Posted inUncategorized

Peak oil and its deniers

UC Berkeley economist Brad DeLong has a running feature on his blog called, "Why, oh why, can't we have a better press corps?" Amen, brother. But even the best newspapers have blind spots, and that has especially unfortunate consequences when those dark zones concern some of the biggest issues of the day. The New York Times is already terrified of climate-change stories and won't plumb seriously into the soft empire we've created and its crushing costs. One of its biggest deficiencies is coverage of energy, especially the oil industry. Hence, we were served a story on Sunday about peak oil that failed to define the term and consigned the people in the story to the survivalist fringe. This from a newspaper that also publishes a deferential story about the retrograde nihilist Rand Paul and shrinks from nailing the tea party for its racist supporters, incoherent positions and — especially — shadow control by big corporate money.

Peak oil doesn't mean "we're about to run out of oil." Even defining it as "demand outstripping supply" is incomplete. Peak oil means the world has reached a point where half of the planet's oil has been burned up (see, "climate change"). The remainder will be increasingly hard to reach and more expensive to refine. America hit its national peak in the early 1970s. The North Sea has passed peak. Several of the world's giant "elephant fields" are near or past peak. This is a simple fact of geology about which there's no disagreement among most experts (the outlier: the oft-quoted and highly-paid-by-industry Daniel Yergin). Peak oil was being used in ads by major oil companies and speeches by their CEOs in the mid-2000s. As with climate change, the debate is over details; in this case, when will peak hit and what will be its effects?

Not for nothing did America fare well in World War II because it was a petro superpower and the world's leading oil exporter. Neither Hitler nor the Japanese Empire had much in the way of oil resources. Hitler failed to make the Caucasus oilfields an immediate priority in his attack on the Soviet Union, a geopolitical example of when cops say, "Thank god for stupid criminals." Now, more than three decades after hitting peak, America still produces oil, especially in Texas, Alaska, California and Louisiana. We're even still one of the world's larger oil producers, but that is way outstripped by our appetite.

22
Posted inUncategorized

Speculators and oil prices: an idea running on empty

Some Democrats and even Republicans would have us believe that speculators are to blame for higher gasoline prices. A bill has been introduced to close the so-called Enron loophole that allowed some energy trading on unregulated "dark" markets. That and other "dark market" loopholes should be closed. But the affect on gas prices will be minimal.

Americans have often railed against speculators — the Revolution and Civil War come to mind — and sometimes with good reason. Unfortunately, you can’t have capitalism without speculation. The key is sound regulation. But the idea that speculation is the major cause of higher oil prices is evidence of the magical thinking going on in much of America. It’s deep denial about the real reasons for more expensive oil.

Thus, a war against speculators will be useless at best and could do real harm, both by gumming up the efficient mechanisms of the market — of which speculators are an important part — and distracting us from the real tasks at hand.

2