Can A 'Shadow OPEC' of 'Global Guerrillas' Set Global Oil Prices?
Posted by Prof. Goose on June 18, 2008 - 10:15am
This is a guest post by John Robb. John is an author, an entrepreneur, a blogger at Global Guerrillas, and a former USAF pilot in special operations. His book, Brave New War was published in April 2007 by Wiley, which can be purchased here. The book apparently is influential, since Robb was named one of the "Best and Brightest" by Esquire Magazine and invited to speak at a plethora of venues (the DoD, CIA, NSA, NIC, Highlands Forum, Center for Biosecurity, and many more). The book is also being used in universities from the Naval Post Graduate School to Johns Hopkins.
The run-up in oil prices over the last four years is usually framed, likely correctly, as a combination of torrential demand from developing countries (China and India), speculation, and peak supply. Other analysis indicates that production is also being damaged due to NOC mismanagement, political instability, and rapid increases in domestic consumption within oil exporting countries.
However, the rapidity and volatility of current oil prices may be due to a more narrow set of factors surrounding the production of light sweet crude: the comparative quality and scarcity of light sweet crude, world demand, and guerrilla systems disruption.
The Basics
1) Light sweet crude is at the top of the oil quality pyramid. Current excess production capacity, the bulk of new production slated to come online, and the vast majority projected reserves are from the lower strata in the pyramid.
2) The world demands light sweet crude -- this demand is structural (not easily shifted) since most of the current infrastructure is built to process light sweet. As a result, it trades at a significant premium to heavy crude. This puts oil producers in a difficult bind: increased production of heavy crude without a corresponding increase in infrastructure to process it will result in a rapid collapse of prices for heavy crude. Therefore, heavy crude is kept in the ground until prices/infrastructure can support it.
3) Guerrilla systems disruption. Much of our global production of light sweet crude is located in countries where small bands of guerrillas, loosely organized within what's called an open source insurgency, have been disrupting production and preventing investment. The cumulative impact of this activity may constitute a "Shadow OPEC" (akin to the impact of thousands of ants vs. that of an elephant). Let's look at this in detail.
A Concentration of Disruption
The war in Iraq has proven to be a proving ground for the strategies and tactics of 21st Century warfare, much like the Spanish Civil War was for WW2. Unfortunately, the bulk of the improvement has been in how small groups of guerrillas/terrorists can defeat a nation-state. Of particular note has been the increasing use of sabotage and targeted violence to induce systemic failures in critical infrastructure. These use of these methods have been concentrated in many of the states that produce light sweet crude.
1) Iraq. Ongoing disruption of critical oil infrastructure has kept Iraqi oil production below pre-war production levels. It has also kept new investment (from global sources) that is necessary to repair existing infrastructure, let alone expand it, away.
2) Nigeria. Disruption of Nigerian production has radically reduced production (600 - 800,000 barrels a day) already and it is growing.
3) Others. Attacks on oil workers in Algeria may indicate the potential of guerrilla tactics to the new model. Attacks on natural gas infrastructure in Mexico last fall and its ongoing guerrilla war may translate into new disruption this year. Venezuela is in an ongoing crisis and may succumb to guerrilla warfare that disrupts production in the next couple of years.
A Shadow OPEC
So, given production limitations and strong/concentrated demand, even small disruptions by guerrilla groups on light sweet crude production is likely to have a direct influence on global oil pricing (in contrast, disruptions aimed at heavy crude production should have little impact on global pricing). Further, there are already active groups in many of the most critical production areas.
Fortunately, from the demonstrated behavior of these groups it doesn't appear that guerrilla/terrorist groups have fully grasped their potential market power with small attacks (despite aspirational pronouncements from al Qaeda and large scale attacks in 2005/2006). Once they do, as bad as disruption is today, it could get MUCH worse.
Why? A direct connection to scalable profits.
Most guerrillas/terrorists are highly entrepreneurial. They participate in everything from land scams to protection money to smuggling to kidnapping. Further, many guerrilla groups already directly profit from the sale of bunkered/smuggled oil to international markets (already worth billions). While higher global prices improve the returns from that activity, so much more money could be made through connections to financial partners able to profit from price movements on international markets. These profits would be nearly impossible to trace.
As we saw with e-mail spam/phishing, even the faintest whiff of profits can turn a loose collection of individuals/groups into a torrential crime-fueled marketplace generated billions and attracting tens of thousands of participants. Are we about to see the same occur with oil?
'Jomo Gbomo' is only an e-mail away....
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"If a man's trust is in a robot that will go around the earth of its own volition and utterly destroy even the largest cities on impact, he is still pitiably vulnerable to the enemy who appears on his doorstep, equipped and willing to cut his throat with a penknife, or beat him to death with a cobblestone. It is well to remember two things: no weapon is absolute, and the second of even greater importance--no weapon, whose potential is once recognized as any degree of value, ever becomes obsolete."--J. M. Cameron
"For the wealthy nation, the probablility of loss exceeds the possibility of gain and dictates its role as defender. The unburdened opponent, enjoying the prospect of gain for comparatively insignificnt loss, retains the initiative. He may endlessly alternate threat of action with pretense of compromise and continue nowise in danger of diminishment. When the utmost possible gain is achieved in this way, he may still attack at his own discretion."--J.M. Cameron
"[The French army in Vietnam] suffers from the considerable disadvantage attaching to those who seek to protect and preserve rather than simply destroy. It is much easier to cut a railway line or blow up a bridge than to protect them from destruction."--Gen. G.J.M Chassin
Peaks happen, even in politically stable areas, where private companies developed the oil fields, using the best available technology, with virtually no restrictions on drilling
Based on the logistic HL model, Mexico started declining at about the same stage of production at which the North Sea started declining. The ongoing slide in production and net exports from Venezuela preceded Chavez coming to power, although Chavez certainly has not helped matters. The US invasion of Iraq has certainly not helped matters there, and Nigeria certainly has problems with guerrilla activity.
However, peaks happen, even in the best of circumstances, and the peaks occur because we tend to find the big fields first, and we then can't fully offset the declines from the older, larger oil fields. If Ghawar is in decline, which I believe it is, every oil field in the world which has ever produced one mbpd or more of crude oil is presently in decline.
If we use ExxonMobil's upper end estimate for the decline rate from existing wells worldwide (-6%/year), which is the midpoint for many estimates, the world needs, from 2005 to 2017, about 37 mbpd of new crude oil production--just to maintain flat production.
Geological peaking happens without regard to geopolitical issues, but I think the relevance of this Shadow-OPEC concept is twofold:
1) geological peaking transforms what would be a negative geopolitical feedback-loop into a positive feedback-loop (if they could, producers would just produce elsewhere when geopolitical troubles pop up); and
2) these geopolitical feedback-loops have the potential to dramatically accelerate geologically-driven declines.
Jeff, this comment by John Robb seems a recapitulation of comments you have made in the past vis a vis your construct of RHISOME. I would hope you could amplify your comments on John's work, you know Jeff: contrast and compare....
Probably more accurate to say that John Robb's writings have been a significant influence in my formulation of rhizome. I would contrast "rhizome" as a theory of organization with Robb's "Global Guerrillas" concept as a geopolitical phenomenon that involves some of the same organizational principles at its core.
Jeff,
I am a huge fan of your rhizome networks idea, I think trying to do build wind, solar and geothermal is ridiculous if we are not planning to end the growth paradigm. Do you have a link to any of your papers explaining what sufficient negative feedbacks you would need in place to keep it resorting to increasing hierarchy?
Thanks,
Crews
The link above (here) probably has most of my writing on buffering these positive feedback-loops, though I haven't done a good job of framing the issue that way--something I plan to work on. I think one key is the development of localized/individualized self-sufficiency (at least in key areas), but I've certainly drawn a lot of criticism with that argument (particularly the placing the situs of self-sufficiency at the individual/family level instead of the community/national level). I stand by the theory, though.
Interestingly, John Robb has also addressed buffering these positive feedback-loops. See his posts on his concept of Resilient Community. Robb places the situs of self-sufficiency at the community level, and adds some interesting notions of platform engineering, distributed manufacturing, etc.
2) these geopolitical feedback-loops have the potential to dramatically accelerate geologically-driven declines.
I agree, but not about just or precisely THESE geo-political feedback loops. War is part of a geopolitical feedback loop, and this is certainly going to directly hasten decline and the effects of decline.
