Rhinocrisy

I haven’t talked about oil in a while, mostly because ever since the ol’ economy took a big shit and died it hasn’t been a big issue - oil consumption drops with other kinds of consumption (fewer trucks delivering goods, fewer people driving and flying around, fewer people heating their pools with a hundred curling irons, etc.), so things have been pretty slow for the past few years. Snazzy graph from EIA:

Nevertheless, though things have slowed, that doesn’t mean our wild-eyed blubberings about peak oil are now completely mitigated. Quite the contrary; the problem was quite real, and remains. I read the other day that when OPEC recently trimmed their output in order to encourage the oil price back up around $100/bbl after it collapsed down to the $40s, the level they ratcheted down to was still an incredible 97% of capacity, leaving a whopping 3% margin of spare capacity - at the low end of productivity.

So we should be expecting news like we got last week from the US military, which announced that it expects a major shortfall in oil production in the next two years, and a serious crisis by 2015. By then, they expect a shortfall of 10 million barrels a day - that is, something like 12% of global oil consumption. As an exercise, just try to imagine the effect this will have on the price of oil.^*

We’ll pause to note the irony in the US military - the largest single consumer of oil in the world, at about 400,000 bbl/day - making this announcement. They haven’t announced exactly what they’re going to do about it. Maybe if we fought a couple of more wars it would help. Fortunately, it seems like the economy is going to be lying in the shitter and weeping for a bit longer, which might buy us some time.

In the meanwhile, to make up the shortfall, I advocate going back to doing what we were doing before: sending teams of ferocious, hook-wielding men in boats to kill thousands of whales for their oil-rich blubber. I’ve already done my part by canceling my contributions to Greenpeace.

^* Put a few hill giants and evil wizards into your scenario for good measure, just to spice it up.

The stakes are high for our citizens and for our economy, and with gasoline running at more than four bucks a gallon, many do not have the luxury of waiting on the far-off plans of futurists and politicians.

This, from a speech McCain is to give on the subject of opening up offshore drilling. Some of you may recall that when last we left it, the question had been broached and approved in the House, which voted 232-187 in favor of allowing offshore drilling beyond 50 miles from any coast (with an option to ban in the 50-100 mile range by individual states). Subsequently it languished in the Senate, and has now been reintroduced as the “Deep Ocean Energy Resources Act of 2008″ (with exceptions for Florida and California, the most beach-dependent and therefore most recalcitrant).

Bush has done McCain one better and also proposes opening up a bit of ANWR for exploration and development. Politically this is a good time to propose these things, because the price of gas is absurdly high (round these parts nearing $5/gallon) by American standards. It’s a moment for feel-good solutions, even if they won’t manage to actually stave off the high prices for the next few years. Oil companies still rely on exploration, and exploratory drilling, all of which takes quite a while even before you get to the point of setting up a well. So charitably speaking, even if we manage to pass this bill and open up the outer continental shelf for exploration by 2009, it won’t make a lick of difference to oil prices for, minimally, the next few years, and realistically the next few decades. As campaign rhetoric goes, this is merely, well, campaign rhetoric.

The department of Interior’s Minerals Management Service estimates that there are about 86 billion barrels of technically recoverable reserves waiting for us in the US outer continental shelf. To put this in perspective, current US total reserves amount to less than 21 billion barrels. This represents quite a bit of oil, and at current prices of $136/bbl, it’s also a lot of money ($11.7 trillion). Ostensibly, of course, the goal of this effort is to reduce that bloated figure, but it’s not necessarily the case that it will do so. All other US reserves are in terminal decline. Oil production follows a more-or-less bell-shaped distribution, as once a region is open for discovery it is methodically explored and exploited. US productivity history looks like this:

In about thirty years we’ll be bone-dry if we don’t develop our offshore resources. Most of the rest of the world is in the same situation. So by the time we do get those offshore fields into production, it’s probable they won’t be able to make up for the intervening aggregate loss in production.

This isn’t necessarily catastrophic, if we ignore our various environmental concerns. Developing our energy infrastructure need not be a zero-sum game, and we can certainly imagine that this offshore exploration might continue apace with the development of other technologies that obsolesce it before it even becomes problematic. Political will, however, is definitely no better than a zero-sum game, and probably has diminishing returns over time. Adopting more oil production as our forward-thinking energy model doesn’t set the stage for the kind of century I had in mind.

