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Oily Thread IV
by Jérôme
The article Russian oil prospect provides a bleak view of Russian oil reserves. In a nutshell, ..
.. the author, Leslie Dienes, a geographer by profession, argues that Russia’s recent oil production increase is mostly due to
(i) some catching up of the “lost production” of the 1990s (the oil that would have been produced in existing fields if production had not dropped dramatically due to the turmoil in the country) and
(ii) “skimming off” the easiest bit of the existing reserves by the new owners of the Russian oil sector in order to boost financial returns in the short term.
She indicates that hardly any production comes from new fields, and that future production will require heavy investment as the fields (in the Asian part of Siberia) are hard to access, very distant from markets and with difficult geological configurations.
In the meantime, the Western oil majors are more busy giving back cash to their shareholders than investing in exploration; and when they invest they are concentrating a growing share of their budgets on natural gas (including the LNG business). They have called on OPEC to open up to them as these countries effectively control all the remaining (large-ish) oil fields where it makes sense for the majors to invest in.
So to sum it up:
- oil demand is growing unexpectedly strongly (pulled by China, thus not likely to slow down even in the event of a recession in developed countries)
- oil supply is very tight, with very limited spare capacity (see here – 500 thousand b/d is about 0.5% or current production)
- oil majors are unwilling or unable to invest significantly to increase oil production, due to lack of access to the reserves or a choice to give back cash rather than invest in small (and more expensive) fields
- there are strong doubts that OPEC countries can increase their oil production in the short or even medium term, as they seem unable to do so without Western know-how, investment or technology and unwilling to let them in
- Russia, suddenly the last great hope of the US, may not be able to provide a sustainable increase either.
In any case, there will continue to be tensions on the oil supply-demand balance in the short term and it is yet unclear whether this will change in the long term…
Short term advice – buy oil futures…
Medium term advice – buy a Prius or a bike…
Long term advice – find a way to invest in electricity-powered transportation…
I expect that “demand destruction” is going to become a very widely used term in the future.
Prior discussions with many insightful comments and useful links:
Oily Thread III
Oily Thread II
Oily Thread I
@jerome, good to see you once more having the mental focus and energy to write (compellingly as always) on this topic where you have such expertise.
I would like to introduce a subtheme (from a discussion elsewhere). In making a soft transition to a lower-energy-consumption future we must contend with a flood of propaganda from professional deniers such as
Terence Corcoran, Financial Post. Notice the dead giveaway, the reference to Julian Simon.
This link was posted to a “carfree” discussion list of which I’m a member, with requests for comments and/or rebuttals. Partridge’s paper effectively demolishes Simon in a language accessible to general readers, so that was easy. But we need imho to think hard about Cornucopianism and its dangerous effect in persuading people (and politicians) not to take peak oil seriously.
Corcoran has his finger on one little bit of accurate cultural criticism: he says, and rightly, that the Peak Oil event fits neatly into an ever-attractive human myth-system, the Doomsday Cult or End of the World Story. For persons of a pessimistic disposition, or those unhappy with the present order of things, it is always tempting to believe that some catastrophic event is just ahead that will turn the world upside down, humble the mighty, reshuffle the deck, or just plunge us all into annihilation. The popularity of the Rapture Cult in the US is an excellent illustration of this kind of millennialism (or is it millenarism).
But Corcoran is only telling half the story. On this topic a day or so ago I wrote
There is a mirror image to the Doomsday Cult, and it’s the Cult of the Big Rock Candy Mountain — the cult of pie in the sky forever and ever, of streets paved with gold and little piggies running around pre-roasted for everyone to take a slice — a childish fantasy of life without any limits, ever — where everyone can indulge their most gluttonous dreams indefinitely. It’s counter-physical, counter-historical, and even counter-intuitive, but its persistence testifies to the persistence of wishful thinking in the human heart, and the persistence of chicanery in commerce and finance. Ponzi was by no means a lusus naturae: he was downright typical — a perfect Cornucopian.