Our only hope as a species is to get ahead of the decline, i.e. decrease our consumption of non-renewables ahead of decline rates. War and the threat of war is the chief impediment to any such program.
I have mentioned before the only way to solve this problem is for the oil rich countries to share the wealth with ALL their people by creating large publicworks projects like we did in the drepression.
That's what I'm worried about. Any time they want the Saudi government clique can send all the migrant workers home and the resulting demand for labor will make everybody in Saudi Arabia middle class and happy.
But what happens to India, Pakistan, Bangladesh, Egypt, Yemen, Malaysia, Indonesia, and the Phillipines if that were to happen? Those people will starve. India and Pakistan are known to have nuclear weapons. The other countries are reticent about their capabilities.
These sort of vulnerabilities are inevitable with tight supplies at peak, and are a product of it.
In the past, a disruption in one place would be countered by production increases in another, often almost seamlessly.
A stretched fabric tears more easily.
A stretched fabric tears more easily. -DaveMart
Excellent.
As a corollary, there is no particular need to trace the precise origin or history of a given tear once we understand that the whole suit of clothes is coming apart.
I've described the US economy as a guy with terminal cancer and a bad heart condition, who is shot while being run down by an 18 wheeler. What killed him first? Does it matter?
I'm just curious: how does the (apparent) current demand destruction compare with that of the 1980's? Which sectors cut back then and which are cutting back now? Any data out there?
Would be interesting to see how these affected oil prices.
The opening of energy futures markets in UAE and Iran are notable with regard to the ability to financially exploit an attack on oil infrastructure. Futures & options markets in the Middle East will potentially make it easier for states to financially play their own actions (e.g. Iran could play their own interaction with the IAEA on their own oil bourse) and may make the links between attackers and speculator less transparent, making it more difficult to uncover the connections between attack and speculator than if the transaction was on NYMEX or ICE.
About oil prices.
While oil may not be coming out of the ground quite as fast as demand requires, the main reason for the rapid rise in prices is another: there are way too many dollars around (aka debt and monetized assets) and oil prices finally caught up to this reality. As Milton Friedman said: "Inflation is always and everywhere a monetary phenomenon".
As such, the real "oil terrorists" are the banking and monetary system, in the classical sense and the newer, "shadow" version. You cannot flood the world with "funny money" and expect cheap oil - or cheap anything, for that matter.
In support of your position, as the US debt increased by an average of 1/2 a trillion a year (5.4 trillion in 2000 and now 9.4 trillion almost 8 years later = 1/2 trillion more debt per year) the value of the Dollar has plummeted in comparison to the Euro. If the Dollar has maintained its value in relation to the Euro, the price of a barrel of oil would be 72 dollars, and the price at the pump would be approx. 2.50 a gallon.
What we heard at the time was the argument that the debt increase was a small percentage of GDP, and any argument against this minor increase in debt was purely political. Well, here we are just 8 years later with a dollar that's worth so much less in comparison to foreign currencies that we are paying the price at the pump, the grocery store and everywhere else.
So the next time someone makes the argument that deficits don't matter (Cheney), the public should be up in arms. Giving away three huge tax cuts to the super wealthy at the expense of the currency due to increased long term debt, is a foolhearty policy.
Not to negate Peak Oil, which is real and will continue to be a problem, but monetary policies in this case where such a big factor in the price for fuel, that we must be vigilant against Administrations that only consider short term benefits for their base.
Right now it can only be counted as a good thing for the price of oil to continue rising at a rate sufficient to alarm people everywhere, yet preferably not quite at a rate which induces great numbers of them to panic.
Our only (perhaps forlorn) hope of avoiding overwhelming chaos over the next several decades is for people around the globe to become sufficiently worried that they start working together, pro-actively, to reorganize for some kind of minimalist survival until the population slowly begins to drop by way of reasonably acceptable forms of attrition.
We now need to reach the mentality of a Battle of Britain. Every minute we waste accumulating short-lived status and wealth brings us closer to the worst imaginable scenarios of human destruction.
There is a big hole in the inflation argument. If you adjust the current price for inflation and say that oil should be at $72 inflation adjusted, then you also need to inflation adjust incomes, which no one ever does.
In other words, if oil were at $72 you would also have fewer dollars with which to buy your fuel, so the $72 oil would be just as dear as $135 oil. Assuming, of course, that your income has at least kept up with inflation. If not, you're declining income is a bigger problem than rising fuel costs.
Its the same silly arugment people make when they say, "remember when gas was 25 cents a gallon!" Yeah, I do, but I was only making $2.50 an hour at the time!
I would be happy to be making 90,000$ per year in my present postition. Count me in!
I'm not sure I understand that argument. If inflation is a "monetary" phenomenon I would expect that the destruction of credit markets, and the evaporation of wealth--both on the consumer and the financial end would lead to something "other than inflation" [don't speak the "d" word].
The banking and monetary authorities are fighting deflation as hard as they can. Just look at what the Fed alone has done to avert it. There has been very little outright debt destruction so far - that's the point.
If you accept Friedman's remark then you also have to realize that not all price increases are inflation. Any price increase that is out of bounds (as the oil runup has been) cannot be explained by inflation. It has to be explained by market forces i.e. reduced supply or increased demand.
--
JimFive
Thought experiment: The Fed decides to reduce total money supply by 10% tomorrow. What do you think oil prices would do?
Hellasious,
Oil prices would not decrease 10% and stay there, which is what you are implying. They would decrease some percentage of that 10% and remain volatile. Since the volatility in the past few weeks has been on the order of 5% per day it is unlikely that we would be able to measure the real effect of that change.
Some amount of oil price changes can be explained by a weak dollar (again, not necessarily caused by inflation). Some amount of the oil price changes can be explained by monetary policy (basically inflation). But primarily oil prices can only be explained by market forces. Supply not keeping pace with demand.
My point is that if you use the definition of inflation that Friedman is using, "expansion of the money supply" then you cannot call all price increases "inflation". You also cannot then measure inflation by those price increases. Doing so is a form of the fallacy of ambiguity. As I said in my previous post.
Finally, There has been some amount of destruction of the money supply due to foreclosed loans (Paid off loans also destroy money, but that is scheduled). The Fed, as you have noted has tried very hard to offset that destruction by lowering interest rates. That gives us three possibilities:
1. The money supply has shrunk by some amount
2. The money supply has remained roughly the same
3. The money supply has grown by some amount
In both 1 and 2 we would expect there to be no or downward pressure on the price of oil. In the case of 3 we are assuming that the work of the Fed has been more than successful in offsetting the destruction due to the housing "crisis" that it pushed oil prices through the roof, but yet is somehow still more concerned about a lack of available credit than it is about inflation. That seems to me to be an unsupportable position.
--
JimFive
Another take on the Iraq situation, is from:
Oil “Price Rise” Factor in the Iraq War - A macroeconomic assessment (PDF warning)
So, it's not the guerilla attacks or sabotage by those pesky Iraqi terrorists that is driving down oil production and up the price - it is the fact that US invaded the country to begin with.
Now, I don't personally subscribe to the above thesis, but it is much better argued than the terrorist blame. It is historically a more coherent argument, imho. Although I believe the majority of the price rise is from something else (why else would I be here?), but putting Iraq offline and activating a huge oil slurping military machinery surely didn't help.
As for the "choke points are vulnerable, easily attacked and can be leveraged to deal a price hike" argument, it is of course causally obvious.
However, I am afraid that it will be used increasingly to explain and to justify extended military presence, actions and illegal wars anywhere desired, while at the same time conveniently ignoring the multi-studied fact that aforementioned operations have increased the likelihood of terrorist attacks - not reduced them. It's as if the US wants more terrorists attacks on oil infrastructure and wherever, not less. The mind boggles.
I'm beginning to turn towards the opinion that US help put itself and the rest of the world in this mess with the willing accomplices of several OECD countries. However, I don't see US pulling us out of this. War consumes more oil, not less. Unfortunately, if the only effective tool one thinks one has is military-navy-airforce, then all the problems start to look like wars.
To me that is not a very encouraging sign.
I sincerely hope I'll be proved wrong by the next administration to come and the ingenious scientists, enterpreneurs, politicians and ordinary people of USA.
But please forgive me, if I remain skeptical due to the overwhelming evidence from history of US military actions.
