Peak Universe

October 22, 2007
    The big Peak Oil conference of the year took place in Houston last week – but before we get to the substance of that, a few words about where we were.  It is hard to imagine a more horrifying urban construct than this anti-city in the malarial swamps just off the Gulf of Mexico.  And it is hard to conceive of a more desolate and depressing urban district, even of such an anti-city, than the utter wasteland around Houston’s convention center.

     Luckily, we didn’t have to enter the convention center itself across the street -- a baleful megastructure the size of three aircraft carriers, adorned with massive air-conditioning ducts to counter Houston’s gym-sock-like climate.  And when I say “street” you understand we are talking about four or six-laners, with no curbside parking, which is the norm for this town. The effect is that every street behaves like an extension of the freeway at the expense of pedestrians – but pedestrians have been eliminated anyway because in ninety percent of Houston’s so-called downtown of glass towers there are no shops or restaurants at the ground-floor level, only blank walls, air-conditioning vents, parking ramps, and landscaping fantasias.  We were informed that in parts of downtown there existed a network of air-conditioned underground corridors with shopping, but that everything in it closed at 7 p.m. when the last office workers straggled home.  Anyway, none of it extended as far as the convention center.  The rest of district was devoted to surface parking.

     It has often been stated that Houston’s ghastly development pattern comes from having no official zoning laws.  But all it really proves is that you can achieve the same miserable results of typical American boneheaded zoning with no zoning – as long as your don’t give a shit how people feel in their daily environments.

     The convention center itself, though, demonstrated something beyond even that degree of thoughtlessness.  Its pharaonic hugeness was a metaphor for the fatal grandiosity at the heart of contemporary life in American today, the utter disregard for a scale of human activity consistent with what the planet has to offer within its ecological limits – and of course the oil issue was at the center of that story.

     Oh, one final thing about Houston life per se.  Judging by the local items in the daily newspaper, the so-called city enjoys a level of mayhem that makes Baghdad look like a Sussex garden party.  Sample headlines: “10 Charged in Burglary Spree,”  “Pit Bull Shot Dead After Pony Attack,”  “Jury Gives Man Life in Carjacking Death,” “Two Killed in Home Invasion.” One particularly insane story told of a man who shot and stabbed a visiting friend who “dissed” his dog.  We didn’t see any of that action around the convention center's Hilton Americas, where the ASPO conference actually took place, but the news didn’t exactly make you want to venture out beyond the lobby.  Anyway, you couldn’t buy a stick of gum within a mile walk of the place, and the thought of traipsing past all those surface parking lots in 90-degree heat was like an invitation to reenact the Bataan Death March.

      It was a sublime coincidence of fate and history that throughout the ASPO conference, the price of a barrel of oil surged up through the high eighty-dollars range and briefly touched $90-a-barrel on Friday (just as the stock market was tanking by 360-odd points).  It was also interesting that as all this action was unfolding, MSNBC was running an interview with Senator Larry Craig (R. Idaho), lately accused of soliciting sex from a policeman in an airport toilet.  Apparently what the nation really wants to know about is the Senator’s self-described “wide stance” in bathroom technique.  Perhaps when Craig is finally forced from his senate seat, he can get a job as a “personal toilet coach,” and become the pioneer in a whole new realm of self-improvement science, teaching others how to assume the manly “wide stance” and become more effective leaders.

      So, while the price of oil ratcheted up hour by hour, the ASPO conference members heard from an impressive range of experts who have been leading the public conversation on the Peak Oil story – with no help from the mainstream media or the political sector.  Among them were Robert Hirsch, co-author of the now-famous 2005 Hirsch Report, commissioned by the US Department of Energy, which, much to the consternation of its sponsor, first told the nation in no uncertain terms that it was heading for a catastrophic set of disruptions in “normal” American life if we heedlessly continued energy business-as-usual.  Hirsch went a little further now, two years on, than he had in his famous report, predicting a future of “oil export withholding,” panicked markets, and allocation disturbances that would make the 1973 OPEC embargo look like a golden age.

