Thanks,
Stephen, for posting that from two famous energy consultants. Here’s something else, forwarded to me, concerning
the economic and political implications, that adds to the argument that
conservation and research should be the primary focus of any sane, rational energy policy, not drilling
for the same old depleting resource.
Excerpt from Bill
Powers’ House of Saud = House of Cards @ http://www.financialsense.com/editorials/powers/2003/0629.htm,
or it could be subtitled,
Waiting for
the Wheels to Fall Off:
“With little exploration success since the 1960s and many of its
fields showing signs of decline, Saudi Arabia is having an increasingly
difficult time keeping production flat. According to energy investment banker
Matt Simmons, head of Simmons and Company International, many of the country’s
aging fields are showing increased water cuts. Water cuts, water produced along
with crude oil that is later separated, are a sure sign that a field is headed into
decline. The country’s largest field, Ghawar, now produces over 1 million
barrels of water a day along with its nearly 4.5 million barrels of crude. With
Ghawar accounting for 60% of the country’s 7.5 million barrels per day of crude
production, there is little hope Saudi Arabia can keep production flat if
Ghawar continues to water out. Since Saudi Arabia cannot invest the billions of
dollars needed to maintain current production and develop smaller fields,
Ghawar has assured the world high oil prices are here to stay.
Another
great myth about Saudi Arabia is that the country has spare production
capacity. Many believe that Saudi Arabia’s spare production capacity allows
them to “turn on the spigots” at times of high oil prices. It is extremely
unlikely the country has any spare capacity. There exists little incentive to
restrict production at times of high prices and low inventories. Unless human
nature has changed substantially in recent months, I doubt that the
cash-strapped Saudis are producing much below their production capacity.
The
situation in Saudi Arabia has caught the world in somewhat of a Catch-22 in
terms of oil prices. If oil prices were to fall anywhere near $20US and remain
there for a significant period of time, the quality of life for the average
Saudi citizen would deteriorate to such a degree that an overthrow of the royal
family would be almost certain. History tells us that when a country has a
sudden regime change, oil production drops precipitously. A few examples would
be Iran in 1979 when oil production dropped from 6 million barrels per day to
zero almost overnight, the collapse of the Soviet Union devastated oil
production in Russia and more recently the regime change in Iraq halted all oil
production in that country.
Some of the best
insights into the current state of affairs of a country can be gleaned from
those who have gained first hand knowledge of the country through travel.
World-renowned investor and author Jim Rogers, who recently completed an outstanding book titled “Adventure
Capitalist,” had the following to say about the country after his visit to
Saudi Arabia: (For more information about Jim and his travels please see www.jimrogers.com)
“By the 1990’s the Saudis were spending much more money than they
had, and the nation’s debt began to skyrocket. Today, despite its considerable assets, the country is one
of the more indebted countries in the world. If the price of oil drops, the
government will ultimately go bankrupt.
It will no longer be able to support all of its princes much less its
mullahs. Only if oil prices remain
high will Saudi Arabia be able to whether the storm—perhaps.” Jim Rogers, “Adventure Capitalist,"
p. 225
The
coming fall of Saudi Arabia is going to have a huge impact on investors in the
Canadian energy sector. The news
that the royal family has been finally thrown out will almost certainly send
oil prices skyrocketing. The
heights to which oil prices would climb is anybody’s guess. What is more important is that prices
will climb to unheard of levels almost overnight. As I mentioned earlier, predicting regime change in a
country is like shorting stocks, do your research, take your position and wait
for the wheels to come off. While
it might seem like an eternity for your thesis to be proven, its fruition is
often well worth the wait. I
believe we are already seeing signs that the House of Saud is in trouble. With the recent bombing of an American
compound and the State Department’s temporary closing of the US embassy in
Riyadh, it is clear that we are at the beginning of the end of the House of
Saud.”
(end of excerpt)
SS wrote: The coming shortage of energy supplies that Keith and former UK
Environment Minister Michael Meacher write [below] about
may well present civilisation with "the sharpest and perhaps most violent
dislocation in history."
The following excerpts from a recent *Foreign Affairs* paper about US energy
policies tell me that:
(1) there is more to be gained by even small increases in the *efficient* use
of energy than I would have imagined
from the dire consequences Meacher appears to draw from declining UK oil
imports, and
(2) the Cheney-Bush policies are so irrational that they can only be explained
by incompetence or a determination to
support petroleum companies *no matter what* (ie, Bush White House = the
executive committee of oil barons).
++++++++++++++++++++++++++++++++++++++++
-- from pp. 77-78, 83-85 of:
"Fool's Gold in Alaska," Foreign Affairs (July /August 2001), pp.
