World ASPO Conference, Thursday Afternoon, Oct. 26

World ASPO Conference Thursday afternoon

This is, of necessity, brief notes, but I have tried to get the basics.

Natural Gas, LNG, Unconventional Fuels

David Hughes, Geological Survey Canada

Canadian Tar Sands

Tar sands only have a 2:1 energy profit ratio, that is, it takes a unit of energy to create two units of energy. In general only a small percentage of unconventional resources, such as tar sands or oil shale, in the ground can actually be extracted. Talk of huge reserves is misleading. What matters is what can actually be turned into useful fuel at an energy profit. In the case of oil shale it is just a few percent.

The other problems include:

Huge cost overruns in constructing the mining and processing infrastructure
Uncertainties in extraction potential, meaning that getting investment is difficult.

Jim Bartis, Rand Corporation

RAND has been studying the energy economics of biofuels.

Alcohol and biodiesel have low oil displacement, perhaps ½ a barrel of oil displaced by a barrel of biofuel. This is because of the high fossil fuel inputs. There are also the problems of limited acreage and the competition of biofuel production with food crops. The conclusion of their studies was that without major technical advances the contribution of biofuels will be insignificant.

He also spoke about biomass gasification to produce liquid fuels. Here there is a conflict between economics of scale and the economics of material handling. The complexity of the process requires a large plant in order to be economical. Conversely, as the plant demands biomass from a larger and larger radius, the energy and economic cost of transporting the biomass grows.

He went on to discuss oil shale production. Oil shale is porous rock that contains a substance called kerogen, the precursor of crude oil. All it needs is a few million years of heat and pressure. The shale can be mined, crushed, and cooked under pressure. There are huge shale resources in a small area at the intersection of Utah, Colorado, and Wyoming. The entire resource is equal to 1 trillion barrels of oil, roughly four times that of Saudi Arabia. Sounds good, right?

Problems:
It is hugely energy intensive. The mining and processing gives it a high cost and very low energy profit ratio. It could be produced at a price of $70-95 a barrel. It can also be processed in situ by drilling wells and putting heating elements underground. The heat processes the kerogen in place, which is pumped out of conventional wells. Again, this is energy intensive. It could be produced at $30-40 a barrel. Still, there are many unanswered questions about technology and environmental impacts. The major resource is in the Colorado River watershed. The effects on groundwater chemical contamination and salinity could be profound. The process requires about 3 barrels of water to produce a barrel of oil.

There are surface impacts as well, considering the 200 wells drilled per acre. The process produces 1.5 to 2 times the CO2 of conventional oil. It has an uncertain future. Given the present state of development, RAND estimates that oil shale could produce only about 3 mbpd 30 years from now. (About 1/7 of U.S. present consumption) RAND recommends slow and careful development, with no government promotion unless private companies are willing to get into it for real profit rather than government subsidy.

Coal to oil conversion also has unclear prospects. Plant costs and performance are unknown. RAND estimates that it would take a $5 billion plant to produce a mere 50,000 barrels a day, a cost of $100k per barrel per day. Crude oil would have to be at least $55 a barrel for profitability. It produces twice the CO2 of conventional oil. Proponents have talked of pumping the CO2 back underground to permanently sequester it, but can’t predict leakage rates. Face it, if there is a 5% leakage rate, then all the CO2 would be back in the atmosphere in 20 years anyway.

Ezra Hausman of Synapse Energy Economics spoke about the importation of liquified natural gas (LNG). LNG is produced by cooling NG to –259 F. It isn’t actually pressurized. This reduces the volume by 600 times. It is a highly capital intensive process with a 15-30% energy penalty.

Right now, the expansion in LNG receiving and regasification facilities exceed liquification facilities, meaning that there is competition for the resource.

He noted that most “new”discoveries of NG in the U.S. are actually the redevelopment of existing fields. The discovery of new fields have dropped by half over the last 15 years.

His proposed solution is “negatherms,” the conservation of natural gas energy. He pointed out that existing programs, if fully implemented, would offset all potential

Jim Gordon, Cape Wind Project

Jim has been touting the Cape Wind Project. Nothing new or striking, buuuut….

