More Voices Say Oil Production Not Sustainable

Over time, facts slowly but surely go mainstream. We're not quite there yet but a growing number of voices recognize that worldwide oil production is not sustainable in the short term, meaning any time between now and the next 15 years, depending on who's doing the talking.

Now it may happen that oil production could surpass the 2005 high mark or even the 2008 high mark in the next two to eight years. But no one knows if that will happen. But one thing is certain: the age of cheap oil is gone. It's history.

Oil prices will continue to vary. They may even collapse temporarily as they did in 2008, thanks to the worldwide economic meltdown. We're on a roller coaster ride that will last for decades and it's not certain how things will look on the other side of a new age, an age of shortages and shifting dynamics. Of course, the more the United States and other parts of the world have their head in the sand, the more difficult it will be.

A few years ago, the conventional wisdom was that there was still plenty of oil. In a trivial way, that's true, but what there is no longer a lot of is accessible oil. Nor is there enough easy to reach oil to produce in sufficient abundance to offset the declines of older oil fields. Here's an interview from Forbes Magazine using a word many people would like to ignore: peak oil:

Charles Maxwell: The use of petroleum in the world is now up to about 30 billion barrels per year. The rate at which we have found new supplies of petroleum over the last 10 years has fallen to an average, of only about 10 billion barrels per year.

Charles Maxwell is a mainstream energy analyst. He says what others have noticed simply by looking at the facts: for some years now, the world has been using far more oil each year than it is discovering. The current shortfall is about 20 billion barrels a year. If you think of oil as a bank account, it's clear that the account is being drained.

As Maxwell points out, greed and blunders by producers are creating even more problems:

What's happening is that the increase in the world's population and greater use of oil in transportation, particularly in the emerging countries, is working to lift oil demand, and that spurs us to drain a field more quickly, but not necessarily to get a higher proportion of oil out of it. So we have technology improving production capability, but actually taking the oil out faster rather than getting much more out.

What Maxwell is saying here is that we're making poor use of our technology in an effort to sustain business as usual. But we already know that such thinking is not sustainable.

In the past year, a majority of Democrats tried to pass an energy bill that would deal with climate change while also addressing America's growing need for alternative energy. But a minority of Democrats and almost all the Republicans opposed the legislation. In the meantime, according to CNNMoney, the alternative energy sector in China is creating jobs:

China has already surpassed the United States in the amount of wind turbines and solar panels that it makes. China is also gaining on the United States when it comes to how much of their energy comes from renewable energy sources.

The country that leads in the renewable energy industry, is opening the door to more home-grown jobs.

Whatever one may think of the Chinese, American conservatives are handing them the future. Keep in mind that oil will continue to be produced in the United States for many years to come. But we are continuing to buy more and more foreign oil. This is precisely where the lie of conservatives is so obvious: foreign oil does not create American jobs. But jobs in alternative energy in the U.S. would create tens of thousands of jobs. That is a simple fact. And we ignore that fact at our own peril.

Realities of the North Dakota Oil Boom

An oil boom is underway in the western part of North Dakota near Williston. If one takes the long view, eastern Montana and adjacent parts of Canada are considered parts of the same boom involving the Bakken Shale oilfield. No doubt a combination of factors make western North Dakota easy pickings for the moment. For one thing, oil rigs are hitting few dry wells. That is, as long as they use the fracking system developed in recent years by Halliburton. The consequence is that a lot of oil, money and jobs are available in these fields. From all over the country, young unemployed Americans are heading to the area to see if they can land a job. In a bad economy, a lot of people see the boom as a good thing. For many people, it is.

But there's a lot of hype and excess associated with what's going on in North Dakota. Here's an article by Tamsin Carlisle in, of all places, The National, an Abu Dhabi newspaper:

It contains hundreds of billions of barrels of light crude oil and thousands of wells and should be scaring the pants off any oil exporter needing high crude prices to balance its budget.

It is the Bakken Shale oilfield, which sprawls across two Canadian prairie provinces and two western US states including North Dakota, under 500,000 square kilometres of land.

Its US portion is described as the country’s largest oil deposit outside Alaska. With its biggest and most accessible part in Canada, the Bakken could prove to be one of the largest oilfields in the world.

That's a lot of oil and a lot of hype. The title of the article by the way is "A New US oil rush could rock OPEC." The article is worth reading and it's important not to dismiss everything that is said about the Bakken field. But we have here a newspaper in an OPEC country where things are not always what they seem. OPEC countries, ideally, want two things: they want the oil age to last as long as possible and they want high prices as long as possible. The theory is that the more the world switches to alternative energy, the faster the price of oil will drop and the more difficult it will be to fund expensive oil projects. So, it's supposedly in the interest of OPEC to convince their biggest customers (including the U.S. but also countries like China) that the world is still awash in oil. Of course, it isn't. At the very least, the age of cheap oil is largely over.

The implication of much of the hype around Bakken is that it's a game changer that will help take care of America's oil needs for years to come. There are claims that the field holds up to 500 billion barrels of oil. However, even if the figure is accurate (probably not), the only figure that matters is the amount of recoverable oil. So what is recoverable? The USGS puts the amount at 4.3 billion barrels. That's enough to supply the oil needs of the United States for eight months. At the end of the day, that's not much of a game changer.

But let's say the Bakken oilfield is the same size as the greater Prudhoe Bay oilfield in Alaska. As of 2005, Prudhoe Bay had produced some 11 billion barrels of oil. Some estimates put the remaining amount of oil to be produced after 2005 at around 2 billion barrels of oil. That's 13 billion barrels for a field said to contain 25 billion barrels (it's a fact of life that not all oil can be economically recovered).

Production at Prudhoe Bay started in 1977. So it took almost 30 years to reach 11 billion barrels. How can we put that into context? Well, let's look at a graph of U.S. oil production (courtesy of the U.S. Energy Information Administration - EIA - click on it to enlarge):


In 1970, U.S. oil production reached an all-time average high of 9,637,000 barrels per day. In the graph, you can see how U.S. oil production then dips down until 1977, the year Prudhoe Bay started producing. After that, U.S. production began to rise for several years, but production never caught up to 1970. By 1986, even with the help of the production at Prudhoe Bay, U.S. production started dropping again. Ironically, from 1986 to 1998, oil production at Prudhoe Bay continued to grow until it reached 2 million barrels per day. Think of this for a moment: 2 million barrels a day was not enough to reverse declining American oil production.

So what's the oil production in North Dakota? According to this website (and other sources), production in North Dakota has grown, as of June 2010, to 315,282 barrels a day. Production at the Bakken field is expected to grow for some time, but for now 315,282 barrels a day is less than 16% of Prudhoe Bay's maximum production in 1998 and that 2 million barrels a day could not stop declining U.S. production.

Today, the U.S. is producing not 9,637,000 barrels a day, as it did in 1970, but only 5,361,000 barrels a day. That's a considerable drop that has to be made up by imports. Total consumption of crude oil by Americans is somewhere around 15 million barrels a day (total consumption of all petroleum products is around 18-20 million barrels a day, depending on what exactly one is measuring: if this sounds confusing, blame the oil companies and their lobbyists who want as much confusion for consumers as possible so that the reality is not that clear).

Clearly we import far more petroleum than we produce. Clearly, oil production continues to decline. Even if North Dakota and Montana combined were miraculously able to ramp up and produce 4,500,000 barrels of oil a day by the end of twenty years (it takes time to build up production), we would not pass the maximum oil production of 1970. Why? Because in those twenty years, production in older oilfields would still be declining, just as older oilfields were declining during the buildup of Prudhoe Bay's maximum production years.

In the meantime, during those twenty years, the population of the U.S. would also be growing and we would be importing more oil than ever.

One can argue that the Bakken oilfield is, for the most part, if we ignore certain issues, helping the American economy. If the Bakken oil field does nothing more than help sustain the American economy for just a few years more, then the extra time must be used to help transition an economy to something that isn't heavily dependent on oil or other fossil fuels. People will still be drilling oil for some time to come. But oil is no longer the future and no longer enough to sustain our economy.

The oil barons, whether they live in the Middle East, Texas or elsewhere, don't care much about the future or much about the world. They care about grabbing the maximum for themselves. It's no way to run a civilization.

The Gulf Oil Spill: A Social Fiasco

Some of the best analysis I've seen on the Deepwater Horizon oil spill has taken place on The Oil Drum. One of the main bloggers is Gail the Actuary and she recently wrote a post on a subsidiary of the site called The Oil Drum: Campfire. Here's the opening section with four questions:

It seems to me with the BP Horizon Blowout, we may be hitting a turning point in belief systems, in more than one way:

• Can businesses really be expected to regulate themselves, with minimal oversight?

