Tower of Power - Only so much oil in the ground - YouTube
There's only so much oil on the ground
Sooner or later there won't be much around
Tell that to your kids while you driving downtown
That there's only so much oil on the ground
Sooner or later there won't be much around
Tell that to your kids while you driving downtown
That there's only so much oil on the ground
There’s only so much oil in the ground, so what is the Obama administration thinking with its new offshore oil program?
By ,
Once upon a time, “There’s Only So Much Oil in the Ground” was a popular song that could be heard on the radio. The year was 1974, and Tower of Power, an Oakland-based soul and funk band, was enjoying some commercial success. They made the year’s top 100 with “What is Hip?” In addition to the important topics of being young, hip, and falling in and out of love, they sang about the energy crisis. Following a brief OPEC oil embargo, the price of crude oil (in today’s dollars) jumped from $23 per barrel in 1973 to $41 in 1974. Everyone was thinking about the world’s finite and diminishing supplies of oil. As the song continued, “Sooner or later there won’t be much around.”
What have we learned in the decades since OPEC, Tower of Power, and others brought the oil crisis to our attention? Back then, the Nixon administration’s energy policy included a big push to open the outer continental shelf to offshore oil and gas production. In 2010, the Obama administration has announced plans to open more of the outer continental shelf to oil and gas production.
We’ve been there, done that. And it didn’t work. Despite plenty of drilling, U.S.crude oil production reached its all-time peak in 1970, and began to fall rapidly and steadily after 1985. By 2008, it was barely half of its 1970 level.
What was the Obama team thinking? This administration is full of people who are way too smart to believe that offshore drilling will supply any noticeable part of our long-term energy needs. In the overly clever mode of partisan triangulation — is there any other mode in Washington? — it smells like a concession designed to get a few Republican votes for a climate change bill. Oddly enough, our national policy is now to increase fossil fuel production in the hopes of winning support for reducing fossil fuel consumption.
We can learn a painful lesson from the sorry state of energy policy today — and it’s not just that the hypothetical-filibuster rule, allowing 41 senators to effortlessly stop a vote, prevents Congress from taking action on almost everything.
Reflecting on the fact that there’s only so much oil, some environmental advocates have adopted the “peak oil” theory: When the world as a whole passes the peak and production starts to fall (as it already has for the United States), the fast-growing scarcity of oil will create a deeper crisis, forcing us to change our ways. As Tower of Power said, “Soon enough the world will watch the wells run dry.”
Although there’s only so much conventional oil, there is a much larger amount of oil shale, tar sands, extra-heavy oil, and other geological formations from which oil and gas can be extracted — at the cost of vast environmental damage. When oil was readily available at low cost, it wasn’t worth the effort to destroy large areas of Alberta to extract oil from tar sands. With oil currently hovering around $70-$80 per barrel, however, northern Alberta is one of the hot new properties for oil companies.
Counting the oil that could be extracted from tar sands, Canada is second only to Saudi Arabia in oil reserves. Venezuela, which is rapidly running through its conventional oil, has gigantic amounts of very heavy, dirty oil, perhaps exceeding the Saudi reserves. The United States has large oil shale reserves, under the Colorado River basin, and other formations from which natural gas could be extracted — including a big one under upstate New York, Pennsylvania, and West Virginia. If industry is allowed to experience the joy of breaking rocks, along with the resulting air and water pollution, big chunks of the Western Hemisphere could be pulverized to produce more fuel.
Solving our energy problems, without a change in direction, will lead to increasingly costly and environmentally destructive production — either deep offshore, or deep in the rocks below existing communities and watersheds. We need a tax (or a fee resulting from an allowance system) on energy, to keep the cost to consumers high enough to encourage conservation, while holding the price for producers low enough to discourage the pursuit of the worst fossil fuel deposits.
And the real answer to our energy problems? As Tower of Power told us back in the day, “Alternate sources of power must be found.” It’s got a beat; you could dance to it.
Why is Obama Drilling? - FPIF
Of course, this was before the recent collapse in oil prices
- which has had an impact on the notion of 'peak oil':
Peak Oil Theory May Have Peaked - Right Side News
... as reported on this blog:
Futures Forum: Peak Oil as a concept is finished: "Now a huge amount of money and smart people are invested in replacing much energy production dependent on oil: This scares the oil producing countries and they start reducing the price of the oil to keep people consuming their product for longer."
It seems that the Saudis would like us to depend on their main export product for a little longer:
Saudi Arabia's Plan to Extend the Age of Oil - Bloomberg Business
Saudi Arabia Bets Price Plunge Will Add Years to the Oil Era | afr.com
This has more to do with power politics and the politics of power:
Civil War Strikes #OPEC #peakoil - thecherrycreeknews.com
How Iran's Rise Could Mean the End of Oil Kingdoms / Sputnik International
#Iran Nuclear Deal and Oil Investing - #peakoil - North Denver News
This is the view from the FT last month:
The oil world’s been full of speculation about the shift of strategy last year by Saudi Arabia which saw it keep the pumps running even as the price fell, turning an initial drop into a plunge.
There may be a simpler explanation for Saudi’s willingness to see prices slide than anattack on US shale or a “political plot” against regional rival Iran, though: a change in the Saudi view on peak oil.
The Saudis have two choices with their oil: sell it now, or sell it later.
