Published: Thu, 30 Mar 2017 00:00:00 -0400
Last Build Date: Thu, 30 Mar 2017 02:37:45 -0400
Tue, 21 Feb 2017 15:30:00 -0500
(image) The world was running out of oil and the global economy was about to collapse as a consequence ten years ago. Imminent peak oil doom was everywhere and one of its leading proponents was banker Matthew Simmons. Among other things, Simmons based his prognostications on the claim that oil production in Saudi Arabia was about to peak and fall steeply, presaging an era of permanent global oil shortages. Simmons further suggested that global oil production had peaked in 2005 and would fall at a rate of 5 percent year thereafter.
To be fair, Simmons like most peak oilists fuzzied up his numbers and timelines enabling him to be vague about just what level Saudi production would achieve before beginning its inevitable decline. For example, one of the analysts over at peakist The Oil Drum site declared in 2009 that Saudi production had peaked at 9.6 million barrels per day in 2005 and projected that it would fall to around 7 million barrels per day by now. Simmons was a bit more canny and suggested that if Saudis worked really hard to boost production, they might briefly get to 12.5 million barrels per day. Even so, Simmons' main assertion in his book Twilight in the Desert was: "My research has convinced me it is unlikely that Saudi Arabia could sustain any higher oil output than it now produces, and that even the current production rate may be too high."
Simmons was sufficiently confident of his predictions that he took New York Times columnist John Tierney up on a bet in 2005 for $5,000 that the global price of oil would exceed an average of $200 per barrel in 2010. He lost.
So what did happen to Saudi Arabian production? According to Bloomberg News, Saudi production reached 10.7 million barrels per day in November and, as part of an agreed Organization of Petroleum Exporting Countries' (OPEC) cut in production, dropped back to 10.5 millon barrels last month. World oil production in 2005 - when it supposedly peaked - averaged 85 million barrels per day. The global average stood at over 97.2 million barrels per day in 2016. Of course, the peak oilers also failed to see the shale oil and gas revolution made possible by fracking and horizontal drilling that boosted U.S. oil production from 5.2 million barrels per day in 2005 to nearly 9 million barrels per day today.
If the OPEC production cuts don't hold, some analysts see oil prices falling back toward $30 per barrel later this year.
Tue, 07 Feb 2017 17:15:00 -0500
(image) Well that was fast. According to Reuters, the Army Corps of Engineers has filed court papers stating that the agency plans to grant an easement that will enable Energy Transfer Partners to complete the Dakota Access Pipeline by drilling under the Lake Oahe reservoir. This action appears to be pursuant to an executive order signed late last month by President Trump instructing the Corps to "review and approve in an expedited manner, to the extent permitted by law" such an easement.
Environmental activists believe that preventing the pipeline's completion will help forestall man-made global warming by keeping oil in the ground. In addition, the local Sioux opposed it due to fears that it could leak and contaminate their drinking and irrigation water supplies. Nevertheless, the Corps completed and issued an environmental assessment (EA) with a "Finding of No Significant Impact" with regard to the construction of the pipeline beneath Lake Oahe. This displeased folks in the Obama administration who pressured the Corps into finding a way to stall the project. In December, acting Assistant Director of the Army for Civil Works Jo-Ellen Darcy obliged by issuing a memorandum that voided the Corps' assessment. In addition, Darcy ordered that full-blown environmental impact assessment be conducted, a process that could take as long as two years more to complete.
That was then; this is now. Consider the fact that the regulators' environmental assessment last July had concluded that the granting the easement under Lake Oahe was appropriate. Nevertheless, at the direction of Obama administration officials, the Corps was ordered to revisit and revise its decisions which it duly did. Now the Trump administration has ordered to Corps to reconsider its reconsideration and revise its conclusions again which it is evidently doing.
One way to look at what is happening is that a highly politicized regulatory decision by the Obama administration is being corrected by the Trump administration. Those of us concerned about the rule of law on which activists, oilmen, and all other citizens hope to rely, might see the situation differently: The pipeline was stalled at the whim of one president and is evidently being green-lighted now at the whim of another. Whimsical regulation is bad for everybody.