The problem of how to deal with the terrorists in a "Commercially
sound" way has to be to find what they most would not like to lose.
If they are Islamic terrorists that are in the extremist camp would
they be horrified if Mecca disappeared ?
If they are more politically orintated would the loss of their
political masters be more effective, or the cripling of the economy
of the country of their political masters be equally horrifying ?
There is a new form of warfare now appearing and the countries that
allow the terrorists to operate freely must expect to receive the
sort of attention that they could have expected in previous types of
warfare.
The rules of this new warfare are incomplete hence the problems with
Guentamo Bay. The trendies will not like this particular trend but
they have no say it is being imposed on them.
That whole text reads like a psy-op brainwash text from a military insider.
I'll try to do a tongue-in-cheek military mumbo-jumbo to plain english translation:
'terrorist' = aka person we want to destroy
'commercially sound' = effective killing
'islamic terrorists' = those who have the oil
'extremist' = people who have guns and are not police/military/intelligence service/blackwater
'political masters' = guys who oppose our ideology
'new form of warfare' = guys, our powers are shrinking, what should we do? Invent a new enemy!
'countries that allow terrorists' = those who have worthy natural resources or are geographically in a convenient spot
'warfare' = killing, let's not talk about economic warfare, which we ourselves engage in
'rules are incomplete' = we can do what we want, even repel human rights, Geneva convention, anything! Hey, let's do it guys!
Now, this is not an attack against you Bazz, I'm just using the above text as an example, because I think it's littered with concept and words brandied around so much these days. The agenda behind them is so obvious, it's like reading an open book.
Now, let's look at some real world statistics and not scare-mongering military speech by for paid ideologically driven brain washers.
Within EU there were 498 "terrorist attacks"* in 2006. One of these was done by what was labeled as an islamist. The rest were done by (Catholic and other Christian-Sect) separatists, right wing and left wing fringe.
One 'extreme islamist terrorist' attack. One. Repeat that. One.
In USA? Zero.
Now, should we talk about the thing that is really happening: Christian and atheist terrorists! People of devoted Christian faith or lack of it, who constitute more than 99% of the terrorism found in statistics. Or regional separatists. Or racist right wing groups? Or leftie-anarchos?
Where is this horrible islamist terrorism boom that everybody is talking about?
Ah, in the occupied/opressed countries of course. The people of Afghanistan, Iraq are of course not 'freedom fighters' 'opposing' a 'foreign occupation' of an 'illegal war' - to use the parlance of patriotic militaristic speech when talking about our side. They are just 'terrorists'. And terrorists are baaaaad. They need to be 'brought justice to' as well as everybody who 'harbors' them.
Islamic terrorism surely doesn't show up in any of the non-military statistics that I read as more than a statistical blip. Sure, it exists, but is it this world gripping powerful force that is about to kill us all?
Hardly.
It mostly appears to exist in the western military ideology and especially the fear mongering propaganda. Conveniently for them, they themselves feed it, through psyop and actual military operations. I'm sure the multiplication of their budgets doesn't hurt them.
BTW, the above data is straight from TE-SAT EU Terrorism Situation and Trend Report 2007 (Europol).
* Terrorist attack is quite loosely defined and sometimes throwing a cake on somebody's face is deemed a terrorist attack in this day and age.
PS TO any American reading this, who thinks I'm insane, consider reading a NON-American news source (pref. also non-UK) for 6 months while watching no US television and reading no US newspapers (the same for radio/net/etc newsfeeds). You'll be amazed as to what kind of a world view can exist, which is at least equally correct than the one given by US MSM.
Interesting article
Whereas most previous guerrila wars were for national liberation, you are saying this now becomes "for profit"
This is similar to the guerrilla/ drug lords in Columbia morphing from freedom fighter to mercenary - except here the stakes are much higher.
wins and losses in the drug wars make the back pages of the paper.
wins and losses here will make headlines
However, this will really just be "business as usual" for western style (US) capitalism in the oil market:
1. The first phase was to undercut the local govt and install a puppet who was a US friend
2 the second phase was the popular revolt against the puppet, and rise of a popular leader, who, however, would still sell his oil on the open market
3 the third phase will be guerilla take over and holding oil for "ransom" - but at the end of the day, the ransom (cash) will be paid for the oil, at market rates, or the guerillas will lose their own local support
cash is king - can't be worse than who it goes to now
On several threads, Robert Rapier has said, if I remember correctly, that most refineries can handle heavy crude, they just don't get as much of the desirable product from it unless they have installed cokers. This makes me wonder if the assertion that "refineries cannot handle the available heavy crude" is valid. Is Robert around to comment on this?
Here's what I know about heavy oil refining. About 4-6 years ago there was a big push to modify existing equipment to handle heavy oil from both Canada and Venezuela. I know of at least 6 major refineries that made the upgrade and most were in midwest. Louisiana and Texas has some existing capacity for HO. As I recall, it generally took about two years to complete the upgrade (or downgrade, if you will) after obtaining necessary permitting which is the major hurdle.
From what I gather making the change is not big deal, but increased sulfur emissions is huge political problem. Environmentalists tried tried to stop most upgrades and succeeded with a few.
This is pretty bad. Does it occur to Mr Robb that the any of the groups attacking oil production and transport facilities might think, since they are operating in their own countries for the most part, that they have a greater right to the oil than the US and Europe? In the old days, when people rose up in resistance to invasion of their countries, it was called resistance, not terrorism? How would Mr Robb classify the US founding fathers' war of independence, who had a far, far weaker case than Iraq, Afghanistan, and other countries have against US invaders? I mean Britain wasn't dropping DU on us, and it hadn't killed a million of our citizens and hadn't displaced millions more. The issue was taxation without representation. You have have got to be kidding!
I won't even get into the profiteering. Halliburton and the likes are but the tip of the iceberg. To condemn the various resistance groups for profiteering is like Jack-the-Ripper reprimanding someone for not holding the door for a lady.
The peak oil issue can cut two ways: it can be taken, in conjunction with the general ecological crisis, as a clear sign that nations and humanity have to start cooperating in totally re-adjusting our relationship to the planet so we can all survive -- or -- it can be taken as sign that it's time for all-out war to monopolize the remaining resources. So I suppose it's inevitable that such view's as Mr Robb's would make their appearance here.
Oh, and I forgot to add, who is trying to sabotage the proposed gas pipeline from Iran to India thru Pakistan? Guerrilla/terrorists?
I am not making a value judgement here. The post is a description of an evolving dynamic that may influence the price of oil. I'm non-political.
I'm non-political.
It's not reflected in your terminology or what you choose to focus on. You talk about the "guerilla/terrorists" outside the context of what the empire has been doing. That's not non-political. If you discuss a murder and ONLY describe the victim's actions e.g. scratching the face of her attacker, that's not neutral.
Actually, my main focus is on how warfare is evolving and most effective innovations are being pioneered by individuals/small groups. Hence the tendency to talk about guerrillas at the expense of states.
Here's a backgrounder article on some of my work from a couple of years ago:
http://www.fastcompany.com/magazine/103/essay-security.html
Hi John,
I would guess the reason "most effective innovations are being pioneered by individuals/small groups" is that most fighting is between nations and individuals/small groups? In WW2 there was considerable innovation between nations.
In the same way that the size of the participants is asymetric most often what one side is prepared to do is also asymetric, e.g. suicide bombs, genocide... Generally genocide is not seen as an acceptable response unlike say Saddam, Chemical Ali. I imagine that it would be easier say for the US to completely kill everybody in a location than try to police/pacify that area. For the avoidance of any doubt I am not promoting that, or as the politicans would say I cannot foresee any situation whereby I would support that approach!
I am with davebygolly, SamU, and others pointing out the flaws here...
One reason I am a fan of TOD is that it focuses on evidence and rarely puts out sloppy, politically edged punditry like this. This article is a fairly transparent transferring of a hawkish military agenda onto the oil-price topic, and that's about all it contributes. The comment about Venezuela is particularly betraying; Venezuela is not "an ongoing crisis" to anyone except those who are out to get Chavez. That it may "succumb to guerilla warfare" sounds more like a threat (remember the Contras?) than a prediction. Such a thing is equally (un)likely to happen in Saudi or Iran.
Ultimately, Robb offers no evidence that thousands of disparate groups around the world could or would coordinate their actions as a "Shadow OPEC" in a coherent enough manner to play the market. That is merely an idea, an apocalyptic vision, for use in fearmongering.
