Peak Oil and the Sorry State of the Union

Men's News Daily (CA)

By Byron King
February 11, 2006

In his State of the Union speech, President Bush said, "America is addicted to oil," and set a goal of replacing 75 percent of the nation's Mideast oil imports by 2025 with ethanol and other energy sources.

Who is he kidding?

Saudi's Ghawar field is close to being in irreversible decline. The Saudis are only managing to maintain current oil production volumes by virtue of a massive seawater injection program that pumps more than seven million barrels of salt water per day into its oil fields. This pumping helps to maintain production pressures in the oil reservoirs, but is also the source of formation damage due to the presence of oxygen and bacteria in the seawater. By 2025, Saudi will still export oil, but far less oil than now and each tanker will be of such value as to require its own armed escort.

United States Peak Oil: Iran and Iraq

Iran is not quite at its production peak, but within 20 years, even the most optimistic estimates forecast that Iran will cease to be a net oil exporter. (This may also have something to do with Iran's desire to develop a nuclear program.)

And Iraq? By 2025, Iraq may be an oil exporter, not to mention an eastern province of Iran. But considering the looming and inevitable decline in daily world oil production, who will be able to afford whatever gets exported? (Hint, do you speak Chinese?)

The point is, on the other side of Peak Oil, the United States will be fortunate to receive any oil at all from the Mideast, let alone the Bush goal of only 25% of current (or forecasted) imports. The planners, who are connecting the dots of the past, and mechanistically extrapolating out into the future with no allowance for Peak Oil, are living in a fantasyland. They are planning, if anything, for the failure of the American economy and the attendant decline of American civilization.

Still, our Mr. President raised the subject. To recall an old phrase: "What does the President know, and when did he know it?" If G.W. Bush is onboard with Peak Oil, he failed to bring up the subject with specificity in his State of the Union speech and give the concept the publicity and credibility that such a speech would merit. Then again, maybe the president saw the movie A Few Good Men. Maybe he is imitating Jack Nicholson's character, a colonel in the Marines, who said, "You want the truth? You can't handle the truth." Maybe, to Mr. Bush's way of thinking, he is just doing the best that he can.

There are people who plan for the long term. There are Japanese companies with 100-year business plans. Can anyone predict what the world will be like in 100 years? No. But these companies, reputedly, intend to be around when the next century rolls over. One way or the other. It might be the founder's great grandchildren, but they will be around. As the saying goes, "It's not the plan, it is the planning." (This is a famous quote from General Eisenhower that is painted on the wall of every staff college of the U.S. military.)

United States Peak Oil: Strategy

Strategic planning, operational planning, tactical planning...they all have their place in this world. It is not that things will follow exactly the plan. It is that you have at least planned something and thought things through. You have identified your challenge. You have considered your "desired end state," and determined which pathways might get you there. There are many roads from which to choose, so ya gotta choose. What are you going to do? You need to marry-up your resources to your action plan. What do you need in order to accomplish your mission? You need to identify what you need, and how you are going to get it. And you have to consider the alternatives along the way.

You need to think in terms of "what if this?" and "what if that?" And then you act, starting tomorrow morning, knowing full well that the next day, some freaking damn thing will occur to screw you all up. But at least you have a plan for this as well. And whoever has the better plan, the United States, China, Russia, the European Union, or the Bolivians...they are going to be left standing at the end of the day.

Few things in this world are more scripted than a U.S. President’s State of the Union address. By comparison, the Oscars are a little-old-lady Bingo game down at the fire hall. The entire resources of the U.S. federal government are at the disposal of Herr POTUS. If el Presidente says "X," then the next day there are small armies of federal employees power-pointing "X." If el Pres. says "Y" in the SOTU address, then...you get the picture.

The U.S. Navy, for example, has a 50-year plan. Why? It is because we are building ships with a useful life of 50 years. What will the world look like in 50 years? Beats me; beats anybody. But I bet that you will see U.S. Navy nuclear-powered aircraft carriers floating on the waters of the world. The Navy is inventing its own future, Congress permitting and appropriating. They are designing berthing compartments and kitchen sinks, not to mention nuclear reactors and gear reduction systems and catapult systems, for sailors who will not be born for another 25 years. And when the time comes, these young lads & lassies will be sleeping and washing up, and sailing and shooting airplanes, off of something that some guy designed at a drafting table in Newport News, like, maybe, yesterday.

