Did some Polly's want names and proof that the oil industry is in trouble?
But that thread was filled with bitter debate, rancor, and trolling. It might be useful to step back twenty five or so years to see how Y2K denial is just part of a much larger and regular pattern of our way of life.
My memory is sort of fuzzy on the exact dates (senilty setting in [grin]), but I believe that the first oil shock/embargo came in 1973, around the time of the Arab/Israeli Yom Kippur War. This event woke the country up to the fact that as a nation we were greatly dependent on foreign oil.
Fast forward to 1976. Jimmy Carter is elected President, partly because of his campaign stance that he will help America reduce its dependence on foreign oil. The energy department is born (yes, I know how screwed up it is today--but that is a DIFFERENT topic), and Carter proposes a series of measures designed to promote the creation of alternate sources of energy: solar, wind, geothermal, etc. Tax credits are enacted to help these "new" industries get off the ground. Congress passes the 55 mph national speed limit. Rules are enacted mandating that new cars will get better gas milage each year, aiming for a target of about 28 mpg by 1985. (I don't remember the exact target mpg or year.)
And, imagine this, Americans wanted and purchased smaller, more fuel efficient cars. Toyotas and Datsuns, and a host of mediocre American-made small cars made their appearance at that time.
And then we had the Iran hostage crisis, we dumped Jimmy Carter for Ronald Reagan, and we forget about the energy crisis. I sometimes think that the main reason Reagan was elected was because of how much Americans hated small cars.
Buried and forgotten in all this was the accomodation that our bankers made with the international oil cartel. A handful of oil sheiks, dictators, and other countries that were less objectionable, held tens of billions of dollars each from new found oil wealth. (I think oil cost about 2 dollars a barrel in 1972, and upwards of 40 dollars a barrel by 1978. Please correct me if I've got these numbers wrong.) So arrangements were made, so to speak, that worked out to the mutual benefit of those who held the oil, and the bankers. And so the modern banking system that so many love to bash was created.
Matters settled down. Oil prices drifted downward and became more or less stable. Automobiles got considerably more effecient, making 20 dollar a barrel oil affordable. And Americans started buying bigger cars.
And than old Saddam had to go and grab Kuwait. This of course threated the the sheiks with their now hundreds of billions of dollars of oil money, the bankers best customers, and Joe Public driving his big rig. So we sent our boys and girls over to the gulf to keep the world safe for the status quo.
Again, I think that this war cost aroud 600 Billion dollars. Historians please check on the numbers. But hey, the sheiks had this kind of money in the bank. Uncle Sam and the bankers made a few transfers on the electronic ledger, and everyone but Saddam is still smiling.
And Joe and Jane Public decided to throw off the last little bit of guilt or doubt that might have lingered in the back of his or her brain that buying gas guzzling cars, and being dependent on foreign sources for over 50% of our petrolium needs might be less that prudent. Everyone started buying pickup trucks, because there wasn't a great selection of SUVs back then. (Oh, and Dodge minivans, too.)
And the far beyond suburbs, boy did they grow. Highway traffic and congestion, ditto. Gridlock, road rage, likewise. After all, the reason that I, Joe or Jane Public, am tied up in traffic is because that slob if front of me is taking up MY space on the road.
Here's where the Y2K denial comes in. I got sick of all this about 1995, and moved out of Kansas City to the Missouri woods with my family. We live on a nice road where two or three cars go by in the average hour. (I know, I know. If everyone did what I did, every rural town would have traffic problems like Aspen or Santa Fe.)
What is Joe and Jane's response to the gridlock and road rage? Why buy a bigger car, of course. I was up in Kansas City yesterday, book shopping and drinking Star Bucks coffee in a Barnes and Noble out in the comfortable way out suburbs. I spent quite a while just gazing out into the parking lot, looking at the people and their vehicles. (Yes, I've become quite a hayseed.)
It appeared to me that about half of all the vehicles were SUVs, Vans, or Pickups. And a whole bunch of the SUV were either Chevy Suburbans or Ford Expeditions, you know, those vehicles that look like two Ford Escorts could easily fit inside. Most of these big rigs were driven by petite women, who must have dropped the kids off at summer sports earlier in the day.
But what the heck, even if a 350 pound Joe had been driving these rigs, whats 350 pounds next to the 8000 or 10000 pounds that these monstrosities must weigh. And I'll bet around town that they are not getting any more that 10 or 12 miles to the gallon of gas.
