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Site Map PETROLEUM MAN -- CHAPTER 1 FROM "CROSSING THE RUBICON" |
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by Michael C. Ruppert
Global demand for oil and natural gas is growing faster than new supplies are being found, and the world population is exploding. Currently the world uses between four and six barrels of oil for every new barrel that it finds, and the trend is getting worse.1 Natural gas use is exploding while the rate of new gas discoveries (especially on the North American continent) is plunging.2 According to most experts -- including Colin Campbell, one of the world's foremost oil experts with decades of experience in senior geologist, upper management, and executive positions with companies including BP, Amoco, FINA, and Texaco -- there are only about one trillion barrels of accessible conventional oil remaining on the planet.3 Presently the world uses approximately 82 mb/d (million barrels per day). Even if demand remained unchanged, which it clearly will not, that would mean that the world will run out of conventional oil within thirty-five years. Oil, however, does not flow like water from a bottle. Since the world's population and the demand for oil and natural gas are increasing rapidly, by reasonable estimates, the world supply of conventional oil is limited to perhaps 20 years. It's a common mistake to assume that oil will flow in a steady stream and then suddenly stop one day. Instead, the stream will gradually diminish in volume, with occasional small increases, even as the number of people "drinking" from that stream, and the amount they consume explodes. Other issues compound the problem. As fields deplete, oil becomes increasingly expensive to produce. These costs must be passed on to consumers. Not all oil in the ground is recoverable. When it takes more energy to pump a barrel of oil than is obtained by burning it, the field is considered dead regardless of how much oil remains. Unconventional substitutes are extremely expensive and problematic to produce. Tar sands, oil shale, deep water, and polar oil sources have severe limitations. Canadian tar sands development is proving disappointing because it requires large quantities of fresh water and natural gas to make steam, which is a necessary part of the extraction process. Natural gas cost and fresh water shortages are already limiting production, and the material costs for the energy needed to make the energy have already begun to curtail production. The same problems afflict the development of shale, deep water, and polar reserves. They are currently too expensive to develop in quantity, and when exceptions arise, they're too small to mitigate Peak Oil. Even the best-case "fantasy" scenarios for these energy sources don't change the picture much. To learn more about this I recommend two web sites; <www.peakoil.net>, and <www.hubbertpeak.com>. I'm capitalizing the phrase "Peak Oil" to indicate that it's a historical event. It's an unavoidable, utterly transformative crisis, and an increasing body of evidence suggests two major consequences. I'll state them here in the starkest terms; later I'll add reassuring qualifiers and a few formulations that might be more palatable. But it comes to this: first, in order to prevent the extinction of the human race, the world's population must be reduced by as many as four billion people. Second, especially since 9/11, this reality has been secretly accepted and is being acted upon by world leaders. In this chapter I marshal the evidence for this disturbing pair of hypotheses which, taken together, constitute the ultimate motive for the attacks of September 11th, 2001. What have hydrocarbons done for you lately? Oil and natural gas are close cousins. In nature the two are often found very close together because they can originate from the same geologic processes, under conditions that have existed only rarely in the Earth's four-billion-year history. Oil and gas are hydrocarbons that come from dead algae and other plant life. There are biological traces in oil proving that it came from living matter.4 Since the earth is a closed biosphere, oil and gas are finite, non-renewable resources. The world has used half (if not more) of all the hydrocarbons created over millions of years in just about one hundred years.5 According to Richard Duncan, PhD in 1999 approximately 95 percent of all transportation was powered by oil. And 50 percent of all oil produced is used for transportation purposes. No other energy source even comes close to oil's convenience, power, and efficiency.6 Oil pervades our civilization; it is all around you. The shell for your computer is made from it. Your food comes wrapped in it. You brush your hair and teeth with it. There's probably some in your shampoo, and most certainly its container. Your children's toys are made from it. You take your trash out in it. It makes your clothes soft in the dryer. As you change the channels with the TV remote you hold it in your hands. Some of your furniture is probably made with it. It is everywhere inside your car. It is used in both the asphalt you drive on and the tires that meet the road. It probably covers the windows in your home. When you have surgery, the anesthesiologist slides it down your esophagus. Your prescription medicine is contained in it. Your bartender sprays the mixer for your drink through it. Oh yes, and the healthy water you carry around with you comes packaged in it. Be careful. If you decide that you want to throw this book out, your trash can is probably made from it. And if you want to call and tell me what a scaremonger I am, you will be holding it in your hands as you dial. And if you wear corrective lenses, you will probably be looking through it as you write down a number with pen that is made from it. Plastic is a petroleum product, and its price is every bit as sensitive to