Awash With Oil

Awash With Oil
Vol: 21 Issue: 3 Friday, March 3, 2017

Back during the OPEC Crisis in the 1970’s we were forced to come to grips with a nightmare scenario nobody was prepared for.  The world was running out of oil.  We knew that it HAD to be true.  The laws of supply and demand confirmed it.

The price of a gallon of gas suddenly jumped from a quarter in 1970 to fifty cents by 1973 and by the end of the decade, topped a dollar a gallon.

At first, it was called the “OPEC Crisis”, and then the “Oil Crisis” until finally, some forward-looking environmentalist hit on the winning formula and the “Energy Crisis” was born.

The 1970’s energy crisis was ostensibly the result of peaking oil production in the major industrial nations, (US, Canada, Europe, etc) coupled with embargoes by the Arab oil-producing states as a consequence of Western support for Israel during the 1973 Yom Kippur war.

“Peak oil” describes the period when the maximum rate of oil production is reached, after which the rate of production enters “terminal decline” meaning all the oil has been drained from a particular oil field.

Peak oil was renamed the “energy crisis” as part of the effort to reduce Western dependence on oil and petroleum byproducts and to provide incentives for the development of alternative fuel sources we could switch to when the oil runs out.

That was the theory.  That we needed to come up with viable alternative sources of energy to run our gas-guzzling cars or soon we’d all be freezing to death because our electrical generating plants would be forced to shut down. 

“Why?” 
“Ummmm, lessee, er, AHA! Because they burn coal and coal is dirty.”  
“What does that have to do with peak oil?” 
“Well, it takes oil to get the coal to the electrical plants.” 
“That much?” 
“Next question.”

When Obama assumed the presidency in 2008 he did so on the promise that; “This was the moment when the rise of the oceans began to slow and our planet began to heal.” (Yes, he really said that!)

By this time, just about everybody who ever would believe in global warming and the energy crisis and peak oil and dirty coal and dangerous nuclear power and the efficacy of bio-fuel had peaked. 

John McCain and Sarah Palin lost the White House primarily over their contention that we could drill our way out of dependence on foreign oil, something that by then, conventional wisdom had sagely concluded was impossible.

It became one of those mind-numbing mantras that gets repeated over and over until it becomes popular conventional wisdom.  And as everyone knows, the label, ‘conventional wisdom’ is almost always a euphemism for something which is neither conventional nor wise.

During the OPEC Crisis, the US was 35% dependent on foreign oil.  Gas prices quadrupled in a decade and Jimmy Carter told us all to put on sweaters.

In 1981, as the oil shortage eased, the Democrats immediately voted to cut off access to offshore drilling.  Today, Obama’s domestic energy policies have America almost 70% dependent on foreign oil, mainly from unfriendly regimes.

To argue that the Democrats didn’t see this coming is like arguing they were startled by daylight at sunrise. They sold out the country’s best interests to advance their own best political interests. 

In 2008 Barack Obama came along with the winning strategy for solving the petroleum shortage.  Tax the Big Oil’s “windfall” profits.

Now that their policies started producing the results that have been predicted for decades, they started looking for ways to shift the blame to Big Oil and exonerate themselves.  Hence, the mindless mantra, “We can’t drill our way out of this mess.”  They had no other alternative.

To argue otherwise would raise the question of how we got in ‘this mess’ to begin with.

Assessment:

But then, something unexpected happened.  As the price of oil per barrel on the international market began to rise, the ‘windfall profits’ generated made the technology for alternative methods of extracting oil financially viable. 

Technologies for extracting the oil from shale or from oil sands got cheaper as we got better at it, and almost overnight, the whole equation changed.  Including shale oil and oil sands, the United States now sits on the largest proven oil reserves in the world.   

Larger than Saudi Arabia’s.  Larger than that of China.  Larger than Russia’s vast reserve field.  

Why has this happened?  Price signals work.  Oil has been costly for more than a decade.  This has spurred prospectors to look harder for unconventional fuels: oil and gas that lie deep under the sea, buried in shale beds or stuck in Canada’s vast oil sands.

A report filed in 2013 by Canada’s state-owned media claims that Australia’s Brisbane Energy may have discovered a massive shale oil source that may dwarf Canada’s Athabasca oil sands region in Northern Alberta.

And one last tidbit.  For the past couple of years, American oil producers have been retooling and refitting some of their Gulf Coast oil importing facilities as oil exporting facilities!

Remember when Barack Obama promised, “Under my plan, the price of energy will necessarily skyrocket.” (?)  

Obama’s plan was to make conventional energy sources so expensive that alternative energy sources would look comparatively cheap. 

Instead, it backfired on him, since it made alternative recovery of conventional energy sources cheap enough to be viable.  As Forbes concluded last year, “Peak Oil, Entirely Nonsense: As is Peak Gas.”

Finally, I found this report at oilprice.com that says that ISRAEL may well be home to the world’s THIRD largest reserve of shale oil, together with having one of the world’s largest proven natural gas fields.

Since the next largest producers like the US, China and Russia, are likely to be the major consumers of their own oil, the idea of Israel becoming the number one oil exporting nation in the world is a genuine probability.

What does it all mean? 

Memo to the Saudis: “Oil tastes terrible.  And you can’t drink gas!”

Memo to the Rest of Us: “The only thing more dangerous than oil-rich, bored Islamists are flat-broke, furious Islamists forced to compete with the Israelis.”

This Letter was written by Jack Kinsella on January 29, 2013

Featured Commentary: Israel – Don’t Go There ~Alf Cengia

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