Friday, October 31, 2008

 

Eat, Drink, and Be Merry

That is the message that members of the global consumer society get from those who run the world. It’s drilled into us from day one. The corporate state constantly tantilizes and tempts us with visions of material richness: A big house, luxurious cars, lots of cool possessions, vacations abroad... Plus, if only we buy and use certain products, we’ll also enjoy beauty and health, and we’ll even be sexy! The zenith of this promise is the American Dream, wherein success brings all these things and more. And because 99% of humanity lusts after such things, hooking them on this powerful drug is easy. In no time at all, people find themselves deeply in debt, but still willing to max out their credit cards for the next must-have product that is relentlessly hyped.

Now, there are people who claim that all these indebted people have only themselves to blame, especially now when globalization is reversing, the consumer society is losing steam, and the financial crisis threatens to engulf the whole world. Consumers should have exercised self-restraint and better judgment, is the claim.

That is of course true to an extent. But in reality, few people are capable of such self-discipline, especially when exhorted constantly to consume and spend, and given the implicit promise that economic growth will continue unabated. Unrelenting growth propaganda, ubiquitous advertising, and various forms of constant pressure to spend and consume — not to mention the belief, deeply instilled into us, that consumption is happiness — present a united front so powerful that only a few strong individuals are able to resist.

In the final analysis, the victims do indeed deserve part of the blame, but most of the blame must go to the corporate state for shamelessly and viciously exploiting this weakness, even though it is clear what the eventual outcome will be.

Thursday, October 30, 2008

 

The Great Unwind

Others have already observed how the crash in oil price and oil demand has coincided with the financial crisis that now grips the globe. Suddenly, everything just seems to be falling apart, and of course there’s a reason for that.

Picture the world economy as a giant clock spring without a ratchet. It takes a lot of energy to wind up that giant spring, and keep it wound up. Fossil fuels, in particular oil, have provided the energy to wind up that spring tightly and keep it wound up. That colossal energy surplus is behind the expansion of world trade into the “globalization” phase and the generation of so much money that no one really knows how much is swirling around the world. But suddenly that energy became too expensive, and the spring is starting to unwind at a fearsome pace. Mountains of money disappear in a single day. Businesses are talking about “reverse globalization.” Millions of Chinese factory workers are getting pink slips, not to mention in other countries. Giant financial institutions and corporations are foundering. Whole national economies are in danger of going under.

Cheap and high-quality oil was the boost of energy that wound the spring. As it unwinds, it expands and inflicts damage on everything around it. And the carnage is just beginning.

There is no other source of energy that can wind that spring back up again like oil, so the spring is going to keep unwinding until it reaches a lower energy level that can be sustained for a while. What the level is, is anyone’s guess right now. Assuming it will not be a very high level is safer for the time being.

Thursday, October 23, 2008

 

Graying Oil Industry

As if geology, geopolitics, and financing challenges were not enough for the oil industry already, there is the matter of replacing the industry’s graying work force. As this article ominously notes, “If efforts to plug the skills gap don’t succeed, senior industry executives say oil companies’ ability to tap new and challenging hydrocarbon resources fast enough to meet demand may have already have reached its limit.”

Add to this still more problems like the shortage of drilling rigs and the extensive rusting of oil infrastructure, and we have a real recipe for disaster.

Wednesday, October 15, 2008

 

More Financing Problems for Oil and Gas Development

The discerning likely don’t need any more evidence that depressed crude oil prices and the world financial meltdown are endangering new oil and gas development, but here are a couple more items. In Iran, Oil Minister Gholamhossein Nozari notes that low crude prices are making it harder to finance projects, while the Russian government is disgorging a massive amount of cash to help certain companies because of the problems in getting financing. Among those companies are Lukoil and Gazprom.

Tuesday, October 14, 2008

 

Another Down Side to Cheap Oil

When crude was skyrocketing a few months ago, each day saw a growing incentive for investment in renewable energy. Further, there was still plenty of credit to go around. But now the world economic system is doing a slow crash. Fossil fuel prices are coming down, and credit is drying up. This considerably weakens the incentive and the means to invest a lot of money in alternatives. Here is an article that touches on this problem.

So again, cheap oil indeed brings down prices at the gas pump, but examining the ramifications of cheap crude reveals that it creates other problems.

Monday, October 13, 2008

 

Cheap Oil: Big Problems Loom

In a recent post, I noted that while oil consumers are rejoicing over the decline in crude prices and delighted at the prospect of further decline, the prospect of cheap oil should be raising warning flags all over the world, not just in oil-producing countries. This Rigzone article in fact points out just what I was saying, plus more. To get straight to oil, as you can see in the final two paragraphs, keeping the spigots turned on is getting progressively costlier. If oil gets too cheap, new oil field development projects would have to be scrapped, or would not even get off the ground because they would be unprofitable. Producers have to be assured of a high price in order to invest massive amounts of capital in oil field development.

