Does Obama Understand Oil Scarcity?
A lot of readers are twanging on me for refraining to castigate President-elect Obama for deeds yet undone. They’re discouraged by the advisors and cabinet secretaries he’s picked, ostensibly because the crew coming in are Washington “insiders,” meaning they can’t possibly see or do things differently.
My own starting point for this is the belief that in the years just ahead any sociopolitical entity organized at the giant scale will flounder — this includes everything from the federal government to global corporations to factory farms to centralized high schools to national retail chains. So even expecting Mr. Obama’s government to act effectively may be asking too much in a situation that will require mostly local action.
The meta-situation will be the overall decline of energy resources and the necessary downscaling of our activities. We are obviously in a transitional period between the old profligate energy economy and the new economy of relative scarcity. We have no idea how disorderly this transition will be, but there is certainly potential for tremendous instability in daily life.
For a while, perhaps, the federal government may retain some ability to affect the way things go, or give the appearance of doing so. This raises the issue of what Mr. Obama and his team really know about our energy predicament. The president-elect has made some noises — recently on the 60 Minutes show — that he understands something about the current price dislocations in the oil markets resulting from the larger financial turmoil. He alluded to the public’s erroneous notion that current low-ish oil prices mean the oil problem is over. But does the incoming president know some of the following details?
For instance, does Mr. O know that global oil production appears to have peaked at around 85 million barrels a day, with poor prospects of ever getting beyond that? This single naked fact has broad ramifications, above all whether we can continue to think in terms of industrial “growth” as the benchmark for economic health. There are many interpretations of the current financial fiasco. Some of them are based on long-term technical wave theories. A more down-to-earth view suggests the shock of peak oil — though it doesn’t exclude wave theories.
Does Mr. O know that world oil discovery has fallen to insignificant levels after peaking long ago in the 1960s. Does he know we are finding no more super-giant oil fields on the scale of Arabia’s Ghawar or Mexico’s Cantarell, which have supplied most of the world’s oil for the past forty years and are now running down? Does he know that you can’t produce oil that hasn’t been discovered? Does Mr. O know that virtually all the oil-producing nations have entered production decline. Surely someone has whispered in his ear about the IEA’s projection that global oil production would fall 9.1 percent in the coming year.
Does Mr. O know that oil exports have been trending to decline at a steeper rate than oil depletion? That is, the exporting nations are losing their ability to send oil to the importers (like us) at a rate mathematically greater than the run-down in their production. They are using more of their own oil even while their production is going down. For example, Mexico is depleting overall at more than 9 percent a year (with the Cantarell field alone running down at more than 15 percent annually). Does he know Mexico’s net exports are crashing? Mexico has been our number three leading source of imports. In a very few years they will not be able to send us any oil. A deluded American public has no idea that this is happening. Will Mr. O explain it to them?
Does Mr. O know that the “old major” oil companies (Exxon-Mobil, Texaco, Shell, et al) produce less than 10 percent of the world’s oil now — the other 90 percent coming from the foreign nationals — and that blaming them for the situation is a waste of time. The foreign national companies are changing the landscape of the oil markets. They’re making special contracts with “favored customers” rather than just putting their oil up for auction on the futures markets. One thing you can infer from this is that we’re entering a period of national oil hoarding based on coming scarcity. The futures markets were based on relative abundance, and they will not operate very well in a climate of scarcity. Consider that the USA will probably not be among the “favored customers” for several oil producing nations. Figure that in with the coming loss of imports from Mexico (and Venezuela and Nigeria).
Does Mr. O know that the current drop in oil prices (due to massive financial deleveraging) has resulted in the cancellation or postponement of the very oil production projects that were hoped to offset the coming depletions? It’s not worth it for an oil enterprise (private or foreign) to drill in deepwater or venture into arctic regions when oil is priced at $50-a-barrel — if it costs $80 to get the stuff out of the ground. It’s not worth digging up tar sands in Canada at that price. This halt in activity is going to boomerang back on the US in a year or so, with depletions ongoing everywhere and no new oil to take its place. Does Mr. O know that we’re just as likely to see shortages as a resuming rise in oil prices here in the US during his coming term?
Does Mr. O know that the current re-inflation program being run by the Treasury and the Federal Reserve is so egregious that it may lead to loss of the dollar’s legitimacy, to the renunciation of dollar holdings by other nations, to the down-rating of US Treasury debt instruments, and finally to an inability of the US to purchase foreign oil — which comprises two-thirds of all the oil we use every day?