supply shortages as gasoline. Oil companies do not charge a significantly different price for oil they sell to a plastics company than they charge a gas station owner. If the wellhead price goes up, then every downstream use is affected. If you live in the United States and the power generating station that serves your community was built within the last 25 years, natural gas is probably providing you with the electricity that powers the bulb illuminating this book. According to figures supplied by the US government, some 90 percent of all new electrical generating stations will be gas powered. Vice President Cheney's "energy task force," the National Energy Policy Development Group (NEPDG), stated in summer 2001 that "to meet projected demand over the next two decades America must have in place between 1,300 and 1,900 new electric plants. Much of this new generation will be fueled by natural gas."7 Oil is also critical for our food supply. Quantitatively speaking, modern food production consumes ten calories of energy for every calorie contained in the food.8 When the farmer (or more likely the "agribusiness employee") goes out to plant seeds, she drives a vehicle powered by oil. After planting she sprays the crop with fertilizers made from ammonia, which comes from natural gas. Then she sprays them several times with pesticides made from oil. She irrigates the crops with water that most likely has also been pumped by electricity generated by coal, oil, or gas. Oil powers the harvest, transportation to processing plant, processing, refrigeration, and transport to the grocery store (to which you, the consumer, drive an oil-powered vehicle). You may pay for it with a piece of oil that you carry around in your wallet. Then you take it home, cook it by means of either electricity or natural gas, and eat it on a plate that may have been made from oil, after which you wash the plate with a synthetic sponge that is also made of oil. Consider this: our of six and a half billion people, there are about four billion who don't have, and who want, all of the things I have just described. The current world economy is inherently committed to endless growth, and while physically impossible, this illusion is to be chased after by driving the poor countries into a globalized market for cheap goods. Haiti, for instance, has had its domestic rice farming ruined by American export dumping. When the Haitian farmers could no longer underbid the American rice in Haitian markets, they moved off the land and became urban unemployed. Then the Americans raised rice prices to crippling levels. So Haiti is a captive market, but it's a market nonetheless. Similar developing countries are slowly acquiring more purchasing power and the industrialized world is gaining a foothold in their domestic economies by targeting them for cheap exports. One way or another, the have-nots must become consumers. Food How important are hydrocarbons to food production? One recognized oil expert puts it this way; "If the fertilizers, partial irrigation, and pesticides were withdrawn, corn yields, for example, would drop from 130 bushels per acre to about 30 bushels."9 That's bad news in more ways than you can think. The same applies in varying degrees to any crop; wheat, alfalfa, lettuce, celery, onions, tomatoes; anything that commercial agriculture produces. Oil and gas are irreplaceable if the world is to continue pumping out enough food to feed 6.5 billion people. And that says nothing about the additional 2.5 billion that are projected to be here before the middle of this century. Organic farming or permaculture is responsible and respectful of nature and may ultimately be nearly as productive as hydrocarbon-based agriculture. But the infrastructure is not in place to implement it. You could ask several billion people to stop eating for a year or two while we switch over and work out the bugs. Do you want to volunteer? Would you volunteer your children? So what about all the beef cattle, pigs, and chickens that feed on grain and corn? Would you be prepared to pay $50 for a Big Mac if there were severe grain shortages? How about a $25 chicken breast? That would be a quality problem for an American, as opposed to someone in Africa or Asia who lived off of crops and food products sold by globalized agriculture in case there was nothing locally grown. You have always been told that these people just weren't as productive as we are. It's not true; they don't have the oil and the natural gas that we do. The United States contains 5 percent of the world's population and currently consumes 25 percent of the world's energy.10 Growth Oil also powers more than 600 million vehicles worldwide.11 Would you pay for a $50,000 car and pay $5 a gallon for gas? $10 per gallon? Could you? In the current financial paradigm, the stability of the world's economy depends upon growing revenues through the sale of more and more vehicles and other products that are useless without hydrocarbons. The revenues generated by current customers in developed countries won't be enough to sustain future growth, so cars and computers and air conditioners are beginning to flow into the new markets of China, Asia, and Africa. Those populations don't have these energy-guzzling machines (nor the myriad petroleum-derived plastic consumer goods enjoyed in the relatively high-wage countries), but they quite clearly desire them -- especially the younger generation, whose purchasing power is growing at the fastest rate. As their economies grow more robust, wages rise and the consumers' desire becomes actual economic demand. For the moment, much of the developing world remains ravaged by massive, artificially engineered debt to the World Bank and the IMF. But rising literacy rates and the correlative falling birthrates in many regions promise a massive expansion in consumer spending.12 And this has already begun; Chinese auto sales are exploding. According to one report, 2002 Chinese auto sales jumped by more than 50 percent. 13 GM's auto sales in China jumped by 300 percent in 2002 alone. 14
