Thoughts on the "End of Oil"

by Thomas Neuburger

The phrase "the end is near" has overtones so cartoonish as to render it meaningless. Joke after joke has been built on this announcement, many of them excellent. One of my favorites is above; another is below:

But however much we laugh at these pronouncements, things do end — just not when we expect them to. We ourselves will end, as will our earth, swallowed, in five billion years or so, by an expanding, burning, dying sun, all to be returned to space dust from which something else will be made.

But is that end, or any of those ends, near? In the case of ourselves, we hope not. In the case of the earth, not likely. In the case of our species ... well, we'll have to see.

At some point, oil as a commodity will end. The question is, will it end prior to the end of civilized life, which may or may not be near, or will it cause the end of civilized life, in which case that end will be nearer than anyone wishes?

Use of oil as a commodity will certainly peak; many think that has already occurred. According Sierra Club writer Antonia Juhasz, the consulting firm Kinsey and Co. "warned oil-producing nations in 2019 to begin 'sufficiently diversifying their economies for a post-[oil] peak demand world.'"

Something will kill oil, and all carbon-based fuels, as a product — but what will that be? The end of a market for it is one such cause, based either on a happy conversion to renewable energy sources (the end of demand via choice), or less happily, the end of man's ability to use it in enough quantity to matter (the end of demand via death and decimation). In both of these cases, though, the end of oil comes via demand.

Can its use also be strangled by supply, not just lack of supply, but an over-supply that drives the price below the cost of production and makes the industry itself unviable and subject to collapse?

That's less certain, but it's the thesis of Ms. Juhasz's latest piece for Sierra, "The End of Oil Is Near." Her subtitle says, "The pandemic may send the petroleum industry to the grave," and she may indeed be right. This pandemic, like all economic depressions, is shutting down demand, causing oil tankers to park outside of ports like "an enemy invasion" that turn the seas around them into "aquatic parking lots."

"Today, the global oil industry is in a tailspin," she writes. "Demand has cratered, prices have collapsed, and profits are shrinking. The oil majors (giant global corporations including BP, Chevron, and Shell) are taking billions of dollars in losses while cutting tens of thousands of jobs. Smaller companies are declaring bankruptcy, and investors are looking elsewhere for returns. Significant changes to when, where, and how much oil will be produced, and by whom, are already underway. It is clear that the oil industry will not recover from COVID-19 and return to its former self. What form it ultimately takes, or whether it will even survive, is now very much an open question."

Perhaps her headline would better be written, "The end is near, but only if you cause it."

This Covid economy presents indeed a priceless opportunity with respect to fossil fuel. If indeed investor confidence has weakened to all-time lows and only "government bailout programs and subsidies could provide the lifeline the industry needs to stay afloat," deliberately denying those bailouts and subsidies may be our only hope — other than a chaotic market collapse in which a bailout is political poison — for ending the life our species' chief biological threat, Big Oil.

Make no mistake: The fossil fuel industry will kill us, in full knowledge that it dies with us, simply to extend its own existence and profits into the last decade allotted to anyone. It will not die so we can live; it will live so we and it can die together.

This makes both Joe Biden and Donald Trump into killers of monumental magnitude. Trump will accelerate fossil fuel production out of his own blindness and hubris, and at the behest of the monsters controlling his party. Biden will slow demand enough to "make a good show of it," a good show of caring about the rest of us, while still taking the industry's money and, in return, not restraining its ability to dig every drop and sell every ounce it can dig.

It's not even certain that Trump's race-to-ruin will end us faster than Biden's more measured destruction. If Trump's hands-off policy is allowed to run through an extended Covid-induced crisis, a chaotic market collapse may come sooner under Trump than under Biden's carefully managed "keep the industry afloat while seeming to restrain them" approach.

And should it be the case that Biden staves off an oil market collapse, its barons will honor him as a savior. By then he may not know what that honer even means, but his backers will, as will Harris, Pelosi, Schumer, and all the other fossil fuel enablers we allow to rule us.

