Penetration

My new novel of the post-oil future, World Made By Hand, is available at all booksellers.
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     The telling moment last week was Robert Hirsch's appearance on the CNBC morning "Squawkbox" financial show in which he proposed the probability of $500-a-barrel oil within "a three-to-five-year time-frame." Squawkhead Becky Quick was clearly nonplussed by the stolid Mr. Hirsch, author of a (then)-startling 2005 US Dept of Energy report (since referred to as the Hirsch Report and buried by the Secretary of Energy) that warned of dire effects on the American way of life as the Peak Oil predicament gained traction.
     Perhaps more reality-challenged was the uber-idiot Larry Kudlow on CNBC's night-time money show, who kept repeating the mantra "drill, drill drill" when presented with signs that something other than "oil speculators" was driving up the price and creating global scarcity. These idiots always return to the shibboleth that "there's plenty of oil out there." What they don't get is that even while the world is enjoying the all time peak of production (somewhere around 85-million barrels-a-day), that same world is demanding at least 86-million barrels -- so even though there's more oil than ever, there's not enough. And the gap is only bound to get bigger.
     The difference between what's available and what's demanded is being felt by poor countries and poor people in richer countries. Third world nations lacking their own oil are simply dropping out of the bidding, and the lower classes in the US are having to choose between buying gasoline and velveeta. The floods in the corn belt will surely aggravate the problem here in the USA. Lunch breaks may soon be a thing of the past for WalMart Associates. Maybe they'll just play video games on their cell phones in the parking lot to allay their hunger.
      Meanwhile the notion that drilling drilling drilling offshore the US and up in Alaska will solve this problem shows how incredibly misinformed the news media itself is. The probability is next to zero that anything found off California or Florida would even fractionally offset ongoing depletion in the handful of old, established super-giant fields that the world gets most of it oil from. By the way, I support the idea of drilling in Alaska's ANWAR reserve because I think it can be done in a sanitary way and, more importantly, it would get the idiot cornucopian right-wing assholes to finally shut up about it -- before they discover that it contains less than half a year's oil supply for the US at current rates of use.
      Also on the "meanwhile" front, the OPEC meeting Sunday at Jeddah, Saudi Arabia, was simply a desperate dodge, a mummery, a kabuki theater of powerlessness. Once again, the Saudis are pretending that they can increase their production -- in essence, pretending that they actually have some power in the game. As Jeffrey Brown has pointed out on THEOILDRUM.COM, the Kingdom will still show a steady three-year decline over their 2005 production rates even if they're able to goose current output as much as they say they will in 2008.
    All this reality content is beginning to penetrate the collective consciousness in the US, but the result is mostly panic or paralyzed disbelief rather than any set of intelligent responses. For example, I got a call from one of Katie Couric's producers at CBS news on Friday. Somehow, they had noticed that oil prices were becoming a problem in America. They called me for a comment. The scary part was they were clearly treating the issue as a "lifestyle" story. Did I think more suburbanites would move downtown? And would that be a good thing...?  They have no fucking clue how broadly and deeply these dynamics will affect the life of this nation, or even our ability to remain a nation. Also, by the way, this demonstrates how the nightly network news has become the equivalent of the old "women's pages" of the daily newspapers.
     The parallel universe of the financial world is showing the strain of all this oil anxiety -- since, after all, oil is the primary resource for running industrial economies. It has been some time since the banker boyz embarked on their fateful venture to alchemize a new mutant strain of investment instruments to replace the tired old stocks and bonds which represented the hope for production of surplus wealth from industrial activity -- now mooted by the oil story. The idea of the mutant investments was to produce wealth with no real wealth-producing activity. This old trick, formerly known as Ponzi finance or a "pyramid scheme," was naturally self-limiting, and in a way that would prove ultimately very destructive to society as a whole. In fact, it has fatally undermined the legitimacy of the entire financial system, and a state of comprehensive nausea has set in as we all witness the dissolving foundation of the US economy under a tsunami of debt that will never be repaid.
      The markets seem to know this, the more vocal playerz are squawking more about it, some banks are issuing frightening "duck-and-cover" warnings, using horror movie phrases such as "...worse than the Great Depression of the 1930s..." and the general public is sinking into the quicksand of bankruptcy, repossession, and ruin. I haven't been to any lawn parties in the Hamptons this year, but I imagine that eczematous anxiety rashes are competing with suntans and Versace separates out there this year. Really, we're right back where we were last year about this time, only worse. Oil has doubled, food is outasight, the levees have broken, the people who run things are shitting their pants, and everybody is waiting for a whole lotta other shoes to drop.

