The Blame Game, or who will be first to finally admit it’s over…
Posted: April 16th, 2008 by: h2
These news items are extremely important to understand, because this is a clear indicator that the current group of industry supported politicians will not be the ones who finally begin to lead the world to any meaningful solution to the energy supply issue, or probably any other major issues facing us for that matter, especially climate change.
In fact, I am having stronger and stronger doubts that any US or British politician in the current political climate will lead anywhere that points away from enabling industry to try to squeeze out a few more quarters of profits before the inevitable happens.
This is not what real leadship looks like, but it is what we deserve for having glued our collective minds to the television screens for decades while politicians and industry have formed increasingly incestuous bonds, to a degree not seen since Soviet Russia or Nazi Germany.
Britain calls for OPEC to increase production:
Oil prices jumped to a new peak near $114 a barrel on Tuesday amid lingering supply worries and weakness in the U.S. dollar, deepening concern in world consumer nations that a spike in energy costs could cause severe economic damage.
Britain’s prime minister, Gordon Brown, on Tuesday called on OPEC members to boost production to counter rapidly rising oil prices, which have shot up 80 percent since a year ago, adding his voice to similar requests from the administration of U.S. President George W. Bush.
“We are not producing enough oil … and we can take collective action to persuade OPEC and others to get the oil price down,” Brown said in an interview on Sky Television.
Not a single word about the destruction of the US dollar by the US government/banking industry. Not a single word about the need to conserve more and more as global supplies begin to peak while demand is rising.
USA and Britain blame OPEC for high oil prices
“We are not producing enough oil … and we can take collective action to persuade OPEC and others to get the oil price down,” Brown said in an interview on Sky Television.
Bush has also repeatedly urged the Organization of the Petroleum Exporting Countries (OPEC) to supply more oil.
“I think politicians are trying to talk down the oil price because obviously it’s putting a squeeze on western economies,” said Richard Batty, investment director at Standard Life Investments.
THE BUCK STOPS HERE
Analysts say politicians are ignoring the influence the global economy, especially the dollar, is having on oil.
“The energy markets seem to be completely wrapped up in the dollar’s near-term prospects,” said MF Global Energy in its daily research note.
The dollar has fallen to record lows against the euro, dragged lower by fears about the U.S. economy.
A weak dollar tends to raise prices for commodities denominated in that currency. They become relatively cheap for non-dollar buyers and offer investors, such as pension funds, an inflation hedge.
“OPEC could increase production by 500,000 barrels per day tomorrow, but that would not necessarily stop pension funds from buying into commodities,” Jakob said
The World is Pumping it as fast as it can.
There is no spare capacity.
That’s why production is on a wavering plateau, now.
Now let’s look at reality for a bit. First, if you keep in mind the core points in Matthew Simmons’ great book, Twilight in the Desert (read it, don’t read about it), you’ll begin to understand that currently the only people who serious believe that OPEC has any signficant spare capacity are the politicians of the United States and Great Britain.
To think that Great Britain was once led by Winston Churchill…. how far the mighty are about to fall.
And the truth is…
Sadad I. Al-Husseini, an oil consultant and former executive at Aramco, Saudi Arabia’s national oil company, gave a particularly chilling assessment of the world’s oil outlook. The major oil-producing nations, he said, are inflating their oil reserves by as much as 300 billion barrels. These amount to hypothetical reserves that are “not delineated, not accessible and not available for production.”
A lot of production in the Middle East is from mature reservoirs, and the giant fields of the Persian Gulf region, he said, are 41% depleted.
Global oil and gas capacity is constrained by mature reservoirs and is facing a “15-year production plateau,” Mr. Husseini said. He predicted that supply shortages will continue to add $12 to the price of oil for every million barrels a day in additional demand. Global demand, now at some 85 million barrels a day, was on average 10 million barrels a day lower in 1999.
[…]
A top official at the Energy Department disputed OPEC’s claim that supply isn’t an immediate challenge. “We think the market still needs more barrels, as we look toward the next year or so,” said Guy Caruso, an administrator at the department’s Energy Information Administration. “The problem is we don’t have cushions,” in terms of spare production capacity and spare crude stocks, he said. “We have relatively low and declining inventories and a refining sector that’s finding it hard to get the crude it needs.”
The Wall Street Journal, October 31, 2007 (reprinted by RoyalDutchShellPLC.com )
You got that? The oil industry certainly does, even if the governments will not face up to this fact.
The refusal to understand that oil is now in the process of peaking in terms of global production is going to prove increasingly catastrophic if current first world leaders do not start to be honest about this stuff, and fast.
You can point to barely substantiated deep ocean finds in Brazilian waters all you want, those will do nothing more than pad the downhill slide of global oil production. The failure to be honest about this in especially the USA is especially hard to accept, given that the USA already peaked in oil production in 1970, exactly when Hubbert predicted it would!. And now the global production is in the process of peaking.
