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Monday, August 29, 2005

Oil Storm Deja Vu

Back in June, FX aired a docu-drama entitled, “Oil Storm.” The movie was sub-titled, 1 million barrels of oil gone. The movie began with a hurricane taking out Port Fourchon, the major entry point for oil into the United States. Circa, late summer, 2005. Eerily prophetic.

The US government ends up tapping the Strategic Petroleum Reserve to make up for the shortfall. We call on the Saudis to bail us out, but the radical Islamic fundies put the kibosh on that maneuver. Russia finally comes to our aid with a big oil shipment. China initially outbids us while the oil is in transit, until we up the bid and invest heavily in Russian oil infrastructure. We all live somewhat happily ever after.

On the LA 1 Coaltion website they state:
http://www.la1coalition.org/highway_02.html:

Louisiana’s southernmost port is Port Fourchon, strategically located in the central Gulf region where it serves as a focal point of deepwater oil and gas activities...Analysts predict that losing access to Port Fourchon could choke our national energy supply, sending gas prices to over $3 per gallon.”

Before hurricane Katrina was forever etched into our memory, the US was suffering from an oil refinery capacity problem; one of the main causes of the recent run-up in oil and gasoline prices. Refinery capacity, therefore, is still a problem. Katrina will just exacerbate it to new heights.

The Louisiana Offshore Oil Port (LOOP), the first and only offshore oil terminal operating in the United States capable of off-loading the huge, deep draft supertankers, is located less than 20 miles south of Port Fourchon in the Gulf of Mexico. LOOP connects to over 30 percent of this nation’s refining capacity, some of which is in St. Bernard’s parish near New Orleans--almost directly in the path of the hurricane. The homes in St. Bernard's parish are currently under water.

The world has recently been suffering from “infrastructure peak,” as a result of increasing demand, a lack of refining capacity, and other bottlenecks; not to mention, the peaking of light sweet crude oil. Many of the refineries are just not able to handle the heavier sour crude grades that are now becoming an ever-increasing share of global oil production.

Oil has now breached $70/barrel and is destined to possibly soar when the reports on the damage to production facilities in the Gulf come in.

Will we call on the Saudis and OPEC to increase production? Will we tap the SPR? Will gas be over $3 by Labor Day?

As Paul Harvey would say, “stand by for news!

Sunday, August 28, 2005

Hijacking Reality



I attended a peak oil mini-conference recently hosted by the Green Party of Texas.

It was surprising to see see so man people in one place, who are interested in Peak Oil and resource depletion. I suppose I was half expecting 12 weirdo's sitting in a circle and swapping conspiracy theories. Maybe it's just me, but it seems like the disaffected conspiracy crowd always seem to be early adopters of any issue which predicts problems for humanity.

The crowd was roughly 100 people... Everybody from college students, housewives, blue collar guys, seniors, and even a few young children. So my conspiracy-nut fears soon dissolved amid this mixed crowd, and my attention shifted from the crowd to the message being delivered.

They screened The End of Suburbia of course, and conducted breakout sessions for those of us who had seen EOS already. The session I attended was presented by members of the Green Party sponsors. It began with a somewhat rambling introduction to peak oil, with frequent interruptions from a well-intentioned, but very annoying young lady with some agenda I never did quite catch. This was followed by a Green Party pitch, complete with little brochures and hand-outs. Much what I had expected I suppose. I didn't identify myself to anyone because I wanted to see the event from the perspective of a newcomer, and to avoid co-opting their time.

After the sessions and screenings were finished, a round-table of Green Party affiliates answered questions and made short presentations. These were focused on solutions and activism messages among a panel of around 8. I didn't know any of the speakers myself or by reputation. Urban planning and energy friendly homes were the mainstay of the Q & A.

That's when it dawned on me...

The people who organized & presented the seminar were "piggy-backing" on the Peak Oil buzzword as a method of promoting their own agenda... just like the conspiracy nuts I had anticipated. I could have attended this entire event, and never actually understood what Peak Oil is really about. Not to discount the mostly worthwhile goals of these groups, but it became clear that Peak Oil was not really among them.