The Cornucopian Cult comes in many forms, but since the Enlightenment it has mostly come in the guise of technophilia and industrial optimism, a very C18 and C19 belief that an infinitude of wealth can be extracted (forcibly, if need by) from the physical world, or “created” by human ingenuity and technology. In our day, with the collapse of the Soviet bloc, the prevailing Cornucopian voice is rightwing in political allegiance, but Cornucopianism was at the heart of the great Soviet industrialisation program and the same bogus accounting (externalising costs, treating the biosphere as an infinite source and infinite sink, laying waste and moving on, ignoring issues of sustainability) was practised during the Soviet heyday. So there is also a Cornucopianism of the Old Left, and I would say there is a Cornucopianism of the New Leftish tendency as well, the Hydrogen Energy Cult (Rifkin as primary popular cheerleader), the Lovins thinktank might qualify.
The dominant rightwing Cornucopianism is imho a fossil philosophy, rooted in the naive vision of earlier centuries, when a smaller population and deep ignorance made planetary resource appear (for all intents and purposes) infinite. It also borrows, I believe, heavily from the expansionist mindset of the colonial era (there is always another “terra nullis” just waiting to be invaded and looted).
Although the “infinite natural resources” assumption was already disproven by real world events in C18 and C19 (well documented by Clive Ponting in his book A Green History of the World), it has remarkable staying power — possibly because it resonates with Biblical narratives about a world created to order by God for the use and provision (consider the term “Providence”) of Man [sic]. Certainly a naive Cornucopianism in the US, among semiliterate Fundamentalists, holds that God will create whatever resources are needed for his chosen country (America) to have as many SUVs and air conditioners as God’s people want.
The emotional linchpin of the Cornucopian worldview is that planetary resources are infinite. Since this is physically absurd, obviously so (ever since we figured out what a planet is) then those who don’t invoke miraculous intervention by a partisan Deity must cloak the emotional presupposition in pseudo-rational indirections and redefinitions. One is the notion that humans create wealth, i.e. resources are created by humans, therefore with an infinite supply of humans we can never run out of resources. Another is substitutability, i.e. the belief that whenever one resource becomes scarce, human ingenuity will simply substitute another resource. Partridge details and refutes these assumptions, I don’t see a need to go through them all over again.
There are several reasons why people promote the Cornucopian dogma. One, obviously, is denial: fear of a future that will not be similar to the present, unwillingness to accept change, and total immersion in a “status economy” in which status and rank are expressed by energy squandering (so that the more energy efficient a mode of transport is, the lower its social status is). Americans in particular regard buses as lower-class and many would feel personally demeaned or degraded if they had to use public (ugh!) transit rather than ride in private carriages. It is the attitude of aristocracy throughout the ages, but now perilously vulgarised. This emotional/ego attachment to energy squandering is an enormous barrier to change and an enormous motivation for people to cling to Cornucopian dogma.
Another motive for the promulgation of Cornucopianism is purely venal. Oil and other fossil fuel companies, auto and truck companies, etc. are completely invested in a technology which is rapidly approaching obsolescence. They face an “adapt or die” moment, and most have grown into lumbering behemoths of industry with enormous resistance to change. They are strongly motivated to maintain course and try to keep their stock value high by pretending that they have a long, profitable future ahead and that no (expensive) retooling or new design work is needed, and that no faster, better-adapted competitors will ever challenge them. Hence a huge investment by oil companies in prostituted scientists (or genuine contrarians) who churn out papers and press releases denying any anthropogenic component to global warming, denying peak oil, etc. Some of the funding for the promotion of Cornucopian dogma will come from obsolete industrial sectors where enormous wealth has accumulated, pumping out propaganda to make themselves look viable.
