Friday, July 11, 2008

Radical Appetite Surgery

I actually want to start talking about the sort of personal adjustments that will be necessary for many Americans to adjust to the realities of Peak Oil. But I keep getting distracted by weekly news from the oil patch. So this week I will start by indulging my distraction.

In my post titled, “The Myth of Inadequate Investment,” I wrote of my perception that American and European international oil companies (IOC's), along with American and European media outlets, were blaming the present oil crisis on “inadequate investment” and lack of expertise on the part of many state-owned oil companies based in non-European nations. I believe this to be a public relations campaign that is part of a larger push by the IOC's to force these nations to open their fields to Western oil companies, on Western terms (as in obtaining ownership rights over the oil reserves of a country, extracting all the oil from that country, and pocketing most of the profits in Western banks while paying a small pittance of a bribe to the governments of the country in which the oil resides). Since I wrote that post, I have been searching for evidence to disprove the IOC propaganda.

I found some interesting bits of news during the last two weeks – news items which directly address this issue. I want to thank Leanan at the Oil Drum site ( for posting these items on the Drumbeat. First there was an article carried by Reuters on 2 July whose title reads, “Oil Reform Won't Reverse Pemex Woes – Mexico Finmin.” The article deals with the continued steep decline in Mexican oil production due to the decline of the Mexican-owned Cantarell oil field. Mexican president Felipe Calderon has been proclaiming for several months that the only way to reverse the decline in his country's oil production is to revise Mexican law to allow foreign investment (as in obtaining ownership) in the state-owned Mexican oil company PEMEX, as well as allowing foreign development of Mexican oil resources. Calderon's statements have provoked a strong backlash among the left-leaning portion of the Mexican electorate, who quite naturally see Calderon's proposal as a ploy to give Mexico's wealth and natural resource away to foreign control.

Now it seems that Mexican Finance Minister Agustin Carstens is also against the proposal, stating that it “...would not solve PEMEX's problems over the next 20 to 30 years.” He has a point. The American and European oil majors would like the world to believe that if only they owned Mexican oil assets, they could boost oil production from Mexican fields. But the fact is that Mexican oil production has peaked due to geology, and is now in irreversible decline. Transferring ownership of Mexican fields to Exxon Mobil, Royal Dutch Shell or BP won't reverse this. After all, when US production peaked in 1970, the private oil companies who owned American oilfields were not able to reverse the subsequent decline, even though they had the best equipment and no restrictions on drilling.

Another article was posted on the Rigzone site on 1 July, and is titled, “National Oil Firms Well Placed to Take on Majors,” from AFX News Limited. This story contains statements from Algeria's energy minister, a Mr. Khelil, about how the national, state-owned energy firms are now just as competent as the IOC's. He cited Algeria's own state-run company, Sonatrach as an example, as well as Malaysia's Petronas and China's CNPC and Sinoc. Khelil stated that the state-run companies are well-equipped to compete against the IOC's in developing the world's remaining resources, including resources located in other countries.

The last major article I saw is titled, “Of Nations' Pride and Access to Resources,” by Syed Rashid Husain, and was posted in the Arab News today. Mr. Husain accurately dissects the source of the West's interest in the Mideast, describing how in 1953, when Iranian president Mosaddeq nationalized Iranian energy assets, he was overthrown in a coup orchestrated by American interests. He also states the now-obvious conclusion that the American invasion of Iraq and removal of Saddam Hussein was solely about oil.

Mr. Husain cites the current propaganda campaign being waged by the IOC's and Western governments such as the current U.S. presidency to force increased access to Mideast oil for the IOC's by portraying the state-owned oil companies as inefficient and lacking in expertise. Unfortunately for the IOC's, however, one of their own let the truth slip out recently. Mark Finley, general manager of Global Energy Markets for BP, was forced during the recent International Energy Forum Secretariat to grudgingly admit that the state-run Saudi Aramco has the technical expertise to manage Saudi fields, and that the IOC's cannot do very much more than what Aramco can do by itself.

