Submitted by Jim Quinn of The Burning Platform
There Are No Good Outcomes
The political class and their mouthpieces in the corporate controlled
mainstream media are desperately trying to spin the oil price surge as a
temporary inconvenience that will not derail their phony recovery
story. Brent crude closed at $116 per barrel yesterday. West Texas crude
closed at $104 per barrel. Unleaded gas has risen by 22% in the last
month and 60% since September 1, 2010. I’m sure this slight increase
hasn’t impacted Ben Bernanke or Lloyd Blankfein. Their limo drivers just
charge it to their unlimited expense accounts. Joe Sixpack, driving his
15 mpg Dodge RAM pickup, is now forking over an extra $1,200 per year
in gas expenditures, not to mention more for everything impacted by oil
such as food, utilities, and anything transported to their local
Wal-Mart by truck (everything). Luckily, the Federal Reserve and crooked
politicians only care about their comrades in the top 1% elitist
society, for whom oil is an investment, not an expense.
The “experts” speak as if they know what will happen, even
though they never saw the rebellions coming in Tunisia, Egypt or Libya.
They assure the masses that Libya doesn’t really have an impact on U.S.
oil supply. It’s as if these shills never took Econ 101 in college.
World oil demand is 88 million barrels per day. Oil supply is 88 million
barrels per day. If 1 million barrels of oil supply are taken off-line,
it doesn’t matter that the U.S. doesn’t get their oil from Libya. The
Italians need their oil. Do the talking heads understand that oil is
fungible? The supplier will ship the oil to the highest bidder.
Presto!!! – $116 a barrel oil.
With Friends Like This, Who Needs Enemies
Let’s assess the probability of things getting better in the near,
medium, long term or ever term. Take a gander at the chart below. These
countries account for 29% of the daily world oil supply. Does it strike
you as a list of stable countries with happy populations of employed
young men? Egypt, Libya, Yemen, Syria and Iran have already experienced
revolution or are on the verge of revolution. Algeria is dead man
walking. The Saudi royal family is trying to buy off the masses to stay
in power. The revolution genie is out of the bottle. It can’t be put
back. Mix 40% unemployment, with millions of young men, no hope, and
some Muslim fundamentalism and you’ve got yourself an out of control
situation. No amount of public relations spin will create a positive
outcome for the United States. The existing world order of despots,
kings, and military juntas was just fine for Washington DC. They poured
hundreds of billions of “aid”, tanks, helicopters and missiles to these
“freedom fighter” despots who diverted the billions to their Swiss bank
accounts and fell into line with U.S. policy. No matter who takes power
when these revolutions succeed in toppling our puppets, the new regimes
will not be friendlier toward America. And they still have the oil.
|Country||Reserves (bil barrels)||Production Per Day|
One look at the chart of self reported world oil reserves paints a
picture of woe for the United States. Countries in the tinderbox of the
Middle East and Africa control 65% of the world’s oil reserves. Saudi
Arabia controls 20%, Iran and Iraq control 11% each, Venezuela controls
7%, Russia 5%, and Libya 3%. So, countries that can barely stomach our
existence, hate us, or just despise us, control 57% of the world’s
remaining oil. Sounds like a recipe for lower oil prices in the future.
The two countries on our border are the only dependable suppliers for
the U.S. Canada controls 13% of the world oil reserves, mostly in its
tar sands. Mexico controls just over 1% of the world’s oil reserves, but
supplies 13% of the U.S. daily oil supply.
Drill, Baby, Drill
Now for a reality check on the “Drill Baby Drill” propagandists like
Larry Kudlow and the other dishonest Republican shills. The United
States controls a full 1.58% of the remaining oil reserves in the world.
We have 21.3 billion barrels of reserves versus 264 billion barrels in
Saudi Arabia. We are currently producing 9 million barrels per day. At
that production rate, the U.S. will deplete its proven reserves in the
next 6 to 10 years. New discoveries will not be able to keep up with
depletion of existing wells. The good news just keeps coming. Mexico’s
oil production has been dependent upon one giant oil field since 1976.