ADDENDUM: For some typical commentary, see this one by Charles Krauthammer (presumably so named because he is the scion of a family of cabbage-beaters), where he excoriates McCain for not going far enough with his oil-exploration madness, but ignores the fact that the exploration he is touting won’t actually earn us any energy independence, especially as compared to, say, developing alternative energy sources. I will never understand why, when you are discussing questions that depend on fundamentals of geology, you ignore the fundamentals of geology.

I highly recommend this article by Michael Klare on the subject of America’s oil dependence and its effect on our superpower status. The best summary of it is in this calculation:
19 Mbbl/day * $120/bbl * 365 days/year * 0.65 = $540 billion per year spent on oil imports. That’s about on par with the Pentagon’s budget and about 4% of US GDP.

(Via ATR)

Long time since we made any mention of the black gold round these parts. When last we left it, profits were high, oil price was surging, and times were good for all and sundry except those people who happened to, for example, drive an automobile.

In recent days the price of oil has jumped up quite high - I regret not having marked the passage of that meaningless milestone when it crossed $100 per barrel. But it is worth noting that the price of oil is now ten times what it was in the late nineties, before it began to climb.

Some fraction of this rise in price may be due to the drop in the value of the dollar. Although from the American perspective this makes no difference in terms of economics, it is worthwhile to convince ourselves that there is a scarcity-driven increase in oil price, and not just a monetary one. To the right is the trend in oil price (West Texas Intermediate) in both Euros and Dollars. Assuming Europe as our economic baseline, there has at least been an almost seven-fold increase in oil price since 1999.

Gas prices are consequently running pretty high (by American standards), and as our nation has a singular reliance on the automobile for more or less every kind of activity, it is to be expected that this should have some sort of economic impact. But how much?

The usual way of measuring these things is energy intensity, a quantity which purports to capture the overall efficiency of the economy. The calculation is simple: total GDP divided by total energy consumption. If this goes up, your economy is becoming more energy efficient, and its total reliance on energy has decreased. The usual argument is that our economy is now very tech-heavy and not extremely energy-dependent, whereas before it was built on dinosaur-like technologies that burned a lot of oil. The Oil Drum has a good treatment of this question with lots of comments from parties more knowledgeable than myself.

Irregardless^*, there’s a definite consensus that high oil price is problematic, and something must be done about it. As a matter of public policy the question is framed in terms of “high gas prices”, but it has at least made some inroads into the ongoing presidential pie-slinging competition.

Probably the stupidest proposal to come out is John McCain’s “gas tax holiday” plan, which is to suspend the gas tax during the summer months. Dean Baker (amongst many others) lampooned this idea as bunk, pointing out that if you remove the gas tax, the price probably wouldn’t drop all that much - corporations would simply eat the difference, and maybe pass a few cents in savings on to the consumer.^† Hillary Clinton, ever favoring style over substance, jumped on board this brainless scheme, and also piled on with a “windfall profits tax”, which we previously discussed here. This formula is sure to result in exactly the scenario described above: if the “windfall profits tax” is identical in amount to the gas tax, as Clinton suggests it should be in order to make up for the loss in revenue, then oil companies will have zero incentive to pass savings on to consumers, and the change in gas price will be $0.0000.

Once again Obama proves himself to be the sharp tack in the bunch:

“That’s typical of how Washington works. There’s a problem: everybody’s upset about gas prices. Let’s find some short term, quick fix. That we can say we did something, even though we’re not really doing anything. Because if you actually took away the gas tax, what are the oil companies going to do? They’re gonna raise your gas by 5 cents. You’ll never see the savings. And then we pretend to do something.”

There are, of course, only two actual solutions to easing the price problem: increase supply, or decrease demand. The former is perhaps impossible; certainly in the short-term there’s nothing that can be done. The latter is the only reasonable course. Conservation can have dramatic effects on consumption. Between 1979 and 1983, US consumption dropped from 20 Mb/d to 15 Mb/d, while automobile fuel economy doubled in the same period. It’s quite clear that the technology exists to produce a similar contraction (and, let’s not forget, we have other motives to do so), and only a small nudge and tweak is needed to encourage it to happen.

^* Yes, irregardless is a word. My spell-check told me so.

^† McCain seems to be floating a whole barge of bad ideas; the more I’m exposed to his actual policy perspectives the less I respect him.

I know how low my expectations of U.S. government have fallen when, upon reading this report, I am not only furious but also relieved, like the time I hurled up a burger that had been out too long.