Denial. What denial you say. There's plenty of gas out there right now, and these folks can certainly afford the gas, even if the price doubled.
I'll grant they can afford the gas, but the surplus of gas is only an illusion.
Please note, the following article is from Barrons, published by the Dow Jones/Wall Street Journal. Not from the doomer press. And similar articles appeared in last years Forbes and Scientific American. (I don't have the url. Barrons is availalbe on-line for a fee. Or free at your local public library.)
--------------------------
Here We Go Again: The oil surplus won't last as long as we might wish.
Here We Go Again: The oil surplus won't last as long as we might wish.
by James Srodes, Barrons, Oct 19, 1998
Most news analysts got it wrong when they credited low oil prices for the
recent proposed $48 billion takeover of Amoco by British Petroleum. What's
really driving this mega-merger is an impending global oil shortage that will
have profound economic and social implications. Seen in this light, the
BP-Amoco merger makes short and long-term sense, and the light also shines on
other oil companies.
For European companies like BP, marriages of convenience with American merger
partners will offer shelters for profits from the uncertainties of the European
monetary union. Also, there will be cost savings from cutting staff and
consolidating offices. And U.S. oil companies like Amoco bring retail
service-station networks and refineries into the world's largest market for
petroleum products. But most of all, the new hybrid giants will have the muscle
to survive critical challenges that loom in the not-too-distant future.
Behind the BP pursuit of an American base is a recent series of alerts from
many respected petroleum engineers, acknowledged by oil-industry executives and
government energy planners: We rapidly approach the point where the global
output of new discoveries of oil will begin to contract sharply even as the
world demand for energy products becomes still more acute.
Put most simply, a consensus has formed in recent months that within a few
years new supplies of conventional oil energy will be outstripped by spiking
world demand. Very soon after that the real volume of oil output will begin to
shrink abruptly -- even as demand growth coasts a bit higher.
We've seen this before, but the 21st century's supply disruptions and soaring
prices will dwarf the OPEC crunches of 1973 and 1979.
The best industry estimates reckon that the world began this year with 1,020
billion barrels of oil in "proved" reserves. At the current production rate of
23.6 billion barrels a year, these supplies would last only another 43 years --
if there were no growth in demand.
As for growth in supply, the industry has spent the past 20 years exploiting a
new age of discovery technology. Now many oil geologists say that 90% of the
globe's oil fields have already been tapped and many are already exhausted.
Bigger Problem
There are several things wrong with the current consensus. Many of the OPEC
nations have been inflating their estimates of proved oil reserves. More
obviously, consumption of oil products has already jumped by 50% in Asia and by
a third in Latin America, since 1990. By the estimated peak production year of
2010, world demand will have risen by more than 60% to as much as 40 billion
barrels a year. Finally, there is the geological bad news that once a mature
oil field reaches the midpoint in its productive life it becomes harder to pump
out each remaining barrel. Examples of mature fields include much of the Middle
East, the North Slope and the North Sea.
Two remarkable things about this latest crisis outcry are how recent it is and
how authoritative are the alarmists. It was only last November that two top oil
geologists presented papers on the impending oil depletion to a conference of
the International Energy Agency of the United Nations in Paris. Colin J.
Campbell, an Oxford-trained geologist, and his French counterpart, Jean H.
Laherrere, have been senior geologists for firms such as Total, Texaco and
Amoco for more than 40 years. Currently they work at the industry think tank
Petroconsultants in Geneva.
The two geologists were so convincing that the IEA dropped a generation-old
view that held oil discoveries to be merely a function of price -- that is, the
higher the price the more oil will be found. Last March, at the Moscow summit
of the Group of Eight major industrial nations, the IEA presented its own paper
to the national leaders accepting the Campbell-Laherrere view that sometime
between 2010 and 2020 the crisis will be upon us full blast. The
Campbell-Laherrere analysis also cut the reserve of oil currently known to be
in the ground to about 850 billion barrels.
Since then, others have joined in the public debate. Recently, Franco Bernabe,
chief executive of the Italian oil company ENI SpA, has given a series of
interviews in which he moved the doomsday clock forward to between 2000 and
2005. He forecast that today's world price for a barrel of oil would soon begin
to rise from its $15 base and quickly pass the $30 mark. He forecast that both
the British and Norwegian sides of the North Sea will begin to see production
declines within three years. The United States passed its peak (even with
Alaska) long ago. Left open for argument is the amount of new oil left to be
discovered in the Third World.