One session speaker offered Mad Max DVDs for newcomers to understand post peak life...

I rest my case.

It reminded me of a favorite Simpson's episode actually.


Homer: "Okay, okay, it was me. I'm sorry I blew your secret! But you don't know what it's like to be a nobody! I just wanted to bask in your reflected glory! Reflected glory!!"

Kim: "Homer ... you betrayed our confidence. I just don't think we can be friends anymore."

Homer: "But ... where will I bask?"

Alec: "Anywhere but here.'

Homer: [puts his hand on Ron's shoulder] 'Come on, Ron. We're not wanted here. ' [Ron removes Homer's hand] 'All right, I'll go. But the next time you want someone to remind you which brother is which, or smell your hair while you're sleeping, just remember ... old Homer won't be here anymore!'

It's our greatest strength... & our worst failure.

Competition

Google News - peak oil

Google News - peak oil

Wednesday, August 24, 2005

Tuesday, August 23, 2005

Hoarding Gas and Oil

During the 1973-74 oil embargo, gas prices doubled within days. Gas rationing resulted in hoarding, and Western economies accustomed to cheap oil sputtered into recession. Rationing of gasoline forced many motorists to wait hours in long lines at gas stations to obtain just a few gallons. Drivers of vehicles with license plates having an odd number as the last digit were allowed to purchase gasoline for their cars only on odd-numbered days of the month, while drivers of vehicles with even-numbered license plates were allowed to purchase fuel only on even-numbered days. People rented their license plates for the day if they had gas and others didn’t.

People slept in their cars overnight to be in the front of the line. You couldn’t buy a locking gas cap, gas can, or siphon device to save your ass. People punched holes in your gas tank with a chisel to get around the locking cap. Fist fights broke out at the pump, tempers flared, guns were drawn; people got hurt.

There was some black market gasoline hoarding. Some people hoarded it for their own use. You would often see two or more 5 gallon Jerry-cans strapped to the bumper of cars or in the backseat. The “approved only” gas containers grew out of this time, as people would fill up milk jugs or glass bottles at the pump. It wasn’t about the price of gas; it was about getting any at all.

On the world scale, there is a degree of hoarding as well. It is called the Strategic Petroleum Reserve (SPR). This time around, I think it could have a far larger impact, as it will be a new source of global demand.

The U.S. SPR is the largest stockpile of government-owned emergency crude oil in the world (700 million barrels). The oil is stored in huge underground salt caverns along the coastline of Texas and Louisiana. Established in the aftermath of the 70’s oil embargo, the SPR provides the President with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy. It also allows the United States to meet part of its International Energy Agency obligation to maintain emergency oil stocks, and it provides a national defense fuel reserve.

Developed nations across the globe started to build their own strategic oil reserves in response to the oil crisis in the 1970s. Currently, oil reserves of the United States, Japan and Germany can meet these countries' oil demands for 158, 161 and 127 days, respectively. As oil prices continue to skyrocket, oil-guzzling developed nations are taking measures to increase their strategic oil storage.

China is building a national strategic petroleum reserve that will consist of three tank farms, co-located with major refineries, and will be built and filled in phases, with the first phase using its own oil. According to Zhenhai Strategic Oil Reserve Administration in east China's Zhejiang Province, 16 oil-tank facilities will be completed by the end of August 2005 and oil storage is expected to start by year-end.

Construction on four more oil reserve bases will be finished by the end of 2008. The strategic oil reserve will provide the equivalent of the country’s 30-day oil imports.

India is planning to set up a strategic petroleum reserve equal to 15 days of the country's oil consumption.

And who knows how much "speculator" hoarding we will see as oil prices head for the moon.

If gas rationing comes to your town, be prepared for the worst; it can and will get ugly.