Does Mr. O know that we are not going to run the US automobile and truck fleet on any combination of alt.fuels? Continuing it by other means is a fantasy that will only disappoint us. The motoring era is coming to an end. Heroic investments in highway infrastructure to create jobs will be a tragic waste of our dwindling capital. The pressure for Mr. O to make these misinvestments will be enormous, perhaps insurmountable. There are probably not a thousand people in the US who agree with what I am saying — meaning the consensus to keep the cars running at all costs overwhelms reality at the moment. Does Mr. O’s concept of “change” include the possibility that we may have to live very differently in this society?
Chances are, if Mr. O knows any of these things he might be crucified in the polls and the media by acknowledging them. The only “change” that America really wants to hear about is evicting George Bush from the White House. They’re sick of him and all the disturbance he has caused in their financial affairs. But beyond that, the American public is deathly afraid of the kind of changes we actually face — such as, the end of consumer culture, the gross loss of value in suburban real estate (which forms the bulk of the middle class’s private wealth), the prospect of food and fuel scarcities, the need to re-localize our lives, the need to physically shape up to stop the costly and unnecessary drain on our medical resources, to grow more of our own food, to work harder at things that actually matter, and to save whatever we can for a difficult future.
If Mr. O introduces any of these themes into the national discourse, the public and the media and the bloggers will all dump on him for failing to prop up the wild party that American life became in recent decades.
Regards,
Jim Kunstler
December 04, 2008
James Howard Kunstler
James Howard Kunstler is perhaps best known for The Long Emergency, which predicted the financial meltdown and the implications of the peak oil problem. The Geography of Nowhere , about the fiasco of suburbia, is a campus cult classic among the architecture and urban planning students. It was followed by a sequel, Home From Nowhere and The City in Mind: Notes on the Urban Condition . Mr. Kunstler has also authored 10 novels including World Made By Hand, a story set in America's post-oil future. His articles have appeared in The New York Times, The Washington Post, Rolling Stone and The Atlantic Monthly.
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I can relate to the questions posed by the above writer because most people have simply not been taught “creative thinking” and have difficulty thinking outside the box. I agree that politicians are hamstrung by public perceptions and rarely venture beyond “SAFE” topics and conventional solutions. We in Canada are now starting to be impacted by the unprecedented foolishmess and malfeasance of numerous banksters and corporate executives feathering their own nests with reckless disregard for the EFFECTS on the general poulation and the economy as a whole. I submit that our “leaders”? have on the whole a relatively POOR understanding of basic economics and have for the most part been miseducated.
Our Prime Minister here in Canada is currently experiencing the very effect the writer envisons; being dumped on by the opposition parties who claim he is “not doing enough” to stimulate the economy and bail out the automobile industry. Two key opposition leaders have stirred up such a frenzy with wild eyed radicals rallying in major cities that one could envison “mob rule” if they do not get their way, it could get quite ugly if the government does not turn on the printing presses, so I sent the following analysis to the Prime Minister and some media outlets hoping to generte some intelligent debate>
Your government has made some effort to REDUCE the national debt which is highly commendable contrary to Jack Laytons reckless economic theories but at this time it might just be more prudent to increase Canada’s gold holdings as I have previously alluded too. The chances are EXCELLENT that gold will increase in value far faster than interest on the national debt will accumulate at current low rates!
In fact, given the TRILLIONS of fiat dollars the U.S. is injecting into the system to “restore confidence” and the very real possibility of further deterioration and collapse of additional bubbles such as the losses sustained by insurance companies stock market losses, commercial real estate collapsing as retailers are bankrupted, defaults on credit cards as jobs are lost, the potential deleveraging is absolutely scary! That is to say nothing of the INFLATION that is sure to follow the unprecedented expansion of the money supply
To set the stage for possible creative solutions let me detail some of the economic principles I have learned over the years!
1) Anything that is physically possible and desirable can and should be made financially possible!
The only questions that need to be asked are, A) do we have the necessary raw materials to build whatever is of benefit to society as a whole, B) do we have people ready willing and able to do the work necessary to create the things that our society needs, C) if the necessary skills are not adequate do we have people that can be TRAINED to meet the perceived needs?
When these criteria have been met then the only question remaining is HOW do we pay for it? Instead of going to the Central Bank and having THEM print the necessary funds for us at the price of paying them interest that will double the cost by the time the bonds are retired, why not just bypass them and CREATE the MONEY AS A CREDIT retired by taxes at half the cost? Impossible you say, the same thing that makes a central bank created fiat dollar good, (the taxing power of the government) will make a dollar issued as a CREDIT to utilize Canadian raw materials and labour good!
The only cost would be bookkeeping easily handled by our already bloated bureaucrazy, all it takes is some creative thinking, a few new laws to enable and implement an economic stimulus of infrastructure projects that are sorely needed and held back by a supposed lack of money!