Tue, 22 Nov 2016 23:42:00 -0500As the protests over the Dakota Access Pipeline stretch into their seventh month, reports of brutal police attacks from the scene continue. Most of the available video from the protests is shot and transmitted by people on the scene. But in the past week or so police behavior has been garnering major newspaper attention, and most of the information below are from such sources. But a collection of livestreams from Sunday night's violence can be found here. • 21-year-old protester Sophia Wilansky had her arm seriously injured Sunday by what her family and other protesters insist was a concussion grenade tossed at them by law officers. Disturbingly graphic photos of the damage to Wilansky's arm can be found here, not for faint of heart. Her father Wayne Wilansky told The Guardian that: "The best-case scenario is no pain and 10-20% functionality,"...He said...the arteries, median nerve, muscle and bone in her left arm had been "blown away". Sophia will require additional surgery in the next few days and her arm may still have to be amputated, he added. "She's devastated. She looks at her arm and she cries," he said. Law officers denied to the Los Angeles Times that they used tossed any such thing at protesters.The Standing Rock Medic & Healer Council, reports The Guardian: refuted law enforcement's claims in a statement, citing eye-witness accounts of seeing police throw concussion grenades, "the lack of charring of flesh at the wound site" and "grenade pieces that have been removed from her arm in surgery and will be saved for legal proceedings". USA Today's report on the injury to Wilansky. • Law enforcement use of hoses to spray water on protesters in sub-zero [in centigrade, but in fahrenheit merely "below freezing"] temperature caused, activists insisted, 200 cases of hypothermia. The Los Angeles Times reports law enforcement's side: Footage of the protest from the independent news outlet Unicorn Riot showed officials specifically targeting protesters with the water cannon, though the water pressure was not turned up high enough to knock anyone down... Water cannons have not often been used for crowd control in the U.S. in recent years. "It's a fairly nonstandard application," said Richard Odenthal, a former L.A. Sheriff's Department captain...Odenthal said the L.A. Sheriff's Department had once discussed whether to adopt a water cannon for crowd control, but decided against it, citing famous footage from the 1960s of Southern police officials turning high-powered fire hoses on black protesters. "We decided that wasn't an image we wanted to portray," Odenthal said. Herr, the Morton County sheriff's spokeswoman, said that a fire department had brought a water hose to help put out a brush fire and that officials at the scene decided to repurpose it against the protesters, citing "aggression from the agitators in the camp [who] continued to raise their level of resistance against law enforcement." • Details from The Intercept via reports from medic's on the scene: "What it was like was people walking through the dark of a winter North Dakota night, some of them so cold, and sprayed with water for so long, that their clothes were frozen to their body and crunching as they walked. So you could hear this crunching sound and this pop-pop-pop, and people yelling [to the police], 'We'll pray for you! We love you!'" [Linda] Black Elk [a member of the Standing Rock Medic and Healer Council] said, describing the scene as police sprayed protesters with water and fired tear gas and rubber bullets during the more than six-hour standoff. "All of a sudden there were these bright, blinding spotlights, so you could see each other, but you couldn't see [the police]," she said. "Every once in awhile you could hear someone scream who had been hit by a rubber bullet." In the midst of the clash, the Medic and Healer Council, which was set up to provide health support to those fighting the pipeline, released a statement pleading with police to halt the use of water cannons. "A[...]