But we started with "the end is near." We should finish there as well. Though collapses happen quickly — just ask a certain czar of ill repute, or a Bourbon of headless note — I'll venture to say that like many other predators, these our destroyers, this blood-drinking vampire industry, will prove more resilient by far than any we've faced.

We've beaten malaria, smallpox, the plague; polio and tuberculosis; lions, tigers and bears, and all the beasts of the forest and savannas. But the barons of fossil fuel, I'm deeply afraid, ride us till we die ­— unless we, uncharacteristically­, stop them with organized intention and with force.

That means stopping the next elected president, whoever that poor fool is, with organized intention — and with force.
 

Do Members Of Congress Really Sell Out America For A Little Cash From Big Oil?

Since 1990 the Oil and Gas industry has pumped $221,453,356 into congressional campaigns, legalistic bribes that went almost four to one to Republicans, exceptions being a handful of Blue Dogs and New Dems from the Republican wing of the Democratic Party whom Big Oil finds it useful (and easy) to bribe. The Dirty Dozen House Members taking the most in bribes from Big Oil since 1990 are all Republicans:

• Joe Barton (R-TX)- $1,816,205
• Steve Pearce (R-NM)- $1,675,914
• John Boehner (R-OH)- $1,398,338
• Don Young (R-AK)- $1,238,763
• Mike Conaway (R-TX)- $1,139,718
• Lord Charles Boustany II (R-LA)- $973,780
• Pete Sessions (R-TX)- $972,072
• Kevin Brady (R-TX)- $922,862
• Mike Pompeo (R-Koch)- $877,260
• John Sullivan (R-OK)- $835,900
• Kay Granger (R-TX)- $796,853
• Cory Gardner (R-CO)- $754,100

But these 12 crooks have more in common than just the Republican Party and the immense amounts of money they have gobbled up from Big Oil. Each and every one of them has, time and again, put the interests of Big Oil ahead of the interests of their own constituents and ahead of the interests of the United States. And with the possible exception of Steve Pearce, not a single one of these crooked Republicans is being challenged by the enfeebled and corrupt DCCC this year.

When Big Oil wants to get something done, even something absolutely antithetical to the best interests of the United States, these 12 Members are always the starting point. And no one carries their water more diligently than Joe "Oily Joe" Barton, who has made himself a detested comic figure by ritually dismissing and defending massive and deadly oil spills. This week though, Barton is trying to push through Big Oil's latest policy: lifting the ban on crude oil exports. Barton, safe from electoral challenge, doesn't care that his proposal puts American national security at risk-- just so long as it adds to the immense profits that Big Oil rakes in… and shares with him and his party.

The U.S. has had a moratorium on crude oil exports since the 1970s. But Big OIl and their GOP shills want it lifted now. Barton told The Hill this week that "The shale revolution has drastically reshaped America’s energy landscape, unlocking a vast supply of untapped oil and gas. In order to take full advantage of this opportunity, we need to rethink outdated laws that were passed during an era of energy scarcity, which is why I am in favor of overturning the ban on crude oil exports." Barton, who can't see beyond the next big bribe check he expects from Big Oil-- last cycle alone (although he had no viable opponents) he took $164,150 from the oil and gas industry-- claims the U.S. has “more than enough resources to meet our domestic energy needs." Barton says he is working on legislation-- meaning waiting for the exact wording from Big Oil lobbyists-- that would repeal the ban on crude oil exports altogether, and will be introducing that soon.

Barton isn’t alone in his push for exports, Rep. Bill Flores (R-Texas) too wants to see the ban completely lifted. [So far this cycle he's taken $158,139 in legalistic Big Oil bribes.]

But where Barton sees real action coming next year, Flores thinks his Republican colleagues need time.

Flores is confident they will come around to agreeing with him. For now, though, he said it’s “premature” for the House to vote on the ban.

Flores said it was important to educate the public on the benefits from oil exports.

“We just need to get through the economic benefits for the American soccer mom about how she is better off, and her family’s better off, by having crude oil exports,” he said. “That’s just going to take a little time.”

Flores is being patient, allowing his fellow lawmakers time to think through the issue. He hopes that the Energy and Commerce Committee will hold a hearing on lifting the ban next year-- or even in 2016.