If there is no growth in revenue for the corporations that make and sell these things, then what is left of your 401 (k) plan will be worthless. And you might even be out of a job yourself. Colin Campbell has rightly identified a subspecies of Homo sapiens that he calls Petroleum Man. He provided me with this population graph that shows the effect of hydrocarbons on the planet since their introduction. The little dip around 1400 was aused by the bubonic plague.15 A number of environmentalists have been sanely and prophetically decrying the destruction of the biosphere for decades. This is another key part of the equation. They have pointed to alternative energy supplies such as wind, solar, geothermal, and biomass as steps toward protecting the ecosystem. But very few understand the infrastructural problems that must be addressed if the crisis is to be solved in any rational manner. Peak Oil will likely turn human civilization inside out long before global warming does, unless -- and there are signs that this is happening -- oil and gas shortages elicit a tragically shortsighted return to coal. Given the hundreds of thousands of non-combatant deaths in the resource wars of Afghanistan, Iraq, and so many other places; given the deaths in Europe and Asia from extreme weather conditions in both summer and winter months; given the murderous, smoldering conflict in Nigeria and other oil-rich countries where corporate power combines with the forces of local warlords; given all this, Peak Oil is killing us now. That, and the argument that these are the merest hints of what Peak Oil is going to bring, is the message of this book. Making rational assessments As I traveled throughout the US, Canada, and Australia in 2002 giving my lecture called "The Truth and Lies of 9/11," I was routinely asked by youthful activists about an immediate changeover to alternative energy sources. I first asked if they wanted to layoff tens of millions of people in the oil, shipping, and auto industries, in car dealerships, garages, and gas stations while all the factories and ancillary services were retooled. That process might take decades. Who, I asked, would pay the mortgages for the people thrown out of work? What would happen to the supermarkets, the banks (credit cards), the dry cleaners, et cetera, if all of these people suddenly stopped making payments? Who would make up the tax revenues that these people no longer paid? Who would finance all the capital investment needed to convert us over to alternative vehicles? And, in spite of recent promotions about hydrogen, as of October 2002 the federal government is still fighting tooth and nail to keep electric vehicles from becoming a commercially viable reality. 16 The myth of hydrogen salvation is a fantasy of the naive and a cruel hoax of the policy makers and business people who know better. Remember also that electricity is not a primary energy source, but merely a carrier of energy produced by some other means. Although oil and gas are critical, it is electricity, as one scientist put it, that is "the indispensable end-use energy for industrial civilization."17 Once you use an oil-powered vehicle to get to wherever you're going, think about what you would find there if there were no electricity. Refrigeration is only one of many essential services that come to mind. In 1999 an estimated 42 percent of the world's energy was used to produce electricity. Oil ate up 39 percent for non-electric uses; gas, 18 percent; and coal a measly I percent. 18 As this book goes to press, there are definite indications that the US is reverting to coal-fired plants as quietly as possible with some 94 new coal-fired electric plants planned across 36 states.19 Even conservative Republicans who insist that global warming is a myth have acknowledged that burning coal is environmentally unsound. Although EPA regulations have made it economically difficult to bring new coal-fired plants online, strict retrofitting requirements passed by Congress to remove pollutants have been quietly skirted to keep America's electricity flowing.20 From a profit standpoint, this new coal rush can only be happening as a response to a shortage of the other fossil fuels. This is because the generating plants that are designed for oil and natural gas require less investment and regulatory oversight to construct, and have much shorter permit approval processes. Electric vehicles are an illusory solution. I remember being on one of my 30 or so commercial flights (made possible by oil) in 2002 and reading an airline magazine article about a great new electric car. The author rightly commented that all the pollution the vehicle he test-drove was not putting out was, in fact, being spewed out by the coal-powered generating station that he had plugged into to charge it. In 2002 approximately 50 percent of all electricity in the US was generated by older, coal-burning power plants whose replacement is cost-prohibitive.21 Until early 2002 it was officially anticipated that all new generating plants would be powered by natural gas. Then, America's energy planners encountered a separate problem hidden in plain sight: North American natural gas is running out faster than oil, and it can't be imported as easily without massive investment and time lags for the construction of Liquefied Natural Gas (LNG) tankers and terminals. Understanding energy In 1843 an American physicist named James Prescott Joule discovered a salient feature of the way energy behaves: the total inflow of energy into a system must equal the total outflow of energy from the system, plus the change in the energy contained within the system. That fascinating principle will become an important part of our story later on, but for now let's note