Tue, 05 Jul 2016 12:31:00 -0400The Rystad Energy consultancy has just released its new calculations of global oil reserves and estimates that the U.S. may harbor as much 264 billion barrels of oil compared to Saudi Arabia's 212 billion barrels. Overall, world oil reserves exceed 2 trillion barrels. At current production rates, this is enough oil to supply the world for 70 years. The Rystad analysts compare their estimates with those of the closely watched annual BP Statistical Review that conservatively calculates that the U.S. has 55 billion barrels of proved reserves and that world reserves stand at just under 1.7 trillion barrels. ExxonMobil's 2016 annual Outlook for Energy report observes: Technology is not just expanding our daily oil production; it also continues to increase the amount of oil and liquid fuels we can count on for the future. In 1981, the U.S. Geological Survey estimated that remaining global recoverable crude and condensate resources were 1 trillion barrels; today, the IEA estimates that it is 4.5 trillion barrels – enough to meet global oil demand beyond the 21st century. By 2040, the amount of resources yet to be produced will still be far higher than total production prior to 2040, even with a 20 percent rise in global oil demand. However, the folks at Rystad do note that ... ...cumulatively produced oil up to 2015 amounts to 1300 billion barrels. Unconventional oil recovery accounts for 30% of the global recoverable oil reserves while offshore accounts for 33% of the total. The seven major oil companies hold less than 10% of the total. This data confirms that there is a relatively limited amount of recoverable oil left on the planet. With the global car-park possibly doubling from 1 billion to 2 billion cars over the next 30 years, it becomes very clear that oil alone cannot satisfy the growing need for individual transport. Well, maybe. As I explain in my book The End of Doom: The the advent of self-driving vehicles could provide a technological end run around such projections of a growing vehicle fleet. Instead of sitting idle for most of every day, as the vast majority of automobiles do now, cars could be rented on demand. Researchers at the University of Texas, devising a realistic simulation of vehicle use in cities that took into account issues like congestion and rush-hour usage, found that each shared autonomous vehicle could replace eleven conventional vehicles. Notionally then, it would take only about 800 million vehicles to supply all the transportation services for 9 billion people. That figure is 200 million vehicles fewer than the current world fleet of 1 billion automobiles. ... In addition, a shift to fleets of autonomous vehicles makes the clean electrification of transportation much more feasible, since such automobiles could drive themselves off for recharging and cleaning during periods of low demand. Back in 2000, former Saudi oil minister Sheikh Yamani famously declared, "The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil." Given technological trends that prediction still sounds right.[...]
Mon, 16 May 2016 14:38:00 -0400Venezuela is on the verge of both economic and social collapse, and the Bolivarian socialist government headed by President Nicolás Maduro is lashing out at any everyone from "whingeing" factory owners (who lack the raw materials they need to produce anything of value) to the U.S. government, who he accused of formenting a coup when he extended the nation's state of emergency last Friday. The style of socialism introduced to the oil-rich country by Maduro's predecessor, the late Hugo Chavez, was credited by Salon's David Sirota with creating an economic miracle as recently as 2013. But the disaster currently unfolding is more than just a failure of socialism. Venezuela has been spending a fortune on unnecessary and ridiculous expenditures for years. That is, when government officials haven't been (allegedly) stealing billions in oil profits and pocketing the cash outright. Despite sitting on the world's largest oil reserves and having nationalized oil production, Venezuela spends $45 million a year on Pastor Maldonado — an undistinguished Formula One race car driver with a predilection for crashing a lot — who essentially serves as a walking billboard for the country's oil company. Wasting taxpayer money on sponsoring a loser athlete is bad enough, but what could possibly be the justification for spending that kind of cash to advertise the national oil company, which by definition has no competition? The waste and graft surrounding sports doesn't end with Maldonado. Formula Freak reports that following Chavez's death in 2013, "Alejandra Benitez, the Venezuelan minister of sports, found that her falsified signature had moved over 65 million in sporting-fund dollars to places in which it did not belong." In 2007, as part of Chavez's ambition to "combat American cultural hegemony," he forked over nearly $18 million for "scripts, production costs, wardrobe, lighting, transport, makeup and the creation of the whole creative and administrative platform" of a prospective Danny Glover-helmed film project about a Haitian slave revolt. The film never went into production. Pro-free market types enjoyed a good laugh when the country's largest beer company ceased production last month, as a direct result of a lack of access to foreign currency and a domestic currency now more useful as toilet paper than legal tender, but the situation in Venezuela grows more tragic by the day. Though supermarket shelves are pretty much empty these days, for the past two years the government has been fingerprinting shoppers to prevent "hoarding," which itself was also made illegal. As could be completely expected by such scarcity of basic items needed to live, much less live in any semblance of comfort, Bolivarian socialism has spawned a thriving black market. "In a system that mirrors the rationing implemented across communist countries last century," Andrew Rosati writes in Bloomberg, "Venezuelans are allotted certain days of the week that they can purchase goods deemed most essential by the government." The hole in the marketplace is now filled by entrepreneurs known as bachaqueros, who in turn "have developed their own ecosystem, rules and regulations." Though Maduro would classify any unauthorized transaction as emblematic of the "economic war" he imagines himself fighting, the economic realities his movement has created have led to "Doctors and accountants moonlight[ing] as cooks at restaurants" and everyday survival the only matter of concern to the populace. Electricity has been rationed and the workweek has been cut to two days. The government, never known for its tolerance for dissent dating back to Chavez's earliest days in office, recently tried to get a U.S. court to shut own a website advertising favorable exchange rates in towns along the Colombia-Venezuela border. In The Wall Street Journa[...]