The U.S. Chemical Safety Board decided to slam oil company BP for screwing the pooch on safety at its Texas City, Texas refinery and contributing to an explosion that killed 15 people and injured 180 in 2005. Their press release is terrifying. It says a tanker-truck worth of flammable hydrocarbons spewed out of a vat in less than two minutes. It vaporized and spread over the property before being ignited and bang. “High overpressures from the resulting vapor cloud explosion totally destroyed 13 trailers and damaged 27 others. People inside trailers were injured as far as 479 feet away from the blowdown drum, and trailers nearly 1000 feet away sustained damage.”

It wasn’t surprising that fuels can burn and even explode. Or that refineries might suffer from design flaws. The two surprises were how open the investigators were about negligence by the oil company and in recommending federal regulation as a cure.

For BP’s part, here was a particularly damning section:

the refinery only investigated three of the eight known previous ISOM blowdown release incidents, where flammable and potentially explosive vapor was released from the same blowdown drum involved in the March 23 accident. In 2004, an internal BP audit graded the refinery’s analysis of incident information as “poor.”

And there was that subhead, “Dysfunctional Safety Culture Existed at All Levels of BP,” followed by lines like “BP executives made spending cuts without assessing the safety impact of those decisions.”

I know I’m not including BP’s side of the story here, because my point isn’t to provide a news story. I’m just pleased that any U.S. federal agency would speak such clear truth to power. And even more surprised that they would call on the government, rather than voluntary industry action, as the remedy. They did so in a section called “OSHA Should Increase Petrochemical Inspections, Enforcement.”

Proposed OSHA fines during the twenty years preceding the March 2005 disaster - a period when ten fatalities occurred at the refinery - totaled $270,255; net fines collected after negotiations totaled $77,860….

Federal OSHA conducted only nine [in depth, multi-week] inspections [between 1995 and 2005], and none in the refining sector. State agencies in the 26 states that operate their own workplace safety programs conducted a total of 48 [such] inspections, including six at refineries. However, a number of states - including Texas, Louisiana, and New Jersey, where much of the U.S. oil and chemical industry is concentrated - rely upon federal OSHA to enforce workplace safety rules….

California’s Contra Costa County, which has its own industrial safety ordinance, inspects each covered facility every three years. A county staff of five engineers performs an average of 16 inspections per year.

I can think of a few other places where the U.S. Chemical Safety and Hazard Investigation Board’s straightforward analysis could come in handy.

Or rather, food for cars.

I found it strange a few days ago, in this transcript of a conversation between Hugo Chavez and Fidel Castro, that the two of them agreed that ethanol was a horrible waste. Their reasoning was one I haven’t heard articulated outside of the disgruntled mumblings of luddites:

Hugo Chávez.- Do you know how many hectares of corn it takes to produce one million barrels of ethanol?Fidel Castro.- Of ethanol, I think you talked about 20 million hectares the other day, something like that (Laughter), but remind me.

Hugo Chávez.- Twenty million. No, you are the one with the exceptional mind.

Fidel Castro.- Ah, 20 million. Well, of course, the idea of using food for producing fuel is tragic, it is dramatic. Nobody is certain about what is going to happen with food prices, when soy is becoming a fuel, with the need there is in the world to produce eggs, to produce milk, to produce meat, and it is one more tragedy of the many that exist at this time.

But then there’s this:

An increase in the cost of tortillas, a staple of the Mexican diet since the Maya ruled 1,000 years ago, has triggered a slump in the peso.

Tortilla prices jumped 5.9 percent in January, the most in eight years, after costs climbed for corn, the main ingredient. That increase fanned inflation and a bond market rout that curbed demand for the currency. The peso has fallen 2.3 percent in the past month, making it the world’s second-worst performer against the dollar among the 70 currencies tracked by Bloomberg…

The peso may fall further in the next several months as corn prices continue to rise. Corn has soared 16 percent in the past eight weeks and 121 percent since late 2005 as demand for the grain grows from ethanol producers.

That’s not to say there’s no debate on the subject. But it’s pretty remarkable. Of all the reasons for corn prices in Mexico to finally rebound from their Nafta-depressed state, this is the most depressing. A need to feed cars.

Note: this blog beat me to the discussion.

Update: Saurabh, in comments, spots the impresarios’ math error. What’s two orders of magnitude when you’re in charge of a whole damn country? The basic point remains — consumption of corn for fuel, or speculation on corn because it’s now trendy to see it as an energy commodity rather than a boring old grocery store item, is screwing up Mexico.

