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.
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.
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.
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 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.