Wed, 09 Mar 2016 06:00:00 -0500Every fiscal year, the Congressional Budget Act of 1974 requires the House and Senate to enact 12 separate discretionary spending bills, one for each appropriations subcommittee (Agriculture, Defense, Homeland Security, and so on). They have failed to meet this minimum requirement since 1994. When Republicans re-took the Senate in November 2014, thus ensuring GOP control over both houses of Congress, they vowed to change all that. "One of my challenges is to try to convince some of my members that passing an appropriations bill is a good thing, not a bad thing," incoming Majority Leader Mitch McConnell (R-Ky.) told The New York Times. "The Senate basically didn't do squat for years." Yet squat is still the order of the day. While the unified Congress did manage for the first time in six years to pass a budget resolution—the also-required, nonbinding baseline blueprint from which the appropriations bills are supposed to be carved—the appropriations process once again devolved into an ungainly, unreadable, last-minute mess of legislation called the omnibus. Clocking in at $1.1 trillion for Fiscal Year 2016, and stuffed with bills that even the relevant committee chairs had no idea were going in (see "The Last Honest Man in Congress," page 32), the best thing that can be said about the omnibus was that at least it wasn't another continuing resolution. Continuing resolutions (or C.R.s, as they are known in D.C.), keep the federal government funded for short stints while politicians continue arguing about the appropriations bills they refuse to pass. In practice, they increase the frequency of can't-miss deadlines—and, during periods when Congress is divided, round-the-clock headlines—after which money for all "nonessential" purposes runs out. That hypothetical was realized on October 1, 2013, when a cutoff to appropriate funds for the next fiscal year came and went without even the band-aid of a continuing resolution. House Republicans had passed a package that purposefully did not include money for the Affordable Care Act. President Barack Obama and the Democrat-led Senate refused to consider the bill. For 16 days the government went into power-saver mode, until a heavily criticized GOP gave in and passed a C.R. that funded Obamacare. Since that moment, Republicans—particularly their new House Speaker, Paul Ryan (R–Wis.)—have preferred that their white-knuckled deadlines come less frequently, and without the noisy arguments over a shutdown. In October, as Ryan was on the verge of taking the gavel from John Boehner (R–Ohio), the House passed a two-year budget deal to increase federal spending by $80 billion, remove the 2013 sequestration caps on military spending, and suspend the debt limit until March 2017. In one fell swoop, the comparative fiscal discipline imposed during the divided-Congress era of 2011–2014 was discarded. The main drama left was seeing how exactly lawmakers would divide up the spoils. Omnibus packages, which combine at least two and usually more individual spending bills, offer several advantages to members of Congress at the direct expense of their constituents. By combining so many disparate elements into one big legislative glop, representatives leave a much smaller paper trail against which they might be held accountable for their votes. By coming in a must-pass rush, the packages become ripe for gaudy earmarks and tailor-made rule-changes benefiting favored interests. In the eyes of the political press, the up-or-down vote becomes a referendum on legislative responsibility where the only wrong answer is no. The 2,009-page omnibus (along with an extra 233 pages of tax extenders) for Fiscal 2016 was introduced on December 16, passed by both chambers on December 18 (316–113 in the House, 65–33 in the Senate), then signed into law later that day. Combined with October's budget deal, the compromise effectively blows a hole through an already bleak[...]
Mon, 07 Mar 2016 09:05:00 -0500
(image) During the Democratic debate in Flint, Michigan between former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders both weighed in against hydraulic fracturing combined with horizontal drilling to produce oil and natural gas. Never mind that the fracking revolution has essentially doubled U.S. daily oil production from a recent low of 5 million barrels in 2008 to nearly 10 million barrels now. The same technology has also greatly increased daily domestic natural gas production from 44 billion cubic feet in 2005 to 76 billion cubic feet now. Rising U.S. oil and gas production has been partially responsible for the recent steep fall in the prices for both. In fact, production of both has increased so much that the U.S. is actually exporting crude oil and natural gas.
