[Marxism] More liberal wisdom on oil

David Walters dave.walters at comcast.net
Mon Jun 30 17:55:57 MDT 2008


As usual, Joaquín (finally found that accented "í" key!!!) writes a 
provocative essay, this time on energy.

He does however make some generalities I'd like to  address. Here is a 
little essay in response.

= = = =

Iron ore, etc, etc, etc, etc.

I'm not sure where the focus on "iron ore" came from. Most steel is not 
made from iron ore. Steel represents the single greatest recycled 
material known to humanity, second only to...water. And even here steel 
has water beat since *most* steel is recycled eventually, whereas most 
water is dumped into the ocean where it combines with NaCL and becomes 
useless saltwater.

The Chinese expansion has caused all sorts of interesting commodity 
statistics to raise it's peaks and valley's...including steel. The PRC 
now is the biggest consumer of scrap steel in the world. Should it 
surprise anyone that scrap steel, the most important 'raw' material in 
steel making should go up in price? Does anyone care? Would it surprise 
anyone that that *over 90%* of the worlds erected cranes...the big 
thingees you see on top of most construction sites....are in China right 
now? Would it surprise anyone then that the price for this singular 
piece of construction equipment which has to be assembled on site, has 
doubled and tippled in 10 years? At my plant where I work, our 2005 
overhaul was actually delayed 1 full year because so many orders for 
structural steel had poured in that our contractor, Babcock & Wilcox 
couldn't order the material we need because it was all being shipped to 
China. China has been the largest single boom to the US steel industry 
(such as it is)...since the auto industry switched to aluminum. China's 
economy is expanding and that's an expansion that is compounded *yearly*.

= = = =

Oil/Energy.

I'm not a peak oil fan. With the price of oil where it's at (I hesitate 
to give a number because I haven't checked Bloomberg's energy index in 
the last 5 minutes) there is actually a HUGE incentive for US oil 
companies, not to mention *every* oil producer, private or national, NOT 
to produce and soften the price. In the last year as oil has risen, 
countries like Mexico, Venezuela (with currently stagnant oil production 
at 2.7 million bpd) and Indonesia (which will leave OPEC next year as it 
ceases to export oil) have had stagnant or dropping oil production have 
MADE MONEY and thus save exportable resources. On the things that has 
spurred on the so-called "nuclear renaissance" world wide has been oil 
and gas exporting countries desire to...export oil and gas and not 
consume it all producing electricity for their rapidly expanding 
domestic electrical market.
 
It is important, therefore, to note that it is in all these producers 
interests *not to exaggerate for now their oil reserves*. Whereas 
preciously (like last year) it was just the opposite because their 
credit ratings and ability to borrow against the reserves was 
all-important, it not longer is, obviously, since they are accumulating 
petro-dollars (and increasingly petro-euros). God bless Venezuela who 
constantly tries to prove their reserver higher than either OPEC or the 
world wide petroleum institutes and markets would give them credit for.

= = = =

Peak oil.

So...I wrote all that to say this: the peak oil people are increasingly 
narrow on what they consider "reserves". Both theoildrum.com (the best 
one out there) and the doom-mongers-the-glass-is-ALWAYS-half-empty 
http://www.energybulletin.net/ have displayed a somewhat noticeable rise 
in 'doubt' over what exactly IS peak oil. This is because prices have 
caused a slight roll back in consumption (especially in the US no less) 
world wide, recession...always an energy consumption killer is now here 
or around the corner...and reserves have *increased* not decreased. 
Barrel per day (bbd) production has increased, not decreased.

Peak oilers vs Venezuela. Peak oilers do not consider Venezuela's 
ultra-heavy crude (think tar used on streets) as part of the world wide 
reserves. Generally Venezuela's "conventional" oil reserves are about 
80 billion barrels. Take or add 10 billion, based on different sources. 
This is what peak oil folks use. PDVSA pumps down about 1 billion 
barrels per year (bpy) so they have an 80 year supply based on current 
exports and usage. They pump 2.8 bbd, export 2.2bbd, the difference used 
internally. Venezuela, it should be noted, *claims* to produce 3.5 bpd 
but even I don't believe them since their exports are verifiable and it 
would make their own usage ridiculously high and impossible. There are 
no independent sources I've been able to find that would back up PDVSA's 
claims. Of course, while politically I can see this as a problem for 
Venezuela, financially it's been irrelevant as even as they've had a 30% 
reduction in overall production, their income has more than doubled in 
the last year *so who cares!*.

But I digress. So the peak oilers generally take this 80 bbs total as 
gospel. Venezuela on the other hand thinks this is nuts. They claim 
another *170 to 280 bbs*!!!! because of the ultra-heavy, particularly 
nasty Orinoco oil now under development. OPEC now recognizes that this 
oil is real, exploitable and makes Venezuela as the "No. 1 Oil Country 
In The World." The US and various capitalist oil companies and markets 
do not  go along with this, but screw them, who cares what they think. 
So..we now add 200 bbs to the worlds reserves hitherto ignored by peak 
oilers.

