Ok, so we've got 5 buck gas. 150 buck oil barrels. Lots of pain- but remember, it's short-lived. Sharp, pointed, excruciating to the bank account, but we'll get used to it. We've been here before, only much worse.
Few living today seem to recall the day in October 1973 when the Oil Embargo began. When gas not only went from about 32c a gallon to almost 60c a gallon (In the United States, the retail price of a gallon of gasoline rose from a national average of 38.5 cents in May 1973 to 55.1 cents in June 1974)- when you could find it. Days in lines. Lined up on the days you were allowed to GET gas. Rationing in many places. But- we got thru it. Cars then averaged about 8 miles to the gallon; the cost of gas, then, was the equivalent of nearly 3 bucks today. So it was even MORE painful then. There were NO compact cars to speak of, certainly none getting anywhere near 32 MPG. Hybrids and electrics weren't even a pipe dream then. From The History Channel:
1973: OPEC cuts production
The Arab-dominated Organization of Petroleum Exporting Countries (OPEC) agrees to cut oil exports by 5 percent until Israel withdraws from territories occupied in the Yom Kippur War. Failing to achieve that result, Saudi Arabia and several other nations cut oil production more dramatically. They imposed a total oil embargo against the United States and the Netherlands in retaliation for their military support of Israel. The embargo caused a major energy crisis in the United States and Europe, which included price gouging, gas shortages, and rationing. OPEC cut production several more times in the 1970s, and by 1980 the price of crude oil was 10 times what it had been in 1973.
Fast forward almost 10 years. Inflation was at 13% or more. The Carter years. House loans were at 18%. Credit cards were normally about 28% or higher- the only benefit of it was you could deduct that cost from taxes. Gas went up sharply- again. Cars were better- averaging about 15 mpg. Compacts like the Rabbit or the Accord were growing rapidly in popularity. Diesel was a great option- if you could find a decent car that had a diesel. Gasoline cost more then the equivalent of 3 bucks/gallon today. But we got thru this too.
After the jump, some rumination on a possible fix. One you may not like. Hate, even. But is it even possible? Thinkable?
Update: Subsunk weighs in with some very pertinent info- see it after the jump!
Now lets say you could fix this issue. Let's say you had a crystal ball- and it was telling you ANOTHER of these episodes was coming. Only it could be worse. 2 of the largest economies on the planet were growing- and demanding more oil and other resources. Oil that could not be pumped fast enough- and was controlled by a cartel that would shame DeBeers or the Columbian Cartegena coke groups. What if you could completely bypass that cartel and have your own, nearly inexhaustible supply of the stuff, and you could influence the price and availability?
You couldn't get it yourself- gov't regs and special interest groups prevented you from digging in your own yard. Even though you could potentially influence the price of oil enough thru adding into the supply perception that would drop or prevent raising prices upwards of 50% or more. So you had to go find a supply somewhere else. A LARGE supply. A cheaper supply. A more accessible supply. In the days of yore, you invaded a country and took its riches, or forced a negotiation to your advantage for the supply of whatever you wanted. Only these days, that type of action was frowned upon. Even if it meant your very survival.
Lets say that this scenario involved Iraq. That we now may have, by negotiation with the Oil Ministry after the OIF operation, sole supply access to the entire Iraqi load of oil. Saudi, Iran, Venezuela, Nigeria, all could collapse and we'd still have enough oil to pump and get access to for the next 200 years or more. No more OPEC. Libya can drop/increase its supply into the global supply all it wants- it won't affect us. OPEC can cease any time- we'll still get ours. And Iraq gets a permanent 'customer' as well as help stabilizing itself and returning to its former glory.
So was this correct? Was this a good idea in the LONG RUN? Have we prevented an even worse scenario 50 years from now?
There is a lot of
oil offshore. The American (and European) oil companies are pursuing
it, but the uncertainty is immense when you are talking about drilling
in the ocean, in some cases over 3000 feet down to the floor of the
ocean, then you still have to drill 10,000 to 20,000 feet through rock
to get to the oil. At those depths, there is no such thing as a diver
that can operate to handle things on the ocean floor. Everything is
done by Remotely Operated Vehicle (submersible robots). ROVs aren’t as
fast as a diver, and are still limited by what they can do at those
extreme depths. Plus building platforms that can go out and drill ain’t
cheap. At those depths, you drill from a floating spar or drill ship.