A crowd of protesters just invaded the conference room and started chanting about a diesel power plant in Chelsea MA. Apparently Jim Gordon, the present speaker is not only promoting the Cape Wind offshore wind farm, but also promoting a diesel fired power plant in a low income area. We have flyers on every table and banners over the balcony accusing him of environmental hypocrisy. The security people are shutting them up and herding them off the balcony. Well, what’s a conference without a protest?

May I be excused? My brain is full. More tomorrow.

Report from the World ASPO Conference, Boston University

World Association for the Study of Peak Oil Conference, October 26, 2006

I’m at the conference, hosted by Boston University, and while they are giving out the awards I’m going to give a brief account of the speakers this morning. Don’t expect a lot of prose – it has been a data barrage, with power point slides flashing montage style on the big screen. These presenters are some of the heavy hitters in the ofossil fuel industry.

The first speaker was Mike Rogers of PFC Energy, talking about non-OPEC oil depletion. Some bullet points:

Production peaks lag discoveries. Production exceeds discovery for some time, then declines when 50-60% has been pumped out of the ground.

- Major producers such as Brunei, China, Malasia and India are on the production plateau at 60-65% of reserves.
- The states of the Former Soviet Union (FSU) have been taking up the slack in non-OPEC production since 1998. Non-OPEC, non-FSU production has been flat since ’98.
- Non-OPEC, non-FSU countries have been out producing oil discoveries since the late 80’s and are hitting the 60% production range.
- There is an average 7% yearly production decline on wells drilled before 2000.
- At present rates of decline, non-OPEC/FSU production should drop from 30 million barrels per day (mbpd) now to 10 mbpd by 2015. (Compare to present total world production and consumption of 85 mbpd)
- If major oil companies achieve a high success rate with deep water oil exploration, they may slow the decline to 3% a year.
- Only Africa has had a positive discovery to production ratio since 1990.
- Prediction: Non-OPEC production will peak at 45 mbpd of conventional oil, 20 mbpd non conventional (tar sands, natural gas liquids (NGL)) in the early part of the next decade.
- Despite high prices, the discovery rate of new oil is the worst since WWII.
- Exploration will have to ramp up at dramatic rates to achieve predicted production. The problem is that it is hard to find a spare oil drilling rig right now.
- Prediction: A downward price trend through 2010-2012, what with new OPEC NGL capacity. Oil could fall into the $30-40 per barrel range.

The next speaker was David Hughes, who works for Geological Survey Canada, the folks up there who try to figure out what’s down there. He focused on natural gas supply.

His first point was that natural gas (NG) is a regional product. Most of it travels through pipelines. Only 7% of world NG is liquefied and transported across oceans. There is a 15-30% energy loss in liquefication.

There has been a 300% growth in NG use since 1965. Production and consumption is generally balanced because of the regional nature of NG. 4% of world reserves are in North America. He predicts a peak in conventional gas in 2025 and non-conventional (coal bed methane, deep offshore, shale) in 2045. Canada reached a non-conventional peak in 2002.

When you look at our reserves vs. our use in the U.S., we have 10 years left. Canada has 9 years of NG left. North America overall has about 10 years left.

In 1996 Canada drilled 4000 NG wells and produced 15 trillion cubic feet.
In 2003 they drilled 13000 wells and experienced a 3% decline.
In 2006 they drilled 16000 wells and still declined.
Productivity declined by half from 1998-2004.

Canadian production is on the beginning of a plateau that will last till 2007-2009.
They need to develop production of 3.3 billion cu. ft. per day every year just to hold the line.

In short, the U.S. and Canada are on a NG production treadmill, trying to discover enough new wells to replace the failing wells.

The U.S. is looking at a 10 trillion cu ft shortfall in 2025, 5 TCF around 2012, starting now.
We’d have to double the world liquid NG shipping fleet and terminal base to meet this shortfall. Meanwhile, we would be competing with Japan and N. Korea for LNG.

As for the Tar Sands of Alberta, a Canadian oil exec said, “Using natural gas to exploit oil sands is like turning gold into lead.”

Bottom line: We can only slow NG production decline.

Jeremy Gilbert, the former chief petroleum engineer for British Petroleum (BP), gave a presentation on oil reserves. He addressed the question “What are they?”

His main point was that the amount of oil you get out of a field is a fraction of the oil actually there. The oil isn’t just in a big pocket underground. It is absorbed in between small particles of sandstone, like a solid sponge. The structure of this sandstone sponge and its distribution underground, along with the water and gas pressure beneath it, determines how much of the oil that can be extracted. This varies from about 6-70%.