“It’s going to take a full discussion to make sure everybody knows the economics and they know whose ox gets gored in this,” he said. “And really, if we do it right, nobody’s ox gets gored.”

The likelihood of any movement this year is slim.

Rep. Fred Upton (R-Mich.), chairman of the House Energy panel, said he is focused on natural gas exports, but is still studying crude exports. [His haul from Big Oil and Gas this cycle alone has been a whopping $646,950.]

When asked if he supported lifting the moratorium, Upton said he “hasn’t said yet,” but acknowledged “there is a push from the Texas folks.”

Next year is a different ball game, according to Barton.

“I am confident that it will gain traction legislatively next year,” he said.

“Pressure to remove the ban on crude oil exports is growing from both ends of the political spectrum,” he added.

Many Republicans and a majority of Democrats, though, are hesitant over the impact more oil exports could have on consumers.

Refiners like San Antonio-based Valero argue the system works as is.

“It would do more harm than good and lead to higher prices in the U.S. for consumers,” Valero told The Hill earlier this year.

Still, Barton says he is “seeing support grow every day” for a change in policy.

Jordan Haverly, a spokesman for Rep. John Shimkus (Ill.), a top Republican on the Energy committee, said his boss is open to lifting the ban “and treating American crude oil like other domestically-produced commodities.” [Shimkus' haul from Big Oil and Gas has been $498,361 since 1990 and so far this cycle, a generous-- and persuasive-- $97,000.]

The Commerce Department too has indicated it is having a serious discussion about crude oil exports. The White House says it is “evaluating” the policy, but has not announced any changes.

But Barton is confident the ban will soon be lifted.

“I predict that no matter which party controls Capitol Hill or the White House, the ban will eventually be lifted for the same reasons Congress eventually overturned other failed government efforts to regulate energy price and supply,” he said.

He has a point. Democratic lobbyists and corporate whores-- take Lawrence Summers for example-- are, predictably, on the side of Big Oil too. But not all Democrats are as fast to sell out as Summers.

[N]ot everyone's convinced. Sen. Robert Menendez (D-N.J.) has argued that the export ban was put in place back in the 1970s to "protect U.S. consumers from volatility and price spikes." Allowing more exports, he argued, might cause U.S. gasoline prices to rise and hurt American consumers. And some environmental groups are leery of boosting fossil-fuel production even further.

…What was the point of the ban?

It all dates back to the 1973 oil embargo by several Arab nations. World oil prices were soaring, and Congress was trying to limit U.S. exposure to the global crude markets. So lawmakers enacted a bunch of conservation measures (including fuel standards for cars and trucks) as well as restrictions on exports. The idea was to keep as much crude oil at home, limit the nation's reliance on imports, and sidestep the volatile global markets.

…There are three common objections [to lifting the ban]:

Gas prices: First, opponents like Menendez have worried that lifting the export ban could raise the price of U.S. gasoline. Many consumers in the Midwest benefit from the current refinery bottleneck, because it artificially depresses the price of crude. If oil producers can sell abroad, prices would presumably rise.

Environment: Second, there's the environmental argument. A recent report (pdf) from Oil Change International agreed that lifting the export ban would probably allow U.S. companies to drill for more oil. But, the report added, this would be a bad thing-- because it would increase overall greenhouse-gas emissions. "In order to play its part in meeting global climate goals, it is imperative that the United States maintains the ban on crude oil exports and does everything it can to decrease, rather than increase, the global pool of fossil fuel reserves that are exploited," the report said.

Lobbying: Third, many U.S. refineries like the existing state of affairs just fine-- since they can buy oil at artificially low prices and then export the gasoline and diesel abroad at a markup. "We wouldn't be doing as well financially if it weren't for that [the ban]," one refinery lobbyist told National Journal's Amy Harder. And Valero Energy, a major U.S. refiner, has spoken out against allowing exports.

No one seems to be talking about dwindling oil supplies and asking what happens when domestic oil actually runs out? Thinking about the future isn't something people do-- not when millions of dollars are riding on not thinking about the future. Meanwhile… remember the "clean coal" scam? How about "clean oil" or "green oil?" Do I smell a huckster here?

