Letters to the Editor
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Mexico should copy Norway
Leonard again pushes an agenda, provides shallow analysis, and misses the point. To start, let’s all agree that “peak oil” is real, at least in soft form. Specifically, oil is a finite resource, the sweetest, easiest to extract crude is diminishing, and global consumption is rapidly growing as the world becomes more prosperous. What most peak oil proponents refuse to grasp is that the current global supply of oil is as much a result of government incompetence as the geological certainty of depletion. We have known for some time through publicly available data that Iran, Venezuela, and Mexico have declining year over year oil production; now Russia has joined this club. In other words, the nationalized oil companies - who control 80% of the world’s oil reserves - have not done a good job at maintaining their production capacity. One can argue that this is a good thing; sell less, make more. The problem – using Mexico as an example – is that Mexican production is expected to decline precipitously. Given that the majority of government revenues (>65%) are generated from oil, the country will not be able to fund its social programs, or much else for that matter. The solution – and a benefit to the Mexican people – is to open up their market to international investment, negotiate favorable terms, and invest in a sovereign wealth fund for the benefit of the entire country. In other words, copy Norway.
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Reminds me of the forestry industry
Just drive along almost any rural highway in Oregon, and you see miles and miles of clearcuts. Very scenic, eh? Miles of mud, brush piles, stumps, and itty bitty seedlings that the deer haven't eaten yet.
The forestry industry would blame all their woes on conservation. If only they could cut down every last tree, there would be money for everyone, jobs would come back to tiny single-industry timber towns, schools would be funded, and life would be good.
But, even if we threw the forests open tomorrow, WE'D STILL RUN OUT OF TREES. It's FINITE. Yes, it's a "renewable resource", but not on the scale that Wall Street wants. It takes hundreds of years to grow the kinds of trees the forestry industry wants to "harvest" today.
So it's not surprising the oil industry uses the same logic. Open it all up! Pump it all out! If we just keep on pumping, there is no shortage!
1. Insert fingers in ears.
2. Sing "la la la la."
3. Continue pumping oil.
4. Repeat as necessary.
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You mean?
peak oil raises problems other than high prices, falling produciton, and potentially falling revenue?
Hmmm ... no, I don't see it.
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Just a note, to keep reality in play here
In Russia, the problem is not so much a lack of oil but an investment drought. This has been caused by high taxes and hostile treatment of foreign and some domestic companies by a government reasserting control over its energy sector.
Let's please all face some uncomfortable facts about the Russian energy sector.
The biggest oil company in Russia was being run by flat out murderers who casually hired armed thugs to wage a campaign of contract killings and attempted killings against ex-employees, disgruntled foreign business partners and even the mayor of Nefteyugansk. Yukos sentenced the mayor to death for the crime of sending the company a bill for back taxes.
If oil executives in the West ran their businesses anything like the team that ran Yukos, then you'd definitely see the government asserting some kind of control over the sector.
Maybe not as much control as is being exerted right now as in Russia. But then the petro-corruption here doesn't come anywhere CLOSE to where it''s come in Russia.
I see the Yukos PR team has loaded up Google so that it's very hard to find an accounting of all the murder cases linked to the Yukos management that wasn't written by the Yukos PR team.
Nonetheless -- Nevzlin is on trial in absentia right now for having ordered the murder of that mayor.
I hope things in this country won't get that crazy when peak oil fever takes over.
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The script calls for panic... what are you waiting for? Panic!
Everything I have read about the "age of peak oil" is that it is a desperate time in which we'll be pulling out every stop to keep the ever dwindling resource flowing, discarding environmental controls, applying more costly and damaging processes to recover oil from sources we once eschewed, and fighting wars over the remaining scraps. So in that sense, FT is right. By declaring that production has peaked, Russia is taking a lackadaisical attitude towards the looming disaster.
But every time I see the current price of oil, I am still puzzled about why companies aren't falling over themselves to build coal liquefaction plants. I know it's likely to devastate the environment, but that can't be why, can it? When I first read about coal liquefaction, the break-even point was a distant $35/barrel. Then we passed it, but marginally, and it was probably just a short-term shock, not worth the capital investment. OK, so now we are well over $115/barrel and we've been way past $35 for a long time. Does anyone think oil will ever go down below $35?
Some time I'd like to see Andrew Leonard research this seeming contradiction. Maybe it's really more expensive than the old estimates. Maybe companies are just too short-sighted to invest in anything longterm. Maybe social trends against increased carbon emissions are making this into a kind of third rail for energy companies. Does anyone have a good analysis?
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there's a slow learner.
motivation is everything, you know. corporations, for instance are driven to provide profits. if corporations control governments, governments will be driven to maximize profits, too.
do corporations control governments? you bet! not as well as they'd like, of course. but when a nations policies are in the hands of a few hundred politicians, those politicians can be bought, and the policies with them. that's why "representative" democracy is leading america to resource depletion and ecological disaster.
there is no cure, we're dealing with the human race, here. but a nation with citizen initiative can create long term policies whose goal is not profit for a few, but well-being for the nation. too bad america, for all it's talk, is not a democracy.