Peak Oil: Another Fine Jackpine Rant

[Jackpine Radical]

:rant: (offered for your approval before I submit it as an op-ed piece)
The current Republican party line holds that the high gas prices are the fault of the Democrats, who won't unleash the oil companies to drill wherever they want for the remaining dregs of that liquid black gold. Unfortunately, the oil price situation is a bit more complicated than that.

To begin with, experts are debating whether or not we have already reached the point of “peak oil--” the point at which more than half of the Earth's oil reserves are used up. That is the theoretical point at which the economists tell us that there is no escape from ever-rising prices.

There is no doubt that oil is a finite resource, and we are having to move into more and more costly extraction situations, with an accompanying upward drift in prices. At some price point, resources such as shale oil and oil sands will become economically worthwhile to exploit. Therefore the concept of peak oil is something of a moving target. One can use up half of the oil available by certain extraction methods without having used up half the oil that might be available if the price were high enough. Also, of course there is the possibility of new and cheaper extraction technologies, which also clouds the issue.

I'm not at all confident that we have good data on precisely what the world's oil reserves are. It is not in the interests of the industry for those numbers to be available, so they aren't, at least with any accuracy. They will give us whatever numbers best serve their interests of the moment.

Also, in the long run, of course oil prices must go up as the commodity runs low. In the very short term, however, gasoline prices seem rather unrelated to supply. I think we are being grossly manipulated, "Enron-ed," at the pumps. The economist Ravi Batra lays out some of the relevant data about the oil monopoly in his recent book The New Golden Age. Here Batra points out some things like the difference in the natural gas versus oil markets. Natural gas fluctuates wildly with demand--a fact Batra attributes to the fact that the natural-gas market is divided up among many owners & is therefore fairly competitive. Oil, on the other hand, is much less responsive to supply-demand fluctuations due to the fact that the supply and the prices are controlled by a relatively few gigantic interests.

If you look at the data, you can see the consequences of monopoly in the oil market quite readily. People are simply driving less, and US gasoline usage is currently something like 7% below last year, but—despite recent drops—the prices are much higher than a year ago. To make up the difference, the poor oil industry is having to export some of the surplus gasoline that is clogging their storage tanks. Gasoline exports from the US to other countries is up 30% over last year.

One interesting side-effect of the near-monopolization of the oil occurred recently when Exxon-Mobil announced profits of $11.7 last quarter.. These profits were the highest on record for any American corporation in history. You may be surprised that Exxon stock prices fell as a result of this annuncement. Wall Street was disappointed that the profits were not even higher.

To return to the long-term scenario, there is no doubt a true supply-demand curve resulting in increasingly short supplies of a finite and irreplaceable resource, but there is also a huge amount of price manipulation, driven by forces such as speculation and corrupt monopolistic behaviors, along the way. Economists know that effective regulation could quite readily bring about a substantial drop in prices in the short run by the simple expedient of driving the forces of speculation out of the scene--but of course ultimately the physical reality of shortages will catch up with us. My real concern, though, is with the effects of unbridled use of fossil fuels and oil-based pesticides, fertilizers, and other chemicals on the environment.

To put my fears a bit more straightforwardly, regardless of the exact point of peak oil, I'm afraid that we may have enough of the stuff to kill ourselves with. We very badly need to get off the fossil-fuel habit--and quickly--in the interest of the biosphere, regardless of the ultimate availability of the stuff.

[donco6]

1. Excellent.

Liked this part best:

If you look at the data, you can see the consequences of monopoly in the oil market quite readily. People are simply driving less, and US gasoline usage is currently something like 7% below last year, but—despite recent drops—the prices are much higher than a year ago. To make up the difference, the poor oil industry is having to export some of the surplus gasoline that is clogging their storage tanks. Gasoline exports from the US to other countries is up 30% over last year.

One interesting side-effect of the near-monopolization of the oil occurred recently when Exxon-Mobil announced profits of $11.7 last quarter.. These profits were the highest on record for any American corporation in history. You may be surprised that Exxon stock prices fell as a result of this annuncement. Wall Street was disappointed that the profits were not even higher.