72-85
by Amory B. Lovins and L. Hunter Lovins
find link at: http://www.rmi.org/sitepages/pid171.php
[MY CAPS-SS]
[If one is concerned about running short of oil, higher costs of oil, or
political instability affecting importing oil] [p.77], ... a third option
exists: substitution.
SUBSTITUTION means displacing oil with more efficient use of
oil or alternative energy sources... [T]he United States
has already partly followed this course; its oil
productivity has already doubled since 1975. But the
efficiency-promotion strategy could have gone much further
if U.S. policymakers had not quickly combated and suppressed
it after the 1986 oil-price collapse. (In that year, for
example, a rollback of car and light-truck efficiency
standards doubled U.S. oil imports from the Persian Gulf and
wasted one [Artic Wildlife] "refuge" of oil.) IF THE UNITED
STATES HAD CONTINUED TO CONSERVE OIL AT THE SAME RATE THAT
IT DID IN 1976-85 OR HAD SIMPLY BOUGHT NEW CARS THAT GOT 5
MPG MORE THAN THEY DID, IT WOULD NO LONGER HAVE NEEDED
PERSIAN GULF OIL AFTER 1985. Instead, policy in the 1980s
discouraged energy efficiency, which was officially
characterized as an intrusive, interventionist burden of
curtailment and sacrifice. Efficiency also appeared
needless when the 1986 price crash ushered in a decade of
cheap oil, while deep budget cuts crippled technological
innovation in energy productivity. Today, the dramatic gains
in energy efficiency that the United States launched during
the Carter years have been forgotten. Many journalists and
political leaders no longer remember that efficiency gains
are not only possible but profitable. Yet DESPITE THE
NEGLECT OF EFFICIENCY FROM 1986 TO 1996 (WHEN EFFICIENCY
BEGAN A SUDDEN RESURGENCE), THE NATION HAS STILL CUT $200
BILLION OFF ITS ANNUAL ENERGY BILL.
U.S. oil imports crept back up in the late 1980s, spurred by
low prices, abundant supplies, corporate inattention, and
policy neglect. IF THE FIRST BUSH ADMINISTRATION HAD
REQUIRED IN 1991 THAT THE AVERAGE CAR GET 32 MPG, THAT
MEASURE ALONE WOULD HAVE DISPLACED ALL PERSIAN GULF OIL
IMPORTS TO THE UNITED STATES. INSTEAD, THE UNITED STATES
FOUGHT A WAR THAT DEPLOYED TANKS MOVING AT 0.56 MPG AND
AIRCRAFT CARRIERS MOVING AT 17 FEET PER GALLON. That effort
cost the United States more than it would have cost to save
(through investing in [p.78] efficiency technology) all the
oil imported from the Gulf. That lesson was ignored as
Congress stalled most efficiency initiatives in the 1990s.
By 2000, oil imports had rebounded to their record 1977
level, and oil prices spiked once more. The three-member
Alaskan congressional delegation, chairing three of the four
chief congressional committees controlling public lands,
again pressed for drilling in the refuge. On January 22,
2001, AIDES TO PRESIDENT GEORGE W. BUSH CLAIMED THAT
CALIFORNIA'S ELECTRICITY CRISIS SHOWED THAT THE NATION
DESPERATELY NEEDS MORE FUEL. IN FACT, CALIFORNIA HAS NO
SHORTAGE OF OIL, AND ONLY ONE PERCENT OF ITS ELECTRICITY
COMES FROM OIL; NATIONWIDE, ONLY TWO PERCENT OF OIL IS
CONSUMED TO GENERATE ELECTRICITY. Curiously, the
administration's response to the nation's supposed "energy
crisis" has been to reject the notion of "doing more with
less," the very definition of energy efficiency. It has
halved key budgets for efficiency research, increased future
power needs by 13 billion watts by weakening cost-effective
air-conditioner standards, and centered its supply-side
strategy on seeking - against all odds - congressional
approval to exploit refuge oil.
...[p.83] If oil were found and profitably extracted from the
[Arctic National Wildlife] refuge, its expected peak output
would equal for a few years about one percent of the world
oil market...
