White Noise Insanity

As the year draws to a close, it is a good time to look back at what has happened and what clues we can discern about 2007.

The most notable event affecting the advent of peak oil during 2006 was, most likely, the great summer price spike. Oil started the year around $62 a barrel, steadily increased to just below $80 and then fell to close out the year about where it started. Now there are a number of observations that can be made about this spike.

First it drove average US gasoline prices from $2.21 in late December 2005 to a high of over $3.00 per gallon during the summer. This was significant in that it caught a lot of people’s attention for the first time that there just might be a problem out there. At the height of the spike, Congressmen were running around like rabbits proposing new laws and making pious speeches about how they were doing something about gasoline prices. Although the US economy as a whole seems to have held up pretty well under $3 gasoline, Detroit took a hard hit. Sales of low-mileage vehicles that had been the bread and butter of the US auto industry plunged, tens of thousands of auto workers lost their jobs, and dozens of factories closed. By year’s end Toyota was poised to become the world’s largest automotive manufacturer.

From the public’s point of view and unfortunately most of the media’s, peak oil seems to be only about gasoline prices. Above $3 a gallon there is concern. Let gasoline sink back towards $2 and we are back in Camelot.

The 2006 price spike is widely perceived as being caused by an excess of speculation. Hedge fund managers read forecasts of a bang-up hurricane season in the offing and that, coupled with greater-than-normal turmoil in the Middle East, led them to speculate wildly in oil futures. When the Middle East turmoil subsided a bit and the hurricanes failed to appear as advertised, oil prices collapsed. All this of course is perfectly true, but is only part of the story.

Largely unnoticed was the underlying supply and demand situation, and a new factor: oil affordability. The final returns won’t be in for several months, but it is beginning to look as if world oil production stayed about the same or increased insignificantly during 2006. Consumption in China, Russia, and the Gulf oil states increased while staying about the same in the industrialized states of North America, Europe and Asia.

With flat production and steady or increasing consumption in those countries that publish detailed reports, something had to give or else we would be seeing considerably higher oil prices. The give came in the underdeveloped world where $20 or $30 oil was affordable for generating electricity, running pumps, and for cooking, but $60 or $70 per barrel oil was not. Again, the returns are not in yet, but anecdotal evidence is accumulating that many parts of Africa, Central America, and Asia are starting to shut down. For these peoples, the oil age, such as it was, is already over. There is little to look forward to for a long, long time.

Nearly every aspect of the various Middle Eastern political conflicts deteriorated further during 2006. From the peak oil perspective 1.5 million barrels a day of Iraqi oil exports appear to be the most precarious, but what ever falls out of Iran’s nuclear ambitions are a close second. A general conflagration occasioned by the collapse of the Iraqi government or renewed Arab-Israeli fighting are well with in the realm of possibility for the near future. The insurgency in Nigeria is picking up steam and there will be either a presidential election or civil war there next year. The prospects for a large percentage of the world’s petroleum exports sure did not get any better in 2006.

When the history of the year is written, resurgent Russian nationalism is sure to have prominent place. During the year, Moscow made good on its goal to bring exploitation of Russian oil by the international oil companies back under its control. President Putin clearly sees the opportunity to regain superpower status by controlling a significant share of pipeline-supplied natural gas on the Eurasia landmass. It seems likely a reduced role for the international oil companies can only lead to reduced investment and delays in the exploitation of Russian oil and gas deposits.

As yet no major developments in the world’s oil depletion story have emerged in 2006. Production from numerous major oil deposits – the North Sea, Mexico’s Cantarell, Alaska’s Prudhoe Bay, Kuwait’s Burgan – continues to decline. Many analysts harbor suspicions that Saudi production has or will shortly go into decline. The situation is obscured, perhaps on purpose, by OPEC production cuts that have “required” the Saudi’s to make reductions in their oil production. It may take many years to sort out their actual production capacity.

So where do all the developments of 2006 leave us as regards to peak oil? Maybe further than is currently apparent. One thing is for certain, the earth has 30 billion barrels less cheap, easy-to-produce crude at its disposal than it did 12 months ago because we burned it up. World oil production currently is giving every indication of at least plateauing for a while, perhaps forever. Many new production projects are being delayed as the cost of exploration and drilling new wells increases to unheard of heights. Oil availability for the rich nations still appears adequate because the poor are shutting down. But this is a one-time phenomenon. Soon, increasing demand from the rich and rapidly developing nations will cause them to bid against each other for stagnant or decreasing production.

Then the troubles will begin in earnest.