      Matt Simmons, the leading investment banker to the oil industry, who has worked tirelessly to lift public awareness of Peak Oil, also raised the specter of shortages, telling the audience that market allocation problems in the near future would almost certainly induce “hoarding behavior” among the public that would cripple the economy, lead to enforced rationing, and shock the nation. Simmons compared the current public mood over energy issues to a “fog of war.”  He also repeated his oft-stated opinion that the drilling rigs and other equipment used around the world to pump oil out of the ground are so uniformly old and decrepit that they pose a problem every bit as dire as peak oil itself.  In the meantime, he said, to offset climbing prices, the developed nations have lately dipped so deeply into their accumulated stocks of crude and “refined product” that some countries may breach what is called their “minimum operating levels.”  Offstage, he told me, “We’re too preoccupied trying to figure out the exact date of the peak.  Meanwhile, we’ll drain the gasoline pool and it will be gone forever.”

      The other most significant contribution came from Texas geologist Jeffrey Brown who presented a full-blown version of his theory that world export rates from the countries with oil to sell are liable to decline so much more sharply than their actual production decline rates that the world would be thrust into an oil export crisis within the next five years – and that this export crisis would turn out to be the defining condition of the Peak Oil story.

      There were plenty of other fruitful contributions on subjects ranging from the future of the airline industry to reviving passenger rail service, to the question of nuclear power.  And there was one real clunker presentation by a shill from the Toyota corporation, designed to blow green smoke up the audience’s ass about the future of happy motoring (Toyota’s products will save it from Peak Oil).
      For coverage of the particulars, visit TheOilDrum.com, the nation's best energy discussion website.

      If there were reporters from the mainstream media present at this event, I didn’t run into of them.  They are apparently uninterested in the fate of industrial economies, at least as long as Senator Larry Craig is out there on the frontiers of toilet coaching science, and Britney Spears is still sparring with K-Fed, and Diddy is beating people up in nightclubs, and people are murdering their friends for dissing their dogs.

Comments

[Johnny Rico]

If you don't believe me, try this little experiment. The next time you see one of those 12,000 gallon tankers making a delivery to a gas station, stop and introduce yourself to the driver.

Tell them you are writing a book about gasoline. Ask some basic questions like how many gallons it holds, how many deliveries a day they make, how many types of gas can one tanker hold. Where the local supply depot is. Stuff like that.

They might think you are a terrorist, but usually they are psyched that somebody is interested in their job.

Then ask them if they know what peak oil is? Ask them how long before they expect to be driving around with $150,000 loads and no police escort.

[scott]

Whenever I talk to other drivers about PO, they say, "we've got plenty of oil, there's thousands of wells capped off in Texas"

[scott]

If I've heard it oce, Ive heard it 20 ties fro ifferent drivers. It is very suspicious because I get repeats of 'My dad was in the oil business..."

I'm thinking since I get a lot of "canned" responses there must be a conspiracy of sorts.

[scott]

I think the batteries in my wireless keyboard are succombing to entropy.

[Johnny Rico]

Figures the one person I wrote that to ended up being a driver :)

[scott]

When I say, "those wells were capped off because they were no longer profitable because all of the easy stuff had been extracted and they were not competetive with the big OPEC fields."

They agree by saying, "yeah, we're using their oil 'cause it's cheaper and we can save ours fer when they run out."

[Johnny Rico Johnny Rico]

"What I want to know is what is going to happen if the Kurds kick Turkey’s ass."

Thanksgiving.

[scott]

Thats my problem with CERA, they promulgate the notion that "there's plenty of oil" If you view the oil situation through that lens and that lens only you've reduced every thing to semantics and a false interpretation of reality.

[cornell]

Thanks very much for the summary, Jim. I'm heartbroken this country seems unable to generate the interest in possibly one of the biggest stories of our species. Biased media, a one party system ("business party," as Ralph Nader puts it), and an unwillingness to face real problems is embarrassing. And yes, I'm part of the problem: I drive a car (only one, at least), fly in jets, etc.

