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Comment/Learsy hearsay or what's wrong with Raymond Learsy's "forthright comments" on oil

It is probable, or at least possible Learsy himself takes seriously what he claims as facts in this "trenchant" piece. Basically he asserts the IEA or International Energy Agency has been taken over by dark forces which inject the world's media, and politicians heads with dangerous, or at least wrongheaded propaganda to drive up oil prices. The Learsy IEA is a friend of oil speculators who cynically and greedily manipulate oil prices, usually upward, before they implode their hedge funds, investment banks or other dark nests of dubious financial deeds and run to governments for generous bailouts. The same Learsy IEA, for the same reason also credibilises peak oil pranksters, like Matt Simmons who can double any peak oil price forecast you would care, or dare to make.

A few clicks of the mouse will reveal exactly how, when and why the IEA was established. Its Nixon-Kissinger founding duo were surely not "shilling for OPEC" when they created the IEA, that is certain ! In fact, they set the mission and purpose of the IEA as a second-best to what they really wanted to do, in the agonizing Oil Shock period of 1973-1974. Nixon and Kissinger wanted to invade Saudi Arabia, to "liberate" its oil resources or at least make sure the Saudis kept up their production and oil exports "at reasonable prices". This is not supposition and innuendo, or the journalistic excesses Learsy puts on paper, but simple fact. Nixon and Kissinger wanted the US and its allies to invade Saudi Arabia, to maintain oil exports at a low barrel price. Not being able to do that, for various realpolitik reasons, they produced a second-best, in the shape of the IEA.

This real world IEA has a difficult balancing act to maintain, and path to tread. Learsy rages at its Japanese executive director's "outrageous obsequiousness" or kow-towing to OPEC, but the IEA has to make do with words. Much lesser and lower politicians, decades after Nixon and Kissinger, went further and did what those 1970 founding fathers of muscular energy policy really wanted. But the IEA only has the weapon of second-best playing on oil and energy information, with the vague but fully-documented intention and mission of "confusing the enemy", that is OPEC, into exporting oil at the lowest possible price. Like any liberal economic entity or agency of the 28 OECD member states in the IEA, it would be strange if it didnt defend free markets and what Greenspan calls their "exuberance". Since 2008 other adjectives are used to qualify market trading in any conceivable, and often imaginary financial instrument, right across the spectrum of tradable finance instruments. After the 2008-2009 meltdown, during which oil prices crashed with everything else, hubris and self-delusion are politically correct ways to describe the mindset of free market operators, at least when they blow up the game and lose everything.

Learsy however chooses oil market traders as the worst of the bunch. He cites the US CFTC or Commodity Futures Trading Commission as a watchdog, with no bite and almost no bark, which now provides splendid ex post facto views and comments tending to suggest the recent run up of oil prices was "speculative". And the preceding crash of oil prices, through late 2008 and early 2009 ? Or oil price movements preceding and following the Iraq invasion of 2003, or Kuwait liberation of 1991? Or, to change the tune, gold price movements when the US monthly trade deficit number is specially bad, or not as bad as expected? Or copper prices when Chinese stockpiles are higher, or lower than expected and forecast ? Markets only work for their operators when prices change. The more they change the better things are for traders. Does Learsy need to be told this ? Learsy puts oil traders on the block and pulls the guillotine handle. Along with OPEC, the IEA and Peak Oil pranksters, he thunders, this Gang of Three is driving good old oil into dangerous waters. Learsy's strawman oil traders are based in Moscow, Tripoli, Caracas, Riyadh and other oil capitals, but as Learsy's friends at the US CFTC show, in regular monthly reports, dating back for a decade, the vast majority in fact operate in New York, London, Singapore and Tokyo. Trading outside of these centers, for example in zero oil exporting Dubai, is minuscule by comparison.

When it comes to the IEA Learsy is specially vitriolic. To be sure, back in the old days and for Nixon and Kissinger, the 28-nation IEA including all the OECD's major oil importers was intended as an entity that would gather oil data on a continuous basis. Using this, it would coordinate divideand- rule dealings with the oil exporters. This would result in lower priced imports, and would limit any possibility of the 1973-74 oil shock repeating. The only problem is that this old model IEA, and its old model mission were based on world oil trade dominated by bilateral, state-to-state oil trading. By the late 1980s this model had almost disappeared. Today it is a folk memory, but could or might come back when oil prices do comply with the prankster notions of Matt Simmons, and oil market traders make their final bid for a handful dozen more dollars on every barrel!

