Michael Klare: Tough Oil on Tap
Posted by Prof. Goose on August 16, 2007 - 7:00pm
TomDispatch.com writes:
Michael Klare's latest piece offers perhaps the crucial context within which to consider Cheney's urge to launch an air assault on Iran. If we are, as Klare writes, entering a "tough-oil era," if global oil supplies are already under intense pressure and oil prices ready to leap on any hint of possible oil disaster anywhere on the planet, then imagine what a major air assault on Iran before January 2009 might mean. Actually, Secretary of Defense Robert Gates helped us imagine just this at his confirmation hearings back in December 2006 when asked about the effects of such an attack: "It's always awkward to talk about hypotheticals in this case. But I think that while Iran cannot attack us directly militarily, I think that their capacity to potentially close off the Persian Gulf to all exports of oil, their potential to unleash a significant wave of terror both in the -- well, in the Middle East and in Europe and even here in this country is very real."
Yes, that's right, Klare is buying in to things a little more than he used to...
Recently, however, a spate of high-level government and industry reports have begun to suggest that the original peak-oil theorists were far closer to the grim reality of global-oil availability than industry analysts were willing to admit. Industry optimism regarding long-term energy-supply prospects, these official reports indicate, has now given way to a deep-seated pessimism, even in the biggest of Big Oil corporate headquarters.
http://www.tomdispatch.com/post/174829/michael_klare_tough_oil_on_tap
(Of course, peak oil getting hidden by a deflationary spiral--if it continues--isn't going to help awareness much...)
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Of course tough oil is the perfect cover story for a backpedal.
"No, we were right, there are still huge amounts of oil out there, we're no where close to running out of it. But is has proven to be a lot more expensive and difficult to extract than we anticipated, and so that's why production is down."
Comforting words for the motorist waiting in the mile-long line for the $20/gallon gasoline. . .
A mild recession that causes the oil price to drop is better than a sudden crash under high prices. It gives time to prepare for a transition if in fact that is possible. Those still with jobs should be scared into permanently cutting back their energy use, cheaper prices or no. The tough times will be when there are no more voluntary cuts to be made.
I don't want to be a doomer but I feel very pessimistic as to what can be done. The problem, as I see it, is that we have become greatly overextended and just when we need resources to change our world the resources will become scarce. Also, I don't see the political will to take the right steps. Our political system is based on increasing extraction of resources and a growing economy.
On the plus side there is considerable slack in our system which could allow us some chance to muddle through. Think of all those people driving alone in cars. It should be technically (not socially) easy to double them up which would cut our oil use almost in half overnight.
Similarly, many people live alone in relatively large homes. There is huge opportunity to have them double up and cut energy use dramatically. Again, this is technically possible but it would be socially very difficult.
Hi Neutrino23,
have a read of this: http://energybulletin.net/23259.html
It's one of the posts that GailTA put up as a link in his work. It's a great insight into how conditions changed for the Soviets during the collapse of the USSR back in the late 90s and compares how 'prepared' they where with the USA now. I do not live in the USA but I do not see Europe as being that much better prepared.
As I read it I could easily imagine that some sort of 'tipping point' might be reached in the next decade or two whereby cascade effects cripple the US. I would think that those Nations suffering from PO effects now -think some of the African Nations where oil is just unnaffordable unless you are rich- are good microcosms of what could happen.
Its clear that we are entirely unprepared on just about every level and this is during times of plenty. We have gone so far beyond merely sustaining our existance that forever increasing standards of living are ingrained as a birth-rite into our psychie. Its going to be an awful awful shock to 98%+ of the population when the realization hits -like learning that the ship is sinking and there arn't enough life rafts.
Perhaps at this point people will be prepared to spend the sorts of sums talked about on preservation but not yet. Also consider that we have just seen the effects of distressed financial times in the form of a minor credit crunch -no money for big projects, tightening lending- couple this with fear of losing jobs or being made redundant, mass unemployment, inflation and you get an investment environment that procludes purchase of renewables, fancy new hybrids, etc.
Having said that there will always be those that profit during the coming times... Look what Abromovich achieved...
I am now considering payments for stuff that may be useful as 'insurance' but I am very much rooted in the 98% camp apart from my increasing awareness of 'troubles afoot'...
Regards, Nick.
Anything that can be done without further investiment is socially easy during a crisis.
Arkansawyer
Watch this.
The Fed just cut the discount rate.
The same thing that brought us to this point.
So we get to borrow money at less cost to finance
money we can't pay back.
The dollar should break now as China begins to unload.
Arkansawyer
"It gives time to prepare for a transition if in fact that is possible."
When the status quo is given time, we keep the status quo.
We now have the financial undead to match the political.
