Tag Archives: oil

The WWIII Chronicles: Introduction

As 2015 draws to a close I am beginning the development of a theme that has been ruminating in my mind for more than a year. The theme is that we are witnessing the initial skirmishes of the hot phase of World War Three (WWIII) identified by many as the New Cold War or Cold War 2. There are almost daily events that we can weave into this theme which is why we are starting this journal as a set of chronicles.

Although we like to think in terms of linear causation with the result we attribute specific events as seminal markers, that is not how the world works. A linear deterministic mode of thinking can never capture the evolution of a complex system of the actions and interactions of many actors.

Taking World war I as an example, The Week gives us the common cited simplistic immediate cause of the war as the assassination of Franz Ferdinand, the archduke of Austria-Hungary. The Week also outlines several geopolitical situations that fed into an active hot phase of hostility. By ‘hot phase’ we mean military action.

Under construction

References

  1. How did the First World War start?

Inside a Silo

Zero Hedge posted an article today titled  BP’s Latest Estimate Says World’s Oil Will Last 53.3 Years. The article states (emphasis ours):

BP’s annual report on proved global oil reserves says that as of the end of 2013, Earth has nearly 1.688 trillion barrels of crude, which will last 53.3 years at current rates of extraction. This figure is 1.1 percent higher than that of the previous year. In fact, during the past 10 years proven reserves have risen by 27 percent, or more than 350 billion barrels.

In Jeopardy Question: This Body of Water Determines the Fate of the Modern Day Anasazi, we stated:

We are linear deterministic thinkers. Another description of our thought processes is that we think in “silos”. Broad dynamic networks of independently acting agents are beyond our ability to model and rationalize so we simply ignore them.

This is a classic example of “silo” thinking. This is a linear projection of future reserves based on a figure for the current rate of extraction projected to the point where the reserves are exhausted. What are totally ignored are the feedback loops that will affect extraction decisions.Certainly the cost of the next barrel extracted will not be the same as the cost of the last barrel extracted.  Certainly demand will not stay constant, affectingh both price and extraction decisions. But the feedback loops that Gail Tverberg speaks of (read Oil: Primary Energy Source for the Human Social CAS) will affect extraction costs and decisions long before the last barall is reached. In facct, society as we know it will have changed in unimaginable ways and perhaps collapsed altogether before known reserves are exhausted.

The BP extrapolation is useful for drawing people’s attention to the immediacy of the problem but for no other reason.

Related Links on This Site

Oil: Primary Energy Source for the Human Social CAS

On the “About” page of her blog site, Our Finite World, Gail Tverberg writes:

In early 2007, Gail decided to devote full-time to issues related to oil shortages, and other shortages, and their impact on the economy.

She explains in one sentence what she is about – a researcher and writer on the relationship between material shortages, particularly oil, and the economy. A sharp focus like this is usually the sign of a sharp mind. At the same time, she confirms our intuition that the issues around oil are a full time job, validating our decision to largely avoid the topic. Now that we share her interest in the context of networks or CASs, we will pick up the topic by distilling her latest essay, Why Standard Economic Models Don’t Work–Our Economy is a Network.

This essay becomes the first on the energy aspect of our new series on complex adaptive systems (CAS: The Operative Principle Behind Everything). In extracts that we quote from her essay any emphasis will be ours unless otherwise noted.

CAS: Limits in a Connected World

The grand strategy that we have adopted is to understand our global civilization as a complex adaptive system (CAS) or less formally, a networked or connected world. One of the first sources of commentary that came our way when we launched this effort is the video by Chris Martenson below (56:04 minutes). After the video we comment on it, extracting what are key ideas for our theme.

This is a long but well produced and clearly explained analysis of the current state of our civilization from three key viewpoints, economic, environmental, and energy. We examine each in turn.

The Future of OPEC

 

December 4, 2013
The Future of OPEC
Pump jacks in the Kurdish town of Derik, on the border with Turkey and Iraq, Nov. 25. (ACHILLEAS ZAVALLIS/AFP/Getty Images)

Summary

The prospect of revitalized oil production in Iraq and Iran may add to tensions between those two countries and Saudi Arabia over export quotas. On Dec. 4, representatives of the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna to discuss a number of topics. OPEC is facing two challenges. First, OPEC’s historically biggest consumer — the United States — is rapidly increasing its own domestic production. At the same time, OPEC must deal with plans to expand oil production envisioned both by Iraq and Iran, which could lead to lower prices than the cartel desires. Ultimately, however, emerging markets in Asia will set global demand, and their energy thirst will determine the scale of the problem OPEC faces.

