With the latest crude oil price hitting $115 a barrel on Wall Street and more increases predicted to be on the way. I decided to do a little intensive investigating to see if I could find a common denominator between the rise in oil and the sharp incline in gold prices.
It wasn't long before I realized my search needed to be refined to just oil and it looks as though I may have to write about oil and gold together at another time, as there is so much that needs to be reported on with oil alone.
I figured that the big increases probably had something to do with Big Oil, the wars in the Middle East and/or George Bush and his friends pockets. Unfortunately, from a writers point of view, there is no obvious corporate conspiracy to blame it on.
The answer simply was in supply and demand, as production can't keep up with the worlds expanding addiction for not just gasoline, but for all of the many products and services that we take for granted, such as manufacturing, the computer industry and food production and transportation which are so dependent upon oil.
Our whole country and most of the industrialized countries of the world can't survive without oil as we have steadfastly defined our culture around its production.
The world as we know it is abruptly coming to an end and most people aren't even aware of it.
It is not that we are running out of oil so much as it is that we can't produce it fast enough to support the economy.
In the 1960's gas seemed to be an endless commodity and service stations around the country were having what was referred to as "gas wars." Stations were selling gas for as little as 18 cents per gallon trying to steal customers from their competitors.
That all came to a screeching halt in the early 1970's as America experienced it's first oil shortage known as the Arab Oil Embargo. That shortage proved that a drop in oil production as small as 5% can have a devastating effect and caused the price of gasoline to increase four fold.During that period, the public went into a frenzy, "topping-off" their gas tanks, thinking that that you had to "get it while you can" in order to maintain their oil dependent lifestyles. Mile long lines at gas stations were common as well as people resorting to physical violence, trying to get to the pump before the stations put up the dreaded " Out of Gas " sign and closed sending customers that had been in line for hours away to find another line. Many vehicles actually ran out of gas before ever getting to the pumps.
In an emergency meeting, Congress was forced to pass laws in order to try to bring the chaos under control. Most people today might think that some of these laws were ridiculous, one being it was a felony to top-off your tank.
Other measures went into effect such as mandatory rationing, gas by appointment only and even using odd or even last numbers of your license plate to decide what day of the week you were allowed to by gas. Most new to late model cars of the time were gas guzzlers and cars were being sold at less than wholesale prices and/or traded for gasoline.
Unfortunately the days of long gas lines may be on the horizon again in the near future, and we will see supplies dropping at an alarming rate of 3% per year. The 1970's shortage was only temporary. Unlike the new shortage as it will not end and will effect the price of all consumer goods including food as we are seeing already.
Above ground conditions including weather, war, major catastrophes etc. could push that envelope to more than 10% per year within 7 years. If that is the case, we can then expect gas to be closing in on $10 per gallon instead of $5 as it is now.
(Note) While gas prices in California are always higher than average due to the MTB additive, the price at the authors local Chevron station is over $5 per gallon for premium gasoline. It costs over $100 to fill a 20 gallon tank. People in some parts of the country are still paying under $3 per gallon.
World oil production peaked in 2006 at 80 million barrels per day and now in 2008 has began to drop down the back side of a chart called the "Bell Chart." The chart is called that because the graph line on the chart used by many annalists to show the production of oil from about 1900 to 2060 and beyond, measured in millions of barrels per day, is shaped like a bell. This same bell on a chart of 1000 years would look like just a bleep. Production levels for 2030 are expected drop to equal that of 1930 levels.
Again it is not that we are running out of oil as of yet. We are however running out of cheap oil. The question now is. . . Is it worth it to drill for oil 6000' below the ocean and 350 miles off shore or even consider using our depleting reserves to refine oil shale and tar sands in order to sqeeze out a few more barrels?
There has been much controversy over drilling oil in the ANWR (Arctic National Wildlife Refuge), but with todays consumption, there is no more than 3 months supply of oil there.
The same is true here on the North Coast of California, which has been boycotting oil for decades due to the fact that the ocean producing over 20' waves and bordered by cliffs would make a spill a catastrophic disaster. If. . . it was decided that these waters absolutely needed to be drilled, as they are trying to say about ANWR, the supply would only amount to 3 or 4 months worth of oil production.
It may come to a surprise to some, but the largest supplies of easy to get to oil (cheap oil) left in the world are Saudi Arabia and you guessed it Iraq, followed by Iran, Afghanistan and many other Middle East countries. Draw your own conclusions.