Contradictions to Cornucopian dogma will not come from most governmental echelons because no government wants to be the one to tell the public bad news. No US politician has forgotten how Pres. Carter’s career went down in flames the moment he told the American people that they needed to focus on conservation (i.e. reducing energy demand) rather than assume that supplies would go on increasing forever. No US politician is going to take the risk of telling Americans that they need to reduce energy demand. Leadership cannot be expected from the “leaders”, as usual. Compounding this problem is the current identity of oil interests and the Presidential post and cabinet: the US is for all intents and purposes owned and operated by an oil cartel at present, and we see the result in blatant suppression of content in official government reports, censorship of government web sites, etc. — as well as in a distastrous foreign policy focussed on colonial resource-stealing as a means to support a Cornucopian domestic energy policy.
A further difficulty is posed by the current intellectual hegemony of neoliberal (Chicago School) economic theory. The problem with this flavour of capitalist theory is that it requires a neverending growth or expansion in order to “work”. Markets must expand continually for the bogus mechanisms of future discounting to work, and these mechanisms are required to make the bogus concept of “externalisation of costs” to work. The whole economic philosophy is predicated on infinite growth, and hence Cornucopianism is built into the entire global economic system at this time. The absurdity of this is easily seen when we read editorials in major papers bemoaning the tapering-off or even reduction of population in selected affluent countries. Given the approximate carrying capacity of the planet, the role of fossil fuel in allowing us to “cheat” on this carrying capacity and overshoot our sustainable population/consumption threshold, and the imminent decline in fossil fuel availability, any reduction in population growth is very good news. But because our economic dogma requires infinite growth, it is perversely regarded as bad news. (A countercurrent or “New School” in economics is struggling to be born — here’s an intro.)
I would even propose that there is a deeper psychosocial barrier to overcome, and that is the definition of masculinity in Western cultures. That definition is so tightly coupled to what I could call “immaturity” values: aggression, insouciance, display/swaggering, recklessness, contempt, conquest. Values like caution, modesty, probity, farsightfulness, negotiation, caring, and the respectful acknowledgement of limits, are considered “girly”, female, demeaning for “real men” to practise. Since these are precisely the values needed in planning and technology to succeed in a finite-resource environment, we have a dangerous situation in which the very self-definition of “manliness” is invested in attitudes directly incompatible with a soft landing: resistance from the male public and from male politicians will come from levels of ego so deep as to be quite intractable. We need only watch the boyish, thuggish posturing in which Senator Kerry is indulging, in order to prove himself “manly enough” to win the voters’ confidence, to see how difficult it will be for any US politician to embody basic sustainability principles.
We have therefore an astonishingly difficult set of barriers to overcome, in order to achieve a soft landing after the end of the Cheap Oil Era. To achieve a soft landing, demand reduction must be seriously addressed; and demand reduction cannot be addressed while we cling to the Big Rock Candy Mountain fairy tale, or to the various structures that support that fairly tale or depend on it, or the emotional obsessions that require us to believe in it.
There are barriers between scientists and the public, enforced by corporate ownership of media and governmental self-censoring. There are barriers inside the public mind, enforced by religious dogma, egomania, and politican indoctrination. There are conceptual and intellectual barriers throughout the academy and the secular-priestly caste of economists and technomanagers.
I agree with Bernhard’s analysis and with Jerome’s practical, pragmatic outline for a lower-demand transport network. It is eminently sensible, and what’s appalling is that, in this day and age, it should seem to anyone “science fiction-y” or extreme. But to get there from here will be uphill work. Truly we have our work cut out for us — economists, politicians, religious dogmatists and the public will need to be dragged kicking and screaming into contact with physics and reality.
. . . outcome can be avoided — and I fear that we are going to lose this battle (or the related battle against catastrophic climate change) because the forces of inertia will resist action until we can see ourselves about to go over the precipice.
oh Simon, you underestimate the human race. well over the precipice and in free fall, our talking heads will still be insisting firmly that “that was NOT a precipice” and “we are NOT falling,” or “that direction we are going in should NOT be called ‘down'”, and citing Julian Simon’s latest paper debunking the “unproven theory” of gravity.
Posted by: DeAnander | Oct 10 2004 21:36 utc | 12
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