Comments

[American]

Of course drilling in ANWR is a no-brainer. When things get desperate, you're going to see drilling take place all over tarnation.

[LaughingAsRomeWasBurningDown]

Yeah, if $4 a gallon is invoking this kind of panic, then I shudder to think what a 1970's "no gas" or seemingly overnight doubling in price will do... Buckle up!

[Dave]

Great one today Jim !

I saw the Hirsch interview and the lady of Condi Nash and her rejoinder about the price of is going where "no one really knows" and Hirsch's stern and fatherly response that that was economist balderdash ! It was great !

[Dave]

By the way, I support the idea of drilling in Alaska's ANWAR reserve because I think it can be done in a sanitary way and, more importantly, it would get the idiot cornucopian right-wing assholes to finally shut up about it -- before they discover that it contains less than half a year's oil supply for the US at current rates of use.

i second that motion.

[steve duncan]

Come January, 2009 this entire putrid mess will all be Obama's fault. I can hear Hannity, Gingrich, Limbaugh and the rest now. Instant blame, 2000 through 2008 never having occurred. Phil Gramm will pile on with commentary that slays "irony" for good as a concept. Barack is in for serious lumps. It's better than nuking Iran and Syria, I suppose. McCain's forefinger will twitch in his sleep looking for that red button to push.

[umass82]

Hisrch said we have to drill among other things.

Sen Graham on Meet the Pres, when asked why he now supports drilling off shore said $4.00 a gallon gas changed his mind. What will happen at $5 or $6 a gallon.

Sen. Biden on Meet the press said the oil companies need to drill old leases, he has no clue not enough rigs or manpower also no proven oil in the leased land.

The Saudis are maxed out, they are drilling like mad but can not even offset depletion never mind higher local consumption soon they will go into decline the the shit hits the fan.

[montysano]

This past week has once again demonstrated the utter depravity of our news and information culture. Hannity and Limbaugh spent the week braying about "drill, drill, DRILL!", with Hannity making the fantastic claim that "We've got more oil in North American than the entire Middle East." He was referring to oil shale and oil sands, of course, but saw no need to enlighten his audience as to the realities of those supplies.

In fact, has anyone seen a sober discussion, using numbers and facts, of our energy situation? I haven't, leading me to think that the truth about energy may be the most radioactive, third-rail issue of all.

[montysano]

"Come January, 2009 this entire putrid mess will all be Obama's fault."

Spot on, Steve. In fact, if Obama were to go on teevee tonight and say "Fuck it, I've changed my mind", who could blame him?

[peakoilmom]

Come January, 2009 this entire putrid mess will all be Obama's fault"

The Republicans already are blaming the Democrats about this, saying that it's their fault because of the ban on drilling off the coasts.

We need a politician who can rise above both parties and speak the truth about the mess we're in. We don't have time for this issue to devolve into partisan politics.Yet that is exactly what is happening. Are there any politicans who can unite the country instead of divide it? And no, I don't think Obama is that person.

Maybe we need a Hirsch leading the nation -- someone who doesn't have a political history ... Fat chance of that happening, at least in this go 'round. Maybe by 2012 desperation will lead to better leadership, though my cynical side says it will likely lead to a dictatorship.

Still, America's best leaders seem to have emerged during times of crisis.

[Abrey]

Dear Jim: Off-topic comment today, regarding the loss of your dear companion Buddy over the weekend. Condolences on your loss. Take time to mourn your special friend. When you are ready, perhaps you would consider adopting another, from an animal shelter, and give another sweet dog a happy and loving home. One of your continuing themes in your posts is that we should be more considerate and caring as we move forward; and that includes animals as well as people. Have a good week, Jim.

