The energy secret - understanding what drives the 21st century and why peak oil really matters
There are at least two invisible things that tend to be ferociously difficult to understand.
The Energy Secret
There are at least two invisible things that tend to be ferociously difficult to understand. One is relations among humans and the other is energy. Especially when the former want more of the latter. And for some reason, understandable perhaps but also unfortunate, we are mostly loathe to try to comprehend where our energy comes from. Thus there is a kind of 'energy secret': we cannot see energy and we don't seem to be very good at understanding it, even though without it there is no life here or anywhere else in the universe.
These difficulties of understanding play out at every level from buying groceries to geopolitics. And yet though energy itself is invisible, its effects are visible everywhere, including this last week in the form of Hurricane Gustav, and a string of storms and hurricanes coming in behind it, lining up to hit the south east US. Gustav, though it has fortunately left New Orleans largely unscathed, has killed many people in the Caribbean.
Gustav has also caused many oil and gas wells off the Louisiana coast to be shut in temporarily. The three named storms following Gustav probably won't cause any more shut-ins, but this has been another reminder that the offshore Gulf of Mexico—the most important US oil and gas production area—is highly vulnerable so supply shocks. This is therefore a very good time to start looking carefully and realistically at the current oil and gas supply situation to the world's largest economy and energy user.
Since the majority of US oil comes from foreign shores, we'll start this series by looking at the most important oil suppliers and the interesting situations above and below ground that will help us to understand where things are heading.
One of those interesting above-the-ground situations is that thanks to below-the-ground changes in oil reserves we may now be witnessing a final historic shift in power relations from a declining superpower to a nascent one. This is likely to be final, because once the petroleum age is over, twentieth-style superpowers will not be possible, at which time both the US and Russia will likely be very different places.
1: Mexico Gives Lessons In Cliff Diving
Before then, the US is the nation with the biggest oil problem, at least by quantity. Typically the US imports approaching two thirds of its oil and petroleum products (such as gasoline). Until recently, it has had two very generous neighbours, willing to supply it with oil to the limits and possibly detriment of their own nations. I refer to Canada and Mexico. Canada's own conventional oil supplies are definitely dwindling, but (like Venezuela) it has vast tar sand deposits, which are now producing over a million barrels a day, much of which finds it way to America. The carbon dioxide emissions are appalling and the tar sands operation may be ruining the River Athabasca and the surrounding environment, but the output is definitely increasing, albeit expensively and much more slowly than predicted.
For over thirty years, Mexico has been supplying the US with ever increasing quantities of oil, noticeably stepping up its exports in the early 1980s, helping America during difficult economic and political years after the Iranian oil crisis of 1979. Not only has Mexico supplied more oil, it is next door, meaning that oil can be piped in and shipped—it can even be trucked in.
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