• Can technology solve all our problems?

• If there are technological solutions, can they be expected immediately?

• Can we really depend on the oil supply that everyone has told us is here?

Let's take a quick look at these questions in light of recent events, including the growing size of the spill. The spill is so large that everyone is having trouble figuring out the exact size. But it is clearly far larger than the first estimates made to the public. It appears the larger estimates are not that far off from what BP said in its own internal estimates within the first few days of the accident. BP also had a range of the possible size and the high end of that range was around 2.5 million gallons a day. Surprise. All we can say for sure is that this is the largest oil spill in our nation's history and is now one of the largest in recorded history—and it is still growing. Tens of millions of gallons have poured into the gulf because BP decided to take shortcuts and had no backup plan if things went wrong.

Now Gail the Actuary asks: 1. Can businesses really be expected to regulate themselves, with minimal oversight?

I'm not being cynical when I write that this is the wrong question. The right question in the year 2010 is simply this: can large corporations be trusted, period?

When 10,000 people in Bhopal, India died back in the 1980s because of a chemical accident/blunder at a Union Carbide plant in India, the chairman of Union Carbide accepted full responsibility—for about a week. It took the chairman that long to learn what it meant to accept responsibility and to receive dozens of calls from angry major stockholders who were themselves unwilling to accept responsibility for what had happened. The chairman went into public relations mode mixed with a large dose of stonewalling.

In some respects, Congress should also include major stockholders in their hearings. Of course, some major stockholders include pension funds, retirees and foundations. Responsibility has a way of being deferred rather effectively down the road with the help of an army of lawyers and public relations flacks.

Tony Hayward, the chief executive of BP, has perhaps taken the procedure a step further as we see in this Houston Chronicle article:

In response to question after question, Hayward calmly insisted that he did not know what motivated key decisions about the blown-out well's design, frustrating House members who complained that his answers were evasive and overly legalistic - as if drafted by lawyers mindful of the flood of negligence lawsuits facing the company.

Tensions spilled over less than 20 minutes into the hearing.

"You're not taking responsibility," said Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee. "You're kicking the can down the road and acting as if you had nothing to do with these decisions."

"I'm not stonewalling," Hayward responded, over the clicking of cameras documenting his inaugural Capitol Hill testimony. "I simply was not involved in the decision-making process."

I can guarantee that every executive in America is taking notes. It doesn't matter one bit that BP is a British corporation. Most corporations around the world are in the same racket: maximizing profits, socializing losses and denying responsibility.

Without getting into a long history, the answer to the question is this: no, corporations cannot be trusted unless they are regulated, held to a high standard and clearly see that cheaters and lawbreakers are punished no matter how many lawyers they have.

2. Can technology solve all our problems? This is a sad question, particularly given the optimism around 1960 or so. In real time, given the real conditions of the world, the answer is a pathetic and resounding no. Most technology problems are usually social problems. This means that if a technological solution exists, it is only temporary because the social problems begin to intrude again. The green revolution, for example, increased world food supplies but it also led to a large increase in the number of humans in the world and meant diminished resources per person in the world.

The more pertinent question, perhaps, is this: can science solve all our problems? Maybe, but only in conjunction with a profound understanding of human nature that we are far short of achieving to this date. In fact, what we have achieved so far leaves far too much out of the "equation," though if we survive this century, we may develop tools that begin to give us some of the insights that we need. But the vision of science will have to grow much larger than it is now. What we need is a bit more wisdom and science does not have an abundance of that.

But back to the question. We are running out of cheap oil and it is beginning to have a major impact on the world. There are solutions, and maybe eventually there will be cheap solutions, but there are no cheap, quick technological solutions and it would be a disaster to continue with business as usual. We are either heading for major change that will allow a large majority of humans to survive, or we are heading for a disaster too large to imagine if we continue on our present course, as if we have no choice or better visions. Alternatives exist, but we are running out of time if we think leaving things to companies like Exxon, Enron, Halliburton and BP is somehow a viable option.

3. If there are technological solutions, can they be expected immediately?

Not give today's business standards and the Republican laissez faire deregulatory philosophy that has existed since Reagan took office. We are destroying our resilience and reserves for the sake of a few extra bucks. If there is an emergency, we have no backups. This is a national security issue where right wing Republicans have dramatically failed. Right wing Republicans are the kind of people who cut a fire fighting budget by $50,000 and then are nowhere to be found when there is a $500 million fire. We allow too much of our critical military equipment, our infrastructure, our technology and our business tools to be made outside the United States. We allow insurance companies to sell policies without the cash to pay off those policies. We allow banks to operate who do not have the resources to handle bizarre financial instruments when those instruments collapse. We do not have the equivalent of a fire house and equipment when a truly major oil spill occurs. We have taken our comfortable way of life so utterly for granted that we do not realize the danger we have put ourselves in.

4. Can we really depend on the oil supply that everyone has told us is available?

The answer is no. It's been no since the 1970s. It has always been no. It will remain no. It will become increasingly obvious that the answer is no. When we start burning a lot more coal in the cities, we will be reminded why we turned to oil and natural gas in the first place. Question four is stupid. It requires a large number of ignorant people to even exist. And they do exist. Oil companies are heavily dependent on the ignorance of a majority of Americans. If a large enough majority of Americans truly understood what we're facing, there would be change. There should have been change 30 years ago.

Oil Spill: It's Bigger Than the Exxon Valdez

It's not official but there can be no doubt at this point that the oil spill from Deepwater Horizon in the Gulf of Mexico exceeds what happened in 1989 with the Exxon Valdez. And the oil is still leaking.

No one knows exactly how much oil is flowing into the ocean but it far exceeds the 210,000 gallons a day that has been estimated so far. Here's the first story by way of the Los Angeles Times:

BP's success at drawing oil from a leaking pipe has proved that official estimates of the size of the Gulf of Mexico spill have been too low.

The company effectively admitted as much Thursday when it said that a tube inserted into the broken pipe connected to its blown-out well is collecting as much as 5,000 barrels of oil and 15 million cubic feet of gas a day, even as a live video feed shows large volumes continuing to billow into gulf waters.

The government has underestimated the size of the spill. Then again, BP has done almost nothing to help gauge the size of the disaster it caused. I have personally seen NOAA do a terrific job of handling a small oil spill but that was back in the 1990s, before President George W. Bush watered down some of NOAA's effectiveness (I once sat through a boring speech by a Bush appointee who prattled on about Ronald Reagan who was not exactly a friend of NOAA). Like many agencies, NOAA suffers the same problems as many corporations: people who are competent are overseen by people with an agenda. Maybe this disaster will make it clear to President Obama that real reform cannot occur while bending over backwards to please Republicans who are not interested in reform—or reality.

Here's another story, this one from the Houston Chronicle, which has done a reasonably good job of reporting:

BP said on Thursday it is capturing 5,000 barrels of oil a day from a leaking pipe in the Gulf of Mexico — a double-edged progress report that showed that the company and government have been understating the scope of the spill for more than a month.

(snip)

BP would not estimate how much oil is still evading a collection tube inserted into the larger of two breaks on the riser pipe that once connected the Macondo well to the Deepwater Horizon rig a mile above.

BP has said the larger break is believed to be gushing 85 percent of the oil escaping from the ruptured well 40 miles off the Louisiana coast.

The oil spill in the gulf has not happened in a vacuum. Less than two years ago, Republicans like Sarah Palin were shouting: "Drill, baby, drill."

In recent years, there have been three kinds of Republicans: opportunists, pragmatists and know-nothing right-wingers like Sarah Palin. Republican pragmatists used to arrive in Washington in larger numbers but they are having a hard time staying in office because they are under assault by the know-nothings and the opportunists.

The Republicans, of course, have no monopoly on opportunists since Democrats have them too. However, in Congress, Democratic pragmatists far outnumber Republican pragmatists, who seem a bit shy about asserting themselves these days. For once, a little progress in Washington is being made, but not fast enough.

The big problem in Washington and the country is the coalition of Republican opportunists and know-nothings who try every trick in the book—don't hold your breath—to make sure Congress and anyone else in government does as little as possible. Why would they do that? Because they receive a lot of money from companies like BP as well as other oil companies, coal companies, chemical companies and anyone else looking for a favor or an administration willing to look the other way. This, of course, has to change or we will have even more oil spills like the one at Deepwater Horizon. Why? Because oil has become expensive and there are certain people in the world who, despite the risks, cut corners. The bigger the risks and the bigger the profits, the more chance there is that someone will cut corners on a project like Deepwater Horizon. Keep in mind that deep sea oil drilling is high technology. It is expensive and there is little margin for error.