Canada/US

I raised Venezuela to note it is an example. The other two countries to 
note on this are the U.S. and Canada. This because of newly discovered 
oil reserves AND their own form of disgusting unconventional oil in the 
form of oil sands (Canada) an the oil shale (U.S.).  If once includes 
Alberta's oil sands, Canada comes to within 3/4's of  Saudi reserves of 
270 bbs. But people don't include them and therein lies a problem when 
calculating "peak oil". The fact is, oil is flowing to the tune of 
millions of bbd from this resource. It costs $40/bbl to exploit this 
stuff. Impossible two years ago. Now...?

The US's oil shale is almost *equal* to that of Canada's oil sands. Both 
are energy intensive to extract and cause enormous environmental damage, 
the least of which is tons of CO2 released. Building nukes to generate 
heat for this process is now under discussion there (and yes, I'm 
opposed to this idea in case you wondering..albeit better nukes than 
natural gas which is what the are using now).

= = = =

The interesting case of Mexico.

Mexico's oil production is sharp decline. It is predicted they will stop 
exporting oil in less than 10 years. This is bad because PEMEX, the 
state oil company brought into being by L. Cardenas back in 1938 when he 
nationalized Rockefeller's personal oil supply there, supplies upward of 
40% of the budget for the Mexican gov't. Not good. Thus the gov't has 
put out calls to 'reform' PEMEX (notoriously corrupt like PDVSA before 
it was 'renationalized' under Chavez). It has been a cookie jar for the 
rich elites in Mexico since the 1940s just like PDVSA has been since the 
1970s. Because PEMEX's role in Mexico, the gov't has, under both PRI and 
PAN administrations underfunded and de-invested in exploration, 
equipment and training. One can't just 'drill a hole' and get oil out 
until the reserves are gone. One has to keep drilling in the same 
location and get all the little pockets of oil that make up an oil 
field. PEMEX hasn't done this. The comrade activists from both Chiapas 
and the militant wing of the national oil workers union in Mexico all 
know there are the LARGEST deposits of oil in Mexico under this southern 
state. It's completely untapped except for exploratory holes sunk that 
proved this. The gov't wants foreign companies to come and "exploit it 
for the usage of the Mexican people". The fact is that PEMEX 
specifically and Mexico in general has  a well developed engineering 
cadre that has been pumping, exploring and exploiting Mexico's vast 
reserves for over 60 years. We don't know how much oil is there but 
estimates run upward of 50 billion barrels.

= = = = =

Iraq

As we know...oil there is pumped out about 1/8th of what it could be 
were it not for the war and the US occupation. The first ministry taken 
over by US troops back when the US entered Bagdad wasn't the Republican 
Guard. It wasn't Saddam's underground bunker. It was the Oil Ministry. 
And there the US Army seized the geological maps of Iraq's *unexploited* 
oil fields. These maps are now all in the hands of US influenced or own 
transnational oil companies. They represent potentially a doubling or 
trippling of Iraq's oil "official" 120 billion barrel reserves.

= = = = =

Oil turned into gasoline.

The reason it will be a long time before there is more energy used to 
produce gasoline than in the gasoline itself, something that Joaquín 
alluded too,  is because of the *humongous* energy density of gasoline 
and petroleum products. Simply put...a LOT of bang or the buck. So long 
as the price is high enough, we will always have a petroleum economy. 
The ecological cost for this is or orders of magnitude bad medicine: 
carbon, soot, heavy metals, radioactive materials (Canada's oil sands 
are that countries largest source of radioactive contamination...yes 
folks, this stuff contains uranium, just like coal, even though it's 
very low level), ash,  gunk, devastated forests, etc etc.

= = = = =

All the above was the SHORT list of why peak oil folks, meaning well, 
*don't do it right.*

End

The Peak Oilers don't like oil exploration. They don't like new 
discoveries or unconventional sources of petroleum. They certainly don't 
like synthetic forms of fuel like dimethyl ethyl or bio-fuel like algae 
spawned diesel fuel (which don't take up land to produce). They really 
don't  like fuel with carbon-carbon molecules (before some chemist 
nimrod on this list sees the error...dimethyl ethyl doesn't have 
carbon-carbon molecules --the bad ones that make soot and CO2 -- it has 
carbon-oxygen-carbon mols which are nicer, sweeter and go 'coo'). I'm 
with 'em...I don't like 'em either. But they are going to be around for 
a long time so long as human ingenuity keeps find new sources for them. 
And that folks doesn't mean 'peak' oil...it simply means we "don't know".

David
PS..please note I had no shameless plugs for nuclear energy here. Sorry.




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