of FDR. Instead we are looking at 2 more years of one of the most corrupt and incompetent Administrations in our history and a Democratic Party that appears willing to wait them out.



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Hugh!
Hugh!
Out here in Cali, my gas price has gone up 15 cents in one week, and the papers are saying to expect another 20 soon.
They say it’s the switchover between CA’s winter and summer gas formula, but they say that every year, and the price never declines afterwards.
I’d wager our rapid increase has more to do with the SA field news than anything else…
Regardless, great post.
Thank you Fitz.
There was recently an op-ed piece in the NYT that said peak oil was bullshit and even ridiculed the “experts” who had predicted it.
Never believe anything in the NYT.
Obviously the only solution is coal-burning cars.
Excellent post, Hugh.
Eli @ 6
Of course! (Slaps forehead)
We’ve known about “peak oil” for years, but now we’ve discovered we’re possibly going into peak bee. And peak frog, too…
Good essay, Hugh.
The large picture dictates that by far, the most pressing things concerning our survival are environmental and war issues. And these problems are inextricably linked.
What frightens me is that other petroleum byproduct that will disappear: plastic. How will we build and furnish our houses? How will we package and transport our food? How will we get that emergency blood transfusion? And why doesn’t anyone ever talk about this?
Rainforests are also key to global warming. Their destruction is occurring at an exponential rate and gee Dubya Bush is encouraging it. James Howard Kunstler at Clusterfuck Nation is a good source for up to date reporting on global warming and solutions that nobody else is willing to talk about. Mass transit via rail is one of them. Chain Dickey’s non-negotiable lifestyle is a pipe dream. Its going to end whether we like it or not. Its high time to get real.
The best short books I know about peak oil are by Kenneth Deffeyes from Princeton. The earlier one (at the bottom of that page) is a quick and entertaining read. Deffeyes leads you right up to the edge of the crisis, and then pushes you off the wall. Once you’ve read it you can’t unlearn what you know, and it will change the way you think about the oil industry.
The book makes the fact of peak oil so obvious, you can’t help but believe in it… Hubbert was right when he predicted the peak of oil production for the United States, and there is no reason to believe he wasn’t within a couple of years with his prediction for the global peak as well. Here’s a hint: we’re already past it.
melfeasance @ 11
I think the answer is that oil will gradually become too expensive to burn as it gets harder to find, but it will be a much longer time before it gets too expensive to make plastics. I think the amount need for making plastics is dwarfed by the amount we burn.
bdu,
The most recent pressures on gas prices nationally have come from decreased inventories and a spate of cold weather, now ending. Crude oil stocks are also down so this may also hit gas in a bit. The decline in the stock market had a transient effect. There were also some refinery problems in California for the Western US gas market.
All these things tend to tug in various ways. I often find Bloomberg hilarious because one day they will have oil falls following stock market. The next day the market recovers a little and they write: Oil up on higher market. I try not to look to closely on the day to day stuff unless it is really big.
Riesz Fischer @ 13
Or we’ll just start making plastics from nuclear power plant byproducts. Two birds with one stone!
Our climate debt is staggering. Gigatons of industrial waste in the biosphere and no hope of remedy from any quarter.
Would that we could produce solid diamond columns with the atmospheric carbon we’ve released over the last 50 years and that wouldn’t even come close to approximating the value of the biosphere to life.
Carbon crystal trees…diamond dahlias…nah…
Eli: Or we’ll just start making plastics from nuclear power plant byproducts. Two birds with one stone!
[jumps up and clinks beer bottles with Eli]
Brilliant!
Hugh! Kudos. Glad to see that FDL talked you down from the ledge about starting your own blog. (haha- just a little funny to Hugh)
Did you see that I was jonesing for you to do a post on “Bushpique as a ferign anguish”?
Fantastic post Hugh!
We need an enormous effort by Americans to WakeTFU and do something. The Western world has contributed to this debacle for far too long, and now some try to blame those pesky “other” traditionally poor countries– China, India, etc, etc. for the mess that we are mostly responsible for, imho.
(ps– the shot made me choke up, to tell you the truth)
Eli @
6
You’re kidding, right? Tongue firmly in cheek!
Ann in AZ @ 20
Of course. What we really need to do is burn the coal and extract the hydrogen from the smoke to make fuel cells.
Hugh- do you see any connection between the decline in the Saudi oil production, the closeness of BushCo. and the House of Saud, and the Iraq invasion?
What fascinates me about the near decline in oil is how it will affect daily life. We have lived a long time with the myth of the open road, but will we be able to keep personal transportation (with oil’s coming decline) and will we want to (because of carbon loading and global warming).
A lot of our electricity still comes from coal. Will technologies like sequestration really work? Will we get serious about conservation?
One of the things that makes immediate action on global warming imperative is that we are locked in to technologies that will take time to replace. A house is built nowadays probably to last about 50 years. A car for 10-20 years. TVs and home electronics 5-10 years. All that can’t be changed in a day or a year. Some of it is generational.
APOLLO Project for ENERGY!
NOW!
When oil is $60 per barrel, a whole host of alternatives become economically attractive. As Al Gore says, all it takes is political will. We know that BushCo (the Halliburton-Exxon-Conoco Phillips Cabal) does not have the will but in 2008 the new Democratic sheriff most certainly will.
FOSSIL FUELS ARE FOR FOSSILS!
The new era has begun. We seek reduced CO2 emissions and energy independence. There are not enough Prince Bandars in the world to stop this.
hackworth @ 12
Rainforests. To experience the beauty and ambience of a tropical rainforest, I cannot describe. Or for that matter, any rainforest. Anybody love the movie “Medicine Man”?
For more on Scooter Libby’s private fantasies, I recommend you read this diary.
Also consider these photographs when meditating on Scooter Libby’s sexual phantasies.
Campaign slogan for anti-global warming campaign:
Fuck you and the SUV you rode on in!
Valley Girl @ 22
Well we didn’t invade Iraq for the oranges, but it all went horribly wrong when no one informed the Iraqis they were supposed to throw rose petals in our path. The neocon vision actually saw Iraq as a fallback position from Saudi Arabia. It had oil too. It was secular and looked like a more stable country to host US bases. OTOH the neocons thought that Saudi Arabia was likely to explode because of its pent up social and religious contradictions (it still might).
Kevster @ 24
I wish I could be so sure. Gore is the only Democrat I can really see pushing for serious energy reform, and I suspect that half the Democratic caucus would be fighting him right next to the Republicans.
It *shouldn’t* be that way, but I fear that it will – since at least 2002, there have always been roughly 20-25 Democratic senators willing to line up with the Republicans on the most *amazing* shit.
So why are burning up thousands of barrels of oil fighting pointless wars?
My last class before graduation in 1991 was a critical thinking course. They brought in teachers from six different disciplines; some from political science, some biology, some environmental scientists, etc. The thing I remember most from that class is that they told us before 2030, we would have to give up 2 things; one was our cars, the second was meat. They said we live too high up on the food chain and an Indian or Asian on a bike uses a lot less energy than a motorized vehicle. Said don’t be surprised if we end up having to eat insects because there is a lot of protein in them. At upward of sixty and already disabled with a debilitating disease, I doubt I’ll have to worry about that, but some of you younger folks might want to consider altering your lives now, while there is still time. I’m trying to do my part, I recycle and recently bought the new type of light bulbs. Anything else I can do, I’ll try, but it’s mostly up to you younger people now. I would think giving up those SUVs might be a serious consideration.
mattes @ 30
Stupidity and greed.
mattes @ 30
To make the neocons’ dicks hard? Don’t you think that’s worth it?
Ann in AZ @ 31
Hey, we’re, like, classmates!
What if the oil that was in the earth was meant to be there to help keep it cool – just as oil in the car does?
I pine for what’s left of the old growth Redwoods of the north-west coast.
sorta OT – erm, why is the shrub telling Brazil we will buy ethanol from them? we can’t grow our own corn? I’d think there’d be some pissed off American farmers out there…
Ann in AZ @ 32
Grasshoppers are supposed to be pretty good. And they’re kosher.
Thanks for the post, Hugh.
For those of you who are now hooked on the issue, I recommend the Oil Drum.
There was a recent post (warning, terrific graphs!) on Saudi Arabian production (declining) vs. number of rigs (increasing).
And a very recent one about why the decline is not voluntary. Essentially, you can see that prior to Q3 2004, the Saudis could stablize the peaks and valleys of the rest of the world because they had excess capacity. No more.
Scary stuff, girls and boys.
Morris Sheppard @ 37
Can they be served kung fu, er, kung pao style?
This is just another reason -
Al Gore. Now, more than ever.
Oklahoma kiddo @
10
Oh, yeah! Can you imagine the effect bombs going off, especially if they become nuclear weaponry, will effect the ecology? Or do you remember the images of the oil fields in Kuwait as they were set on fire by Saddam’s soldiers when they were in retreat? That was one of my biggest worries when they commenced talking about war in Iraq. What a horrendous idea!
Morris Sheppard @ 40
Saying “The Earth needs you” might be the only way to get him to subject himself to the misery of another campaign, and 18 months of catty swipes from MoDo.
Eli @ 33
Really? I got my degree really late in life, as you can tell!
Morris Sheppard @
41
“Accept no substitutes”
Can we assume that the DLC is pro-environment?
Ann in AZ @ 43
I got mine at the usual time, but I figure any time’s a good time. But yeah, I was class of ‘91.
Oklahoma kiddo @ 45
*snort*
Eli @ 40
Why not? Kung pao, sweet and sour, with fermented black beans and garlic. Anyway you like. I’ll even watch you eat them. (no thanks, I’m full.)
I did, OK @ 25.
We are energy hogs.
People don’t want windmills cause it’ll ruin their view. No money to tie into the grids that could disperse the windpower generated by wind farms that do exist where people don’t care about their coastal views. Heavily subsidized energy companies won’t do anything. Our rails have fallen apart. Lazy, lazy, lazy and stoopid.
Al Gore.
Miss P. @ 34
Then we are so fucked.
Mr. Gore’s leadership in the White House is sorely needed.
angie @ 50
angie… ;0)
Eli @ 43
If we’re lucky, 114 months of catty swipes from MoDo.
OH, and punaise @45
That’s what we said in grade school.
Eli at #15 says:
Then will we all glow in the dark?
Ann in AZ @ 55
*Three* birds!
Or maybe three-headed birds…
Eli @ 48
I absolutely love economical responses. ;0)
Morris Sheppard @ 48
I’m having trouble choosing between that and the General Tso’s Cricket.