Over the years the IEA has gradually made up for its loss of mission. It has broadened its mandate to cover such sensitive things as the ultimate horror for Learsy and his ilk - geological oil depletion and the need to use less of oil.

Here we can use some Learsy-type sophistication and suggest an entirely more interesting interpretation of the latter day IEA's role and mission. It now works with a semi-hidden objective of making that mystic entity, The General Public, in the USA and other IEA member countries, aware that oil is running out. To be sure, the IEA along with your local supermarket and city mayor will also tell you that solar and wind energy are needed to fight climate change, but keeping folks interested, that is anguished about oil and energy is a way to get them talking about renouncing their dependence on fossil energy. This too has a very clear free market goal: getting the public to rush out and buy overpriced renewable energy gadgets. As the April 2009 G-20 Summit, briefed by the IEA with Fatih Birol at the microphone put it: Towards a global green recovery.

Pu this another way. What average oil hungry consumer citizen, not only in the IEA's 28 member countries but increasingly in China, India and elsewhere, the proud owner of a 6-cylinder 250 HP car, or apartment using 100 kWh per square meter every year, would have the slightest interest in solar energy or windmills, or biofuels a few years ago, if oil wasn't menaced with extinction ? The renewable energy boom, that the IEA warmly supports, to the distaste of Learsy, would have no sense if oil wasnt getting rare and pricey. If the consumer citizen was extremely erudite or Internet savvy he or she would also find out their food is totally oil-based, and some kinds of food are basically just oil with a few pesticides and coloring thrown in, for flavor or to create downstream jobs for the medical profession. Putting two and two together, the average consumer citizen now has to worry about their food supply, as well as their energy supply.

We could add with the IEA that not only cheap oil but also polar bears are menaced with extinction. The ecology and biodiversity plank, very popular with some segments of adult consumer populations, and not only in OECD oil importer countries, only aids the drive towards oil saving and replacing oil with renewable energy. Green citizens take ecology seriously, or at least watch TV programs on the subject while twiddling their iPods. Along with the IEA and home entertainment TV talkshow hosts, we can quickly come to the new bottom line.

Learsy studiously avoids this latest street credible wisdom, but we can repeat that, today, the IEA says we have to find ways to use less oil.

Reasons for this in reality include the abysmal failure of Iraq "liberation" to almost spontaneously lead to a vast increase in oil exports from Iraq. This fact can of course be used by defenders of the thesis the Iraq war was not an oil war ! Other geopolitical reasons for the US to use less oil, or at least oil imported from the Middle East, Africa, South America and Russia, include the disastrous effects on world opinion, of the USA, caused by the War on Terror. Yet other Middle Eastern reasons for unsure and insecure oil export outlooks include the rapid growth of After Oil investing in Gulf Arab countries, in other words these producers are taking their feet off the gas pedal when it concerns increasing output capacity. The IEA highlights other and more allowable explanations for why we should use less oil. No doubt enraging Learsy, the IEA claims that using less oil will not only make it cheaper and more affordable by reducing speculation, but can also save polar bears, in an almost painless and truly seamless double operation.

And what about Saudi Arabia ? The Saudi's may be underproducing, nothing like the hysteria number of Learsy's, that is 4.5 Mbd of hidden wont-share oil pumping capacity, but on purely logical grounds Saudi Arabia is overdue for "liberation". Learsy of course does not add that midweek, late night TV talk show hosts still say that Osama could or might be hiding there, with a few toy centrifuges next to his iPhone and dialysis machine.

Times have however changed since those long lost days of muscular energy policy from the Nixon Kissinger duo. Saudi rulers now play ecological, or at least pay high price western architects to design solar collectors into their 60-storey "sustainable" concrete towers overlooking the 16-lane urban highway, poured from the same concrete delivery trucks. The massive new highways in Saudi Arabia, usually built by the Bin Laden family, are stuffed with high power gas guzzling limos that increase Saudi national oil consumption, cutting its exports ! This Green Saudi playacting, in fact, is probably a highly effective anti-invasion strategy, far better than joblots of cheap anthrax spores, toy centrifuges, or similar vaudeville WMD. It is also a nice way to use up, or "recycle" Saudi petrodollar stashes, like those of its smaller princely friends in the Arab (or Persian) Gulf region - without the disgraceful obsequiousness Americans and Europeans are forced to show towards the Chinese, with their 2 100 Billion US dollar capital surplus earned from hard industrial slogging, and far bigger than any Gulf Arab stash.

