The Ratchet Effect

August 30, 2004
The past week's events demonstrate the persistent power of delusional thinking in a nation determined to be misinformed and misled. Oil prices zoomed up near $50 a barrel two weeks ago. When they fell back to about $43 last week, the news media heaved a great sigh of relief, the stock market posted a winning week, and the public concluded that the previous rise in prices was just another hiccup the world will get over and forget. No problemo.

Over the weekend, in two seperate incidents, Iraqi insurgents blew up a total of eight oil pipelines in the region close to the Persian Gulf export terminals, which account for 1.85 million barrels a day, or about three percent of global daily demand. (These incidents were barely reported in the mainstream media, certainly not on Page One of the New York Times.)

This is going to send the price-per-barrel ratcheting back up toward $50 and perhaps beyond. The ratcheting effect will be the recurrent pattern. The price will tick up five clicks, fall back three clicks, tick back up five clicks, and so on, and this is how it will go barring a truly significant event such as an insurrection against the house of al Saud

A great deal of oil is being produced in the world today. That is the inherent nature of the global production peak. But enormous as the production is, it is not keeping up with world demand. There is no spare capacity. There aren't any more swing producers who can, at the nod of a head and turn of a valve, flood the world market with product to drive down the price.

Then, of course, once the world passes peak, and we proceed down the depletion arc where demand will always exceed capacity (while capacity steadily falls 2 - 5 percent a year), we will witness the destabilization of all the major systems that support modern economies -- a process that will be both preceded and attended by massive sociopolitical turbulence.

If the candidates for president even understand this, they must understand too that our way-of-life here in America will have to change whether Americans like it or not. The single most important thing either George Bush or John Kerry can do is prepare the American public for these unavoidable changes. That is leadership.

I felt deep pangs of sorrow this morning listening to NPR play recordings of Jimmy Carter's 1980 acceptance speech, the year he ran against Ronald Reagan and lost. Carter was a deeply humane and brave president who didn't shrink from telling the public the truth about our fundamental predicament in the world -- which has not changed in a quarter century. We have invested our national wealth and our national will in an energy-gluttonous infrastructure for daily life that has no future. That future is now here.

Under Carter's brief single term, real changes were made in federal energy policy, including conservation measures that would be intolerable to the present generation of Americans -- e.g. the 55mph speed limit. When Reagan came in, he took the solar collectors off the White House roof that Carter had installed and rewrote federal energy rules so that efforts like small-scale hydroelectric generation no longer paid.

Whoever is elected President this year will be swept away on a torrent of change coming in the next four years. Personalities will hardly matter. Events will be in the driver's seat. The only thing the president will be able to do is tell the public the truth, and if he has the guts to do it, they will hate him for it.

Comments

[lindenen]

You may not have heard but Mexico claims it's found large oil deposits that would boost its output to the level of Saudi Arabia.

http://www.americanthinker.com/articles.php?article_id=3799

[aj]

Oh please! Thomas Lifson (publisher of American Thinker) is an old Harvard Business School buddy of W's, and is pretty much a low-level Republican surrogate who pops up on sites like Frontpagemag to issue forth boosterist statements/apologies for this administration's miserable failures. The fact that the knuckle-draggers on freerepublic.com quote him is proof enough for me that whatever Mr. Lifson has to say should be taken with Dead Sea levels of salt, if not taken out and given a thorough drubbing. The man all but prostrates himself and flogs himself over any supposed offense to the Gods in Houston, to whom we must be eternally grateful for our insipid National Automobile Slum.

Mexico discovers some offshore oil - wonderful, but are these claims of 'saudi arabian' levels of reserves provable? Especially given the now-revealed nature of the industry to overstate their reserves? And boosting 'output' to the level of Saudi Arabia is one thing, but how long that will last is another thing entirely..

How many decades will pass before Mexico can bring that on-line in any significant capacity? What kind of oil is it -- sweet light crude or sour? How easy is it to get to?

1000 dead so far, 1100 wounded (read: blinded, amputated, brain damaged) in the last month alone.

[chrispy]

What we desperately don't need now is a new Saudi-size discovery. The sad irony is that we are facing twin disasters: Oil depletion and global warming, which are co-arising.(Consider the very unusual and destructive Hurricane Ivan, now approaching oil rigs in the Gulf.) Further, discovery of a new giant field will only postpone and greatly magnify the eventual and unavoidable crash.