Saturday, October 11, 2008

 

Speculation on the Presidency

Right now I see two ways this could go.

First, there are big questions about McCain’s health. So the scenario that comes to mind here is that McCain will become incapacitated shortly into his presidency, putting Palin at the helm. Since it seems unlikely, judging by McCain’s less-than-robust appearance, that he could serve his term, perhaps the idea from the outset is to have Palin become president. Naturally, with her lack of political experience and knowledge, she would not be running the show, but, like George W. Bush, would simply be the mouthpiece and face of TPTB.

But another scenario is that the GOP chose a sick man and a totally inexperienced woman as a losing ticket. Fire up the Right, let the fires of bigotry burn bright, then hand the election to Obama, who is left holding the bag. Not that I personally have any reason to believe that Obama would right things. He is, after all, committed to the same basic system. (For a detailed treatment of this subject, see the articles dealing with Obama on Black Agenda Report).

So, no matter which way this goes, the prognosis is not good.

Friday, October 10, 2008

 

United States of Socialism

So, the McCain campaign is appealing to people’s lizard brains. Nothing surprising or unique here, as that is a trick used by politicians and their cousins throughout the ages. But what I find interesting — and it appears right at the start of this article — is the accusation that the other guy is socialist, which of course derives from the “socialism is evil” message that is drummed into Americans from the day they are born.

Let’s be honest: The United States is full of socialist institutions, and rank-and-file Americans have benefited greatly from them, without even realizing that they are benefiting from evil socialism. I won’t even get into the socialism for corporations, the rich, and elites, which has attained new dimensions under Comrade George W. Bush. Plenty has been written on that.

Here I would like to point out those socialist institutions that benefit the Little People. How about public schools? How many of the Little People could afford to put their kids through private schools? How about public libraries, public roads, and public transit? How about tax-subsidized healthcare institutions? Oh, and what happens when the Little People are out of work? Well, they get unemployment compensation, welfare support, and help in finding work from publicly funded employment agencies. And when the Little People retire, how do they expect to support themselves? Social Security and Medicare, of course.

In case you haven’t noticed, these are all evil socialism! How many of the Little People would be willing to forgo all this socialism and let “the market” supply their needs, as is official US government policy? Let me venture a guess: Precious few.

Why does no one point out this embarrassing truth to people shouting for an end to socialism? It could change the whole debate.

And yet, ironically, here they are railing against socialism, which they are led to believe is an unmitigated evil.

But the times they are a-changing. While socialism for corporations, the rich, and elites escalates to new heights, socialism for the Little People is declining fast, and will no doubt be eliminated entirely, or at least mostly, within a decade. Or even less. Pensions are being cut. The US government is flat broke and on life support (courtesy of China), so how will entitlements be paid, especially now that the baby boomers are ready for retirement? The answer is, they won’t. The payout amounts will be cut, and finally the whole system will just collapse.

If you are a corporation or a member of the elite, you can look forward to benefiting more from evil socialism. But if you are one of the Little People, get ready to go it alone.

Wednesday, October 08, 2008

 

Would Cheap Crude Really Be Good?

There’s been a lot of discussion about what will happen to crude prices in a recession or depression. One factor is that oil producing countries want a high floor under prices to fund their own social programs and domestic development. That’s why we hear talk of OPEC cutting production if oil gets cheaper. But they might well decide to cut prices and pump if they perceive that it’s necessary to jump start the world economy. So we have optimists saying that it’s great because we'll be back to $20 oil.

But that creates a monster problem that hardly anyone but Tom Whipple has seen. Developing oil fields now is much more expensive than in the days of yore. Especially offshore, renting a drilling rig costs hundreds of thousands of dollars a day, and lifting cost will be more expensive than that of onshore fields. If crude prices get much cheaper than now, many projects will have to be shelved because they’ll be money-losers. Crude production will then depend largely on fields that are already pumping. Because reserves and capacity are already slipping under current circumstances, cheap crude prices would greatly aggravate peak oil. Once expensive projects are abandoned, it would take enormous amounts of effort and money to start them up again later.

Compounding this problem is the global credit crunch, which makes it harder to fund energy projects. Further, keep in mind that although the financial meltdown is the trigger, the explosive growth in manufacturing, consumption, trade, and finance that built this mountain of money and debt was underpinned by decades of cheap, plentiful energy. So here you can see a feedback loop in which more expensive energy is limiting growth and money, while limited money is hampering energy development.

The bottom line, therefore, is that if crude gets too cheap, oil field development would suffer accordingly, so cheap oil would not be the savior that people hope for. In the long run, it would make peak oil even worse.

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