Urban Survival And The Gulf Of Mexico Oil Situation
The fact is that capitalism drove the GDPs and with it, the demand for
oil & gas, all they way up the Hubbard peak. On the way down, it
is no longer part of the solution-- it is part of the problem.
Reporting from The Oil Drum already shows
that the situation is worse than the MSM have admitted (though they're
starting to come around). The situation is still very murky, and more hard data is needed. But don't trust the happy
talk, especially after you eyeball these numbers.
Let me sum up: Hurricane Ivan destroyed 7 platforms and 100 piplines and 0 rigs.
Katrina & Rita destroyed (so far) 90 platforms and (who knows) pipelines and 100(?) rigs.
There are typically around 130 rigs working in the Gulf. Today, there are 23.
There will be virtually no new exploration in the Gulf for the next
year or so, assuming everything stays the way it is right now. Plus,
with the rigs left in operation, there are several countries bidding to
have them work in their waters. Guess who wins? Highest bidder.
Gasoline was up $0.40 at my test location just since last night.
Expectations are that it will rise over $1.00 by Sunday night. Two
years ago, I could fill my SUV (26 gal tank) for $28. Today, it cost me
$28 to fill my buzzie with a 10 gal tank.
Service companies are strained to the max. There is very little
equipment available. Dive equipment, generators, winches and the whole
lot were destroyed in the storms. Rentals are going out all over the
world to get the equipment to do the job. Right now, everything is on
an even keel, but one more surprise could put the whole remediation
effort over the edge, as well.
It's not only bad, it's very bad.
We may not take too long getting there...nobody likes lines any
more than you do. Now let me add it up: A tenuous political situation in DC, New Orleans
clusterfibbit, quakes pending west, and oil outages on the horizon.
That means rationing and restrictions on travel.
It's pretty funny how "free market" folks
keep talking about "demand destruction" as a market-driven solution to
this energy crisis. Sure, an expensive product becomes cheaper as it
becomes less popular. But for most Americans gasoline and electricity
are not luxuries--they are necessities like food and water. "Demand
destruction" means that some people cannot drive to work or heat their
homes.
The fact is that American consumption needs to be lowered by 8% (=1.5
MMBPD GOM shut-in / 18 MMBPD pre-huricane consumption). In an
egalitarian society, one would strive to spread this "suffering" across
the population. However, in a market economy some will go on consuming
like nothing ever happened--because they can afford $3/gasoline and
$15/MMBtu nat'l gas. Others meanwhile will be forced to stop driving
to work because what they earn and stop paying their heating bills
because what they burn. They will lose their jobs and have their
heating cut off. Their consumption may be reduced by ~100% then.
There is your demand destruction, which may very well be irreversible.
The fact is that capitalism drove the GDPs and with it, the demand for
oil & gas, all they way up the Hubbard peak. On the way down, it
is no longer part of the solution-- it is part of the problem. The point is, in the post-peak or near-peak
world the old supply-side models do not work. And we should be worried
when we only hear these as "solutions" to the present energy problem.
I'm kind of in-between on this question. On the one hand, it really
bugs me that poor folks are having to scramble to deal with this change
while rich folks can go on filling their SUVs without a second thought.
On the other hand, though, there's a middle ground between
driving as normal and losing jobs: There's carpooling. There's mass
transit. There's bicycling and walking. There's moving closer to
work. Many of these strategies are more available to poor folks (who often don't have to sell a house before they can move closer to work, for example).
The best we can hope for is that things get bad in the right
way: a shock, so that people decide early to make these changes, and
then a period where things get a bit better to give them time to make
the changes (but not so long that the early adopters feel like they've
made a mistake). Thrashing about with prices high enough to crush the
poor followed by six months where prices are cheap again, combined with
politicians saying things will go back to normal, would cause worse
problems.
What we need are aggressive government-sponsered programs in
coal-gasification and Fischer-Tropsch synfuels (or similar
"alternative" but demonstrated technologies). The "market forces"
won't make this happen becuase they are afraid that LNG imports will
make coal-gasification uncompetitive.
There is this myth in America that all great technologies were
developed without government help. The reality is that the most
successful technologies in the fuels and petrochemicals were developed
during WWII with aggressive government help-- fluidized cat-cracking
for high octane gasoline and synthetic rubber being just two examples.
For personal travel - plug-in hybrids are the best way to curtail
transportation demand for gasoline and diesel in the medium term (5-10
yrs). Fuel cells for autos still seem to dominate the popular press
and US auto makers as the likely solution, but the technical
improvements necessary to make plug-in hybrids in real numbers are far
less of a challenge. Plus beefing up the US electrical grid is a lot
less daunting than thinking about building a hydrogen distribution
system.
