Oil, Jihad and Destiny - Chapter 1: Crisis? What Crisis?
Truth is reality
Truth is unpopular.
Liberals ignore truth if it challenges their beliefs or mocks their preconceptions. They are more comfortable with an adjusted reality that supports their ideology. Conservatives reject truth if it will force change. They are more secure with intellectual pursuit that confirms established principle.
Neither philosophy will like this report. It undermines doctrinaire wisdom and predicts catastrophic change. Our future reality includes the decimation of our economic condition and the subsequent decline of human culture. All that we have achieved, and all that we aspire to, are in mortal jeopardy.
Oil depletion is a secret. The press typically ignores a problem until it causes a crisis. By then it will be too late. Politicians are reactive animals. They shun the topic of oil depletion because it is political suicide to discuss unpleasant issues. If they acknowledge a pending oil crisis, then we voters will ask embarrassing questions: Why did you let this happen? What do you intend to do about it?
And that will lead to more obfuscation. Neither the press nor our politicians have a clue.
Then there is the issue of corruption. A thorough inquiry into the subject of oil depletion would raise uncomfortable questions. Have our politicians been feeding at the oil money watering trough?
So nobody wants to point the finger. Not Democrats. Not Republicans. Liberals or conservatives. Don't rock the boat. Government reports mislead us with unfounded optimism or ideologically correct misinformation. The officious pressure of conformist procedure ensures government bureaucrats will cover for government politicians and academics will reject meaningful discussion.
Oil, it would appear, is not a politically correct subject.
But eventually the voters will find out about oil depletion and the whole Middle East mess. And then the politicians will have to fabricate some plausible excuse for their failure to act. Blame it on the President. He wants to spend billions on space exploration. We can nail him for his failure to propose a comprehensive energy program. What's more important, we will ask - a make work program for NASA - or heat for your home? Pretty pictures of some planet - or gasoline for your car?
Doesn't our government know how to set priorities?
But we are suspicious. We who will suffer. Ominous signs are everywhere. Rising gas prices. Talk of shortages. Indefensible terrorist activity. A growing suspicion of Iran, Syria and Saudi Arabia. The threat of conflict in most of the Middle Eastern nations where oil is produced. An oil crisis will dump the world's economy down the toilet. Poverty. Unemployment. High inflation. Kids going hungry. Men desperate for a job. Women struggling with demeaning depravation.
Doesn't anybody care? Why isn't energy a high priority subject on the agenda of every industrialized nation? Why are European and American politicians avoiding the reality of oil depletion?
Because if our politicians can keep oil depletion a secret, they don't have to deal with the inevitable economic and cultural consequences, the embarrassing questions of failed leadership and the contempt of an unhappy electorate.
Fair warning. Oil depletion. It's coming. Sooner or later.
Maybe sooner than later. If Islamic fanatics have their way, the oil spigot will be turned off. So it doesn't matter how much oil sits under the ground in some pool of reserves. What really matters is how much oil can we actually produce? And that takes us back to Saudi Arabia. And Iraq. The world's economy, it seems, teeters on the political stability of these two countries.
Saudi Arabia is supposed to have the largest oil reserves in the world. But it is becoming increasingly clear that this country's reserve numbers are bogus. And by the way, isn't Saudi Arabia struggling with a growing political instability that could devastate its oil production?
Iraq? Coalition troops try to keep the peace. Islamic fundamentalists are determined to kick the infidels out. Democracy will not work in a land torn by cultural chaos. Dictatorship and tyranny are the future. Under these circumstances, how can we possibly believe that Iraqi oil will delay the inevitable decline of world oil production?
Yes. Oil consumers have a problem. Big time.
But hold on. We're getting ahead of ourselves. Before we talk about an Islamist induced oil crisis, we need a better understanding of the basic problem. Oil depletion. Reserves. How much of that black gold there is left for us humans to consume.
Actually we don't know. How much oil there is in the ground. Or how much oil we Homo Sapiens can produce. And those who control the information don't want to tell us the truth. They sell perception. They know reality. They feed us the big picture to make us feel safe.
