2007 February 07 Wednesday
Oil Crisis Could Bring On World Recession
Sebastian has a piece in Vanity Fair on the threat that political instability poses to oil prices. If a rebel military organization in Nigeria called MEND knocked out all of Nigeria's oil production the price of oil could spike to $80 a barrel and go to $120 a barrel if this happened in combination with a terrorist attack on oil facilities in the Middle East.
Since Nigerian oil is classified as "light sweet crude," meaning that it requires very little refining, this makes it a particularly painful loss to the American market. Concurrently, in this scenario, a cold wave sweeping across the Northern Hemisphere boosts global demand by 800,000 barrels a day. Because global oil production is already functioning at close to maximum capacity (around 84 million barrels a day), small disruptions in supply shudder through the system very quickly. A net deficit of almost two million barrels a day is a significant shock to the market, and the price of a barrel of oil rapidly goes to more than $80.
The United States could absorb $80 oil almost indefinitely—people would drive less, for example, so demand would decline—but the country would find itself in an extremely vulnerable position. Not only does the American economy rely on access to vast amounts of cheap oil, but the American military—heavily mechanized and tactically dependent on air power—literally runs on oil. Eighty-dollar oil would mean that there was virtually no cushion in the world market and that any other disruption—a terrorist attack in Saudi Arabia, for example—would spike prices through the roof.
According to the Oil ShockWave panel, near-simultaneous terrorist attacks on oil infrastructure around the world could easily send prices to $120 a barrel, and those prices, if sustained for more than a few weeks, would cascade disastrously through the American economy.
Gasoline and heating oil would rise to nearly $5 a gallon, which would force the median American family to spend 16 percent of its income on gas and oil—more than double the current amount.
MEND has knocked out big pieces of Nigerian oil production running into the hundreds of thousands of barrels per day. This scenario is not out of the question. The article reports on how the US government might intervene militarily to get oil pumping again in event of big cuts in production due to rebel forces. I think the lesson we should take away from all this is that we should develop energy technologies that can replace oil and at low cost. Better batteries would let us use electric power for a substantial portion of all transportation. Cheap photovoltaics, cheaper nuclear power, wind, and geothermal could eliminate the need for fossil fuels for electric power generation. The sooner we start seriousy to end the era of fossil fuels the better off we'll be.
We should be drilling in the US for oil now. There is quite a bit of of the Eastern coast of the US from at least NJ to Florida and off the West coast too (opposition to this comes from the usual suspects. I don't know where the issue stands now in Congress. Once again, anything that might actually benefit this nation is held up by those assholes.) Cuba is looking to drill for oil for Christ's sake! Why should they do it and not the US? Will Danny Glover complain? Increase drilling in Alaska as well. That way we will not be dependent on oil from these dysfunctional nations. The sooner we build nuclear plants the better. Nuclear power will be clean, cheap and plentiful. If lefty enviros whine about nuclear power being bad for children, puppies and butterflies, tell them that the French do it, so it must be OK. The same goes for John Kerry. And more windmills off Cape Cod, right by the Kennedy compound and the rest of those liberal shits who have vacation homes up there. Energy independence will require sacrifices (but not from Nancy Pelosi apparently.) But before those plants come on line, we should mine more coal as well. Yes, coal is dirty, but the US is like the Middle East of coal. Maybe we could export it too. By exploiting the existing fossil fuels in the US we can mitigate any disruption from overseas supply. It will also provide good jobs for Americans instead of sending the money to muslims who will use the cash to build IEDs, RPGs, AKs and other stuff that will be used on our people. I don't know if the US would invade Nigeria if the oil supply was held up. We might, but I would bet on another African nation trying to seize those assets for itself with US support. Is anybody competent enough in that part of the world? Sorry about the rant, but this stuff could be done easily. But the leadership of this country for some reason refuses to do it and they are assholes for it.
The US should begin working NOW to end its dependence on oil imports from politically unstable areas, such as Saudi Arabia, Venezuela and Nigeria (which are the #3, 4 and 5 oil exporters to the US, after Canada and Mexico). About 56% of US petroleum consumption is imported, and this could be dramatically reduced over the next decade by the maximization of domestic production (Alaska, near-shore and outer continental shelf), modest conservation, alternative energy sources plus development of oil sands/shale. The known reserves in The Arctic National Wildlife Refuge alone are enough to replace the Saudi imports once they are fully brought on line. Al Gore could set a good example in this regard by giving up his private jet and 11,000 square foot home and traveling to Alaska by dog sled to live in an igloo. Maybe he could even win the Iditarod!
Another point to consider is that money used to pay for imports from these countries goes to support terrorism and religious fanaticism (Saudi Arabia), anti-American thuggery and Marxism (Venezuela), and gangsterism and corruption (Nigeria). If we had spent the money the war in Iraq is costing (over $170 billion per year) on promoting domestic production and alternative fuels research, we would be much better off today. Wouldn't it be nice to be able to laugh at these nations during the next oil crisis and tell them where they could stick their oil wells? Yet our political classes prattle on about trivial issues, assuring that the next oil price run-up will cause a severe recession. What idiocy!
Ned and Sal,
I agree. We should open up many more US oil fields to production. But we sould do that in parallel with a massive research program to advance the technologies and lower the costs non-fossil fuels energy sources.
The advantages of obsolescing oil:
1) Stop flow of money to the Middle East that funds Jihad, the spread of Islam, and the development of Muslims nukes.
2) Eliminate the need for the US Navy to keep open the Strait of Hormuz.
3) Make a cleaner environment. Less particulates, oxides of sulfur, mercury, etc pollution.
4) Lower costs. Cheaper energy means faster economic growth and higher living standards.
5) Improve the US balance of trade.
6) Avoid global warming problem.
The points you make are excellent, and I agree completely. But have you ever wondered why, if these facts are so obvious to us peasants, our political leaders always seem to ignore them? After all, the next oil crisis is likely to be a severe blow to the economy, and the money we send to these rogue states just subsidizes our enemies. Here's what I think. The Republicans are closely tied to the big oil companies, who have extensive foreign holdings and to whom alternative fuels are pure poison. The Democrats, on the other hand, have an important constituency in the wacko environmentalists, who oppose offshore drilling, Alaska drilling, nuclear power, all forms of combustion and who think the proper response to the next oil crisis is that we all ride bikes to work. The result? A perfect storm of political inaction.
May I suggest to Ned that the reason it doesnt seem to be obvious to our leaders is that they, most certainly the Bush administration(s) have been bought by the oil lobby. Ths isn't paranoia - there's ample evidence. It's a bit like AIPAC - just so deeply embedded at all leveels of power that it can take out any meaningful challenge - without appearing to. Only a real crisis, say oil at $150 a barrel while the majors post massive profits, or the US dragged into a (another!) disastrous war by the Isaelis, might force the public to awaken.
Its for real that oil production has declined a bit and the near future
the oil deposits will be exhausted.
There are three options that we could readily do to solve this
dwindling oil supply.
First is to use biofuels like biodiesel and E85 as an
alternative to oil.
Second is to patronize fuel efficient Hybrid Cars. Diesel hybrid is the
Third is to hasten the research and development of Fuels cells which is
being used in All Electric
These 3 measures are sure way to solve and eventually break free from