When asked about fracking Secretary Clinton answered:
I don't support it when any locality or any state is against it, number one. I don't support it when the release of methane or contamination of water is present. I don't support it -- number three -- unless we can require that anybody who fracks has to tell us exactly what chemicals they are using.
So by the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place. And I think that's the best approach, because right now, there places where fracking is going on that are not sufficiently regulated.
(image) So first, we've got to regulate everything that is currently underway, and we have to have a system in place that prevents further fracking unless conditions like the ones that I just mentioned are met.
My answer is a lot shorter. No, I do not support fracking. ... And I talk to scientists who tell me that fracking is doing terrible things to water systems all over this country.
First, contrary to assertions by both Clinton and Sanders, a preliminary report from the Environmental Protection Agency last year noted that the agency's scientists "did not find evidence" that fracking has "led to widespread, systemic impacts on drinking water resources in the United States." Second, most states already require that drilling companies reveal what chemicals they are using to frack wells and list them on the FracFocus Chemical Disclosure Registry.
Third, the ongoing switch from coal to natural gas (methane) to generate electricity is largely responsible, according to the EPA, for the recent reduction in U.S. greenhouse gas emissions from 7.4 billion tons in 2005 to 6.9 billion tons in 2014. (On the other hand, some recent research suggests that U.S. methane emissions into the atmosphere have also increased, but burning natural gas has offset the global warming effects of any such increase.)
Clinton and Sanders either (A) don't know the actual results of research on fracking or (B) they are simply pandering to the environmentalist wing of their party. I pick (B).
Fri, 06 Nov 2015 13:05:00 -0500New York State Attorney General Eric T. Schneiderman issued subpoenas on Wednesday to oil giant ExxonMobil demanding that it turn over internal communications regarding what the company knew about the risks of climate change. Shades of Watergate: What did the company know, and when did it know it? The investigation by the grandstanding attorney general follows in the wake of a long-standing claim by some environmental activists that oil companies have sought to confuse the debate over climate change in the service of their profits. On top of this, activists have been more recently pushing the notion of a "carbon bubble" stemming from the argument that in order to protect the climate most hydrocarbon assets will have to remained buried. As a consequence, companies that own those assets will become bankrupt. Maybe. But in its 2014 World Energy Outlook report, the International Energy Agency projects that global oil production will rise from 90 million barrels to 104 million barrels per day by 2040 and that fossil fuel use will increase overall by 37 percent. In any case, Schneiderman is specifically seeking evidence that ExxonMobil knew, but failed to warn its shareholders, about climate risks to its assets. In recent months, activists claimed to have uncovered "smoking gun" documents from ExxonMobil showing that the company did in fact know that emitting carbon dioxide by burning oil and natural gas was causing climate change. The activists cite a 1977 memo by Exxon scientist J.F. Black which summarizes: What is considered the best presently available climate model for treating the Greenhouse Effect predicts that a doubling of the C02 concentration in the atmosphere would produce a mean temperature increase of about 2°C to 3°C over most of the earth. The model also predicts that the temperature increase near the poles may be two to three times this value. Interestingly, this is about the temperature range for a doubling of atmospheric CO2 in the latest Intergovernmental Panel on Climate Change report is 1.5°C to 4.5°C. The 1977 memo also notes the many uncertainties about the sources of CO2, the primitive state of climate models, and so forth. ExxonMobil has made the early climate change memos cited in the recent reporting available to the public. The executives in the company were clearly aware that future climate change caused by burning fossil fuels could become a significant problem in the coming century. On the other hand, the internal reports do take into account important uncertainties about climate prognostication. In a recent article, the Los Angeles Times makes much of the fact that in the early 1990s, ExxonMobil researchers and engineers were evaluating how global warming might effect the company's arctic operations. As the LA Times however reports one the lead engineers ultimately ... ...did not recommend making investment decisions based on those scenarios, because he believed the science was still uncertain. However, he advised the company to consider and incorporate potential “negative outcomes,” including a rise in the sea level, which could threaten onshore infrastructure; bigger waves, which could damage offshore drilling structures; and thawing permafrost, which could make the earth buckle and slide under buildings and pipelines. Smoking gun? Not really. It would be surprising for executives and engineers not to evaluate all kinds of scenarios as they consider long term capital investments. And ExxonMobil researchers and executives were not alone in their uncertainty about the future trajectory of climate change. In 1992, the National Academy of Sciences issued a big report, Policy Implications of Greenhouse Warming: Mitigation, Adaptation and the Science Base, that, among other things, noted: Increases in atmospheric greenhouse gas concentrations probably will be followed by increases in average atmos[...]