[Johnny Rico]

Now does the fact that we as a nation have not doing anything to prepare for peak oil and actually have been increasing our consumption of everything to insane levels mean that if terminal geologic decline sets it, it will produce collapse that much faster and violently?

No, not necessarily. For one thing, things don’t actually change overnight. I believe there’s a good chance that gasoline could rise to $10 in the next ten years. Maybe in the next three. Who knows. But it won’t go from $3 to $10. It wil go from $3 to $4 and so on. At every stage there is a segment of the population that will be forced to change its behaviour.

If you can’t afford a gas you take the bus. If there is no bus you move. If you don’t do these things then I would imagine you starve. Maybe you start sleeping in your office. Maybe you start carpooling. People won’t stop buying things necessarily, they will probably just stop driving so much.

Jim always talks about the “40” or “50” mile commute from the Atlanta suburbs or whatever his city of the week is. He rarely discusses how this is probably only half of the driving Americans do.

Most is spent going to the mall 17 different times for seventeen different things or driving little Johnny to baseball practice. Well the family will still continue to but 17 things, they will just make one trip together to the mall every Sunday after church. Johnny will start riding his bike to practice and probably lose a few pounds in the process.

Will this effect the economy? Of course it will. But not necessarily in a negative and irreversible manner. Notice. I haven’t said anything about Technology or efficiency. I don’t think Jim even knows what those things mean. I think his definition is “things that are not a solution.” Fine. Whatever.

I find it hard to believe that $6 gasoline might cause people to either lay down and die or vote for the next guy who pledges to invade Saudi Arabia or search for oil on the moon.

I’ve been reading a lot of Jim’s archives recently and as I’ve said, it’s really interesting because you don’t really get a sense for the volume and frequency of his predictions by just reading every Monday morning. The repetition of themes and phrases is also quite noticeable.

And since Jim never admits to any mistakes or bad calls, and is always talking about the “reality” that is about to slap America in the face, I have to wonder – is Jim delusional in some sense? Does he live on the same planet? What is this “reality” that he sees?

Every fall when the DOW falls a few hundred points it is evidence that it is headed towards 4000. Why can he look at the same things everybody else is looking at and come to these wild conclusions, be wrong 9 out of ten times, and still convince a sizeable number of people that what he sees is in fact “reality?”

I don’t get it. But it’s working for him, I guess. Does he actually go around and believe that he was right is some way when he said stuff like in the fall of 2005 after Katrina to the effect that we would emerge in the Spring as a different nation. Or would he concede in person that he was actually completely wrong and perhaps a tad too dramatic?

[Tvashtar]

Whoever is posing as "Johnny Rico Johnny Rico", get a life. He's thinking this stuff through and all you do is say Thanksgiving? I would call you names, but Rico is right about that not really cutting it.

[Johnny Rico]

On the issue of CERA, yeah, there message is out of whack with reality. But the last serious report which went public (in 2005) was so far over the top in its predictions, it is hard for me to see how anyone can take them seriously.

But the same time, nobody put peak oil people know who CERA is or aware of any "message."

We shouldn't be paying attention to them. Their forecasts from 2005 get more wrong every year. The reality is more people know T.Boone Pickens then Daniel Yergin. T.Boone and Simmons get as much face-time as Yergin does on the tube.

Another reality is the CERA's message is a lot more complicated and nuanced then can be boiled down to a catch-phrase. Perhaps a bit too optimistic (well, way too optimistic) - but there are actually countless other voices in the oil world that voice these same sentiments. And there is no indication that CERA has been an influence on them. In fact they are industry veterans whose views seem to be shaped by decades of experience.

Tom Kloza on that gasoline site I posted last week as a good example. There are dozens of people like him who state frequently that they think peak-oilers are nutbags.

Phil Flynn on 321energy.com, also frequently seen on CNBC. What's funny is these guys are surprisely frequently right about the oil market - much as T.Boone Pickes is.

