Original story published on the Internet
David Sadler For Congress (2002) 12th CD/Illinois
In the left column is a peak oil story, 'The Quest For Oil,' by John Myers.
In the right column are my comments on the story, paragraph by paragraph.

This will be a two part series.
Watch for the second part titled, 'The Quest for Oil: It Gets Worse.'

In the second part, we'll show that when discussing the energy supply, peak oil is not as bad (or as soon) as it gets.

-- David Sadler --


The Quest For Oil
By John Myers
The Daily Reckoning
Paris, France
Wednesday, 27 August 2003

Comments by:
David Sadler
www.david-sadler.org
2003.08.29

Oil is the largest single traded commodity in the world. It supplies about 95% of all transportation fuels and 40% of the world's commercial energy. It also provides feedstock for thousands of manufactured products and is critical for food production.

Yeah, it drives the global industrialized economy.

While global consumption has continued to rise steadily, worldwide oil discoveries have declined progressively since the 1960s. The challenge for oil producers is that each year, the world consumes more than three times the amount of oil that is discovered.

Resupply (discovery) is not meeting consumption.

Yes, the world is 'running out' of oil in that it is a limited resource and we are using it up.

However, there is still a lot of oil left.

The problem is, CONSUMPTION EXCEEDS THE DISCOVERY OF NEW RESERVES.

Aggravating the situation is that consumption (demand) is growing at a very fast pace while supplies (reserves, discoveries) are shrinking.

This presents a supply and demand problem, which is going to impact the PRICE OF ENERGY.

This price increase for energy is going to affect the global economy because the industrialized world runs on energy.

Now its time to do the simple math and think forward.

"The time has come for a rational response to the inescapable reality that oil is finite and available supplies will soon be insufficient to satisfy growing demand," writes Dr. Colin J. Campbell, a petroleum geologist at the London-based Oil Depletion Analysis Centre.

The problem is recognized and acknowledged. But now, watch as they sugar coat the problem by offering 'promises' AND IGNORE THE ULTIMATE SOLUTION!

THEY STATE THE PROBLEM,
OFFER A PROMISE OF INCREASED SUPPLY,
BUT IGNORE THE BRIDGE MOVING US AWAY FROM THE PROBLEM TOWARDS A SOLUTION!

Maybe a bridge doesn't exist.

Maybe The Daily Reckoning is suggesting we pursue short-term profits, much like power companies maximizing their profits by not reinvesting in their infrastructure. Eventually, the infrastructure collapses creating a crisis requiring immediate attention paid for by the struggling taxpayer writing their checks out in the dark.

" The ... peaking of oil will never be accurately predicted until after the fact. But the event will occur, and my analysis is leaning me more by the month, the worry that peaking is at hand; not years away. If it turns out I'm wrong, then I'm wrong. But if I'm right, the unforeseen consequences are devastating...But unfortunately the world has no Plan B if I'm right. The facts are too serious to ignore. Sadly the pessimist-optimist debate started too late. "
-- Matthew Simmons, CFR member and G.W. Bush energy advisor to the secret Energy Task Force headed by Dick Cheney before 9/11, speaking candidly about Peak Oil at the May 27th, 2003 second international conference of the Association for the Study of Peak Oil (ASPO) which was meeting at the French Petroleum Institute (IFP) in Paris --

Q. Last year, you defended the administration's concept of depletion ... and the hydrogen proposal is really a fantasy. Don't you think it is time for a more enlightened energy policy [from the G.W. Bush Administration].

A. " That would be wonderful but I think that it is going to take a while. There really aren't any good energy solutions for bridges, to buy some time, from oil and gas to the alternatives. The only alternative right now is to shrink our economies. This is a tough question and I have no answers. " -- Matthew Simmons --

A growing number of analysts predict that global oil production will peak within the coming decade and then start to decline, leading to higher energy prices with major economic consequences.

It has already peaked in many areas including the US (1970) and the old USSR (1980s).

Big Oil acknowledges the increasing difficulties of finding new sources of petroleum to replenish reserves. In an effort to reverse this trend, petroleum companies are turning to technology.

Oil discovery and recovery technology has been a booming business for decades. Thinking that such technology is going to reverse geological and consumptive realities is wishful thinking.

The oil service industry is providing the instruments to locate previously undiscovered reserves and the tools to glean existing reserves from abandoned wells.

Sounds like an alcoholic licking the inside of the glass.

Since petroleum technology and service companies hold the keys to the world's remaining oil reserves, that puts them at the top of the investment chain, in my opinion. And just as it was in software 20 years ago, picking the eventual winners will lead to incredible investment fortunes.

Moreover, the petroleum industry, and the companies that service it, have the full weight and support of the federal government [for what it's worth... ]. Early in his presidency, George W. Bush announced that one of his administration's priorities was to provide the nation with secure energy supplies. The president insisted that part of his strategy was to maximize North American production.

The world economies are collapsing, but they 'promise' you can make a big profit on your neighbor's misery!

No doubt, the oil companies will need government assistance.