I surmise that even if the present fiat system were allowed to continue for a time as far as COMMERCIAL and personal financing is concerned, while adding at least partial backing of our money by Gold could enhance Canada’s already leading performance among the G8! That combined with the potential reduction in taxes, while adding thousands of jobs through a major infastructore program would be a tremendous economic stimulus as more dollars were left in consumers pockets!
This is only a brief overview and I would be happy to make myself available to discuss details further should you be interested in my idess!
MY BEST TO YOU, MYRON
The figure of 9.1% decline is actually decline in the rate of oil production, not the oil production itself. Still alarming, but that first number startled me bad.
The Pres of USA bribed (paid boo coo bucks) to Canada’s politicians to hey hey hey do things our way: we have gotten away with it for years: where the folks at the top have it all; can do whatever they want & never have to pay for it! THUS, your fine country began hobnobbing with criminals & became as corrupt as ours is; they have a “plan” called the NWO; interestingly enough: they write laws just for looks on the books; & each administration changes the laws backdating them even as they did for the Colombia Trade Agreement when $800,000 brought back by Bill Clinton for Hillary’s campaign; and of course the direct targeting & killing of folks trying to get a decent wage for living can be traced back to the criminal & corrupt USA Corps backed up by the USA Gov; who work together to enslave the people; sorry Canada; Mexico is already in civil war due to this: perhaps our best bet is to let the people join together & rid our land of criminals & crooks; the COUNTRY consists of the PEOPLE & the LAND; our folks here have RULED running it just like a plantation & it’s mentality is SLAVERY & THE PEOPLE MUST PAY! Hillary in the White House: fired long term employees, hired new ones, lesser pay, working only 39 hours so they could NOT get health benefits; NO ONE was to LOOK or SPEAK to HER: THIS is the very background of what is going on in OUR nation & now into YOURS. They keep all the $ at the top; & NOTHING is EVER DONE for social need. THIS is what they like to call “democracy”; it is what WE call SLAVERY. ********unthinkable! undrinkable! chemicals now so put into sodas & food supply change it chemical warfare to the maximum; India uses Pepsi & cokes as pesticides: figure it out; asparteme contains FORMALDEHDYE one of the deadliest & most dangerous toxins on the planet: FDA had no problem pushing right through for Don Rumsfeld: & now not only in sodas but in every possible food that there is! Prominent politicians profit from poisoning the people: deliberately: and write the laws saying can’t hold them responsible.
My best to all of you! Well change is what you wanted and change is what you got ! unfortunitly Mr. O meant the change in your pocket that your going to be left with. The dip sticks like Reed and Frank and “Palowse”( not miss spelled) Are to dumb to run anything but there mouths. If this country thinks that re-electing these imbeciles time and time again is any indication of the brains or caliber of people that come from these states we are all in one hell of a lot of trouble! “Chicago” is the Vatican compared to D.C. THESE ARE BIG TIME CROOKS, THAY DON’T ASK FOR THE MONEY THAY JUST TAKE IT! THEN THEY HAVE THE BALLS TO BLAME BUSH, SURE HE’S NO BARGIAN, BUT AT LEAST HE’S NOT A CROOK. JUST REMEBER AS LITTLE AS 2 YEARS AGO IF YOU CAN, EVERYONE WAS SO HAPPY ,AND THE THE DEM’S TOOK OVER DEREG THIS DEREG THAT EVERYTHINGS JUST FINE , SEE EVEN I GOT A SWEET JUMBO {Mr. O and Frank, Dean} and just keep these dinosaurs in for ever and see what your children have left. Obama/ Biden
Or is it Dumb and Dumber.you will see soon enough, Way to go U.S.
Castigate for “deeds undone” you say? Uh… let’s look at the Born Alive Act, which Obama, America’s Next Jimmy Carter, was the ONLY senator to vote against. What is the Born Alive Act you say? If a baby is born alive after a botched abortion, the child would have the right to live. But not in Obama’s PC world.
No doubt, you’d be waiting in the 1933 on Hitler for his deeds “yet undone,” too, or maybe even be telling us, “Hey, Jim Jones hasn’t done anything yet!” even as he was mixing the Kool-Aide in the Guyanan jungle.
Yes Mr. Kunstler, Mr. O. most certainly knows. His advisors are well read and have read your books. Mr. O’s public posture won’t always agree with the real facts because unfortunately the public isn’t ready to get slapped in the face with the real facts. That would create an altogether new problem and his administration will already have a full plate when they move into office on Jan. 20.
It’s up to folks like yourself to spread the word about peak oil. Thanks to your efforts the knowledge will soon reach critical mass and become more-or-less accepted fact in the same way as global warming. Cheers.