I don't know precisely what kind of Republican Bobby Jindal is. Maybe he's the opportunistic kind. Maybe not. Maybe he's just doing his job. Here's a New York Times article on the oil now coming ashore:

Gov. Bobby Jindal of Louisiana said Wednesday that sheets of heavy crude oil from the offshore spill had seeped deep into the delicate marshes around the mouth of the Mississippi River. He called on the federal government to approve a plan to build sand berms to protect the bayou country.

“These are not tar balls, this is not sheen, this is heavy oil,” Mr. Jindal told reporters on a pier here, holding up a plastic bag full of sticky brownish liquid, after taking a helicopter and boat tour of the area. “What we are seeing yesterday and today is literally this heavy oil coming into our wetlands.”

Finally, here's a link to pictures of the oil spill and reactions in other places courtesy of The Huffington Post. I have no doubt we will be seeing many more pictures.

If the reader notices that some of these sites seem progressive or at least not conservative, they're right. A number of conservative news outlets are still in denial about what is happening or engage in silly theories as the oil rolls ashore and spreads deeper and deeper into the Gulf of Mexico. Such conservative news outlets are useless as a source of reliable information.

I want to say it one more time: this is not a 'tiny' spill as BP CEO Tony Hayward suggested a few days ago. No one knows how much the oil spill will cost us. But we now know that the oil spill is much larger that we thought just a couple of days ago. For now, it is still growing.

Size of Deepwater Horizon Oil Spill

This is a quick look based on combining two NOAA graphics (click on the map to get a larger view):


If this looks like a patch job, it is. It's a combination of this NOAA file near Louisiana and this NOAA file covering a larger area of the Gulf. The total picture is a forecast for Thursday, May 20, 2010.

The blue represents the mapped areas of the oil spill and the larger area enclosed by the dark line represents possible areas currently affected by the oil spill but it's not known for certain where else the oil may be, either on the surface in thin patches or below in thicker plumes.

Regardless of what BP says, this is a large spill and although there are signs that the spill is no longer growing at the pace it has been, it is in fact still growing for now.

Here's an updated map that was not available earlier.

Deepwater Horizon Oil Spill Continues

No one knows for sure how much oil is spilling into the Gulf of Mexico. But pictures of the size of the spill show the impacted area growing every day. If 210,000 gallons a day are leaking from the well at Deepwater Horizon as BP says, we already have a spill of over 5,000,000 gallons. Keep in mind that a number of scientists believe the spill may be much larger.

No one knows when the leaking oil will be capped. But the oil executives—who seem to get to the top based on their public relations skills—are getting egg on their faces as they point fingers at one another and trip over their feet as more and more mistakes, blunders and misguided shortcuts are revealed. And then there's Tony Hayward, CEO of BP who told us the other day than fighting the oil spill is a bit like landing at Normandy. But now, according to The Guardian, he's telling a little different story:

Tony Hayward, the beleaguered chief executive of BP, has claimed its oil spill in the Gulf of Mexico is "relatively tiny" compared with the "very big ocean".

In an bullish interview with the Guardian at BP's crisis centre in Houston, Hayward insisted that the leaked oil and the estimated 400,000 gallons of dispersant that BP has pumped into the sea to try to tackle the slick should be put in context.

"The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume," he said.

Hayward is apparently an idiot who receives a very large paycheck every year. One has to be amazed at these things. Here's a graphic from NOAA that shows the size of the oil spill (bigger maps are available on NOAA's webpage):


That's a spill that potentially stretches along half the Louisiana coast, all of Mississippi's coast and as far east as Mobile, Alabama. The blue areas, the core of the spill, just continue to grow every hour.

Now Tony Hayward says that the gulf is very big and the spill is rather tiny. Let's take a look at the Gulf of Mexico:


The first thing I notice is that the water of the Gulf of Mexico is surrounded by land—lots of it. Along the shore are beaches, marshes, shipping, breeding grounds, hatcheries, fishing marinas, industry and lots and lots of wildlife and habitat. Hayward is a fool and doesn't know what he's talking about.

Unfortunately, the longer the oil spill goes on, the more potential there is for enormous damage. As a news story from Reuters reminds us, hurricane season is approaching:

Meteorologists say that climate conditions are ripe for an unusually destructive hurricane season, the storm-prone period that runs from June 1 to the end of November in the Gulf. Oceanographers say that could hurt the clean-up.

"If a storm comes into this situation it could vastly complicate everything," said Florida State University oceanography professor Ian MacDonald.

"All efforts on the shoreline and at sea, the booms and structures and rigs involved in clean-up and containment, could stop working."

One doesn't have to be a scientist to see the potential problems. If nothing else, a hurricane can shove oil ashore. But no doubt the public relations departments of the oil companies—as well as their Washington lobbyists—will continue to be 'bullish' about the clean-up and the future of offshore drilling.

In reality, though, it doesn't take much homework to discover that the big oil companies know truths that many Americans would rather not know. The simplest truth is that oil is no longer cheap. The second truth is that beyond the next ten to twenty years, the oil companies have no business plan to maintain worldwide oil production and they have no solution to the diminishing reserves of oil throughout the world. The third truth is that it will take ten to twenty years to develop a robust infrastructure for renewable green energy. The fourth truth is that the American taxpayer is paying to subsidize the obscene profits of the oil companies when those tax dollars should be spent protecting our future with a huge investment in green technology.

Admittedly, some oil companies are slowly getting into alternative energy. But I would not be comfortable letting the Tony Haywards of the world be involved in the new economy we need to build. In fact, that would be a mistake. In the last three years, Wall Street, the big banks and big oil have shown us how not to do business. We need change. Maybe Obama is finally understanding that change is not a political slogan but a necessity.

Republicans: Drill, Baby, Drill

The title for this post might seem a bit unfair. But no one is more associated with "Drill, baby, drill," than Sarah Palin. The Countess of Wasilla, alas, is just as dim as ever. She seems to be upset with the 'foreigners' who created the mess. Here's the Daily Telegraph story in The Vancouver Sun:

Sarah Palin has added to growing anti-British sentiment over the Gulf of Mexico oil rig disaster by saying "foreign" oil companies such as BP were not to be trusted.

The former Alaska governor and potential presidential candidate attacked the British oil company over the recent Deepwater Horizon spill and a previous one in her state in 2006.

She made the comments despite the fact that her husband Todd worked for BP for 18 years as a production supervisor. He left the company last year.

The hypocrite from Wasilla fails to note that many Americans as well as a number of American companies have been involved in the project, including Dick Cheney's old company, Halliburton. The idea that American companies are somehow exempt from oil spills is a fantasy. During Hurricane Katrina, it's estimated that at least a million gallons of oil were spilled along the Louisiana coast and out among the oil rigs.

Now BP is certainly not exempt from blame. For some years they have benefited from a green image that was not exactly justified. For example, they did a poor job of maintaining pipelines in Alaska (hey, maybe Todd can tell us about that!). I know enough about the oil business (I've been fortunate to know a handful of people who know a great deal more) to have an idea of the kind of people involved. Like many other fields, there are people who know what they're doing (usually the oil workers, specialists, geologists and most engineers), people who push the envelope in pursuit of the bottom line (usually alpha types or narcissists who bend the rules and don't care much what happens if things go wrong, largely because they have the last group on their side) and finally the bullshitters who are skilled at talking their way out of difficulties (usually amoral lawyers and public relations flacks).

Now I don't know much about Tony Hayward, the chief executive of BP, but here apparently is a taste of how he talks, at least according to Clifford Krauss of The New York Times:

"It’s only one of the battle fronts,” said the chief executive, Tony Hayward, as his leased Sikorsky helicopter hovered 1,000 feet above the spot where the Deepwater Horizon drilling platform exploded...

(snip)

Mr. Hayward said he was convinced that his oil company would eventually get the growing spill under control using a variety of tools, from a flotilla of skimmers to the spraying of chemical dispersants and the drilling of relief wells to plug the leaks on the sea floor. “This is like the Normandy landing,” he said. “We know we are going to win. We just don’t know how quickly.”

Normandy? It's not difficult to figure out which type Mr. Hayward represents, is it?

As of Friday night, May 7, no one really knows how big the oil spill is. The main attempt to seal one of the leaks is going on as I write, but no one knows if this attempt will work or how long it will work or how much oil it will stop from leaking if it does work. What is going on at Deepwater Horizon is deep water technology and that technology is just as much art as it is science. My hunch is something like this has simply been waiting to happen for some time. No doubt mistakes were made but every project like this seems to have a series of mistakes that are made, just not enough to create a major oil spill.