If they think oil is running out, it is reasonable to think prices will keep rising in future – perhaps rising much faster than the returns they could earn by deploying the money elsewhere, particularly since they invest a lot of their excess foreign exchange in US Treasury bonds paying almost nothing. The logical thing to do is to keep as much oil in the ground as possible, pumping only enough to keep the global economy ticking over.
On the other hand, if peak oil is so much bunkum, at least for the foreseeable future, then it makes sense to pump a lot more oil. Worse, if peak oil is the opposite of the truth – that demand for oil might go into a long-term decline – then it makes sense to pump as much as possible as soon as possible, whatever the price, because it will only be worth less in future.
Not being a senior member of the Saudi royal family I don’t know the truth. Perhaps the Saudis did a secret deal with the US to hurt Russia. Perhaps they are trying to pressure the Russians to cut off Bashar al-Assad in Syria.
It is true that the simplest explanation isn’t always the best in the strife-torn Middle East. But new technologies are making it easier to access oil from shale, Brazilian pre-salt formations and Canadian oil sands, while global warming, ironically, is making the Arctic look like a potential new source of wells.
At the same time, human ingenuity has done what it always does when prices of one resource are very high: find ways to replace it with others. Electric cars have gone from an expensive toy to the edges of the mainstream, and demand for fuel efficiency made smaller cars a popular choice in the SUV-loving US once again.
Some Saudi comments suggest they are just fed up with being the swing producer, letting inefficient high-cost countries make money when they could be instead. But if the Saudis believed in peak oil, it doesn’t matter at all. If oil is running out, then the value of the Saudi fields goes up the more Russian or Venezuelan fields are depleted, no matter how inefficient their production.
Behind all the debates, a simple change of mindset is enough to explain why oil has plunged. If this is really the deeper explanation, then oil may well never see $100 a barrel again.
Related links:Why Saudi Arabia’s best bet may be to increase output – FT Alphaville
When the cartel bursts, Brent edition – FT Alphaville (Oct 27, 2014)
Is the end of the oil era nigh? – FT Alphaville (Mar 27, 2013)
It’s a super market price war! (in oil) – FT Alphaville
Is Saudi Arabia starting to panic? - FT Alphaville (Jan, 2013)
Saudi Arabia resorts to Jedi mindtricks – FT Alphaville (May, 2012)
When the cartel bursts, Brent edition – FT Alphaville (Oct 27, 2014)
Is the end of the oil era nigh? – FT Alphaville (Mar 27, 2013)
It’s a super market price war! (in oil) – FT Alphaville
Is Saudi Arabia starting to panic? - FT Alphaville (Jan, 2013)
Saudi Arabia resorts to Jedi mindtricks – FT Alphaville (May, 2012)
Saudi oil: Peak conspiracy | FT Alphaville
So, the Saudis won't be leaving it in the ground:
Futures Forum: Climate change: 'stranded assets' and 'unburnable oil' ...... or the pressures to leave oil and gas in the ground
But, to finish, the website 'Peak Oil Barrel' sees things rather differently:
Why we are at Peak Oil Right Now
In this life nothing is certain. Therefore I am not declaring, absolutely, that we are at peak oil, only that it is a near certainty. But I am putting my reputation on the line in making the claim that the period, September 2014 through August 2015 will be the year of Peak Oil. Below are my reasons for making this claim.
First of all, Peak Oil is not a theory. The claim that Peak Oil is a theory is more than a little absurd. Fossil hydrocarbons were created from buried alga millions of years ago and they are finite in quantity. And as long as we keep extracting them in the millions of barrels per day, it is only common sense that one day we will reach a point where their extraction starts to decline. In fact most countries where oil is extracted are already in decline. So obviously if individual countries can experience peak oil then the world as a whole can also experience peak oil...
Here is a chart of Historical Crude Oil Prices. The average price, the blue line, is the average price of oil for that year. The orange line is the average price from 1946 to any point on that line. For instance the average price of oil for the 34 years from 1946 through 1973 was $23.68. And that in today’s dollars. From 1946 through 1973 oil companies were getting an average of $23.68 a barrel for their oil, and they were making a pile of money at that price. Today, the price is more than twice that amount, and many of them are losing a pile of money.
So let’s get back to reserves. The reserves produced in 1973 and prior years was very profitable at less than $24 a barrel. Then all hell broke loose in the Middle East and prices skyrocketed. Then for the next dozen years oil companies made windfall profits. But in 1986 oil prices came down to normal. Between 1986 and 2002 oil prices averaged $30.42 a barrel. (Not shown on the chart.) Even at that price oil companies still made huge profits. But today they are losing money at $50 a barrel.
The problem is with those “reserves”. Today’s reserves are just not the same as those earlier reserves. All the good cheap stuff has already been sucked up. We are now left with dredges at the bottom of the barrel.All today’s new oil is harder to find, depletes a whole lot faster, and cost many times as much to produce. None of the cheap stuff is left except in a few old super giant fields that are undergoing infill drilling like there is no tomorrow.
Once again, we are at peak oil right now. The peak will straddle the 2014 and 2015 time line. 2016 will be the first full post peak calendar year. It really doesn’t matter how many barrels of oil is left in the ground. The point is we will never again pull it out of the ground at the same rate we are pulling it out right now.
Why we are at Peak Oil Right Now - Peak Oil BarrelPeak Oil Barrel.
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