If Robert (or anyone) comes along and pokes holes in his assertions about light vs heavy crude, I'll be confirmed in my opinion that this is just fluff. I hope not to see too many more distractions like this at TOD...there's plenty of other places (from all sides) to get this sort of thing if you want it.
Not sure how you tease this out of the article:
"This article is a fairly transparent transferring of a hawkish military agenda onto the oil-price topic"
Agree, John. His statement, "Venezuela is not "an ongoing crisis" to anyone except those who are out to get Chavez." is just a tad naieve considering Chavez is funding FARC and other regional guerillas against other regional governments. Chavez is not a live and let live sort of fellow. He has some grand schemes in mind which is obvious to anyone watching him.
I'm no fan of Chavez, but he is clearly very popular among Venezuelans, and has been intervening in Colombia from a position of strength. Thinking that he will collapse in "a couple years" is what is naive. It's way too stretched a conjecture, and the singling out of Venezuela (as opposed to Saudi) therefore smacks of either wishful thinking or propaganda, especially since the only way such a thing would happen so soon is if it were funded by the US.
As SamU said, the way you frame the issues is likely to "be used increasingly to explain and to justify [US military intervention abroad.]" If this is not how you'd like your work to be perceived, you should probably be more sensitive to how it will play. Like it or not, by repeatedly using the word "terrorist" you are signaling which side you are on. (Using the word "insurgent" instead would be a fine way to avoid this problem.) Do not assume that people are familiar with your previous work, either.
If the purpoes of your article is to point out that political instability leads to oil supply disruptions, that's a commonplace. If the purpose of the article is to predict that disparate groups causing local or even regional instability will band together into a "Shadow OPEC" that controls the global price of oil, I think your piece is too thin and short to be seriously considered. It seems as likely that on the global scale these disparate "guerilla/terrorists" will work against each other as much as against nation states, yet you lump them all together and give the "threat" a name. I don't understand why, if your intended effect is not as SamU fears.
Iran and Venezuela are not sources of actual supply disruptions, because they don't withhold the benefits of their oil from their population. Nigeria IS a source of disruption, because it does withhold the benefits. It seems very clear that while you don't regard the Nigerian government as part of the problem, you do regard the Venezuelan government that way. Frankly, the only reasonable conclusion is that you regard someone as a "terrorist" if and only if they are opposed to cheap oil being shipped to the West. If they are a corrupt government behaving just as immorally, they escape inclusion in your nefarious "Shadow OPEC." This underlying attitude is undeniable in your piece, and is where my conclusion about it comes from. If that is not how you want to be seen, if your preference would be a world where the price of oil is not set by violence, if you think popular governments in oil-producing countries should not be overthrown, those sentiments are definitely not well expressed in your article.
When dire predictions are made without much solid evidence to back them up, it's reasonable to wonder what their purpose is. I think you probably mean well, but I don't think the rigour of your analysis in this piece meets the normal standard at TOD.
The most common term used in the article is guerilla. 'Terrorist' was used, but briefly, since it does apply in many instances. To suggest that the terminology can't be used, even when it fits the tactics and methods a group involved actually uses, is not based on fact.
Actually, the article doesn't suggest that there will be a governing body of groups that set prices. Instead, it suggests that the cumulative actions of many groups, operating on a similar basis can achieve the same effect. The article points to the mechanism and likely participants.
Projecting the specter of "GWOT" onto this didn't come from me ;->
Ok, inclusion. Why not include Saudi Arabia? I've written extensively about potential failure there but making a special effort to include it didn't appear to be needed. I also didn't include Iran despite the claim. Finally, this wasn't an article about the failures of the Nigerian government (they are legion), but rather about the ability of small groups to disrupt supply to effect.
Omissions are based on time/effort constraints for an article rather than nefarious motive. The need for such an expansive exploration in the article to demonstrate a lack of a bias, does not appear to be relevant. If more detail is needed to explain the article to readers unfamiliar with the topic, well, that's what the discussion is for.
I was not the first or only person here to see a hawkish agenda in your article. (And I never mentioned "GWOT", btw.) When multiple people see the same thing in your article, maybe there's something to what they see.
I am not asking you to be unbiased as much as I am asking you to live up to the usual standard of analysis here at TOD. (And I'm asking TOD to maintain that standard.) For example, you could have attempted to estimate the total amount of crude oil supply globally that is being disrupted due to violent civil conflict. You could have laid out best case and worst case scenarios. I probably would have considered that a worthwhile contribution on the subject, and I think it's too bad if that's beyond your "time/effort constraints". Lacking this kind of effort, your article reads as mere hyping of the threat of terrorists.
If you have written or read previous work that addresses these questions for "readers unfamiliar with the topic", it's easy as an author to point to it, and far more efficient than a comment/discussion thread.
Ben. Not sure I can assuage the critics who think disruption/sabotage is a good thing, even if there is more than one person that claims that. Hey, but that's just me.
Re: standards of analysis. I've been getting paid for analytical work for over a decade, mostly in the tech sector. One service I published generated $5 m in sales per year. However, that doesn't mean I can't improve my analytical approach. Do you have any of your own analysis that I could read for pointers?
I gave you some pointers in my last reply. Here is another: if you don't want people attributing purposes you don't have, it would probably help to state your purposes straightforwardly. (My own purpose, fyi, is to avoid and reduce civil conflict around the world, which I think is mostly attributable to ill-advised intervention by the richer countries, particularly our own America. Such interventions are not made less likely by hyping the threat of terrorism, as I feel your article does.)
For further pointers, you could observe the style of a few typical posts here at TOD. That has been my main and only important point in this discussion. I didn't have to look back very far at all (http://anz.theoildrum.com/node/4143) to find a TOD post that offers plenty of data, links to related material, and which admits to where it is incomplete.
(And as for how much money you have made doing whatever you have done, that has nothing to do with making TOD a good website or helping the world weather the peak-oil crisis.)
Ben, that's a different type of analysis and obviously something you prefer. I liked that article too.
However, while your opinion (as feedback) is useful, I was more interested in finding out if you had any particular expertise and/or insight into the analysis/synthesis of complex problems that I could leverage in future work. I guess not.
I totally agree with davebygolly and jaggedben.
The various terrorist group have different motivations/goals. There must be even a wide range with any one group. But most seek the support of the general public to some degree. Regardless of one group's true purpose it should recognize potential motivations of the indigenous folks. Offering to assist the population in its goals, whether the terrorist group has true sympathy or not, is key to local support. And though out history local support has been critical to "the cause".
Perhaps we should pay more attention to the potential of symbiotic relationships growing between terror groups and nationalists. There is certainly motive for many indigenous folks. I can offer just one insight from my own experiences. Last year I was involved in drilling several wells off the coast of Equatorial Guinea. Don't feel bad if the country isn't at all familiar to you...it isn't to most. It's a very small island nation off the eastern coast of Nigeria. A population of only 500,000. A Spanish colony until the 80's. Oil wasn't discovered there until the late 90's. Currently ruled by a dictator who took control after killing his uncle, the first dictator after liberation.
I don't have the numbers at hand but I would guess current oil revenue exceeds $80 billion per year. With their small population they are technically one of the richest per capita in the world. Yet 99% of the population lives in extreme poverty. One of the great shortages is protein...odd you might think for an island nation. But the ruler destroyed the local fishing fleet after a failed invasion by mercenaries in 2002 (led by Margaret Thatcher's son). The ruler was concerned that another invasion might use the fleet to infiltrate.
The field I drilled sits right off the island in clear sight of the population. In addition to watching tankers carry off their oil to Europe weekly they also watch the burning of 20 million cubic feet of natural gas per day. This is the associated NG produced with the oil. The operator offered to lay a pipeline and transport the gas to the mainland at its own expense but the dictator rejected the offer. He didn't want to spend the money for a local distribution system.
This is an example of just one little spot on the globe that few know of and even fewer appreciate their contrabution to our endless thirst. How easy would it be for anyone to gain local support by offering a chance to live even a third class existance. I hadn't thought much about this thread reguading a possibly expanding net work exerting control over more of the production stream. In thinking back to what I saw in EG I'm surprised the bad guys haven't made a move in that direction.
Who would condemn the EG people for seizing control of their wealth and utilizing their oil reserves to develop their own economy? Makes the fight against "taxation without representation" seem somewhat trivial compared to being starved to death.