The BBC has a graph showing the different sizes of various oil spills over the last 43 years. It claims the Deepwater Horizon oil spill is small compared to other oil spills—well, so far. The number they give is 7,000-10,000 tonnes of oil. That's equivalent to somewhere between 2 million to 2.86 million gallons of oil. The spill from the Exxon Valdez was over 10,000,000 gallons and that spill is still regarded as one of the smaller oil spills. But much depends on what an oil spill does. The Exxon Valdez damaged one of the richest biological areas in the world and the damage is still visible to this day.

The Vancouver Sun carries a Reuters story that suggests that BP's spill is much larger:

The Gulf of Mexico oil spill may already be bigger than the massive Exxon Valdez spill in 1989 and could have dumped as much as 13 million gallons (49 million litres) of crude into waters off the U.S. coastline, a Florida oceanographer said on Friday.

Ian MacDonald, a biological oceanographer at Florida State University, said official estimates that 5,000 barrels (210,000 gallons/795,000 litres) have poured into the Gulf each day since the Deepwater Horizon rig exploded two weeks ago were much too conservative.

The real flow rate from the undersea well, based on aerial images of the oil slick and estimates of the thickness of the oil itself, is probably closer to 25,000 barrels (1,050,000 gallons) per day, MacDonald said in an interview.

I'm sure other figures are probably around. If we only take the figures from the BBC and Reuters, the spill is somewhere between 2 million to 13 million gallons. No matter how you cut it, that's a lot of oil. The truth is that 2 million gallons of oil can do considerable damage and the effects should not be minimized, particularly since the oil is still leaking. But if it's 13 million gallons, the damage along the Gulf coast is going to bite for at least a couple of decades.

Now it's been several days since the leak started. What bothers me is that there's good methods and protocols for measuring the size of an oil spill (and it worries me that the oceanographer above is probably aware of those methods). We need hard numbers and I'm curious why it's been so hard to get those numbers. Warnings from BP that the numbers might be larger are not reassuring.

Now what about future offshore drilling? Let's first state the obvious before I proceed: oil is getting costly and will continue to get more costly. There are alternatives, solar and wind being the most obvious choices in addition to major improvements in the efficiency of the technology we already use. But even if the United States took on a Manhattan-sized project to produce 80% of our energy through green technology, it will probably take 15-20 years to accomplish. And it probably cannot be done without burning oil to fuel the transition. We have a problem.

If we drill for oil the way Republicans want to drill, without bothering with green technology, and without bothering to regulate the oil companies more tightly, our economy will go into the ditch rather quickly because we simply cannot overcome the fact that U.S. oil production will continue to fall. We use too much of the stuff. The world uses too much of the stuff. And this says nothing about the effects on the world climate. And nothing about using dirtier and dirtier fossil fuels.

We will have to continue to drill. But hopefully with tight regulation of the oil companies and slowly enough so that we can measure what drilling is doing not just to our environment but to us as well. And also slowly enough to allow green technology to thrive.

Whether we like it or not, oil is subsidized. It costs considerably more than what we pay at the pump. Republicans and oil states in general are all too happy to have the government pick up the tab. The government has been bailing out the oil companies for decades and that's a fact. Here's another fact: alternative energy is now very competitive with oil, but this requires understanding that oil has become far more expensive than anyone on Wall Street, in Washington or in Houston is willing to admit. The age of oil is slowly coming to an end and we need something to replace it. And because we have dawdled for more than thirty years, we have no choice but to continue to burn oil to pay for the transition to green technology.

How Much Oil Will Iraq Produce?

If the purpose of invading Iraq was about oil, the results have been disappointing. Although Iraq has had a few good quarters in the last two or three years, they have not been able to put together a year of production equal to pre-invasion levels. And it's been three decades since Iraq reached it maximum output. Wars, corruption and incompetence share blame for Iraq's poor performance.

Of course the oil is still sitting in the ground. Everyone agrees there is still a sizable reserve. Here's the latest concerning Iraqi oil:

Head of Iraq's State Oil Marketing Organization, Falah Alamri, said that the country plans to start crude oil shipping operations in March and prepares to export larger volumes of crude in the future, Reuter reported.

Another site carries the same Reuters story. They have a picture that may or not be contemporary and yet it seems to fit what I know of Iraq's petroleum industry for the last thirty years.

It's hard not to be skeptical. Stuart Staniford has a post in The Oil Drum that's also skeptical but he explores the possibility of Iraqi oil production rising from a little more than 2 million barrels/day in 2009 to 12 million barrels/day by 2017. Here's an excerpt from Staniford's post:

At this stage, it seems too soon to say the Iraqis definitely will succeed. But the scenario that they might seems worth serious consideration.

(snip)

There doesn't seem to be too much dispute that Iraq has enough reserves to support far higher production than has actually occurred in the past.

(snip)

Iraq held two rounds of auctions for oilfield management contracts in 2009 that the large international oil companies have responded to. The first round, in June, were for fields that were already in production and set up contracts in which companies get paid a fee per barrel for all production over the existing level. The second round, last month, were for fields not yet on stream. The Iraqis seem to have driven hard bargains - the oil companies are being paid a flat fee per barrel that is generally under $2/barrel in the safer parts of the country, and thus will not benefit from high oil prices - all price risk/reward remains with the Iraqis. Nonetheless they were able to attract some bids from large competent oil companies with a track record - the likes of Shell, Exxon, Statoil, and Lukoil, and have been signing preliminary contracts with them. According to the oil ministry, the total contracts awarded amount to 12mbd of production, and this could be achieved within six years.

Staniford always has good graphs. Below is just one of the them:



It's simply not possible these days to post such a story without checking to see if the Chinese are paying attention. They are:

Iraq's oil exports amounted to 1.97 million barrels a day in December 2009, an increase of 950,000 barrels over November, the preceding month, according to latest statistics from the Iraqi Ministry of Oil. And a significant change in the volume of exports fully reflects the rapidly-rising momentum from an aspect of current oil production in the country.

In line with requirements for its government to sign a contract with foreign energy firms, Iraq would increase its crude oil to 12 million barrels a day from the current 2.5 million barrels in the next six years; at the same time, its gas production would increase to 144 million cubic meters from the present 48 million cubic meters. Representatives of some OPEC member nations, however, regard that Iraq’s practice for a large-scale increase of oil production is inconsistent with the OPEC’s current strategy for "limited production and oil price protection", and this could cause volatility on the future global oil market.

Admittedly, the article doesn't say all that much, but it's in the opinion section of the People' Daily Online. That means it's news China wants to be noticed. Despite the optimism of Iraq's oil sector, China and Stuart Staniford agree: there may be increased production from Iraq but we're also likely to see increased volatility in the world's oil markets.

In the long run, a plug-in or hybrid car not only sounds like a bargain but may also offer peace of mind.

The Rise and Fall of the Age of Oil: Opportunity or Endgame?

A couple of years ago I read a book on the rise and fall of several periods of Chinese history. Some emperor would fight a few wars, unite a few more provinces than the last emperor, and his heirs would thrive for a few generations.

But the collapse of a dynasty often followed a similar pattern. As the population grew during the good times, the amount of tilled acreage per family dropped while taxes kept rising since the wealthy demanded more and more to keep up appearances. Sooner or later, corruption grew, more demands were placed on peasants and the emperor found himself unable to control events as easily as before.

Of course discontent would grow, generals or talented peasants would take advantage of the discontent and rebellions would flourish, forcing the emperor to impose harsh crackdowns. Meanwhile, people on the borders would notice the lack of troops in the usual places and would encroach on Chinese territory. And the encroachments would give an emperor an opportunity to use foreigners as a distraction while perhaps gaining some more territory and more taxes with it.

But eventually the emperor's army would find itself overextended with rebellions and external enemies. Throw in a famine or an epidemic along with a war that doesn't go well and collapse would soon follow. China of course never fully collapsed during these troubled periods but they sometimes could lose as much as 10-50% of their population. Suddenly, after all the troubles, there would be more acreage per family available and the period of rise would begin anew.

Such rises and falls of course are not unique to the Chinese. But about four to five hundred years ago the pattern began to change, particularly in Europe and later in the United States. First the British and Europeans found coal and better ways to burn it and use it. And Americans discovered an entire continent of virgin forests that provided firewood for over two hundred years. In the middle of the 19th century, American industry exploded with the growing use of coal and the discovery of oil.

Oil meant energy. Oil meant every acre of a 160 acre farm could be used for food and profit. Acreage for horses was no longer necessary. Oil also meant kerosene and light for longer days. It eventually meant fuel for farm tractors, industries, electrical power plants and so on.

