We're doomed. Doomed! DOOMED!!!
Posted on 05/06/2004 9:00:54 AM PDT by .cnI redruM
HEALDSBURG, Calif. (CBS.MW) -- As the price of crude oil keeps rising toward $40 a barrel and beyond, it has become increasingly clear that the world is heading toward a major oil crisis -- in terms of both price and supply -- that will dwarf that of 1973.
There can be no doubt that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions.
For many of us who have been observers of global energy trends for what now amounts to decades, this has become not a matter of "if" but rather one of "when." We are facing a convergence of three forces that will have a potentially explosive effect on the market for crude oil.
They are:
1. A growing geopolitical crisis in the Middle East, which is now threatening to spread beyond Iraq to Saudi Arabia, the world's largest producer and exporter of crude oil.
2. A surge in global demand for energy and particularly crude oil and its derivatives, fueled by the recovery of both the American and Japanese economies and the unprecedented growth of China, which has just replaced Japan as the world's second largest consumer of crude oil.
3. A structural deterioration of the world's oil supply. What is involved here is nothing short of an imminent peaking out of production of crude oil on a global basis -- known by energy industry insiders as "Hubbert's Peak" -- which would turn a cyclical supply/demand crisis into a structural energy crisis of unprecedented proportions.
This is the first a series of articles dealing with this pending crisis and its potential impact on our economy and financial markets
Where the role of geopolitical events on the price and supply of crude oil is concerned, the early warning signals of a major crisis are now coming in every week. In late April it came in the form of a terrorist attack on the Persian Gulf oil terminal through which 90 percent of Iraq's crude oil exports flow. The attack forced the temporary shutdown of the facility. This event merely adds to the mounting evidence that those who have been trying to convince us that Iraq will soon reassume its role is a major supplier of oil to the world market -- as much as 3.5 million barrels a day this year, and 5 million barrels per day within five years -- have been leading us down the garden path.
As a result of the disastrous security situation prevailing in Iraq, all attempts at restoring the output potential of its oil field have now been put on an indefinite hold. Even the first $20 billion dollars of funding originally committed to needed repairs of the facilities there has been cancelled. The sad truth is that in the foreseeable future Iraq will supply less crude oil to the world market than it did before the war.
But compared to what could happen inside its neighbor to the south, all this barely deserves a footnote. The first indications that the supply of oil from the entire Mideast may be on the edge of implosion are now beginning to take on concrete and unmistakable form.
I refer here to the massacre of five employees of the Swiss-based ABB who had been contracted out to run a petrochemical a joint venture of Exxon Mobil and Saudi Basic Industries Corp in Saudi Arabia. It was an inside job. Their killers were Saudi nationals who worked there. This prompted the US ambassador to Saudi Arabia to urge all US nationals -- numbering in the tens of thousands -- to leave the country immediately, because neither the kingdom nor the United States can guarantee their security. This represents a retreat by the United States of historical proportions.
Since World War II, our country has essentially acted as a protectorate of the rulers of Saudi Arabia, the House of Saud, in return for that nation's commitment to act as the great stabilizer of both the supply and price of crude oil in the global market for this key commodity. Saudi Arabia is uniquely able to play such a role, since it is universally recognized as the world's key "swing" producer of crude oil. On average its output of 8 million barrels a day accounts for 10 percent of the world's supply of crude petroleum, almost all of which is exported. But what is perhaps even more significant, Saudi Arabia is in a position to increase output and exports to 11 million barrels a day almost overnight should a supply crisis occur elsewhere in the world.
Were, however, the rulers of this supplier of last resort be brought down by the revolutionary forces of the Islamic Fascists whose numbers seem to be increasing geometrically inside Saudi Arabia, their first step as the nation's new rulers would be to suspend all oil exports, demonstrating for all to see the ultimate power which Islam wields over the West.
For there can be no doubt whatsoever that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions. Lest there be any doubt about this, as Larry Goldstein, president of the Petroleum Industry Research Foundation told the Wall Street Journal this week: A disruption of Saudi oil supplies is "one event to which no one has an answer."
As will be described in the next article in this series, such a supply crisis could hardly come at a worse time. The world's dependence on oil is spiking with the revival of economic growth in the U.S. and Japan, and the emergence of China as a major competitor for the limited supply of petroleum, even as all attempts to introduce energy conservation on a major scale have been essentially abandoned.
B) Lower speed limits back to 65. Cars are much more fuel efficient at 60 MPH than at 80 MPH. See comment A on funding the jihaddis.
C) Governments at all levels should operate only hybrid vehicles whenever possible. That would save massive amounts of taxpayer money that Government on all levels spends on gasoline.
These two require higher costs for the taxpayers. Lower speed limits would simply generate more speeding tickets. People tend to drive at what they feel to be a comfortable speed for the driving conditions. At current gas prices, you would need to drive a hybrid an estimated 200,000 miles before there is a payoff. This assumes the hybrid requires no additional maintenance beyond what a gas engine would require. Again, I think both of these would simply cost us more in the end.
A) Whoever toppled the House of Saud would quickly realize that yea, verily silicon was not edible or potable. They would have Saudi oil production back on line w/in months unless it was toasted by a nuke.
B) We've got 15 centuries of coal in The Rocky and Appalachian Mtns just waiting.
Can't fuel our cars with coal, though...
Several nuclear power plants have been stone-walled by radical greens. The stone walls will come down when the air conditioner fails in some tenured environmentalist's $500,000 palatial estate. In a word, oil is very replacable if it ever really does run out.
Yeah but look at the YEARS it would take to get nuke plants online. In the meantime it could devistate our economy. We need to start building nuke plants NOW!
2) On the other hand, we should all stop gripping about fuel and energy prices unless we are willing to work towards two goals; to reduce oil demand severely and rapidly augment our supply. Our biggest problem with oil prices is that we are on a course to burn through 2.5 mil barrels more this year than last. If you pick out at the buffet table, the restauranteur will naturally jack up the prices.
A) CAFE standards on the entire US auto fleet must rise. People say, "but SUV's are safer." I say "not for anyone they collide with." Burn less gas, fund fewer jihaddis.
Amen. Technology exists TODAY to improve fuel economy 30%. Diesel engines.
B) Lower speed limits back to 65. Cars are much more fuel efficient at 60 MPH than at 80 MPH. See comment A on funding the jihaddis.
Nah. Automakers need to put more emphasis on aerodynamics. Increasing CAFE will result in this.
C) Governments at all levels should operate only hybrid vehicles whenever possible. That would save massive amounts of taxpayer money that Government on all levels spends on gasoline.
Nah. Hybrids are almost never cost effective, high city-driving percentages excluded. The fuel savings a Hybrid creates never surpasses the increased cost of the Hybrid itself.
D) Drill ANWAR like a $10 hooker.
Amen
E) Put up every off-shore drilling rig we can manage. OPEC would whine like a Greenpeace Demonstrator at a spotted-owl shoot.
Amen
Energy policy is another issue where we all want the trip to heavan, but nobody is willing to go through dying. Either we sacrifice something, or we get used to filling up at $2.50 a gallon and make it a part of all our weekly budgets.
Amen
So while the problem is nowhere near as bad as the scaremongers and bunny-huggers want us to believe, the solution rests in our hands alone. That's probably why we will all drop the ball, buy the tricked-out hummer, and piss and moan on the same webblogs next year about the overbearing price of heating oil and gasoline.
You left one out - axe all ethanol subsidies. It is proven that it takes $1.30 to generate $1.00 worth of ethanol. This ends up costing us money, and using more crude oil than if we didn't support ethanol production.
Only 2~3 boatloads/month of towelhead juice comes to our local refinery, most from other sources.
It'll cost even more to fix your engine wrecked by ethanol, it sucks don't ever use it!
We're doomed. Doomed! DOOMED!!!
That's asinine.
Nigeria is an OPEC member.
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