Abrey

[German Mike]

One desperate, final push to increase production. The current price of crude will mobilize ALL untapped reserves world wide.
The Saudies will increase production of less desirable grades of crude by about 2 million barrels. Iraq will finally get back into the oil business by increasing production by about 3-4 million barrels a day. The US Congress will give in to big oil and drill in all formerly off limits areas, increasing production by about another 2-3 million barrels a day. In addition some more production will come from Brazil, Angola, China and Lybia. That will put us somewhere near 92-94 million a day within the next 5-6 years. That's about it. While peak oil is a mathematical necessity it is not here yet. We will be able to cheat death one last time. How will we use those remaining years? Will we build an electric rail system? Will we develop wind, solar, nuclear and other alternatives? Will we mandate 40+mpg for cars? Will we implement other energy saving measures? Will we build public transportation and bike lanes? If our past performance is any indication of our future we will we partying like there's no tomorrow. Peak oilers will be (temporarily) discredited and it's back to business as usual. In about 2014 we will face the same dilemma again, only this time we won't be able to drill our way out.

[PillowTick]

Hey Jim,Insightful and frightening to say the least. i read an associated press story this morn on how people are border hopping to Mexico to get Gas its about 3.60$ a gallon its 4.15$ in San Diego. the man they interviewed said he gets gas and shops for groceries there. its great! It used to be cigarettes and cases of Corona.
now its the basic necessity's of life. throw in a Mexicali drug war with real bullets and now you really got chaos. if people are looking for relief in Tijuana then we really dropped the ball here in the states. in the immortal words of John Stewart "HOARD GOLD"!

[Loveandlight]

"You. Will. Not. Be. Able. To. Get. Food." by Jan Lundbergh

http://tinyurl.com/5zargx

[MaryW]

Fabulous post Jim with your usual delightful saltiness.

The bill for showing off with oversized cars, houses and lives has finally become past due.

The world is now the mouse that the cat OPEC is toying with, but still lines up to get sucker-punched yet again instead of getting a clue.

Against the horror picture back drop of world economies tottering towards complete close-down, governments of developed countries scream ever more stridently for a resource that’s in terminal decline and keeps lying to the public.

The public needs some gumption and has to start listening to the so-called subversives if they’re to have any chance at all, or will be looking at their own imminent extinction.

Peakniks are finally vindicated.

[Uncle Al]

HIV could have been contained by imposed quarantine or natural mortality. Unconstrained propagation abetted by $(US)10^11 therapeutics and healthcare subsidies was the solution. Government energy crisis amelioration will be equally successful, cost and effect. Public service announcements for framing.

When public transportation runs at a subsidized loss, 10% increase in ridership plunges it into abyssal red ink and White papers. Let's aim for 30%.

[theroachman1]

Larry Kudlow is by far the single worst Business reporter in TV history. Which is pretty touph to do when the compatition included Neil "Soft P**n" Cavato.

[scott]

"they won't let us drill", "there's plenty of oil" , "ANWAR", "the California coast and the Florida coast" I think comes verbatim from think tanks like this one in D.C.

http://www.hudson.org/index.cfm?fuseaction=publication_details&id=5558&pubType=HI_Opeds

70% of Americans believe that digging faster and caring less about where the dirt lands is the solution to our energy problems. The debate, at least from the infinite growth Libertarians who claim they want honest money but fight tooth and nail against it are arguing once again for infinite growth. Their strategy is to first and foremost disspell the notion that there is a limit or capacity for growth.

These same "economists" will explain that the worlds past 125 years or so of unprecedented in the history of the planets "persistent growth" is attributable to our greater understanding of economics. I would argue that it is attributable to and correlates with the past 125 years of fossil fuel production, coal, oil, gas and the technologies that have subsequently been invented to consume it.

Nevermind that ANWAR is in a remote ARCTIC location with no roads bridges, electricity or infrastructure of any kind and that the only thing geographically and geologically similar yielded less than 1/10th the estimated reserves, the mantra of "drill" has more to do with economics debate rather than science and math.