Fri, 09 Oct 2015 17:03:00 -0400
(image) Back during the "energy crisis" of the 1970s, Congress voted to ban the export of oil produced in the United States. Why? Because the federal government had imposed domestic price controls to combat inflation and crude export restrictions were thought necessary to make those price controls effective. The economically idiotic price controls are long gone, but the export ban remains.It is past time to lift the ban and allow American producers to sell their crude in international markets.
A 2014 study by researchers at the Washington, D.C.-based think tank, Resources for the Future finds that lifting the ban would likely reduce domestic gasoline prices and boost investment in oil production. How so? Basically the fracking boom has so increased domestic production that it is right now outstripping refining capacity, thus enabling the bottlenecked refiners to buy domestic crude at discounted prices. Lower domestic prices also means that producers have less incentive to invest in more production. The RFF researchers note lifting the ban would mean that domestic oil prices would rise, but they calculate that greater efficiencies at refineries would more than offset that increase. The ultimate result would be gasoline prices that are between 1.7 and 4.5 cents per gallon lower.
They conclude that ...
... the economic arguments for lifting the ban are strong, based primarily on the gains from free trade and the example it sets when we live by our market principles. Such action will create winners and losers, however, and may lead to increases in greenhouse gases.
President Obama opposes lifting the ban as do various Congressional Democrats. Why? Sen. Edward Markey (D-Mass.) offered this rationale:
“It makes no sense to export our oil abroad when we still import millions of barrels of oil a day and consumers are saving at the pump because of discounted U.S. oil prices."
The House has acted. So now it's time for the Senate remove an export ban which is already 40 years past its sell-by date.
Tue, 21 Jul 2015 12:57:00 -0400
"You will always have people selling doom," says Reason's Science Correspondent Ronald Bailey. "It's lucrative and it makes you sound serious. But they will be proved wrong."
In his new book, The End of Doom: Environmental Renewal in the 21st Century, Bailey acknowledges the reality of climate change, but insists that humans will utilize technological advancements in solar, nuclear, and other forms of energy to manage any hazards long before oft-predicted calamity strikes. Bailey argues that world population will peak later this century and prices for all sorts of commodities—from oil to food to metals—will continue to fall as well.
Bailey paints a highly optimistic vision not just for the environment but for human flourishing in general, a point of view he concedes is generally not as good for book sales as visions of the apocalypse are. But he, notes, the optimistic vision does have the advantage of being true.
About six and a half minutes.
Produced By Anthony L. Fisher. Camera by Meredith Bragg, Paul Detrick and Zach Weissmueller.
Music: "3 Days Until Ressurection feat SkyRider" by S.J. Mellia (http://soundcloud.com/sj-mell)
Scroll down for downloadable versions and subscribe to Reason TV's YouTube Channel to get automatic updates when new videos go live.
Tue, 07 Jul 2015 11:07:00 -0400
(image) This month Cato Unbound is hosting a discussion on the question: Is China Winning the Race for Resources? The first essay on the topic is by economist Dambisa Moyo, author of the New York Times bestsellers Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa and How the West Was Lost: Fifty Years of Economic Folly and the Stark Choices Ahead. Her third book is Winner Take All: China’s Race for Resources and What it Means for the World.
In Moyo's initial essay, "Winner Take All: China and the Global Race for Resources," she argues:
Over the last decade, China has been buying up mountains and mines, agricultural land and oil fields, thus ensuring that it will have the upper hand in the future struggle for the world’s resources. Scarce, finite, and rapidly depleting global supplies of land, water, energy and minerals – the inputs to foodstuffs, automobiles, mobile phones, computers, and other products of higher living standards – cannot match the demand emanating from a rising world population, rapidly increasing global wealth, and urbanization.