ROCKMAN,
Thank you for a very descriptive post, and once again we are reminded of the scale of tragic waste of lives and resources that go in a supposedly "modern" world.
This brings up an absolutely fascinating point that to me is so astounding it is hard to grasp completely and that is simply this: We humans have difficulty grasping what must be the sheer scale of resource waste and loss and loss of the power of ideas worldwide caused by our own primitivism.
Often it is said "we live in a world of limits" which must certainly be true. But do we have any idea how high those limits may be? Is it possible that due to our primitivism, our own inhumanity, our own terror of one another, that we must accept for humanity a primitive existance of near poverty with such low limits on our human future? That our poverty is NOT caused by lack of natural resources but is caused by human ignorance and that the world and our sun can provide enough wealth for all humans if we only knew how to live with one another and use the brainpower of over 6 billion people?
I would make a case that your post describing events in, as you say, one little corner of the world unknown by most people, is an example of why so many people are optimists. Because we realize that it is NOT physics that limits us, it is not geology that limits us, but instead it is the vast scale of our own barbarism. We do not need to overcome nature. We simply need to overcome our own human stupidity.
While this will be very difficult, it is not impossible. There is no law of physics, no bell curve that proves that humans must be stupid.
"The crisis of the West is in it's essentials an ethical crisis." Albert Schweitzer
RC
The author of this article Mr. John Robb had no right to be given the honor to be posted at this valuable website. Contributors here (before posting of this article) used to be people of good morals and the handful of few that can see above themselves by thinking about common good of humanity. They researched and posted here not for themselves but for the sake of people who sit blind and deaf as the storm approaches. A great many people wrote articles at this website regarding alternative energy resources and on even more critical issues like food security and the link between green revolution's increase in food productivity and use of fossil fuels, but the whole tribe get a bad name now that a person who join the air force for his college and who not mind bombing innocent people being an effective part of the most fatal weapon of american armed forces.
Lost all his morality in pursue of his salary and free college education he dare to call the freedom fighters of a valuable country the word fed in his mind by his bosses....TERRORISTS. Lost all his logic he can't see that while he bomb civilians and intrude in other people's country there are people on ground (which he think are no more important than ants) who think about common good and fight for their religion, their country and their people.
It not matter that when he see them from high above the sky sitting in one of the most sophisticated weapons humans ever made yet they look like ants to him who he think he is rightful to kill with as little sympathy as to insects when you spray poison on them. Yet he can't answer why his country's armed forces are getting such a big big big defeat their? Why can't all those weapons, all that money, all those allies can save them? How can a tiny country with no air force, no navy, no tanks and no one unified force can damage so much to the most powerful empire on face of earth today?
He need to learn a little lesson from history. Being too lazy to use what little mind he is left with he is advised to ask his bosses what went wrong in vietnam? Then he has to sit and think that in vietnam it was soviet union they were fighting with which was equal in power to usa and then there was added power of china against usa and then at that time weapons were not that sophisticated but in iraq there are no soviets, no help from china and usa has much much more sophisticated weapons, why usa is still losing the war?
The reason is when you are the culprit, the robberer, the criminal then the forces of nature works against you, then you are in direct war with God and you can't win against God!!!
There were many invaders in history of iraq, the mongols, the british etc but at the end they lose and the iraqis win. You can't beat the pride of 7,000 years old and the first ever civilization, the land of the first ever village, first ever city, first ever written language and the first ever written code by calling them terrorists.
If you and your country men especially the elite get terrified with a handful of people who have no larger weapon than rifles and road-side-bombs and they are not terrified with your stealth bombers, satellite guided missiles and nuclear-reactor-run submarines then think yourself who is the coward.
When you can't handle a group of militia how do you think you can fight if you ever have to conflict with some army of your size? What if looking at the incompetency of usa forces in iraq and realizing that the deaths and injuries of the best of the american soldiers in iraq has weaken america from inside, soviet union or china decide to invade usa? This is not far-fetched imagination and has parallels from history such as after defeat and wiping out of the elite portion of soviet army in finland (in 1936 i guess) nazis got courage to invade russia which resulted in a single war that had so many people killed as the sum of all human wars till then.
So Mr. John Robb, how many barrels of human blood are equal in value to one barrel of crude oil, if its?
(a) iraqis blood
(b) american blood
(c) blood of your family
(d) your own blood
This is one of the most interesting ad hominem attacks I've experienced.
To clarify, this post and my work isn't a justification for warfare. It is, however, a description of a dynamic that could influence oil prices and supply.
Fortunately, the man's rhetoric exposes his "wisdom."
As a long-time TODite and a reader of your website and "Brave New War", I find your work on fourth-generation warfare and its interaction with peak oil to be trenchant and illuminating. Your article does not appear to have any obvious political bent, far from it. While any discussion of guerilla warfare has an obviously political dimension, it seems to me that your work is about methodology rather than ideology.
Thank you for posting on TOD. Your work, as well as posts by Jeff Vail, adds substantially to the range of topics we discuss here on TOD.
Thanks much Bryant. It was my pleasure.
Ah, now there's a post I can agree with. I can't hold with those upthread who object to the author's use of terms as an indication that he is promoting a particular agenda. That there is a connotation to the use of certain words is beyond doubt, but it's clear from reading content of the post that the author is merely describing the phenomenon, nothing more.
I wonder why these people are trying to suppress your statement? Are they working for the US government and afraid that you are giving ideas to people from oil exporting countries?
I think people in there already have these kinds of ideas. Our government thinks that if no one talks about this sort of stuff then it won't happen. They are wrong. It will happen.
The profit oriented 'freedom fighters' can win wars and have before. Like our revolution in 1776. We launched so many privateers that the mighty British navy gave up trying to suppress them and instituted convoys, then pressured the British government into making peace.
We had better start working on coal based synfuels before we really hit the crunch. We had better start working on solar power, because if oil tankers are vulnerable to attack, just think about LNG tankers.
What about those REAL attacks of bombs, missiles and bullets that you and your fellow american air force pilots do on regular basis at civilians of iraq and afghanistan in order to kill their oil consumption to generate greater profit for your oil companies.
Wow!!!!!! do you really dare to say that your work of killing innocent people in other people's country to loot other people's oil is not a 'justification' of war? Is that the level of bankruptcy of your logical thinking? When you bomb those people either you think you are doing the right thing or you think you are not doing the right thing. If you think you are doing the right thing then in your thinking your work is 'justified' which is in contradiction to your above quoted statement. If you think you are not doing the right thing then you value oil over human blood. Both ways you are totally wrong.
Wow! This man's "wisdom" must be derived from Afganistan's poppy plants. the enemy of freedom is losing everywhere and is hiding not from airplanes, but from ground forces that are better at fighting with pencils then it's opponent is with any weapon imaginable. sadly, this side topic, however, is irrelevent and does not belong here!
John, I think your comments are mostly plausible and I do not regard your use of certain terms to be unobjective. You must understand that some people are relating their own lives with those of the perceived victims of tyranical regimes and as such will take any criticism of anyone other then the USA as a direct attack. This country was founded on the rights of freedom of speech, among others. don't let anyone say it's a bad thing to have your own opinion. I can see that you are on the right track.
Can someone please address what President Bush said this morning?
1. Is there that much oil in the Artic?
2. Is there that much recoverable oil Tar Sands, CO?
3. Is there that much oil in Anwar?
4. Kudlow on CNBC said that we have a trillion barrels to be recovered. What is the everyday person suppose to beleive?
What is the everyday person suppose to beleive?
They shouldn't believe anything. They should do what you are doing, start to investigate and listen to all sides. And the first step is always to realize that there is ALWAYS more than one side despite the media's pretense otherwise.
There are others here who can much better answer your other questions.
Hey Dave we should do our own do diligence from mine. I think the way peak will transpire is gradual not instantaneous. that should give us all some time to prepare. Unless Israel goes into Iran then all bets are off.
Regarding conventional production in various locales, increased drilling will help, but I think that it will not be material, i.e., it tends to be hard to maintain an infinite rate of increase in the consumption of a finite energy resource base.
The oil shales of Colorado consist of kerogen, a solid substance that is a precursor to oil. It has to be mined and "cooked" or cooked in situ to produce a product that can be refined. At present, Shell has a pilot in situ project, but there is no commercial project, and there are serious questions about the net energy component. It will also be hugely capital intensive, with a low rate of production--if we can even get net energy out of it. It's very much analogous to the huge supplies of gold in the world's oceans.
