Thursday, April 27, 2006

Wherein I rip The Economist a new one

So the Economist comes out with this article, basically stating that oil won't run out anytime soon, and that everything is just hunky-dory. It's one of the most fantasy-fueled pieces I've seen in a while--just read the whole howler for yourselves; it's not worth quoting.

My response is detailed below (and I'll just love seeing Jerome a Paris rip it to shreds as well, for the benefit of humanity):

The article leaves out five critically important points:

1) Global demand for oil is rising exponentially, especially as the economies of China and India develop. The exponential increases in demand that are projected over the next 30 years are the biggest story, and they are almost ignored in this article. This demand will also create geo-political conflicts as nuclear powers fight for the shrinking percentages of the oil pie.

2) Heavy oil and shale oil is always there. So is the ability (unmentioned in the article) to process coal--of which there is absolutely no shortage at all--into oil through a complex process that would cost $50 per barrel of oil. The big question, of course, is "at what cost, and is it worth it?" The price of airline fuel is already making running an airline business prohibitive, and gasoline is already preposterously subsidized. The writers of the article blow this off, claiming that price controls and global market dynamics will fix the problem by prioritizing the ability to trade oil. It will not be that easy, by a long shot. There will be major economic convulsions, leading to the nationalization of airlines and oil industries worldwide. Shale oil, for instance, costs much more to produce than any company would ever gain by making it; it will take even heavier subsidies to make it happen--and nationalization in other cases. The writers of the article claim that better technology will simply save the day to make it easier, but that too is unlikely to take place in time for it to matter.

3) Estimates of the amount of oil remaining in Middle-Eastern oil fields are routinely heavily exaggerated by the nations themselves in their reporting, and by the oil companies themselves looking to receive government subsidies for exploration in these areas. Most credible articles mention this fact in any discussion of, say, the Bhawar fields, where the writers of the article cheerily repeat the estimates provided the Saudi and other governments, which are highly unreliable.

4) Ignored is what is called by many in the industry "Protection Subsidies": the amount of money the U.S. spends on military to secure the oil fields. Most of the oil--even the "dirty" oil--is still in the Middle East. Bin Laden is the direct result of our attempts to keep Saudi Arabian oil cheap. The Iraq War is another example of the loss of blood and treasure to secure regional oil resources. The coming war with Iran is yet another. Then there are the dictators of Uzbekistan and Kazakhstan we have to deal with to get the Caspian oil, eventually. Then there are the dictatorships and sectarian conflicts of sub-saharan africa, where a lot of the oil is. Most of the oil is South America is already galvanized, through Chavez in Venezuela (whom we assassinate, no doubt, in addition to our other massive crimes against goodness and humanity) and the FARC in Colombia, against the U.S. and rightfully so, given the travesty of our actions there. How much further price in the loss of blood and treasure and world status shall we pay the keep the oil flowing? This goes utterly unmentioned in the article.

5) Global warming or climate change, and environmental impacts are unmentioned. Extracting "dirty" oil like shale oil is extraordinarily detrimental to the surrounding environment, as well as expensive. Meanwhile, global warming IS a HUGE issue, and will certainly have more impact on world civilizations that terrorism ever did or ever will. The cost of continuing to burn fossil fuels due to increased climate change in the form of hurricanes, floods, droughts, tornadoes, rising sea levels, crop damage, glacier disappearance, and biomass loss (plankton death, for instance, which is already a concern would be a MAJOR problem), will be in the trillions and trillions of dollars worldwide. And if the Atlantic conveyor belt shuts down, all hell will literally break loose.

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So, the article underestimates demand, overestimates supply, underestimates the pain of extracting dirty oil, overestimates the promise of new extraction technologies, underestimates the cost of keeping the supplies secure, and drastically underestimates the cost of continuing to burn fossil fuels.

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