that, in recognition of Joule's achievement, his name was adopted as the standard unit for energy. The measure of the energy produced by any system can always be expressed in joules, no matter what form of energy it is. Suffice it to say that there is nothing on the immediate horizon that offers a realistic solution to humanity's dependence upon hydrocarbon energy. Oil's bell curve Every domain of oil production follows a general bell curve, whether it's a single oil field in Texas or Kuwait, or a country such as the US or Kazakhstan, or the planet as a whole. On a global scale, both oil and gas are nearing their peaks of production, at differing rates, and are in an inevitable and irreversible decline. The implications of this are staggering. It was Dr. M. King Hubbert who, some 50 years ago, plotted the oil depletion curve that now bears his name. The Hubbert curve is not only descriptive of depletions that can be seen and measured in hindsight, it is strikingly predictive of resource outcomes that are still in the future. Indeed, Hubbert's fame is based on his successful calculation of the 1971 US domestic oil production peak some 14 years before the fact. Laughed to scorn at the time, his prediction eventually proved correct to within 12 months. Its effect on the astute portion of the geological public was like that of the ancient mathematician and philosopher, Thales, who once stopped a battle by stepping into the space between the two armies and successfully predicting a solar eclipse. The eclipse promptly happened, and the astonished soldiers all went home. Unfortunately, most of the profit-driven petroleum industry is still on the battlefield, only gradually realizing that they're fighting in the dark. As FTWs Contributing Editor for Energy, geologist Dale Allen Pfeiffer wrote in late 2001: US oil production peaked in the early 1970s. To meet its rising energy needs after this point, the US became increasingly dependent on foreign oil. This paved the way for the Arab oil embargo. By the end of the decade, US oil production had begun to decrease irreversibly. Whatever anyone tries to say to the contrary, our dependence on foreign oil is permanent and increasing all the time. Dr. Hubbert was vindicated, and his methodology is now the standard for projecting oil production.22 Oil is getting more expensive to produce in almost every part of the world. As oil fields get older, wells must be drilled deeper or in more hostile conditions, and more frequently into reservoirs that either are emptying or are smaller than the large fields that were tapped first. The oil thus obtained is also likely to be of inferior quality and thus more expensive to refine.23 Almost all there is to be found has been found.24 There are not likely to be any major new discoveries that will make a difference in this trend. Confirming the last statement IHS, the world's foremost recognized consulting firm cataloguing oil reserves and discoveries, announced that in 2003 -- for the first time since the 1920s -- there was not a single discovery of a field in excess of 500 million barrels.25 The significance of this becomes clear when one remembers that the planet consumes a billion barrels of oil every 11.5 days. Although technological advances are improving extraction rates, the bottom line is that without more discoveries, production cannot be increased indefinitely. And global oil discoveries peaked in the 1960s.26 New fields that are being discovered are much smaller than giant fields, and they tend to be in less accessible environments, like deep sea or polar regions. New discovery trends have been mathematically included in evaluations of the Peak Oil model, and they make little difference in the scope or the timing of the outcome. Pfeiffer provided FTW with the graphs below. One shows the bell curve for a particular region, and the other shows Hubbert's Peak for the planet as a whole. The third tracks population and per-capita production of hydrocarbon energy, superimposed over energy production, showing that population will overshoot production capacity by a large margin. The catastrophe made inevitable by these limits is beginning now. This is the canvas on which the post-9/11 world is being painted. Policy makers, economists, the financial markets, and politicians are deceiving the world about how much oil and gas are really left. They have to, in order to protect the markets and their jobs. They are also misleading the population about what this means. The most important of these events is the point in time when demand (need) for hydrocarbons outpaces the planet's ability to give them up.27 The second is the fact that the OPEC nations of the Middle East will peak last, many of them between now and 2010.28 They will soon be supplying up to 40 percent of the world's oil.29 Whoever controls the oil in the Eurasian continent, which includes the Middle East, the Caspian Basin, and Central Asia, will determine who lives and who dies, who eats and who starves. The demand for hydrocarbons Clearly, short-term and mid-term increases in hydrocarbon energy will be supplied by the so-called "swing" producers (countries able to vary production significantly enough to control price or meet demand) like Saudi Arabia, Iraq, Nigeria, and Venezuela. Saudi Arabia possesses 25 percent of the world's recoverable oil, and Iraq possesses 11 percent.30 Yet even in Saudi Arabia, there is an awareness of the finite nature of oil. "They have a saying, My father rode a camel, I drive a car, my son rides in a jet airplane -- his son will ride a camel."31 In May of 2003 I attended an international conference on Peak Oil at the French Institute of Petroleum in Paris and was surprised to hear an expert from the Iranian National Oil Company describe data showing that Saudi Arabia is already at peak production. He had previously acknowledged that Iran passed its peak of production in the 1980s.32 I reported this more than six months before the New York Times issued a report indicating that Saudi Arabian production had possibly peaked -- which set off a subsequent round of reactive conferences in Washington, DC, and in certain New York financial circles.33