This means that those who volunteer investments have a chance at a small and short-lived profit. Those who choose not to invest will have the money taken from them in taxes and given to the oil companies for 'national security' reasons.

Energy is a strategic requirement of the national security infrastructure. Obviously, it can not be allowed to fail. So the people who run the infrastructure pocket large profits by gouging the consumer each month on utility bills, then maximize the profit by not reinvesting in the maintenance and improvement of the infrastructure.

In my view, this is criminal behavior. It is highway robbery. I would classify this activity as being much more harmful to society than smoking marijuana or robbing a liquor store.

Washington's Oil Doctrine was announced in a May 2001 National Energy Policy report. The report concluded: "America must build strong relationships with energy- producing nations in our own hemisphere, improving the outlook for trade, investment, and reliable supplies... As a result, the United States will rely increasingly on imports of both natural gas and oil from Canada."

 

Big Oil has admitted that finding large oil pools has become a major problem. One remedy that has worked at the corporate level has been a rash of takeovers.

And a rash of invasions followed by occupation

In May 2001, Conoco announced that its Canadian unit would buy Gulf Canada Resources for $4.33 billion; in August of the same year, El Paso Energy acquired Canadian-based Velvet Exploration Ltd. for $228 million. These are just two acquisitions in a string of Canadian petroleum companies that fell into U.S. hands.

 

But although buying reserves might look good on a balance sheet, it doesn't add a drop of new oil to the world's reserve base.

This is a key point.

The only way to do that is through exploration. After years of falling exploration budgets, oil companies are once again aggressively searching out new reserves.

According to a 2003 survey, Canada will set the global pace for exploration and development spending this year.

If they come up empty, push the panic button.

The money will be fueled by U.S. majors and independents shifting capital to Canadian activities, says investment banker Friedman, Billings, Ramsey & Co. Inc. The Virginia- based firm projects U.S. exploration and development spending will edge up by a mere 0.2% to $32.08 billion, while Canadian spending will race ahead by 12% to $11.9 billion.

Oil exploration companies are fulfilling Friedman & Co.'s prediction. The total U.S. count of working rigs at the end of June was 1,067 - up from 838 units that were working in June 2002. Renewed exploration is even more remarkable in Canada, where 337 rotary rigs were working at the end of June compared to 210 in June 2002.

The petroleum industry is more optimistic about its chances of finding new oil and gas than Washington is. I will get to why Big Oil has high hopes in a minute. But first let's look at the energy quagmire that our federal government has gotten us into.

In June, Energy Secretary Spencer Abraham called for more conservation and fuel-switching by utilities. His concern is over low gas inventories and high summer demand, limiting storage injections ahead of next winter. In a letter to 30 U.S. lawmakers, Abraham wrote that in the Department of Energy's view, there are only 'limited opportunities' to boost supplies over the next 12-18 months.

 

Of course, the federal government has good reason to fret about oil. The Middle East, home to two-thirds of the world's oil reserves, remains a tangled mess with America taking pot shots from the world press while our GIs are taking rifle fire from irate Iraqis.

But remember, we're there to liberate and improve Iraqi lives. That's why the Iraqis hate us. The fact that the US/UK/Israel are stealing Iraq's oil has nothing to do with them shooting at us, I'm sure.

Baghdad fell to U.S. forces in early April. Since then, efforts to restart Iraq's oil industry have been delayed by looting, sabotage and technical problems. According to The Wall Street Journal, 'Continued attacks threaten to set back U.S. efforts to pacify Iraq's restive populace. Long lines are again a common sight at Baghdad gas stations, with drivers waiting hours to fill up at prices still higher than before the war.'

That is really a remarkable quote.

Replace the word 'pacify' with any of the following words, and you'll see why the Iraqi's and their Arab neighbors are shooting at us. (oppress, defeat, kill, imprison, disarm, starve, poison).

The use of the phrase 'restive populace' is also interesting. Substitute these words for 'restive populace.' (freedom fighters, Iraqi homeland patriots, defensive militia).

In June, two Iraqi oil pipelines exploded - merely the latest violence that has occurred in an occupied, but not yet conquered, country. The first explosion shut down a key fuel pipeline 150 kilometers west of Baghdad. The second pipeline carried crude oil to Syria.

Look how effective those two simple acts of sabotage were to slow the theft of Iraqi oil. Expect more oil infrastructure sabotage from source to consumption. The US/UK/Israel started the war, but it is far from over.

Saudi Arabia, the world's oil kingpin, holding one-third of the world's conventional reserves, has also been experiencing unprecedented terrorism.

Much of this 'terrorism' is CIA, NWO contractor initiated. Some of it from comes locals and sympathizers who despise the US/UK/Israel installed and maintained Saud family.

The Saudi Ras Tanura oil terminal, the largest in the world, used to be a stop on sightseeing tours. But today, the facility that processes 4.5 million barrels per day - or half of the oil that the kingdom produces - is surrounded by elite security troops. The tightened security follows a string of attacks by extremists in the country, including a June gun battle between al Qaeda and police in the holy city of Mecca.