Yet some fooles will continue to come in here and spew idiotic false statements even though the reality is closing in around them. 2006 was a good year for energy prices and availability to Most Americans. However at some time, whether in 2007 or 2008 or maybe 2010 the amount the industrialized world demands for it's transportation, electric generation stations, chemical, pharmaceutical and fertilizer industries will outstrip the ability of the producing nations to pump fast enough. At that moment the entire western capitalistic world is going to change. No longer will we be able to take a drive in the country because gas is too expensive, and is only to be used if absolutely necessary. The cost of personal transportation will go up rapidly. Mass transit, especially that which can be provided by electricity from coal and hydro power will become a staple of existence. Too bad the repugnant neo-cons have tried hard to destroy Amtrak and underfund the mass transit in the United States. The Europeans are light years ahead of us there. In the 1970's I could travel across Germany by using the Bus lines to get into the city, the trams to get to the train station, and intercity rail to travel from town to town. Here with no investment for development and the idiotic demand that the future of mass transit be economically profitable it is been ignored for decades, and NOW when it could lighten our reliance on more and more oil and gas, it does NOT exist.

There is no replacement for the hydrocarbon molecules which our chemical pharmaceutical and fertilizer industries are built on. As oil es increase, the costs these industries will go up and get passed on to the consumer. Drug prices already astronomical will simply become too expensive for the vast majority of citizens or their insurance companies to afford. Plastics upon which the modern post WW2 world is built on will become more scarce and expensive, with the associated products which are produced from plastic becoming more costly. As prices escalate in most areas, jobs will be lost as companies can no longer make enough money with ever falling sales of more expensive products. People will lose better jobs as companies which have not already been outsourced can no longer compete in the harsh environment or rising material energy and transportation costs.

One other area which will be severely affected, but has little good options available to it it our food production industrial farms. they will have rising costs for their machinery, energy demands and fertilizer costs, and as each becomes more scarce, it will become much harder and harder to produce enough food and get it to the markets at low enough prices to feed the ever enlarging poor people this country will have, let alone feed the ever enlarging poor nations and people around the world.

Countries will go to war for shrinking energy resources, and as those areas are destabilized and the infrastructures damaged in these wars (like they have been in Iraq as a result of that illegal invasion), the energy resources will become harder to produce and get to the western countries.

With every problem compounding each other problem the situation of the middle class life style the vast majority of American people are used to will disappear replaced by the struggle to survive. The US and every other modern industrialized nations will be reduced to a small but very wealthy class of owners who still can afford the good life and the rest of us struggling to survive, with no more middle class jobs and no health care with food costing much more as a part of ones earnings that is did in 2006.

Even though 2006 was a struggle for a good part of the people of this country, the future is not going to get much better, but much worse at some point. Jimmy Carter tried in vain to warn us in the late 1970's after the first energy shocks, but the repugnant fooles like Ronald Reagan ignored the bad news, spun the truth of the situation and set the US on the course where not only are we losing far to much in energy today both in lives lost in a war to gain control of ther oil in the middle east. when we could have put our great industrial power and intellectual capacity to solve the problem when it was noticed, Reagan and the Bush's denied the problem and aided with oil finds both in Alaska and Mexico were able to put off the day of reckoning. this time that is not an option and the pain and costs of finding the replacements for oil are much higher, and more urgent today then they were back then..this time no amount of repugnant spin will solve the problem, and we are so far in debt as a nation because of the illogical economic policies started by Reagan where he borrowed massive amounts of money to fund the government but had NO plan to repay that debt has financially tied the government hands at the same time the globalists have out sources a large part of out industrial base where the solutions could have come from. Thus we now are facing almost some of the very same quandaries that Jimmy Carter spoke to us about in 1980, but with far less money available for research and development and far less oil to tide us by until a solution is found, thanks Reagan, Bush41 and Bush43 for NOTHING, because that is really what you three have given this nation and it's future generations.

As the article mentions, LARGE oil field finds of the past are starting to decline, but nothing near their size is being found to replace them, much smaller fields and oil that used to be too expensive is being exploited, but it will never replace an Burgan in Kuwait let alone Ghawar in Saudi Arabia if that field has reached peak and is in decline. There is nothing left on this planet to replace these fields when they begin to play out as the US oil production has since 1970 when the US production reached it's peak. Today we as a nation produce 1,000,000 barrels less oil each day from our domestic fields than we did in 1980. We imported far less than 50% of our needs in 1980, but we import that today, and that percentage will continue to grow each year. we still get the vast majority of our oil from the US Canada, Mexico and Venezuela today, but with Mexico's production falling and Alaska's Prudhoe Bay also in decline we will eventually have to go to the middle east for oil, which is why Dick Cheney based his secret energy meetings in 2001 on maps of the Iraqi oil fields and the PNAC plan to topple Saddam and emplace a leadership in that government to allow the US companies to develop those fields for OUR benefit. From the perspective of energy and economic terms 2006 was not a very good year but far from a bad year, however one of these years in the near future will make 2006 seem like the Golden Age of our society.

Enjoy the "good times" while they last.