Another crucial factor, according to an oil industry executive I interviewed for this book, it takes about six weeks to get a drop of oil from the Persian Gulf into an American gas tank. If it comes from West Africa it takes about two weeks, and if from Venezuela, only four days. What was known about Peak Oil and when In April 2001 the Council on Foreign Relations and James A. Baker (Secretary of State for G.H.W. Bush) published a detailed study of world energy problems. Because it was nor an official government document and not widely circulated, it could come closer to telling the truth without risking panic in the financial markets. It confirmed that key elites had been aware of Peak Oil for some time: Strong economic growth across the globe and new global demands for more energy have meant the end of sustained surplus capacity in hydrocarbon fuels and the beginning of capacity limitations. In fact, the world is currently precariously close to utilizing all of its available global oil production capacity, raising the chances of an oil supply crisis with more substantial consequences than seen in three decades. These choices will affect other US policy objectives: US policy toward the Middle East; US policy toward the former Soviet Union and China; the fight against international terrorism. Meanwhile, across much of the developing world, energy infrastructure is being severely tested by the expanding material demands of a growing middle class, especially in the high growth, high-population economies of Asia. As demand growth collided with supply and capacity limits at the end of the last century, prices rose across the energy spectrum, at home and abroad.34 The CFR report made clear another chilling point. "Oil price spikes since the 1940s have always been followed by a recession."35 This fact has been acknowledged by financial media such as the Wall Street Journal, the Financial Times, and the Asia Times. A great many analysts understand, and have written, that one way to prolong inevitable decline is by the creation and management of recessions, which inevitably reduce demand for oil. People use less gas when they're unemployed. In May, 2001 a statement from the National Energy Policy produced by Vice President Cheney's National Energy Policy Development Group ( NEPDG) hinted further at the pending crisis: America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s. Estimates indicate that over the next 20 years, US oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent. US energy consumption is expected to increase by about 32 per cent by 2020. Between 2000 and 2020, US natural gas demand is projected by the Energy Information Administration to increase by more than 50 percent. Yet we produce 39 percent less oil today than we did in 1970 [the peak year of production in the US], leaving us ever more reliant on foreign suppliers. On our present course, America 20 years from now will import nearly two of every three barrels of oil -- a condition of increased dependency on foreign powers that do not always have America's interests at heart.36 Lastly we look at an important quote from Zbigniew Brzezinski, former national security adviser to Jimmy Carter; intelligence adviser to Presidents Reagan and George H. W. Bush; professor at Johns Hopkins; a co-founder of the Trilateral Commission with David Rockefeller; and a member of the CFR. In his 1997 book The Grand Chessboard: Americas Primacy and Its Geostrategic Imperatives, Brzezinski wrote: The world's energy consumption is bound to vastly increase over the next two or three decades. Estimates by the US Department of Energy anticipate that world demand will rise by more than 50 percent between 1993 and 2015, with the most significant increase in consumption occurring in the Far East. The momentum of Asia's economic development is already generating massive pressures for the exploration and exploitation of new sources of energy, and the Central Asian region and the Caspian Sea basin are known to contain reserves of natural gas and oil that dwarf those of Kuwait, the Gulf of Mexico, or the North Sea.37 What "Zbig" didn't say was that the North Sea and the Gulf of Mexico have passed their production peaks. Kuwait, however, may not peak for about ten years. It is currently estimated to have about nine percent of all the oil on the planet.38 What Brzezinski should have said was that the oil (and gas) sources in the Central Asian Republics and the Caspian Sea Basin were -- at the time he wrote the book -- estimated to contain perhaps 200 billion barrels of oil. But according to Colin Campbell (citing actual drilling records), between October 2000 and October 2002 exploratory wells showed that there is not one deep pool of oil in Central Asia, but a series of separated pockets, which have produced revised estimates of only 40 billion barrels. There is however, in Qatar, a huge deposit of natural gas that could significantly soften the blow when natural gas supplies (which tend to fall off a cliff rather than politely declining down a bell curve) run out. Because of energy losses in conversion to liquefied natural gas (LNG) and in reversion back into gaseous form during and after extremely expensive shipping, those reserves will most likely benefit countries that can be reached by pipeline, or those which can afford the cost of LNG . Regarding Caspian Basin oil, Campbell told FTW in an October, 2002, interview: There was talk of the place holding over 200 Gb [billion barrels] I think emanating from the USGS [US Geological Survey, but the results after ten years of work have been disappointing. The West came in with high hopes. The Soviets found Tengiz onshore in 1979 with about 6 Gb of very deep, high-sulfur oil in a reef. Chevron took over and is now producing it with difficulty. But offshore they found a huge prospect called Kashagan in a similar geological setting to Tengiz. If it had been full, it could have contained 200 Gb, but they have now drilled three deep wells at huge cost, finding that instead of being a single reservoir it, like Tengiz, is made up of reefs. Reserves are now quoted at 9-13 Gb. BP -Statoil has pulled out. Caspian production won't make any material difference to world supply. 