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January 12, 2007
Oil Outlook
This is a really long piece by A. Jacksonian. He wrote this as a series of e-mail exchanges with me and I edited it making some minor corrections which A. Jacksonian has approved. It covers the outlook for oil production for the next 5 to 10 years. The short version: Iran and Venezuela will probably be dropping out of the oil market as producers. ====== The petroleum infrastructure of any Nation or company has multiple components for input, output and feedback. Economic, of course, is the main judge of the overall system, but not the only guide as to system health. The physical 'plant' component of pumps, pipes, pressure gauges, platforms, and then refineries, which are their own specialty, are critical to continued economic efficiency. That said the system is maintained by the actual people hired on to do the work and their skill base is reflected *into* the system itself. An individual, here or there at a low level, can do some OJT, but for the system to work as a whole, good management and training are essential. Economic feedback *into* this system then goes for pay, training, upkeep, exploration to replace depletion and increased demand, and keep output steady with a slow upward spiral to it. Overall the system is 'motion stable' with feedbacks to reduce wobble and instability. The numbers on the amount fed into this system, economically, will either establish/maintain stability or reduce stability. Boom/bust cyclicity is not wanted as sudden surges/declines means an unstable labor base and the physical plant suffers due to that. The servo, if operated under a steady load, but designed for a small slowly increasing load, is a good example. A flywheel spinning up far below its design tolerances but suffering uneven control and feedback are another. Sudden changes in load, electrical input and stress will each start to put strain on the overall system. If the system is designed for such strain, small amounts of it are acceptable. A petroleum infrastructure is like a mechanical watch in that regard: you need enough winding to ensure continued operation, but getting it actually 'cleaned' for maintenance once in a great while is also necessary. Otherwise the junk builds up, friction increases and no matter how much you wind it, the poor thing stops. Works right up to the last tick! The overall supply/demand and boom/bust cycle are inter-related, although the longer term trend analysis looking at reserve capacity points to a plateau in current existing supplies of oil as we have known it. Oil shale and oil sands, however, have reached a price point in which the improved technology has brought the extraction price down and the as the market price for oil has trended upwards over time. So, the 'easy to get to' first generation oil reserves are already starting to see replacement by oil sands production in Canada. And as those reserves dwarf anything in the Middle East, they have a longer-term price stabilizing component in them with the limiting factors being: capacity expansion and production capability. One of the early notes of mine on Canada commented on this and the impact this would have in actually capping actual prices at a ceiling when Middle Eastern oil starts to hit its first real stumbles. Chevron, as an example, in 2005 alone invested $70 billion in the oil infrastructure in Canada, mainly Alberta. Canada, itself, has an interesting system of being a welfare regime at the top end, but not having any say over local resources. The central-western provinces of Canada now have a negative unemployment rate and cannot get enough Canadians to relocate there to fill these jobs. Not just in the petro-industry, but across the board for services as well. These provinces are also getting fed up with subsidizing Quebec and a few other provinces, looking to get their money out of the oil revenue stream. Cheap gas, oil, and land have led to urban sprawl and decay, which it already had but is now spreading faster. Compress the US history between 1910 and 1960 without the sustainability of industry and you get an idea of the problems China will have. They are also getting this damned thing known as cheap telecom, which is starting to liquidize their social cohesion. Attempting to put a 'Great Firewall' in has proven that you need lots of folks to plug leaks and that some of those folks are none too trustworthy in that job. Even if that were done, the SMS cellphone capability has made distributed messages of pure text to be something easily done at nearly no cost burden at all. Add to that increasing storage capacity, processing power and cameras, and you suddenly have individuals who are their own file servers with autonomous wireless connectivity. Attempting to stop the wired internet has proven impossible *inside* China, as the low cost of computers and storage now makes redundant, off-site, fail-over possible. Pull down one server and two others will pick up at distributed locations. To end this China would have to get rid of *all* computational capability, including cellphones, which now serve as the wireless conduit into the world. To step forward they must let go, to let go is to invite disaster, to stay authoritarian invites overthrow, and to try and buy off the population just speeds the acceptance of modern digital technology which the State is not very adept at handling. My basic outlooks on energy independence for the US is in these following posts: Cross Posted at Power and Control
posted by Simon on 01.12.07 at 01:19 PM
Comments
den Beste, call your agent. Someone's channeling you, and you're not even dead yet! Aaron Davies · January 12, 2007 03:35 PM Not only must we legalize drugs, we must legalize the easily transportable drugs such as heroin and cocaine. In particular, legalizing soft drugs will be useless in this struggle. Joseph Hertzlinger · January 14, 2007 01:30 AM Post a comment
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Great blog, this A. Jacksonian!
Lots of food for thought. My first reaction? Dust off the Monroe Doctrine!
My second reaction?
Legalize drugs!