From my inbox:
“On Sunday, Senator Jim Webb will appear on ABC’s ‘This Week’ with George Stephanopoulos to discuss his legislation prohibiting funding for military operations in Iran without Congressional approval, Iraq, Walter Reed and other issues.”
I did ask his staff if he could PLEASE accept more of the many invitations to appear on nationa news shows. He gets them all the time.
G’night, wishes for sweet dreams and a progressive tomorrow.
Miss P. @ 34
Most of the carbon in oil and coal was laid down between about 500 to 250 million years ago, so in some ways it’s not that old. What we are doing in a few centuries time is putting a lot of that back into the biosphere. A few hundred million years vs a few centuries. That’s scary.
What I think often gets lost in these kinds of conversations is the enormous effect that life can have on the planet. Almost all of the oxygen in the atmosphere was released by bacteria. Almost all of the minable iron deposits in the world were laid down by bacteria. These are huge systems we are dealing with and they should not be treated lightly, so of course our political leadership at this time of crisis would have to be Bush and Cheney.
There was once a humorous book How to become extinct. There should have been a chapter on Bush and Cheney.
egregious @ 59
Yes, please. There just aren’t enough Cliff Schecters to go around.
I’d like to see more Dean, Clark, and hey, remember Hackett?
Hemp can produce plastics and fabric and is fast growing and does not deplete the soil. Dupont and other competitors made sure that hemp growers were demonized, put out of business and the product demonized and declared illegal. It is superior to cotton in almost every way.
OK, my brother is a physicist and he’s often telling me how difficult or impossible things are as regards many alternate sources of energy.
Nonetheless, I refuse to believe that a species as clever as we are can not solve this problem if properly motivated and enough resources are devoted to it. After all, I’m sitting here at a computer no bigger than a small box of chocolates and conversing in real time with people all over the world and it’s supposed to be impossible that we can’t develop a system of moving people and goods that does not rely on petroleum?
shrub’s at a JAR of what now? 29% And gas prices are rising quickly. This promises to be a fun ride over the next few weeks I think. Maybe we’ll get real lucky and even this Congress will dump a president with an approval rating in the low twenties or high teens. Then again, probably not.
But somebody needs to run an ad, about now, featuring a teacher scaring a bunch of starving-looking white kids with shrub’s portrait, set in the bleak desert that is all of our environmental futures.
Sorry, I really doubt Gore’s gonna run, no matter what else happens between now and Nov 2008.
But the eventual Dem nominee better commit up front to creating an energy dept that includes Gore in a role as policy-maker.
I recently had a depressing conversation with my brother about Saudi oil fields. What he says is that they are pumping oil as such a rate that it is causing subsidence (sp) – and that the slumping/geographical changes will make it difficult to get at the oil that is left.
Anyone here know anything about this?
I live on six wooded acres. Last summer I put in a outside wood furnace. Burning wood is carbon neutral. I figure I am off oil but haven’t figured out electricity yet. I don’t have enough wind or sun for either method. I hope for innovation soon. I also figure there will be a positive health aspect. Getting the wood ready is great exercise. It gives me a chance to take care of trees damaged by winter storms. I’m having a great time – except last night when I didn’t use enough hard wood and had to go try to get it going at 1:30 and 2:30 and then one more time at 6:30. The hard wood is frozen in the ice. Next winter I’ll be better prepared.
Morris Sheppard @ 64
We need Mr. Fusion, is what we need.
Oh, and most of the masses or the bedouins didn’t get very much for the black gold under their camel’s feet– but they’re getting a whole lot worse now! No electricity, no clean water, no gas, no kerosene…
(Neither do the miners anywhere who bring up diamonds or coal or gold or silver.)
So, nobody else can have a nuclear program– what are they gonna do when they run dry? Buy boosh’s switchgrass and turdblossom pies?
*that picture is truly evocative, Hugh*
Riesz Fischer @ 51
Metaphorically speaking, naturally, I am compelled to concur.
Eli @ 39
As long as there’s chocolate, who cares?
We visited a wind farm last summer at Tugg Hill, NY near Adirondacks where we summer. We snuck up to the base of one (got caught, but not before we got pictures). They are awe inspiring, actually dreamy in a way. On the peaks of mountains in the distance, or up close, they are majestic and soothingly quiet. I could imagine having one in place of the big power lines that stretch across areas in large scale scarring the earth view. You know, those permanent bare spots? If we put one, just one, in our neighborhood it would power all the homes. Probably with enough energy to sell back to the power company.
But I’ve always been a dreamer.
what’s all this talk about pea coil?
Hugh @ 62
Yes, but you are not thinking about the billions of dollars that are lining their pockets – hundreds of thousands each day. He with the most toys wins.
If he could, Cheney would be the last man standing on the last isleta of dry land on earth, grasping a fist full of dollars screaming to the heavens, “I win!”.
Oklahoma kiddo @ 45
Surely you jest?!!
louisianagirl @ 53
you might get a kick out of this :
http://falafelsex.blogspot.com…..-deer.html
I realized I think I dated Scooter Libby.
Now, dear reader, if you are offended by graphic sexual descriptions, I have two things to say to you. First, you are probably here by mistake anyway. Second, you probably should move on, because I’m about to bring down the Falafel Sex house.
How in the world does one compare Gore to Hillary?
Typical on mature fields, especially where fluid-injection strategies are being used to force the last drop out of old wells. It’s completely normal and just illustrates the massive environmental devastation that’s of all aspects of the oil industry’s supply chain. Use ‘em up, screw up the ecology of the area, find another one, start all over…
Fern @ 67
moi @ 76
Sex with Scooter sounds pretty grizzly.
Ann in AZ @ 75
Yep… ;0)
Oklahoma kiddo @ 77
Favorably.
How in the world does one compare Gore to Hillary?
not compare; contrast.
Hugh @ 61 – Speaking of bacteria, some scientists hold the theory that humans evolved as a life support for bacteria; that we exist only for bacteria.
I’m what’s called a “tree-hugger”. (among other things)
Eli @ 70
Couldn’t agree more, but when I talk to bro about fusion his eyes sort of roll up. I remember about 30 years ago I was sure fusion would be up and running in about 25 years. I think we’re a little behind schedule.
melfeasance @ 83
Well, the ability to coexist with and even make use of bacteria is almost certainly adaptive, but that might be a rather extreme way of looking at it…
punaise @ 83
You’re being rather polite tonight. No? ;0)
I frequently drive by about a dozen windmills south of Wilkes Barre, Pa. They are really graceful I think. I wish I had enough wind to make one viable. A friend in Rhode Island has a neighbor who has had an outdoor wood furnace and a windmill for over 20 years.
Morris Sheppard @ 85
Fusion would solve so many problems, although probably not so much on the transportation side.
Of course, the fact that it would be the perfect solution doesn’t automatically mean that it’ll happen, or at least in time to do us any good…
Oklahoma kiddo @ 85
Or, as “Benedict Ronald” referred to us, “the bird’s nest crowd”.
melfeasance @ 83
That’s how I feel sometimes.
Eli @ 87
But it would explain why we’re presently being ruled by bacteria. Escherichia Shrubi.
Oklahoma kiddo @ 79
It’s the same as apples to oranges.
I just finished reading “The Revenge of Gaia: Earth’s Climate Crisis and the Fate of Humanity” by James Lovelock and “The Road” by Cormac Mccarthy. If you want to scare yourself silly, read those two back to back.
Lovelock, the preeminent scientist who introduced the Gaia theory basically says our only hope is nuclear power. Other than that we are screwed.
I’d love to buy some linoleum. Real linoleum, like was in my parents’ kitchen. Made from linseed oil, lasted like iron. I hope that will start being made again, soon.
PS Morris Sheppard—you make beautiful furniture, I never thought to click on your name before!
Punaise is being literal. Shall I compare you thee to a summer’s day, etc. In that sonnet compare = make you like that.
If he could, Cheney would be the last man standing on the last isleta of dry land on earth, grasping a fist full of dollars screaming to the heavens, “I win!”.
That would be a tree-less earth. All the trees will have been sold in the free market. Sick Dick would be standing on a patch of barren land proclaiming himself the final winner.
excellent —- 60% of the world’s oil rewserves are in Russia where they have about the same number of people (Ukraine, Belorussia et al incl), a bigger land mass, which will be mote productive under global arming as we get more desert-like, and better education. Russia is not our friend, despite Dubya look into the depths of Putin’s eyes. Russia is competing to be Top Boy in these last years before India takes over.
So we make a great effort to irritate the owners of the (declining) other 40% for this period while we shall have to find alternative methods.
BTW we, where I was, had cars converted to have coal-burners mounted to make gas to run the car in WWII. Kein Probleme, the technology is old.
Miss P. @ 35
I’m late to this thread. Was determined to hit the rack without even one more peek at FDL. Fat chance.
Ms. P, I have wondered the same thing, in a general, non-specific way. We keep sucking and digging things out of the earth–oil, minerals, water. And though it is absolutely unscientific and based on zero knowledge, I can’t help thinking that sooner or later, the earth is going to groan in some cataclysmic way that roughly equates, “I’ve had enough. Leave me alone!”
Anthropomorphizing the planet, I know, but it’s the fastest way to get where I’m going with this. How much longer can we plunder and abuse the earth (and that is what we’re doing) without some kind of massive pay-back?
I suppose this relegates me to the flat-earth society or something like it, but I’ve said it and I’m glad.
Eli @ 80
i know, just cant bear the thought.
Margot @ 97
It is still being made. Now a big thing for restoration of older Arts and Crafts houses.
bdu @ 66
I think he’d run if enough people were in line to back him up! It’ll be hard to convince him, but especially if Hill is shut out early, he probably would run.
Hi all you fdl’ers! Just back to technology after walking the 71km Queen Charlotte Track for the past week (left last Monday (Sunday US time).
Did I miss anything?
Oklahoma kiddo @ 87
yeah, well a pre-weekend getaway to wine country turned me into an indulgent softie. it won’t last.
Morris Sheppard @ 94
Would prunes to strawberries work also?
bobtaco @ 96
Physicist brother would agree. He’s an environmentalist and quite liberal but thinks nuclear power still makes tremendous sense, and waste problems can be solved. Basically nukes make electricity and electricity powers everything else, including cars.
Morris Sheppard @ 101
Forbo Marmoleum
Gore is a Dixiecrat who couldn’t even win a debate against the village idiot. We can do better than that. 2008 is going to be like 1976– whichever candidate the Democrats run will win. Let’s be a little more particular.