He spoke of primary, secondary, and tertiary oil. Primary oil is the oil that comes out naturally under pressure. 6-40% of the resource can come out this way. Secondary oil comes out when the drillers inject water and/or gas into the well. This brings up another 0-40%, inversely proportional to how much primary oil was extracted. Tertiary reserves are those extracted by injecting chemicals into the well or heating the oil to make it more liquid. This requires a heavy investment and only gets another 0-10%.

Tertiary extraction doesn’t make much difference in the long run.

He noted that there have been some sudden reserve increases stated by OPEC that are technically unsound. A polite way of saying that they were lying. He advised caution about anybody’s reserve numbers – they are either educated guesses by geologists or numerical models from engineers based on minimal data.

Matt Simmons, author of “Twilight in the Desert” and president of a major international oil financing group, talked about how he became a peak oil believer. He noted that he never ceases to be amazed at how consistently wrong the major oil companies are about predicting oil prices and production. He doubts all the hype about new oil production technologies – they always end up producing less than expected later than expected.

He noted that world demand increased from 66.5 to 82.5 mbpd between 1990 and 2005, even while demand in the FSU declined by 5 mbpd. If the FSU economy hadn’t slacked off we would now be in shortage mode.

Middle Eastern oil fields are old and hitting depeletion.
40% of North Sea oil rigs will be decommissioned in the next 10 years.
Unpredicted increases in reserves were common between 1940 and 1960, but no longer. The oil industry is still assuming that new tecnology will keep that up.

He suggests that we keep an eye on Table 11b of the monthly Energy Information Administration (EIA) report for world production. There was at least a temporary peak in December of 2005. If this isn’t exceeded in the next 6-12 months, we can assume that world oil production is permanently in decline.

Stuart Staniford, the editor of The Oil Drum, is a statistician with a specialty in statistical anomalies. He went through a barrage of graphs and charts that came to the conclusion that production is flat despite huge increases in drilling rig counts, and that production data shows a peak between 2007 and 2009.

That’s all so far. It doesn’t look good for SUV sales. More wonkery to come. Back to the conference.

You Too Can Visit a Syrian Prison

Some of you may have heard about the Military Commissions Act recently passed by Congress. I get the feeling that most people don’t understand the import of this new law, so I read through it and plucked some pieces that struck me as significant. I’ll emphasize certain parts of the text and insert my comments. This is a long piece in comparison to my usual essays, but its importance justifies the length. This law puts the powers of a dictator in the hands of the president and places everyone (yes, including you) at risk of arbitrary perpetual imprisonment and torture.

S.3930
Military Commissions Act of 2006 (Enrolled as Agreed to or Passed by Both House and Senate)
`CHAPTER 47A--MILITARY COMMISSIONS
`SUBCHAPTER I--GENERAL PROVISIONS
Sec. 948a. Definitions

`In this chapter:

`(1) UNLAWFUL ENEMY COMBATANT- (A) The term `unlawful enemy combatant' means--

`(i) a person who has engaged in hostilities or who has purposefully and materially supported hostilities against the United States or its co-belligerents who is not a lawful enemy combatant (including a person who is part of the Taliban, al Qaeda, or associated forces); or

`(ii) a person who, before, on, or after the date of the enactment of the Military Commissions Act of 2006, has been determined to be an unlawful enemy combatant by a Combatant Status Review Tribunal or another competent tribunal established under the authority of the President or the Secretary of Defense.

Translation: There are no specific rules for determining who is an unlawful enemy combatant (UEC). One or more individuals chosen personally by G.W. Bush or Donald Rumsfeld can peg anyone on the planet, including you, with that legal definition.

Sec. 948b. Military commissions generally
(g) Geneva Conventions Not Establishing Source of Rights- No alien unlawful enemy combatant subject to trial by military commission under this chapter may invoke the Geneva Conventions as a source of rights.

Translation: 57 years of international law on the treatment of prisoners pitched out the window.