[Dr.Doom]

Howdy JR, yeah this whole "debate" concept is being promoted by MOU with perhaps Holmes as an accomplist, dunno. What's to debate other than rates? Methinks the big wakeup call will be when we have widespread gasoline shortages. Price increases are a little like raising the temperature in the frog pond, folks will pay more and grumble a lot. We have a long ways to go to match the pump pain experienced now in the UK, with "petrol" running up to about 4 pounds sterling ($8 US) per gallon.

Americans will just have to learn to stiffen their upper lips, like the Brits. Actual shortages are another matter. Anyway, I'll try to around at 10 PM EST for any questions.

Regards,
Doom

[Johnny Rico]

MOU,

I don't know if I'll be around tonight, but if I am it probably won't be til like midnight. I think I gave you enough material here to get started, right?

Cheerio

[Johnny Rico]

Whoa! Doom, you showed up. Just as I'm leaving. Anyway, yeah, I agree, I gotta run though. Catch the bus. Talk to you later maybe.

[scott]

testing

[thal]

Doom, Johnny,

The person that called this summit is beyond your control. Be that as it may, yer both smart. Why not? Even if it takes place after the designated time. I'm tangential to this effort, as doom has eloquently analyzed the solicitations regarding fusion reactors.

The notion I keep thinking about is: being born when I was born, what are the odds that I'd be present to witness the sea change?

Something is happening here but I don't know what it is, do you, Mr. Jones?

[XER]

"The State’s loss of power means not just diminished functions but an overall loss of authority. For example, generations of lies have eroded the credibility of America’s government – and its replacement by NGO’s as reliable sources of information and analysis. We see this today as Americans seek to learn about events in the Iraq War."

"Citizens have good reason to seek non-official information sources. Government manipulation of its citizens by lies has deep roots in US history. To cite just two examples, remember President Eisenhower denying our U-2 flights over the Soviet Union and President Johnson’s misuse of the Tonkin Gulf Incident. In both cases their lies were directed at the American people, as our enemies already knew the truth.
Private companies have played an active foreign policy role in our past, such as US food companies using the Marines to insure access to cheap fruit, and the apocryphal Hearst telegram “You furnish the pictures and I'll furnish the war." Today we see similar efforts but on a larger scale and with greater sophistication."

"This is the essence of 4GW, as governments and their non-state allies maneuver to gain the moral high ground. Elites manipulate information to intimidate opponents and produce a suitable public attitude towards our new long war – if not enthusiasm, at least complaisant passivity."

"Unfortunately for us, it has become increasingly obvious that our elites are either unwilling, or uninterested, or unable to manage America’s affairs to promote the general welfare. This should be fine, as it is our job – collectively – a burden to be delegated only at the cost of our freedom. There are historical precedents beyond counting, beyond tears, to this sad truth."

I agree with Dr. Doom. Energy shocks along with constant supply disruption's will be the choke point. The rulers will not come clean before the shocks. Gas lines will force there hand.

These events are on the horizon. I like the 5+ year scenario floated by Defeyes, Simmons and Hirsch. I think Dr. Doom talked about it last week.

Simmons has used the term "Energy 911".

[thal]

Yeah, but XER, what if nobody's even paying any attention to the elites, or reality? What if somnambulism is the order of the day? It makes Doom's contemplations (no offense, Dr.) look like pollyanna writ large.

[XER]

It keeps sounding more and more like 1914.

"MOSCOW: Russian President Vladimir Putin yesterday suggested the US military campaign was a "pointless" battle against the Iraqi people, aimed in part at seizing the country's oil reserves.

He also promised new nuclear weapons as part of Moscow's military build-up, saying the experience of Iraq showed the need for resource-rich countries to keep strong defences.

In a televised question-and-answer session with citizens ahead of elections in December, Putin also told the US to set a date for withdrawing all its troops from Iraq.

The US was at a "dead end" in Iraq, he warned. "Thank God Russia is not Iraq," Putin told a questioner who asked about supposed US intentions to gain control of Siberia's vast natural resources.