Ann in AZ @ 103
Yessss!
bobtaco @ 95
The premise the nookular argument maintains is that we shall sustain exponential population growth. Nookular or otherwise, the earth cannot sustain future population forecasts. It is imperative that we remove religion and anti-birth-control from politics.
Eli @
81
Yes, it is indeed animalistic. But Libby crosses the line when he goes here. For this is what was on his mind when he wrote the novel. Gross.
Plant lots of trees.
Now is the best time.
.
Morris Sheppard @ 106
I find the idea of increasing nuclear power under a Republican government, with its hostility to regulation, oversight, and environment, to be seriously terrifying.
Morris Sheppard @ 63
There are difficulties. Corn based and cellulosic ethanol both contribute greenhouse gases, they wear out the soil and use water resources, they compete with food use, corn at least takes fertilizer, even the most ambitious case scenario they can replace only a small fraction of energy we get from oil.
Nuclear has safety and disposal issues.
Hydroelectric modifies and sometimes destroys ecosystems.
Fern @ 66
There are a lot of issues with oil: What kind or how deep, for example. Another is permeability. Oil doesn’t exist in some big pool below ground. It exists in rock of variable porosity. Rock that is more permeable will tend to have more oil and oil that is easier to get at. As fields are developed and go into decline, you need to look at their less permeable components and introduce new technologies to get what is left from the original field. Subsidence may result but I am not sure that it would have too much of an impact on extraction, except in how it might affect how oil moved through the rock.
Eli @
16
Superb idea. Spread that stuff around and we will not only solve the population problem but mutations should produce a superior race.
Peak Oil is a crock BTW but just maybe we shouldn’t be burning the stuff anymore than creating more poisons.
Best, Terry
maunga @ 98
Maye the oil in the earth also helps to keep the cold places on earth from being even colder.
Oklahoma kiddo @ 109
I think Gore has a moral responsibility to run :)
Barbara @ 100 – you should read this book by Lovelock I mentioned up thread, because it is very similar to what you describe.
bobtaco @ 95
Personally, I don’t think we’re in such bad shape IF our political leaders are prepared to take us down the right path. Replacing petroleum used in transportation is, as others have pointed out here, hard, and economically painful, but car emissions are not the biggest US use of hybrocarbons (only about 27% or so). Building construction accounts for something like 36% or something like that, and the construction industry is adapting more quickjly and comparatively easily. In terms of power generation, there are lots of alternatives, many of which are quite viable. My pessimism arises not from the lack of technological or engineering alternatives but rather from the power of the oil and auto industry lobbies and the entrenched mendacity of our political leaders.
Hi NZ Expat, well…
Scoots is guilty on 4/5 counts and Henry Waxman is holding a hearing on the 16th with Valerie and Bush is being booed in Latin America and Cheney has a little clot in his leg, there’s no world peace, etc.
oh, and the world’s running out of oil.
Riesz Fischer @ 109
Gore seems to be the best potential candidate to me thus far. I disagree. Gore won all the debates handily. The media (IMHO, the media is totally right-wing owned) insisted that Gore lost the debates. They piled on Gore like a ton of bricks and made a 50/50 race out of what should have been a clear victory for Gore. When they get close to 50/50 they can steal the election and they did – twice.
Lovelock mentions that to the earth, radioactivity and hence nuclear waste, is not dangerous. He uses the example of the Chernobyl site which is teeming with flora and fauna now that it has been abandoned by humans.
His perspective is that the planet is sick and we are killing it, and we need to think about the health of Earth (Gaia) first before we think of ourselves.
What do we think about the Gore-Obama possibility? Or Edwards-Obama?
When I was a much younger kiddo type, I actually, really worried that with all the liquified dinosaurs (oil) we were pumping out of the ground, we would make the planet so light we would float out into space. How silly. It was silly, wasn’t it?
Nice post, Hugh.
The issue of peak oil is, IMO, one of the most important in framing and contextualizing many of the geopolitical realities we see today, and it also appears to be one of the most contentious and debated, as we see from its vocal host of adamant activists – some of whom verge into the conspiratorial – and equally adamant naysayers – which range from Big Oil to, apparently, the NYT. I find the issue fascinating, but I often find it hard to perceive the “real” truth behind the reporting and speculation (though both my intuition and reason suggest that the activists are a lot closer).
Some of the cloud over the debate about peak oil seems to lie in the documentable fact that 1) both the Saudis and big oil are rather tight-lipped about actual reserves (or there’s little accountability to ensure they don’t fudge their estimates), and 2) when tidbits of truth are revealed, they go largely unnoticed, as you point out. So how do we really know what’s left – and where? It’s kind of like having sand thrown in the eyes.
IIRC, Hubbert accurately predicted both America’s and Russia’s oil production peak. I don’t know if or what he predicted about the world, but the latest Saudi decline does not bode well. I’ve seen estimates that the world is 5-10 years from peak, at peak now, or somewhere vaguely in the 50-100 years range (and the optimistic argument goes that by that time we’ll have come up with some “technological” miracle that will save us).
I’ve also read a lot about how, collectively, none of our current alternative energy sources can equal what oil gives us so easily; even price is moot. Activists suggest that the world’s economic engine is so totally lubricated by oil that there’s little chance we can ween ourselves in time, which seems to echo in your post.
I don’t have any answers, but I’m glad that this issue is part of our discussion here, and I’d love to here what various readers have seen “out there” as to what our most realistic assessments – and hopes – are.
Miss P. @ 92
Our bodies are so full of natural bacteria, if we took everything out of us except the bacteria, we’d still be standing.
Blub @ 123
I prefer Gore-Obama. I wouldn’t mind Clark or maybe Richardson as running mates either.
Riesz Fischer @ 108
How can one actually engage the village idiot in serious debate? Therein lies the advantage?
bobtaco @ 119
Just looked at the link. Here’s a quote from one of the reviews: “He (Lovelock) says we put our national tribe before all others and don’t recognise the unity of life. This is a simplistic attitude.”
I think it is not simplistic. I think it is fundamental to the problem(s). All else pivots on this concept.
Big talk from a relatively down-to-earth kinda gal. But down-to-earth is the bottom line here, isn’t it?!
Thanks for this tip. I think I’ll be reading it.
And just for the record? I’m rooting for a Gore candidacy, Big Time.
I pretty much prefer Gore at the top. With Hillary nowhere in sight.
Morris Sheppard @ 107
I spent two weeks in Switzerland last fall. The whole place runs on electricity–trains everywhere and I never saw anything that came close to resembling a traffic jam. Its also one of the cleanest places on the planet. Aside from some hyrdro-electric, it is all created in nuclear power plants. France is big on nuclear too.
huffington post
is intimidated by
the right
for posting comments from the
70% of americans who can’t stand
dick cheney
heh…
now all the comments are being censored
barbara @ 99
The other thing I remember from my last class in 1991 was the speech about the carrying capacity of the earth, and how, once Mother Nature tires of our wasteful ways, she will shake us off like a dog shakes off its fleas. Basically, this speech addressed the same things you just said.
The other thing that bothers me is that once global warming starts to reclaim our coastlines, and weather changes start to affect where people can live, where will we grow all the food we’ll need for our burgeoning populations?
Eli @ 128
Gore/Obama would be my favorite combo as well. I would like to see Clark as Sec Def.
Oklahoma kiddo @ 124
Not silly! I asked someone a few years ago what replaces the oil. The answer I got was water. Or water-ish.
Thanks Angie. Was there anything about Sealed vs. Sealed? Any further prosecutions to come?
On the oil frontier, what were the profits of Exxon and BP this last year? Any signs of suffering, or are we in the “last throes” of frenzied profit-taking?
hackworth @ 122
I agree that the media are totally wingnut-owned, but did you really feel that Gore won those debates? He was sighing and acting helpless. I got the feeling that his handlers had told him to be easy on Chimpy so as not to alienate the Moron Americans (independents).
I’m sure he’d be a better candidate this time around, and he’s great on the environment, but so would any good liberal candidate be. And Gore helped Clinton sell us down the river with the free trade agreements of the 90s. I just think we can do a lot better. Isn’t Gore a member of the DLC?
melfeasance @ 82
Stephen J. Gould I think had the view that evolution in some ways is a fluke. That if you look at the success and sheer tonnage of bacteria they have always dominated life on earth. The rest: plants, animals, humans are outliers, that is increasing complexity is not a necessary outcome of evolution. It just turned out that way and so we ascribe greater importance to this outcome because we attach greater importance to ourselves.
This does not mean you should sell your SUV tomorrow.
Yes, it does.
Morris Sheppard and Punaise,
Thanks, that’s exactly what I was looking for.
Now to find out how Bakelite was/is made…;) I mean, really, what are we going to use for radios and computers if not something like that? Hm. Hemp Bakelite.
And so if water replaces the oil, will we spin out of balance. I’m serious, anyone know the math?
Morris Sheppard @ 41
My exact thought as I’m reading this. Hugh’s post was great, although scary. I think I’ll be having nightmares tonight. If Al doesn’t run and win, I don’t know if there’s anyone else out there as committed to this issue who will be able to start to try and solve it. Most people just go about their daily lives and figure things will turn out okay — if they even know half of what most of us here know.
NZ Expat @ 137
A record annualized fourth quarter ‘06 PROFIT of $41.6 billion. They’re doing fine. Thanks to shrub’s generous concern for their social welfare, no suffering there…
sorry. that’s for Exxon
Blub @ 124
What do we think or what do you think? Personally, I’d vote for a yellow dog if he’s a democrat. I like Edwards. I liked Obama’s speech at the ‘04 Democratic convention. I didn’t like Obama’s criticisms of the party, but I am warming up to him lately. Like I said, I’m the kind of voter that votes a straight democratic ticket. I would prefer the Green Party or a more progressive party, but I am cognizant of the limitations of our two party system. Nothing is worse than a goddamn republican adm.
hackworth @ 145
Yup. Justice Stevens ain’t gettin’ any younger.
Hugh @ 115
Lots of people you know eat trees, cardboard, like that?
Cellulosic ethanol is being made today from forestry waste. Brewery waste is producing ethanol on a commercial scale.
Not geothermal which is derived from radioactive decay in the crust of the earth. Despite neglect, unfavorable tax policies, high capital costs, geothermal power plants produce more electricity than wind turbines in the U.S..
Exactly how do run of the river power plants destroy ecosystems?