Learsy says yes and of course he is right. Any news about oil feeds speculation, either for pushing prices up or pushing prices down. The same applies to sugar, wheat, gold, pork bellies or company stock in world class toilet paper producers. Green Energy speculators pay more interest to stock of lithium mining companies, but if a world class WC paper producer has a new gadget for absorbing SO2 emissions or Going Green by sequestering carbon, it could make a guest appearance in the ecological investment portfolio. Always the basic mechanism is the same, called Free Market exuberance. Others, not including Learsy but certainly myself call it a 24 hours-a-day gambling frenzy but as we know, the alternative of North Korean communism is not very eco-friendly, Pyongyang has very few solar energy start ups and probably no "ecologically minded" hedge funds. Some days, on some IEA web sites we are permitted to read and adore pure anti-oil propaganda of the type that drives Learsy to foaming rage. Other days, on other IEA web sites you will find good, solid anti-Iran cheap oil-and-war propaganda. Learsy should be a more patient or less lazy before shooting off his mouth. Browsing the range of what is on offer is in fact highly educational. It brings out what talking heads like to call the "complexity" of thinking, or latter day schizophrenia, ignorance and hypocrisy, cognitive dissonance and day-to-day groping of the entirely oil dependent societies of the OECD consumer world. As Learsy doesnt say, a very few facts and figures underline the basic problem. The IEA's 28 member countries have a population of about 1100 million and consume oil, in 2009, at a rate of about 13.6 barrels per person, per year. In 2007 it was about 14.3 bbl per capita, so we could say that IEA propaganda is working, but an easier explanation would be economic recession and population growth ! Even better, we can note that OECD oil demand is falling quite fast in some countries, including the USA, as its price falls. That is, people use less oil when its cheap !


Without exactly saying this, Learsy comes close to accusing the IEA of pandering to doom mongers - for example Peak Oil pranksters. But we can ask why the IEA should not fully represent the new agony and ecstasy of oil consumers in the late capitalist world? Nixon and Kissinger probably shared the same angst, of finally understanding that oil really isn't forever, like 1970s James Bond films and 3 billion-year-old diamonds. But that wonderful duo of born liars, and war criminals to many, did not know that solar energy can run a full-size sedan car several miles with only an hour's charging by a 100 square metre solar cell array. This is now revealed, by the IEA and others ! In sunny daytimes of course. For a modest outlay of 300 000 dollars not including the car, of course. At night we can hope that giant windmills will be spinning, but that might not be the case. Other green hopes are that municipal waste tips can yield us a little methane from the fantastic mass of wastes that late capitalist civilization produces. And Qatar can give us a lot of cheap methane for a while - meaning that things are not so bad as the doomsters pretend.

To be fair, Learsy uses the "D-word" for oil depletion as a prop, for asserting there is no such thing as oil depletion. Showing he plays fair, Learsy does not stoop to abiotic oil or imported Martian oil to show there is No problem, but he works some fancy math on Californian oil fields able, today, to cover US oil demand, of about 13 200 barrels per minute (at least 5% down on 2008 demand), for several days, that is dozens and dozens of hours. Even the magnificent Bakken field, that Learsy curiously avoids mentioning, if it did yield every single barrel of its reserves claimed by some as up to 9 billion barrels, would only cover world total oil demand for about 15 weeks.

Mature urban industrial consumers with an iPod to maintain are not particularly impressed by a 12- month extension of their oil dependent nirvana. Their population could or might include IEA personnel, even Nobou Tanaka and Fatih Birol. These persons have a right to their own opinion, whatever Learsy thunders they should think. Other, like myself, will of course go that mile or ten further, and accuse Learsy and his ilk. These pranksters on the precipice, unlike Peak Oil pranksters and crazed gamblers in oil market trading shebeens, are the real menace. Their whining takes attention from effort giving us hope that yes, we can change our lifestyles without losing too much face, and above all without losing the race to get off oil.

Editorial Notes: Also on Vheadline.com From the Vheadline.com website: Andrew McKillop GSO Project Director (Global Sustainability Options Consulting). Founder Member, Asian Chapter, International Association of Energy Economists. Former chief policy consultant on Energy Programming, Division A, Energy Directorate, European Commission, Brussels.

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