The Cantarell oil field produced 2.1 million barrels per day in 2003 at
its peak. It is currently producing 464,000 barrels per day. Peak oil
has arrived in Mexico. By 2015, the country that currently supplies 13%
of our daily oil supply will become a net importer of oil. Drill Baby
Based upon the monthly import data below from the IEA, it would
appear that, to paraphrase Chief Brody in Jaws, we’re going to need more
corn. As the Obama administration operates in denial of these simple
facts, they will continue to push ethanol and Chevy Volts to save us
from dirty oil. We are already diverting 40% of our corn crop to the
ethanol boondoggle. I’m sure that has nothing to do with the 98%
increase in corn prices in the last year. Maybe tax credits for solar
panels on SUVs and rubber band propeller cars will save the day.
We know for a fact that Mexico’s 1.2 million barrels per day will
evaporate in the next few years. But, at least we have that solid
dependable 2.7 million barrels per day (30% of our daily imports) from
those stable bastions of democracy Nigeria, Venezuela, Iraq, Angola, and
Algeria. Makes you want to go out and buy a Hummer. The storyline being
sold to the American people is that there is no need to worry. Saudi
Arabia will step to the plate and make up for any shortfalls throughout
the world. Just one problem. Saudi Arabia is lying about their reserves
and their ability to increase production. They’d fit in very well in
Congress and on Wall Street.
|Crude Oil Imports (Top 15 Countries)
(Thousand Barrels per Day)
|Country||Dec-10||Nov-10||YTD 2010||Dec-09||YTD 2009|
Lies, Obfuscation, Misinformation & Denial
The late Matt Simmons made the strong case In his book Twilight in the Desert that
Saudi Arabia has been lying about their reserves for years. Documents
released by Wikileaks give support to this contention. Cables from the
U.S. Embassy in Riyadh , released by WikiLeaks, urge Washington to take
seriously a warning from senior Saudi government oil executive Sadad
al-Husseini, a geologist and former head of exploration at the Saudi oil
monopoly Aramco, that the kingdom’s crude oil reserves may have been
overstated by as much as 300bn barrels – nearly 40%.
The UK Guardian reported:
According to the cables, which date
between 2007-09, Husseini said Saudi Arabia might reach an output of 12m
barrels a day in 10 years but before then – possibly as early as 2012 –
global oil production would have hit its highest point. This crunch
point is known as “peak oil”.
Husseini said that at that point Aramco
would not be able to stop the rise of global oil prices because the
Saudi energy industry had overstated its recoverable reserves to spur
foreign investment. He argued that Aramco had badly underestimated the
time needed to bring new oil on tap.
One cable said: “According to
al-Husseini, the crux of the issue is twofold. First, it is possible
that Saudi reserves are not as bountiful as sometimes described, and the
timeline for their production not as unrestrained as Aramco and energy
optimists would like to portray.”
The US consul then told Washington:
“While al-Husseini fundamentally contradicts the Aramco company line, he
is no doomsday theorist. His pedigree, experience and outlook demand
that his predictions be thoughtfully considered.”
A fourth cable, in October 2009,
claimed that escalating electricity demand by Saudi Arabia may further
constrain Saudi oil exports. “Demand [for electricity] is expected to
grow 10% a year over the next decade as a result of population and
economic growth. As a result it will need to double its generation
capacity to 68,000MW in 2018,” it said.
It also reported major project delays
and accidents as “evidence that the Saudi Aramco is having to run harder
to stay in place – to replace the decline in existing production.”
While fears of premature “peak oil” and Saudi production problems had
been expressed before, no US official has come close to saying this in
The overstatement of reserves by Saudi
Arabia and most of the OPEC countries should be abundantly clear to
anyone with a smattering of critical thinking skills. This eliminates
just about everyone on CNBC or Fox News. Essentially, the self reported,
unaudited declared oil reserves from OPEC members are a fraud.
Production quotas for each member of OPEC are dependent upon their oil
reserve amount. When this was instituted in the early 1980s, shockingly
OPEC countries miraculously added nearly 300 billion barrels to proven
reserves in a six year period with NO NEW DISCOVERIES of oil. The chart
below shows the unexplained jumps in reserves in red. Do you honestly
believe any self reported number from Iran or Venezuela? Dr. Ali Samsam
Bakhtiari, a former senior expert of the National Iranian Oil Company,
has estimated that Iran, Iraq, Kuwait, Saudi Arabia and the United Arab
Emirates have overstated reserves by a combined 320–390 billion barrels
and has said, “As for Iran, the usually accepted official 132 billion
barrels is almost one hundred billion over any realistic estimate.”