There is no shortage of clever ideas for solving climate change once and for all. I’m not talking about amateur-hour stuff like electric cars or planting lots of eucalyptus trees. I mean serious proposals with at least a little scientific backing that might screw everything up for everyone but would solve some aspect of climate change. They might prevent some of the tipping scary feedback loops from accelerating out of control. And the good news is they are guaranteed against any unforeseen effects. After all, everyone knows that reengineering the world’s climate is a simple, linear process that has no possibility of failure.

Here’s one that was presented at a scientific conference in December with the I-wish-I-were-joking title, “Are Salps A Silver Bullet Against Global Warming And Ocean Acidification?” No, the term “silver bullet” isn’t being used sarcastically. It’s a concept by this fellow to pump nutrients out of the deep ocean to increase the population of salps, strange jelly-like creatures, which then shit out lots of carbon-rich excreta which drop to the bottom of the sea, sea-questering it for “ever.” The nice inventors appear to be positioning themselves to make money with this kind of scheme when carbon credits go above $26 a ton, as companies will pay them big bucks to sequester carbon so they can keep pumping out more CO2 into the atmosphere.

Another idea is to spray sulfur compounds into the upper atmosphere to reflect light and “counterbalance most of the warming associated with the greenhouse gas forcing. Surface temperatures return to within a few tenths of a degree(K) of present day levels. Sea ice and precipitation distributions are also much closer to their present day values. The polar region surface temperatures remain 1-3 degrees warm in the winter hemisphere than present day values.” They note that they didn’t study “the important ethical, legal, and moral issues that are associated with deliberate geo-engineering efforts.”

Thanks to Saurabh, master of all things bloggy, I am writing my first post in months. First a little update: I am semi-retired as I am going through a job transfer that is likely to leave me on a different continent. I have spent recent weeks rummaging through my burrow, realizing how closely related hedgehogs are to packrats. Meanwhile I have outsourced all of my blog needs to Jonathan at Tiny Revolution, who has been doing a yeoman’s job of smiling into the apocalypse.

Speaking of the apocalypse, here is the best news I’ve heard in ages:

The relative lifetimes of CO2 and aerosol in the atmosphere result in the expectation that reducing fossil fuel use will accelerate warming. A CO2 molecule has a lifetime of about 100 years in the atmosphere, while an aerosol particle has an average life expectancy of only about 10 days. Therefore, if we instantaneously ceased using combustion engines, the (cooling) fossil fuel-related aerosols would be cleaned out of the atmosphere within weeks, while the (warming) CO2 would remain much longer, leaving a net positive forcing from the reduction in emissions for a century or more.

Meanwhile, this quote from Colorado:

“I don’t want to start an issue about censorship,” she said. “But you won’t find men’s genitalia in quality literature.”

Colorado? Yes, the source of such gigglers as this:

The Greeley Tribune has agreed to end a years-old practice of copying stories from competing newspapers and falsely labeling them as Associated Press stories, the newspaper’s publisher said today….the practice began several years ago when Chris Cobler was the newspaper’s editor. Cobler is currently overseeing the paper’s online operations and announced this week that he was leaving to take a job with the Poynter Institute, a St. Petersburg, Fla., organization that provides training programs for professional journalists….Cobler agreed the practice was unethical and said it was his fault if it happened on his watch, but added repeatedly that he had not been the editor for 18 months.

Has, unfortunately, arrived.

Iraq’s massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.

The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972 … would permit Western companies to pocket up to three-quarters of profits in the early years…

Proposing the parliamentary motion for war in 2003, Tony Blair denied the “false claim” that “we want to seize” Iraq’s oil revenues. He said the money should be put into a trust fund, run by the UN, for the Iraqis, but the idea came to nothing. The same year Colin Powell, then Secretary of State, said: “It cost a great deal of money to prosecute this war. But the oil of the Iraqi people belongs to the Iraqi people; it is their wealth, it will be used for their benefit. So we did not do it for oil.”
Supporters say the provision allowing oil companies to take up to 75 per cent of the profits will last until they have recouped initial drilling costs. After that, they would collect about 20 per cent of all profits, according to industry sources in Iraq. But that is twice the industry average for such deals…

Several major oil companies are said to have sent teams into the country in recent months to lobby for deals ahead of the law…

The good news is this might mean the U.S. is preparing to withdraw its troops. Mission accomplished, as they say.

Forget terrorism, the Nov. 7 election will be decided on gas prices. Which look like they are headed in one direction. $40 a barrel? Really?

I am happy to see the U.S. opening to talks with Iran. I just wish it didn’t mean that we’d get another two years of this. Especially after hearing that a huge majority of Americans want the White House investigated to find out what the heck they’ve been doing for the past 6 years.