Monday, August 22, 2005

The Near Term Economic Effects of Peak Oil

If you don’t know it by now, peak oil means the end of cheap, readily available oil. This price increase will flow through our economy like a pandemic disease, causing higher commodity prices, economic decline and rising unemployment. But not just commodities; there will be inflation in the price of everything. We are seeing it already.

The most dependent countries on oil will be the most affected, and the least affluent countries will bear the first wave of economic onslaught as they will be the least able to afford the higher prices. Affluent countries like the US will have conservation and energy efficiency to initially fall back upon, followed by a decline in the standard of living. The poorer countries will just do without, having no huge gluttonous fat belly to sustain them for the harsh winter of oil decline.

Foreign aid and subsidies will fall to the wayside, and there will arise conflict between the natives and immigrants, especially the illegal ones. Homes and jobs will be lost, spurring competition for the remaining occupations that manage to survive the downsizing. As unemployment rises, there will be a migration into the military for work to support families. Families will double up in one home, while others will take in boarders to help cover expenses. Marginal business will fail and the rising dissent amongst the people will be squashed.

I have been trying to think of what I would cut out of my budget when it gets tight. I think most people will pay whatever price gas is, until they no longer can. The more affluent, and those more forward-thinking will buy more efficient vehicles. Maybe, like in the phrasing of James Howard Kunstler, there will be a “decanting” of the suburban population back into the city as the 150 mile per day commutes become foolish and totally unaffordable.

How chaotic will this transformation get? And remember, we are not talking about shortages yet, just higher prices. In the short term, I think we will see more rage at the pump. They sure fought in the gas lines I was in during the gas crisis of the 1970’s. I read the other day that a gas station owner had been run over and killed for $52.00 worth of gas in a “drive-away” incident.

The end of cheap fossil fuels is going to have some dire repercussions. And let’s hope we don’t have a Murphy’s Law event right away to start a domino effect that leads to utter chaos.

Sunday, August 21, 2005

Conservation

To most people, conservation means using less of something. But in the larger picture, it means the care and protection, or management of natural resources. Sometimes, this means not using them at all.

In the post-peak oil world, we will have to explore the options before us in this finite world, from increasing the efficiency of energy use, to learning to do with less, and perhaps even finding our true place in the cosmos. Conservation and improving energy efficiency may be the most cost-effective thing that we can do in the short term. How much you will actually benefit from this depends on how you approach it. Every opportunity for saving energy requires significant effort if it is going to work and endure the test of time.

There is a difference between man and all other animals—he is the only animal whose desires increase as they are fed; the only animal that is never satisfied. The wants of every other living thing are uniform and fixed. Of what nature offers them, be it ever so abundant, all living things, save man, take only enough to supply wants that are definite and fixed. The only use they can make of additional supplies or additional opportunities is to multiply.

But not so with man. No sooner are his animal wants satisfied than new ones arise. The beast never wants more; but the man has but set his foot on the first step of an infinite progression—a progression upon which the beast never enters. While the animal can but multiply; the man will develop. We must learn to develop within the boundaries of our ecosystem and the renewable energy resources that avail us. This will require a paradigm shift in our world view that is consistent with the parameters of this sustainable world.

In terms of anthropology, we need to explore our en masse experience; why have we journeyed down this path in particular, and what will we make of this journey in hindsight, and where will it take us from here. We must also concern ourselves with the awareness that we are inextricably woven into the web of life. Conservation-based thinking then entails a rich understanding of ourselves and our functioning within the grandness or our world system—not in it or of it, but with it. In other words, we will be required to revisit every single one of our assumptions about who we are, what we do and why we do it. We must think of ourselves in intimate detail and we must think of what the world thinks of us or how we would look to the “larger system.”

In essence, to conserve is to buy the time we require to make the transitions needed to continue the "human project" as per the Earth's ecological linmits, and then embrace the subsequent conservation values and ethics into the future for all time.

"Conservation is the key to self-sufficiency, and self-sufficiency it is the key to survival."
What’s Up at the Pump?
By Aaron Dunlap

Aug 16, 2005

Notice anything unusual at the gas station recently?

