oil for nothing

OIL FOR NOTHING

Ah, oil for nothing and our chicks for free ( if you watched MTV pre-rapper era, music only explained by pirating forcing music executives to really cut expenses and rap requiring no talent or skill so you could always hire the next cheapest guy wanting out of the ghetto and all that was required was their teeth not yet be eaten away by crack, this song is now going through your head even thirty five years later ).  What?  You thought you would escape an article on oil since I probably already had one a mere two months ago?  Silly rabbit, energy EROI is for kids.  Everyone looks at the title, hopes it is like 90% of my other titles which are obscure references rather than content descriptive, and foolishly continued reading right up until now, tearing at their relatively befouled and hideous hair, and screaming an ear piercing high decibel girlish roar followed by a Son Of A Bitch!  Dudes, you are looking at this SOOO wrong.  You think, Sweet Baby Jesus On Roller Skates, not another friggin Demise Of The Oil Age article, when you should be relieved I keep trying to convince you that your entire world is about to take a complete squishy dump.  I’m warning you, here, and this is the thanks I get?

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Look, I understand that ever since we started converting our economy to oil ( not that we had a choice, our proto-Industrial Age economy starting on hydro power, but also depleting wood [ the East chockablock full of new growth forests ] and then coal and we never would have been an empire without oil, or even probably in contention for one of the top economies economically ) there has been panic and anguish and the gnashing of teeth that our oil was in danger of running out.  For the longest time our government, budding propagandists that they were and professional disseminators that they now are, played along with the interests of Big Oil ( Rockefeller had his monopoly broken up but retained control of the new companies and actually got richer afterwards.  That’s a Roosevelt for you ) and led the charge of panic, “proving” time and again how “proven” reserves were dingus.  Now they do the opposite.  And we do what about official statistics?  That’s right, boys and girls, we believe the exact opposite of what they say.

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Not that it is rocket science to look at oil production and see the trend.  Once it became obvious the lies were boldly refuted, then the fracking propaganda started, but more on that below.  For now, you know that ten years ago the oil production in this country was HALF of our peak in 1971, and that peak production was ONLY lower 48.  Now we are half, AFTER adding in the Gulf Of Mexico and Alaska.  If we compare apples to apples, just using the lower 48 states now, production is pert near diddly squat.  And if you compare yield in BTU, it is literally dropped to nothing.  You can’t refute Peak Oil from the data.  So, you “discover” phantom oil elsewhere and call it a good day to not panic.  But, all that is just a refresher.  A reminder how poor production is.   A bedrock to rest your initial panic on.  Then you add on EROI and after you are done with that, probably the most important aspect which is financing.  Because, just to tease you with the point of this particular article, it wasn’t JUST volume, and it isn’t JUST net energy yield, but it is ALSO financial.  Our oil had been free.  Not even cheap, but free.  Now it isn’t and the cost, even at the reduced inflation adjusted price today, is too much for our economy to absorb.

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That is the issue we have been facing and after this decimates our economy, we still have to factor in ever declining net energy yield, and once the petrodollar crashes, volume decline.  Oh, what fun and games we have in store for ourselves real darn soon.  Remember, none of this is a forecast.  All trends are already in motion and have been the last decade.  All I am doing here is pointing out how humped we are, and don’t even realize it.  What took Britain fifty years to absorb, the loss of colonies and all the free resources they delivered, we will do in months.  Oil is such a powerful lever for power, wealth and control, just losing a bit of oil loses you a lot of the former.  And we are and will lose a lot more than a “bit”.  Everyone shows volume pumped rather than BTU delivered, so it looks good that the global volume is up to 85 million barrels a day.  But, even using old figures, we are at least down to closer to 65 in true net energy.  We maxed out at about 75, then dropped.  The 85 figure is derived from Fake Fuel.  Tar sands, deep water, ethanol, fracking-all the single digit EROI oil.  Remember, the drop to 65 is using out of date data.  It is most likely closer to 55 since the majority of producers are losing the average of 8% production a year.  Saudi Arabia is even worse.  Since Simmons book ten years ago they are down about half in production.

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None of this is visible if you just read the Happy Optimist propaganda pieces.  But it takes very little digging around the Peak Oil pieces to get a better picture.  This isn’t like Gore Warming with stern lectures to believe the majority hypothesis because you are akin to a racist if you don‘t.  You can fudge oil reserve numbers but you can’t production.  Unlike moving temperature gauges to the middle of heat sink airports to prove Gore Warming, oil production numbers and net energy content numbers are what they are, not what someone wants them to be.  The fact is, our average daily oil use, high in volume, is down to ten or twelve to one, EROI ( energy returned on invested.  In 1910, EROI was 100 to 1, and 1970 was 30 to 1.  Now, maximum is about 12 to 1.  We have already fallen way past the point of maintaining the infrastructure built on 100 to 1 oil [ all that means is you invest one barrel of energy in exploration, pumping, delivery and refining, and get 100 in return.  Net energy, for you new folks ] in 1970, so why do you think the economy is even worse now? ).  Even total volume, not factoring in net energy loss, has fallen.  It was just a blip on the graphs of a drop of total miles driven at first, but we went from 20 million barrels a day usage ( while only producing about seven-remember, as our total use contracts, that makes our imported oil numbers fall.  Too bad that is involuntary on our part-but we’ll get to that ) to about 18, a ten percent drop.  But, that takes care of dropping EROI and dropping volume in the past.  Let’s move over to finances.  Remember, oil was free and now it is not.

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If I was to give you a dollar to invest and got a hundred back, would you say that my money was pretty much free?  Sure, not technically, but it was for all intents and purposes.  That is the oil we used to build everything in this country.  All those huge steel bridges, the tunnels, the sewage and subway systems, all the dams giving us electricity, all the power lines and roads for vehicles, everything that is our infrastructure.  That includes the stuff we used based on the infrastructure such as the cars on the roads with the gasoline used in the cars and etcetera.  Now, that was just building the infrastructure, and for a low population.  Very soon, we could no longer build new infrastructure and soon after that we couldn’t even keep the original infrastructure properly functioning.  Fifty years ago we had reached that point, when we had THREE TIMES THE ENERGY AS TODAY.  Shortly after the energy supply had decreased to the point the economy started failing, in the 1960’s, everything failed.

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More likely than not, Vietnam never would have been a major war if our economy wasn’t failing at the time and we tried to repeat WWII which got us out of a Depression ( there were plenty of problem spots that never required intervention, such as Greece or the Congo, etc. ).  The problem was, we didn’t have the net oil in 1965 we had in 1935 ( public works projects, which included national employment to fight the war.  Which had nothing to do with Japan or Germany and everything to do with central banking and empire ), despite increased production.  The free oil was costing more than what our economy was designed for.  Our fine tuned engine went from running 110 octane to 85.  Well, a few bright boys ( the idiots were busy designing the M-16 and managing the war ) figured out a new mega oil production field in Saudi Arabia was just the ticket for almost free oil.  Stop, and think about that.  Our economy was designed to run on oil CHEAPER than Saudi Arabian $2 a barrel oil.  How unsustainable was that?  We lost our entire industrial base when we had to start buying oil for $2.  And that wasn’t even really $2, as they were buying our Treasury bonds with the oil.  So it was the interest on that debt alone that was our cost.

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I’m not sure what the interest on our debt was back in the early Seventies, although I know it was much higher than today.  But that new version of “free”, merely the interest on the debt, was not free enough and it nearly ruined our economy.  To compete with the British and German economy we built a manufacturing economy on free oil, getting most of the worlds gold and control of half the globe politically, militarily and colonially in the process.  That is what using oil to defeat coal power gets you.  But a mere twenty years after we colonized our half of the globe, our free oil economy crashed and burned.  We had to give up manufacturing because we didn’t have the free oil to run it anymore, we only had our very, very low cost oil.  Now, our economy fifty years later is so bad a COAL powered economy is kicking our ass.  We are now Nazi Germany, but without the well run military.  And that is AFTER we went to a financial economy.  We have so little oil, net, after poorly trying to run SOME of the old free oil infrastructure ( how many watts do you think Detroit is running on now, compared to fifty years ago, AFTER the riots and AFTER the car companies were in trouble?  Far less, since almost the entire city infrastructure is dark ). 

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Now, as bad as all that is, you know it is going to get a lot worse.  We still have SOME countries shipping us oil, and SOME countries still buying oil with our debt.  But so many folks dropped out of the petrodollar arrangement already, all that did the last decade was make our oil much more expensive.  Oil for debt paying 2% interest means a six month bond on a $50 barrel of oil costs us $1.  One.  Dollar.  Adjusted for inflation, cheaper than a 1971 Saudi Arabian barrel.  And that is a PetroDollar barrel. The LESS expensive kind.  BUT.  And there is always a butt.  A barrel of oil now delivers one third the net energy as before, and that is conventional crude rather than Fake Oil.  You can’t look at it like the same barrel has the same BTU ( remember, this is an apple to apple comparison of convention light sweet crude to the same, not oil to tar sands ).  What is happening, big picture, is that we must invest more energy into extracting that one barrel of oil.  Larger equipment, or more wells, each well delivering less volume over its lifetime, more labor, less refinery product, longer transportation distances, etc.  In a macroeconomic sense, the entire economy is able to utilize less energy on everything else because more energy is being used to extract and deliver usable oil.  That is what “free” oil delivered.  NO oil siphoned off to extract oil, for all intents and purposes. 

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If we had built our entire country, infrastructure from food growing to housing to trade goods, on low amounts of energy, our low amount supply right now would not equate to economic contraction.  But we didn’t.  We built that infrastructure on extremely high rates of energy.  And that journey  towards lower energy sources is why not only we are failing economically but why we can’t even hold on to what we did invest in.  Look at fracking oil.  The fracking gas has given us a lot of electric, keeping our Internet running which replaces a lot of physical goods or human labor.  The fracking oil has kept our food frozen and transported and cooked, keeping the corn fed population from starving.  But a frack field lasts one quarter of the time of conventional oil, or less, and delivers a net energy in total of about one seventh that of real oil.  We are printing debt to finance the frack fields, throwing away money as the process NEVER made any money, not even when oil sold for $100,  but just required more and more investment as new wells had to constantly be put into place, even as the field production declined.  In effect, that was the last can we could kick down the road energy wise.  Importation HAD to be curtailed as we couldn’t pay real money for oil, only debt.  Only less and less folks wanted our debt anymore.

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Remember, our oil needed to be FREE.  That is the only oil our economy can afford.  Now, how sad is that?  All this economic contraction for fifty years ( with some years of less contraction when we briefly returned to more almost free oil ) because we built a sand castle out of free oil.  If none of this concerns you, just return to enjoying your free retirement money, driving your free oil burning car and working at your free oil dependent job.  I’m sure you’ll die prior to any oil disruption.

END ( today's related link http://amzn.to/2vElkC6 )

 

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