Sec. 948d. Jurisdiction of military commissions

`(c) Determination of Unlawful Enemy Combatant Status Dispositive- A finding, whether before, on, or after the date of the enactment of the Military Commissions Act of 2006, by a Combatant Status Review Tribunal or another competent tribunal established under the authority of the President or the Secretary of Defense that a person is an unlawful enemy combatant is dispositive for purposes of jurisdiction for trial by military commission under this chapter.

Translation: If one or more people chosen by GW or Rummy say you are a UEC, kiss the U.S. court system goodbye.

SUBCHAPTER III--PRE-TRIAL PROCEDURE
Sec. 948r. Compulsory self-incrimination prohibited; treatment of statements obtained by torture and other statements

`(c) Statements Obtained Before Enactment of Detainee Treatment Act of 2005- A statement obtained before December 30, 2005 (the date of the enactment of the Defense Treatment Act of 2005) in which the degree of coercion is disputed may be admitted only if the military judge finds that--

`(1) the totality of the circumstances renders the statement reliable and possessing sufficient probative value; and

`(2) the interests of justice would best be served by admission of the statement into evidence.

Translation: If you were tortured into confessing before 12/30/05, but your interrogators were skilled enough not to leave marks, the officer in charge can use your confession if he wants to.

`(d) Statements Obtained After Enactment of Detainee Treatment Act of 2005- A statement obtained on or after December 30, 2005 (the date of the enactment of the Defense Treatment Act of 2005) in which the degree of coercion is disputed may be admitted only if the military judge finds that--

`(1) the totality of the circumstances renders the statement reliable and possessing sufficient probative value;

`(2) the interests of justice would best be served by admission of the statement into evidence; and

`(3) the interrogation methods used to obtain the statement do not amount to cruel, inhuman, or degrading treatment prohibited by section 1003 of the Detainee Treatment Act of 2005.

Translation: They will now make you confess using methods that don’t leave marks.

`SUBCHAPTER IV--TRIAL PROCEDURE

Sec. 949a. Rules

`(a) Procedures and Rules of Evidence- Pretrial, trial, and post-trial procedures, including elements and modes of proof, for cases triable by military commission under this chapter may be prescribed by the Secretary of Defense, in consultation with the Attorney General. Such procedures shall, so far as the Secretary considers practicable or consistent with military or intelligence activities, apply the principles of law and the rules of evidence in trial by general courts-martial. Such procedures and rules of evidence may not be contrary to or inconsistent with this chapter.

Translation: We will follow the rules unless we don’t want to.

`(2) In establishing procedures and rules of evidence for military commission proceedings, the Secretary of Defense may prescribe the following provisions:

`(A) Evidence shall be admissible if the military judge determines that the evidence would have probative value to a reasonable person.

Translation: It’s my damn courtroom, I’m a reasonable person, and this evidence will put you on the gurney with the needles in your arm.

`(B) Evidence shall not be excluded from trial by military commission on the grounds that the evidence was not seized pursuant to a search warrant or other authorization.

Translation: The fourth amendment is now toilet paper.

`(C) A statement of the accused that is otherwise admissible shall not be excluded from trial by military commission on grounds of alleged coercion or compulsory self-incrimination so long as the evidence complies with the provisions of section 948r of this title.

Translation: Torture is ok as long as it leaves no marks.

`(D) Evidence shall be admitted as authentic so long as--

`(i) the military judge of the military commission determines that there is sufficient basis to find that the evidence is what it is claimed to be; and

(See “It’s my damn courtroom,” above)

`(ii) the military judge instructs the members that they may consider any issue as to authentication or identification of evidence in determining the weight, if any, to be given to the evidence.

Translation: “I think it sounds good. Do you guys think it sounds good? Good.”

`(E)(i) Except as provided in clause (ii), hearsay evidence not otherwise admissible under the rules of evidence applicable in trial by general courts-martial may be admitted in a trial by military commission if the proponent of the evidence makes known to the adverse party, sufficiently in advance to provide the adverse party with a fair opportunity to meet the evidence, the intention of the proponent to offer the evidence, and the particulars of the evidence (including information on the general circumstances under which the evidence was obtained). The disclosure of evidence under the preceding sentence is subject to the requirements and limitations applicable to the disclosure of classified information in section 949j(c) of this title.

Translation: We can piss on the rules of evidence if we tell you beforehand, but we don’t have to tell you if we decide that it is classified.