The company I work at designs those platforms. It is like building a
ship, and those cost several hundred million today. Hell, my current
project is building two platforms to sit on the bottom in 400 ft of
water off the coast of Brazil (in a field which was discovered about 3
yrs ago), using technology perfected in the 60s, and our engineering
bill alone is $25M. The contractor is going to spend another $100M just
to build it. The ship being refurbished to handle transporting the oil
is a year late right now and our company is being asked to take over
the engineering design portion of that effort too. We already are
managing the drilling rigs refurbishment (at a price of over $20M just
for the engineering) and the construction company trying to refurbish
them (since they were laid up in a field in the 80s when the price of
oil went bust ($20/barrel) and half the folks in Houston lost their
jobs and houses overnight. Don’t talk to me about some shitheads in San
Francisco losing their homes because of some evil mortgage company BS
when I know better. I don’t care about their stupid asses.) And
whatever price we charge, the oil company will pay it because there is
an acute shortage of drilling rigs, platforms, and personnel to design,
build, operate and maintain them. Drilling companies used to charge
$200K per day to drill for oil, but because of the shortage of drilling
rigs/ships for platforms and spars and deepwater drilling they are able
to charge and get $700K per day now. And the backlog on their drilling
platforms runs out the next 4 yrs at least.
There just isn’t enough technical capacity in the world today to drill, find the oil, pump it out and get it to a refinery to make it as cheap as it used to be. We are faced with a huge crunch of projects vs. personnel and equipment to get it out of the ground. The timelines to make it happen keep getting longer. It doesn’t take ten years, but it will take 5 yrs at least offshore, without significant incentive and more engineering/mechanical oriented personnel to do these things. Drilling on the beach (land, for you non squid types) is easier, depending on the characteristics of the oil to be found, and the number of rigs and personnel available, but even these are in horribly short supply. We are already drilling everywhere it is most likely to find be economically found. After all, only about 20-40% of the holes drilled find oil, even after all the surveying, testing, and prospecting.
I like the idea of an X Prize, but we need to face facts. There is no magic bullet that technology will provide to give us cheaper energy in the future. Battery technology is not rocket science or nuclear power. It is pretty simple and has been pretty well researched to death by Gould, National battery types, etc..... And that is what the electric car folks are looking at. Hybrids are great for gas mileage, but in 5 yrs replacing those batteries will kill their economics. It is like replacing the engine on your truck every 5 yrs at about the same cost. Tough for a guy who makes only $10/hr with his wife and two kids who only make $8/hr. Tough life and times ahead for a lot of folks.
Nuclear power could cut down on our electrical costs but do nothing to transport us around (except electric cars) and because they are so expensive to build and maintain it takes a long time to get them up and running, and they still aren’t as cheap as coal. Coal should be used for everyday electrical consumption. The utilities run coal and nukes wide open as long as their maintenance cycles will allow because they are far cheaper than natural gas and oil. Clean coal use is more expensive, but we have lots of fuel available (over 200 yrs at current rates). Using wood chips and other renewables is just not gonna cut it and still keep a tree in your backyard. Renewable my ass. Have you ever seen the outcry when some timber company wants to clear cut on property they own themselves? No problem in Georgia and the Carolinas because that is their bread and butter, but try doing it in California and Washington state. You could cut through an environmentalist chained to every tree. It is always keep my lights on but don’t you dare burn anything to do so. If we go to wood, the heat content is only half of what coal is, and so you have to burn twice as much to get the same electrical output. Rocky the Flying Squirrel better find a cardboard box to live in. Cause there won’t be a tree left standing in America. Try changing CO2 to oxygen without trees. It’ll take your breath away.
The laws of physics and economics are finite and non revocable. In order to burn something, the chemistry says it HAS to end up in CO2 and Water. No other possible outcomes generate as much energy, and if they don’t end up in CO2 and water, they end up with CO and some intermediate (and acid rain corrosive) element that requires more energy to get to its final stage of CO2 and water. So if high CO2 means the world is gonna heat up(not exactly something I subscribe to), then you better all invest in air conditioning stock. Try telling Grandma or your kids they can’t watch TV anymore if they want to be cool enough to survive and I guarantee you she’ll still want her TV. You’ll insist on paying her AC bill. And we’ll all have less electrical power available to do real work.
The only way for some relief is to drill now, everywhere, and work on technology to find something which we can use to generate power or make oil in the future. It isn’t likely to present itself and still allow billions of people to live like we live. So chaos is going to ensue. There will be fights over water before there are fights over oil, though. That’s in shorter supply on most continents. On second thought, invest in plenty of guns and ammo. You’re gonna need them.