Note the word 'extremists.' The spin-smiths can't consider the use of terms such as 'freedom fighters' or 'defensive militias' or 'popular resistance.' Those are reserved to describe the overt and covert insurrections sponsored by the US/UK/Israel.

But blanket security may be an impossible proposition in this desert nation where oil is almost as plentiful as water.

They mean 'drinkable water.'

A retired oil engineer who spent 30 years working in Saudi Arabia told me that there are many choke points inside the country where a bomb could disrupt the flow of Saudi oil.

I'm no engineer and I've been saying that for years, before 9-11. Remember Y2K?

Al Qaeda understands that petroleum is America's Achilles' heel.

Funny. The people in my church don't even understand this. Here's how they reason...

1) George W. Bush has prayer groups in the White House,

2) Bush says this war is to liberate the Iraqis from plastic shredders,

3) Bush also says Iraq poses a direct and imminent threat to America's mainland,

4) Bush says that this has nothing to do with oil and everything to do with the evil-doers in the Middle East.

The majority of the people in the church I attend and the majority of the American people have bought this neocon propaganda hook, line and sinker.

In June U.S. intelligence warned that al Qaeda may be targeting petroleum facilities and pipelines in Texas. Ironically, an attack on Texas would do less strategic harm to the United States than an attack on Saudi Arabia.

That's true to a certain extent.

Saudi oil is such a large percentage of world output that a significant disruption of that source for any extended length of time, would bring the industrialized world to its knees.

But discounting the affects resulting from the destruction of US based pipelines and refineries is naive.

Consider the gas lines, social disruption and $4.00 per gallon gas prices Phoenix, AZ just witnessed. All that was due to a simple 'rupture' of the L.A. to Phoenix gas line.

As of this past April, the United States imported a record 12.3 million barrels per day (mb/d), almost 6% more oil than it was importing in April 2002.

Anyone who doesn't get a chill up their spine over that number just doesn't understand how close we are to the edge of the cliff.

Meanwhile, U.S. oil production continued to slide down the slippery slope of decay. Our nation is producing 5.8 mb/d of oil, down from the 1970 peak when America produced 11.3 mb/d. Over the past few years, U.S. production has declined at a rate of 4% per year.

And we are supposed to believe that the oil companies are just now concentrating on new discovery and recovery technology!?!? Notice also that the article is confirming the US reached its peak oil in 1970.

Yet new technologies promise not only the discovery of new oil and gas fields but also the ability to extract new hydrocarbons from abandoned oil fields.

Promises, promises.

Just how important is this endeavor? A study completed in 1995 showed that in the United States from 1983 to 1992, about 85%, or 20 billion barrels, of proven oil reserves were from old fields.

"20 billion barrels, of proven oil reserves were from old fields" means what in terms of SOLVING OUR ENERGY PROBLEM?

The world consumes 1 billion barrels of oil every 12 days.

The U.S. IMPORTS 12.3 million barrels per day.

Taking the figure of 20 billion barrels cited by the article...

20 billion / 12.3 million = 1626 days = 4.5 years at current US import consumption rates.

If the world was normal, but growing, how much time is gained by new recovery technology used on old US wells? Not much.

But the world isn't normal. Peak oil and the neocons have made certain of that.

The world is a very volatile place.

The reserves may or may not be there, but one thing is certain. The recovery, transport, refining and delivery of the reserves can not be assured.

In other words, there is now a large factor of sabotage and interdiction to be considered along with the dismal numbers already presented to us from the geologic reality of peak oil.

Taking the optimistic numbers this article from France has given us, we must factor in the possibility of significant reductions and disruptions in the imported supply.

We must consider the affect upon domestic supplies and strategic reserves should such an interruption in oil imports occur.

But wait. There's an even larger and more immediate threat to the US national security. I emphasized this during my 2002 campaign for congress in my call for a national Manhattan Project to assure US self-sufficiency in our strategic national infrastructure requirements.

As we continue, keep in mind the threats to US national security posed by

1) the combination of peak oil and

2) an intentional interruption of oil imports.

To recover old oil and discover new oil, the petroleum industry has armed itself with a bevy of new technologies. The big oil companies are betting that they can reverse the decline of America's petroleum production and boost Canada's production. If they are successful, the companies that deliver effective oil service technologies will generate windfall profits.

What a self-serving statement that is. Expect to hear, "The oil companies are too big to fail. The taxpayer MUST subsidize them and pay $5.00 / gallon at the pump to boot, and, oh, by the way, we need to occupy the oil fields of the rest of the world.

The Oil Wars are deadly business in more ways than one.

We are in this fix because of our government's criminal negligence on the matter of sustainable energy policy.

The industrialized world is facing a meltdown from peak oil. This threat is compounded by the possibility of an intentional disruption of oil recovery and delivery.

If such an interdiction occurs, the US will depend entirely upon domestic and regional (Canadian, Mexican, Caribbean) oil imports.

But how dependable and vulnerable is that?

The tax base is going to dry up along with the wells. Those who take comfort in a corporate or government pension had better start now trying to find another source of income if they live to see retirement.


Coming next part II. 'It Gets Worse.'




Revision Notes