In his book, Feeding the Fire, Mark E. Eberhart covers some of the history of coal and oil and reminds us that the British, Europeans and the United States might have had a very different history if coal and oil had not been available in such abundance for the last three hundred years. The subtitle of Eberhart's book is: The Lost History & Uncertain Future of Mankind's Energy Addiction. Offhand, it sounds like the kind of book others have written on Peak Oil, climate change, environmental concerns, the need for abundant alternative energy and so on in the early 21st century. There is some of that in Eberhart's book but he sounds more like someone in the corporate world who's reluctantly and gently sounding the alarm and providing deep background. Actually, despite some reservations I have about the book, I found Eberhart's approach refreshing since he provides a host of material I have not seen before. I don't agree with some things he says but I have learned a lot. On page 183, he writes:

Crude oil is a mixture of hydrocarbon molecules. You might think of these as strands of hairy pearls, where the pearls are carbon atoms and their hair is made of hydrogen atoms. Each pearl in the strand has two hairs, except the ones on the end, which have three. This molecular jewelry comes in different lengths, from a strand with one carbon pearl, which is methane, to strands with thirty or more carbon atoms. The number of carbon atoms controls the properties of the molecule. For example, if the strand has fewer than five carbon atoms, the molecule is a gas at room temperature; five to eighteen, a liquid; and nineteen or more a solid. The most volatile components of crude are called naphthas, which are used as solvents and dry-cleaning fluids and are characterized by strands of five to seven carbon atoms. Gasoline is the component of crude with strings of 7 to 11 [carbon] atoms in length. Kerosene is the portion containing strands of 12 to 15; diesel, 15 to 17; and lubricating oils are made of hydrocarbon chains of more than 17 carbon atoms. The 20-atom-plus range is where paraffin, tar and asphalt are found.

Eberhart explains that one of the things that so quickly made oil so efficient to use is that the heavier oils can be 'cracked' by baking heavy crude at high temperature under high pressure (not unlike how the shorter carbon chains are created in hot pressures found deep underground. Of course light sweet crude doesn't require as much treatment (or 'cracking') as sour heavy crude. So part of today's energy picture requires that people understand that throughout the world, the volume of heavy crude going through the refinery process (requiring additional processes, time and equipment not necessary for light sweet crude) is growing.

What I want to emphasize is that these processes are energy intensive and expensive. Expensive in terms of cost and expensive in terms of lower net energy. Sour heavy crude, however, is still preferable in many ways to coal. And the production of coal is rising dramatically, particularly if we take China into account. Regardless of what one thinks about climate change, pollution, peak oil or the environment, we have already entered a different age and it's already a harsher reality, largely because the United States for the last thirty years has failed to act. There is still time but we can no longer afford illusions.

Curious Swift Boat Article about Cato Economist

If the United States had spent the last thirty years converting to alternative energy and maximizing energy efficiency, we would now be in excellent shape. But a majority of American voters in 1980 decided Ronald Reagan and his emphasis on deregulation and laissez faire economics were the answer to our problems.

Of course there were many contradictions in Reagan's policies. As an example, Reagan pretty much ignored enforcement of antitrust laws, which in turn dampened competition. As a result, we saw a feeding frenzy of mergers and monopolistic behavior in the 1980s. Needless to say, a number of companies "too big to fail" were created (though more of that came later).

Of course Reagan's policies could never change the fundamental fact that America's oil reserves are finite. Despite a boost from Alaska's North Slope, oil production in the United States continued to fall and these days we now pay an onerous premium for foreign oil. Somehow it rarely gets mentioned that 99% of our taxes stay at home but the same can't be said of our payments to foreign oil producers.

Some Republicans who ought to know better suggest we ought to "drill, baby, drill." It's now 2009 and we have considerably less oil than in the early 1970s when our domestic oil output reached its maximum. We can't significantly reduce our payments to foreign oil producers by trying to increase our own oil production. Even if it were technically possible to increase our production significantly, that would simply delay for a few years a dramatic increase in payments to those same foreign oil companies.

The only way we can ensure our future energy security is to launch a massive number of solar and wind projects on a scale somewhat comparable to the number of planes and ships we built during World War II. We can certainly manage in ten to twenty years what we managed during five years of wartime.

It's pathetic that we insist on developing tar sands when most wind turbines now being manufactured provide far more energy on initial energy invested than do tar sands. Not only are Republicans insisting on extending the horse and buggy age, but the horse and buggies they're protecting are expensive. In fact, oil continues to have a double cost: the expensive cost we pay today, and the expensive cost we'll be paying in the years ahead to clean up the mess left behind.

In 2009, conservatism is dead as far as having any significantly useful ideas but Republicans still have a noise machine and there are still millions of Americans with short memories. Swift Boaters like Jerome Corsi take advantage of people who either don't (or can't) do their homework or who want very much to engage in wishful thinking.

On the conservative site, World Net Daily , Corsi has an article about Julian Simon, an economist at Cato (nowadays that's not much of a recommendation). I'm just going to quote two paragraphs which give the gist of what passes for serious thinking:

Oil remains so abundant that it is unlikely the world will ever run out, Jerome Corsi's Red Alert reports.

(snip)

"Simon's energy resource analysis essentially maintains that we will be running automobiles with nuclear batteries long before we run out of oil," Corsi wrote. "Another point consistent with Simon's analysis is that technologies have been developed permitting the clean burning of coal, while coal resources in the United States yet remain among the most abundant on the earth. In the final analysis, nuclear power is the final inexhaustible energy resource.

Right-wing thinking never takes long to contradict itself. Oil will last forever. Uh, if it doesn't, we'll have nuclear batteries.

Needless to say, we need real energy policies, not fantasies.

Conservative Supreme Court Gives Big Oil a Windfall

If there's one thing we can say with certainty is that the 5-4 conservative majority favors business as usual and it favors privilege. Here's a story on how the Supreme Court may have just handed the oil industry $19 billion:

The Supreme Court rejected on Monday an Interior Department appeal of a ruling that the government says will likely cost it at least $19 billion in lost oil royalties from energy companies.

The justices declined to review a ruling by a U.S. appeals court that Anadarko Petroleum Corp (APC.N) did not have to pay about $350 million in royalties for drilling on federal leases in the Gulf of Mexico issued between 1996 and 2000.

Maybe the bankers who received their $10 million bonuses despite the economic meltdown are in the wrong business.

The Chalabi Cousins and Pie in the Sky Oil News

Remember Ahmed Chalabi, the head of the Iraq National Congress and darling of the neoconservatives? He did much to feed false information about Iraq to the Bush Administration and somehow, curiously, was never brought to account. He has done well.

After failing to lead some sort of democratic revolution that Bush and his friends were counting on, Chalabi somehow got involved in various aspects of Iraqi government including some aspects of oil. He's now involved in debaathification but still has connections to Iraq's oil business and has a cousin who was the oil minister. We wouldn't want to judge people by their relatives but Fadhil Chalabi sounds too much like his more famous cousin who was very adept at telling people what they wanted to hear:

Chalabi, a former senior Iraqi oil ministry official, believes the country has huge undiscovered reserves on the grounds but no major development projects have been undertaken for more than two decades.

The proven reserves were officially put at 112 billion barrels in 2007 but Chalabi believes the final figure could exceed 300 billion barrels. “Iraq could have this figure, there is no exaggeration in this,” he said.

Iraq has large proven oil reserves that are substantial but there's been a tendency for countries in the Middle East to exaggerate their reserve potential. Even Saudi Arabia wants us to believe that it might have large undiscovered reserves in its 'Empty Quarter.' There are people, including Fadhil Chalabi, who argue that Iraq may have more oil than Saudi Arabia though they don't seem to make clear whether those reserves might be more than Saudi Arabia's fictitious figures or its real figures. This begs the question of course of motivation. If an Iraqi is genuinely concerned about the future of his country, should he speak up now about possible reserves or should he wait until after the Americans leave?

There's been a tendency since the sharp oil price hikes in 2005 for reports on new oil finds to focus on the high end of possible reserves. It doesn't seem to matter whether the oil finds are in the Gulf of Mexico, Brazil or Siberia. To date, the high numbers have not been justified. We have a problem and we're still moving in slow motion to deal with it.

President Bush and His Oil Theory Fraud

We have a dishonest president. I don't know how much that has really sunk in with the American people. I could point to a wide range of issues where Bush's dishonesty is blatant and embarrassing. Today, I'll just focus on oil.

Dick and George, our two oil executives, have been lying to the American people for years about oil and energy. But the problem goes deeper than that. It goes back to President Reagan and the failure of his administration to deal with the energy problem. For years, Republican leaders in Congress and the White House have refused to deal with the simple fact that oil is finite. Where once we believed oil might last five hundred years, we know now the oil age will be relatively brief. If we are to sustain our civilization, we need other sources of energy. We knew this long before Global Warming became established as a threat to our world. We know now that fossil fuels emissions are a major cause of Global Warming. We have a problem. What we do not need are games.