Friday, August 17, 2007
A 50 bp Gift From The Fed
The official Fed Funds target rate is 5.25%, but the effective rate is currently around 4.79% - this is the average at which Fed Fund transactions between banks have actually been taking place during the past 7-8 days. The Federal Reserve is supposed to intervene in the interbank money market to maintain its target rate, but it has not been doing so.
Since a variety of adjustable rate loans use the official Fed Funds rate as a benchmark, the Fed's lack of action is a direct gift to lenders who continue to pocket the 5.25%+spread rate on their loans, while their cost of funds has gone down almost 50 b.p. - at least for the portion that is related to the interbank market. A fifty basis point gift may not sound like much, but in banking it is huge. It is also conclusive evidence of unofficial easing which, if it goes on past this week, should start raising some awkward questions. For example, why is the Fed penalizing household borrowers for the benefit of the banks?
Posted by Hellasious-suddendebt
And this:
"Those still with jobs should be scared into permanently cutting back their energy use, cheaper prices or no."
The exact opposite-the more afraid, the more is used.
And outsiders are made to cut back. Think Republican Guard.
McGowan: That one line is classic- "why is the Fed penalizing household borrowers for the benefit of the banks?" All this time I had thought those players got together on Jekyll Island to help Joe Sixpack and his indigent cousin. Classic.
Arkansawyer
Wall Street becomes another Green Zone.
8D
Brian--
The Fed's main purpose is to protect the value of the Creditor Class--
Have you ever read Secrets of the Temple?
The book on the fed--
I like how he addresses the NPC report. I have heard people on both sides of the peak oil argument regard this report highly, and both sides condemn it.
We wrote
Michael Klare's article says,
"Again, the numbers involved are staggering. According to the NPC, an estimated $20 trillion in new investment (that's trillion, not billion) will be needed between now and 2030 to ensure sufficient energy for anticipated demand. This works out to "$3,000 per person alive today" in a world in which a good half of humanity earns substantially less than that each year."
So the next time you hear about the unsustainable expense of solar or other alternatives, use that number as an alternative. 20 trillion bucks.
The great thing is, just as the oil gets move from "easy oil" to the hard tough to get stuff, the alt energies are moving from hard to easy....
Think of it this way: The HARDEST kilowatt of power produced by PV must have been back in the 1950's, witht the first kilowatt. That first kilowatt would have taken all the lab work, all the chemical development, all the fabrication skill and testing embedded in that first few solar chips to produce.
The second kilowatt was a breeze in comparison, and the third.
With each scaling upward, we face the same thing: The first megawatt was a huge achievement....the second, much easier, the third, easier still, and the 100th megawatt now barely makes news....This is the FUNDAMENTAL advantage of the true renewables that the oil and gas industry does not want you to know about. Time is against the fossil fuels, as each barrel burned makes the next barrel harder to get and more expensive, while with the renewables, each megawatt produced makes the next megawatt easier to produce.
TIME IS ON OUR SIDE. The only question is, do we have enough time now to get out of the gate. We have wasted decades, and trillions already chasing the depletion curve. The perception has to become acceptable to the customer that throwing away another 20 trillion on a downward spiral is far from an assured gain, but instead an assured loss, while investing it on the upward side of a rising EROEI (Energy Returned On Energy Invested) and ROI (Return on Investment) is the only modern and intelligent way to go.
How many megawatts of clean, truly home made and renewable power would 20 trillion dollars buy? Any guesses from the math and stat geeks out there? :-)
RC
Remember we are only one cubic mile from freedom
Time is against the fossil fuels, as each barrel burned makes the next barrel harder to get and more expensive, while with the renewables, each megawatt produced makes the next megawatt easier to produce.
Only up to some point.
Just as fundamental geology limits oil production, fundamental physics limits practicalities of full renewables. It's unfortunate it is so, but it's truth.
The magnitude of renewables, except large-scale hydroelectric, is still so much less because of the much lower energy density of the input. There is no way to engineer around that immutable fact.
Consider 2.5 MW wind turbines---the biggest on-land ones, these give power-factor adjusted at best 1MW. Fifty of these on a ridge are very impressive, and noticable---drive by such a wind farm. You can see a large capital investment, and for some people quite an undesriable alteration to the landscape. And yet, this is nothing---you need at least 1000 to equal the useful electrical output of one single nuclear reactor. One thousand, to put where? And for but small increment to capacity? Modern nuclear plants have two or three reactors, as well.
Significant scale-up of nuclear seems quite difficult, but equivalent scaleup of PV and wind seems substantially further from practicality. But when people see the large numbers for PV and wind (so far from current) the dreamy optimism takes over---like for a caveman going to alpha centauri is not much harder than going to the moon. But, it really is.