Mining of oil sands BTW is increasing, not that it is a great idea, while Chevron, has drilled an elephant at great depth. There is not so much a shortage of oil but rather greater expense in getting at it and doubt that we should.
One of my favorite projects is using digesters to extract methane from manure. The methane is a very potent greenhouse gas.
We are only limited by lack of our own energy and will.
Best, Terry
There is no way to run our civilization currently constructed if you take away the oil. No combination of energy sources can replace it. I think the only thing we can hope for is a managed decline. However, that should have started 30 years ago, and now it’s probably too late.
Of course, right at the time we need to make this huge change, we will be getting clobbered by the increasing effects of global warming. We are going to see a huge reduction in the standard of living and probably a drastic reduction in the world’s population.
I’m for Gore as well, but even with him as President, I don’t see a way to mitigate all of the pain that is coming screaming at us.
Who else but Gore? He’s the only person for the job, IMHO. This is the time, and if he believes in what he says, he owes it to the country and the world to run and get ahold of that bully pulpit.
Miss P. @ 142
No, all of the oil takes up only a tiny percentage of the Earth’s crust, and the crust is a very thin skin over the mantle. I’m pretty sure that removing all the oil or replacing it by water would not even be noticed by Mother Earth. (Do you agree, Hugh?)
I sure would like to know the truth about how much money Bush and Cheney have reaped from their oil related interests (including M/I complex) since these two crude barons ‘won’ the White House.
NZ Expat– Fitz said he was done with the investigation, but left the door wide open for Congress to
bring it onplay ball. So Henry Waxman announced yesterday that he was holding a hearing and sent Fitz a letter…here:
http://oversight.house.gov/story.asp?ID=1205
Alicia @ 150
“Where have you gone, Al Gore, NGO? A nation turns its lonely eyes to you.”
hackworth @ 146
I think Gore-Obama could give us 16 years. I’m not holding my breath for Al, but I’d sure like to see him jump in. Is Obama-Edwards a possibility?
Riesz Fischer @ 108
OOh, you’re in Gore country. Don’t forget, Gore won the last election he was in. Unfortunately, the other son of a former president was a governor of the state that gave his brother, George W, the election–I cannot be convinced that some of those votes were not stolen, or if a recount had been allowed to be completed in the state court, he would have taken that state, too. This was the only time in history that the Supreme Court appointed a president. I don’t think that would happen again, because people want a do-over. Besides, what other candidate can claim two academy awards and a Nobel Peace Prize nomination in the same year. This is a highly respected man–maybe not by you, but by much of the rest of the world.
Alicia @ 150
I think Edwards is a much more genuine liberal. He gives a shit about the middle class. I haven’t heard Gore say much about outsourcing jobs and renegotiating the trade agreements. As I said, any liberal is good on the environment– that isn’t the right issue for a one-issue candidate.
I heard Waxman on Air America this afternoon and am now convinced he will go nowhere with the Libby obstruction.
He said over and over that his hearing is only about if laws should be strengthened.
It’s a very bad thing – but this thing has hit a dead end. They got way with lying about uranium from Niger.
Riesz Fischer @ 156
It’s his signature issue, but it’s not his only issue. He knows exactly what’s going on.
stingray @ 157
Crap, I hope you’re wrong. Waxman’s one of the few Democrats I trust.
Hugh @ 139
So we’ve got two ways of looking at this. We have to conserve everything so it doesn’t run out or we’ll perish. Or. We perish and what is left is the bacteria and the cockroaches and who says they are any less entitled than we?
Have you hear Gore talk about the war?
He roars and was against it from the gitgo!
He’s not a single issue candidate and these two issues are the most important, imho.
Ann in AZ @ 134
Eli @ 127
Gore/Obama’s okay, or Gore/Dean (except for today’s oddity) or Gore/Edwards; I like Richardson for Sec’y of State and Joe Wilson for UN Ambassador (poetic justice, irony.)
bobtaco @ 149
[sigh] South Africa has been converting coal to a petroleum substitute for decades. They use a process invented by the Nazis.
An MIT study claimed that geothermal could produce thousands of times all the electricity produced in the world today. They were more than a little optimistic about the rapid development of hot dry rock technology rather than heated aquifers IMO but the DOE is attempting to zero out all research on a “mature” technology.
Best, Terry
I am in tune with the Gore message on two crucial and essential items. The environment and the Iraq war.
I want Gore.
Riesz Fischer @ 138
The sighing was magnified 1000 fold by the right-wing media (herein you have fallen into their trap. Twas not unlike the winger amplified scream by Howard Dean). It really was insignificant. I think I would have sighed myself, under the circumstances. Chimpy made a ton of sophomoric and asinine remarks. But yes, the trade agreements were of a quality that an evil republican would be proud of. I still like Gore better than anyone else thus far.
Ann in AZ @ 164
and Valerie Plame for National Director of Intelligence
stingray @ 159
If that’s going to be all there is to it, why have Valerie testify?
Oh, people, stop saying interesting things. Talk like Republics. I have to go to bed!!
angie @ 162
To the head of the class with you.
A coworker of mine recently purchased a Hummer. Maybe I should ask her “Why don’t you care about the environment?”, much like the wingers asking “Why do you hate the troops?”
fiyero #123,
There are cornucopians out there who think that oil will never give out. My view is that a finite resource can not by its very definition be endless.
The best guesses on peak oil vary but I would say around 2012. It’s difficult to say with greater certainty because so much information is kept secret by oil producing countries jockeying for power and position in international markets and with other oil producers.
terry halinan #146,
Large scale hydroelectric means big dams and big environmental impacts. It like solar, wind, tidal, and geothermal depend greatly on location.
Tar sands have massive negative environmental effects and require large water resources. Water resources are already becoming a serious issue with competing claims on them by various users and countries.
stingray @ 158
If this is true, we all need to call Waxman again. It’s possible that he could be playing his cards close…
Is there a list yet of people he’s planning to call for the hearing, and has someone compiled a list of people he ought to call for the hearing?
I have to go back and read comments, but hurrah for the Brazilians. I had a Brazilian foreign exchange student last year, and Priscilla and her family could not believe what had happened to America. (Her mother had been a foreign exchange student a generation before).
stingray @ 158
Say it aint so! I had my tin foil hat on earlier today and even worried for a moment that maybe some may want to drill (drilling is a big thing in this admin) Fitz for info just to plan pre-emption. Sorry for that thought. It ain’t easy being me.
Riesz Fischer @ 157
Hey, a ray of sunshine in the darkness. :-)
Obama is great IMO. I dream of Webb running but he won’t. Wesley Clark might.
Nearly anyone but Gore, the self-styled “conservative alternative,” and Mrs. Bill Clinton.
Best, Terry
Riesz Fischer @ 149
Yes. The earth is a big place and even with huge oil tankers and pipelines the actual volume relative to the size of the earth is miniscule.
angie @ 162
Yeah, he was against the war, and that’s huge.
He can kick ass when he wants to, thus the nickname “A-Bomb Al”.
OTOH, he was a founder of the DLC, and that stinks.
At least we have a diverse blog– Naderites and Gorites. I fit somewhere in the middle.
Bye all.
Hugh @ 173 – that’s about where my thinking is on the subject, too.
Hey, how about Webb for veep?
Eli @ 128
Those are my top three for VP, too, with Obama probably my third choice, although if Gore runs I don’t care that much who VP is as long as it doesn’t start with “L” and end with “man.”
EPU zone here, what with Late Nite coming up, but . . .
If you haven’t already, go read Jay Rosen’s PressThink article on us. That’s right — all of us FDL’ers. Immensely satisfying. Take a bow, everyone!.
Woodhall Hollow @ 135
Clark is not eligible to be Sec. of Defense. He has to be out of the military for 10 years before he will be eligible.
Morris Sheppard @ 169
There is a chance she will reveal something new, I suppose. But my guess is it’s just a dog and pony show.
When you are a politician in Waxman’s position it’s almost more valuable to maintain a cloud of suspicion than to punish the perp and have it done with.
I do want to be convinced otherwise.
Terry @ 165 – sure you can make a substitute fuel with the Fischer-Tropsch process, but it is a net energy loser. It is going to take more energy to make, than what you get out of it. You need something with a posititve energy return on energy invested (EROEI). Also, you are going to be putting a ton more carbon into the air and exacerbate the global warming situtation.
The real problem is that we have too many humans using the finite resources of the planet. I doubt we will see a politician address that here.
Hugh @ 178
Ok thanks.
As much as I detest the DLC, I still take Gore. The DLC is basically anti-environment and pro-Iraq war.
SharonRB @ 183
Yeah, thanks for reminding me, Sharon.
Another black mark on Gore’s record– his choice of running mate in 2000.
I rest my case.
terry hallinan:
you surely seem to know quite a lot about this stuff.
wow.
LoudounLib @ 172
You should say that it is a nice vehicle, but aren’t you concerned about gas prices? You know they will only increase. And were you aware of the global warming issue? I don’t know a lot about it, but Al Gore’s video was an eye opener to me. I thought it [global warming] was a lot of crap until I saw that video. You should rent it. It was really well done. Like the planet will be – well done and extra crispy. You do like KFC don’t you?
From all the reading I’ve done out there, the Saudis wouldn’t want us to find alternative fuels, but we’re going to.The great American innovators are on the job. Already there are plans for electric cars. Its a start. I’m not filling up the tank. Let the Saudis keep their black gold.
Great post Hugh.
Believe it or not, I might be induced to support Hillary for AG.
mattes @
31
The biggest question.
Riesz Fischer @ 189
Looks worse and worse every day, but I think 2006 Gore is VERY different from 2000 Gore.
I recently found myself wondering, if Gore had won in 2000, how long would it have been before he had a little “accident”, or got assassinated by some lone nut?
I guess the only upside would be that President Lieberman could never have gotten re-elected, what with his disastrous war based on lies and everything.
hackworth @ 192
Brilliant!!
Terry Hallinan asks:
By drowning them.
Cause first they build a dam.
I prefer Gore-Obama. I wouldn’t mind Clark or maybe Richardson as running mates either.
Those are my top three for VP, too, with Obama probably my third choice, although if Gore runs I don’t care that much who VP is as long as it doesn’t start with “L” and end with “man.”
Yeah, thanks for reminding me, Sharon.
Another black mark on Gore’s record– his choice of running mate in 2000.
I rest my case.
That was pre 9/11 and pre Iraq. It’s not like they’ve been BFF since then, anything but…
I rest my case ; )
We didn’t know as much about Lieberman back then as we do now. Did we?
Oklahoma kiddo @ 199
No, I just thought he was pious and lame.