In early 2008, Larry Kudlow had two succinct pieces of advice:
SELL OIL ! BUY FINANCIALS !
I hope you didn't follow his advice.
My advice:
Oil and gas companies can and will make money finding smaller conventional fields and developing resource plays like the tar sands in Canada. However, there is a huge difference between oil companies making money and making a real difference. Net energy consumers who confuse the two do so at their peril.
West Bush is from a oil family he should know something about this right. Right. Or Am I assuming to much ?
Or he might be working on trying to create a winning political issue for November, i.e., you are unable to afford to drive to and from your job because the Democrats are keeping oil companies from drilling.
To clarify my position, I think that we should open more areas for drilling. I just don't think that it will make that much of a difference, but among other reasons we are going to need the jobs, and hopefully we can use the energy to help transition toward an electrification of transportation future, powered by wind.
WT,
Don't you think it will make a difference when hoarding takes place and exports start seriously declining? It seems to me that every drop we have will make an ever larger difference under developing circumstances.
pocampo, I believe that if you read thru enough of TOD's past postings, you'll find that the analysis shows that there is about a trillion barrels left to be exploited, as Kudlow states. However, it will be more expensive to extract and transport away from source. It is also only about thirty-three years worth at the current rate of usage.
Lesson from Matthew Simmons (paraphrased from the way we are supposed to do science):
"Data always beats theories. Look at data three times and then come to a conclusion, versus coming to a conclusion and searching for some data. The former will win every time."
So, when a politician says something and the data says the opposite, believe the data.
In this day and age, lies are cheap.
More than happy to respond to questions or get into a discussion about the article.
John, I am sure your general 'guerrillas' thesis is correct, I know that geologic peak oil is the 'best case' and things will almost certainly be worse than 'best case' because of 'above ground' considerations.
I am also sure that there is speculation going on - in order to speculate and affect the price you have to hold physical stock - the only people who can do this on an ongoing and continuous basis are the producers, by deliberately witholding production (or deliberately not making adequate investment to meet the customer's needs) and they would be mad not to do it, so I assume that now we are at, or close to, peak crude oil they are not mad and will do it more and more.
From my recent European experience the 'guerrillas' don't have to be small numbers of violent activists, they are increasingly just lots of ordinary people who are struggling to adapt their lifestyles to, or taking advantage of, the new reality. People like truckers oil workers and fishermen, and, if the UK is anything to go by, everybody that has no option but to pay the price to heat their homes and feed themselves - it can only get worse.
xeroid said "guerrillas' don't have to be small numbers of violent activists, they are increasingly just lots of ordinary people who are struggling to adapt their lifestyles to, or taking advantage of, the new reality"
EXACTLY! Economic adaptation, by community guerrillas, is the key to the new reality. I'm currently working on my next book called, "The Resilient Community." It's a set of approaches to organization and economic empowerment that will allow communities to not only weather the coming storm(s) of disruption (from violent guerrillas, hollow nation-states, markets 'gone wild' and more) but prosper. If we can crack the nut on how to do this, it is something that will do more for positive global development than anything attempted so far.
John,
Assuming that the U.S. becomes a hollow state at some point, what do you think the primary loyalties will be?
Aside from guerrilla/criminal entrepreneurs, what actions by ordinary citizens and or local governments(county/municipal) would the national state find most threatening? Along that vein, do you think that some of the adaptations we will need to make to our society here in the U.S. to cope with declining oil availability, will be perceived by the nation state as threatening? Specifically, do you see devolution of power to local political structures and the concomitant decoupling of infrastructure proceeding peacefully? Or at least relatively so?
Bryant,
Ok, let's run with the hypothetical.
In the US, primary loyalties will be all over the map. The US has atomized. The family structure is relatively amorphous and cultural norms are very loose. This means that manufactured loyalties will likely predominate. They will be built from the ground up based on any soil that is available.
If decentralization does take hold, as a response/correction to rising instability, local structures would gain power quickly (at the expense of national structures). There is also the potential for a significant rift with the central government -- particularly if there is an attempt to nationalize local capabilities, cut/control interconnections, withhold tech, raise/collect emergency revenue, enforce corporate control, etc. If it came to blows, given the rapid improvement in the capability of small groups to wage war....
Thanks...I know that was peripheral to the main topic but I appreciate your responding.
I'll give it a shot. I've been trying to understand the mindset, esp. after watching the two long video lectures (available on the net) by Thomas Barnett.
IF guerrillas can be non-organized, non-extremist, non-ideological people, who just happen to need the energy (puncture the pipeline to steal oil, rob a boat, etc)
AND their actions can indeed cause supply disruptions, several of which can synchronize stochastically and cause a bigger combined consequential supply loss (assume no organized Shadow-Opec)
THEN how do we conceptually group and thus, label these people?
THEN how do we treat these people?
WHAT is the proper or likely police, political, judicial, military, other action?
I fully understand and accept that if such a situation were to become reality (hypothetical, I don't necessarily believe it), that it might indeed be severe and have very serious primary and secondary/tertiary effects.
My further question is: how do we view this from a changing military/war perspective? Will the response be purely tactical "control to normality" or will it be based on some strategical imperatives about how we should deal in such situations and with such people?
I can fully understand if you do not wish to reply, as my question borders on themes of ideological variety.
Regardless, I consider this an important issue and would really appreciate any opinion you may want to share on this.
This article started as being about light sweet crude, the most valuable oil. I would like to see a conclusive post on the past peak of major light sweet oil deposits. From there on EROEI is going down.
"I would like to see a conclusive post on the past peak of major light sweet oil deposits." I'd second this. It would be a potentially very valuable bit of analysis.
John,
You might have mentioned that the Saudis have spent a small fortune recently upgrading their security after a number of very serious attacks in 2006. They didn't do that because they had nothing better to do with the money.
With good reason. Al Qaeda is going for a big event.
For example, the Saudi Abqaiq attack nearly shocked the system in early 2006. They got through the second layer of security in ARAMCO marked vehicles but didn't get to the correct blast point.
Also, Zarqawi in 2004 attacked the Iraqi Basra offshore terminal with 3 speedboats laden with explosives. Hit a parked tanker but not the facility.
Earlier post on the 2006 attacks:
http://globalguerrillas.typepad.com/globalguerrillas/2006/02/al_qaedas_b...
With the various bits of software that run most things - is the black swan going to be sabotage via SCADA? And would one even know that it was an attack VS just a 'programming error'?
Could be. Haven't seen much of that yet.
I've seem a movement afoot that asserts that there really is no Al Qaieda, that it is all a straw man created by Bush so he can take over middle east oil. The same sort of thing has a following in congress.
The only problem with 'created by bush' theory is that the name 'Al Qaieda' was in play before Bush II was in national office.
Nobody has ever asserted Al Qaieda was created by Bush. He was CIA creation.
pocampo,
I haven’t seen the latest statements but I doubt they’ve changed. Please correct me if I’m presuming wrongly.
First, and above all else, statements that X amounts of oil being present in this area or that area are meaningless regardless of who they come from. The question is: how much oil can be recovered under what pricing and technology assumptions. With regards to pricing if oil were to drop to $10 per barrel few of us (yes…I’m one of those oil guys) would care to drill in ANWR or the outer continental shelf. There may well be billions of barrels of oil in ANWR but it’s expensive to develop. How much could be developed at $130 per barrel? A lot more than at $10 per barrel but no one (and I mean no one) could tell you how much. But they will say there is “the potential” to produce X amount of oil. And when someone says “potential” what they really mean is that there isn’t enough evidence for anyone to prove their number is wrong. I’ve seen hundreds of exploratory wells drill during my 30 years and every one had the “potential” to produce large amounts of hydrocarbons. And 85% of those “potential” discoveries found nothing…nada….zip. But most did have an honest “potential” to be successful.
The question of technology is also often misused. Yes…there are billions of barrels of oil that could be distilled from the Canadian tar sands. But the technology requires a tremendous amount of energy and water to generate the steam used in the process. So much natural gas is needed to expand the recovery that Canada cannot supply it. This is why the Canadian gov’t approved plans to build 25 nuclear plants in the tar sand fields to supply the energy. But the gov’t has recent withdrawn those plans. I don’t know for a fact but I suspect that the expansion would have used the entire ground water resources of over 300,000 native Canadians in the area might have been a factor.