So much global economic progress depends on the exploitation of oil. Energy
from all hydrocarbon sources accounts for 80% of what makes our world go and
oil accounts for 38% of all energy used. And it's oil that truly powers
economic activity because it produces so much raw lift for activities, since it
is so movable and can be used in so many ways.
Most "alternative" energy sources require more energy to get them running than
they ever produce. For instance, it takes 71% more energy to produce a gallon
of ethanol from grain than the energy contained in a gallon of ethanol will
generate in use. A barrel of oil routinely offers 10 or more times the raw
power for our activities than it takes to get it, conferring an enormous profit
not only on the companies that supply oil but on the entire economy.
Some alternative sources are just the figurative drop in the bucket. Wind
generators require technological investments that outweigh the power they can
generate, even if every windy hillside is sown with them. Solar cells pay off
only in remote locations. Other substitutes are possible and may provide almost
as much economic profit. But construction of nuclear reactors or projects to
wrench oil from shale deposits have mostly been cancelled during the last 20
years of oil surplus and low prices. And coal, which is abundant and
profitable, has environmental costs. The recent uproar when strip miners
blasted the top of a scenic West Virginia mountain showed just how much of our
environmental consciousness will have to be reassessed during the next energy
crisis.
Advancing the Market
This is where market forces come in and why the BP-Amoco merger fits the rough
logic of the days ahead. Soon enough the giant oil combines of the next decade
will find themselves doing battle with the likes of Vice President Gore and
British Prime Minister Tony Blair. The bigger the major oil producers become,
the longer they can hold out against the temptations of politicians to
redistribute what oil remains. The 'Seventies offer a convincing example of the
impulse to tax "windfall profits" and spend the proceeds on vegetarian-style
alternative energy sources.
Then very quickly the fight will be over the dwindling petro-reserves
themselves. Those nations rich with oil and strong in resolve will get their
energy fix. By that standard America can thrive quite nicely; so, too, can
countries as diverse as Britain, Mexico and South Africa. Other European Union
members will fare according to their ability to command and pay for energy (in
dollars and not in euros, thank you).
Much of the social safety net that defines the industrial West will be up for
debate again at considerable political pain. Nuclear power, with all the fears
it raises, will be back on the policy agenda again.
There will be obvious nations at risk too. Some are already visible on the
horizon. Russia, which has lost control of the petro-energy subsidies that made
collectivism possible, is imploding before us. Japan, which must import each
barrel it uses of economic growth, is adrift. Even some nations that have oil
-- Indonesia and Nigeria, for example -- must show they can control it, lest it
be poured down the drain of civil strife.
Other productive and oil-rich regions face challenges. The Middle East with its
easy pickings grows increasingly unstable with each passing day. Some new
fields, such as the Caspian Sea area, are hostage to rival bands of terrorists
whichever way their pipelines head.
Finally there are the have-nots, those poor nations strangled by a poverty that
can be alleviated only by massive use of more and cheaper energy. Think of
China, India or Pakistan unable to obtain the means of prosperity and the
picture grows dark indeed. The struggle for national prosperity fueled by
energy will not automatically go to the rich and already powerful. The nuclear
wild card makes players of all nations.
Left to market forces, the energy producers of the world will find and exploit
a range of energy resources at the prices that reflect the needs of the world.
But the vision of the last half century -- that anyone can have everything --
is no longer likely.
JAMES SRODES is a Washington writer specializing in international business.
Copyright c 1998 Dow Jones & Company, Inc. All Rights Reserved.
OK now, optimists and pessimists. If the Y2K optimists are right, maybe we've got four or five more years until world oil scarcity drives us into another crisis. And if Y2K turns out to be something more than a bump-in-the-road, the oil supply, which is already problamatic for all the reasons people have mentioned on this forum, will turn ugly even if there are only modest disruptions. As the Barrons article points out, there are no good or cheap alternatives waiting in the wings.
My guess is that we'll see 3 dollar a gallon gas by 2005, Y2K or not. Not being an economist, I don't know what effect that will have on the economy. But I bet we'll see a lot of big SUV's parked on people's lawns with for sale signs.
----Alexi.
-- Alexi (Alexi@not-in-the-dark.com), July 01, 1999