Gore in ‘08.
Hugh @ 173
Hugh, Hugh, Hugh, I carefully wrote run of the river hydroelectric. What do you see as the environmental impact that disturbs you?
Dammed water can be environmentally friendly too or we should be exterminating beavers. Our lake was dammed up for irrigation and flood control. Efforts to generate electricity were frustrated by regulators as happened with many other similar small-scale projects.
Like Earth you mean?
http://www1.investorvillage.co…..id=1604982
True enough.
Best, Terry
Eli @ 201
Same here. In fact that’s pretty much what I thought about Chimpy.
Great post Hugh.
Oklahoma kiddo @ 200
Ditto. Or maybe he chenegd in the meantime.
Riesz Fischer @ 203
I was pretty sure he would be bad, but I had no idea *how* bad. Of course, it took 9/11 to really elevate him from mediocre incompetent to cartoon villain.
Linda @ 193
The problem is that there is no fuel that will come on-line quickly enough and smoothly enough to allow the status-quo to continue. Only the very rich will be able to afford to drive a personal vehicle. Hope this helps.
bobtaco @ 187
I don’t recall recommending it but it provides a substitute petroleum.
Did I just hear a vote for nuclear power? :-)
Best, Terry
Eli @ 201
I thought the same. But I voted for Gore anyway. Back then I disliked Lieberman. Now… well I don’t want to be rude to Joey, so suffice to say I loath the man.
I voted for Gore but I did know enough about Lieberliar ’cause I lived in CT. Made me sick then, too.
BUT, anything was better than a Boosh. Anything, a grasshopper, a cockroach, a prune.
I don’t know that river run hydroelectric is feasible for large scale power production to rival the traditional dam based variety. It’s megawatts versus kilowatts as far as I can see.
Using geothermal for electricity in a place like Iceland is one thing using it in the Midwest is something else.
Chicago Dyke upstairs with Sex, Drugs, and RocknRoll for our Late Nite pleasure
angie @ 209
Has he gotten worse, or are we just seeing him more clearly?
Fern @ 198
When did our tinker toy power company dam Niagara Falls you think? Some of our power comes from Niagara Falls.
There are no dams with run of the river power stations.
Best, Terry
angie @ 210
A turnip.
I like to tell people that Bush didn’t win the 2000 election, he just fell of the turnip truck and rolled into the Whitehouse and they crowned him president.
Miss P. at #117 says:
That would be the argument that gets him!
Eli @ 211
I think the vanity Vice Presidential run tipped him over the edge, from a putz to a schmuck.
Terry @ 208 – I’d recommend reading “The Party’s Over” by Richard Heinberg. It lays out most of the limitations to the larger alternative energy solutions.
Also, “The Long Emergency” by James Howard Kunstler is another required reading on the subject.
Well, off to watch Maher. Have a great night, everyone.
They’ve both gotten worse, Eli.
Joe has always been a sanctimonious and slimy pol. I never voted for him except when he ran with Gore– I would write in folks. He’s a dangerous cartoon.
Lieberman (with Gore) in 2000 was to get the Jewish vote in Florida, IMO, that’s it. One dumb move, among may.
Hugh @ 211
Hmmm. Can we capture the excess global warming heat and somehow turn IT into power? That’s probably stupid. Can we vacuum it out in a funnel like apparatus (at an undisclosed location)? Maybe I should say night night…
Cozumel @ 220
Well, it *sort of* worked…
The real problem is that we have too many humans…
Did I just hear a vote for nuclear power? :-)
Best, Terry
Grid living is something that we have become dependent upon that we don’t really need. Solar and wind power and other means can manage the energy demands of the average household or group of homes. Nuclear energy is dangerous and it is something that the republicans are hyping. If the republicans want it, it must be really horrible. Everything they advocate is either fantastically horrible or a diversion.
Hugh @ 217
He never changed.
Many of us quit supporting an organization that claimed to be funding liberals running for Congress when they supported Lieberman against Weicker.
Gore probably hasn’t either. He was the fine fellow who voted for the Human Life Amendment to the Constitution, the most radical anti-abortion legislation ever attempted and still defends his vote last I heard. The man is a chameleon. He was a willing tool for Clinton’s destruction of environmental legislation, notably the Protection of Species Act.
Best, Terry
Still the era of cheap energy is ending
When you consider the stunning amount we pay in federal taxes to fund the “D O Defense” and how much of that gets focussed on the area with the richest oilfields on the planet, I would argue that we the people have not had cheap oil energy in decades.
The pump price belies the true cost we are paying. It’s a direct raid in the treasury to benefit oil interests, most of which are based in (big surprise!) Houston Texas.
Contolling the world’s biggest oil fields might be arguable as a good thing, but you should need to make that case. It is blatantly illegal, or damn well should be, to threaten people into it using imminent-threat, pre-emptive war-condoning mushroom cloud analogies.
I’m sure they thought it was a white lie, but it WAS a lie, and in a nutshell that’s why “Hubris” was such a good title word for Fineman’s book and “Deceipt” for Marcy’s.
I like to think justice will ultimately prevail, but don’t see anyone human capable of rendering that verdict. Not Fitz, not Walton, and most definitely not Waxman’s weakling little gig next week.
Eli @ 223
Granted ; )
LoudounLib @ 172
Yes!! And Martini, I’m with you on the libations.
stingray @ 226
That is exactly correct. If we could add in subsidies and sweetheart deals with big oil companies, environmental damage, and all the resources going to defense, the price at the pump could cause a heart attack.
Oklahoma kiddo @ 194
What? I might support her for President, but what is this from you?
Hugh @ 211
Get some glasses. :-)
Niagara Falls is rather large.
A company in British Columbia I prefer not to name here has a number of megaprojects in development all from run of the river.
A large Swiss corporation specializes in run of the river power plants in Europe.
Tsk, tsk, you didn’t bother reading my link. :-)
The U.S. produces far more electricity from geothermal than Iceland. The Philippines is second. Iceland is left in the dust.
Texas has recently decided geothermal is worthwhile and started leasing tracts with old oil and gas wells.
Heat pumps for heating and cooling are economical most anywhere on the planet.
Neglect of a very large resource means that discovery is mostly fortuitious or from above ground hot springs.
Best, Terry
BTW, Hugh, thank you very much for indulging me in one of my favorite subjects.
I think there is a vast misunderstanding of what is possible and, as usual, the government is mostly tied to current commercial interests.
Little is more misguided IMHO than utilizing feed grains for ethanol. Corn squeezings were meant by the Good Lord for drinking, not fueling a car.
Cheers all.
Best, Terry
Riesz Fischer at #156 says:
Oh, yes, and his judgement is sooo good that he didn’t vote for the AUMF. Oops, guess it’s not quite that good. OTOH, I guess you didn’t hear his speech at Constitution Hall on MLK day in 2006. Last time I looked, it was still available on the internet. You should go listen to it. This is a man with a true understanding of our Constitution. And he wouldn’t be calling the internet a series of tubes, because he actually did do a lot to assist in it’s creation (I said “creation, not “invention”) and promotion of its use. For a one issue candidate, seems he’s done quite a bit!
bobtaco @
218
None of us know everything though we many of us think we do.
If anyone cares for a thrill about the possibilities, I invite them to look at the ongoing hot dry rock geothermal project in Australia’s Outback. Tells a wonderful story.
Unfortunately the problems of developing such a resource will probably need a great deal more research.
But what is quite available isn’t getting done for lack of will.
True believers in Peak Oil seem to mostly quote each other and make little attempt to keep up with developments. Technology advances very quickly today.
Best, Terry
Pade @ 68
Don’t know if this will suit but check out this company which makes a residential magnetic levitation wind turbine.
Eli @ 87
Well, the joke when I was studying Biology was that we were useful to mitochondria to carry them around.
Margot @ 96
Have you ever looked into marmoleum? It’s made from linseed oil and used in many heavy traffic areas.
Al Gore for President!!!
Bob in HI
I was just mentioning this topic in Thewashingtonnote. Energy policy is the reason that I think no Republican is acceptable, period.
Republicans are too cozy with the oil companies.
We need oil, but the oil companies are blocking change, both in energy policy and global warming.
Ronald Reagan’s most important legacy was to kill discussion of national energy policy for 25 years.
If we elect another Republican, we won’t see change for another decade.
Time is short.
terry hallinan @ 234
The estimates for the transition are between 40 – 50 years, so they better hurry up.
Technology is not the same thing as energy.
Different oil fields peak at different times. Texas peaked in the 70’s. The town of Baytown, Texas (north of the ship channel going from Galveston Bay to Houston) has suffered a great deal of subsidence. The San Jacinto monument (slightly taller than the Washington monument with a star on top) had to have extensive levees, etc. to preserve it and the battleground.
bobtaco @
240
A scientist changes his theory to fit the data. Idealogues change the data to fit their theory.
How long oil might last depends on usage, the state of technology, substitution of other fuels, economics, even weather. How much oil is available will not be known until it is all gone.
“It’s tough to make predictions, especially about the future.” – Yogi Berra
I don’t know what that is supposed to mean, Bob.
As a scientist, you know the energy of the universe is infinite by our standards. Harnessing energy is what technology is about.
However much oil (or natural gas or coal) is available, I agree with those that believe we should not be endeavoring to burn it all but rather conserving it. I disagree with the Peak Oil advocates who seem to think we must burn it all.
I am less enchanted with harnessing wind, and particularly solar, energy than others though obviously both have great utility. Intermittent sources of energy would require storage of energy far beyond the state of the art in the foreseeable future. The Swedish airplane developed to run on solar energy doesn’t speak highly for the intelligence of us Swedes (”Watch out for those *&^%$ clouds, Sven”).
What seems to me is needed to replace fossil fuels is sources of massive supplies of uninterruptible energy. I think I have made it plain to the point of boredom that geothermal fits the bill better than most anything.
http://web.mit.edu/newsoffice/2007/geothermal.html
Dr. Tester, along with his experts from various fields, were far more optimistic about the development of hot dry rock technology than I am but they helpfully pointed one way to the future with a vastly underutilized resource.
Biomass in various forms fits the bill as well but I think loosening and even discarding the ties to agricultural interests is necessary. If only the founding fathers had provided a wall of separation between DOE and DOA. :-)
Best, Terry
A few thoughts:
“Peak Oil” is just another scare tactic to keep prices high; between current known reserves, new drilling technologies, vast US shale oil deposits in the west and the heat mining possibilities mentioned above, we won’t run out of energy anytime soon.