As far as Kudlow statement, the following is also true: there are billions of pounds of gold that could be recovered from the oceans with current technology. But the fact that it would cost many times more than the current price of gold does put a kink in the plan. Again, the volume of any product…oil…corn…etc…that can be produced will be a function of cost vs. value. Unless the economic conditions are identified the “trillions of barrels” statements are meaningless.
Thanks Rock for your thoughtful reply. So Rock what do you think of PO is it aways away or is at are door ??
Why is it that it seems no-one wants to step outside the box and figure that the future will be some very unpleasant version of the past.
Let us postulate that post peak oil supplies are short and "terrorists" start damaging oil producing infrastructure.
At what point do you think some nation - China, USA, Russia, Europe, Japan or a combination thereof would go into the area where the infrastructure was being damaged and decide their national security was being threatened to the point that " it was necessary to send in troops to eliminate the local population completely to stop the infrastructure damage".
Joshua sent his troops into Jericho in biblical times to slay every man, woman and child in the city. The English wiped out whole cities in Scotland in the middle ages and then brought in English citizens to repopulate the cities. And there have been other instances of such actions since then.
I would guess that it will almost certainly happen again and it will be over reliable access to the remaining oil that will precipate it.
So if you hear the battle cry - "Jericho 'em", you will know what is about to happen.
Yesterday cities, tommorrow whole areas or whole nations?
Gee, maybe people don't bring this up all the time because they don't want to give others ideas, or desensitize themselves to the horror of it. (And if you think nothing like this has been mentioned on this site before, you probably haven't been reading too closely.)
The questions is, are you just waiting for the genocide you describe to happen, or are you doing something to prevent as much of it as possible? Please don't tell me you think it would be okay...
Gee, maybe people don't bring this up all the time because they don't want to give others ideas,
If one looks thru the world with this set of glasses, then you might as well shut down the internet as it 'give people ideas'.
It appears that U.S refineries to a large extent had not been reconfigured to use heavy/sour Crudes and this factor has mainly been responsible for the steep increase in spot prices of light, sweet Crudes. It is baffling as to why US Oil refining companies did not foresee this aspect ( of increasing production of sour, heavy Crudes) and reconfigure their refinery facilities. Now the entire world is paying the price for this non-action!
pocampo,
Actually I haven't paid much attention to refining my thoughts on PO until a month ago when I joined this site. That may sound odd but the day to day oil biz (at least at the grass roots level) isn't focused on PO. We're just focused on our own little piece of the world and getting the next hole drilled.
But from the efforts of many on this site it seems that we'll be getting a small stabilization period for the next few years. No huge new fields coming online but a lot of good sized ones. New technologies allow a much quicker and higher ramp up of these new discoveries so their impact on flow rates overstates their total reserve potential. That's the downside of the technology: high initial flow rates also lead to a relatively shorter life for a field.
I don't see much a peak over the next 5+ years but more of a plateau with highs and lows alternating. But I think once the general pubic recognizes this situation there will be significant consequencies...both good and bad.
Nigerian attack closes oilfield
So, 200,000bbl/day gone, that neatly balances out the Saudis' planned rise in production in July.
It should bring oil up over $140/bbl on the markets tomorrow. MEND does invest in... well, bunkering. Ahem.
Kiashu,
see also:
in:
Shell Shuts Nigeria's Bonga Oil Field After Attack (Update4)
http://www.bloomberg.com/apps/news?pid=20601116&sid=aRx1aLUJHgT0&refer=a...
Antony Goldman was 'surprised'? -- now, there's a guy who needs to read 'Brave New War'
I need more information to be convinced of your following assumption that the crude is kept in the ground until prices points are met. With this assumption one would have to believe that environmentalist, the Dems, and the oil industry are partners in collusion. That mix is more suggestive of oil and water that don’t mix but on the sweet crude and our lack of refining facilities I could envision some link with that assumption. To initiate the construction of that refining manufacturing process has been almost as difficult if not more difficult to accomplish as oil exploitation. But golly gee.. Just think how efficient it will be if Maxine Waters, Maurice Hinchey and their Dem cabal manage to nationalize the refining industry as our dear old friend Chevz and other Communist/Socialist did... The alarming thing is that neither of these charlatans are being laughed out of DC or the country and some polls suggest almost 40% of Dems support such a measure.
“2) The world demands light sweet crude -- this demand is structural (not easily shifted) since most of the current infrastructure is built to process light sweet. As a result, it trades at a significant premium to heavy crude. This puts oil producers in a difficult bind: increased production of heavy crude without a corresponding increase in infrastructure to process it will result in a rapid collapse of prices for heavy crude. Therefore, heavy crude is kept in the ground until prices/infrastructure can support it.
The information below is from the Wall Street Journal “Bush’s Drill Bit” Jun 19/ 08 pg A14 and the Investors Business Daily chart page A10 6/19/08 “Can’t Touch This” Source Richard L. Watson.
Only 0.46% of the Outer Continental Shelf is producing oil (though only 2.3% is under lease). But because of the exploration ban, oil companies go in more or less blind, not knowing the extent of the available resources. Millions of acres lack oil or gas, which is why it's called "exploration." Federal law stipulates that an oil company must sink a producing well within 10 years or lose the lease; it often takes nearly a decade to navigate the geography, not to mention the long process of environmental and regulatory review. Or coping with multiple lawsuits from the green lobby. WSJ “Bush’s Drill Bit” Jun 19/ 08 pg A14
Access to roughly 80 billion barrels is limited in some way by various governmental policies. “Can’t Touch This” Source Richard L. Watson
http://epaper.investors.com/Repository/ml.asp?Ref=SUJELzIwMDgvMDYvMTkjUG...
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dryhole100,
THIS THREAD SEEMS TO BE DYING OUT BUT LET ME THROUGH SOME THOUGHTS ON "COLLUSION".
I WOULDN'T CAST A NEGATIVE VIEW OF ANY OIL EXPORTER FOR NOT PRODUCING AT THEIR MAXIMUM RATE OR DEVELOPING ADDITIONAL ASSETS ASAP. IF THE CITIZINS OF NIGERIA COULD ACTUALLY TAKE CONTROL OF THEIR COUNTRY IT WOULD ONLY MAKE SENSE THAT THEY SELL ENOUGH OIL TO MAINTAIN THEMSELVES WHILE PRESERVING AS MUCH AS POSSIBLE TO USE DEVELOPING THEIR OWN ECONOMY. MOST UNDERSTAND THAT MEXICO IS RAPIDLY DEPLETING. WHEN THEY BECOME A NET IMPORTER SHOULD THEY EXPECT THE US TO START SHIPPING THEM OIL PRODUCED HERE?
SURE...WE NEED IT TO. BUT NIGERIA NEEDS OIL TO ESTABLISH THEIR ECONOMY. SAUDI NEEDS AN EVER INCREASING AMOUNT OF OIL TO SATISFY THEIR CITIZENS. I'M NOT SURE IF I REMEBER CORRECTLY BUT SAUDI IS CURRENTLY CONSUMING 20% OF THEIR PRODUCTION DOMESTICLY. AND THEY HAVE BEEN EXPERIENCING A POP BOOM FOR YEARS NOW SO THAT DEMAND IS EVER INCREASING. SHOULD WE EXPECT SAUDI TO DENY THEIR PEOPLE THE OIL THEY NEED TO SATISFY OUR THIRST?
AND HERE'S A FACT FOR THOSE THAT HATE THE IDEA OF CARTELS CONTROLING OIL FLOW. IN THE 1950'S THERE WAS AN ORGANIZATION THAT EXERTED ABSOLUTE CONTROL OVER WORLD WIDE OIL PRICES. THEIR COUNTRY PRODUCED MUCH OF THE OIL AT THAT TIME. IN ORDER TO KEEP OIL PRICES FROM FALLING THEY ALLOWED THE PRODUCERS IN THEIR COUNTRY TO FLOW ONLY A PERCENTAGE OF THEIR CAPABILITY. THE PERCENTAGE WAS VARIED EACH MONTH TO KEEP OIL PRICES UP AT A LEVEL THAT SATISFIED THEIR OWN SELF INTEREST. ANY OIL PRODUCER IN THEIR COUNTRY THAT VIOLATED THIS ARTIFICIAL LIMIT WOULD BE SUBJECT TO FINES AND POSSIBLY IMPRISONMENT.