How many megawatts of clean, truly home made and renewable power would 20 trillion dollars buy? Any guesses from the math and stat geeks out there? :-)
A heckuva alot less than the same invested in coal and nuclear. Coal will be cheapest for a very long time, but I think we ought to forbid it anyway.
Re: Other renewables
“Scientists say this geothermal energy, clean, quiet and virtually inexhaustible, could fill the world's annual needs 250,000 times over with nearly zero impact on the climate or the environment.
A study released this year by the Massachusetts Institute of Technology said if 40 percent of the heat under the United States could be tapped, it would meet demand 56,000 times over. It said an investment of $800 million to $1 billion could produce more than 100 gigawatts of electricity by 2050, equaling the combined output of all 104 nuclear power plants in the U.S.
"The resource base for geothermal is enormous," Professor Jefferson Tester, the study's lead author, told The Associated Press.”
Energy search goes underground
http://news.yahoo.com/s/ap/20070804/ap_on_sc/drilling_for_heat;_ylt=AjvF...
“Ms Pontes says wave energy could someday supply 20% of Portugal's power. Wave energy could also provide substantial electricity up and down the European coast, as well as along the west coasts of Australia, New Zealand, South Africa, and the United States.
Sean O'Neill, president of a Washington DC trade association called the Ocean Renewable Energy Coalition, says: "The total potential off the coast of United States is 252 million megawatt hours a year.
"That's equal to about six-and-a-half percent of our total capacity in the United States, equal to all the dams that we have in the US right now." “
Wave farms show energy potential
http://news.bbc.co.uk/2/hi/technology/6410839.stm
Sometimes I also think we are heading to dark places then along comes a story where the players do seem to be stumbling towards the light. The local Hydro Commission set up a windfarm subsidiary http://www.roaring40s.com.au/home.html to exploit the relentless winds at latitude 40+ degrees south. The Howard government wouldn’t extend the 2% renewable energy quota so several big local projects were mothballed and the Hydro sold 50% of the firm to China Power and Light. Talk about a lucky break. The Chinese have built a couple of medium sized operations and are talking about bigger projects; I think we’re talking hundreds of MW. The turnaround took one year.
So it’s not all doom and gloom.
At today's prices, about 5 TWpeak worth (roughly 1 TW average). But that kind of volume would push the price way, way down.
ThatsItI'mOut
RC
There's a couple of flaws in the reasoning of your analogies.
First, whwn oil was firs brought in as a fuel use was the 1860's in Pennsyvania with kerosene as a lamp fuel replacing whale oil. It was a replacement for an unsustainable renewable resource.
The second big flaw is that the best money and energy margins for fossil fuels in society occurred when the peak in production hit the largest oil fields. In the US it was when the East Texas field crashed the price of crude in the early 1930's and the price to the producers fell to TEN CENTS A BARREL!
The second example when this sort of thing happened is when the combination of overproduction by OPEC allowable cheaters and the deparation of the Russians led early 1990's oil prices to decline to $10.00 a barrel.
But just because I don't like your analogies, I still like your idea. For any number of reasons we absolutely need wind. We need nuclear too, and it would be helpful if we put the NIMBY people to sleep.
We have to have a baseload and a backup for the electric grid, and nuclear is both safe and a good power environmentaly. But it takes 10 years to get a nuclear plant built in an safe manner. In that time we can easily add the same amount of wind tutbine energy for less capital investment. We have plenty of locations on the bare mountains of Texas and the ridge lines on the edge of the Great Plains.
The second place you're right is the fantastic cost of adding new fossil fuel capacity to even deplace the decline. It costs $100,000 per barrel per day of level production to develop the Canadian tar sands. Check my figures, I'm bad with arithmetic, that meas it will cost 7 Trillion just to replace one half of our current imported oil of 14.25 million barrels of imports with synthetic crude from Canada with and additional $50 a barrel in production costs. And its not clear that we have the natural gas and fresh water to do it.
Its time to get rid of the ideas of preposterously expensive "solutions" like alcohol or tar sands. Just make it illegal to drive without a passenger-at least two people in the car. And start today.
Bob Ebersole
I always enjoy reading Roger's comments, and he has such
an optimistic outlook that it makes be feel almost ashamed of my own rather more gloomy view of the way that things are
likely to work out in the future.
It seems to me that even with the present abundance of cheap
energy mankind is abjectly failing to cope with the multiple
and rapidly increasing problems that it has created.
How anybody can expect these difficulties to be surmounted
in the face of resource depletion,environmental degradation,
and continued population growth, is a source of amazement to
me.
Obviously many people still believe in magic.
Arkansawyer
Complexity leads to collapse.
The $415 Trillion derivatives market has collapsed.
We're in 1929.
And having to raise $20 trillion in today's
dollars. $5 Trillion in deflated dollars.