Despite the recent declines in commodity prices, the consequences of long-term fundamental supply and demand imbalances remain; the two most serious are substantially higher commodity prices and the rising risk of violent resource-based conflict. In the aftermath of the 2008 financial crisis, commodity prices increased 150 percent, and already there are around 25 conflicts raging around the world with their origins in commodities, with many more likely to occur over the next decade.
Besides me, the other participants in the discussion that will unfold over this month are Justin Logan, Cato's director of foreign policy studies and Ian Bremmer, the president and founder of Eurasia Group. The schedule of responding essays is by Justin Logan, July 8, Ian Bremmer, July 10; and Ronald Bailey, July 13. Discussion to follow through the end of the month.
Just a hint at my take: The current economic supercycle is now on the downward side and China's neo-imperialist version of mercantilism will turn out to be economically futile.
Wed, 10 Jun 2015 11:16:00 -0400As I have explained earlier geologist M. King Hubbert famously predicted in 1956 that U.S. domestic oil production in the lower 48 states would peak around 1970 and begin to decline. In 1969 Hubbert predicted that world oil production would peak around 2000. Hubbert argued that oil production grows until half the recoverable resources in a field have been extracted, after which production falls off at essentially the same rate at which it expanded. This theory suggests a bell-shaped curve rising from first discovery to peak and descending to depletion. Hubbert has many peak oil disciples. For example, Princeton geologist Kenneth Deffeyes has written three whole books in the past decade and a half insisting that peak oil is nigh and disaster will soon follow in its wake: In two earlier books, Hubbert's Peak (2001) and Beyond Oil (2005), the geologist Kenneth S. Deffeyes laid out his rationale for concluding that world oil production would continue to follow a bell-shaped curve, with the smoothed-out peak somewhere in the middle of the first decade of this millennium--in keeping with the projections of his former colleague, the pioneering petroleum geologist M. King Hubbert. Deffeyes sees no reason to deviate from that prediction, despite the ensuing global recession and the extreme volatility in oil prices associated with it. In his view, the continued depletion of existing oil fields, compounded by shortsighted cutbacks in many exploration-and-development projects, virtually assures that the mid-decade peak in global oil production will never be surpassed. In When Oil Peaked, he revisits his original forecasts, examines the arguments that were made both for and against them, adds some new supporting material to his overall case, and applies the same mode of analysis to a number of other finite gifts from the Earth: mineral resources that may be also in shorter supply than "flat-Earth" prognosticators would have us believe. Who's a flat-earther now? Instead of falling, global oil production has soared. In the United States the Energy Information Administration predicts that domestic oil production will average 9.43 million barrels a day this year, the most since 1972. Given the fall in oil prices, exploration and production will trail off a bit to 9.3 million barrels per day next year. The low point in U.S. production was in 2008 when pumping averaged 5 million barrels per day. Peak oilists always underestimate the power of markets to mobilize human ingenuity. As it happens, I analyze the "peak everything" fallacy in my forthcoming book, The End of Doom: Environmental Renewal in the Twenty-First Century (St. Martin's Press, July 21).[...]
Wed, 04 Mar 2015 10:18:00 -0500
(image) All right, the headline might be a tad hasty. Nevertheless, geologist M. King Hubbert famously (and so far) correctly predicted in 1956 that U.S. domestic oil production in the lower 48 states would peak around 1970 and begin to decline. In 1969 Hubbert predicted that world oil production would peak around 2000. Hubbert argued that oil production grows until half the recoverable resources in a field have been extracted, after which production falls off at essentially the same rate at which it expanded. This theory suggests a bell-shaped curve rising from first discovery to peak and descending to depletion.
In fact, daily U.S. oil production did "peak" at an average 9.6 million barrels in 1971. In January, U.S. production averaged about 9.2 million barrels per day. If Hubbert were right this should not be happening. The problem with Hubbert's analysis and that of his many peak oilist devotees is that they overlook how market prices can change the definition of "recoverable resources" by means of encouraging new technologies and the search for new reserves. In the current case, fracking has made once unrecoverable resources recoverable. As a consequence, U.S. petroleum production has dramatically ramped up from its nadir of 5 million barrels per day in 2008.