Another Wake-Up Call For The World’s Biggest Oil Junkie

Ken and I have been grappling with the horror of the Horizon deepwater oil drilling rig disaster all week but I was lucky enough to run into renowned energy expert Chris Nelder and to somehow persuade him to help put the whole catastrophe into some kind of useful perspective. No ideologue, Chris' goal has long been to get America to understand the reality of its energy situation, based on the decade he's spent studying and writing about energy and related issues. He's written two acclaimed books on the topic, Profit From The Peak and Investing In Renewable Energy, not to mention nearly a thousand articles on energy and investing. And aside from consulting with government and business leaders on the future of energy, he runs his own blog at GetREALList.com. I asked Chris to give us a little tutorial on what makes last week's disaster so important and what we as a society need to do about it. Chris:

America Still Doesn’t Get It

OK, America, it’s time to get real about energy.

The explosion and destruction of the Horizon deepwater rig and the subsequent oil spill disaster are only the latest in a series of wake-up calls you’ve received. Are you listening now?

Your first warning came in 1956, with the publication of M. King Hubbert’s model of US oil production, which correctly predicted its peak in 1970. When Hubbert updated his model on camera in 1976, he also nailed the peak of worldwide conventional oil production in 2005.

Since then, production has remained flat at roughly 74 million barrels per day (mbpd), despite prices gyrating wildly from $40 to $147 to $33 and back to $86 today. High prices did not deliver more oil to market.

Very simply, the cheap and easy oil is gone. What’s left is smaller, harder to find, of lesser quality, and in much more challenging places-- under a mile of water and another five miles of rock, for example. It’s expensive, risky, and yes, dangerous.

American domestic oil production peaked in October, 1970 at just over 10 mbpd. It has been in a steadily declining trend ever since, and now stands at 5.5 mpbd.

Over 30 percent of domestic production is from offshore drilling, of which about three-quarters comes from the Gulf of Mexico. Deepwater oil production has only become possible in recent years with the development of cutting-edge technology. We do it not because it’s without risk, but because we need the oil-- badly. Only offshore is it still possible to find a field in North America that can deliver over 100,000 bpd. Just two of the Gulf fields, Thunder Horse and Atlantis, produce a combined 350,000 bpd.

By comparison, the remaining onshore resources in North America are now decidedly marginal. The days of gusher strikes onshore in the U.S. are long gone. About 1.2 mbpd, or over 20 percent of domestic production, comes from thousands of small “stripper wells” producing under 15 (yes, 15) barrels per day. Low-quality resources like tar sands and shale oil are vast but expensive, and so difficult to scale that they can’t reverse the long-term decline.

The U.S now imports 9.4 mbpd of crude. At $85 a barrel, that’s an $800 million-a-day hole in our pocket, or $292 billion a year. And our import dependency is only getting worse.

An oil export crisis has been developing for years, as oil producers consume more of their own output and Asia outbids the West for declining global exports.

Even so, as the world’s most dependent oil junkie, our demand for oil has held firm. The decline in U.S. oil demand from 21 mpbd in 2007 to 18.6 mbpd today was almost entirely due to lost industrial demand; gasoline demand remained virtually flat throughout the entire oil price spike and recession.

For every finger pointed at an oil company, three point back at us.

Like the whaling ships of the late 1800s that would sail to the ends of the earth in search of whale oil, deepwater drilling is proof that we are willing to pay enormous sums and go to extraordinary lengths and depths to get oil. We have chosen to accept the risks of environmental damage, the horror of oil wars, and the deaths of rig workers in exchange for a continuing supply of cheap, convenient fuel.

We built an entire economy and topography of civilization on the premise of endless, cheap fuel, and profited handsomely from the ever-increasing bounty of the Age of Oil. But having reached the point where it can no longer be increased, and the risks have grown intolerable, we whine and accuse and complain like teenagers, claim we were victimized, and act as though our demand for oil were an unfortunate accident we had no part in.

Isn’t it time ask ourselves how much more risk we’re willing to take, to accept the situation like adults, and plan accordingly?

