From Lewis L Smith
Recently a longtime Internet correspondent of international repute requested my opinion on the relation between oil prices and economic activity. I was both honored [since he is better known than I am] and somewhat take aback, since the subject is neither an easy one nor one on which I have done any research.
Fortunately I have tried to keep up with the work done by others and also have written quite a bit on closely related matters such as peak oil, “wild cards in the oil deck” and such like. So I was able to piece together the answer which follows, with a few revisions here and there. Read more…
from David Ruccio
The numbers just keep climbing, now making the BP oil spill in the Gulf of Mexico by far the largest in U.S. history and perhaps the largest in world history.
According to the Washington Post, the blown-out Macondo well released oil and natural gas at a rate 12 times faster than the government and BP estimated in the early weeks of the crisis and has spilled a whopping 4.9 million barrels, or 205.8 million gallons, to date. Read more…
from David Ruccio
The oil and gas industry knowingly endanger its own workers, the environment, wildlife, and communities in states across the United States—all in pursuit of high profits.
The National Wildlife Federation has just issued a report, “Assault on America: A Decade of Petroleum Company Disaster, Pollution, and Profit,” in which it explains that major oil spills (such as the ongoing BP spill) are really only a small part of the real story.
From 2000 to 2010, the oil and gas industry accounted for hundreds of deaths, explosions, fires, seeps, and spills as well as habitat and wildlife destruction in the United States. These disasters demonstrate a pattern of feeding the addiction to oil leaving in their wake sacrifice zones that affect communities, local economies, and our landscapes.
Here’s a map of accidents and spills in the past decade: Read more…
From Lewis L. Smith
There is no longer any doubt that world production of crude oil [however defined] is going to peak within everybody’s planning horizons, if it hasn’t done so already. The only argument is over when.
The turning point in discussions of this subject came in 2008 when the Saudis stopped talking about producing 10 to 25 million barrels per day for the next 50 years and admitted that their production was going to peak at 12 million barrels per day within a few years and then begin to decline, until all their wells are capped.
Today the forecasts range from 2004 [Dr. Rafael Sandrea — conventional crude] to 2032 [Exxon/Mobil — all crudes] , with a preferred range of 2010 — 2015.
Needless to say, for strategic and electric-utility planners, these dates are “just around the corner”. Read more…
from Lewis L. Smith
BP is one of the world’s largest oil companies. It is also big on “hubris”. In fact, this hubris is undoubtedly a contributing factor to the magnum disaster which BP has just caused in the Gulf of Mexico.
[“Hubris” is the ancient Greek word for “overweening pride”.]
Now, as if nothing had happened to tarnish its image, BP has just presented its “Annual Statistical Review” with great self-assurance, at an invitation-only meeting in London.
To no one’s surprise, BP is one of the few remaining optimists on the question of future crude-oil supplies. In fact, its Chief Economist said at the meeting, “Oil will never peak” ! Read more…
from David Ruccio
Just as the war in Afghanistan is now Obama’s war, so the oil spill in the Gulf of Mexico is now his.
Tim Dickinson explains why, in a remarkable essay on how Obama failed to crack down on the corruption of the Bush years, and let the world’s most dangerous oil company get away with murder.
First, Dickinson traces the activities of Obama and his administration, especially Secretary of the Interior Ken Salazar, in the period leading up to the explosion of the Deepwater Horizon well (when they greenlighted offshore oil drilling and failed to clean up the Minerals Management Service) and after the spill (during which they’ve allowed BP to continue deep-sea production at its Atlantis rig, bowed to BP estimates of the extent of the spill, and attempted to manage the crisis by “supporting” BP efforts to contain the spill and engage in clean-up efforts).
Then, he explains why the Obama administration failed to crack down on BP and to tackle the crisis with the full force of the federal government? Read more…
from Frank Ackerman
Despite talk of a moratorium, the Interior Department’s Minerals and Management Service is still granting waivers from environmental review for oil drilling in the Gulf of Mexico, including wells in very deep water. Until last month, most of us never thought about the risk that one of those huge offshore rigs would explode in flames and then sink, causing oil to gush out uncontrollably and befoul the oceans. The odds seemed low, and still do: Aren’t there lots of drilling rigs in use, year after year? Twenty years ago, your elected representatives thought that you’d be happy to have them adopt a very low cap on industry’s liability for oil spill damages. Read more…
“Fire” by Lewis L. Smith – Analysis and photographs of the Gulf of Mexico disaster
from Frank Ackerman
The social cost of carbon may be the most important number you’ve never heard of. U.S. climate legislation is stalled in Congress, but in the meantime, the Obama administration is trying to fill the gap by considering climate impacts in the regulatory process: from the tailpipe emissions limits and gas mileage standards unveiled April 1, to energy-efficiency standards for many types of residential appliances and commercial equipment.
This is important work; U.S. action to reduce greenhouse-gas emissions is long overdue, and it’s crucial in the global picture, both because of our large share of total emissions, and because of our ability to influence other nations. But it’s also important to do this right, and a look at how the administration has handled the social cost of carbon (SCC) raises some serious concerns. Read more…
from Frank Ackerman
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.” Read more…
from Lewis L. Smith
Traditionally, the US Department of Energy has denied the existence [or at least the imminence] of a peak in world production of crude oil. In this regard, it has faithfully followed the traditional oil-industry line, frequently referring to such an event by the pejorative phrase, “the theory of peak oil”.