So where does this lead us today?
When it comes to all the other possibilities for energy, we need to stop calling them alternatives and start calling them substitutes, as they will someday be our only affordable choices.
Many of the substitutes that have been considered so far use large amounts of oil in their productions and those are things that need to be considered as well. Metal for example takes an enormous amount of energy to produce, from mining of raw materials to trucking that material to a smelter, to shipping the finished product, vast amounts of energy must be used. As mentioned above, many if not most of the products we humans use to live the lives that we do, are dependent on oil in one way or another. As supplies of oil become harder and more expensive to recover, supplies of all products will become harder to produce and much more expensive.
This may seem a hard to swallow but with things going the way they are now, with human existence being so dependent on this vanishing resource, we are quickly headed back in time to where we were 150 years ago. Think about it.
VIEW POINT:
We absolutely have to come up with a substitute way to run all our vehicles, including our nations trucks. All free and/or renewable energy can not just be considered, but must be implemented soon. Hybrid and solar electric vehicles are not just alternative transportation choices anymore, they are the only choices. If over 90 % of our automobile driving miles a year are with-in 50 miles of our homes, what is wrong with a car that only gets 50 miles per charge? We can not put this off until after the cheap-to-recover oil wells dry up and the oil wars escalate into another World War.
Like it or not, they have already started.
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Published: Tuesday, April 22, 2008
Last modified: Wednesday, May 21, 2008
The views expressed in this article are those of Kipper Mathews only and do not represent the views of Nolan Chart, LLC or its affiliates. Kipper Mathews is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
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Reader Comments:
Posted By: Jim Hines
Date: 2008-04-22 03:08:39
Yes.Many believe that this is just another socialist conspiracy ie: global warming. But a day or two's research should at least get you thinking as the evidence is quite convincing.Also there is a very tiny school of thought that believes oil is manufactured at the earths core and that if we could just drill through the mantle supplies would be "infinite". It's called abiotic oil. There is no conclusive evidence as to it's existence.Roscoe Bartlett (R) from Maryland is the only congress person sounding the alarm. If you want to contact your congress person it would be helpful to reference his house speeches were he himself references Official Government sanctioned and tax payer financed studies like the Hirsh Report as well as others by the GAO, IEA and USGS.Transcripts of Bartletts speecheshttp://www.xecu.net/thorn/PO/index.html
Posted By: Brian
Date: 2008-04-22 07:19:41
Perhaps there is some validity, perhaps not.
Hubbard didn't ask where oil comes from. He only predicted the production rates based on physical statistics. Dino-Juice or magic mantle secretions... It doesn't change the rate that it's comming out of the ground.
Posted By: Brian
Date: 2008-04-22 08:38:56
As an afterthought...
If we could dig deep enough to extract the so called abiotic oil; We wouldn't need oil at all. That's certainly deep enough to tap the temperature differences between layers of the earth for energy, it may be deep enough to tap the mantle to operate turbines directly.
Posted By: Kipper Mathews
Date: 2008-04-22 08:45:42
That is a good point, however we don't need to drill to get to the mantle. There is plenty of vents such as volcanoes to test this theory. Why hasn't anybody tried that yet?
Posted By: Jim Hines
Date: 2008-04-22 15:19:13
Isn't that what geothermal power is? There is a large field in California, I think it's called the Geysers.
Posted By: moofph
Date: 2008-04-22 16:12:13
...we know what the alternatives are.
...we know what's inconclusive.
What we don't know is what (as a country of people in power...so, I was lead to believe) ...what are we to do about it?
May I suggest using your almighty dollar by putting it in the right place. You must adjust your life to the alternatives...use your money as your voice of reason. You do have that choice...be wary of the divide and conquer approach to science, just as it is used in politics and the MSM.
The best form of energy should be decided by YOU. Do not decide because a corporate talking head or governmental agency speaks or a scientist concludes.
we are ONE.
Posted By: Chris
Date: 2008-04-23 10:46:42
I think it is safe to say you can do all the research til your hearts desire, the fact is though, that research can only include facts and figures that are released. If all the facts are not on the table then without a doubt the picture can be painted to look any way the painter wants i.e. governments and big oil. I do however believe that we can all be much more responsible about how we use resources that are costly, not only to our pocket books, but to the environment too. I do not believe in human caused global warming, however that does not give us a free ticket to destroy what we have simply for convenience. There are many technonlogies that do exist now that would help tremendously with our energy 'problem' the bad thing is many of these technologies are too costly for the average American family, or they are suppressed due to loss of profits etc. In reality the problem will never be solved so long as money is the driving force in the world, which there is probably no solution at all for that.