What could the refuge actually produce under optimal
conditions? Starting about ten years from now [summer
2001], if oil prices did stay around $22 per barrel, if
Congress approved the project, and if the refuge yielded the
[US Geological Survey's] mean estimate of about 3.2 billion
barrels of profitable oil, the 30-year output would average
a modest 292,000 barrels of crude oil a day. (This estimate
also assumes that such oil would feed U.S. refineries rather
than go to Asian markets, as some Alaskan oil did in
1996-2000.) Once refined, that amount would yield 156,000
barrels of gasoline per day - enough to run 2 percent of
American cars and [p.84] light trucks. THAT MUCH GASOLINE
COULD BE SAVED IF LIGHT VEHICLES BECAME 0.4 MPG MORE
EFFICIENT... IN 1979-85 ... NEW LIGHT VEHICLES ON AVERAGE
GAINED 0.4 MPG EVERY 5 MONTHS.
EQUIPPING CARS WITH REPLACEMENT TIRES AS EFFICIENT AS THE
ORIGINAL ONES WOULD SAVE CONSUMERS SEVERAL "REFUGES" FULL OF
CRUDE OIL. Installing superinsulating windows could save
even more oil and natural gas while making buildings more
comfortable and cheaper to construct. A COMBINATION OF ALL
THE MAIN EFFICIENCY OPTIONS AVAILABLE IN 1989 COULD SAVE
TODAY THE EQUIVALENT OF 54 "REFUGES" - BUT AT A SIXTH OF THE
COST. New technologies for saving energy are being found
faster than the old ones are being used up - just like new
technologies for finding and extracting oil, only faster. AS
GAINS IN ENERGY EFFICIENCY CONTINUE TO OUTPACE OIL
DEPLETION, OIL WILL PROBABLY BECOME UNCOMPETITIVE EVEN AT
LOW PRICES BEFORE IT BECOMES UNAVAILABLE EVEN AT HIGH
PRICES. This is especially likely because the latest
efficiency revolution squarely targets oil's main users and
its dominant growth market - cars and light trucks - where
gasoline savings magnify crude-oil savings by 85 percent.
New American cars are hardly models of fuel efficiency.
Their average rating of 24 mpg ties for a 20-year low. The
auto industry can do much better - and is now making an
effort. Briskly selling hybrid-electric cars such as the
Toyota Prius (a Corolla-class 5-seater) offer 49 mpg, and
the Honda Insight (a Corolla-class 2-seater) gets 67 mpg. A
FLEET THAT EFFICIENT, COMPARED TO THE 24 MPG AVERAGE, WOULD
SAVE 26 OR 33 REFUGES, RESPECTIVELY... General Motors,
DaimlerChrysler, and Ford are now testing family sedans that
offer 72-80 mpg. For Europeans who prefer subcompact city
cars, Volkswagen is selling a 4-seater at 78 mpg and has
announced a smaller 2003 model at 235 mpg. Still more
efficient cars powered by clean and silent fuel cells are
slated for production by at least eight major automakers
starting in 2003-5. An un-compromised fuel-cell vehicle -
the Hypercar - has been designed and costed for production
and would achieve 99 mpg; it is as roomy and safe as a
midsized sport-utility vehicle but uses 82 percent less fuel
and no oil. SUCH HIGH-EFFICIENCY VEHICLES, which probably
can [p.85] be manufactured at competitive cost, COULD SAVE
GLOBALLY AS MUCH OIL AS OPEC NOW SELLS; WHEN PARKED, THE
CARS' DUAL FUNCTION AS PLUG-IN POWER STATIONS COULD DISPLACE
THE WORLD'S COAL AND NUCLEAR PLANTS MANY TIMES OVER.
As long as the world runs largely on oil, economics dictates
a logical priority for displacing it. Efficient use of oil
wins hands down on cost, risk, and speed. Costlier options
thus incur an opportunity cost. Buying costly refuge oil
instead of cheap oil productivity is not simply a bad
business decision; it worsens the oil-import problem. Each
dollar spent on the costly option of refuge oil could have
bought more of the cheap option of efficient use instead.
Choosing the expensive option causes more oil to be used and
imported than if consumers had bought the efficiency option
first. The United States made exactly this mistake when it
spent $200 billion on unneeded (but officially encouraged)
nuclear and coal plants in the 1970s and 1980s. The United
States now imports oil, produces nuclear waste, and risks
global climate instability partly because it bought those
assets instead of buying far cheaper energy efficiency.
... If three or four percent of all U.S. cars were as
efficient as today's popular hybrid models, they would save
the equivalent of all the refuge's oil. In all, many tens
of times more oil is available - sooner, more surely, and
more cheaply - from proven energy efficiency. The cheaper,
faster energy alternatives now succeeding in the marketplace
are safe, clean, climate-friendly, and overwhelmingly
supported by the public. Equally important, they remain
profitable at any oil price. They offer economic, security,
and environmental benefits rather than costs. If any oil is
beneath the refuge, its greatest value just might be in
holding up the ground beneath the people and animals that
live there.