Will somebody tell these infinite growth think tank people that we do not have honest money to limit growth so that the Malthusian argument can properly be disspelled.
http://en.wikipedia.org/wiki/Malthus
I think they already know that every civilization in the history of the planet has outgrown it's resource base and collapsed. I also think they are aware that every FIAT currency system has similarly collapsed because of a lack of limits to growth--but that is the idea isn't it? We can't comprehend anything but more, more, more to the point of war, war war.

[Brian Little]

The most annoying aspect of this "drill everywhere now" bullshit is how these fools act as though this process has zero latency. Like you can just sink a hole and have it produce ready-to-burn gasoline in the next 30 days. Good fucking grief.

[scott]

The thing that annoys me the most is to hear so many people on the street regurgitating the mantra of drill drill drill. Their only research into the subject is to buy into what amounts to political rhetoric that 1) tells us what we want to hear. and 2) reinforces the idea that the status quo of infinite growth can be sustained for ever if it were not for "THEM". "they won't let us drill" "they want us to ride bicycles while THEY fly around in jets"

[RJCW]

So depressing. Let's watch a movie!

http://www.youtube.com/watch?v=kRaKHq2dfCI&eurl=http://www.propagandamatrix.com/articles/june2008/062308_dead_bodies.htm

[American]

From CNBC this morning, I learned that peak-oil believers are kept up nights, fearing the flood of new oil supplies about to be unleashed.

I suppose, in today's America, no one would watch a channel with informed, thoughtful coverage of business; any more than they would watch a channel with informed, thoughtful coverage of news generally.

Often, the locker-room stupidity of CNBC is just too much.

To their credit, however, where else on TV can you see Hirsch, or Matthew Simmons, with any regularity?

[Movenonup]

AS GOES THE MIDWEST, SO GOES THE NATION

http://www.stevequayle.com/News.alert/08_Photo_of_Day/080623.photo.of.day.html

[scott]

From what I understand gasoline isn't the problem, it's diesel fuel, jet fuel and home heating oil. All the refiners are at 52 week lows and trading lower as crude prices rise. There is an abundance of gasoline on the markets but refiners are forced to refine more and more crude to keep diesel and kerosene in supply. There is only about 7 gallons of diesel that is cracked from a 42 gal. barrel of the bench mark grade and with demand up from emerging markets infrastructure buildouts, there is more demand for fuels that are burnt in big trucks and heavy machinery for road building, mining, construction, etc.

Another variable is the appreciation of the EURO over the dollar. Europeans like the energy efficiency of diesel burning cars and are able to acquire diesel at more favorable prices with the currency situation and are putting more diesel burning cars on the road that compete directly with U.S. trucking companies and airlines. U.S. commerce is heavily leaveraged by higher diesel prices.

I think the U.S. should buildout a new modern coast to coast freight rail system that has spurs to population density ares such as Chicago, I-35 corridor in Texas.

We need to build coal to liquids plants since the products rendered from this process are diesel fuel and jet fuel.

[Consultant]

"The Saudies will increase production of less desirable grades of crude by about 2 million barrels."

Many of these posts make no sense. If our large fields are declining, how can they increase production, even marginally?

Even lacking exact production figures, I think it's fair to conclude that many current fields are declining, and therefore any increase in production from other current fields would be offset by declines elsewhere. The Saudis, for example, would not only have to increase production, but also increase it enough to offset the declining production rates in other fields.

The only thing that would effect oil prices right now is a significant increase in production from a current oil producer. No one seems to be able to do that, so, I guess were at Peak Oil boys.

Everyone, listen up! Next up is severe recession (modern language for a depression). Demand destruction will occur, along with some nasty side effects (resource wars).

[Loveandlight]

I'm pretty sure we're a little bit past peak, but because we're in the "peaking" region, there may be one last semi-bonanza to be had by scouring all the forgotten corners for every last bit we may have previously neglected. The thing is, though, that will mean more growth which will mean we will fall that much harder when we truly enter the terminal decline phase. After all, it's not as though we're going to behave any more responsibly with that one last bonanza, should it actually exist.