Using some common sense, someone might ask,
“How could Saudi Arabia’s oil reserves remain above 260 million for the
last 22 years despite pumping over 60 billion barrels during this time
frame, and not making any major new discoveries?” Maybe their
statisticians did their training at Goldman Sachs or the Federal
Reserve. The monster Saudi oil fields are over 40 years old. They will
deplete. Oil is finite. They will not refill abiotically like some
crackpots contend. Saudi Arabia’s production peaked in 2005 and it has
been unable to reach that level since. The spin sheiks in Riyadh and
spin doctors in Washington DC cannot spin oil out of sand. Peak oil is
about to choke the American way of life.
|Declared reserves of major Opec Producers (billion of barrels)|
|BP Statistical Review – June 2009|
The denial, accusations and misinformation have already begun.
Congressional hearings will be called to blame Big Oil and the dreaded
speculators. Americans always need a bogeyman to blame for their
mindless decisions and willingness to be led to slaughter by corrupt
politicians. Big oil companies do benefit from higher oil prices. Big
oil companies spend millions buying off Congressmen. Big oil
companies cut corners, ignore safety procedures, and seek profits by any
means possible. But, they do not control the oil. Nations control the
oil. Many of these nations are led by lying, corrupt, evil despots. That
is a fact. Blustering moronic Congressmen going after oil executives
and phantom speculators is just a sideshow. It will divert the
non-thinking masses from the truth that our leaders haven’t allowed a
refinery or nuclear power plant to be built since 1977. These leaders
have promoted and subsidized corn based ethanol that requires more
energy to produce than it creates and has driven the cost of our food
sky high. We are more dependent on foreign oil than any time in our
The real speculators are the Americans who clog our highways every
morning driving monster SUVs, turbocharged sports cars, gas guzzling
minivans, and pickup trucks that make them feel like salt of the earth
tough guys despite living in their 6,000 square foot energy sucking
McMansions in suburban tracts 30 miles from their jobs, if they have
one. The ignorance of the average American car buyer knows no bounds.
The recent bounce back in auto sales was led by SUVs and pickups. The
green clean cars are nothing but hype and bullshit. GM expects to sell
about 10,000 Volts this year, and Nissan expects to sell about 25,000
Leafs in the United States, a piss in the ocean compared with the
millions of sport wagons and SUVs purchased by Americans annually.
Americans have the attention span of a gnat and are already dazed and
confused by the surge in gas prices to $3.50 per gallon.
When oil prices spiked to $147 barrel in 2008, Americans were
spending $467 billion per year for fuel. By early 2009, the collapse in
energy prices due to the worldwide recession reduced the annual
expenditure to $265 billion, freeing up over $200 billion for consumers
to spend on other items, pay down debt, or save. Expenditures for fuel
had already surged back to $400 billion before the recent spike in oil
prices. Next stop $500 billion. That should do wonders for the faux
economic recovery that has been touted by Obama and the MSM for the last
year. The years of denial, lies, indecision, bad decisions, and inertia
have left the country vulnerable and at the mercy of countries in far
off lands that despise our way of life.
There are no good outcomes, only bad, really bad, and catastrophic.
Take your pick. Could gas prices drop below $3.00 per gallon if the
world sinks back into recession? Yes. But it would only be momentary.
The easy to access supply is dwindling. The medium and long term
direction of gas at the pump is up. There is nothing that can be done in
the next five years to prevent significantly higher oil prices. A full
court press of realistic ideas like converting our truck fleets to
natural gas, a major effort to build nuclear power plants, more
drilling, greater use of wind, geothermal, and solar would take at least
a decade to have an impact. There is no consensus or resolve to
undertake such an effort. Therefore, Americans will suffer the
consequences. Be a good American and take advantage of GM’s no interest
for 7 years deal on their biggest baddest SUVs and buy two. What could