"It is strong enough to protect its interests within the national territory and, by the way, in other regions of the world.""

http://www.gulf-daily-news.com/Story.asp?Article=197277&Sn=WORL&IssueID=30213

[XER]

Thal,

They will start paying attention when they are out of work and waiting in line to buy $8 gasoline for their broken down gas guzzling Ford or Chevy SUV. This situation will cause tremendous anger and resentment.

[thal]

Movenonup,

Despite your best intentions, and formally to provoke JR's notion of the failings of predictability, JR's gonna be a no show and if not, drunk beyond recognition to himself, and a no show to the summit to which you've labored. Still, I'll be looking just the same. You're very hopeful, aren't you?

[thal]

XER,

I doubt "paying attention" nor "waiting" are the operant verbs (I forget a lot of the sentence structure learned in grade school - I'm maybe remedial bound in this regard)...it would be more likely to suggest "not giving a fuck" (as opposed to "paying attention") and "grabbing opportunistically" (as opposed to "waiting") especially when it comes to lines. It's easier to crack a head than argue a point. I stand by all you've suggested of a darker nature in the past. Consider all you have read, elaborated upon, and yes, taught on these pages.

[XER]

Thal,

"not giving a fuck" That just about says it all for 10-22-07.

Just like, "It will never happen here."

I don't particulary like to talk about the war stuff, but the only alternative is to break out the Norman Vincent Peale and Tony Robbins crap. I am convinced that it will come down to the way people think, feel, and will. Thank you for the nice things.

[scott]

"No, not necessarily. For one thing, things don’t actually change overnight. I believe there’s a good chance that gasoline could rise to $10 in the next ten years. Maybe in the next three. Who knows. But it won’t go from $3 to $10. It wil go from $3 to $4 and so on. At every stage there is a segment of the population that will be forced to change its behaviour."

Higher prices=rationing not conservation. Whether prices spike or gradually increase will be determined by decline rates and nations ability to monopolize sources. I do not think we can assume the status quo regarding sources can be extrapolated into the future. In other words, as the reality of permenant depletion sets in we can expect polarization among regional powers to monopolize sources of oil.

The idea that markets are resilient in the face of higher oil neglects the fact that prices are not high enough yet to affect rationing in the U.S. or China, only non-industrialized nations so far. This doesn't mean that we are not experiencing some effects from supply/demand fundamentals and their tightening. Foreign investors would have been more than happy to keep the equity market rackets going if not for the effect of diminishing returns that declining oil production produces. After all equities are just entries on a computer but oil and other commodities are the real things that are traded right?

I don't think of the pricing of oil in terms of dollars or any currency because the value of fiat currencies is arbitrary, we can print up all that we want as long as our ability to produce, refine and distribute is thought of as infinite because it gives worth to essentially worthless paper. If(we will) we continue to print dollars in excess of declining) production, refining and distribution then yeah, we'll see spikes in energy prices. Look at Zimbabwe for an extreme example of hyperinflation.
http://news.bbc.co.uk/2/hi/africa/4665854.stm

As far as Americans incrementally changing their behavior as a result of incrementally higher prices I would respond by saying that much of the waste that you view as a cushion will not exist in the first place once the "infinite" distribution paradigm ends and the "wealth" it supports vanishes. How many Americans have "created" jobs? It has been so long since there has been a deep recession in this country that I think some people are unaware of the high unemployment recessions produce. Lets just say hypothetically of course, that declining global oil production will produce an absence of growth potential. A recession by definition is a period of slow to no economic growth that will produce tighter labor markets in a world of already cheap labor but don't think that this will take demand off of the market because it will not.

The dynamics of high population ares like China and India and their exponentially growing ability to affect influence beyond their borders will maintain relentless demand pressure on global oil supplies regardless of the interests of the U.S.

Regional powers China, Russia and India will inevitably "monetize" sources of oil in their region to the exclusion of the U.S. and the U.S. will need to secure sources in it's own hemisphere. U.S. led globalization is ending and polarization will be it's replacement.