This does NOT mean we shouldn’t accelerate our efforts to conserve energy. It is laughable that our fuel economy standards for automobiles are so low. One simple move in the right direction would be to require buses and taxis to gradually switch to natural gas vehicles as replacements are needed. Because they refuel in a central location the “can’t find enough refueling stations” excuse would be moot.
As for Gore, I can only hope he runs. He’s been right on all the major issues, and there is no better position to chair the global warming discussion than 1600 Pennsylvania Ave.
~
Or we’ll just start making plastics from nuclear power plant byproducts. Two birds with one stone!
Ooer, depleted uranium supermarket bags, I love it!
Sttp in Ohio @
243
You are dead wrong…there is a place where the geophysic types hang..theoildrum.com…spend some time there and you will get the real picture and it is not good.
I spent nearly 14 years of my life doing emergency management in the nuke industry,as well as a couple of years for .gov doing the same.I have developed the ability to see things that many miss.This is one.I spent much time and treasure trying to raise public awareness about peak oil,includeing giving a presentation to the natural resource commitee of the ore.state leg….there now is a group in portland authorised by the city to do a impact study…and many here are getting hep to what peak really means..
Peak is real.Deal with reality or reality will deal with you
Best study blog,as well as linksite is http://www.theoildrum.com
3-part post on Petrogame
I
Perhaps the following scenario will help explain events and predict others.
These are core facts of the Petrogame that drive events:
Consider: A desert chieftan in the 1930’s discovers that his territory has tons and tons of gold laying in countless veins just 100 meters under the sand. Almost unbelievably easy to access it merely with big shovels. As such desirable treasure is impossible to exploit secretly, what would be the single, over-riding consideration dominating his thoughts…from the moment he verified the fact of that gold?
Clearly his next-tentflap neighbors will be at once dazzled and obsessed with plans to make him the main course for their dinner .
As the lucky chieftan, he has certainty that he must obtain an overwhelming military force to squash the appetite of neighbors, before their plans mature and overwhelm him. All his attention goes to securing both the new wealth and his ownership of it.
Here lay apparent contradictions. Until late 1970’s, Saudi Arabia had no real military forces at all ! No Army…No Navy…No Air Force…Only police and internal security forces. That defies sensibility because the chieftan in the late 1930s, and surely by 1941, had Standard Oil engineers verify the data demonstrating that huge pools of oil were in fact there. Knock a pipe into the sand, screw on a valve, make lots of new friends. Does not even need a pump.
It is impossible that there was no huge, military force immediately established to protect those deposits. But there was none…or was there?
There had to be, but it was hiddden. A powerful partner was there. There was a quid-pro-quo created where each partner held exquisitely equal leverage. If either party renegged, the other could cause disaster. The key to workability was the equal leverage which ensures durability of the arrangement.
The Oil Powers [dominated first by Standard and soon RoyalDutchShell and later BP ] were able to guarantee that the now RoyalChieftanFamily stayed on the Royal Throne, in exchange [1] for the Chieftan depositing his oil revenue monie$ into the Oil Power’s banks; and equally strategically, [2] the Oil Powers led by Standard would retain overriding control of wholesale and retail distribution policy to extent of who would/would not receive the ultimate use of the petro products [oil and gas] and at what terms.
What was the OilPowers’ guarantee? The US Military was [somehow under the control of The Standard] to be made available to guarantee continuity of the Royal Throne as long as the Throne deposits the bulk of their revenue$ in OilPowers, banks and does not withdraw said deposits; and obeys any production/distribution/marketing directions. Oil became denominated in US Dollars. As for the Throne’s leverage, just their mere hint that $ deposits would be withheld or withdrawn would undermine credibility of banking systems. As the magnitude of flowing oil rose, the partners next agreed the USDollar would be the exclusive trade-currency. Each party had equal and credible leverage to enforce its position.
That is what happened in Saudi Arabia.
“Oil Powers” identities change over time, but are essentially Anglo-American. “Oil Powers” are not companies; they are individuals with similar goals who use oil/gas as a tool to enable strategy.
Petrogame II
Petro-oleum = Rock Oil. Until 1859, it was thought to exist only as slow seepage from inside rock, in non-commercial quantities. By 1859 petroleum was discovered to exist in underground pools. This was quickly recognized by some as the ultimate source of Heat/Light/Power [HLP], in terms of cost, quality and efficiency.
Silliman at Yale University had done the first major chemical analysis of crude oil within months of its being found to exist in commercial quantities. Note the first use for petroleum, in commercial quantities, was lamp-oil for light [nearly white, non-smoking, portable and cheap] and the demand was worldwide, overwhelming even from Asia. Demand for light was later followed by demand as lubricant. Still later as fuel for steam production [e.g. ships]; later still as source fuel for combustion [gasoline] engines, space heating and electrical generation.
Wherever oil was made available, it could easily dominate as the source of HLP demand. Thus he who controlled its distribution could control whoever needed it…or whatever nation needed it. You want Heat? You want Light? You want Power? Either be compliant or be coldly in darkness and powerless.
A super tool to compel cooperation from any ruler. Or to find another who will. Control the ruler or create the new ruler, and let the ruler control the population. Best to select a Royal Family, as that means a predictable line of succession. The plan is old, but the plan has had many successes.
Early on, Standard’s Rockefeller and Royal Dutch’ Dietermann and the English Crown understood all of this. [England’s Shell and RoyalDutch merged about 1900.]*
It is critical to include the fact that the OIL-game was merged with the BANKING-game. * *
As with Saudi Arabia, the similar deals made with Kuwait and other ruling-family-type governments. He who partners with the family controls the oil/gas as long as that family stays on the throne.
The deals all involve Standard [American] and Royal DutchShell/BP [Anglo] et al, who have similar, effective, covert control over their respective governments’ forces [military and/or other contributions to the required force] to guarantee longevity of the ruler’s status and similar production/distribution/marketing rights from the ruler.
So explains the saga of Iran’s Shah. Democraticly booted out in early 1950’s, quickly reinstalled by Anglo-American force, then booted again 25 years later. No more Royal Line = end of deal = OilPowers attempt in ANY WAY to stop/ruin any oil production/marketing they cannot control.
So explains the saga of Saddam. Non-cooperating [e.g. not denominating exclusively in USD] and no Royal Line.
So explains the saga of Kuwait when Saddam briefly took over. Who reacted very forcefully to put the Sabah family back on the Royal Throne? You can bet the Saud family was watching nervously to see if, in fact, Standard et al would make good the guarantee; after all, the Saud clan held the same guarantee with the same partner. The Saud clan breathed easy when Kuwait’s Sabah family was returned to their throne [followed by abrupt end of military operation].
So explains some of the Czar’s troubles. The Czar would not relinquish control of Russian oil [e.g. Baku] which really crimped Rockefeller’s [Standard] and Dietermann’s [Royal Dutch/EnglishShell] world-monopoly dream, and not-so-oddly, WW I did not end in Russia until 1922/1923; then government that followed the Czar was not ruling-family type, thus no predictable line of succession.
WW 1 ? Have a look at the territory of the Ottoman Empire at that time. Then, locate the known oil resources within that perimeter, factor in England’s Lawrence of Arabia and promise of self-government to their Arabian allies for expelling the Ottoman rulers. Then watch what happened when the the Ottoman armies were expelled.
WW 2 ? Surely Krupp, I. G. Farben et al in oil-less Germany knew well the prize of Baku/Caspian. There’s an old bio of Dietermann who, in 1920’s, was quoted in English newsmedia, claiming that the resources of Russia would be the “greatest commercial prize in history”, and that “Baku is the finger that points East” as he promoted another war. But the world depression from 1930 delayed the acquisitive Dietermann’s-and-others’ plan to jointly invade Russia.
So explains the saga of Vietnam. Offshore, oil/gas deposits were surmised because the geography fit the oil industry’s working model of Continental Shelf theory [just GOOGLE “vietnam oil” to see who/what is happening post-1975] but, after the French left, there was no possibility to control a petroleum industry. And certainly no ruling family after failed attempt to create a Diem clan. The thought of oil being independently developed and marketed was indeed a threat.
So explains the saga of all non-ruling-family-type governments’ attempts to develop and market their oil. In the case of Mexico, albeit without a ruling-famly, Marines were sent into Veracruz and the oligarchs coalesced to rule extended-family-style since then; and being right on US border facilitates control. Those oligarchs who did not agree were visited by unlucky events.
So explains the saga everywhere a ruling-family has oil that can be produced and potentially marketed.
So explains a lot of other observations from circa 1880 to present time.
So explains why the petrogame of “I hold you by your heat/light/power arteries” is getting interestinger and interestinger. And wilder.
So explains the addiction. Oil addiction was created by low-cost, high quality, efficient and readily available fuel supply. The addiction was/is maintained by intense suppression of alternative HLP sources [e.g. by legislation; denial of funding; misdirecting R&D], along with theOilPowers closely monitoring all aspects of their game.
The petrogame is the means to World Domination by a small group who coincidently share similar goals.
Only petroleum [as oil and gas] can be harnessed in a way that precludes unwanted-others from joining the group.
No other HLP resource can be globally monopolized;
Petrogame Part III
The petrogame is the means to World Domination by a small group who coincidently share similar goals.
Only petroleum [as oil and gas] can be harnessed in a way that precludes unwanted-others from joining the group.
No other HLP resource can be globally monopolized; or exists in sufficient quantity. The others are merely technology based, and technology cannot be monopolized. [E.g.– a nuclear club to monopolize enrichment/extraction is a work-in-progress, but has only short-term and spotty workability that can be bypassed. Also there are local monopolies, such as control of hydro-power, that are not scaleable to global scope. As for coal, technology has not resolved enormous pollution aspects, and coal has potential only to crimp or tweak the petrogame.]
In Dick Cheney’s 1999 speech to The Petroleum Institute, these 3 quotes should be carefully read: (1)”Oil is unique in that it is so strategic in nature. …The degree of government involvement also makes oil a unique commodity”[Please look-up “strategic” in a good dictonary, with derivatons]. (2) “Oil remains fundamentally a government business.” (3)”It is the basic, fundamental building block of the world’s economy. It is unlike any other commodity.” [This speech is referred to in Kjell Aleklett’s recent article, Dick Cheney, Peak Oil and the Final Count Down. It was removed from the original Institute of Petroleum website http://www.petroleum.co.uk/speeches.htm , but we found it using the Wayback machine at
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Doubt about Peak Oil raelity? Here is Dick Cheney’s 1999 speech to The Petroleum Inst. Cheney didn’t use words “Peak Oil’, but he was talking to industry insiders. The meaning is there. [broken into 3 parts]
Dick Cheney Part I
Published on 8 Jun 2004 by London Institute of Petroleum. Archived on 8 Jun 2004.