Posted By: Tim G
Date: 2008-04-24 08:51:35
Are we in that dire of straights? I believe we are coming to that point indeed, but consider this one notion. The argument that I am about to present has played out in our government and has been effectively shut down from happening, but consider anyway. We have untapped oil reserves in the Midwest that the Canadians have been utilizing for many years now. In fact, most Americans are unaware that the number one supplier of oil to the US is Canada, part of the reason the reason their currency is now worth more than ours. So where does Canada get its oil as it relates to the American Midwest?Environmentalists and our current policy makers have stalled many efforts for oil exploration in the Alaskan ANWR and I happen to agree with them there. Not for the environmental aspect but because of the fact that this is purely exploration. It is very costly to try and find oil and the prospects are pretty meek in that neck of the words currently. So how about if we had the prospect of drilling for oil rather than exploring for it? How about if we knew exactly where the oil was and could go get it for the temporary safety of OUR people? Environmental consideration should always be taken when drilling for the precious lifeblood that we need and this is where the argument gets heated to what I am about to present again. Let's drill the Great Lakes. Currently, Canada has over 200 oil heads in Lake Erie alone, 200 plus! Is there oil and gas related spills that happen? Yes. How about the fact that only 45% of those spills are effectively cleaned up by the Canadians every year where they average a spill a month? This is devastating to one of the largest reserves of drinking water for the US, but apparently not enough to stop its use. Millions upon millions of us use the water provided by the Great Lakes on a daily basis. We drink the Lake Eire water or even swim in it for that matter while Canada drills away. In fact, the regulations put in place on US drilling companies could effectively cut the spill rate in half of what Canada currently experiences.The fact is our society, which has been built around the idea of cheap oil, is as reliant on oil as it is on water. If we as a society do not finally find a viable working option for transportation that is not reliant on oil, then we will need to go ahead and dive into the known national oil reserves, let go of some of our environmental agenda short term, or continue funding wars that are merely posturing for oil. Transportation is only one area of oil consumption, but is indeed the greatest consumer of this blood.Drilling in the Great Lakes is surely a temporary solution for a permanent problem, but our domestic agenda is being corrupted for our foreign agenda guided by our lust of oil. Give the US a fighting chance.
Posted By: Roy
Date: 2008-08-21 05:29:23
I agree with the author on most points, but would like to make one point very clear to the readers.
As someone "in the business" there are a couple of misleading points. We are not running out of oil anytime soon as he states, but neither wwill production decline as quickly as he states. The missing component in the Hubbard graph is that it is based on recoverable resereves. "Recoverable" should be read as "economically recoverable". At $100/bbl alot of oil tha was left in the ground at $10/bbl (1999) becomes practical. Also alot has been made about the fact there have been fewer discoveries in the last 3 years. The main reason is the same as above. The oil companies are not dilling as many pure exploration wells because they only have a limited number of rigs. They have the choice of looking for new fields, which is risky, or developing proven but previously uneconomic fileds, which is much less risky. I work in the offshore sectore and a deepwater exploration well will cost you between $50,000,000 and $150,000,000........each.
To put these cost in perspective Exxon´s (not my company) record profit for the quarter was $11 billion and has many, including congress screeming about a windfall profits tax. In the offshore world tha amounts to the cost of only 3 or 4 development projects. Once they have run out of knwo fields with profitable $100/bbl oil they will start looking for and finding more.
The ANWR/Coastal drilling point made were somewhat misleading. The 3 or 4 months mentioned in both cases is I assume based on worldwide oil consumption. The big advantage of both these areas is that they are NOT in countires that may or may not someday decide to cut off our supply. Developing them is a form of insurance.
All this does not mean however that we should not be doing everything possible to find aletrnative energy sources. While the oil will not run out it will continue to get more expensive and as long as the USA economy is depednent on oil we will suffer. There are also the pollution and security of supply aspects of buring oil as our primary energy source. Some say the price cant get higher. They also say that the high price is due to speculation. The real reason the speculators are rasing the price is world wide production is very close to worldwide comsumption. If you think oil/gas are expensive now wait and see what happens when the first report that consumption surpased production occurres.......