Since Hubbert’s first warning, our wake-up calls have come ever faster: The Arab oil embargo of the early 1970s and the gasoline rationing that followed. Oil spills. Oil wars. Economically devastating oil price spikes driven by hurricanes and shrinking spare production capacity. And the increasingly frequent spectacle of sinking and spilling offshore rigs.

Yet somehow, this stark and deadly serious reality has escaped our notice. The eager search for a scapegoat in the wake of the Horizon disaster is a clear sign that America simply doesn’t get it.

After highly visible disasters like the Santa Barbara oil spill of 1969, the Exxon Valdez spill, and now the Horizon spill, the public understands the risk of offshore oil production. What it doesn’t understand-- at all-- are the choices we now have to make.

Those calling for an end to offshore oil production in the U.S. apparently don’t understand that it accounts for over 30 percent of our domestic supply. They don’t understand that making offshore oil off-limits would be a double-whammy to our pocketbooks, both restricting our income and forcing us to import even more oil at ever-higher prices. They have an inkling that ethanol production is pressuring food supply, but have no concept that the non-food alternatives, like fuel from algae and cellulosic ethanol, are still puny, and a long way from being ready to scale up and replace oil.

Instead of having a rational discussion about how we’re going to manage our remaining offshore oil resources, we look to technology… as if deepwater drillships and blowout preventers and acoustic shutoff switches were the problem, rather than miraculous solutions only a dedicated junkie could love. These technologies don’t fall from the sky. Every safety measure ever invented came as the result of a lesson learned the hard way.

Instead of discussing how we’re going to break our addiction to oil, we turn to politics…as if yelling “Drill, Baby, Drill” or “Spill, Baby, Spill” even louder, or changing tack on our energy policy every four years, could amount to a solution.

All of our politically-driven energy approaches--carbon caps and trading schemes, offshore leases and moratoriums, short-term incentives for renewables, and so on--
are woefully incapable of addressing our long term problem.

It’s easy to vilify oil and its producers, and it’s politically popular to call for an end to drilling, but replacing oil is far more difficult and expensive than anyone seems to understand.

Here’s the real challenge.

Within two to three years, global oil production will begin a long decline. As a rough rule of thumb, the world will lose roughly 25% of its oil supply in 25 years, 50% in 50 years, and 100% in 100 years.

It’s likely that we will also see the peaks of natural gas and coal in the next 20 years. Hydropower and nuclear will do little more than hold their current market share.

By the end of the century, nearly everything will have to be powered by renewably-generated electricity, not liquids or gases.

But scaling up renewables to take over for fossil fuels, and transitioning all the infrastructure, is going to be mind-bogglingly expensive, difficult, and slow. Renewables like solar and wind currently make up less than two percent of the world’s primary energy supply. It will take decades of effort and trillions of dollars in investment to offset a mere 20 percent of global demand with renewables, and we’ll have to do it in an environment of declining fossil fuel supply and shrinking economies.

For another rule of thumb, consider this: To compensate for the decline of oil alone using renewables, the world would need to build the equivalent of all the world’s existing renewable energy capacity, every year. Since that is impossible, efficiency and a long transition to renewably powered infrastructure must make up the shortfall. This will take 50 years or more to achieve.

If we use it wisely, offshore domestic oil could provide a crucial portion of the fuel we’ll need in order to build that new infrastructure. But if we remain in ignorance of our energy reality, letting politics be our guide and scapegoating oil companies upon their every misfortune, we’ll go down in flames as surely as the Horizon did.

One more tool in the deepwater toolbox, be it an acoustic shutoff device or something not even invented yet, will not solve our problems. Scapegoating drillers while we continue to pump gasoline into our tanks is unproductive and hypocritical. Hyping the size of marginal resources like shale without acknowledging their low flow rates is disingenuous. And championing alternatives that can’t even meet half a percent of our needs, like non-food biofuels, while trying to shut down the 10 percent of our supply that deepwater production provides, betrays a suicidal ignorance of our reality.

It’s time to wake up, put politics aside, get a grip on the scale of the problem and its solutions, and develop a serious energy plan.