Keeping the home fires burning.

The graph that is attached is taken from the EIA evaluation of Colombian oil production until 2003. Until recently the United States obtained about 260,000 bd of its imports from there. But, as you can see, as production declined and new exploration failed to find new resources, the amount available is falling away. Colombia was the third largest South American producer, and one of the top ten suppliers to the United States. Now production is continuing to decline, and as soon as three years from now Colombia may be importing fuel. But it is not that curve that I want to discuss but the other, the rising domestic use of fuel and how this, in turn, reduces the amount that will be exported.

For many countries, such as Colombia, oil provides a desperately needed revenue stream that underpins the national economy. But it also provides power to the country, and, through local industries that it supports, it also creates more jobs and an economy that can, under a wise government, sustain itself after the oil runs out (see some of the Gulf States for example).

This is important to recognize because of one of the points that Matt Simmons mentioned in the book Twilight in the Desert. Back in 1970 Saudi Arabia had only six million people, of whom a third were only there as temporary workers. It now has almost twenty-two million people (about half the population of the United Kingdom). To provide an economic underpinning to the population, the state must increasingly provide additional industry that will create employment and support outside of the oil industry itself. Thus an increasing amount of oil and power must remain in country if it is to drive that industry and provide the energy and raw material needed to make it run.

After the recent announcements that the Kingdom would increase its investment in oil production, it was interesting to note that the amounts actually designated that would lead to increased crude oil export were not that much more than had previously been committed, whereas additional monies were being set aside for petrochemical activities. A new pair of press releases have been released today describing how Saudi Arabia is opening the opportunity to invest in these assets to others. The first:
Saudi Arabia has confirmed plans to float shares in its petrochemical and mining companies, that may be worth as much as SR22.5 billion [U.S.$6 billion]. Oil minister Ali Al-Naimi stated yesterday that the first step would be an offering to Saudi investors of SR10 billion [$2.67 billion], to be made following approval by the Capital Markets Authority. A number of new projects are being established, for the manufacture of petrochemicals such as polyethylene, propylene polypropylene, polystyrene, glycol ethylene, methanol, and butane.
And the second :
As a means to promote investment opportunities in Saudi Arabia, the Saudi Committee for the Development of International Trade, in cooperation with the U.S. Departments of Commerce and Energy and the National Association of Manufacturers, has organized a series of workshops to introduce $623 billion in new investment opportunities in the Kingdom through 2020; that is in addition to more than $800 billion in privatization opportunities expected in the next ten years.
However increasing supplies of oil for domestic use will have to come from the amount of oil that Saudi Arabia will produce, and thus will reduce the amount that is available for export.

A similar diversion of energy produced to internal use is likely to reduce exports from Russia, and other countries struggling to bring their own economies forward, even as they sell oil abroad to support their growth. And where nations neglect this need, as the current situation in Bolivia has shown, they do so at their own peril.

The arithmetic game that is now being played to try and divide potential growth in oil supplies among the nations quite often neglects this subtraction, in much the same way that it neglects depletion. Unfortunately both subtractions leave a shrinking pie of exportable oil, that too many nations are going to be chasing after.

And in response to Prof G's reiteration of balogh's challenge; "yes," he shamefacedly confesses, "it took until tonight, but I now have replaced the bulbs in five rooms. Can I go now? Facing this corner is awfully lonely!"

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Interesting that the effects of recursion, either minimal, such as countries consuming their own oil production, or quite extensive, such as when ethanol is used to prooduce ethanol, don't get much press anywhere else but here. I think people have the "Fear of all Sums".

South American events are leading to the formation of PetroSur--the pooling of state hydrocarbon industries into a cooperative--to better control SA hydrocarbon development and marketing, while distributing its monetary benefits more equitibly. This will prove to be the ultimate "blowback" suffered by the US Empire, as the long tail of Latin America finally wags the dog. This is being caused by widespread popular revolt against the neoliberal "Washington Consensus" policies imposed by the IMF and World Bank and renewed resentment against "traditional" Gringo Imperialism of the past as it resurfaces in Washinton's policy of "Democracy Promotion," which was first implemented during the illegal Contra War. If you follow the reporting of, you will have an idea of the depth and steadfastness of this continental revolt that will soon climax with the Mexican elections in 2006.

This development will be a good thing for the SA people and help us to Power Down.

The movement to grab stripper wells has begun here in the US, indicating to me that there are groups of people at least reading about PO. Too bad that this looks to be a typical move to "cash-in" on the long emergency rather than something good. The plans are to drill extended contact wells and "maximize production" from these stripper fields.

Without government intervention, this last gasp will permanently damage many stripper fields by sucking them dry too fast, isolating the remaining oil for many decades until it pools again. Problem is, the only way to know where it might pool is to leave the strippers intact or drill again.

Royalty owners who are older and looking for a lump sum instead of a monthly check, and younger owners who want their cash now to spend will likely sell into these schemes. Corporations (land and timber companies owning mineral rights) are all feeling pinched right now, and they will usually opt for the big sum over the lower paying but steady stripper checks.

I bring this up for several reasons.

Other countries are working together, as outlined by karlof, or else preserving a portion of their oil resource for future use. This speaks very well of our neighbors, who watch us and avoid emulating many of the stupid things we engage in here.

We will not do that here in the US. AS the price climbs, bidding for privately owned oil resources will escalate. Our New-Fangled technologies will maximize immediate production to sell remaining oil at greater and greater prices. As people try to enrich themselves in this fashion, fields which might pump consistently for 30-50 more years (pumping near well influx rates) will get trashed.

Due to this profiteering mindset and the mythical "free market" economy, the US will not reserve oil for it's own consumption. Instead, as is evidenced by the number of players grabbing for resources (we have received 3 offers in the last two months, on property owned for 40 years, and 5 offers via timber corporation mineral assets in the last 6 months), there will be that final push of money madness.

This will simply make the final landing that much harder. What the government should do is reserve stripper well production, provide incentive for production management oriented on maximum total production and dedicate this oil to specific application (like chemical feedstocks). It should be at least managed with an eye to the future, rather than simply mined for money.

Prof Goose,

Please increase the font size on the comments. The comment window fonts CANNOT be resized by the user. I am sure that at this font size, you will turn away a quite a few older readers from being able to read, appreciate and respond to comments. Comments are an important part of the blog, and serve to be thought provoking, and offer an opportunity to engage in a dialogue.

Rajiv--at least in Firefox, I am able to resize the comments window using a key combination available in the browswer (ctrl-+). Might be a problem with IE (if that's what you're using).

I'll leave it to pg to see what can be changed within Haloscan, if necessary.

I am using Mozilla, and Ctrl + and ctrl - works, but is non intuitive to many viewers. I am not sure about IE, but, the default font size should be readable. Th previous comment window with the orange boder and the royal blue fonts was definitely more readable in the default font size -- and definitely more aesthetic.

I thought I put them back to 11pt yesterday, but apparently it didn't take (some of these problems have been haloscan issues...)

how's this? anyone else having problems?

Much better!