Saturday, September 17, 2005

Saudi Bullshit Sounds A Lot Like Alaskan Bullshit.

Top of the morning gents,

I smell bullshit.

I've been all over the Energy issue, back and forth,
inside and out. Shit, even wrote a research paper for
my Masters Thesis how the Nordic Power Grid makes our
shit look retarded and gay.

You guys know that the Energy Issue is a bastard sort
of trinity: Coal, Oil/Nat Gas, and Nukes.

If yer lucky enough, you can replace one of these with
hydroelectric dams, wind or ocean current to spin yer
generators. We can also burn fish and vegetable oils
as supplements to diesel, but these alternative fuels
can't contribute more than 10% of our total demand
without driving up fish and corn commodity prices
outlandishly, hence mirroring current crude oil price
spikes.

I never knew the difference between automobile
alternators vs. generators, but I know that I gotta
spin the living shit outa them to get good spark,
defroster fans, and wipers. Same dilemma anytime I
need electricity, I gotta spin shit like magnets
around coils of wire faster'n shit and under
tremendous magnetic resistance.

Electron harvesting is a bitch ye know. Ye gotta peel
them off and shoot them down cables converted to AC
to mimimize line drop (lowering voltage, rising
amperage) inherent with Direct Current. The forces
needed to strip electrons and funnel them to town
requires large diesel generators or harnessing whole
rivers.

Fuck salmon. Give them fucking Induns electric
appliances so they can convert from wholesome
foods to obesity and diabetes laden diets compliments
of Welfare Begets Welfare Food Stamps and Quest
Cards duelly serving as ID cards indicating membership
to a class of subhumans I'll NEVER rent any of my
properties to.

If you get a chance to, drive over any of the 50+ huge
dams throughout the western states. You ain't got the
nads to lean over the rail and hack a loogy.

Besides, I won't let you back in the car is you smell
like runny baby poop. I get flashbacks whenever I
smell fresh ass paint from scared shit. Before every
event, swimmers take a pit stop to test fire their aft
rockets. Same for cross-country and wrestling.

Some smells evoke overwhelmingly powerful emotional
reactions. One smell bothering me is the distinct odor
of bullshit with every oil reserve estimate wafting
outa the Middle East.

Goddamn camel porkers refute the theory of peak oil,
ignorantly pitching the entire science of resource
economics into the shitter. This will not do.

America's oil demand has steadily ramped up over the
last 50 years. The rest of the world's oil demand has
dramatically ramped upwards in just the last 25 years
as 2nd and 3rd world nations invest and develop
industrial infrastructure derivative of post WWII
expansion here in the United States.

The world's oil reserves are ours aren't they?

90% of all our scrap metal (crushed cars and
appliances) is shipped overseas to Asia for smelting
and casting. Asia's appetite for metal exceeds world
ore extraction capabilities and is outstripping our
recycling, reclamation and scrap yard metal reserves.

The price of scrap metal has risen so sharply, old
landfills and dumps are now rich sources of affordable
metals to mine. Weird, we're now digging up our old
city dumps like rich ore veins, re-smelting and
shipping to China for products we'll abuse, then pitch
back into our dumpsters.

Metal contracts are fun commodities to watch. The
World Trade Center scrap metal was sold and shipped
away faster than we could clean up Ground Zero.

America's population never truly stressed oil and
metal production capabilities, but India and China's
new and modern housing and luxury car industries have
spiked the demand and also commodity prices. Housing
billions of Asians and hooking them up with cool cars
and fat rides are a primary commodity cost driver,
hence distorting our own CPI-inflation index.

The rapid and voracious cannibalization of our old
growth timber, scrap metal and metal ore stashes are
yielding big dineros. Big money, but I don't think we
have enough raw materials to put billions of 2nd and
3rd world citizens in American sized houses and
American sized SUV's and Trucks.

See what we started? Cultural Imperialism and Modern
Warfare put the USSR into bankruptcy, thus impressing
the rest of the fucking world. Now everybody wants a
piece of the American Dream, even the dinks, chinks,
slopes and gooks.

Africa will always be poor. It has to be. Postcolonial
regime structures require overwhelming and oppressive
poverty.

If we lived there we'd lynch every Afro slime Mugabe
dictator, grow some pine chron and brew Amber beer
whilst feeding that nation it's own non-elected nigger
NAZI top heavy governors like Soilent Brown.

Fuck. We still have whole classes of American citizens
that haven't gotten their piece of the good life. Now
these PONTIAC poor folks will have to sit by and watch
as Asia flexes their new found enlightened freedom of
choice at their markets soon enjoying enlightened
freedom of choice in their governments. (Pontiac is an
nasty acronym for Poor Old Nigger Thinks It's A
Cadillac.)