There's no problem - right? They sustain our current level of knowledge. Or is it ignorance?
I know what you are thinking. Those damn oil companies. Who can believe them?
But guess what? The big five oil companies are forced by SEC disclosure rules to be relatively straight. No. They are not without fault. But the worst liars in this circus of misinformation represent national governments. It doesn't matter if a particular nation is a producer or a consumer of oil. For reasons of selfish best interest, they both fib. Obfuscate. Hide the truth.
Consumer national governments are loath to even discuss the truth because - anyway you look at it - oil depletion is bad news. And national governments do not like to tell their constituents bad news. That's the way political systems work. Democracy or dictatorship. Bad news must be avoided at all costs. It creates anxiety. Conflict. Questions. Opposition. Bad news always generates a pervasive distrust that somehow the existing national government is doing something wrong. And eventually the offending government officials will be blamed for causing the problem. People, after all, expect their national government to protect them from harm or deprivation.
Even if that is impossible.
Producer nations want to pretend that they can go on producing oil - forever. Oil reserve information is a state secret. That permits these national governments to fabricate whatever oil reserve numbers they are pleased to present to a gullible public. Big reserve numbers allow them to borrow big bunches of money from the bankers. It gives them prestige and status. But can we trust any of the reserve information published by - or about - the nations that belong to OPEC (Organization of Petroleum Exporting Countries)? Probably not. For example, the reserve gains these nations claimed in the late 1980s are an obvious fabrication. There has never been an independent verification that the oil they claim to have actually exists. And get this - even though they pump millions of barrels per day, their reserve claims never seem to decrease.
Is there a credibility problem?
Even Canada has succumbed to the temptress of misrepresentation. Canada now claims to have the second largest oil reserves in the world, all based on the inclusion of its oil sands in its reserve estimates. Oil sands? Doesn't this ignore the incredible problems of producing oil from sticky rock?
What can we expect from the IEA? That's the International Energy Agency in Paris. The IEA is an autonomous agency linked with the Organization for Economic Co-operation and Development (OECD). The IEA produces the World Energy Outlook. But wait. Where do they get their data? Unfortunately, it would appear that the IEA uses the bogus data of producer nations in its forecasts. And is their outlook influenced by the political bias of OECD members?
What of the United Nations? Would the publication of a comprehensive report on oil depletion tell us the truth? Or would the study bog down in the sludge of self-serving political posturing?
Our political institutions have failed us. It would appear that being politically correct is more important than exposing the truth.
If we can not get a straight answer from the governments of oil producing or consuming nations, or even quasi-government international organizations, then can we get a reasonable assessment of oil depletion data from the oil companies? The answer is yes. And no. It depends on who you are talking to and what data is being discussed.
First the good news. Oil companies listed on any stock exchange in the United States are required, by SEC and various accounting rules, to make a reasonable assessment of their reserve positions each year. Oil reserves, after all, are an important item on the balance sheet of any oil company. Accuracy counts. As a practice, however, oil companies understate their reserves. They do not want to be in the position of inflating the value of their assets. That would be fraud. So they try to fudge a bit on the low side in order to protect themselves. Most investors are pleased with this arrangement.
Now the bad news. Oil companies do not actually own most of the oil they produce. It is produced under a revenue sharing arrangement with a government agency of the nation under whose land (or water) the oil reservoir is located. The oil company has a license or extraction contract. So when an oil company tells us it has so many barrels of oil in its reserves, that figure may include assets that are derived from existing contracts. If the contract goes away, so does the oil that can be claimed as an asset. In addition, at any given time the oil companies are under contract for only a fraction of the reserves that may be claimed by the nation that actually owns the oil.
So this leads us to only one possible conclusion: there may be less oil on this planet than claimed (which would be devastating); or there may be more oil than anyone realizes (which would be very nice).
We simply do not know.
Or do we?
That's what this report is all about.
What do you think? Leave a comment below.
Sign up for regular Resilience bulletins direct to your email.