Full text of Dick Cheney’s speech at the Institute of Petroleum Autumn lunch, 1999
by Dick Cheney
“By 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?… Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world’s economy.”
Dick Cheney :-
Thank you very much for that welcome and that introduction. I am delighted to be back in London today and have an opportunity to spend some time with all of you. To hear that resume reciting all of my political background and experience, of course oftentimes people say that work in the oil industry is not really sort of an uppercrust kind of organisation and I say, ‘Yeah, but I used to be a Congressman and it’s clearly a step up for me to go from the political world to the world of the oil and gas industry. I’m often asked why I left politics [[left DOD 1993]] and went to Halliburton and I explain that I reached the point where I was mean-spirited, short-tempered and intolerant of those who disagreed with me and they said ‘ Hell, you’d make a great CEO’, so I went to Texas and joined the private sector.
But I am delighted to be here and I want to try to avoid, I understand last year when Sheikh Yamani spoke that he was rather pessimistic about the outlook for oil prices and the ability of OPEC to arrive at a price level and maintain it over time and I’m not sure that it’s fair to come back a year later and second-guess and I hope a year from now people won’t do that to me in terms of the forecasts I’m going to make, but I do want to talk about the outlook, certainly from the perspective of Halliburton, how we look at what may occur here in the future and let me say at the outset that I am unreasonably optimistic about our industry.
From the standpoint of the oil industry obviously and I’ll talk a little later on about gas, but obviously for over a hundred years we as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you’ve got to turn around and find more or go out of business. Producing oil is obviously a self-depleting activity. Every year you’ve got to find and develop reserves equal to your output just to stand still, just to stay even. This is true for companies as well in the broader economic sense as it is for the world. A new merged company like Exxon-Mobil will have to secure over a billion and a half barrels of new oil equivalent reserves every year just to replace existing production. It’s like making one hundred per cent interest discovery in another major field of some five hundred million barrels equivalent every four months or finding two Hibernias a year.
For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?
Governments and the national oil companies are obviously controlling about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow. It is true that technology, privatisation and the opening up of a number of countries have created many new opportunities in areas around the world for various oil companies, but looking back to the early 1990’s, expectations were that significant amounts of the world’s new resources would come from such areas as the former Soviet Union and from China. Of course that didn’t turn out quite as expected. Instead it turned out to be deep water successes that yielded the bonanza of the 1990’s.
A fundamental challenge for companies is to do more than replace reserves and production. The trick obviously is also to replace earnings. For most companies the majority of their profits come from core areas, that is areas where they have significant investments, economies of scale and large license areas locked up, but many of these core areas are now mature and it can be difficult to replace the earnings from the high margin barrels there. Some of the oil being developed in new areas is obviously very high cost and low margin.
Companies that are finding it difficult to create new core areas through exploration are turning to production deals where they can develop reserves that are already known, but where the country doesn’t have the capital or the technology to exploit them. In production deals there is less exploration risk but dealing with above ground political risk and commercial and environmental risk are increasing challenges. These include civil strife, transportation routes, labour issues, fiscal terms, sometimes even US-imposed economic sanctions. Many companies are more comfortable dealing with the below ground risk like drilling and reservoir performance than they are with the above ground political risks. The other major element that it is changing is the nature of competition.
One of the biggest questions is what the competitive field will look like in the new industry after this current wave of consolidation in the oil business. Clearly the main driver behind the biggest mergers are the cost savings that are anticipated as a result of economies of scale. Concentration and critical mass are clearly keys to success. There are also cases where difficulty in sustaining and growing the companies [[h]]as led management to offer the firm to a bigger player. In the world-wide competition for capital, there are imperatives for size and scale. Larger companies tend to have the highest credit ratings and therefore the lowest borrowing costs, but they also tend to have higher multiples in the stock market. The share price premium becomes a valuable currency for take-overs. They also have stronger financial staying power to undertake the larger projects and to ride out the lean periods. The result of all this consolidation is that now four out of the five largest oil and gas companies by market value are European.
For oil companies I do not believe that the bigger is better model is the only viable one. While Halliburton has certainly grown bigger through its merger with Dresser and other key acquisitions, this made sense in part because it gave our company both a broader array of services and also greater depth in products and services.
For oil companies I see four basic types of firms that I think will survive and prosper in the new environment. First, we will obviously have the super majors, but they have to be careful to avoid the dragdown of facts and the distractions of physically merging, plus the danger of becoming lumbering giants. I think there is a good chance they will avoid becoming bloated bureaucracies because they are very focused on delivering cost saving synergies for their shareholders.
The second type of survivor will be those companies that have dominance in a region or a market. These integrated companies may not be in the top five globally, but they will be number one or number two in their respective markets. This gives them the critical mass and concentration to compete and win on their turf. Repsol YPF is an example of this type of company; number one in Iberia and the southern corner of Latin America and very profitable.
A third model for competing in the new century is that of what I would call the super independents. These are firms that focus on one line of business but have sufficient scale to have several core areas of material size where they can go head to head with anyone. These combine the advantages of a super major with the agility of an independent. A common element in these three classes of firms will be critical mass and concentration.
A fourth category of survivor in the new competitive world will be what I call niche players who can prosper off the properties that the bigger firms don’t want or because of the very special circumstances they find. Those in the special players will obviously have to compete somewhat below the radar screen of the more dominant companies.
The immense portfolio restructuring that we think likes ahead in the wake of the recent large mergers should create opportunities for competitors to strengthen their positions. New aggregators are likely to emerge which, together with a lot of the brain drain from staff cuts at the majors, could well provide the bigger companies with unexpectedly strong competition in the decade ahead. In many ways the traditional role of oil companies are changing. Increasingly we are seeing international oil and gas companies concentrating on managing investment, financial, commercial and political risk or above ground risk, while service companies are managing technical, completion and operating risk. Meanwhile, national oil companies are focused on managing their country’s national interest and its resources and in the domestic markets. This is part of the new resource rationalism of the 1990’s. NOC’s may own the resources, but when it is in the national interest to bring in outsiders to help develop them, they do so. Venezuela obviously is a clear example of what I would define as the new resource nationalism. Some NOC’s are still looking outside their own borders, but I expect that in the future the emphasis may well be closer to home.
NOC’s can focus on becoming regionally dominant players, leveraging off their strong domestic base to move into neighbouring countries. This will occur where there are links and synergies with their home business, not just going global for its own sake. I think Petrobras in Brazil may be an example of this in Latin America.
Dick Cheney Part II
People ask about the future role for OPEC. Certainly the organisation represents companies that have a vast amount of oil reserves and it has held together for over a quarter of a century already. OPEC have shown the ability for crisis management every time oil prices have dropped to single digit levels, but the group may ultimately bring about its own undoing if it shoots for too high a level for oil prices. As observers point out, in the long run, this effectively underwrites higher cost oil exploration and development around the world all at the same time, limiting demand growth below what it might otherwise be. Nonetheless, I believe most of us in the industry have welcomed the restraint in he leadership shown by OPEC in recent months and the improved outlook for the international oil markets. I know I am pleased with the leadership provided by Saudi Arabia, Mexico and Venezuela and in the long run I think the world will be best served, and the consumer best served as well as producers, by stable prices at reasonable levels.
The oil industry will become more integrated in the new century but not necessarily in the traditional sense of link ups between producers and refiners. The new integration will bring together new capabilities, skills, technology and risk management to create synergies that add value. From my perspective in the oil service industry I see an integrated role for us in helping to manage certain technical risk, leaving oil companies to retain control but focus on investment decisions, commercial and political risk and financial risk.
Oil companies probably spend the most and make the lowest returns on the actual development and operation of their assets. It is here in the middle of the opportunity chain where service companies can add the most value on the below ground aspects of the operation. Service companies can assist oil companies in making knowledge based value added decisions and implementing them quickly; through this type of integration oil companies can better leverage their skills and resources to maximise value, focusing on their core competencies. For NOC’s, working with service companies can make use of the best technical expertise available world-wide, whilst still retaining control and managing the state’s interest in its own natural resources. Service companies are becoming more integrated themselves oftentimes offering integrated solutions.
Let me say a word or two about the impact of technology in the new century. Clearly technology has revolutionised the oil business in the last decade with rapid advances in data interpretation, reservoir management, enhanced oil recovery, directional drilling and deep water operations and the pace of advancement is accelerating. The oil industry is saddled with this image problem as a polluting manufacturing industry when in reality it has become a knowledge based business. The application of technology and information processing is remarkable. Our success as a company and as an industry will depend even more heavily in the future on our ability to develop and deploy new technology.
Let me say a word, if I can, about natural gas because we think there will be tremendous growth occurring in this area in the years ahead. In terms of the North American natural gas market, we are consciously bullish over the next five years and beyond. The demand side has plenty of up side and gas is likely to grab a greater share of US energy consumption in the decade ahead. Virtually all new US power plants are likely to be gas fired and residential penetration is growing fast as well. On the supply side, onshore gas outputs should be weaker and this means that the demand gap will need to be met by perhaps double digit growth rates and Canadian imports and various significant increases in production out of the Gulf of Mexico. The industry will need to get busy bringing on new production facilities and pipelines systems to meet these needs. Deep water gas, obviously, will have a very important role to play.
There are a number of factors which we believe will drive the growing role for gas on a global basis. The environment, obviously, will be a key driver in the natural gas business in the new century as there is increasing opposition to so called ‘dirty fuels’ like coal and high sulphur fuel oil. Gas is the preferred fuel for power generation. There are continuing technological innovations in gas for power generation, combined psycho[[cycle?]] plants, greatly increased output efficiency. Gas to liquids is in the threshold of commercial success. There is growing demand in emerging markets like China, India and Brazil. For international oil and gas companies, gas is increasingly a key element of the E and P portfolios – oil becomes more difficult to replace while gas reserves and production will grow. Another reason natural gas will have a huge role in the next century is that the world’s gas resources are obviously vast.
The Middle East and Africa have over one hundred year’s supply of gas reserves at current low usage levels and the former Soviet Union and Latin America have gas reserve to production ratios which should last over seventy years. Even estimates of proved gas reserves understate the volumes involved, since there is plenty of gas still to be found and many existing discoveries have not been booked, usually due to the difficulty of getting gas to market. As companies find more gas, they need to find ways to monitise the remote fields, developing stranded gas often entails new risk involved in building a new market to use the gas. The three main options for moving this gas to market are pipelines, liquefied natural gas and now gas to liquids.