If you said yes, you’re not alone.

Across the nation & around the world, oil & gasoline have reached record high prices… and there’s no end in sight. Last year traders scoffed at predictions of $50 per barrel oil, until the price hit $50. At $66 per barrel today, last years prices have already become a fond memory.

I saw a report recently, which pointed to a gas station selling gas at $1.99 per gallon. How could this lone vendor be selling gas so cheap? The answer is a sign of the times.

Their pumps would only go up to $1.99.

So what is happening to oil prices?

Why so expensive?

Demand has grown to meet the available supply. Strong growth in consumption of oil, especially in the red-hot Chinese market, combined with anemic discoveries of new oil fields in recent years, has fundamentally altered the world oil markets.

As any first-year economics student can tell you, less supply & strong demand… means higher prices. These higher prices, in turn, provide a financial incentive for companies to find new sources of this highly profitable commodity. And for the last 100 years or so this has been the case. But what if something is different this time around? What happens if we simply can’t find enough new oil deposits to meet our growing demand? Just how high can oil go?

Welcome to peak oil.

Peak Oil is a term coined by geologist Colin Campbell, which describes the midpoint of conventional hydrocarbon production. Peak oil theory states: that any finite resource, (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output as seen in the graph. In addition, the theory says that oil production, follows discovery of oil. We can only produce oil that we have found of course.

Oil production typically follows a bell shaped curve when charted on a graph, with the peak of production occurring when approximately half of the oil has been extracted. With some exceptions, this holds true for a single well, a whole field, an entire region, and presumably the world, after which oil becomes more difficult and expensive to extract as a field ages past the mid-point of its life.


In the US for example, oil production grew steadily until 1970 and declined thereafter, regardless of market price or improved technologies.

In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US oil production would occur in the late 1960's.
Although derided by most in the industry he was correct. He was the first to assert that oil discovery, and therefore production, would follow a bell shaped curve over its life. After his success in forecasting the US peak, this analysis became known as the Hubbert's Peak.
· The amount of oil discovered in the US has dropped since the late 1930s.
· 40 years later, US oil production had peaked, and has fallen ever since.
World discovery of oil peaked in the 1960s, and has declined since then. If the 40-year cycle seen in the US holds true for world oil production, that puts global peak oil production, right about now; after which oil becomes less available, and more expensive.
Campbell applies Hubbert's Peak to world oil production and estimates that approximately half of all oil that will be recovered has been recovered, and oil production may reach a peak in the near future, or perhaps already has.

Peak Oil is about the halfway point…


Almost nobody will argue that a peak in oil production won’t happen, they argue over when. There are a wide range of estimates for when peak oil will occur, from governments, companies & universities. The US Geological Survey estimates around 2030, while at least one Princeton professor contends we have already passed the peak. These estimates are only as good as the data they use of course, and that data is surprisingly difficult to come by, and of questionable accuracy. But before you dismiss Peak Oil as decades away, you might want to hear what some of these experts are saying.

I’m no Petro-Geologist by any means, and a born skeptic. It can be easy to dismiss some theories. But when noted geologists like Colin Campbell & investment bankers like Matt Simmons, oil insiders like T. Boone Pickens take this seriously… I’m all ears.

Dr. Richard Smalley, Director of Rice University's Nano Technology Lab and winner of the Nobel Prize in chemistry, thinks peak oil is very real. Lee Raymond former Chairman of Exxon thinks it's real. So does a report prepared for the US Dept of Energy. Representative Bartlett of Maryland thinks so to.


Still a skeptic?


Independent study of global oil production with the best data available indicates Peak Oil is as soon as 2007 according to the Association for the Study of Peak Oil. (peakoil.net)

Making matters worse, is the very real possibility that one or more OPEC members have dramatically overstated its actual oil reserves; pushing the Peak Oil date even closer.

And perhaps the most chilling observation of all comes from Professor Ken Deffeyes of Princeton. That there is a point in time, preceding peak oil, where we lose the ability to steer clear of the most potent consequences of midpoint oil production; and that this happens long before the actual peak. It takes time to make real changes.