Our entrepreneurial virus worked so well, we may see
Asia surpass Europe as their standards of living
skyrocket close behind ours. Any union job you may
have thought secure, is now employing a global
workforce eclipsing global wealth disparity in two
ways: wage inflation overseas, wage deflation here at
home.

Outsourcing is a beautiful thing. When I was a kid, my
paper route paid me higher wages than half of the rest
of the world.

Pert near 40 fucking years later, the rest of world
has now gotten good jobs paying 3-10 times formerly
prevailing wages making our clothes, toys, and
computer components.

Us Americans have magnanimously spread the wealth
around, breaking old royalty and monarchy regimes and
infusing religious and commercially cultural
reformation on a scale we never dreamed of.

By George, I think we've invaded the world without
ever leaving the farm.

Even if Jesse Jackson gets appointed King of all of
Africa, he'll likely never leave the good ol' USA. All
things continentally African will likely stay tribally
backwards and needlessly suffer.

The sugar and rum driven slave trade is over with and
gone thank God, but do you see a massive wave of
aboriginal Africans stampeding back home?

Shit no. Even if we provided free airfare, our legion
of PONTIAC poor wouldn't budge, they ain’t that dumb.

Despite a public school education, even an American
minority is aware that Africa is a continent so poor
and at such a massive level, this cruelly indigenous
homeostasis may be an inescapable state of mind,
education and existence.

The day America discards Alaska as a resource
extraction colony and invests in Africa, is the day
we're all buying sun screen and teflon condoms and
moving to RapeTown, I mean Capetown where 9 out of 10
females is sexually assaulted. Hooah!

Sounds a lot like my Eskimo village here North of 70
lat.

Harvest the Earth before the third world learns to
read. Fuck all. Right mates?


Karl.

Real good reading about Alaska's oil reserves directly under my butt.

---

North American Oil and Gas News-September 2005 Issue

Vol. 10, No. 37 Week of September 11, 2005

Saudi oil shock ahead

Simmons pokes holes in image of unlimited Middle East
oil; prepare for worst

Rose Ragsdale, Petroleum News Contributing Writer


As Congress turns to legislation that could open a new
era of Alaska Arctic oil production, one highly
regarded energy analyst says he’s convinced the move
is critical to the success of a national energy
strategy.

Matthew R. Simmons, author of “Twilight in the Desert:
The Coming Saudi Oil Shock and the World Economy,”
(John Wiley & Sons Inc., 2005), says crude from the
Arctic National Wildlife Refuge’s 1.5-million-acre
coastal plain could play a valuable role in the
nation’s energy policy.

Simmons, an investment banker who holds an MBA from
Harvard University, is chairman and chief executive
officer of Houston-based Simmons & Co. International,
which specializes in the energy industry. He serves on
the boards of Brown-Forman Corp. and The Atlantic
Council of The United States. He’s also a member of
the National Petroleum Council and The Council of
Foreign Relations.

Simmons recently shared his views with Petroleum News
on Alaska’s oil and gas industry. He has been busy
promoting his book with appearances on several talk
shows, including a recent radio interview with Jim
Puplava, host of Financial Sense Newshour. “Twilight
in the Desert” hit the bookstores in the spring and is
generating considerable comment in energy, economic
and political circles.

Dearth of energy data

Simmons’ book is the culmination of years of research,
including scrutiny of 200 technical papers, published
by the Society of Petroleum Engineers, on problems
encountered by professionals working in Saudi Arabia’s
oil fields. The papers, combined with transcripts from
little-noticed U.S. Senate hearings in the 1970s and
Simmons’ discovery that little actual public and
verifiable data exists on Saudi oil reserves, form the
backbone of observations and conclusions in the book.

While most energy economists start with the assumption
that Middle East oil reserves are plentiful, Simmons
questioned that assumption after he found that no one
had ever compiled a verifiable list of the world’s
largest oil fields and the reserves they hold.

His questions first surfaced at a Washington, D.C.,
workshop, conducted by CIA energy analysts, where top
energy experts gathered several years ago.

“We’d spend a day doing a discussion of all the key
countries, and how much oil capacity they had in place
over the course of the coming three years,” Simmons
recalled. “And I basically said, ‘How do you all even
know that? What are the three or four top fields in
China?’ And no one had any answers.

“So I decided it would be interesting and educational
to see if you could actually put together a list of
the top 20 oil fields by name,” he added.

Saudi oil reserves finite

That exercise revealed that Saudi Arabia, like most of
the other Middle East countries, extracted 90 percent
of its oil production from five huge fields, and the
biggest of the fields, Ghawar, had been producing oil
for more than 50 years.

