Michael Fitzsimmons

Peak Oil for Dummies

to the author: on "alternative energy" you didn't mention natural gas powered transportation. please read my articles on this subject. here is the best transportation solution for the US:

www.autoblog.com/2008/...

think a prius running on US produced nat gas as opposed to foreign oil. that said toyota won't manufacture the car in volume because the US government won't support NGV's or the refueling infrastructure to support them. think of the NG infrastructure the money blown on "cash for clunkers" would have bought. instead, we simply have more (and newer) cars running on gasoline (foreign oil). the US gov knows that it will have ultimate control of the american people if it can control their gasoline supply and thus their mobility. so, congress is instituting executive branch martial law legislation, and building up the military for internal use purposes. meanwhile, the american electorate is watching american idol and sports thinking everything is fine and the american dream is still alive...

Peak Oil for Dummies

the question really isn't if peak oil has been reached or will be reached in the next few years. as 2008 showed us, the earth has reached a point where oil supply cannot keep pace with oil demand in a fully functioning oil based world economy. i have been searching for a solution to a future which dr campbell, whom you quote, so accurately described. there is only one solution: natural gas and natural gas based transportation. yet for all the logical arguments i can and have presented on seeking alpha, still the naysayers want to stay addicted to oil, despite the scary writings on the wall of 2008 and the subsequent economic fallout. the US in particular is in denial - its media, its government, and its citizens. since the US is 5% worlds population and consumes 25% of the world's oil, it doesnt take a rocket scientist to figure out the US will be the hardest hit country when the realities of oil supply and demand strike again (and it won't be long). thanks for the aricle, but i think the only way out of the mess for the US is for the 50 states to band together, call for a constitutional convention, disolve the present congress, and start over with governmental and energy reform as the top 2 priorities. otherwise, the US is going to lose its wealth, freedoms, and democracy much faster than it gained them.

U.S. Oil Supply: Drilling Down to the Facts

your article insinuates that america is not in an oil crisis. yet, here are the scary facts presented in a different perspective::

1) in spite of $145/barrel oil, year over year production at the three biggest US oil producers was down (XOM, CVX, COP)

2) the oil market is a global market. the US imports 65-70% of its oil, and the direct benefactors are russia, saudi, iran, iraq, venezuela.

3) the world is entering an era where worldwide oil supply will not keep pace with worldwide oil demand. any country therefore that is strategically dependent on importing 70% of its oil is therefore not only exposed, but is has an unsustainable economic strategy.

4) the extreme debt run up in the last 8 years will pressure the US dollar further as exhibited by yesterday's nearly 2% drop in the US dollar index. since oil is priced in US dollars (at least for now), a continued weak dollar merely exascerbates the problem.

5) the current low prices for oil and gasoline are a direct result of failed bush and republican economic policy: deregulation of the financial markets, idiotic energy policy, and deeply flawed tax and spend policy (i.e. tax breaks for the ultra-wealthy and huge fiscal deficits at the expense of the middle class). current low oil prices are NOT the result of huge new supply, but rather due to a drastic reduction in oil demand caused in part by the $145/barrel price of oil earlier in the year.

to paint a rosy picture from these facts is not only unwise and unpatriotic, it's downright dangerous. from an economic perspective US reliance on foreign sources for 70% of its oil (and growing) is simply unsustainable and will lead the US into the economic abyss (are we already there??) if not corrected.

Political Energy Policy Just for Laughs

The only solution to the massive oil induced energy crisis in the US is a strategic, long-term, comprehensive energy policy:

thefitzman.blogspot.co...

Failure to adopt something along these lines in the next year or so will be catastrophic to the US economy and our way of life as we enter an era of peak oil where worldwide oil supply will not keep pace with worldwide oil demand. For a country that imports 15 million barrels of foreign oil a day (and uses 21 million barrels), it should be obvious to any thinking human being what steps need to be taken, and taken very soon. The last 8 years have been a complete waste, and 2015 is d-day according to energy company CEO's. That is only 7 years away....