Bush is urging Saudi Arabia to increase its oil production. It's a bit like asking your uncle to empty out his bank account for your expensive lifestyle (okay, never mind that the Saudis have been emptying out their own bank accounts for decades to maintain their own lavish lifestyle). I suppose Bush can't help himself. When Bush makes a blunder, his first response is to blame someone else. He has blundered on oil. And he has blundered on the economy. Here's the story from James Gerstenzang of the Los Angeles Times:

Producers should "realize that high energy prices affect the economies of consuming nations," he said. If those economies weaken, he said, they "will eventually be buying fewer barrels of oil."

Energy demand has "outstripped new supply," Bush told reporters. "That's why there's high price."

Saudi Oil Minister Ali Ibrahim Naimi said his country was sympathetic to such economic worries, but he refused to commit to increasing production.

"The concern for the U.S. economy is valid," he said. "But what affects the U.S. economy is more than the price of oil."

The Saudi Oil Minister has it largely right: what affects the U.S. economy is more than the price of oil. But the Saudis are reluctant to admit a more salient fact: their ability to increase production is limited. In fact, the ability of the world's oil producers to increase productivity is limited. This is a problem that cannot be wished away by presidential temper tantrums.

Oil prices have been slowing down our economy for more than two years. But the five year war in Iraq is also slowing down our economy despite the stimulus of war spending. We are engaged in a war we did not need and we see almost no benefit for the American people. Bush's lax attitude towards business ethics has also slowed down our economy. The failure of the Bush Administration to go after crooks in the loan and derivatives sectors is the back breaker that has set the stock markets roiling since summer. But Bush's many failures to protect the American economy can be found elsewhere. When the price of gold jumps 40% in one year, it's an indicator of serious systemic flaws, and those flaws can be traced to the White House. We're in new territory and we have a president and vice president who haven't a clue.


Democratic Primaries Note: I will support whoever wins the Democratic nomination but I still stand by John Edwards. The theme of change was Edwards' theme months before Obama and Clinton jumped aboard (isn't the fact that Romney jumped aboard a bit odd?). In fact, Edwards has driven the vision and policies that the other two major Democratic candidates have been borrowing. Of all the Democrats and all the Republicans, Edwards is the one who sat down and did his homework. He knows what we're facing. So I'm voting for him.

Caution: American Media Bored by Oil

As refineries finally catch up with demand, gasoline prices continue to drift down, but there has been little news about the rising price of oil over the last number of weeks. In January, oil fell to a low of $51/barrel but the price is now floating above $70/barrel and there are signs it may be awhile before it comes down again, assuming oil somewhat follows the pattern of the last two or three years. There's seemingly little coverage of this in the news. Perhaps the media is bored since Paris Hilton can't be tied to the oil story somehow. Of course, if hurricanes hit at any point in the next ten weeks, the price of oil will probably continue to soar.

Here's a story from the Financial Times worth noting:

A rule of thumb for the price of oil in the past five years has been to take the last digit of the year and add a zero: 2002 saw prices in the $20s; 2003 in the $30s; now oil is hovering around $70 a barrel. These high prices are desirable for steering the economy away from oil, but in the meantime they could also spell trouble. Oil companies need to adjust to this new reality and rethink their business model.

The latest report by the International Energy Agency warns of an oil supply crunch in five years. Demand is expected to rise at more than 2 per cent annually. Supply, the IEA calculates, will not be able to keep pace. Nations outside the Organisation of the Petroleum Exporting Countries are expected to add about 1 per cent to supplies per year. That puts most of the burden on Opec, in particular Saudi Arabia, which would face capacity constraints itself, the IEA says.

There's an active debate taking place in various locations around the world about when (not if) the oil crunch will occur, with some people arguing that the crunch has more or less already arrived. But the exact time the oil crunch will come is not the issue. The issue is that the time for making a reasonably painless transition to a world economy that can use other sources of energy in addition to diminishing supplies of oil has, in fact, been around for some three decades. The time to sell that big SUV and get something with better mileage is not five years from now, but today. Given the number of conservative-leaning contrarians in the United States, I suspect the transition to a new energy economy is unlikely to be painless.

The Future of Oil, Gasoline and Natural Gas

The fact that Iran, Nigeria and a handful of other oil-producing countries are raising the price of domestic fuel (or at least trying to) should alert Americans that times are changing. Domestic gasoline prices for oil-exporting countries is still less than elsewhere but, clearly, the writing is on the wall.

No one can predict exactly where gasoline prices will go in the next three to ten years. There is still plenty of oil to produce but the world's population is growing and it's no longer certain that oil production can keep up with population nor is it certain that oil production can keep up with the economic growth of countries like India and China, let alone the continued growth, though slower, of countries like the United States.

Now we've known for over thirty years that oil is not as plentiful as we once thought it might be and we now have the additional problem that the world, because of accumulating knowledge about climate change, can hardly afford to burn oil in the quantities we have been doing so for the last fifty years. We've had thirty years to innovate our way out of a known supply problem and now we have a climate problem on top of that, and the most innovative country in the world has instead been resting on its laurels, at least in the alternative energy and transportation sector, and it's frankly no longer certain that the U.S. is committed to being the leader in innovation, not when so much of our wealth is concentrated in the hands of so few people who like the status quo just as it is.

I was glad to see the recent bill passed in Congress to raise auto mileage but it's a bill that should have passed 13 years ago and just might have if it had not been for Republicans like Newt Gingrich and right wing agitators like Rush Limbaugh. We've lost valuable time. And we may lose more time because of inattention. I was one of the first to point out a potential problem that may blind many Americans to the problems we're facing when it comes to our future. As oil gets harder to find and harder to produce, prices will spike during different periods, just as oil is spiking now (though this time largely because of problems in the Middle East and Nigeria). High oil prices are going to force poorer countries out of the energy markets. As poorer countries are forced out, prices will drop, at least temporarily and, human nature being what it is, a fair number of average Americans, business people and politicians will nurse the illusion that we don't have a problem. But, indeed, we do have a problem and it would be foolish and even heartless for the most powerful nation in the world to ignore the added time that the falling consumption of oil in poor countries gives us to find a solution, not just for the world, but for ourselves, since we are after all more dependent on energy for our way of life than any other country in the world.

The Oil Drum has a primer on Peak Oil. It's fascinating how the term "Peak Oil" is sometimes distorted in certain quarters. If oil were food, people would understand the situation more clearly. If the world's population rises, food production must also rise. Food production is not a steady thing. Food production rises and falls; a certain amount of safety can be built in by having plenty of food stored for production shortfalls. If food production begins to fall for too long a period and there isn't enough food stored after awhile to go around, bad things begin to happen. One very good thing about food is that it's renewable. Oil is not. "Peak Oil" is simply the proposition that at some point our ability to produce oil worldwide will begin to fall (that is, one year we will reach the all time peak for oil production and no year after that will match that year and on average yearly production will steadily fall at some uncertain rate) and most people in Peak Oil believe the time will approach in the next two to twenty years or that we passed the 'peak' in the last year or two. There is already strong evidence that what we call light sweet crude may indeed have already peaked, but the evidence is obscured by the other forms of fossil fuels that are produced. Because there is in particular growing concern that the Middle East may not have the oil reserves they claim to have, most responsible people who look at these things and who are concerned are trying to make the point that we need to start making adjustments now whatever the date of "Peak Oil" may be.

Here's an excert from the primer on The Oil Drum:

9. When was peak oil first predicted?

M. King Hubbert, in 1956, first predicted that US oil production for the 48 states would peak in 1970. This prediction turned out to be correct, to everyone's surprise. He also predicted a world-wide peak around 2000.

10. Will alternative energy sources be able to make up for the shortfall in petroleum production?

At this point, it seems unlikely that they will make up the shortfall.

(snip)

At this point, there does not seem to be any "silver bullet" for replacing the lost oil production. Oil is unique in its abundance, its high energy density, and its portability. There do appear to be a number of possible silver bee-bees, however. These include:

• ethanol from corn,
• ethanol from sugar (generally imported),
• biodiesel,
• cellulosic ethanol from biomass, and
• coal-to-liquid.

None of these appears to be very scalable, especially in a short time-frame. In addition, there are other drawbacks -- cost, environmental damage, and for coal-to-liquid, climate change issues. Indirect approaches to circumventing the shortage, like using battery operated cars, may be part of the picture as well. If these are used, they will probably need to be phased in slowly, as existing cars are retired. It is likely that conservation will need to be part of the mix.