As a result of flood of new supplies, storage tanks in the U.S. are filling up and the amount of stored crude is at an 80 year high. Since last summer the price of oil has fallen from $107 per barrel to $50 today. Some analysts are suggesting that this glut could cause a second price collapse to as low as $20 per barrel later this year. That would be only slightly above the average per barrel low (in real dollars) of $17.23 in 1998. If prices fall that far, then drilling and production will be cut back and prices will rise again. Nevertheless, what is happening now to U.S. and global oil production and prices was supposed to be impossible according to peak oil theorists.
Thu, 05 Feb 2015 08:30:00 -0500President Barack Obama's new declaration to forbid oil drilling on more millions of acres of Alaska just continues his pattern of attack on oil drilling. Obama's and the Environmental Protection Agency's (EPA) new attack on Alaska oil production can have a consequence that extreme environmentalists have dreamed about all along—shutting down all remaining production bringing oil from the Arctic coast. This would happen because the giant Alaskan pipeline must have minimal flow to function. Otherwise it must be totally dismantled in accord with the law allowing for its original construction. After years of delaying new production and causing billions of dollars of losses for the companies involved, Obama's new attack may be the final blow. Already the pipeline is carrying only some 25 percent of its capacity of two million barrels a day. Less input will allow corrosion and other damages, making it impossible to operate. Here is how the Obama administration has hampered oil drilling in Alaska: The government has virtually prohibited horizontal fracking for new oil drilling on any federal lands and a large part of Alaska, some half of all land west of the Mississippi. America's vast increase in oil production is because of the new procedure on private lands. They have forbid any drilling just to the east of the pipeline on the vast and desolate ANWR nature reserve. Although the reserve is the size of South Carolina, a drilling and production "pad" to produce oil would be the equivalent size to that of a major airport. The preserve is estimated to hold 10 billion barrels of recoverable oil. For years the EPA prevented the transport and drilling on the National (formerly Naval) Petroleum Reserve to the West side of the pipeline (see below). Also in 2010 the Obama Administration closed down half of its 23 million acres to any drilling. The government delayed for years allowing offshore drilling platforms (the water is only 100 feet deep) in the Arctic Ocean to the North of the pipeline. The outer continental shelf stretches over a hundred miles of very shallow ocean water and is thought to contain some 27 billion barrels. Obama's new order is to forbid any offshore drilling in the Chukchi Sea after Shell Oil Company has spent literally billions of dollars buying the leases and preparing to start drilling. When it finally was ready to drill two years ago, the EPA denied it an air quality permit (over the Arctic Ocean!) and thus cost it another lost year and millions more in losses. Obama's tradeoff for shutting down drilling in Alaska is a farce. He will "allow" drilling 50 miles offshore from the mid-Atlantic coast. First, this is immensely deep water also subject to hurricanes, compared to the shallow and calm hundred-foot-deep water that stretches for miles off North Alaska, is near a pipeline, and is already proven to have billions of barrels of oil. There is no pipeline infrastructure in the deep Atlantic, and his "green" buddies would tie up any proposed project for years in the courts. A seemingly unrelated incident in West Virginia offers another EPA "lesson" for investors. After permitting a form of coal mining called hill top removal, it suddenly reversed itself after the company involved had already spent millions of dollars preparing the site. There is a consistent pattern in all this—a warning to investors that the government can at any time, after millions or billions are invested, jerk the permits. The purpose can only be to intimidate future investors from future mining prospects, which they have already pretty well succeeded in doing. There is almost no new mining on any government lands (half of all the land west of the Mississippi). I[...]
Sun, 01 Feb 2015 12:00:00 -0500
In his second volume of memoirs, Special Deluxe (Blue Rider), rocker Neil Young focuses on the many cars he's owned. His recent obsession was a '59 Lincoln Continental he converted to electric, the "Lincvolt." He worked on it for years, dumped piles of cash into the project, and he's honest about the limitations of the results. (The car eventually caught fire due to human error.) Young grapples with the dilemma of the global warming-minded car fiend: how to reconcile the automobile's freedom and joy with the threat he thinks it poses to the planet's ecology?
Young recognizes electric cars won't catch on until they emulate the auto performance we're used to, and that the transition to alt-fuel or electric cars will best involve engines that can take oil as well, "allowing people the freedom of choice they deserve." Young wants to "motivate drivers to use cleaner fuel...with capitalism" while wrestling with the fact that "many hardworking people depended on this dirty, oil-harvesting activity as their...livelihood." -Brian Doherty