“What I also found is that the top 14 fields that
still produce over 500,000 barrels per day each, were
20 percent of the world’s oil supply, and on average
they were 53 years old,” he observed.

Historically, oil field discoveries fit a pattern that
Simmons likens to the nobility of a European country
or the pieces on a chessboard. In each of the world’s
great oil basins, explorers have found a large field
first, most often the “queen” field but sometimes the
“king.” Next explorers typically find another large
field, usually the other half of the royal pair. After
that, oil basins typically yield several
moderate-sized fields, or “lords.” Beyond that, only
small pools of crude reserves or “peasants” typically
remain, he said.

In “Twilight in the Desert,” Simmons not only
documents the history of Saudi Arabia and its oil
fields, he also questions the Middle East country’s
claims that it still has plentiful oil reserves. He
notes that Ghawar is the “king” field and is flanked
by a score of lesser fields, ranging from “queen” size
in Abqaiq to much smaller pools.

Simmons also suggests that Saudi production is very
near its peak. But the feedback he has received from
technical people who have read the book, leads him now
to believe that Saudi Arabia has “actually exceeded
sustainable peak production already.”

“And I think at the current rates they are producing
these old fields, each of the fields risks entering
into a rapid production collapse,” he said.

People don’t understand peak oil

Simmons said energy economists are reluctant to even
entertain the notion that Saudi oil output is past its
peak because they really don’t understand the
difference between oil supply peaking and running out
of oil.

“I continue to remind people that the difference is as
profound as someone saying, ‘I’m getting a little bit
hungry,’ and someone saying, ‘I have about two more
minutes to live before I starve to death,’” Simmons
said. “… We will never run out of oil, in our
lifetime, our children’s lifetime, our grandchildren’s
lifetime. But by 2030 we could easily have a world
that can only produce 10 or 15 or 20 million barrels
per day, and the shortfall from what we thought we
were going to produce is only a modest 100 million
barrels per day. So this is really a major, major,
major global issue.”

Compounding the problem is that every energy supply
model used by economists today starts with the
assumption that Saudi oil is plentiful, Simmons said.
“What’s interesting is that we’ve based all of this
assumption on no data,” he explained.

Saudi oil shock is imminent

Meanwhile, as the world’s thirst for oil grows, Saudi
Arabia and other oil-producing countries will be
unable to keep pace. Some analysts say Saudi Arabia is
capable of producing 20 million to 25 million bpd, but
Simmons says that level of production is “impossible.”

“And I also believe that — Ghawar, for instance, which
is really the whole nine yards, because that is 60
percent of their production — that North Ghawar, which
is the top 20 percent of the field, has a productivity
index that is about 25 times the productivity index of
the rest of Ghawar, and that’s the area that is almost
depleted now,” Simmons observed. “And when that drops,
you could basically see Ghawar go from 5 million down
to 2 million bpd in a very short period of time.”

Cupboard nearly bare

Until now, Simmons said the United States has been
lucky because Saudi oil production was 3 million bpd
when U.S. oil production peaked in 1971. Saudi output
soared and today ranges from 9 million bpd to 11
million bpd.

Elsewhere, explorers discovered the last three great
provinces of brand new oil in the last three years of
the 1960s — Prudhoe Bay in Alaska in 1967-68; Siberian
oil fields in the same period of time; and oil in the
North Sea in 1969.

“And Siberia, Alaska, and North Sea oil, effectively
combined to produce: the North Sea peaked in 1999 at a
little over 6 million bpd, it’s already down 25
percent; Alaska oil peaked in the 1990s at 2 million
bpd; it’s now at about 900,000 bpd; and Siberia oil
peaked at about 9 million bpd; and it’s about 5
million bpd,” Simmons said. “And we haven’t basically
found another province since the late ‘60s.”

To meet growing demand from existing customers as well
as a new surge in demand from emerging countries such
as China and India, Simmons said producers have
continued to pull more and more oil out of the North
Sea. “And then we found deep water which was a
fabulous last shot from the basins (in which) we
already had shallow water production. And we took the
Middle East oil back up to unsustainably high levels
of production,” he said. “So probably, we’re sweeping
the cupboard bare. People looked at the way we were
able to do this and thought, ‘Wow! This is actually
easy,’ without realizing what we were actually doing
was totally non-sustainable.”

ANWR may hold ‘queen’

America needs more oil sources and Alaska is a good
place to look, Simmons said. As for ANWR, he said it’s
ludicrous for people, whether geologists or
environmentalists, to make definitive statements about
the quantity of oil reserves in the refuge.