We need major research to tackle these problems and we need to start making changes. I should note that the very first person who ever drew my attention to these problems was a Republican. He was a smart man and a former oil executive. I'm not sure he would recognize the current Republican leadership and its failure to take on the future. The Democrats are coming around on these issues but they've been slow to do so. In the next five years, we have a lot of work to do.

The Need to Fight the Horse and Buggy Mentality

I would like to believe that the United States is still the leader in innovation in the world and there's evidence to suggest we still lead in innovation in several areas. But that innovative leadership won't last if Washington, and particularly today's crop of K street Republicans continue to protect a horse and buggy mentality. The problem is even deeper than that, though. What we're really talking about is the protection of privilege.

We have heirs in the tobacco, beer, forestry, railroad, oil and auto industries who haven't worked the source of their wealth in two or three generations but they want their wealth protected at taxpayers expense and at the cost of our nation's economic future (this is a broad problem but it strikes me that Bush thinks of himself as an oil man but it's not certain that he ever learned much about the oil business).

And then there's outsourcing; some of the biggest flag wavers in our country are also the same characters who turn their backs on our history and values by looking for cheap labor and destroying American jobs by sending those job overseas; these flag wavers are also weakening our country and in some cases there are serious national defense issues involved when some critical products and parts are made exclusively overseas with no backup plan if something happens to the source of those products.

The most dangerous trend is the amount of our energy that is now outsourced and that we have to import from overseas. It's not likely that America will become energy independent any time soon, but we can clearly improve our situation. And of course, dependence on oil has the longterm economic drawback of global warming. And then there's the issue that there's only so much oil and we need to start making a transition to other forms of energy and increased efficiency for using the energy we have. The more we can produce new, non-fossil fuel, sources of energy domestically, the better off we will be.

The Energy Bulletin has a useful graph illustrating that slowing global warming doesn't necessarily have to slow the economy (hat tip to The Oil Drum):

SOME ways of cutting carbon are cheaper than others. So, at different carbon prices, different sorts of methods of abatement become worthwhile. Vattenfall, a Swedish power utility, has tried to quantify which ones would be worth undertaking at what price (see chart 3).

The chart may or may not be relevant to the longterm scenario of how carbon dioxide will be taken out of our atmosphere (at some point, in the next fifty years, it's probable that all the solutions mentioned by the chart will have to be used for one reason or another), but it's worth pointing that the most expensive methods of reducing carbon emissions seem to be getting the most attention from big business and their friends in Washington. And yet, the four most effective ways of lowering carbon emissions are in the hands of average people: better light bulbs (rather than incadescent), home insulation, fuel efficient cars and better water heaters. The problem with so many corporate answers to our problems these days is that taxpayers or consumers eventually pay for them in one form or another. When the auto industry or the oil industry get together as a group and put pressure on Washington, they're not looking for the cheapest or even the most sensible solutions, but rather the most lucrative.

I remember a story from some years back about an African nation that was having a serious water quality problem and it asked several American companies for a solution. The companies came back with several bids, the lowest being $2 billion. The African nation could not afford the price tag. But the companies were thinking in terms of big projects and big profits. Someone else came along who was more interested in helping the African nation than in making huge profits and pointed out that the water quality could be vastly improved for $2 million by digging wells and putting in numerous public faucets at different locations; it wasn't an ideal solution and it wouldn't be a vast American solution with high quality water but it would be economically feasible and therefore doable. One of the reasons reconstruction in Iraq has gone so badly is that we went in with gold-plated projects that never had much chance of succeeding but that had the benefit of large profits for the companies running these projects.

In the end, innovation should not be about what has the most bells and whistles, but what actually works. We're losing the knack we had in our first 200 years of just figuring things out. To my mind, we are beginning to face things that innovation may not be able to solve, but innovation is still our best chance of getting through the next 100 years. We have a number of corrupt and powerful people who refuse to think that far ahead.

Real innovation may require changing how we think about the world and what our obligations are not just to our own children but coming generations as a whole. It wasn't all that long ago that innovators, particularly those in medicine, donated their ideas to the world without regard to the fat profits they might earn. I have nothing against profits but sometimes we end up encouraging too much of a good thing and it begins to stifle real innovation, the kind of innovation that is critical for surviving the 21st century.

Iran, Oil, and Human Nature

For three hundred years, the human population of the Earth has been exploding while the numbers of many species around the world have been plunging. We know that a large number of species have simply disappeared—and yet I find it odd that there are very large numbers of people who have no curiousity about why such things are happening or if they have any bearing on their own lives or the future of their children.

We don't seem to have a good understanding of why human population starting growing in the 1700s but that rise was nothing compared to the rise that began in the 19th and 20th centuries. To some extent, the rise in human population in the last two hundred years have been driven by new technology but that technology often would not have been possible without finite, nonrenewable fossil fuels like coal and oil. The green revolution, for example, would not have been possible without the use of fossil fuels to make fertilizers.

But human nature is funny. When things are good, memories get very short. In the United States, there are many places in the far west where things were good for a time and memories were very short. I mean gold mining towns, logging towns, fishing villages and so on. During the good times, we forget that gold, trees, fish and a number of other resources are finite. The far west is littered with the remains of ghost towns and signs of old settlements that came and went in a matter of a few decades, or just a handful of years.

For some time, we have been behaving as if carbon-based fuels are infinite or at least some sort of renewable resource. They aren't. At least not the kind we keep pumping or digging out of the ground. If we're lucky, we may eventually be able to run a world economy on renewable resources. But that would require taking a good hard look at where we are and how susceptible we are to our own human nature and how to get around our own shortcomings. And, oh yeah, a lot of research.

Now the Iranians are like everybody else and they're suspect to the same foibles of human nature. Here's an AP story worth thinking about in the International Herald Tribune:

Iran's decision to hike gasoline prices has thrown new light on what could be its most-entrenched problem — a vulnerable, highly subsidized economy, and the political dangers that poses for its populist and hardline president as he faces international pressure over the country's nuclear program.

Even after Tuesday's decision to raise gasoline prices from 800 rials per liter to 1,000 rials per liter (0.059 euros/liter to 0.074 euros/liter, 30 cents/gallon to 38 U.S. cents/gallon), Iran has some of the lowest gas prices in the world. Those rock-bottom prices have led to unnaturally high demand and have saddled the government with fuel subsidies that cost billions of dollars a year.

Iran has any number of economic vulnerabilities, as do most nations around the world, the United States included. In Iran's case, there are vulnerabilities that should be on the negotiating table if the United States is serious about diplomatic breakthroughs (and there are times I doubt that the Bush Administration is in any way serious about any kind of diplomacy unless it's to put off a problem until some later time). Iran has an aging oil infrastructure in bad need of repair and updating. I've talked before about this as a possible venue for lowering tensions if Bush were to choose to do so.

But let's talk about human nature. Iran is very much going down the same path that we did in the 1950s when we had huge oil reserves and we had the notion that the age of oil would last a few hundred years and, therefore we had nothing to worry about. We all remember very cheap gasoline and cars that got ten miles to the gallon. In fact, several of the oil producing countries in the Middle East act as if the oil will last forever and in places like Saudi Arabia, gasoline too is subsidized. I suppose it's human nature to enjoy the good times—while they last. But we're not talking about boom towns of 6,000 people that later become ghost towns because everybody moves away; we're talking about a world of over 6 billion people, that if it doesn't start getting more realistic and pragmatic in its thinking about energy, could be in serious jeopardy.

To be honest, Americans haven't learned much from their own experience with being a major oil producer while once upon a time enjoying the luxury of cheap gasoline (make that twice, if we include the oddly low and deceptive prices of the 1980s and 90s). It's human nature to have short memories, and politicians tend to have even shorter memories. But there are Americans thinking about these things. And Europeans. And others. Of course, it's not clear that the oil producers of the Middle East are thinking about these things, or at least those in charge. I read various articles that suggest sometimes that they do think about these things and yet there are still those odd subsidies that will soon be difficult to maintain for some oil producing countries. That Iran is working to begin reducing the subsidies for gas is actually a good sign. In some ways, it's more than we're doing. If, as some argue, we're in Iraq because of oil, then we have been supporting our oil economy with over $500 billion in direct subsidies since 2003. And that doesn't count the oil subsidies that are already acknowledged.

It's human nature not to want to think about these things. But it's a flaw we can no longer afford.