THE COUNTRY WAS THE USA. THE ORGANIZATION THAT DETERMINED HOW MUCH OIL WAS SOLD EVRY MONTH WAS THE TEXAS RAILROAD COMMISSION. AN ODD NAME BUT THATS WHO REGULATES THE OIL INDUSTRY IN TEXAS. THE RRC SET THE MONTHLY "ALLOWABLE". AT TIMES OPERATORS WERE ALLOWED TO PRODUCE ONLY 305 OF THEIR CAPABILITY. THISYSTEMIS ACTUALLY STILL INPLACE BUT SINCE THE 70'S THE ALLOWABLE HAS BEEN MAINTAINED AT 100%. BUT WAS THE SYSTEM THAT MUCH DIFFERENT THAN THE US GOV'T PAYING FARMERS TO NOT GROW CERTAIN CROPS IN ORDER TO LIMIT THE MARKET AND KEEP THE PRICE UP?
I HATE IT WHEN I DO OR SAY STUPID THINGS. ONE OF THE WORST SINS. IMHO, IS HYPOCRACY. HARD FOR ME TO FAULT OTHERS FOR WANTING TO DO WHAT WE DO...EVEN IF WE END UP LOOSING OUT.
"When Marxist dictators shoot their way into power in Central America, the San Francisco Democrats don't blame the guerrillas and their Soviet allies. They blame United States policies of 100 years ago. But then they always blame America first." Jeane Jordan Kirkpatrick
BUT WAS THE SYSTEM THAT MUCH DIFFERENT THAN THE US GOV'T PAYING FARMERS TO NOT GROW CERTAIN CROPS IN ORDER TO LIMIT THE MARKET AND KEEP THE PRICE UP?
On the first I can agree in part but one element one must not ignore is that farm price supports are not unique to the US but also farm policy in the EU, and at a minimum Japan too. All and not just the US are potentially contributing to increased food prices and possibly pricing developing counties’ farmers out of the market. In part I can agree but that is not the only issue facing those developing countries. When one considers the decades ago Socialism in Ethiopia and the more recent effects the Maugabes of the world have had on their countries, with many formerly huge food exporting countries are now countries suffering severe starvation and now huge importing but still insufficient food amounts. To affront either but more recently the latter our politicos, in my opinion, have substantial throttled the ability of the Special Ops or any other methods to confront such atrocities and that effort’s origins could be considered to have began in earnest when the Dems were challenging the Iran Contra affair. It is my impression that more recently that ability to challenge those elements has been even more restricted by the Dems and the recent Supreme Court Habeas Corpus decision written by Kennedy has likely made an already difficult effort more difficult if not impossible. I believe that your suggestions for the Special Ops are the only viable method to stymie such atrocities is spot on but now severely hampered.
I HATE IT WHEN I DO OR SAY STUPID THINGS. ONE OF THE WORST SINS. IMHO, IS HYPOCRACY. HARD FOR ME TO FAULT OTHERS FOR WANTING TO DO WHAT WE DO...
On US hypocrisy I can easily find links to Kirkpatrick’s quote above and I believe the US market concept will ultimately work to the disadvantage of monopolies. Furthermore, it is my impression that US success has been internationally misinterpreted resulting in envy analysis that is always absent a measured quantitative analysis of our process. A prime example of that process was defined in the book “The Black Swan” when the author wrote, I paraphrase, “only 60 to 70 companies on the S&P 500 in the 1960s survived as an entity in the late 1990s.” It seems that second generation owners are not as dedicated or deliberate as the founders and in our economy there is always someone chasing and catching the leader with improved or new product. I was provided the first hint of that concept some years back when I saw a photo taken in the early 1900s of the top NY 100 shakers and movers and the top NY 100 shakers and movers of the late 19th century. Not one of the families of that original group was on the late 19th century photo. Please don’t misinterpret that I condone or object to exposing or discussing such a monopoly process but to assign such methods as unique to the US is in error. History will yield many such occurrences; however, I am convinced that such a process has a substantially reduced chance of success in our US capitalist system with the entrepreneurial freedom to challenge those monopolies. This morning the Investors Business Daily “Leaders & Success” “Charles Nash Motored Ahead” presented an individual who arose from being an indentured child to create the Nash automobile industry. And accomplished this in a time shortly after and during a time when anti-trust laws anti-monopoly laws were and being rewritten.
Finally, and perhaps more importantly, the precipitous drop of drilling leases in 1981 surely did not enhance our current oil deficit and I just cannot imagine this as a design approved by the Texas Railroad Commission or by any oil entity.
For AOL users: http://epaper.investors.com/Repository/ml.asp?Ref=SUJELzIwMDgvMDYvMTkjUG...
And on doing/saying stupid things? I checked my pulse and as long as it beats so will I be inclined to do/say stupid things so I can learn from my stupid conclusions and mistakes.
One of my favorite quotes is from an individual who has only months to live who said. “ If you must fail, fail spectacularly.” Could it be that the stupider I be the smarter I should become?? One can hope..
On Mexico’s oil production
Past Catches Up With Mexico's Oil Monopoly
http://www.washingtonpost.com/wp-dyn/articles/A16500-2005Jan17.html
Yeah Wickepedia not a best choice but Milton Friedman agreed…
Whether the breakup of Standard Oil was beneficial is a matter of some controversy. Many economists agree that Standard Oil was not a monopoly, ...
http://en.wikipedia.org/wiki/Standard_Oil
All excellent points dryhole100. I am actually a big supporter of constructive intervention by gov't to stablize and modify growth. The Texas RRC did keep oil prices higher but this lead to the development of some of our largest fields...including Prudho Bay. I truely wish OPEC had began a slow and consistant reduction (or at least not unlimted growth) of exports over the last 30 years. This would have motivated the developed economies to adjust efficiencies and alternative development roadblocks.
But, as they say, if frogs had wings they wouldn't bump their butts. Can't change the past but hope (against the odds I feel) that we can start making painful but stablizing changes now. But with the seeming inevitable one upmanship games I anticipate from the two parties I'm noe too hopeful.
supporter of constructive intervention by gov't to stabilize and modify growth.
But with the seeming inevitable one upmanship games I anticipate from the two parties I'm not too hopeful.
Carl Sagan wrote that the scientific culture in Mesopotamia was a richer culture than the Greek culture. It was so because of science while the philosophical talking heads of the Greek culture debated issues with great oratory their slaves’ heavily toiled but the Mesopotamia culture got to as work with science, thus reducing the every day effort their citizens and slaves had to exert. From the DC chambers I hear multiple cri de Coeur presenting positions amplifying their lofty personal significance and virtues, and all positions if adopted continue absent process evaluation but perhaps more definitively they love to hear themselves talk and with these lofty loquacious position comes the free media exposure projecting the intended “I really really care” message.
I had the good fortune to live 2 lives, one in the Military and the other in the Corporate world. From the former I learned values, dedication, organization, and endurance, to name but a few, and from the latter I found a business science oriented continuous process evaluation toward product improvement, with cost evaluations that ultimately determined product improvement and continuation and/or elimination.
Do you want +500 generals in the House and Senate running your war? Do you think those dudes can run your war? Witness Marcus Lutterll’s experience defined in his book “Loan Survivor,” LBJ “those guys can’t bomb an outhouse without my permission” and more recently a Dem party throwing monkey wrenches trying to insure a war they said was lost will for sure be lost. And then there is that combatant Habeas Corpus decision by our illustrious Supreme Court. IMHO I believe that past and current DC and Pentagon culture has been such, assisted by aggravating media and political pressures, which have hindered removal of poorly performing military and civilian personnel with tactical reconsiderations just as adversely affected. Like, “Hey Pres, Cancha do what all the Gens say?” One upmanship hinders either and I find no process evaluation, only politically enhancing conclusions, that they cannot make these decision fast enough to facilitate positive change and I submit to you their ability to stabilize and modify and stabilize industry is even more egregious. Running a business is not always fair and that is a part that elongates the debating process and with the by the by, gotta pay attention to that companies competitors and if we break it up we gotta provide some guidance to insure it does not go belly up. On and on… “He who is governed least is governed best.” Thomas Jefferson
I’m kinda fond of TJ myself... How bout you??
Enjoy your post and positions... Keep it up...