Socialism: An American Scenario I

This essay is based on the promotional video from Porter Stansberry shown below. We warn the reader it is long – we didn’t time it and it doesn’t display its length – and is structured to sell a newsletter subscription. Some readers might find the newsletter beneficial but our intent is to examine the primary scenario, one of a wealth-driven radical increase in socialist programming in the US. We do not have to accept its basic premises but we can extract some valuable points and observations from it. Here’s the video. We follow it with an extract of what we consider to be key points and then we discuss the points.

Three Cheers for Ethical Oil

Below is a new essay from Dr. Paul Merkley printed by permission of Paul and from The Bayview Review.

Ezra Levant’s national bestselling Ethical Oil: The Case for Canada’s Oil Sands (2010) presents compelling analysis on environmentalists’ apparent preference for doing business with fascist theocracies and other nasty regimes.

Viewing Canada’s oil sands as a blessing, Levant points out that Canada is the only genuine liberal democracy among the top ten largest oil-reserve nations. The human rights record of Saudi Arabia is no secret: women are forbidden to drive cars, teenage “criminals” have been “beheaded with swords in the public square,” and homosexuals are executed. Justice in Iran includes “death by stoning, crucifixion, or limb amputation.” There are many reports of human rights abuses in oil-producing nations such as Venezuela and Sudan.

Flash Point: Saudi Oil As Seen By Strafor

In Flash Point: The Implications of the End of Saudi Oil, we discussed a projection that Saudi Arabia would become a net importer around 2022 with severe social and geopolitical stresses emerging well before that point. Stratfor, experts in geopolitics and security issues, has just published Challenges for the Saudi Royal Family: Energy as part of a 3-part series. We review their note in the context of our original post.

Flash Point: The Implications of the End of Saudi Oil

Ambrose Evans-Pritchard, wrote last week in The Telegraph, Saudi oil well dries up. He presented the following chart of projected Saudi oil consumption, vertical bars, and production, dark blue line.

By these estimates, in 2022, Saudi Arabia will no longer be supplying oil into global demand but will be competing in global demand for foreign oil. Long before we reach the tradeoff point, however, certain exigencies will emerge.

First consider the area on the chart between the two curves. This area is highly correlated to their balance of trade and their foreign exchange reserve acquisition. The website Suite 101 states that [t]he petroleum sector accounts for more than 90% of the Middle Eastern country’s exports. If the two curves are at all representational of what is to come, then it should be noted that they are exponential. The implication is the positive Saudi economic position is decreasing exponentially, doubly so between two diverging exponential trend lines. After 2022, their economic position will deteriorate at the same exponential rate.

But this is linear thinking. The strains of a deteriorating economic position will begin to manifest in the economy long before the crossover point is reached. The Saudi’s have been using a large part of their oil wealth to fiance internal social programs to pacify a restive young population through subsidized employment. When these programs can no longer be supported the resulting social unrest may lead to revolution and the overthrow of the Saudi Monarchy.

The other aspect of the use of their wealth has been to support other countries and organizations against Iran and Shiite fundamentalism in the Middle East in the age-old Sunni/Shiite sectarian battle. As Saudi influence wanes through the loss of economic power, Iran with its huge oil reserves, may be just ramping up. The result will likely be a shift in the balance of power in the struggle, impacting the entire Middle East.

With respect to oil itself, if Saudi production is not replaced, then the Saudi supply/demand curve becomes global. Oil prices will respond accordingly and global economies will slow in relation to escalating oil prices. If Saudi production is replaced, then there will be a global shift of balance of trade from the existing failing producers to the new producers. This will have geopolitical implications as well.

 

Saudi Arabia

The Real Reason Behind Oil Price Rises – An Interview with James Hamilton

The topic of oil we view the same as we view the topic of climate, sufficiently large and controversial that it could consume every waking hour we have and we might only be scratching the surface. So we stick to publishing only the occasional piece. We felt that this interview with James Hamilton that we were given permission to republish was a particularly good overview of key issues including:

  • Why we shouldn’t get too excited with the shale revolution
  • The “Real” cause of high oil prices
  • The incredible opportunity presented by natural gas
  • Why long term oil prices will creep upwards
  • The geopolitical hotspots that could cause an oil price spike
  • Why sanctions could cause Iran to lash out
  • Why speculators and oil companies are not to blame for high oil prices.
  • Changes we can expect to see under a Romney Administration
  • Why Short term oil price forecasts are worthless
  • Peak oil & Daniel Yergin

The interview conducted by James Stafford of Oilprice.com follows:

Powered by WordPress | Designed by: photography charlottesville va | Thanks to ppc software, penny auction and larry goins