The Growing Signs of Energy Trouble

While high-priced media pundits focus on nonstories like the price of John Edwards' hair cut, there are troubling signs that we cannot keep putting off dealing with energy. I want to start with a post over at The Oil Drum by regular contributor Stuart Staniford who has been analyzing whether Saudi Arabia's recent cutbacks in production are voluntary or a result of oil depletion:

...Saudi oil production has been falling with increasing speeed since summer 2005, and overall, since mid 2004, about 2 million barrels of oil per day in production has gone missing (about 1mbpd in reduction in total production, and about another 1mbpd in that two major new projects, Qatif and Haradh III, failed to increase overall production). That's 2.5% of world production and, if that production hadn't gone missing, gasoline in the US likely would still be somewhere in the vicinity of $2/gallon instead of well over $3.

(snip) [What follows is after several thousand words of analysis that included many graphs]

As you can see, the whole of North Ghawar is either off plateau already, or getting close. That is something like 3.9mbpd of production based on last known figures. Whatever of this decline has not already occurred will mostly occur during the next decade.

Southern Ghawar, by contrast, can maintain plateau for decades to come, but there is only 1.7mbpd of production there on last known figures.

While we cannot attribute an exact fraction at this time, it seems likely that not-altogether successful attempts to maintain the north Ghawar plateau to the bitter end explain a significant fraction of the sharp increase in oil rigs that began in 2004, as well as the production declines since that timeframe...

Bottom line: while Saudi Arabia still has significant reserves and will remain a major oil producer for many years to come, Saudi Arabia's oil production may be in decline or soon will be. There are few projects worldwide that combined can make up for the potential losses resulting from Saudi Arabia's growing production problems; the downward spiral may be already here or coming quickly. This will only aggravate the growing worldwide energy crisis.

The post by Staniford is well worth reading, along with the ongoing discussions that have been going on within The Oil Drum community. I've been following the Saudi Arabia discussion for some time but I'm not an oil expert or geologist; the current post, by the way, is over 16,000 words long: consider browsing it before deciding whether to read it. But it's well-reasoned and Staniford tries to help out lay readers from time to time (and many of the comments that follow the post are helpful). I should point out that the post is something of a serious collaboration by a number of oil experts.

Staniford's study is not conclusive and he is forced to infer a great deal of information because of the unwillingness of Saudi Arabia to be forthcoming with its hard data. But it strikes me that Staniford's analysis is somewhat similar to what the analysis division of the CIA or the Energy Department might do if they too did not have a full set of data. That begs the question. What analysis, if any, has the Bush Administration being doing in the last six years and, if there have been studies, what are their results? And if there have not been studies, why haven't there been? Congressman Henry Waxman has his work cut out for him on this issue.

Speaking of the CIA, let me go back to an article from a year and a half ago by Greg Gordon of McClatchy Newspapers:

Former CIA Director James Woolsey paints a dire scenario: A terrorist attack causes a months-long, 6 million-barrel reduction in Saudi Arabia's daily petroleum output, sending the price of oil skyrocketing past $100 a barrel.

Matthew Simmons, an industry banker and author, says the kingdom's oilfields are deteriorating anyway. And a recent New York Times story cited an intelligence report suggesting that the Saudis lack the capacity to pump as much oil as they boast they can.

Even if nothing disrupts the projected flow of Middle East petroleum, Energy Department consultants warned earlier this year that "the world is fast approaching the inevitable peaking" of global oil production - a problem "unlike any faced by modern industrial society." They wrote that the United States and other nations are in a race with the clock to find alternative sources for oil, "the lifeblood of modern civilization," and avoid potential economic disaster.

I'm no fan of former CIA director James Woolsey (a Clinton neocon, he endorsed the war in Iraq far too enthusiastically) but it is interesting to see him talking about the problem of too little oil and the effects it would have on the US. Note too that this was right after Hurricane Katrina when the information spigot opened somewhat on energy issues; however, since then, the mainstream media (the one with the short attention span) has been behaving sluggishly on the story and the Bush Administration has hardly addressed the issue in any comprehensive way beyond favors for Bush's oil friends. If nothing else, Congress needs to push the Bush Administration for an answer to two questions: what's our energy situation and what are you doing about it? We talk about energy independence as if it's a problem that won't be here for twenty years. But our problems have apparently already arrived.

We are a superpower (though damaged somewhat by Bush's incompetence and lack of credibility) and we are still a powerful economy (a bloated, increasingly dysfunctional economy that tilts towards protecting the wealthy regardless of whether they're productive or not). For some time to come, we have the capacity to deal with the issues that will soon be impacting our nation in ways that even media figures earning seven figures can no longer ignore. But it's not certain how long we will have the capacity to act if we continue to ignore these problems.

I've been quietly watching the impact of energy prices and shortages on the poorest nations of the world. I've been hoping to see a comprehensive analysis of slowly shifting oil distribution around the world but nothing has come my way yet. But the anecdotal evidence is building and it's sobering. Part of the reason we're not fully aware of the growing energy crisis may be the result of the poorest countries of the world absorbing the impact as the wealthier nations wind up with excess oil that poor countries can no longer afford. So far, this is an unproven hypothesis but, as I said, the anecdotal evidence is building; here's an AP story by way of Forbes:

An Indian company has cut off oil supplies to landlocked Nepal because it has not been paid millions of dollars, causing widespread fuel shortages across the Himalayan nation, a government spokesman said Thursday.

Vehicles lined up outside several petrol stations still distributing gasoline and diesel in Nepal on Thursday, as Ichcha Bikram Thapa, a spokesman for the Nepal Oil Corporation warned it would soon run out of all reserves.

(snip)

Nepal imports all its oil products from neighboring India through the government-owned Indian Oil Corporation, but NOC has failed to pay up to 5.9 billion rupees ($90 million) in back payments.

George W. Bush seems to be working hard to provide us with multiple reasons for believing he will be remembered as the most failed president in American history. His energy policy has been and remains a travesty.

Bush's Bubble Troubles Continue

For a growing majority of Americans, the painful disconnect between what Bush says and what the reality is continues. A growing number of his supporters and allies are joining the ranks of Bush's critics. Even the Republican rank and file no longer support him with their usual enthusiasm.

The conservative magazine US News has a column by John W. Mashek:

All two-term presidents seem to suffer from a fatigue factor, but none like what George W. Bush is going through.

The Bush second term has been battered by the never-ending war in Iraq, a failing policy on the environment, a mess on the firings of eight U.S. attorneys, and the self-destruction of Paul Wolfowitz at the World Bank. There are other flaps as well but you get the picture.

Poll after poll show Bush's popularity and performance in office is in the mid-30s or so. Vice President Cheney has embittered friends as well as enemies with his rhetoric and behavior.

With the help of many Republicans, including rubber stamp Republicans in Congress, Bush is failing Americans on issue after issue. Back in December, Bush had the chance to regroup after the November elections and the timely recommendations of the bipartisan Iraq Study Group that provided him the chance of political cover. But Bush chose to ignore the Iraq Study Group and the many experienced and successful foreign policy hands who said it was time to change course. Bush's arrogance and rigidity got the better of the president and his failed presidency continues with no relief in sight.

Here's just one issue, this one felt particularly hard in California, that's irritating everyone, including many Republicans; here's the story from the San Francisco Chronicle:

About 44 percent of Californians said they've had to cut back on such expenses as food and clothing to afford rising fuel prices, according to a Field Poll to be released today. But responses were sharply divided between higher- and lower-income groups.

The poll found lower-income workers -- those earning less than $40,000 a year -- were twice as likely as those earning more than $80,000 to feel the pinch, with 62 percent reporting reduced spending and 54 percent describing the price rise as "very serious."

(snip)

Californians pay an average of $3.33 per gallon at the pump compared with $2.86 per gallon for regular nationwide, the AAA auto club reported Monday. San Francisco and Oakland both set records, reaching per-gallon rates of $3.45 and $3.35, respectively.

According to the Field Poll, voters cited the oil companies and the Bush administration as those most responsible for the price increases.

The oil companies have donated far more money to Republicans in recent years than Democrats. Obviously the oil companies found their men in Cheney and Bush, both former oil executives. Neither have come to grip with America's growing energy problems and oil companies are only too happy to make record profits. It's hard to find a single issue where Bush has done something useful for the majority of Americans. Even Bush's tax cuts are meaningless for most Americans if most people end up paying more for credit, gasoline and health care while wages continue to stagnate.

Here are Bush's latest poll numbers from All Headline News:

President George Bush's quarterly approval rating, for his 25th quarter in office, has reached a new low. According to a USA Today / Gallop Poll, only 35 percent of Americans approve of the job President Bush is doing in the Oval Office.

Bush continues to live in his bubble surrounded by staffers who tell him exactly what he wants to hear. It's an unhealthy situation and most Americans now understand that we have a problem. The only suprising thing about Bush's poll numbers are the number of Republicans still supporting his failed presidency. But even that is beginning to change.