39 But to think merely in terms of numbers of barrels is to miss the point. Although, this is a virgin region, the oil is not as high quality as that found in other provinces. It has extremely high sulfur content. It will be little more than a diversified source of energy that gives an edge to whoever controls it. There are also very few ways to get that oil into the world's gas tanks without a heavy capital investment into pipelines threaded through some of the world's most deadly political geography. Deceive the people, blame the people The books on world oil reserves are as cooked as the books of Enron. As FTW continued to publish a series of articles throughout 2002 on the coming crisis, I was contacted by many people who insisted that the reserve projections were showing that more oil was somehow replacing that which had been pumped. They also said that government figures from the US Geological Survey showed that there was much more oil than we said there was. First, it is critical to understand that if an oil company reports accurate reserves in a field promptly upon discovery of that field, they have to pay taxes on all of it at once. So they spread the tax burden out over several years -- by reporting new finds in old fields. This practice maintains stock prices and investments for oil companies that haven't made any new finds. Oil in the ground is booked as a corporate asset on the balance sheet. Backdating oil discoveries to the date a field was opened is essential to understanding how quickly new discovery is really diminishing. Patiently, Dale Pteiffer responded to other misconceptions with hard science. What was being reported as new oil in old wells was sometimes the result of the seepage into spaces left by drilling from tiny deposits of oil that then filled the void. It was not much, and it would not make a difference.40 To the people who insisted that oil reserve figures for the Middle East showed that new oil was materializing, he pointed out that the OPEC nations, responding to the recession of the late 1980s, were faced with a problem. There had to be enough cheap oil to stimulate a recovery that would ensure the demand for oil. OPEC's control over that process was enhanced by a successful economic attack on the Soviet petroleum industry. By overproducing and price-cutting, OPEC rendered Soviet oil uncompetitive as its higher production costs began to approach its net revenues. Cutting Soviet oil revenue was a great way to bankrupt the Soviet Union. It worked.
Falsely "never-emptying" reserves. and huge jumps in reported reserves during "quota wars" when OPEC allowed exports (and therefore income) according to a country's reported size of reserves. Data is from Petroconsultants of Geneva, a consultancy whose database is the most comprehensive available for data on oil resources that exist outside of continental North America, and is used as a bible by all international oil companies All OPEC nations have production quotas to manage prices that are based upon stated reserves in the ground. When OPEC suddenly needed to increase production beyond their agreed upon limits, they just broke out an eraser and changed the quantity of reserves on the books. Only one nation, Dubai, did not follow suit to match its neighbors. To believe that all this new oil suddenly appeared, one would have to argue that the oil somehow appeared under the ground in every Middle Eastern country except unlucky Dubai. The following chart posted at <www.hubbertpeak.com> proves the point. The US government, it turns out, is no less guilty of misrepresentation. Pfeiffer took on the magically self-adjusting reserves published by the US Energy Information Administration (EIA) and found evidence of cooked books: This [book cooking] is one of the major causes of disinformation regarding energy issues. The US government relies on the EIA for all of its energy information. Yet the EIA, a division of the Department of Energy, has admitted that it reverse engineers its studies. "These adjustments to the USGS [US Geological Survey] and MMS [Minerals Management Service] estimates are based on non-technical [emphasis mine] considerations that support domestic supply growth to the levels necessary to meet projected demand levels," stated the EIA in a report titled Annual Energy Outlook 1998 with Projections to 2020. This means that the EIA first looks at projected figures for demand, then juggles reserve and production figures to meet that demand! Likewise, USGS reports can no longer be trusted either since the agency's about face in 2000. Prior to 2000, the USGS was talking about oil depletion and the crossover event between demand and supply. In 2000, however, the agency published a rosy report stating there would be abundant oil for many decades. Geologists working for the USGS have stated off the record that they do not trust USGS oil data.41 Further misleading the public are the following official statements. From the CFR report: "The reasons for the energy challenge have nothing to do with the global hydrocarbon resource base, which is still enormous."42 The National Energy Policy blames everything on infrastructure and technology. In its opening page it denies all of the empirical evidence that it subsequently produces to the contrary. Referring time and again to the California energy crisis