A sobering thought.

The jury is still out to be sure, and much heated debate about oil & oil alternatives continue. (peakoil.com) But with a growing list of credible sources weighing in, and pump prices skyrocketing, it’s becoming difficult to ignore the possibility that oil will become more & more expensive going forward, creating enormous challenges & opportunities for us. Fortunes have been made and squandered over less; nations formed & toppled.

The smart money is long on oil.

Fighting

We fight.

Invade, kill, seize & govern... repeat as necessary.

Human history is a "how to" guide for seeking, obtaining & maintaining power. And since raw physical aggression is the supreme authority from which all other authority derives, it's not difficult to image why war is our defining attribute. Competition is at the root of almost every relationship you have ever had. Fathers & sons do it; Siblings do it too; You do it in work & in play. Sean Connery has a line in the movie "The Rock" with Nick Cage... "Losers are always whining about their best. Winners go home and fuck the prom queen"

As offensive as that statement is, it is at the heart of every important social institution the world over.

To the victor go the spoils.

We define ourselves in this context. When you say you are good at something, what you mean is in the context of people who do something, you are better at it than many others... You're a winner.

No rational person would deny the endemic quality of competition to human nature... it's what we do.

Fast-forward to hydrocarbon depletion.

As appealing as the notion that mankind will transcend it's violent history & nature seems, the bitter reality is we fight about everything. As my father is fond of saying, "What you are doing today, is most likely what you will be doing tomorrow."

Makes sense. (Thanks dad)

We sit today enjoying the fantastic wealth created by hydrocarbon power... & still we fight.

If peak oil leads to less available oil, (which I believe it will), competition for these dwindling resources heats up as the stakes get higher. The game is afoot...

And as in any game, you must choose sides, or a side will be chosen for you. There are no spectators in the game of life & death... only winners & losers. Fence-sitting is simply not an option.

Hannibal ad portas

Wednesday, August 17, 2005

The Collapse of Ghawar

Not until the monstrous Saudi oil field of Ghawar collapses will there be an investment in older and smaller oil fields to increase production.

Why? Because there cannot be any chance of the price of a barrel of oil collapsing. It has to remain high. The industry has learned this lesson all too well.

The markets’ ability to anticipate this collapse is limited by the lack of transparency. No one really knows how much oil is still recoverable. Saudi Arabia keeps these necessary numbers under wraps. If the market doesn't anticipate the peak, the price signals needed to stimulate research and development may not arrive until after it is too late. And if the rate of Ghawar’s decline in production is high, that may be a moot concern.

Anticipating the peak is complicated further by the fact that multinational oil companies have relatively few places where they can increase production significantly — many OPEC nations forbid foreign investment in production. Non-conventional sources, like oil shale and tar sands, have their own production and scalability problems. The reserves may be enormous, but the ability to produce at conventional rates of production is a fantasy, not to mention the increased costs, both in dollars and impact on the environment—especially global warming.

Cheap, readily available fossil fuels, (primarily oil) means goods can be imported and exported at little extra cost while less than 2% of the work force feeds those that produce the goods and services. We can scurry to and fro with great mobility and freedom in our AC cooled SUV’s, shuttling soccer teams to practice and old couches to the dump.

These energy sources are rapidly becoming ever more expensive and less and less available. The planning for the peaking of world production should have been started the day we realized the US had peaked in oil production in the 1970’s. It should have been a major wakeup call, but we just hit the snooze button for 35 years.

Foresight does not rule our thinking, and the lessons from hindsight are seldom recalled. Until it becomes a crisis, we just seem to fail to act.

Tuesday, August 16, 2005

Demand Destruction? Not Yet…

Demand destruction is a modern way of saying catastrophic recessions and shortages.