With Cheney still in charge?
Moody's Warns of Potential LTCM-Scale Fund Collapse (Update5)
By John Glover
Aug. 16 (Bloomberg) -- Moody's Investors Service fueled concern that the global credit crisis is worsening by speculating that a hedge fund collapse on the same scale as Long-Term Capital Management LP in 1998 is possible.
And oil/gas prices have collapsed as funds liquidate whatever they have of value, even as Dean is forecast
at CAT 4 to hit anywhere from Cantarell to Holstein.
"Deflationary spiral"--exactly right. Deflation has hidden the true cost of oil. Globalization has provided massive profits--cheap labor, tax perks everywhere you look....
Cheaper products...and still great profits. I suspect that the margins in some areas are still quite substantial. (That is why some still say the economy is basically sound. What a joke. Rich are getting rich....you know the song.)
Most economists would contest your use of "deflation." I think a better way of putting might be "deflationary pressure."
Eventually, as oil rises, those profit margins are going to disappear. Cheap labor will not be able to mask the problem. The Fed, which worries about wage inflation, will have a real problem, because the deflationary pressure will ease and disappear. Then we will start seeing costs going up....
Arkansawyer
"...and after that it moves into the GOM."
The WeatherChannel just now on Dean.
What happens when gasoline deflates in price
into "not available at any price"?
Nice to see Michael has climbed on board the train. Better late than never. I always thought he ascribed too much importance to the self-serving statements of actors like ExxonMobil. Perhaps his habit of thought has been that they are "all powerful" and capable of pulling a rabbit out of a hat to solve the oil supply problem. This may be a consequence of leftist/liberal politics, which ascribes all energy problems to Big Oil. This makes them appear more powerful than they are. Also, many leftists (not Klare) think we're in cahoots with Big Oil to drive up the price.
Funny how a little cadre of people all over the world —there can't be more than a few thousand of us — are slowly but surely taking over the debate.
Also, many leftists (not Klare) think we're in cahoots with Big Oil to drive up the price.
Glaring omission there... If you're to make that statement be an equal opportunity hater when it comes to people believing that the illuminati (or any other stultifying one singular source--like Exxon, space aliens, or Henry Kissinger's ESP) "controls" the price of oil. Many different things influence the price of oil, and their relative weight in the gross overall influence can change over time. From my cursory reading here at the OD and other places over the years I have found that the price of oil is altered by a great massive number of mysterious interacting things with noticable trends and stochastic meandering (like anything, really, especially my comments as I'm sure you've noticed by now)... As long as the supply 'sort of' meets the demand though, it seems to stay below inflation adjusted early 80s price records. For now. If there is not a major recession, or a "calamity" in the markets or in the world, and we manage to twiddle along in Iraq for a while yet (albeit devastating the military) prices could stay below those records for awhile to come.
For every wacky East Coast liberal you can find me I can find you a Southern conservative alike that will say it is them "gouging", that peakoil is a scam or a non-issue because, hell, the "free market" will "fix it" anyway. Or the Russians figured it all out, and peak oil is a Zionist plot or "NWO", a funny theme invoked by many conservatives but hysterically this is also the same mistake that far Left liberals, or "leftists"--so it sounds more similar to communist, often make. That is, that Israel was behind the Iraq war (the stupidity is really spectacular to behold--and I wouldn't go close to Alan Dershowitz with a 20 foot pole.) US politicians even eventually jump in the dunce line too (when they're feeling the heat on the hill usually the donks first, but even the phants jump in and start splashing water when the gerbil-consumer is really agitated at the pump), with glib statements that negate the overall problem--the only call is to raise themselves above blame in the public view, while smilingly or smugly scapegoating others (the premise of our failed democracy, at least in the "media"). This is why the neocons may even know what they are doing... Obviously people are just retarded, so just feed them bullshit all day long and then go about your merry way--because no one can take the "truth" be it a Democrat or Republican. The truth shall not set you free, but it shall make you realize what the neocons clearly realize--that there is no "truth"... No matter what, one can't really win--in politics, or an immortal life--although some say you can, but I have my strong doubts. MD-80 Xenu is enticing, it's got edge, and with it now being tax-exempt and all it's a no-brainer!
One more note on these different "influences". Obviously, the price of oil can be attempted to be controlled, which is what Iraq is a failed attempt at--or a success, depending on how much of a Doomer you think Dick is. I'll let you make up your own mind there, dear reader... That's just the nice guy I am.
With geothermal, tidal, wind, solar and pumped hydro, I think
that we can expand our renewable energy sources dramatically. Congress wants the utilities to get to 15% renewable, we have a standard set for 20% in California. We can do this, but if you only think in terms of nuclear and fossil fuels, then you do not even consider it.