United States Peak Oil: Reduction of Dependence

Yes, we have been hearing this "We will have to reduce our dependence on foreign oil" B.S. for 30 years. And for 30 years, it was easier to let the daily oil markets dictate that the nation did not have to get serious. What were we going to do, put a $4.00-per-gallon tax on gasoline and kill the driving-based economy? Sorry, guys. Democracy gave you Hamas in Palestine, and Ahmadinejad in Iran, right? Well it also has given cheap gas in the United States for the past century. It was fun while it lasted. Now, Mother Nature is at the door, telling you that it's payback time. Uh-oh.

So, we had our $8.00-per-barrel oil in the 1980s, and our $10.00-per-barrel oil as recently as 1999. We sprawled all over the land, from sea to shining sea, paving over the amber waves of grain, running condos up the sides of purple mountains, and laying out housing tracts where the deer and the antelope used to play. We choke the land with Interstates from the Redwood Forests to the Gulf Stream Waters. This land was made for you and me, huh?

And we plugged a hell of a lot of stripper wells along the way, too. So long to those marginal barrels, at three or five units per day, times 100,000 wells.

Now we see and hear G.W. Bush, who is pals with Matt Simmons and Richard Rainwater (ahem...), saying we are going to reduce out oil imports from the Mideast by 75% in the next 20 years. We never heard Herr Clinton say that...did you? Or if he did, he was just trying to pick up some cute girl, sitting in the front row wearing a wet T-shirt that said "No Blood For Oil" (Whatever works, right Slick?). Considering the reality of Peak Oil, G.W. Bush's statement is a freaking no-brainer. Finally ("Hallelujah!!"), the Bush Administration gets it right, even if it may well be for all of the wrong reasons.

Wisdom may come late, but it seldom never arrives.

Then again, maybe Bush is talking alternative energy for the right reasons, but sometimes a president just can't tell people what is going on. Why did the United States decide, almost overnight, to implement the Safeguard Antiballistic Missile System in late 1968 and early 1969? Did it have anything to do with Soviet submarine K-129, and its abortive nuclear strike at Pearl Harbor? Do you think that President Johnson or President Nixon could have come out and said, "Hey, we almost got nuked on March 8, 1968, by some Red Star Rogue (hey, catchy title...), so we need an ABM system.” Sorry, there are some factual secrets that you just have to keep.

This applies to motive as well. Why alternative energy? Why now? Hmmm. The gears are turning, slowly maybe. But they are turning. I can hear the medulla oblongata, grinding away in the Oval Office. "I cannot really say 'Peak Oil.' The only people who know what it is are a bunch of too-smart people at the margins. Besides, whatever I say, it won't be enough for them. And I have to talk to the center. And we all know how stupid they are out there in the center.

“The lumpenproles in Florida cannot even push a stick through a piece of paper on election day. Do I want to lay the Peak Oil gig on them? It will be panic-city. What will happen to the stock markets if the masses wake up and realize that their 401(k) funds are invested in utter trash, in an economy whose long-term business model is just plain busted.

“Besides, we have 60 Minutes peddling all that crap about how the Alberta tar sands are our salvation. People are confused, and I cannot hold school for the entire freaking country during a one-hour SOTU speech. So, I will say as much as I can get away with, and not get myself assassinated by the...well, I'm not supposed to even think about those people."

Something is going on. Something big.

Byron King
The Daily Reckoning

P.S. Not all nations suffer equally in the event of a crude crisis. Since the United States accounts for roughly 25% of the oil being consumed, even a minor shortfall in the production and distribution of oil around the globe portends disproportionate economic downsides here in America... For all but a few knowledgeable investors, that is. Discover how you can stay informed and ahead of the upcoming "Petrocalypse."Oil ApocalypseByron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. He is a regular contributor to the free e-letter, Whiskey and Gunpowder, which covers resources, oil, geopolitics, military history, geology and personal freedom. To get your free subscription, visit Whiskey and Gunpowder.

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