Most economists pull the 1970’s oil crisis out as an example of how rising prices eventually crimp demand and send prices lower. But let me give you a few reasons why we are not seeing a drop in oil consumption this time around—not yet, anyway:

• First off, China’s 9.5% annual growth rate with India trying to emulate…need I say more? Well, I will, though. If there were ever a government that should have been able to plan for traffic and transportation, it should be China with its legacy of central planning and its ability to execute massive projects without a lot of guff from the common people. But the plan for Shanghai traffic — plenty of new highways and an extensive new subway system — didn't work. The plan was predicated on reaching a threshold of 2 million cars by 2020; that level was reached last fall. The Chinese equate owning a car with "personal freedom, prestige and success." Go figure. Guess they watched too many Bonanza episodes.

• Second, easy money from the refi-ATM; tapping into the perceived wealth of “inflated” real estate values world-wide.

• Third, the massive increase in the use of credit cards for gas purchases. Seems less painful to use the plastic.

• Last and not least, we have become even more dependent upon the private automobile, especially the sport utility vehicles (SUV’s); 95 percent of personal vehicle miles traveled in the United States (2.6 trillion miles) are now done in personal motor vehicles, as opposed to public transportation of all types. SUV’s were designed and built to meet this “addiction.”

And frankly, that’s the real crux of the matter…we are addicted and we can’t get the monkey off our back...nor do we want to. The value of auto-mobility can be summed up in one sentence: Cars allow people to go wherever they want whenever they want. If you can’t get around at will, life becomes limited—or so we believe. Now, China has had a “taste.”

How high will oil and gas have to go before we see people checking into rehab centers to kick the monkey?

“When you need the gas, you need it.”

Monday, August 15, 2005

The Nonsensical Ramblings of a Cornucopian

The debate over peak oil is increasing. A line is being drawn in the sand between those who see the tip of the iceberg, and those you have looked under the water. Here are one man’s ramblings from a recent debate I had. It is not edited, although I paraphrased the first paragraph, and much of what follows is out of context; however, the statements are so profound as to not matter, in my opinion. I’ll let you be the judge of that.

I write this not to bash one man’s views, but to point out just how much some are in denial about the issue and to what lengths they will go, and what straws they will grasp, just to insist it just ain’t so. We have our work cut out for us to persuade the masses to accept a much needed change in our world view, not just a change in energy policy.

So, without further ado:

“Peak oil is merely a possible point where an imbalance takes place between demand and lack of supply. In a nutshell, the problem has already been identified as too much road and air transport, as well as, plastic consumption, and the lack of a techno-fix at the time of writing on the demand or supply side coupled with the downstream effect of that.

It is a fact that several new energy sources have been invented by the use of new devices since 1750. Tomorrow one *could* be invented to supply all our needs for thousands of years simply by figuring out a way to transfer energy by use of resources. You stated oil is a primary energy source, when quite clearly even today it’s not. It was not important until 1950. Only the very rich and military had a few planes, there was hardly any cars about. I've told already, up until then it was a railway age, oil meant nothing.

There is also no evidence that *one* commodity, oil, or industrialized society has increased population more that it would have done *overall*. At present the earth could support 67 billion people on a minimal diet if farmers used the most advanced agricultural methods. There is no evidence that through substitution, public education and planning that the population cannot be sustained for the foreseeable future. Efficiency should offset price rises for the next 20 years or so.

No, fossil fuels did not create most of the infrastructure in many parts of the world! No, growth does not require production; money is also generated from services. Energy does not = economic growth. Some energy = economic growth. The reason I said some energy, because you need a certain amount. However energy = growth would imply it's proportional and it's not. There's plenty of economists that don't agree energy = growth. In fact, if anything, too much energy is less productivity and less growth. This is a very US idea energy = growth.

People breed when they see the need or out of sheer stupidity. It is incorrect to say oil created a population boom on its own and will shrink back as it declines. The Green Revolution was just a way to reduce costs and staffing, very similar to the actions of any other industry sector to stay competitive.

If oil wasn't available, we would be still living in a steam engine world, very probably with a similar level of industrialization and population we have now. ”

Author’s note:

People should start asking themselves how they can construct localized economies out of the rubble.