of 2001, it blames the problem on a lack of production capability. California was just the beginning of what the world can look forward to -- and a mild version at that. Although it has since been disclosed that Enron and other companies worsened the crisis and took criminal advantage of it, they did not create the crisis in the first place. While producing page after page of factual data establishing that this crisis is real and unavoidable, the NEDPG group also blamed everything on science and money. Dick Cheney signed off on a report that said, "we must use technology to reduce demand for energy, repair and maintain our energy infrastructure, and increase energy supply. "42 By similar logic, if you lock someone in a bank vault and give him enough money, technology, and incentive, he can materialize a ham sandwich. Further compounding the problem, in late 2003, oil major Royal Dutch Shell announced that it had overstated its reserves (in order to maintain share prices) by as much as 20 percent. Shell actually cut its reserve estimates not just once, but three times.44 Shell's fraudulent bookkeeping not only resulted in the resignations of its two co-chairmen; it also triggered a wave of reserve restatements throughout the energy industry that has yet to be fully played out. Shortly after Shell's announcement, VS energy major El Paso announced that it had cut its stated natural gas reserves by 41 percent,45 As a result, the Los Angeles Times reported that regulators had begun to examine the reserve statements of all major oil companies and that this might produce significant upward pressure on prices as reserves were revised downward. The Times reported, "For petroleum firms, reserves amount to nothing less than 'the value of the company,' says Ronald Hatrell, chairman of Ryder Scott Co., a Houston petroleum engineering firm."46 In other words, the truth about diminishing reserves could destroy share prices, which could destroy financial markets and investments, which could lead to a collapse anyway. Such financial considerations are not irrelevant when one considers that, as the Times of London reported in January 2004, "The world's top ten energy companies are failing to find enough new crude to replenish their reserves, according to Wood Mackenzie, the oil consultancy, which sees exploration in the UK North Sea as the industry's biggest waste of money over the past five years."47 Alexander Solzhenitsyn said, "Men, in order to do evil, must first believe that what they are doing is good." Through all of this I see the same self-justification that has enabled all corrupt politicians and government apparatchiks to lie, to steal, to distort, to manipulate, to deceive, and to destroy: "I'm just doing what the people want." This is the rationale, I suspect, that George W. Bush and Dick Cheney use in their sleep and in their waking moments to justify the US aggression that has taken place since 9/11. George W. Bush did tell us that "the American way of life is not negotiable." I found this attitude summed up again in a passage from the CFR reporr which read, "So we come to the report's central dilemma; the American people continue to demand plentiful and cheap energy without sacrifice or inconvenience."48 Most of the American people don't have a clue as to what is really driving events. No matter what, leaders have an obligation to tell the people the truth. Recall the following quotation, attributed to Thomas Jefferson: "I believe that the people, when properly armed with the facts, will come to the right conclusion." As events have unfolded since 9/11 , we have seen that we are being told anything but the truth. Proving the crisis is here The earth is attempting to rid itself of an infection by the human parasite. -Richard Preston, 1994 Even the major oil companies understand the future. Both academics and former oil company executives have told me that the oil companies know exactly what is happening. They even produce figures confirming it. This explains why so many major oil companies have merged and are currently downsizing.49 Even though reports from the White House and the CFR decry poor infrastructure as the problem, it is not likely that much new infrastructure will be built in the US. There won't be enough energy to power the plants and fill new pipelines. The undeveloped regions must be drilled and pipelines must be built to make the oil and gas useable. And still the new production from these regions will do little except to diversify supplies for a while and ease prices when necessary to avert an economic collapse before the inevitable physical one gets here. According to BP-Amoco, world oil production per capita peaked in 1979. 50 This figure is acknowledged by the International Energy Agency (IEA) and many other scientific journals. It is not going to get any better. Dr. John Price, an economic analyst, pegged the heart of the problem in a May 2001 appraisal entitled "Oil and Global Recession."51 He zeroed in on both the secretive Vice President's Energy Task Force (NEPDG) and the CFR report published only a month earlier. (Note the proximity of these reports to the attacks of 9/11). He used a quotation from CFR member Matthew Simmons, who had participated in both projects, to make his point: [Simmons] exhorted delegates to the recent Offshore Technology Conference to prepare for a 'World War II' scale operation to meet forecast energy demand. Only an operation of this scale could solve the 'energy crisis' -- 'crisis' being defined as 'when a problem or series of problems turn from being troublesome to extremely severe' (or as some would say, when a problem suddenly becomes terminal) 52 Price quoted Simmons as saying that the costs of the operation would be around $5 trillion dollars, not counting costs of infrastructure expansion. Then he observed,