The US would be better off using North American coal reserves to
generate electricity (and thus displace natural gas consumption) than
using the F-T process to generate diesel. I read in the papers a few
days ago that GE and Bechtel agreed to begin engineering and design for
a 600-megawatt coal-gasification plant in Ohio - finally! This is by
far the largest plant to date. Coal gasification doesn't help much
with our global warming problem but it greatly reduces particulate,
sulfur dioxide and heavy metals emissions. In the Pacific NW
and much of their air pollution and the mercury in their tuna come from
coal fired electric generation plants in China. I wonder what the
cost-benefit calculation would look like to pay the Chinese to replace
their existing plants with coal gasification plants. GE would be all
for it.
The President needs to take a step beyond conservation and put
significant DOE money for plug-in hybrid development. His oil company
constituency might not be thrilled, but it wins point on the fuel cost
/ national security fronts.
By the way, the WSJ had a story today about how major oil companies are
holding down the price of gasoline, because of fears of a political
backlash. However, it is having a very negative effect on independent
dealers. I think that I saw this in effect earlier this week.
An independent on one side of the street had gasoline at $3.21 for
regular. ExxonMobil across the street was at $2.89--basically a 10%
difference. The independent lowered his price the next day. He may
have lowered it to the point that he was actually losing money on
gasoline sales.
It's possible that the majors may be using the fear of a political backlash to drive independents out of business.
I don't think that it is a coincidence that the Bush Administration is
launching an aggressive nationwide cappaign next week to encourage
energy conservation. My prediction: no outside Christmas lights this year.
The only question is when George dons a Cardigan sweater and gives us the Jimmy Carter speech--better late than never.
It may be too much to hope that the former House
majority leader -- and
how good it feels to write "former" -- will actually be convicted and
do jail time. The indictment for criminal conspiracy returned by a
Texas grand jury on Wednesday is for alleged campaign finance
violations that are the rough equivalent of money laundering, which is
not the easiest crime to prove in court.
But DeLay's problems are bigger than Texas. His golf-buddy relationship
with Jack Abramoff, a fat-cat lobbyist under federal indictment, will
face months of scrutiny. DeLay's resignation from the House leadership
is supposed to be temporary, but Republicans ignored his wishes and
picked a strong successor who could serve out the rest of this Congress
if necessary. Clearly they believe their former leader will be
distracted for some time.
Now, it's no secret that the radical right loves Tom Delay, and it's easy to see why; he supports them politically. But this piece on far-right groups' statements on the indictment is just fascinating.
But
when Tom DeLay gets in trouble, the response is immediate. Clearly,
people like James Dobson and Tony Perkins know where their bread is
buttered. When DeLay gets hurt, so does their right-wing agenda.
Family Research Council
Robertson: No comment. DeLay: "Tom DeLay is a great leader for pro-family public policies of enduring importance to the nation."
Focus on the Family
Robertson: No comment. DeLay:
"Today’s indictment of Majority Leader Tom DeLay bears all the signs of
a trumped-up, political witch-hunt. The extreme left has seized this
chance to take a swipe at one of America’s leading advocates of family
values."
Traditional Values Coalition
Robertson: No comment. DeLay:DeLay is "a Christian man" and prosecutor Ronnie Earle is exacting "political retribution."
Christian Coalition of America
Robertson: No comment. DeLay:"Yesterday's indictment of House Majority Leader Tom DeLay on an
unsubstantiated charge of conspiracy… [has] been a major objective for
the past several years of the extreme left wing and enthusiastically
supported by their sychophants in the 'Old Media.'"
I don't expect them to be happy, but wouldn't part of a Christian view
of government be that breaking the law is wrong, and wouldn't a
sensible response be something like "Tom Delay has been a good
supporter of our views, and we hope that the charges will be found to
be baseless" or something like that?
Instead, groups that support him from the religious right have (without
evidence) decided that the charges are wrong, picked up Delay's talking
points, and - if he is found to be guilty - will have basically sided
with lawbreaking.
The 12-member grand jury that indicted U.S. Rep. Tom Delay, R-Sugar
Land, faces scrutiny from critics who say they are lackeys for Travis
County District Attorney Ronnie Earle. It
wasn't Mr. Earle that indicted the man. It was the 12 members of the
grand jury," the grandjury foreman Willaim Gibson said. Gibson is a former sheriff's deputy and a former investigator for what is now the Texas Department of Insurance."We would not have
handed down an indictment. We would have no-billed the man, if we
didn't feel there was sufficient evidence," said Gibson.
