Peak Oil- Let the Games Begin

Gasoline here in Visalia is now about $3.20/gal for unleaded regular at the cheapest station in town. While I am surprised that it spiked this time of year when demand for heating, cooling, and driving is at the usual seasonal lows, I knew it would get here sometime and I know that, while there may be a pullback below $3/gallon, the trend is that oil and gasoline will be getting ever more expensive.

Democrats are blaming the "greedy oil companies" for the high prices. Republicans in turn are blaming the evironmentalists. The true culprit is geology. There is a finite amount of oil that can be discovered, drilled and brought to market. If there had been no environmental movement, the amount of oil that could be found in Alaska and off of both coasts that are currently off limits would maybe delay our day of reckoning a few years. While I believe that the major oil companies are run by a bunch of greedy bastards (that milked the recent switchover from MTBE to ethanol to drive up pump prices on the margins), their greed probably only accounts for an extra 20-30 cents per gallon at the pump.

World oil production the past couple years has held at around 85 million barrels/day . Matthew Simmons, who wrote President Bush's energy platform during the 2000 presidential election has been spanning the globe telling the peak oil story . Meanwhile, in Kuwait, the world's second largest oil field is running out of oil .

So why isn't the word getting out? Why are all the major oil executives telling everyone that the high prices are an "aberration"? I feel that their reasons are 1) to avoid for as long as possible a windfall profits or other tax and 2) they are trying to play down the value of oil as a negotiating strategy with foreign governments in submitting lowball offers to tap their oil fields. Meanwhile, all the majors are experiencing declining reserves and have much of their assets in unstable parts of the world. To compound their stupidity, the majors have sold off many of their mature assets in the US and Canada and, in comparison to Syncrude, Suncor, PetroCanada and Canadian Natural Resources, only bit players in the Alberta oilsands. If I were to invest fresh money in energy, the last company I would want to own is Exxon Mobil. There are many better ones out there (go north to Canada young man, I just dropped a few good names).

Wall Street and the financial community have done a particularly horrible job of covering the peak oil story. Not a day goes by on CNBC that they don't trot out some moron like Tim Evans to tell us that there is a "wall of crude" coming and that prices will drop. Funny thing, these idiots told us a couple years ago when oil was $35/barrel that oil will drop to $20/barrel. Now they are hoping and praying for a dip below $60. How these ANALysts keep a job managing money while being dead wrong is a mystery to me.

Finally, where is our political leadership? Matt Simmons worked on Bush's 2000 presidential campaign. Surely Bush must have a clue. Dick Cheney was the CEO of one of the world's largest oil service companies. Is there a little bit of light in his dark heart? This is one administration that should have had the knowledge well ahead of everyone else and failed to lead on this issue. Their solution was to invade Iraq. With a little bit of leadership (I know I'm talking about Bush here but bear with me) from an adminstration with such insider knowledge, we could be on the way to developing alternatives while spending a fraction of what we are in Iraq. Congress gets equally low marks. Roscoe Bartlett, a Repubican Congressman from Maryland has been a lone voice in that wilderness. He has been joined by New Mexico Democrat Tom Udall. When will the other 533 Representatives and Senators pull their heads out of their asses? Probably only when it is too late.

This is my first post on energy. I can promise you that it will not be my last.