`(F) The military judge shall exclude any evidence the probative value of which is substantially outweighed--

`(i) by the danger of unfair prejudice, confusion of the issues, or misleading the commission; or

`(ii) by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.

Translation: Even if the evidence clears you, the judge can spike it if he wants to, especially if the trial is running behind schedule.

`Sec. 949t. Maximum limits

`The punishment which a military commission under this chapter may direct for an offense may not exceed such limits as the President or Secretary of Defense may prescribe for that offense.

Translation: Hey, that’s a relief. You are protected by the moral conscience of G.W. Bush and Don Rumsfeld.

Sec. 949u. Execution of confinement

`(a) In General- Under such regulations as the Secretary of Defense may prescribe, a sentence of confinement adjudged by a military commission under this chapter may be carried into execution by confinement--

`(1) in any place of confinement under the control of any of the armed forces; or

`(2) in any penal or correctional institution under the control of the United States or its allies, or which the United States may be allowed to use.

Translation: We can send you to a Syrian prison. If you’re lucky.

`(b) Treatment During Confinement by Other Than the Armed Forces- Persons confined under subsection (a)(2) in a penal or correctional institution not under the control of an armed force are subject to the same discipline and treatment as persons confined or committed by the courts of the United States or of the State, District of Columbia, or place in which the institution is situated.

Translation: If you get Syria, you get Syria’s version of human rights.

SEC. 7. HABEAS CORPUS MATTERS.

Prediction: No it doesn’t

(a) In General- Section 2241 of title 28, United States Code, is amended by striking both the subsection (e) added by section 1005(e)(1) of Public Law 109-148 (119 Stat. 2742) and the subsection (e) added by added by section 1405(e)(1) of Public Law 109-163 (119 Stat. 3477) and inserting the following new subsection (e):

`(e)(1) No court, justice, or judge shall have jurisdiction to hear or consider an application for a writ of habeas corpus filed by or on behalf of an alien detained by the United States who has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination.

Translation: Anyone who is not a U.S. citizen and is simply accused of being a terrorist can disappear into the system forever. Habeas Corpus, a legal right enjoyed by medieval English peasants, is simply the right to challenge your arrest and imprisonment, or the conditions of your imprisonment. GW’s personal tribunal doesn’t even have to determine that you are an enemy combatant – you can spend the rest of your life on the waiting list.

`(2) Except as provided in paragraphs (2) and (3) of section 1005(e) of the Detainee Treatment Act of 2005 (10 U.S.C. 801 note), no court, justice, or judge shall have jurisdiction to hear or consider any other action against the United States or its agents relating to any aspect of the detention, transfer, treatment, trial, or conditions of confinement of an alien who is or was detained by the United States and has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination.'.

(b) Effective Date- The amendment made by subsection (a) shall take effect on the date of the enactment of this Act, and shall apply to all cases, without exception, pending on or after the date of the enactment of this Act which relate to any aspect of the detention, transfer, treatment, trial, or conditions of detention of an alien detained by the United States since September 11, 2001.

Translation: Abandon hope, all ye non-citizens who have entered here after 9-11.

SEC. 8. REVISIONS TO DETAINEE TREATMENT ACT OF 2005 RELATING TO PROTECTION OF CERTAIN UNITED STATES GOVERNMENT PERSONNEL.

(b) Protection of Personnel- Section 1004 of the Detainee Treatment Act of 2005 (42 U.S.C. 2000dd-1) shall apply with respect to any criminal prosecution that--

(1) relates to the detention and interrogation of aliens described in such section;

(2) is grounded in section 2441(c)(3) of title 18, United States Code; and

(3) relates to actions occurring between September 11, 2001, and December 30, 2005.

Translation: There is a lot of verbiage in Section 1004 of the Detainee Treatment Act of 2005, but the upshot is immunity from prosecution for anybody, including G.W. Bush, for anything they did after 9-11 and before 2006.

SEC. 6. IMPLEMENTATION OF TREATY OBLIGATIONS.