Suddenly, however, DOE seems to be sidling up to the possibility that this alleged “theory” might actually become a reality. In a recent, largely ignored, semipublic meeting, the US Department of Energy presented, as one of its scenarios of the future, the most pessimistic scenario in the agency’s history, apparently without assigning it any probability . Read more…
from Lewis L. Smith
Unlike some of the debates in the 20th Century, the debate over peak oil in the 21st [2004-2008] was not at all theoretical. It was very practical. It turned on two questions — What is the condition and actual production of Saudi Arabia’s active oil reservoirs ? How accurate are the projections of future production?
Despite recent op-ed articles in some of the principle media, the debate is over, and the pessimists won. In 2008, the King said that future confirmations and discoveries would be reserved “for our children” [not your SUV]. Subsequently managers at Saudi Aramco, the country’s oil company, stated — for the first time in history — that oil production would peak in a few years, plateau for a decade and then decline, until the wells were capped. Read more…
from Edward Fullbrook
Two articles in today’s Guardian point to a major dilemma facing economics and every economist. Do we put a price on Nature, including the ecosystem, or not? One of the Guardian articles leaks an unpublished UN report which estimates that the world’s 3,000 biggest companies cause $2.2tr of environmental damage a year and if made to pay for it would lose one-third of their profits. Read more…
from Lewis L. Smith
A friend asked me to comment on some material which he had received, extolling the virtues of the Bakken Formation, which appears to have received considerable publicity among investors in the USA.
This is a large mass of underground rock located mostly in Montana and Wyoming, running up to the Canadian border at least. According to a recent study by the US Geological Survey, this formation may contain large amounts of oil and gas which could be extracted using current technology. In fact, it is already being exploited successfully, and some people believe that it might even be another Saudi Arabia !
The Bakken Formation should not be confused with the now famous, gas-bearing Barnett Formation. Their only similarities are that both both names begion with the letter “B”, both contain lots of shale rock and both have been subject to broker-inspired hype.
Since this “good news” has coincided in with the promotion of stock in oil or gas companies, I though that I would try to inject a word of caution into the discussion of this geological phenomenon with possibly large economic, environmental and political significance. Read more…
Is Malthus relevant post-Copenhagen?
Thomas Malthus died on December 23rd 1834. The work of Malthus raises two important questions. First, are there now too many of us? Second, are there now too many of us doing things we shouldn’t be doing? These are problems of fact and value. The problem for economics has always been how to conjoin the two. The positive-normative distinction has always been a curious one for a social science since its ultimate unit of analysis is an evaluating being that lives immersed in systems of values.
The positive-normative distinction derives much of its authority from Hume’s guillotine. The guillotine is: Read more…
Clive Spash’s paper “The Brave New World of Carbon Trading”, which the Australian authorities suppressed, is now available at:
For background see:
Censorship of Critique of Emissions Trading and Carbon-Offsets Schemes
Update on Censorship of Critique of Emssions Trading Schemes
As an independent economic thinker rather than an affiliated academic, I can perhaps offer a fresh approach to our ecological predicament.
The current approach is typified by recent posts regarding cap-and-trade, including Edward Fullbrook’s request that economists evaluate James Hansen’s “fee and dividend” proposal. These posts are attempts to reform the current system – that is, to improve on business-as-usual. Such reforms are worthwhile, but strikingly inadequate to prevent the collapse that Fullbrook and many others rightly fear.
Climate change is clearly a major threat to ecosystems, but it is only a symptom of the underlying problem we face – ecological overshoot. For the first time in history, humankind has violated environmental limits on a global basis. This situation is unprecedented, and therefore requires an unprecedented solution. Read more…
The climatologist James Hansen opposes the cap and trade scenario being considered at Copenhagen on two grounds: one, at the real-world level it is essentially a programme for fraud and corruption, and two, it is essentially greenwash and thus serves to postpone, yet again, serious attempts at carbon reduction. Yesterday’s Sunday Times provides supporting evidence for Hansen assertion that cap and trade is a system for “paying off numerous special interests”. Read more…
There have been major developments in the story (Censorship of Critique of Emissions Trading and Carbon-Offsets Schemes) about the attempts of Australia’s CSIRO to prevent Dr Clive Spash from publishing his critical review paper on emissions trading and carbon offset schemes. On 2 December, as reported in Nature News, The Australian and ABC Radio National, Clive decided he had been through enough bullying and resigned from his professorial-level position as a Science Leader at CSIRO. That Clive should take such a brave public stand on this matter will probably come as no surprise to Real World Economists who know him as an ecological economist of the highest principles who is concerned about the potential catastrophic irreversibility of climate change if inappropriate polices are adopted. In resigning, Clive called for Read more…
James Hansen is not an economist. But after Lovelock he is arguably the most eminent climatologist ever and currently director of Nasa’s Institute for Space Studies. Like others of his profession, Hansen knows that the Earth’s climate is close to tipping points and that it “is a dead certainty that continued high emissions will create a chaotic dynamic situation for young people, with deteriorating climate conditions out of their control.”
But Hansen has what he thinks may be – if we are lucky – an eleventh hour escape. It is economic in nature. As economists we might want to do our part and develop and promote it further. Hansen Read more…