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FACING DOWN THE RULERS OF WALL STREET A HUNDRED YEARS AGO. THEY ARE BACK.

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Sunday, August 03, 2008

OIL DRIPS

I hate to call any politician a liar. It just seems redundant. But John McCain seems to have disembarked from the “Straight Talk Express” while it was still in motion. And he is now being dragged under the wheels. And now Barak Obama seems to have jumped under there with him. The issue that is grinding up our presidential want-a-be’s is offshore drilling. If this were just another “welfare cheats” verses “tax and spend” debates I could fall asleep smirking. Not to ham this up, but I think that the great American neophytes from both ends of the political children’s hour can be led around by their noses so easily that it seems as a species we are genetically predisposed to nose rings.Please consider a little piece of news I stumbled across in that paragon of right wing justifications, the Wall Street Journal. The giant Cantarell Oil Field, the world’s second largest, has announced, according to the Journal, that it will be supplying 15% less oil this year to American refineries than it did last year. And that fits into a world wide pattern. The four largest oil fields in the world are, in descending order of proven reserves; Ghawar in Saudi Arabia, Cantarell, off the northern gulf coast of Mexico, Da Quing in China, and Burgun, in Kuwait. And the year in which each began producing was; Ghawar, 1951 – Cantarell, 1949 – Da Qing, 1960 – Burgun, 1939. In other words no new major oil fields have been discovered since 1960. And all of the world’s major fields are well past maturity. And that is why the price of gasoline is going up.The price spike ain’t caused just by speculators and it ain’t caused by just Exon-Mobil greed. Greedy speculators don’t help. But cutting them out of the equation is like taking an aspirin for your fever when you have a flesh eating bacteria eating your leg. You will feel a little better but your leg is still going to stink and eventually drop off. Or, as the Chairman of a major American oil development company pointed out back in 1999; “…by 2010 we will need on the order of an additional fifty million barrels a day from existing reserves.” That was said at the London Institute of Petroleum, by the Chairman of Halliburton, Dick Cheney; and yes, that Dick Cheney. He did not say “new oil”, because Dick knew as far back as 1999 there was no where to find 50 million barrels a day of new oil; not in ANWAR, not in the Gulf of Mexico, not off the coast of California, or Texas or Florida. (please see http://dieoff.org/42Countries/42Countries.htm for an idea of how long we have left to ignore this problem.)The United States today (2008) has proven oil reserves of 21 billion barrels. In 1970 we had proven reserves of 39 billion barrels (and that included the Prudhoe Bay field.). Prudhoe Bay, Alaska is the largest field in North America. Production began there in 1977. The output from that field peaked in 1988. The USGS estimates that the Artic National Wildlife Refuge, just south of Prudhoe Bay, might contain, and the word is “might”, as much as 90 billion barrels of oil, or might contain as little as 7.7 billion barrels of recoverable oil. (Artic oil fields tend to contain a much higher percentage of natural gas then oil.)Meanwhile, it is estimated - with considerable better assuredness - that the continental shelf might (there’s that word “might” again) contain about 85.9 billion barrels of recoverable oil. And drilling there is not quite as controversial a choice as drilling in ANWR. But either way, if we started drilling tomorrow the first oil from either source would begin to impact the global price of oil no sooner than the year 2030, by which time Prudhoe Bay will be effectively a dry hole. And ANWR and the continental shelf together will not equal the loss of our shrinking onshore oil reserves. In other words, we can’t drill fast enough to replace what we’ll burn while we drill new wells, which means new wells are not going to drive down the global price of oil.But consider another couple of numbers; in May of 2007 Americans bought 385,625 gallons of gasoline a day. In May of 2008 Americans bought 367,992 gallons a day, or about 17,000 gallons a day less. (http://www.eia.doe.gov/) And the only difference was that in 2008 gasoline cost about a dollar per gallon more than it did in 2007. About 19 gallons of gasoline can be produced from each barrel of oil, so that drop of 17,000 gallons of gasoline projects into a saving of 1,000 barrels of oil a day - by projection, 365,000 barrels of oil saved over a year. And that is an immediate saving. We don’t have to wait twenty years for conservation to affect the global price of oil. It is already driving the price down. So it seems logical to me that the fastest and surest way to lower the cost of gasoline is not to drill, but to immediately raise the “Corporate Average Fuel Economy” (CAFE) requirement for all cars sold in America, from the 27 mpg average, where it has been stuck for the past 20 years, but to the 35 mpg which Detroit will not now be required to achieve until 2020. And if Detroit whines that it cannot meet that requirment in a year, let me point out right now the Ford Fiesta diesel, sold only in Europe, has a 63.3 mpg average. Meanwhile the only 40+ mpg autos sold in America at the moment are the 2008 Honda Civic and the 2008 Toyota Prius. Not a single product from Detroit can come within ten miles per gallon of those two autos from Japanese manufacturers. Only in a world of topsy-turvy logic can McCain and Obama compete to be first to endorse off-shore drilling as a cure for our addiction to foreign oil, instead of insisting upon an immediate CAFÉ increase, so the market place can help us go cold turkey from our addiction to foreign oil.

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