`(D) the term `serious physical pain or suffering' shall be applied for purposes of paragraph (1)(B) as meaning bodily injury that involves--

`(i) a substantial risk of death;

`(ii) extreme physical pain;

`(iii) a burn or physical disfigurement of a serious nature (other than cuts, abrasions, or bruises); or

`(iv) significant loss or impairment of the function of a bodily member, organ, or mental faculty; and

`(E) the term `serious mental pain or suffering' shall be applied for purposes of paragraph (1)(B) in accordance with the meaning given the term `severe mental pain or suffering' (as defined in section 2340(2) of this title), except that--

`(i) the term `serious' shall replace the term `severe' where it appears; and

`(ii) as to conduct occurring after the date of the enactment of the Military Commissions Act of 2006, the term `serious and non-transitory mental harm (which need not be prolonged)' shall replace the term `prolonged mental harm' where it appears.

Translation: Waterboarding is ok with us, as are medium level beatings, short term starvation and controlled hypothermia…use your imagination, ok guys?

My comments are undeniably sarcastic in their tone, but the lowest form of humor is appropriate for the lowest form of law. This law is a rank violation of American justice equal to the Alien and Sedition Act or the internment of Japanese-Americans during WWII. Under this law, a few people handpicked by Bush or Rumsfeld can cause you to disappear merely by accusing you of a particular type of crime. You would have no legal recourse and, like the mostly innocent prisoners at Guantanamo, you could spend the rest of your life in legal limbo, waiting for your UEC determination. This needs to be repealed. Until repeal, we can’t call ourselves a nation of laws.

A Gun to Bin Laden’s Head, But No Trigger Pull From Bush

I have to admit this is a dated story, but amidst all the spin about “who will make America safer,” there is this elephant in the room by the name of Kabir Mohabbat. Mr. Mohabbat is an Afghan-American businessman who at one time acted as a go-between for the U.S. government and the Taliban government of Afghanistan. This is a story about George Bush, our war-on-terror guy, giving up the opportunity to get Osama Bin Laden in a cage or a crater, his choice.

Here’s a link to the complete story by Alexander Cockburn and Jeffrey St. Clair at Counterpunch.

Here is the summary: Back in 1999, the Taliban were feeling isolated. They were harboring Bin Laden and his people, despite various embassy bombings and other nasty acts. Their only real ally, Pakistan, was getting edgy about this, because General Musharrif was cozying up to the U.S. Osama was, as Mohabbat quotes the Taliban representative, “just a damned liability.” Through channels in the European Union, Mohabbat opened up negotiations between Kabul and Washington on how to dispose of Bin Laden. After the bombing of the USS Cole in October of 2000, the negotiations heated up. To quote the Counterpunch article:

“Mohabbat went to Kandahar and communicated the news of imminent bombing to the Taliban. They asked him to set up a meeting with US officials to arrange the circumstances of their handover of Osama. On November 2, 2000, less than a week before the US election, Mohabbat arranged a face-to-face meeting, in that same Sheraton hotel in Frankfurt, between Taliban leaders and a US government team.

After a rocky start on the first day of the Frankfurt session, Mohabbat says the Taliban realized the gravity of US threats and outlined various ways bin Laden could be dealt with. He could be turned over to the EU, killed by the Taliban, or made available as a target for Cruise missiles. In the end, Mohabbat says, the Taliban promised the "unconditional surrender of bin Laden" . "We all agreed," Mohabbat tells CounterPunch, "the best way was to gather Osama and all his lieutenants in one location and the US would send one or two Cruise missiles."

Up to that time Osama had been living on the outskirts of Kandahar. At some time shortly after the Frankfurt meeting, the Taliban moved Osama and placed him and his retinue under house arrest at Daronta, thirty miles from Kabul.”

So there you have it. As of mid-November, 2000, Osama Bin Laden was a dead man walking. So were all his closest associates. The Clinton administration handed over the package to the incoming Bush people. All that Bush, Cheney, Rumsfeld, and their cohorts had to do was decide what mottos they would paint on the cruise missile nosecones.

Why didn’t they pull the trigger? It is inconceivable that they would have any twinge of conscience about dropping a bomb on the guy. They had the means and the opportunity. The answer has to lie in their motives.

The only thing that makes sense, and it is the obvious thing, is that Osama Bin Laden was more valuable to them alive and free than dead or captured. He was the poster boy for the continuing threat of terrorist attack, the bogeyman of militant Islam, the very face of world terrorism. Any scriptwriter will tell you that every movie needs a villain, an individual villain with a face and a personality. Bin Laden provided that at a time when the Bush/Cheney administration needed a frightened citizenry that would accept their wars and attacks on civil rights. With Bin Laden and his top men dead, the invasion of Afghanistan would have been unnecessary. Al Qaeda would have been decapitated. Much of the emotional justification behind the anti-constitutional offensive would have drained away. The attacks of 9-11 might have been disrupted.

As I said at the beginning, none of this is breaking news. It’s just that this story is the one that lays bare the power hungry immorality of the present administration. Their only excuse could be a level of incompetence beyond comprehension. It is the great, yet little known crime of the people who now run the country. It has yet to enter the general American consciousness, while sexual scandals and suicidal gunmen suck up airtime and column inches. It deserves a wider hearing. I have never asked my readers to forward a story, believing that a story should propagate by merit. I’ll break my rule this time and ask you to send it around.

Living on the Plateau, or You Don't Know Jack #2

I am sure you have noticed the recent drop in crude oil and, therefore, gasoline prices. Much of the drop is the loss of the “OhmygodtheMiddleEastisgoingtoblowup” factor, what with Iran negotiating with the Europeans and Israel withdrawing from Lebanon. The other big factor is the much-celebrated success of the Jack #2 oil well in the Gulf of Mexico. Chevron, the company doing the exploration, announced that there could be as much as 15 billion barrels of oil down there. Well, happy days are here again. Go buy that Hummer you always wanted.

Mmmm…..maybe you ought to wait on that Hummer.

The very existence of Jack #2 sends a message that all is not well in the oil exploration business. Chevron went 175 miles out into the Gulf of Mexico in 7,000 feet of water and drilled 28,000 feet down. It was a record-breaking effort that yielded 6,000 barrels per day. When a major international oil company is crowing about finding oil under a mile and a half of water and five miles of rock, it means that they aren’t finding any in the easy places.

As for the flow and predicted reserves, consider that the U.S. uses about 21 billion barrels a year. The headline number for Jack #2 in the news media has been “15 billion barrels,” but the actual report was “between 3 and 15 billion.” So, if Jack #2, meets its expectations it will someday produce between 52 and 260 days of oil for us, total.

That is if it isn’t repeatedly knocked out of action by Katrina-sized hurricanes of the future. The location of the Jack #2 well is right about where Gulf hurricanes reach maximum strength. Jack #2’s neighbor, the BP Thunder Horse platform, was found tilted 20 degrees after Hurricane Katrina, and has been experiencing technical failures. Its 2005 debut has been pushed back to 2008, with hundreds of millions added to its development costs. The deepwater Gulf is a tough neighborhood.

So what’s with all the optimism, after all the pessimism? The problem is that people in the oil trading business aren’t looking all that far ahead. The crude oil price you see on the news is what people are paying for an oil delivery a month from now. There are “long-dated” futures out to 7 years, but most of the action is for deliveries no more than 30 months away. Ten years might as well be forever.

Let me pull my crystal ball out of its velvet lined box and yank the starter cord a couple of times. While it is warming up, I’ll briefly review the Hubbert Curve. Back in 1954. M. King Hubbert, a petroleum geologist, correctly predicted that U.S. oil production would follow a rough bell curve and peak around 1970, which it did. It has become a generally accepted truth that any oil field or group of oil fields will follow this production curve, rising rapidly to a peak, having a plateau, and then irreversibly declining. By this model, world oil production will hit a plateau at some point. In fact, it seems to have hit that point in 2004. World oil production has leveled off and the line on the graph is wiggling up and down depending upon whether there has been a ribbon-cutting on a new oil pipeline or if a hurricane has knocked over some oil platforms.

Now, to the crystal ball. A rising oil price depresses the world economy and discourages oil use, right? Then we get a temporary oil glut and the price falls. The psychology and economics flip, and economic and social forces push usage back up, along with the price. Get in a lather, rinse, and repeat. There is a certain amount of slop in the feedback loop, and very little spare production capacity, so the price of oil will lurch back and forth, the swings getting wilder as the economic and political reactions get more extreme. Eventually the drop in supply will get large enough that it will cancel out the swings, and the price will rocket up and stay there. What we are looking at is a rough sawtooth wave in oil prices with an eventual upward “hockey stick” graph.

So, enjoy the temporary respite from $3 a gallon gas, but don’t get complacent. It is past time to think about how you are going to live your life with gasoline and heating oil prices double that and more.