[Jackpine Radical]

2. Thank you.

I'm especially grateful you posted this excerpt because on rereading, I noticed the little grammatical error: "exports ... is up...." Sounds like I been taking grammar lessons from Bush. Too late to edit here, but I got it before submitting to the paper.

[scarletwoman]

3. Very well done! It lays out the important fundamentals quite clearly.

One nit-picky bit of criticism -- in your 6th paragraph, this sentence: To make up the difference, the poor oil industry is having to export some of the surplus gasoline...

I'd drop the word "poor". It injects a sacarstic note in an otherwise admirably dispassionate analysis. The strength of your case is made through your factual approach; snark is not only not necessary, it detracts from the overall tone, imho.

That tiny criticism aside, it's a wonderful piece! Let us know when and where it gets published!

:loveya:
sw

[Jackpine Radical]

5. I submitted it to the Chippewa Herald, which has a history of

always publishing everything I've sent them, despite their distinct conservative bias. I think your proposed edit was pretty much on target & wish I had seen it before I submitted.

Thanks, m'dear.

[scarletwoman]

6. Good morning! So what's the usual lead time between your submissions & their appearance?

I went to the Chippewa Herald website, but I couldn't find an editorial section.

I'm so glad to know that your pieces get published -- that your well-considered and cogent point of view is made available to a wider audience. Way to go!
:yourock:

sw

[Jackpine Radical]

9. The lead time is pretty variable--a week or 10 days.

And your observation is correct--last I looked, their op-ed stuff isn't online. I think they count on that stuff to sell their hardcopies.

[trof]

4. I like it. It's how I feel too.

The main point (for me and many others) is not WHAT we burn in internal combustion engines.
Whether it's a finite resource like oil, or something we make out of corn or sugar cane, it's the fact THAT we burn, anything.
K&R

[Joe Fields]

7. very nicely done. k&r.

The conundrum of oil was that, when oil was 22 dollars a barrel, it was too costly to drill here at home, in fields with proven reserves. That was the basis for the rise in the amount of oil we imported. It has only been within the last few years that oil has been worth drilling for here.

I'm with you on the peak oil. I'm also with you 100 percent that we have enough to kill the planet with. I also am smart enough to realize that there are plenty of leases NOT being used, where the oil companies know there is oil, that they are holding on to and not using, because the bottom line is this: The Bush/Cheney energy policy is to allow unbridled drilling in any location in the U.S. This is why the republicans are making such a big issue about drilling offshore. If they win this battle, then they will win the next one and the next one, until they (the oil companies) are allowed to drill anywhere they see fit.

[Hugin]

8. Well worth the read.

I really agree with your ending. Yes! Yes! Yes! Even if there is currently an adequate supply in the short-term,
our overuse of the stuff needs to end.

I wonder how much of that 7% reduction is people realizing the environmental implications and reducing their use based
on concerns about the damage? I personally know a few of those people. I've already adjusted what I can and I have plans
to reduce even more based on the environmental concerns. Oddly enough, conversion does cost something over continuing
with the same-old status quo. I'd much rather pay that extra on setting up a reduction plan than hand it over to the
oil companies as an ill conceived regressive tax as a way of forcing a change.

[Jackpine Radical]

10. This is the kind of hole that "market forces" can never dig us out of, despite

all those libertarian/conservative mewlings about Adam Smith's Invisible Hand. First, we have a monopoly system, not a competitive one; and second, even if the free market were operating, the self-destructive course is the one that is profitable in the short term. Just like the tobacco industry--there is no concern for the long-term effects of the industry on the people it "serves."

[Hugin]

11. I was musing over my bill last week...

looking at the usage charts and I'm down by about 12% since last year and much more from two years ago.

I haven't been hot and I'm not sitting in the dark more, but, my usage is down a significant amount.

I did find it remarkable they had managed to charge me roughly the same amount, tho. The cost didn't reflect
my changes. Very odd. No, there's no hidden hand at work. :eyes: