Ten Truths About Oil

American Conservative Union ^ | May 28, 2008 | Alan Caruba

[K-oneTexas]

Ten Truths About Oil by Alan Caruba Issue 108 - May 28, 2008

Having written about the energy industry and issues now for a long time, I hope I can be forgiven for being enraged by the comments by Sen. Charles Schumer (D-NY) in response to President Bush’s recent press conference. There is simply no way to describe them other than false.

The Democrat Party has long made “Big Oil” their favorite punching bag, confident that the public has no idea what influences the price and supply of oil. Saying anything favorable to Big Oil is immediately deemed evidence that one is in their pay and whatever facts are offered are therefore invalid.

There are, however, some simple truths about Big Oil that cannot and should not be ignored. To do so leaves everyone at the mercy of energy policies that have created the situation in which the United States finds itself today.

Fact #1. The combined ownership of oil reserves by the independent, investor-owned oil companies such as ExxonMobil, Conoco-Phillips, BP, Chevron and others is barely 4% of the total known oil reserves in the world. By itself, ExxonMobil’s share is 1.08%.

Fact #2. Oil is a global commodity sold on mercantile exchanges for whatever price it can command. Speculation in oil prices is the primary reason they have been driven to utterly insane costs per barrel. It has nothing to do with actual supply and demand.

Fact #3. No nation on Earth is or can be “energy independent.” The geopolitics of oil is complex, but as nations such as China and India have seen their economies grow, their need for oil grows with it and thus they compete with long established industrialized nations for existing oil supplies. This competition has an impact on prices.

Fact #4. The OPEC nations, those in the Middle East and including Venezuela, control 77% of the world’s known oil reserves. Like Russia and Mexico, where the oil industry is controlled by the state, it is generally poorly managed. Several Big Oil companies that were induced to undertake exploration and development in Russia and Venezuela actually had their assets nationalized or stolen at prices well below their investment and value.

Fact #5. Energy is the master resource. All nations with any hope of growing their economies require it, mostly in the form of electricity, but also for oil’s role in transportation. The failure to have a national long-range energy policy that is based in reality can severely impact energy prices.

Fact #6. The United States has, for years, pursued an energy policy based on environmental myths such as “biofuels” in which corn is turned into ethanol to reduce the import of oil, but it costs as much to produce ethanol as to refine oil and it provides less mileage per gallon, thus negating any reason for this additive. Likewise, suggesting that wind or solar energy can generate anything more than its current 1% of the nation’s electricity needs ignores their unreliability and the fact they are heavily subsidized, a form of hidden consumer tax.

Fact #7. It costs billions to explore, discover, extract and transport oil. It takes lots of lead-time as well. The United States Congress has, for decades, refused to permit the extraction of vast oil reserves in ANWR despite the fact it would have little or no impact on the Alaskan wildlife reserve. In addition, Congress has declared 85% percent of the nation’s coastal, offshore areas off-limits to any exploration for oil or natural gas.

Fact #8. The U.S. Environmental Protection Agency, under the mandate of Congress, requires Big Oil to refine oil into some seventeen different formulations in the name of clean air. With three grades of gasoline, that means that refiners must produce some 45 different blends. The quality of air in America is excellent, but the cost of gasoline at the pump continues to rise as the result of these mandates.

Fact #9. America imports two-thirds of the oil it uses. All of its transportation runs on oil. The population continues to grow. Failure to encourage the construction of a single new refinery since the 1970s puts a further strain on the ability of Big Oil to provide the nation’s oil and diesel fuel needs.

Fact #10. Democrats continue to demand that Big Oil’s profits be confiscated in some fashion and some of the inducements offered to explore for more oil be ended. Because the costs of exploration, extraction, refining, and transporting of oil represents billions, the actual profit margin of a company like ExxonMobil is about 10%, well below what industries such as pharmaceuticals and banking enjoy.

For these and many other reasons, Americans are being impoverished at the gas pump because Congress has dithered and failed in one of its most important responsibilities.

Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center, www.anxietycenter.com. He blogs at http://factsnotfantasy.blogspot.com.

[Pagey]

bttt

[wolf78]

My husband works for public transportation.

In Zurich? Public transportation in Switzerland cannot be compared to the US. Because public transportation is so much more competitive in Switzerland (for historical reasons: Not much oil in the Alps plus shorter travel distances), a totally different, more affluent clientele uses public transportation in Switzerland: Much nicer atmosphere, much better product.

We (my husband and I) don't like public transportation, we don't take public transportation, and we don't want public transportation. You're on the dem side of an issue, again.

The dem side? I think you don't understand markets. Cheap oil means: more cars. Higher energy prices mean: More train and bus use in urban areas, as it's more efficient energy-wise. Supply and demand. But as more middle class people ride the subway, they will demand more security, more comfort etc.. No secret agenda, just necessity: If energy prices continue to rise, such will happen because of market forces.

[K-oneTexas]

Today's Nealz Nuze, 2 June 2008

WELL HERE'S AN IDEA ... TOO BAD IT WON'T WORK

As of right now, 85% of the U.S. coastline is off-limits to energy production because of (anti-capitalist) environmentalists. Most of this includes huge reserves off the Florida coast. The problem is that the politicians (Mel Martinez and Bill Nelson in particular) are not willing to become a part of the solution. But here's an idea that is so logical, there is no way in hell Florida politicians will ever consider it.

Representative Sue Myrick of the House Energy and Commerce panel wants to let coastal states decide whether drilling would be environmentally risky. In other words, don't let drilling be stopped on a national level ... let the individual states decide. She has introduced a bill called the Deep Ocean Energy Resources Act. It would essentially give coastal states that want offshore drilling the power to opt out of the federal Interior Department's offshore restrictions. There's only one problem with that ... what if coastal state don't want to drill. What if they are most concerned about the view their residents will have from their beach condos than actually becoming part of the solution?

Of course, there are incentives in Myrick's bill. She proposed letting states in on federal revenues from leases. It would also give states the ability to control energy production up to 100 miles off their shores and extend their territorial waters.

So we'll leave you with some information from Investor's Business Daily about America's energy security.

• Less than one one-thousandth of a percent (0.001%) of the 7 billion-plus barrels of oil that Washington has allowed to be produced offshore over the past 25 years has been spilled, according to the Interior Department.
• A whopping 63% of petro pollution in North American seas comes not from offshore rigs, but from natural seepage from the sea floor. Source: National Academy of Sciences.
• There hasn't been a major oil spill from an offshore well since 1969 even though rigs since then have been lashed by Katrina and other major hurricanes.

 

[RightWhale]

the fact that the planet is still making it

It would not be appropriate to recommend what someone should do in the market since he needs to make his own decisions, but to base a decision on an unproven hypothesis of questionable value might not be productive.

[Cold Heat]

Still clinging to the errant science taught in the fifties I see.....

This may also explain the global warming hoax as well.

As for oil, the fair value is much, much lower than it's current trading price. The reasons for the run-up in commodities are many, but it's largely unrealized fears of potential shortages that feed on it's own sputum.

In other words, it's a bubble...another one.......

I'm not advising anyone....Just putting my money where my mouth is.

Oil, and other commodities are unwinding. The only thing holding it up now is the institutions who jumped in for a quickie profit and they are beginning to think seriously about the right time to divest. When this happens, all this peak oil nonsense will be shoved aside and a major shift will occur back into equities.

I can't call the when of it, but I can call the event. If it were not for the institutional buying of commodities in a very weak, low volume equity market, this would have occurred already.

Today, the Nigerian rumors are once again causing the market to retest the highs, forming a head and shoulder chart that bodes well for the coming correction so I put my assets where my mouth is and posted to you to let you know my thinking on the issue.

In reply you attack my credibility. I suppose this is par for the course here at this declining web forum. Perhaps that is the reason for the declines witnessed over the past few years.

Just a theory.......another one......

Have a nice day.....and follow the plankton life cycle for further enjoyment and enlightenment.

[Cold Heat]

Mass transit only works in urban areas, and in the U.S., urban areas are in decline.

It just won't work here until that changes.

[RightWhale]

In reply you attack my credibility.

No, I didn't, but I will now. You are putting too much faith in fringe science.

[Paved Paradise]

I’d be interested in hearing your reasons for not liking it and not using it and not wanting it.

It’s a great resource and if you don’t want it fine, but not everyone likes to drive or can. With the terrible weather we have here, I’d love to let “someone else do the driving” during the bad days and save me the white knuckles.

It’s not a Dem issue at all and I frankly wonder where that comes from. I’m a very practical person - never been a Dem either.

[Paved Paradise]

You have got to be kidding about the maximum density thing....
There is max density in many US cities and very few have good PT.

[GOP_Lady]

My husband, who runs lightrail for our area, AGREES.

[GOP_Lady]

I live in the HEART of the snowbelt of NE Ohio, and I do just fine in the snow WITHOUT four-wheel-drive. My husband has a VERY, VERY, VERY stressful job keeping the lightrail (which you love so much) running for our area. He worked 32 hours overtime this past week in addition to his regular 40 hours because they don't have the money to hire the proper amount of people. His job is so stressful that he doesn't even have time to eat lunch. Every so often, to relieve a little stress and for a little enoyment, he smokes a cigar. Remember how your vote made that illegal for him to do that with other like minded adults in our state — not one single place. Just imagine that you take the public transportation service that my husband provides to many in our area — REMEMBER HOW YOU THANKED HIM.

[Cold Heat]

I don't consider the new assumptions to be comparable to fringe science. It is the result of further research on the breakdown of plankton combined with the known conditions of the seas of earth. It makes total sense where the old ideas of oil coming from decaying vegetable matter on essentially dry land never did to my mind and the minds of many others who were forced to learn that stuff.

Decaying matter in rainforest's we know to create peat, coal and it's various forms like lignite depending on the decomposed matter, pressure and other influences like fresh water..

Sweet and sour crude must be a similar but different process due to different matter and influences.

That's how I see it.

Add to that, the apparent reality that most all US mainland crude is found in or near where we know there were seas of water and life like the channel from the Dakota's down through Oklahoma, Texas and into the Gulf. This is where the vast majority of our oil and gas has been located and it frankly still being found.(If we could drill, that is....)

It all makes far to much sense and plankton by weight is the largest mass of plant matter that has ever existed. It affects our atmosphere, and in fact, it is key to many aspects of our life here on land and the sea.

[GOP_Lady]

My husband (who runs the lightrail for our area) just gave me example after example of what I'm going to say. You take government money and you accept the government's terms and conditions instead of running like a true market-based operation.

[GOP_Lady]

My husband and I moved to a RED county where government is great, and we have not regretted it. Due to that, we are without public transportation, which I don’t mind. I don’t enjoying having to sit next to a stranger twice a day, having my schedule dictated to by a transportation run. I enjoy a little “private” time in my car alone where I can listen to Rush without offending anyone or crank up my favorite music. I wouldn’t trade this for anything. America is about the automobile, the individual and mobility, not public transportation.

[okie01]

There is max density in many US cities and very few have good PT.

Boston, New York, Philadelphia, Washington, Chicago, the Bay area...

Name another "max density" city.

The popular definition of "good PT" seems to include subways and/or light rail. Name a city outside of the six above where anybody actually uses the system.

Atlanta, to the airport. OK. That's one.

In 90% of urban areas, busses never have -- and never will -- come close to paying for themselves. On most routes in most cities, you can count the passengers on one hand.

Fact is, American cities are laid out to support the automobile -- because that is the most convenient form of travel for the vast majority of the popul;ation.

And there's absolutely nothing wrong with that. There is nothing particularly "moral" about public transportation -- deapite what the left would have you think.

[tatown]

“It won’t make a drop of difference. This is Peak Oil and has been since Nov 2007.”

.........................................................

Are you sure about that date?

How many times have your fellow diciples in the Church of Peak Oil falsely proclaimed a date for the peak? Enough times to exhausted their credibility....?

[thackney]

This is Peak Oil and has been since Nov 2007.

World Oil Production:
http://www.eia.doe.gov/emeu/ipsr/t14.xls

85.449 MMBPD - 2007 October
85.234 MMBPD - 2007 November
85.765 MMBPD - 2007 December
85.674 MMBPD - 2008 January
85.921 MMBPD - 2008 February

[RightWhale]

Nov 2007 is when industry articles announcing Peak Oil began. Several followed in Dec 2007. They are appearing regularly now.

[tatown]

I must have missed the flood of “regularly appearing” industry articles proclaming Nov 2007 as the new, and official peak oil date. Wow, how long is this official date supposed to last? Is it anticipated to remain the peak until the end of the 2008 or could it hold until 2009?

[GOP_Lady]

I’m wondering the same. I have to buy 600 gallons of home heating oil. Thanks, all.