The world will get more and more connected with gas pipelines in the new century as high strength steel and automated equipment allow pipelines to become economical over long distances. In LNG new markets will fundamentally alter the nature of the business. The days of the twenty year take or pay contracts and top drawer buyer credit ratings like Tokyo Electric are over. New buyers will be local power generators in places like India and Turkey. Credit worthiness of new buyers, contracts lengths and base floor prices will be under pressure, introducing new risk. New structures will be needed to share the risk in building the new markets amongst all the participants: producers, consumers, governments and project managers. The long waiting list of green field and LNG expansion projects may signal market limitations for LNG, problems for putting together new projects are due in part to economic slow down in Asia. LNG producers are facing greater competition and lower returns and they may need to look at investing down the gas chain and re-gasification and power as well.
Long term, there are innovations on the way such as power generation synergies with re-gasification, cost reductions and smaller scale projects that could permit floating LNG terminals. An alternative to LNG as a means of monitising gas reserves is gas to liquids, or GTL which serves a completely different market. This is a well established process for turning low value gas into high value, ultra clean, refined products that are easily transportable meeting the coming demand for green fuels. With a huge world market for refined products, gas to liquids is much more flexible than pipeline or LNG projects which require rigid contracts and offtake commitments. GTL products can be exported inexpensively on product tankers and distributed through existing infrastructures. The appeal of gas to liquids is that there is no exploration risk as with oil, no market risk as there is when trying to open up new areas to gas.
The remaining hurdle has been the economics, but while the conventional wisdom is that gas to liquids viability is still a way off, there are commercial projects on the way right now that have attractive rates of return with the right tax incentives and when viewed as part of a larger strategy. For example, Chevron and Sasol’s plant, Escravos GTL plant in Nigeria is the enabler that permits things such as more gas processing with associated liquids productions, lubes and an ethylene plant. The project, together with Shell’s rebuilding of the MDS plant in Bintulu Malaysia, and projects in Cutter and elsewhere show that GTL’s time is finally arriving. The viability of gas to liquids will be further enhanced through incremental improvements and radical technology breakthroughs in areas such as process, catalyst and reactor technology leading to lower costs, increased efficiency and greater scale and this could herald a revolutionary new era for the international gas industry. Companies are looking at all the sectors : gas transmission, gas distribution, gas trading, power generation, electric utilities, even electricity trading. Some think the opportunities are in owning the infrastructure, while others see the preferred role in the merchant banking function in the energy business, especially trading [[Enron]]and providing financial instruments. Still, others think the key is in having the customers and cross selling services. In some instances, gas and electric utilities facing the loss of monopoly positions want to diversify into higher growth, unregulated businesses like oil and gas.
For the other side, oil and gas companies may seek the earnings stability of an utility business that can broaden or integrate their business. These new businesses could cushion the earnings volatility of the petroleum side of the business, for example one of the companies whose earnings held up the best in 1998 during the oil price downturn was Repsol due to its stable income from Gas Natural. In any event, gas and power will be of growing importance in the portfolios of many energy companies with new forms of integration and this has the potential to expose companies to new and unfamiliar risk.
Firms have a lot to learn about electricity price risk and spark spreads. In addition to new risk there will be new competition. Major players may include names likes CMS, AES, Duke Energy, Reliant, Dominion Resources etc. In the minds of many, the energy business is becoming a commodity business whether it’s oil or gas or kilowatts. I think that in many ways it is also a service industry and in any event, on the product side, one has to concede that these are nonetheless unique commodities.
Oil is unique in that it is so strategic in nature.[[Understand each word in that statement;then re-read to fully comprehend]] We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world’s economy. The Gulf War was a reflection of that reality. The degree of government involvement also makes oil a unique commodity. This is true in both the overwhelming control of oil resources by national oil companies and governments as well as in the consuming nations where oil products are heavily taxed and regulated.
Essentially, the petroleum industry deals with extreme risk and with billions of dollars on the line. Oil is produced in distant lands as a result of huge risk and enormous capital outlays, it is transported over vast distances, refined in expensive refineries with very heavy outlays required to protect the environment and to comply with strict and expensive regulations, distributed through a wide network of pipelines, trucks and wholesale outlets and sold at stations in prime locations and taxed heavily.
It is the basic, fundamental building block of the world’s economy. It is unlike any other commodity.
Dick Cheney Part III
It is the basic, fundamental building block of the world’s economy. It is unlike any other commodity.
The oil and gas industry provides essential goods at the lowest possible cost with regular reliability while still ensuring a cleaner environment and the industry provides security of supply even though at the same time we are required to manage huge political risk.
What we do isn’t always appreciated by the public and this is part of our industry’s image problem that we need to work on in the next century.
Frankly the focus in today’s economy on globalisation and emerging markets is old news to the oil industry. Ours are global companies investing outside the industrialised companies at the turn of the last century. People need to realise that the energy industry often represents the largest foreign investment in many parts of the world and its interest, insights and experience need to be considered.
Oil is the only large industry whose leverage has not been all that effective in the political arena.[[??]] Textiles, electronics, agriculture all seem oftentimes to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and specially[[specialty]] steel producers in Pennsylvania. I am struck that this industry is so strong technically and financially yet not as politically successful or influential as are often smaller industries. We need to earn credibility to have our views heard.[[??]]
Another concern is the disruptive volatility of the industry. In the new century the oil business needs to learn how to break out of the boom and bust cycles we have experienced over the last century. Perhaps it is part of being a commodity business, but it wreaks havoc with planning processes and can drive smaller companies out of business and, needless to say, creates problems for consumers as well.
One hope might be that the new super majors would use their financial staying power to keep capital spending steady throughout the cycle or even to invest counter-cyclically. This would help smooth out the bumps and of course the financial community could do its part by taking a longer view of financial performance and not pressuring sound companies to cut back during periods of weakness, however unlikely. Technology can help smooth out the cycles by lowering costs. A key challenge for companies in the commodity business is growth and there are basically only two avenues to grow earnings : one is through increasing volume and the other is through improved unit efficiencies. These two options have been driving company strategies.
On the volume side we can see the aggressive production targets that some companies have announced of late. On the unit efficiency side we have the cost cutting targets most firms announced for 1999 and beyond, as well as the mergers designed to generate savings through synergies, economies of scale and reduction in overheads. The view is that in the commodity business the lowest cost producer will be the winner.
In the last century and up to World War Two coal was king and looks to have a lock as the primary source of energy. It was dethroned by oil, mostly due to transportation fuels, but also because oil was less polluting and easier to handle. Coal is still with us today, but oil is clearly dominant. In the new century, will the oil age give way to another source of energy or to new technologies? Some predict natural gas will erode oil’s performance, others say that technology, fuel cells, telecommuting on the internet or some other breakthrough will lessen our dependence on hydrocarbons.
Well, the end of the oil era is not here yet, but changes are afoot and the industry must be ready to adapt to the new century and to the transformations that lie ahead. It will mean showing more speed and agility. As I have outlined today, there are new areas to co-operate in, new risk, new competition, new roles, new integration and a new convergence with power. This will be a challenging environment as we cross the threshold into the new millennium.
You don’t hear our times referred to as the Space Age anymore, instead it’s the Information Age. You will notice they call it the Information Age, not the Knowledge Age. Well, I would conclude today by saying that this industry must be at the forefront of moving into the Knowledge Age. Successful competitors will be those that best manage knowledge. This means technology, expertise, best practices, country, market and competitor intelligence and opportunity assessment. These will be the hallmarks of the energy industry in the new century. I for one am proud to be a part of the industry and I am optimistic about our future in the coming century.
Thank you.
Applause.
~~~~~~~~~~~~~~~ Editorial Notes This speech is referred to in Kjell Aleklett’s recent article, Dick Cheney, Peak Oil and the Final Count Down. It shows a deep understanding of the impending energy challenges. It was removed from the original Institute of Petroleum website http://www.petroleum.co.uk/speeches.htm , but we found it using the Wayback machine at http://www.archive.org
[Mod Note; To help keep the FDL servers running smoothly and to avoid any copyright issues, please summarize or provide an excerpt and a link. Thank you.]
Cheney may understand ‘peak oil’, but I can pretty much guarantee that Shrub doesn’t. (Guess who wants to invade Iraq and Iran most.)
Shrub is an oil promoter, one of the guys that sells drilling for oil as an investment opportunity to people who don’t know anything about oil as a business (think wealthy easterners). Shrub has the mindset that ‘if you drill, it will come’. The idea that the oil might not be there doesn’t occur to him, except, maybe, as a Dire Event.
Don’t expect anything from him. Ain’t gonna happen.
p j evans @252
Indeed seems so…that the regime fronted by Dick selected, arranged for and installed Strawman, who in turn delegated authority to Dick to forward regime’s agenda.
They played to Strawman’s vanity as self-created, oil industry insider and his neophyte familiarity with its nomenclature.
He had/has no agenda beyond what was/is scripted for his ears. Strawman is a via for others’ vision. He got the attention and votes. His personality was suitable for that.
The technique echoes the very effective actions of VP Nixon under Ike and VP GHWB under RR…effective, if not ethical.
snuffy @
245
Hey, snuffy, we are all liberals here though some pretend to be Progressives. We ain’t no backbiting, snarling, ignorant wingnuts.
My first job offer out of college was as a – ahh, ummm – “geophysic type.” The excitement of heading off for months at sea in a submarine used for gravity readings in crowded quarters bunking with sweating sailors as against staying onshore honeymooning with my lovely young bride was not so hard a decision to make. One might worry some about how smart those geophysicists are. :-)
We all understand your concern but it is gloomy, hand-wringing, conservatives who sweat like sailors in a submarine. Liberals study the data and the options.
I invite you to do so.
Chevron’s deep see find in the Gulf of Mexico:
http://money.cnn.com/2006/09/0…../index.htm
was not really the breathless news reported.
Tapping it will be very expensive, if it even should be. Chavez in Venezuela has far more reserves of oil in tar sands than in the oil wells that are providing him with the ability to be an obnoxious boor.
Substitutes for petroleum are readily available – at a price.
Eventually we shall all die but in the meantime it is good to look to the future.
Well then surely you saw it ain’t been managed.
Peace, friend. We are all searching for answers and none of us have the whole picture.
Best, Terry