I don't think he took too kindly to the fact that the Ken Mehlman talking point is that "You can indict a ham sandwich."
UPDATE: From Texas to Florida to Ohio, from K Street
to Congress to the inner circles of the Bush administration itself, the
Republican Party is suddenly -- or maybe not so -- looking like the
party of scandal. You can't keep up without a scorecard. Here's ours.
Tom DeLay:
The House majority leader was indicted today on a felony charge that he
conspired to launder corporate campaign contributions through the
national Republican Party in Washington and back to legislative
candidates in Texas.
Bill Frist: The Justice Department
and the Securities and Exchange Commission are both investigating the
Senate majority leader's sale of shares in his family's healthcare
business just before the stock's value plummeted in June.
Jack Abramoff:
The Republican super-lobbyist, known to have bragged about his contacts
with Karl Rove, was indicted in Florida last month along with his
business partner on wire fraud and conspiracy fraud charges related to
their purchase of a fleet of gambling boats. This week, three men were
arrested -- including two who received payments from Abramoff's
business partner -- in the Mafia-style killing of the man from whom
Abramoff and his partner purchased the gambling boats.
David Safavian:
The president's chief procurement officer stepped down two weeks ago
and was arrested last week on charges of lying to investigators and
obstructing a separate federal investigation into Abramoff's dealings
in Washington. Some Republicans who received campaign contributions
from Safavian are divesting themselves of his money now.
Timothy Flanigan:
The president's nominee to serve as deputy attorney general has
announced that he will have to recuse himself from the Abramoff
investigation if he is confirmed because he hired Abramoff to help the
company where he works -- scandal-ridden Tyco International Ltd. --
lobby DeLay and Rove on tax issues.
Michael Brown: The
president's FEMA director resigned earlier this month amid complaints
about his handling of Hurricane Katrina and charges that he and other
FEMA officials got their jobs based on political connections and
cronyism rather than competence or qualifications.
Bob Taft:
The Republican governor of Ohio pleaded guilty last month to criminal
charges based on his failure to report gifts as required by state law,
among them golfing trips paid for by Tom Noe, a major Republican
fundraiser who is the subject of his own scandal regarding the state's
investment in $50 million in rare coins, some of which have
mysteriously gone missing.
Randy "Duke" Cunningham: A
federal grand jury in San Diego is investigating allegations that the
veteran Republican congressman received financial favors from a defense
contractor who allegedly bought Cunningham's house at an inflated price
and let him live for free on the contractor's 42-foot yacht.
Ernie Fletcher:
The Republican governor of Kentucky has refused to answer questions
from a grand jury investigating whether his administration based hiring
decisions on political considerations rather than merit. Fletcher has
pardoned nine people in the probe -- including the chairman of
Kentucky's Republican party -- and fired members of his staff.
George Ryan:
Federal prosecutors made their opening statements this week in the
criminal trial of the former Republican governor of Illinois. Ryan and
a friend, Chicago insurance adjuster Lawrence Warner, are charged with
racketeering conspiracy, mail fraud, tax fraud and lying to federal
agents.
And then there's Karl Rove and Scooter Libby.
The grand jury investigating the outing of Valerie Plame is scheduled
to complete its work in late October. While neither Rove nor Libby is
apparently a "target" of the investigation -- and while the
"corruption" in Plamegate is moral rather than financial -- both men
are known to have played a role in revealing or confirming Plame's
identity in conversations with reporters, which may be a crime under
federal law. SOURCE
The fact is that American consumption needs to be lowered by 8% (=1.5 MMBPD GOM shut-in / 18 MMBPD pre-huricane consumption). In an egalitarian society, one would strive to spread this "suffering" across the population. However, in a market economy some will go on consuming like nothing ever happened--because they can afford $3/gasoline and $15/MMBtu nat'l gas. Others meanwhile will be forced to stop driving to work because what they earn and stop paying their heating bills because what they burn. They will lose their jobs and have their heating cut off. Their consumption may be reduced by ~100% then.
There is your demand destruction, which may very well be irreversible.
The fact is that capitalism drove the GDPs and with it, the demand for oil & gas, all they way up the Hubbard peak. On the way down, it is no longer part of the solution-- it is part of the problem. The point is, in the post-peak or near-peak world the old supply-side models do not work. And we should be worried when we only hear these as "solutions" to the present energy problem.