The T. Boone Pickens Approach

asdf: perhaps you are right, COP traded under $80 today. that said, they're now expected to make $14/share in 2009. i am keeping my COP shares.

wizard: you really need to give it up, CO2's impact on global warming is a scientifically accepted fact.

lminsky: your observation on the cost of iraq is priceless. i agree with your republican political machine comment as well. not sure if you get barron's magazine, but if you do, there is a priceless article this week by jim mctague on the bush economic hypocrisy. that is, while they profess to be "capitalist" and "MBA powered", bernanke and paulsen are busily working (with the administrations full support if not prodding) at nationalizing the entire US mortgage market as well as taking federal control of the banking and financial systems. it's pre WW2 germany all over again (i.e. facists and not capitalist). meanwhile, rush limbaugh and larry kudlow get paid millions to keep the uneducated thinking that bush is a "conservative republican" when what he really is is a "radical fascist".

wizard: if you cannot see the wisdom of jimmy carter's energy plan after all this country has suffered since bush came into office, well, then i think you should change your screen name. wizard doesn't really apply. jimmy carter was dead-on and developed the right policies (and is a fellow georgia techie).

Ensoph: yup yup, but non-believers in global warming have trained themselves to discount science and normal observation. it is an ideological position that once taken by them year ago cannot be reversed. to do so would mean that gore was right all along and they were wrong. i am sure none of them could live with theirselves if they admitted that was indeed the case. so, they prolong their denial even though, every single hour and day shows more and more that their position is simply, for lack of a better word, preposterous.

The T. Boone Pickens Approach

naked: ok, so, i believe i can sum up your thoughts by saying "put a high priority on energy efficiency". although i thought this was perhaps obvious, i realized my energy policy didn't explicitly mention *efficiency*. so, i updated it just now to do so. thanks for pointing out my omission.

freefall: agreed the glaciers are dirty. just like the ice core samples, you can see when the dirtiness began (with industrialization). did you ever stop to think where the dirt is coming from? my dad worked in pittsburg as a young man...said you could start the day off with a clean white shirt and tie and by the time you walked to and from work the shirt would be black. coal. gasoline and diesel exhaust. to say the melting of the glaciers and ice caps have no connection to the CO2 levels is simply an unscientific and inaccurate opinion.

2) well, we just disagree on this and i think the insurance claims are evidence that you are mistaken. perhaps you should look at the data a second time. the claims are on an exponential increase that, funny enough, follow the same exponential curve that the growth of CO2 in the atmosphere is following.

3) no one is saying there weren't droughts in the past (just like no one who believes in global warming thinks that winters will cease to exists). what we are saying is the *increase* in drought related problems. it's happening worldwide. there are over 1 billion people on the planet who rely on glacial run-off for a majority of their water. this runoff is in steep decline and is related to CO2 levels since it is the warming of the atmosphere that is causing the glaciers to receed.

4) so now we are going to try to weave music into a scientific discussion? funny. the glaciers and the ice caps are not located in cities, so i dont understand your point. are cities hotter because of the concrete, lack of forest, and increased burning of fosil fuels? well, of course. no argument here.

5) disagree and this is a well established and accepted scientific fact.

6) nothing like a broad international consensus to prove there must be a conspiracy...

7) i think you need to review GW's own words given in press conferences where the admission was finally pulled out of him. this was done in public, and widely reported in the papers. google it.

my last words on this subject, at least for now:

this year, the world will burn 31 billion barrels of oil, 6 billion tons of coal, and 100 trillion cubic ft of natural gas. the combustion of these fuels will produce 400 quadrillion BTUs and 30 billion tons of CO2. Scientists predict about 1/3 of this CO2 ends up in the oceans (forming a weak acid which is causing "ocean acidification" and is destroying reefs, among other critical ocean life), 1/4 is absorbed by the terrestial ecosystem, and the rest remains in the atmosphere. at this rate, within the next few decades, CO2 levels are expected to reach 550 ppm - twice the pre-industrial age levels. today, that arctic ice cap has shrunk by half since the 1950s. it is melting now at an annual rate roughly the size of west virginia. meantime china is building new coal powered plants at the rate of 4 a month. now, what would a person of average intelligence logical conclude from these facts?

The T. Boone Pickens Approach

asdf439: oops! that should have been 2 million barrels/day wrt COP. sorry about that. and i also apoligize for all the typos and quotation mark problems in my last post..not sure what that's about.

