THE ENERGY PREDICAMENT
by James Howard Kunstler. April 19, 2007
Oil ended 2006 roughly where it began, at just over
$60 a barrel. This reassured the public that all talk about Peak Oil was
hysterical blather from a lunatic fringe. It was reinforced by the publication
of the mendacious Cambridge Energy Research Associates (CERA) report issued
this fall - a tragic document put out by a giant public relations firm
representing the oil industry - with the mission of staving off windfall
profits taxes and other regulatory moves that a true resource emergency might
recommend.
But beyond this debate, in the background, another
ominous trend can account for the stalling of oil prices in 2006 - totally
unrecognized by the public and ignored by the news media: Prices on the oil
futures market leveled off because the Third World has effectively dropped
out of bidding for it - and using it. They cannot afford it at $60 a
barrel.
The Third World has entered an era of energy destitution
and it is manifesting itself in symptoms like local resource wars, genocides,
falling life expectancies, and in many places a near-total unraveling of
the sociopolitical order. American mall-walkers and theme park visitors are
oblivious to this tragic process, but it is perhaps the major reason why
we are not now suffering from $100 a barrel (or greater) oil prices (with
the consequent unraveling of our sociopolitical and economic order).
The major trend on the oil scene for the past 12 months
has been the apparent inability of the world to lift total production above
85 million barrels a day - with demand now rising above that line. It is
unclear how much more demand destruction will come out of the Third World
before bidding intensifies between the developed nations.
One commentator in particular, Dallas geologist Jeffrey
Brown - a frequent contributor on the web's best oil debate site, TheOilDrum.com
- is advancing the idea that we are entering an oil export crisis that will
presage a more general permanent world-wide oil emergency. Brown holds that
the major oil exporting nations are using so much of their own product, because
of rising populations, that their net exports are falling at an alarming
rate, perhaps as much as 9% annually. This trend combines with general depletion
rates now said to be around 3% a year.
The question of total oil reserves around the world
remains somewhat murky, but Brown, Kenneth Deffeyes of Princeton, and others
using a straightforward mathematical model, have stated that the world is
roughly at the same point in all-time production as the lower-48 United States
was in 1970, when America passed its all-time production peak. We know for
certain that three of the four super giant oil fields (Daqing in China; Cantarell
in Mexico; Burgan in Kuwait) are past peak and there is plenty of evidence
that the greatest of them all, 50-year-old Ghawar in Saudi Arabia, is not
only past peak but perhaps "crashing" into a super-steep decline.
Discovery of new oil to replace the production from
declining fields remains paltry. Chevron announced it's "Jack" discovery
in the deepwater Gulf of Mexico with great fanfare this year, but neither
conclusively demonstrated that all the wished-for oil was down there (between
3 and 15 billion barrels, Chevron said) nor that they could get it out of
there in a way that made sense economically, since the oil was extraordinarily
deep and difficult to lift up.
Meanwhile, companies developing tar sand production
in Alberta announced that their costs of production were rising substantially,
while a reckoning lay ahead as to how much of Canada's fast-disappearing
natural gas reserves will be squandered in melting tar. The oil shale project
is going nowhere. American corporate farmers have entered into a racket with
congress to subsidize ethanol production from corn and biodiesel fuel from
soybeans.
But the American public remains ignorant of the tragic
futility of this project, which depends on oil-and-gas "inputs" to keep the
crop yields up and ultimately is a net energy "loser." As the world crosses
into the uncharted territory of "The Long Emergency," Americans will find
themselves having to choose between eating food and making fuel to keep the
car engines running.
The signal failure of public debate in this country
is embodied in our obsession with this particular theme - how to keep the
cars running by other means at all costs. Everybody from the greenest enviros
to the hoariest neoliberal free market pimps believe that this is the only
thing we need to worry about or talk about. The truth, of course, is that
we have to make other arrangements for virtually all the major activities
of everyday life - farming, commerce, transport, settlement patterns - but
we are so over-invested in our suburban infrastructure that we cannot face
this reality.
The bottom line for oil in 2007: Expect the bidding
on the futures markets to regain intensity between the United States, China,
Europe, and Japan. A contracting U.S. economy could take some demand out
of the picture, but the sad truth is that we burn up most of the oil we use
in cars, and American life is now so hopelessly based on incessant motoring
that citizens cannot even go down to the unemployment office without driving.
Geopolitical events can only make the oil supply situation worse and probably
will.
We are probably also in the early stages of a natural
gas crisis in the United States. Over the next decade, the gap between U.S.
demand for natural gas and dwindling supply may amount to one-and-a-half
times the current equivalent of our oil imports. This is a staggering deficit.
Natural gas is used for heating in more than half the houses in the United
States and accounts for just under 20 percent of our total electricity
production. Domestic supply is crashing. We are drilling as fast as we can,
with more and more rigs each year, just to keep up.
And to make matters worse, the means of gas delivery
- through a vast web of pipeline networks around the nation - makes
"just-in-time" delivery the norm and, tragically, also makes "just-in-time"
pricing normal, too. Thus, gas prices are responding only to the shortest-term
signals - for instance, unusually mild winter weather - rather than to the
catastrophic long-term reserve picture.
Finally, we are unlikely to solve our natural gas problems
with imports for technical reasons having to do with the cost and difficulty
of moving the stuff by means other than pipelines and for geopolitical reasons,
namely that most of the remaining gas in the world is in Asia.
Regards,
James Howard Kunstler
for The Daily Reckoning
P.S. Bottom line: We could enter a home heating and
electricity production crisis anytime. Massive price increases are likely
to be required in order to reduce demand to the level of available supplies.
This will be one of the major factors in the disabling of suburbia - which
is to say, normal American life:
The New Energy Crisis
<http://www.isecureonline.com/Reports/DRI/EDRIH422/>
Editor's Note: James Kunstler has worked as a reporter
and feature writer for a number of newspapers, and finally as a staff writer
for Rolling Stone Magazine. In 1975, he dropped out to write books on a full-time
basis.
His latest nonfiction book, "The Long Emergency," describes
the changes that American society faces in the 21st century. Discerning an
imminent future of protracted socioeconomic crisis, Kunstler foresees the
progressive dilapidation of subdivisions and strip malls, the depopulation
of the American Southwest, and, amid a world at war over oil, military invasions
of the West Coast; when the convulsion subsides, Americans will live in smaller
places and eat locally grown food.
You can purchase your own copy
here:
The Long Emergency:
http://www.amazon.com/gp/product/0871138883/ref=ase_dailyreckonin-20/
You can get more from James Howard Kunstler - including
his artwork, information about his other novels, and his blog - at his Web
site:
http://www.kunstler.com
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