Sure a country can temporarily boost production, but if you read the Simmons book, you’ll start to understand that when you overproduce an oil field, the damage can be permanent, it’s not something you do just because your bigger customers are:
- Destroying the value of their currency, which is what OPEC generally is forced to sell their oil in. But not for much longer, let me assure you of that my friends.
- Consuming 25% of global production with 5% of population
- Refusing to even discuss CONSERVATION, which is the easiest, lowest hanging fruit to pick when you are facing rising oil and commodity prices
- Invading your members, and threatening others
Also, keep in mind that, despite what the media wants you to believe, most of the OPEC nations are run by extremely intelligent businessmen. They know, mostly, and many are even admitting, that production is plateaued, which means that prices are going to go up.
They also know that their only real resource is oil. So if you sell it cheap today, you have less to sell at a higher price tomorrow. That’s pretty basic economics. So demanding that your vendors / suppliers not follow the basic laws of economics you taught them at Harvard/Yale/Oxford etc, is pretty absurd. Naive, even. Definitely delusional.
So what these guys are actually saying is that they simply do not have a clue what to do.
The Reality of OPEC and the USA/Britain
But, let’s consider some real-politik here for a moment. The alliance of Great Britain and the USA is currently occupying one of the major OPEC producers in the mideast, Iraq after an unprovoked invasion. Do you seriously think any OPEC country doesn’t think it might be next one to go?
The USA continues to support Israel’s essentially genocidal policies towards the Palestinians, and indeed, supports the presence of what is, objectively speaking, the last European Colony in Africa/the Middle East.
To make matters even worse, the United States is continuously posturing and threatening with invasion or other forms of economic sanction two other key OPEC members, Venezuela and Iran, in fact, it’s currently probably only because the US military simply cannot handle any further failed invasions that the Bush group has not attempted an attack on Iran already. And OPEC knows this perfectly well.
“Why should OPEC try to lower prices? … Let America and Britain continue demanding,” Oil Minister Gholamhossein Nozari told reporters on the sidelines of a conference in Tehran when asked about the calls from consumers for OPEC to act.
[…]
Industry experts say many Western firms are increasingly reluctant to invest or expand work in Iran but say Asian firms including from China have been signing up to energy projects.
Reuters
And this behavior is supposed to make OPEC feel all warm and fuzzy towards the USA and it’s little lapdog, Great Britain? Give me a break. Do you know what hubris means? If you don’t, click the link, and you’ll see what I’m talking about.
[hubris means] exaggerated self pride, arrogance or self-confidence (overbearing pride), often resulting in fatal retribution.
Every act the USA has taken has been against its best interests, not for them. This is what happens when you elect blatant sociopaths whose primary aim is to destroy the government’s ability to function to office.
But this isn’t all. With demand rising and supplies at a plateau, Opec does not need to sell to the USA or Britain. China and India will be more than happy to buy their oil, and they won’t be threatening to invade them, or build huge military bases in them, or support countries that pretty much all OPEC members hate.
And, as if this were not bad enough, since most OPEC countries have been sending their best and brightest to the West’s best schools for decades, they have a very good sense of what the West really thinks, which is very simple, at least it is simple among the simplistic worldviews found in our current batch of neo-conservatives: what are those arabs doing with our oil?
They are, or should be, quite aware, that certain extremists who are currently very close to the top of the USA power structure, consider invasion and occupation to be totally legitimate strategies to get and keep control over mid-east oil supplies.
This is not how you generate positive trade relations.
Oil sold/bought in dollars while the dollar plummets
But this is not all. As if to see just how bad you can make the situation, the US government has allowed the ongoing destruction, ie devaluation (today: weakening to $1.5979 / Euro), of the US dollar, the currency oil is traded in. This means that all countries selling oil in dollars lose money, unless they dump the dollars immediately.
The dollar has dropped 15 percent against the euro since September as the Fed cut the target lending rate 3 percentage points to 2.25 percent to protect the U.S. economy from the collapse of the subprime-mortgage market.
Former Treasury Secretary Paul O’Neill said in an interview with Bloomberg Television that the “strong dollar” policy he and every other Treasury chief since 1995 has endorsed is “a vacuous notion.”
Bloomberg
It’s no wonder that key OPEC nations are talking about selling in either a basket of currencies, not to include the collapsing US dollar, or in the Euro or the Ruble.
That move is very close, and grows closer every day that the US continues to devalue the dollar to deal with the massive debt and financial crisis that are becoming the new norm in the United States and Britain, and many other first world nations.
The biggest failure in modern US history
When you want to see a definition of ‘failure’, this is it, on every level, every day, every move, this is failure to succeed policy goal after policy goal, and it’s a failure because the neo-cons have a near pathological hatred of all government, and would like nothing better than to utterly destroy the ability of the US government to function at all, while pulling the rest of the world into a never ending war to control resources.
This plan, sadly, is failing, and it’s failing miserably. And that’s no surprise, after all, the United States elected a total failure to the presidency, what else do you expect than failure in such a case?