The T. Boone Pickens Approach

i'm back again due to all the great comments..well, some are anyway :) here goes:

longoil: yup, i'm surprised by buffet's lack of interest as well. he seems to be a genuine american with high integrity, and his partner charlie m. has made statements that lead me to believe they understand what is happening with oil and its ultimate impact on the country they supposedly love so much, not to mention their investments. who knows. i just scratch my head. Berkshire stock is down what, almost 20% this year? with all the consumer and housing market exposure in his portfolio, wouldn't you think buffet would want a strong middle class? at least he disagreed strongly with the tax cuts for the wealthy. he at least gets that, and he benefits more than anyone from that idiotic policy.

naked: thanks for the "education" on std. distribution curves, but it was unnecessary as i am fully aware of the mathematics. what i was *trying* to get you to do was explain what in the world you were *applying* it to as your previous post was not clear at all. and to be honest, i still am real fuzzy about what you are trying to say. i wish you would take each policy issue once at a time, state your position and why you disagree with me (i think you do, but you jumble your arguments together so much, it's hard to be sure) and let's have a clear and logical debate. in other words, if you focused and simplified each issue, perhaps we could make some headway here.

wizard: as you know, i totally agree with your comment that our addiction to foreign oil, and oil in general, is the greatest economic and national security issue facing the US today, and that the global climate change issue has actually hindered the transition away from oil (because of its ideological divisiveness).

optionsgirl: yet it was ronald reagan that ripped out the nice solar panels that jimmy carter had fashioned in the white house because he believed it was "wimpy". wrt your comments on nuclear, here is a bullet from my energy policy:

• Power sources that should be financially and otherwise encouraged by the government are nuclear, wind, and solar. We will need massive amounts of electricity from these sources, and we need to begin NOW. Nuclear plants require long lead times to license and build and we should have started yesterday.

wrt clean coal, here is another bullet from my energy policy:

• The US has huge coal reserves, but coal is dirty. We need more research done in the area of coal-to-liquids and coal gasification so that we can harness the energy in coal without destroying our environment in a cost effective manner. I don't know if that is possible, but surely we need to find out. Soon.

people say they can burn coal cleanly and "sequester the CO2 in the earth", but to be honest i don't understand this. how, exactly, are such huge amounts of CO2 "sequestered" in the earth? pumped into the ground? are they what big empty spaces in the earth to hold it? how does it not seep out? that said, my biggest fear about coal is what the mercury residues are doing to our water tables. cheney and crew CUT the emission levels on coal burning in the biggets setback to the environment in decades. unbelievable.

i have never said COP shouldn't reward its shareholders (like me).

obama certainly got a great response from the europeans. they are just obviously relieved that bush will be gone. that said, since mccain has changed his mind on just about every major policy issue where he differed with bush, and anyone who has read his past writings or listened to him sing "bomb bomb bomb, bomb bomb iran" realizes he is just as bad (or worse) a warmonger than bush. so, they would breathe a sigh of relief in europe until obama is actually in the white house. all that said, their very cool response to obama's talk of more european involvement in afghan and "the war on terror" means, to me, that the europeans aren't exactly buying into the "terror" program....

otto: what is more socialistic than bush's huge growth in the size of the US government, the takeover of a publicly traded wall street investment bank, the current nationization of the mortgage market, and the huge takeover of the financial system by paulsen/bernanke et all? that is why i keep saying that bush is NOT a "conservative" republican..he is a RADICAL and the biggest hypocrit in the history of the presidency. do you realize we have more private contractors in iraq than military personel? and, they are paid 3x or 4x of the soldiers, and have NO line of command into the military establishment?

freefall: i've been to germany a few times and i agree that their housing, and construction in general, is of a much higher quality than in the US. europe, in general, builds things to LAST. the US builds things for short term profits. that said, the reason germany and europe have energy policies are because, in general, most eurpoean countries dont have oil and nat gas resources (UK and Norway are the excpetions). that is why europeans have been working on energy issues in a much wiser way than the US. yet still, europe is reliant on russian and north african nat gas in a big way. but, they have tried to mitigate their reliance (and currency flows) on foreign oil and are a *much* more efficient energy community than is the US. thus, the strength in the euro and the weakness in the US dollar as oil prices have skyrocketed. expect for this to continue as long as the US does not adopt a long-term, comprehensive energy policy like this:

thefitzman.blogspot.co...

freefall: how about the observations of the ice caps melting, the glaciers in "glacier national park" melting, the increase in storms (the *huge* increase in insurance claims are factual proof of this), the huge increase in fires worldwide, the increase in drought areas worldwide, and the summer temperature records being set in many cities in the US since temperature records have been kept. how about those "observations" (never mind the scientific data that supports global warming, but i forget, we don't like science in the US anymore...). it is not "enlightening" to take ice core samples from thousands of years?? global climate change is acknowledged by the vast majority of credible scientist on the planet, and even george bush has finally been embarassed into admitting as much as he has been made to feel like an idiot sitting in talks on the matter when the data has been presented. the only country that is still even debating this issue is, you guessed it, the good ole USA, the country that used to be the technological leader of the world, but is now run by ideological idiots that use religion and rush limbaugh to convince the masses to follow their idiotic policies (note how much money rush is going to make this year while all his "followers" are losing their asses in the market, on the currency, and on inflation).

asdf439: if you are saying COP is a sell, well, i just disagree with that. any company that can produce close to 4 million billions of oil a day, is printing cash, pays a 2.3% dividend, and is the biggest natural gas producer in the US deserves, IMHO, a PE greater than 6. i believe you'll see this PE expand soon. if bush or israel goes into iran, you will see it pop overnight. bigtime. i suppose that is what makes a market....dumb and smart people, and you are right, time will tell which i am. meantime, i'll take my COP returns versus the S&P500 any old time...last 5 years...last 10 years...and the next 10 years.

The T. Boone Pickens Approach

naked: not sure what you are referring to with the standard distribution curve comment, but i surely dislike dropping rush limbaugh labels (liberal, conservative, red, blue...etc.) into the energy discussion, or any discussion for that matter. the polarization of Americans against one another is counterproductive and a big part of our problems. we cannot seem to address any problem adequately due to this polarization and nastiness. also not sure what you mean by "wimp scenario". please be more specific when criticizing me so i can address your concerns logically. i don't see how anyone can read my energy policy and think it is focused on the "selfish individual" as you describe it. please read it again, and make your criticisms more concise. for instance, my energy policy calls for building out the electrical distribution infrastructure, and this is needed whether we use solar, wind, or nuclear. how is this selfish individualism? my energy policy is not for my selfish interest, it is to keep the middle class strong and my country and economy from falling apart. you need to get a grip on your debating skills and stop the generalizations and focus on specifics. if you do, you may actually see the error in your conclusions.

Mmarrkk: unfortunately his policy to attack iraq WAS followed. so was his policy to regress the EPA clean air standards for coal electric generations plants, so now, instead of spewing less CO2 into the atmosphere and less mercury into our water tables, we are injecting MORE. also, the ethanol policy cheney favors (mandates) are causing food inflation that is averaging over 15%/year (!) while at the same time they keep the import tax on brazalian ethanol. it's all insane in my opinion. as far as financial hijinx, i agree both dems and reps are involved. what i can't stand is the "holier than thou" responses by republicans ideologues who, despite their savings, investments, and currency being absolutely pummelled during 8 years of george bush, continue to act as though they are the "party of the economy". nothing could be further from the truth.
tax cuts permanent during war time? wonderful, let's save everyone 5% on their taxes and then watch the currency drop 7 or 8% a year and inflation rise 10% a year. question: are you really getting ahead with this policy? answer: NO. meanwhile, the debt to your children and grandchildren will be a monkey on their backs. unless you are a multi-billionaire and involved in the profits of raping our US treasury, you'd be better off with a strong currency, low inflation, and a market that gives polsitive returns, instead of the negative returns of the bush years. think about it! your stock holdings are way up since bush got in office? what are you investing in, please be specific. you must be in commodities and US dollar hedges. as far as being in a world of hurt, look around, the US economy is in a world of hurt NOW.

Ensoph: wasn't aware of the GWI, thanks. agree with your conclusions on global warming. i still believe a much greater and more imminent threat than global warming will be the economic impact of worldwide oil supply not keeping up with worldwide oil demand. that should be the focus and impetus for getting off oil dependency and onto alternative energy sources and alternative transportation solutions. to not do so will be disastrous by 2015.

Jimbo: glad you compost and glad you ride a bike. i do the same. don't let Al Gore shape your thinking on global warming - why let one man colour your thoughts. just think for yourself and look at the facts objectively. meanwhile, keep doing what you are doing.

longoil: yes, exactly. what is even more interesting is the response i got from the Bill and Melinda Gates foundation, Warren Buffet, the Google guys, etc: they all politely declined or ignored my suggestion that they address the biggest threat to the US: worldwide oil supplies not keeping up with demand. i had to laugh yesterday when the Gates foundation teamed with Bloomberg for a $500 million (yes, 500 MILLION dollar) effort to tackling a non-smoking campaign. now, imagine what $500 million dollars worth of TV commercials, magazine ads, and investments in R&D could do to help the US government, media, and citizens understand the oil problem. an unbelievable mis-allocation of "charity" funds. i even explained to Gates and Buffets how almost every endeavor they are involved in with their foundation will fail if the energy problem isn't addressed. also, have you noticed, where is the support for Pickens? other than the CEO of Dow Chemical (whose speech on CNBC related to the inflationary impact of our oil dependency was classically great), who is coming out and supporting Pickens? Gates? Buffet? Google guys? i haven't heard any of them support Pickens. damn shame. wish i had their money, i'd be pouring it into the effort. when will people look at history and figure out, if your country goes down, so does the currency and so does all your savings and investments. the only way to keep your wealth is to keep your country (i.e. the middle class) strong. otherwise, you sink into anarchy and revolution. it can surely happen here and where we're headed if we don't address energy with a sane, long-term, comprehensive energy policy:

thefitzman.blogspot.co...

freefall51: yeah, or, we could stick with the bush/cheney energy policy and see oil go up another 5x, maybe $250 by the end of mccain's first four years. i can't wait! sounds wonderful. freefall is right. our economy, after 8 years of bush economic and energy policies, certainly is in a freefall, along with our currency, our stock markets, and inversely proportional to our inflation rates and debt and interest on our debt. yup, i sure want another 4 years of this outstanding economic performance! sign me up beavis! (NOT!)

The T. Boone Pickens Approach

Wow - look at all the comments! I love the passion and participation by you folks on Seeking Alpha. As always...I make the comment section "bi-directional", so, here goes:

baron, CT: thank you.

bill james: i'm all for electric powered rapid transit. if not for the auto and trucking lobbyists, we'd have high speed bullet trains on both coasts. i added more to my energy policy on this due to your feedback.

User: please name some of the "real scientist" you are referring to. please leave out the MIT hack that is on XOM's payroll.

franklin: agreed.

Mmarrkk: thanks. the term "money sucking hypcocrits" could also be applied to the so-called "conservative" republicans who have milked the US treasury dry the last 8 years on their fabricated war and financial hi-jinks. you have no problem with cheney or bush making money? at least we agree on COP.

Clearlead: agreed.

jlounsbury59: your issue #1 (referring to your website) is dead on. isn't it interesting to you guys that the people supposedly responsible for US economic policy (Bernanke, Paulsen) rarely speak about oil at all but are using the current economic "crisis" to increase their socialistic (i.e. governement) control over more and more of the financial system? it's very interesting to me that so-called "conservative" republicans don't see this huge socialization of the financial system that is staring them right in the kisser.

CT: heh heh heh

oldoil: yes, we do have a few hundred years of science to help us. as an editor of EE Times recently wrote, Joseph Fourier (famous engineer who the Fourier Transform is named after) discovered the greenhouse effect in 1824. Swedish scientist Svante Arrhenious published a paper on the relationship between CO2 adn atmospheric temperature back in 1896. everybody talks about the "new" science behind the global warming discussion when in fact, it's not that new at all. what is new is the injection of massive amounts of CO2 into the atmosphere by man in the last 100 years. truck drivers ARE slowing down on the highways to conserve diesel (trust me, i just drove to and from colorado). btw, wind is cost competitive today in many parts of the world, and if you take into account the effects of what Pickens calls the greatest transfer of wealth in history (falling US dollar, inflation, national security), wind is a steal - and it's clean!

schminke: we agree on action, disagree that $725/billion US dollar exports to countries we supposedly are fighting on the "war on terrorism" is not "crucial".

PK de Cville: i disagree with your insinuation that OPEC can control oil prices by pumping more oil. the Saudi's main oil reservoirs have hit peak oil and the depletion rates are averaging about 6%/year. they are currently building the biggest industrial project (and most expensive) in the history of the world to get at a reservoir miles inland which has heavy and sour crude they have to pump sea water hundreds of miles and then pump it into the ground to recover this crappy oil. why would they be doing this if plentiful, abundant, and cheap crude were available? it's the same answer as behind the tar sands in canada: it's because oil AIN'T abundant, cheap, and readily available any more. therein lies the crisis for a country like the US that imports 70% of its oil and whose economy is dependent on it. thus people like Pickens and myself trying to wake up the US government, media, and citizenry. does your handle imply you own a pink caddilac coup de ville? just curious.

cal: thanks, and agree with much you said especially build out of the train tracks. remember, it was GM that bought up all the eastern seaboard trains and tracks and demolished them to force people to buy their cars. now look at the state of GM. wrt nat gas for autos, i believe Pickens is focused on fleets right now, for which the cost refueling and tank storage infrastructure issues can be mitigated. it's a start. there is no silver bullet. the energy crisis is of such a magnitude we will need ALL small solutions together. Repubs and Dems are both to blame and both almost completely useless, and have been since JFK was assasinated. we lost our soul as a country on that one and haven't gotten it back since.

naked: i'm doing the best i can man. if i had the resources of boone pickens, you'd see me doing a helluva more, that much i can guarantee you. what are you doing about it?

jerry: i agree we should be building LNG terminals on both coasts and in the gulf. it's in my energy policy:
thefitzman.blogspot.co...

hypratt: the price of gasoline never went up inline with the price of oil - if it did, we'd be paying north of $7/gallon. wrt climate change, of course it happens all the time, but that is not what the debate is about. the debate is about wether or not man is impacting the normal cyclical Earth's climate change in a drastic fashion over the past 100 years by pumping in mega doses of CO2 into the atmosphere.

barnburner: agreed, cheney is pure evil.

Mmarrkk: your last comments on the "messiah"...have you not noticed what bush has done to your US dollars, your savings, and your tax monies? wake up man! jeez...i am sooo tired of bush fans acting like he has been good for their net worth and their private investments! he has been DEATH to them. wake the heck up man.

edcava: Pickens doesnt hide the fact that he has these investments, in fact, he pounds the table on them. what is wrong with making money AND doing something good for the country. it's like the gore argument about his plane's CO2 output or whatever. it's like people can't see the forest for the trees.

Mmarrkk: yeah, and their energy plan was so good that oil went up 5x during bush's administration. so much for strategy. the problem was iraq: they took millions of barrels off the market at the same time china was ramping up imports bigtime. then, the speculators put a "geo-political" risk premium on oil due to US militarism. wait until israel of the US goes into iran if you want to see real fireworks. that will make iraq look like a day at disneyland....

cswalker: never thought of that before, thanks.

CT: i hope your optimistic view holds...but it is way too early to say we have met this challenge. i think it's a real horserace...time will tell. so far, US energy policy is a disaster and other than Pickens, i see few signs that people out there "get it", which is simply amazing when one considers the oil war, oil at $125, US dollar dropping like a rock, S&P dropping like a rock, etc. etc.

johns: i expect the oil wars will move into both poles at some point, it won't just be china...it will be russia, canada, and the good old USA.

naked: we need an electric car and electrical infrastructure in order for that to happen. i'm all for it..but it takes time...and not everyone can buy an electric car solution the day they go to market.

johnsgordon: agree with that statement. it's like when people say "boy, good thing gore didn't win" i immediately think yeah, boy, the markets, the economy, and the US dollar have done simply GREAT under bush (not!). it's like people have ideological blinders on. i personally don't know how US fiscal, foreign, and domestic policies could have been more screwed up than what bush has done if a president had TRIED to create worse policies. which the cynic in me asks the question: perhaps it ALL has been on purpose??

bot feeder: agree that target is not realizable. he gets over enthusiastic at times, which is one reason he is so divisive. the pickens approach will have a better chance.

bot feeder: agreed that technology is key. that's why i wish we had more money going to engineers and research than in the money sink-hole of iraq.

Oil Majors vs. Drillers: The Battle for Profits

I agree with you that the energy services sector is probably the single best investment theme going forward. That said, your article implies that the oil majors are not delivering record profits - yet they are. COP, XOM, and CVX are all delivering on the bottom line. I don't think energy investors can afford to ignore oil producers that deliver anywhere from 2 to 4 million barrels a day to the market in an environment where worldwide oil supply won't keep up with worldwide oil demand. The profits on the barrels of oil and BOE of nat gas they produce dwarf the refining margins issue. Just view COP's recent stellar earnings report as an example. Why should the oil majors produce oil "full tilt" when they can sell it in a year or two for much more than they can today?

An Energy Policy that Makes Cents (and Sense)

Love the responses....I wish there was a way to get everyone who responded to this article in a room for a month to thrash around all the topics and publish an "Energy Policy" paper. It would be better than anything the government has ever produced.

JimG: You are, of course, absolutely correct in pointing out the geothermal omission, and I thank you for reminding me. Geothermal has huge potential, and although many of the known sources are in somewhat remote areas, what should be taking place by private and government geologists is a detailed study of the Earth to find those places where geothermal can most economically be utilized. It's clean, and it's soooo good.

User 134716: like your comments wrt nuclear energy being used to create the steam for the canadian tar sands. that said, the water to cool the reactor will, i suppose, need to come from the same river that is already being milked dry to process the sands, so i don't know if this model will work up there. worth investigating though.

With respect to your 1st and 2nd peak oil theories, be sure you are taking into account the existing decline rates. Prudoe Bay, the North Sea, and, it is thought, several of the biggest reservoirs in Saudi Arabia are now on the decline curve. Some as much as 7-9% a year, although some only 4% declines (with massive drilling efforts). Yes, it is true that Iraq has much greater potential, which is exactly why the US has boys dying there. Anyone who thinks it is about "democracy" or WMD needs their heads examined. One thing about Iraq that alot of people don't know is that much, even most, of the oil there exists under high pressure. That is, if you look at the wells in Saudia Arabia, you almost always see an electric motor there to pump. In many Iraqi fields, you merely stick a straw into the earth and the oil comes out of its own accord. Iraq is therefore the cheapest in terms of production costs. With respect to the newly found elephant fields (Chevron in the gulf, PBR offshore Brazil), yes, they are huge fields. However, Chevron's is in 7000 ft of water, and 20,000 feet further through the ground, some of it very hard rock). This is more than 5 miles which will have to be drilled from a point in the gulf many miles from shore, which will require tankers to transport. Further, it is the opinion of many geologist that this field is not one big reservoir, but instead, many smaller reservoirs - meaning each will need to be drilled, and we now that just one being drilled is a huge challenge. Earliest production is scheduled for 2013, and will be *expensive*. In the meantime, the decline rates of the existing fields continues. I don't know as much about the Brazilian field, but my guess is that it's not alot different in terms of challenges, but whether is it one big reservoir will make a big difference. Regardless, you must agree that the number of "elephant" discoveries has certainly slowed down in the last three decades, and that existing "elephant" fields are mostly in decline (with a few exceptions). So, I am not sure I agree with your two peak theory. I do believe that worldwide demand will, at some point in the near future exceed the 85 million BPD we currently get, but, I must agree with Jim Mulva, CEO of Conoco Philips, when he recently stated that he thinks man will most likely not exceed 100 million BPD production. With that in mind, and a quick look of the EIA's estimate of 150 million BPD demand target in the not too distant future, and you can see why I am concerned. I'd rather take the conservative approach and plan for the possibility that my analysis is correct, as to do otherwise, and be wrong, would be disastrous economically and, therefore, socially.

THANKS to everyone for their comments. I read them all, even if I did not respond to each individually. You guys give me hope for the future!

Best regards,

Mike (the author).

An Energy Policy that Makes Cents (and Sense)

I am most happy to see the intelligent response and the bandwidth all you commentators contributed to my "Energy Policy" article. It gives me hope that if we can just get the government to ACT the will of the people will support the policies (assuming they are intelligent).