From Richard Duncan, The Oil Crash and You, August 2001. "The CFR solution [political, manufacturing and economic restructuring] won't work. It's too big; it's too expensive; lead times are too long; and the return on investment is uncertain." Returns on investment can only be uncertain if there is doubt about the availability of product. Demand (need plus purchasing power) is a given. Price then confirmed exactly what I have learned through many thousands of hours of research and interviews. This is exactly what Dale Allen Pfeiffer had told me when we first started talking, right after the World Trade Center attacks; "by way of confirmation, people in and close to the oil industry are reporting that increased drilling is not resulting as yet in significantly increased supply." No doubt Price felt that Simmons was referring to a massive operation like the Manhattan Project that produced the first atomic bomb. However, I take the World War II operation suggestion a little more literally. So, it appears, did Richard Cheney and George W Bush. Where would the money in excess of $5 trillion come from? Well, our leaders have a habit of not telling people the truth. It's bad politics. They also have obligations to the people who put them in office (I did not use the word "elected"). But there is $600 billion a year in liquid cash from the drug trade. If invested well it could add several trillion to the pot while killing off "inferior" drug addicts (I have heard this attitude expressed by both intelligence operatives and political figures). What the heck -- there are too many people anyway. In this way, power and control could be maintained. Handsome profits could be passed out among those in the know. And why not? It's a zero-sum game. Individuals in power would be better prepared to deal with what follows when the peoples of the world begin to realize that the population is going to be reduced -- one way or the other: relatively benign or absolutely horrific. The ultimate ethical question that is not being addressed openly is, which? As Price wrote just 111 days before the World Trade Center ceased to exist, "The challenge of recession is immediate; the energy crisis is immediate. The immediate refuses to be ignored." Sir Charles Galton Darwin wrote in 1952: The fifth revolution will come when we have spent the stores of coal and oil that have been accumulating in the earth during hundreds of millions of years It is to be hoped that before then other sources of energy will have been developed. ... but without considering the detail [here], it is obvious that there will be a very great difference in ways of life. Whether a convenient substitute for the present fuels is found or not, there can be no doubt that there will have to be a great change in ways of life. This change may justly be called a revolution, but it differs from all the preceding ones in that there is no likelihood of its leading to increases of population, but even perhaps to the reverse. 53 Darwin's observations were reinforced by geologist Walter Youngquist in 1999. He wrote: World population will have to adjust to lesser food supplies by a reduction in population. Pimentel and Pimentel (1996) stated: the nations of the world must develop a plan to reduce the global population from near 6 billion to about 2 billion. If humans do nor control their numbers, nature will." Because stopping and then turning around the freight train of population growth can only be done gradually, this is a project that should be started now (Cohen, 1995).54 If it is not done famine is likely to ensue.55 Geologist Jay Hanson, among the first to raise the issue of a global oil crisis resulting in population overshoot and collapse, came to the same conclusion in "The 'Longage of Critters' Problem": But when the above scenario seems inevitable, the elites will simply depopulate most of the planet with bioweapons. When the time comes, it will be the only logical solution to their problem. It's a first-strike tactic that leaves built-in infrastructure and other species in place and allows the elites to perpetuate their own genes into the foreseeable future. 56 There is another highly significant test of whether or not what I have presented here is true. Think back to the statement about the results of the war on drugs after 30 years. Does my narrative scenario accord with the events since 9/11: the anthrax attacks (using spores developed by the CIA);57 the new vaccination laws and programs; the erosion of civil liberties; all the inconsistencies in the government's statements about what happened on 9/11 and the bogus link between the attacks and Iraq; the sudden and nearly obsessive preoccupation with biological warfare; the invasion of Iraq itself; the creation of a Department of Homeland Security; and the deployment of US military personnel only in regions of the world connected to oil and gas production or transshipment. As Colin Campbell, founder of the Association for the Study of Peak Oil «www.peakoil.net» has said, "The species Homo sapiens is not going to become extinct. But the subspecies 'Petroleum Man,' most certainly is."58 Before that happens, there will, as we will demonstrate to you, the jury, inevitably be armed conflict to seize diminishing energy resources. It doesn't have to be this way. It shouldn't be this way. But the one thing that makes it inevitable is the operation of the world's economic system, a psychological and ultimately moral limitation that no political leaders and few human beings can see beyond. I heard this reality confirmed by a major Dutch economist speaking at a Peak Oil conference in May of 2003 who said, "It may not be profitable to slow decline." 59 War is the most profitable business of all. In this context five specific quotations from Zbigniew Brzezinski's 1997 book The Grand Chessboard: America's Primacy and Its Geostrategic Imperatives provide key landmarks in our investigation of 9/11:
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