OilDaddy

Maxwell's Oil Analysis

As an oil field production engineer, oil banker, investment banker, venture capitalist and petroleum engineering consultant to major and independent oil and gas companies, insurance companies, banks and private investors over the past fifty years who left the oil fields in 1962 because of poor economics and a questionable future and as one who in 1969 accurately predicted the 1973 world oil supply shortages and in 1999 accurately predicted the 2003 world oil supply shortages with their accompanying two and three fold oil and natural gas price increases, I find it hilarious reading predictions by today's so-called energy experts calling for ridiculous future oil prices based upon a dying oil era.

These are the same "experts" who failed to see the forest for the trees when low, i.e., fifteen years' of $3/B average U.S. oil prices between 1958 and 1973 orchestrated by Congress using steadily rising imports (1.0 to 6.0MMBPD) of cheap foreign oil to stimulate U.S. and Japanese and SE Asia economic growth discouraged development of new U.S. oil supplies, destroyed the U.S. oil industry's oilfield infrastructure and froze OPEC oil supplies causing world oil demand and supply to come to balance, and failed again in 2001 to see that $15/B average oil prices between 1986-2001 orchestrated by the Group of Seven Industrial Nations using strategic oil reserves and false oil reserve and supply estimates by their public mouthpiece, the International Energy Agency, to spur industrialization of China and India so as to ease inflationary pressures in the industrial nations was utterly destroying the U.S. oil producing industry and decimating the International oil producing industry's infrastructures causing world oil supply and demand to come to balance setting off two and three fold price increases. So why anyone takes whatever they say seriously is a puzzle to me.

The world is suffering fifty years of blatantly illogical, academia generated, economic policies relying upon dirt-cheap energy with no allowance for the steadily rising inflationary costs of ensuring continued development of the cheap energy supplies. One such academia based economic genius defended destroying the U.S. oil industry to me with the statement that "Japan built its economy without having an oil industry, so the U.S. doesn't need one and, in addition, there's enough oil in the Middle East and the Caspian Sea Regions to supply the U.S. needs for the foreseeable future"! An excellent depiction of this type of reasoning that I have had for years is a cartoon panel starting with a very healthy cow with four utters and four milkers in panel one, a much less healthy cow with eight utters and eight milkers in panel two, an obviously emaciated cow with twelve utters and twelve milkers in panel three and a dead cow with the twelve milkers standing around scratching their heads and muttering to each other, "do you think we should have fed her?"

Now that the Russian, Chinese and Indian middle class societies are discovering the advantages of a petroleum driven economy, it won't be too much longer before they will produce the technicians needed to restore the once vibrant international oil industry's infrastructure back to health.

As for the U.S. oil industry's infrastructure, there exist many sizeable oil producing development opportunities available, as for example, the 30 billion barrels of oil in the ground in the Permian Basin of West Texas and the 20 billion barrels in the Los Angeles Basin of California that operators abandoned back in the mid-to late 1960's due to poor economics and the onslaught of environmental regulations, that could serve to help reconstruct a healthy oilfield infrastructure. However, the U.S. Congress is going to have to, first, get rid of their brain dead, college based, energy policy advisors, secondly, restore the economic incentives Congresses in the 1930's enacted to encourage private investments in energy and hard rock mineral development and thirdly, recognize that the oil and mineral industries are very capital intensive, long term committments requiring price stability. If the Congressional morons can guarantee major oil companies against losses to encourage the majors to enter and develop Russian oil fields, they ought to be able to do the same for the U.S.