I was told by a good friend recently that I am the most "confrontational" person she knows. I accept this, and can only blame my engineering background for making me a stickler for details and my attempts to get things "right". That said, I am trying to be a better person, and not make things debate personal. In that spirit, I feel the need to respond to some of the comments on my article:

Virtual Optics: I am aware of coal gasification success, in particular the work that Sasol (SSL) is doing. I am concerned that the process is perhaps not as clean as you appear to believe it is. My understanding is that there was a similar effort under way here in the states and it was recently shuttled due to cost, water, and environmental concerns. I am not an authority in this area, which is why I didn't go into more detail other than to say "more research" since the US does have such large coal reserves.

GH: I am aware taking coal out of the ground is environmentally harmful. The problem I have is that the scope and magnitude of replacing over 20 million barrels of oil a day is so huge, and we have neglected the problem for so long, until it is now an immenent crisis, that we have to find a way to use our biggest energy assest (coal) in the cleanest way possible. I would LOVE to rely on only clean renewables, however, a back of the envelope calculation proves this utopian goal as completely impossible in the short term. I also take issue with your stance on nuclear power, for some of the same reasons. France is a good argument against your comments. Although everyone has alot to learn, I appreciate you letting me know that I do as well.

Mr Hurwitz: sustainability definitely deserved mention, and all I can say is "I forgot" to add it, and I agree with you. Aaron Wissner, whom I met after the WSJ article on him, is a pioneer in this area. See:
sustainabilityconferen...

widicusf: wrt your comments on natural gas, I respectfully disagree with you. Natural gas is indispensible! I would go further and suggest the US accelerate our LNG potential. Just because Russia and Iran control 51% (your number) of nat gas reserves surely cannot be an argument that we don't make use of what we have, and the huge reserves in Alaska and Canada. After all, that is my rationale for building the pipeline I suggested in the article.

vboring: wrt incentives, I respectfully disagree. The tax credits currently in place are responsible for what progress we are making on wind and solar deployment. Many companies doing work in this area are on record now saying if the 2008 tax credits are stopped by Congress, they will stop further deployment.

hotdoggy: plz see above comments wrt your nuclear issue.

RMax and others: on population control, I should have touched on the issue. As a human being, I would be opposed to enforcement of any restrictive policy. That said, in terms of education and potential tax penalties, I would be supportive.

THofler: couldn't agree more on your diesels comments. The tax incentives I recommended sure certainly be valid for these. That said, it shows how behind the US is in this area when manufacturers don't even bring these solutions to US markets.

ariesl: One of my bullets was conservation, and I proposed guidelines by the government and utility providers. Perhaps I should have gone into more detail, but it is such a no-brainer to me that I skipped over it. Of course, I agree with your comments.

Mr. Steenblik: You might have misunderstood me. I don't want the DOE to get taxpayer money. I want private industry and citizens to get the tax incentives. The DOE Is part of the problem here along with the EIA.

Marol: wrt your comments on the survival of the planet, of course I agree that the "survival of the planet" is in everyone's best interest. That said, a world that slips into economic chaos due to the neglect of the impact of peak oil will not be a very pleasant place to be, in my opinion. A clean planet where wars are being fought over oil and food is an interesting concept with which I would disagree with. I AM an environmentalist, afterall, I love my fly fishing and I like to drink clean water and breath clean air. It is incorrect to suppose my attempts at addressing peak oil issues mean that I am opposed to a clean environment. To not use nuclear energy is to put more of the "solution" on the back of coal, which is the single biggest source of the environmental problems we have today. I used to be against nuclear as well. More look at the magnitude of the energy gap left by peak oil convinced me that nuclear is a must. I am all for individual energy frugality, which is why I want "peak oil" on every American's lips, and for the government to lead in the education of our citizens. I live this way in my personal life. Regardless, we are all going to suffer a decline in our standard of living with respect to energy usage as the price continues to escalate. My suggested solutions to deal with peak oil are not to maintain our "luxurious" ways, is it to prevent a complete collapse of our economy which would lead us all into the abyss. Being a "pure environmentalist" without regards to economic realities is "pure folly." The two must be balanced and we must be realist and do the best we can to make intelligent tradeoffs. Please give me credit for pushing wind and solar.