These are fascinating articles, but you won't find them in most American newspapers or on CNN or Fox News. No talk-show radio hosts are discussing these things. Of course that is because the media outlets in the US and other wealthy English-speaking countries is owned by corporate interests who have an agenda. I found other news this week concerning the rape of Iraqi oil by American IOC's, and the renewal of plans to build an oil and gas pipeline from Central Asia to India through Afghanistan, bypassing Russia and Iran. These plans had been stalled by the Afghan government since August 2001, and may have led to the US-orchestrated “regime change” which took place in Afghanistan in 2002. But I will leave it to you to peruse those stories. I want to switch to the main topic of this post.

The main point of this blog is that the world is now facing functional, structural limits to economic growth and energy use, due to the exhaustion of our natural resources, especially petroleum. The decline in availability of energy and other resources is a particular threat to the Western way of life. In fact, many very wise people are predicting that the present Western way of life – in particular, the American way of life – is about to end.

When confronted with this threat, many Americans and other First-World citizens start babbling about how technology can rescue our way of life, and that the answer to our energy/climate/resource crunch is to aggressively invest in new technology. Or when they see the threat to our financial system, they look for the perfect presidential candidate who will guarantee that good times will continue. These people view our lifestyle as sacred and inviolable, and are willing to spare no expense in their fight to maintain it. Technology is seen as some magic remedy which will allow people to continue a life of ever expanding consumption motivated by appetites swollen to monstrous size by steroidal advertising. And people who are bothered by the environmental and social cost of their hyperconsumption look to the technologists for some fix which will allow them to live large and go green at the same time.

This is as unrealistic as an obese man looking for a technological solution to his obesity while he insists on slamming down ten pounds of french fries every day. And such an attitude overlooks the fact that we already possess a powerful solution to the problems of energy and resource depletion, and the financial problems which are now arising from declining resources. That solution consists of learning to live on less. But too many of us don't have a very good idea of what it means to consciously choose to live on less. So I have provided a simple illustration.

Consider three houses. House A is part of a nine-house development finished in November 2007. Each house in the development is selling for $1,690,000. The development is located next to a shady two-lane road in a hilly, beautiful part of the Pacific Northwest, and is in a very affluent school district. Lot sizes for the homes range from 9,000 to almost 11,000 square feet, and I estimate that the floor plan for the pictured house is at least 3,000 square feet.

House B is a 1945-vintage three-bedroom, one bath bungalow with a basement. It is located in a working-class neighborhood with a growing minority population, near a couple of Winco supermarkets and a Fred Meyer store (for those in Southern California, think Target or Wal-Mart). The school system is decent. Even with three bedrooms, the floor area probably does not exceed 900 square feet. But the insulation has recently been upgraded. It is selling for $199,800.

House C is another three-bedroom, one bath home built in 1953. It has a new roof and its garage has been converted into a family room. It is located in the same school district as House B. It is selling for $159,000.

Which house has the most value? Pause and think about this for a moment.

* * *

Now, here are some additional questions:

  • The price of natural gas worldwide is rapidly escalating, and on a per-BTU basis it may equal the price of oil before very long. What percentage of a typical family budget would be spent on heating and cooling House A? House B? House C?

  • Houses B and C are conveniently located within a mile of grocery stores and a light rail line that goes directly through the center of the city in which they are located. Also, houses B and C are near frequently-visited bus stops. House A is adjacent to a road along which is a bus line, but the bus runs infrequently and is unavailable for large portions of the day. House A is also located several miles from grocery stores, schools and places of employment. What percentage of a typical family budget would be spent on commuting from each of these houses?

  • How many people do you know who have 20 percent of $1,690,000 in savings? How about 20 percent of $199,800? 20 percent of $159,000? How long would it take for most people you know to pay off a loan for any of these amounts?

  • House A has a large yard in which one could grow vegetables to promote self-sufficiency, but House B also has a large yard. Houses B and C are also located within two miles of a local farmers' market which sells produce at a junior high school every Saturday. How much benefit would people provide to local economies and their own health by supporting the farmers' market near Houses B and C?

  • How many hours per week would an average husband and wife duo have to work in order to make the monthly payments on House A? House B? House C?

  • Do indebtedness and money worries cause you to lose sleep? Have they ever caused stress in your marriage? Would you be more likely to get a good night's rest in House A? House B? House C?

  • Does anyone still want House A? Then let me suggest that such a person may need radical appetite surgery.

No comments: