Oil

Jose G. Perez jgperez at netzero.net
Tue Aug 12 13:03:06 MDT 2003


Nicholas writes:

"David counters the notion of oil depletion and
energy-limits by asserting that reserve estimates are
just a socially-mediated artefact ultimately
determined by the rate of profit and investment, a
kind of amorphous chameleon-like silly putty.  This is
peddling the darkest kind of pomo obscurantism."

Despite all the academic terminology Nicholas  deploys, what David says
is basically right. Reserves are *not* a geological category, but a
socio-economic one. That's just what they are. 

IF you Google "oil reserves definition," and then go the first item to
come up, and go to the first page, and go to the first column, under
"Survey Overview" you would have seen that the first sentence reads:

"EIA defines proved reserves, the major topic of this report, as those
volumes of oil and gas that geological
and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions."

Note the phrase "under existing economic and operating conditions." Oil
reserves are a figure from the "science" of bourgeois accounting, and
*just* as reliable as other such figures, for example, AOL ad revenues
or Enron profits, to name just two.

It is undeniably true that, since the volume of the earth's crust is
limited, the amount of fossil fuels it can contain is also limited. What
that amount is, however, we do not know, the actual physical volumes. We
do know it is much more than is usually referred to in these
discussions. For example, from Birmingham to Pittsburgh, it is pretty
much all coal down there and it was once estimated that just the amount
of coal there could meet the *entire* energy needs of the U.S. at the
rate of growth prevalent in the 1960s and early 70s for 500 years. Which
has not prevented the decline of the coal industry, which is the result,
not of exhaustion of supply, but of economic conditions.

I am very suspicious of this oil-centric catastrophism; for all that I
respected Mark Jones and lamented his passing, I debated it with him
here and privately and he was never able to convince me, unlike, for
example, the comrades I debated about global climate change, whose
arguments, and the accumulation of scientific evidence, eventually did
lead me to change my position radically.

One big reason I remain unconvinced is that, in constant dollars, the
price of crude has, with whatever ups and downs, been declining for a
quarter century, give or take. It may well be true that at $20 or $25
production will peak at a certain point in the near future, but the
argument that supply is inelastic with price is not convincing to me. 

The science fiction I read in junior high is, in many cases, today's
reality. I do not believe that with this long-term trend of declining
prices, we've reached or are near the physical peak of extraction given
current technology, and its more creative application and development,
i.e., without major new technological breakthroughs, just making the
most of what we have. 

The declining price trend suggests to me that there has almost certainly
been underinvestment and decapitalization. I believe the physical peak
that will be possible with the technology that would result from oil
going to, say, $50 or $60 a barrel will be much, much higher. And I
think a jump in prices on something like that scale, doubling or
tripling, is almost certain to be attempted anyways, it is coming.

That because now that imperialist companies seem poised to complete
their acquisition of the actual oil in the ground, to make it their
property, or at least a huge portion of it, I expect to see another
"energy crisis" and a big spike in oil and energy prices. After all,
that is the real point of cartelization and monopolization: to gouge the
public. Whether they need to share the take with the Saudis is probably
more of a factor determining when the "crisis" will hit than anything
else. And I wouldn't be surprised if they also worry about Venezuela.
Given the revolutionary process underway there, giving the Bolivarian
revolution immense resources with which to carry out the social
transformation of the country isn't going to be an enticing prospect to
the junta in Washington, even if they don't talk about Venezuela very
much. 

But nobody knows what the proven reserves would become after a few years
if there is a jump to say, a $50-$60 price range in today's dollars, nor
what the maximum rate of extraction would be. 

The price of gasoline in the U.S. would rise to what is common in most
of the rest of the world, and I suspect Americans would adjust, just as
the rest of the world gets by with $3 or $4/gallon gas. Electricity and
airplane travel would be more expensive. There would be a certain amount
of disruption and rebalancing in the energy extraction/production
sectors; things that were "impossible" [unprofitable] would become
possible, and the world would go on. Depending on how the crisis was
engineered, it need not be nearly as disruptive as the one three decades
ago.

Frankly, I am much more concerned with the *side effects* of continuing
with anything near the current rate of consumption of fossil fuels,
rather than any *immediate* danger of a sharp drop-off in supplies. In a
way, I wish the catastrophists were right.

At this point, the scientific evidence that the global climate is
changing is overwhelming; the scientific consensus is that it is simply
a fact. Even scientists who were leading skeptics into the late 1990s
--except, of course, for the fakers on oil company payrolls-- have
changed their views.

In addition, the data suggests that the *rate* of change may well be
quite high, higher than anticipated; and almost inescapably that a
significant if not overwhelming factor in it is greenhouse gas
accumulation from the burning of fossil fuels. In addition, it seems the
climate system is chaotic in the mathematical sense; and such evidence
as we have indicates  that it is quite likely that the world climate
system changes from one state of quasi-equilibrium to another, it is not
stable at a whole series of intermediate points; and that this change
takes place on a scale of as little as a couple of decades, not
centuries or millennia.

Thus the case for doing something about energy consumption madness, and
something quite drastic, and quick, not 5% or 10% here or there over a
couple of decades, is overwhelming independent of supply considerations.
Kyoto was based on gradualist, proportionate change for proportionate
input climate models. Based on what is known now, that may well be an
overly benign scenario. We have to remember that this sort of
gradualist, a 1% change in output for a 1% change in input, is part of
the capitalist world view, not necessarily something strongly supported
by the data.

For the longest time, the "gradualist" view of evolution was universally
adhered to among paleontologists despite the lack of evidence for it in
the fossil record, which seemed to record the sudden emergence of
distinct species rather than the gradual transformation of an old
species into a new one. Stephen Jay Gould and his friends proposed the
that the problem wasn't the inadequacy of the fossil record, but of the
gradualist theory. A very similar consideration may apply to climatology
today.

The case for drastic change is even stronger if you consider current
commercially viable technologies.

For example the technology to build hybrid cars that yield between 75
and 100 miles a gallon not only exists but is commercially viable today.
There is no reason --apart from maximizing profits-- that the whole
automobile industry could not convert away from the traditional power
plant in a matter of a few years. It also looks like fuel cell
technology will be commercially viable in a few years, and the energy
savings there will be even greater. 

HUGE energy savings are possible because the actual efficiency of
today's automobiles, as a percent, is in single digits. More than 90% of
the energy is wasted, it is not involved in getting from point A to
point B, even if you include carrying around the obscene amounts of
excess metal most vehicles come encumbered with as useful work done.

The capitalists can and do build refrigerators, air conditioners, water
heaters, ovens and all manner of other appliances that are several times
more energy efficient than the average model built today. Mandating
efficiency standards at the high end of today's commercial products for
everything from cars to toasters to lighting to housing would make a
very significant difference, and the transition can be easily
accommodated in a few short years. 

Capital, or rather individual capitals cannot and will not do this.
Their God is Mammon and He does not allow other Gods before Him. 

Whether *capitalism* can do this is another question. I believe it can.
The astounding world wide consensus among the political representatives
of the capitalists at Kyoto that this was a real problem that needed to
be dealt with, I think shows this, and just as the British capitalists
at a certain stage in the first half of the 1800's decided that they
needed collectively to set limits to the exploitation of workers through
parliament, otherwise they would exterminate the entire race of workers.
For any individual capitalist to have reduced the murderous exploitation
of his own workers would have been ruinous; through their state,
however, they were able to freeze and reverse what some people today
call "a race to the bottom." 

I think the capitalists through their states and international
institutions are capable of understanding the threat of catastrophic
climate change. If more isn't being done, it is because the defacto U.S.
administration, the antediluvian junta in Washington, can see no further
than Dick Cheney's next paycheck from Halliburton, and if adherents of
the "free markets" fundamentalist religion keep their hold on Washington
(which I think is almost a foregone conclusion, given the new generation
of unauditable "black box" computerized voting machines being built by
Republican-connected companies) then catastrophe may well strike, for
the climate system is in motion and the time to slam on the brakes is
now. 

I believe THAT, not exhaustion of reserves or an irreversible slide from
a peak in extraction, is the real danger that threatens.

José




-----Original Message-----
From: owner-marxism at lists.panix.com
[mailto:owner-marxism at lists.panix.com] On Behalf Of Nicholas Siemensma
Sent: Tuesday, August 12, 2003 6:36 AM
To: marxism at lists.panix.com
Subject: Re: Oil


David Schanoes wrote: 

> reserves are not a geological category but an
> economic one.

David counters the notion of oil depletion and
energy-limits by asserting that reserve estimates are
just a socially-mediated artefact ultimately
determined by the rate of profit and investment, a
kind of amorphous chameleon-like silly putty.  This is
peddling the darkest kind of pomo obscurantism.  

The social process of capital accumulation which
appropriates nature for its own ends is the form given
to an existent content.  Form cannot determine
content, which is rather the inevitable substrate
which modes of production evolve to work on and shape,
a datum prior to social relations.  This dynamic
interplay is based on the (historically and logically)
prior existence of all those processes and categories
of nature, fossilised and sedimented algal material
and vegetal remains, an original endowment which
capital appropriates in its quest to increase labour
productivity and create a self-sustaining world of
accumulation.

If certain realities of geophysics and geochemistry -
their questions, methodologies and conclusions - as
they relate to hydrocarbon reserves, are mediated by
social and economic realities of one kind or another,
this does not alter the fundamentals.  Mediation
cannot exist without immediacy, and the crude and
obvious facts of geology still serve as the basis of
all (even capitalist!) convention, performativity and
social fact.  To pretend otherwise is mere Judith
Butler-style "science is social relations" bullshit.  
  

Capitalism depends upon a resource of which production
always will be subject to finite physical limitations.
 Oil is, as well as totally indispensable and
irreplaceable, scarce.  David may suggest that he
believes all this, but that he nonetheless understands
the phenomenal forms-of-appearance of apparent
"scarcity" (suggested by the late Mark Jones, among
others) as, instead, outcomes of capitalism's immanent
tendency towards overproduction and a falling rate of
profit.  According to Schanoes, therefore, Mark forgot
that oil possessed all the qualities of the
commodity-form.  This is false: Mark merely emphasised
the unique specificities of oil as a strategic and
elemental commodity unlike any other, and tried to
model valorisation crises emerging from technological
failure to overcome energy deficits.

Placing the oil-nexus at the heart of politics by
analysing a long-run decline in world oil production
does not make one blind to the mundane problems of
infrastructure investment and extraction technologies.
 If anyone made the unwarranted leap of imagination
from oil under the Iraqi ground to free-flowing
petroleum, it was not Campbell, Laherrere, or any
member of this list.  When Fadhil Chalabi wrote his
"Iraq and the Future of World Oil", suggesting that
Iraq could reach 12m bls/day, Campbell and Laherrere
questioned his optimistic assessments.  Even if such
staggering reserves of oil were there, it would not be
easy to extract it or achieve the massive tempos of
investment and production required to even think about
it.

The debate about oil depletion thus only makes sense,
as David suggests, when inserted into the wider
constellation of determinate factors of accumulation
and imperialism.  Simultaneously, however, energy and
the energetics model is itself a fundamental instance
of the world system, and any analysis of the latter is
impoverished if we pretend that it has "nothing to do
with scarcity".  (Anyhow, David's version of Marxist
crisis theory and "overproduction" is problematic,
IMHO.)

> Oil went from $10/barrel to $30 a barrel in a
> year, based on what new
> information about scarcity?  The OPEC actions have
> nothing do with scarcity.

There's the whole internal logic of the oil industry
to consider, the movement from early wildcat days to
Rockefeller's cartelisation, then deregulation, etc. 
What lay behind the re-emergence of deregulation as a
policy theme in the 1980s, when the monopolies came
under pressure as the industry became mature and signs
of shortage appeared?  The combined efforts of the
great capitalist powers and rent-seeking states tried
to fragment the power of the big corporations, to
remove supply bottlenecks on one hand and to gain
leverage and maximise advantage on the other. 
Monopolies and rent-seeking were attacked as gripping
the industry with structural rigidities, and
deregulation took away national controls and brought
new countries into the market, changing the balance of
market power away from states.  In NOPEC states,
deregulation of oil and gas markets produced a wave of
investment and liberalisation.  Simultaneously, the
Soviet Union energetics base collapsed, with
production falling precipitously, and the
fragmentation of the former socialist bloc opened the
natural energy resource-base of the fSU.  The fall in
energy prices must be related to this whole collapse,
as well as the destabilisation of OPEC.  Deregulation
and privatisation were put forward, resulting in
reduced upstream investment, inability to recapitalise
the industry and a whole concatenation of feedbacks,
partly due to the inability of annual global
production to exceed more than 25-30bn bbls.

In any case, the wave of privatisation and
deregulation reproduced the instabilities of
unrestrained markets, producing alternate gluts and
famines.  The late 1990s saw a glut, but the
unworkability and collapse of deregulation itself
surely relates to the evolution of the oil industry
and the fundamental question of depletion.  It also
relates to the Wall St bubble and dollar seigniorage,
which in turn points back to the upheavals, shocks and
crises of the Seventies.  

One of the reasons why oil was very cheap c.1999 was
because Saudi and other Gulf producers announced large
planned increases and investments of over $100 bn to
supply world markets with an additional 10-15m barrels
per day over the next decade – because of the imminent
exponential decline in non-OPEC oil production. 
Refined extraction technologies such as nuclear
magnetic resonance drillhead scanners and horizontal
drilling are indeed important in improving recovery
and stimulating investment, but this doesn't mitigate
the dramatic, steep and accelerating decline of
non-OPEC (eg. North Sea, North America, Russia) oil
supplies.  As NOPEC peaked and declined, OPEC wrested
back strategic initiative.  David writes that the

> North Sea oil production peak was extended by 6-7
> years with half the oil
> still under the sea.  The end of the economic life
> of the North Sea is a
> product of profit, i.e. commodity production, not
> scarcity.

Where does this strict dualism come from?  Cost and
technical reasons mean that much known conventional
oil will remain underground forever, and this due to
accumulation crises, but also due to the required
energy input and net energy yield.  Tar sands and
shales, such as those suggested as "alternatives" by
David, are indeed available in copious amounts, but
require large amounts of energy.  Most
non-conventional oil will remain un-exploited due to
low net energy yields for each new barrel.  There will
always be oil in the ground; but this is not the
issue.  While no reservoir is ever fully depleted, a
point is reached when no more can be produced.  The
energy-famine leading to the collapse of the Soviet
Union is an interesting historical example, as is the
end of the coal age (which Jevons predicted!) with
significant coal reserves left underground.

As for North Sea production, it has experienced savage
depletion due to intensive deployment of extractive
technology which continues until production falls off
a cliff.  Energy supply is pushed to the maximum,
forced to its technical limits as supply falters. 
Dunno why else David mentions this, which finds its
most instructive parallel with the world fishing
industry which can manage to raise catches using
advanced technology, while overnight fisheries
collapse one-by-one.  This hardly disproves the notion
of bell-shaped production curves.  ("UK could reach a
new maximum with highest efforts in bringing all
fields into production.  But the result would be that
the reserves would be exhausted even faster and the
decline would become even steeper.  This would be the
worst of all possible options."
http://www.energiekrise.de/e/articles/Analysis_of_UK_oil_production.pdf)


Nick


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