“Drilling on the (North) Slope has been tricky.
Otherwise, it would not have been so hard to find the
‘king,’ Prudhoe Bay, or we would never have drilled
Mukluk,” he said. “So we shall never know whether ANWR
is a series of dry holes or where the missing ‘queen’
of the slope lies until an intense drilling is done. A
few dry holes does not mean much either.”

The environmental community’s claim that ANWR contains
only a six months supply of oil is a calculation that
assumes the nation has no other source of oil when
ANWR oil comes on line, Simmons said.

“On that standard, we end any new energy development,
period,” Simmons said. “What is very important about
the urgent need to find more oil at ANWR, the Naval
Reserve or somewhere else on the slope is the
inevitable decline of North Slope oil, and the fast
decline that will happen if a gas pipeline is built
and the gas caps (are) blown down.”

Moreover, it would not take 10 years to get a big oil
find in ANWR into production since the infrastructure
is in place, Simmons observed.

“At some point, the oil that flows through the 2
million bpd pipeline must fall to a level insufficient
to get oil over the Brooks Range other than by
shutting in for part of a month so the oil can be
batched,” he explained. “If all ANWR does is extend
the life of the pipeline, it has filled a very
valuable role.

“If a ‘lord’ is found, let alone a ‘queen,’ it is a
home run,” he added.

As for the rest of Alaska, Simmons said he has no idea
whether the state contains other large pools of oil.
“The only way oil is ever found (and gas, too) is to
drill wells,” he said.

Oil is still cheap!

Though the world needs more oil sources, Simmons does
not see additional reserves curbing prices in the long
term.

While others lament the high price of oil, the
investment banker says crude oil at current prices of
18-20 cents a pint is “cheap.”

“Obviously it’s cheap. I don’t know what’s the next
cheapest liquid we actually sell in any bulk is, that
has any value. I suspect there are places around the
United States where municipal water costs more than 18
cents a pint,” he observed. “And yet for some reason,
we created a society built on a belief that oil prices
in a normal range were some place in the $15-20 level.
It turns out $15 per barrel, which is the average
price of oil — in 2004 dollars — it sold for, for the
last 140 years, is less than 4 cents a pint.

So we’ve basically used up the vast majority of the
world’s high flow rate, high quality sweet oil at
prices that were effectively so cheap, you basically
couldn’t sustain an industry. And now we’re left with
lots of oil. But it’s heavy, gunky, dirty, sour,
contaminated-with-various-things oil. It doesn’t come
out of the ground very fast, is very energy intensive
to get out of the ground, and we’re going to pay a
fortune for it.”

Problems ahead

Simmons predicted we would encounter problems with oil
supplies this year, nearly a month before Hurricane
Katrina struck the Gulf Coast.

He said we must operate the nation’s refineries at 100
percent, or we have major product shocks, and we have
to import oil at a rate of 10 million to 11 million
bpd, or we lose crude oil stocks. We have to basically
create almost 3 million bpd of finished product
imports and we have to run the system 24/7, all summer
long, and we still liquidate stocks, he said.

“So we have actually now created a pending domestic
embargo, and we’re going to be lucky to get through
the summer without some periodic shortages,” he told
Financial Sense Newshour the week of Aug. 6. “We
probably will, but the odds are probably as high we
will have some shortages, and then if we get through
the summer we have a fabulous respite from Labor Day
to Thanksgiving, until we hunker to try to figure out
how the world gets through the Winter of 2005 and 2006
because oil demand globally could easily go to 86-88
million bpd during the winter, and that could easily
exceed supply by 2 million to 5 million bpd.”

In a worst-case scenario, Simmons said oil prices
could easily soar past $100 a barrel without slowing
down.

Such high prices would simply be a sticker shock, not
an end to driving, he said. “At $3.20 a gallon,
gasoline costs 20 cents a cup. A cup of gasoline can
take a full car of people about 1 1/2 miles. If you
think this is expensive, try and hire a rickshaw or a
horse-drawn wagon and pay only 20 cents to go a mile
and half. After haggling price for an hour or so, you
pay about $5 to $6 for the ride and thank the person
for not making you walk.”

Curing our energy addiction

To cope with the coming oil shock and much higher oil
prices, Simmons told Financial Sense Newshour, the
world, led by the United States, will have to become
drastically energy efficient virtually overnight. A
series of changes, including transporting all goods
that currently travel by truck, by rail or water,
could cut oil consumption 20-40 percent, he said.

“So by getting trucks off our highway system we have a
major impact on removing traffic congestion. And
traffic congestion is public enemy number 1 through 5
on passenger car fuel efficiency. So it’s a real win,
win, win,” he observed.

He also suggested returning to a system of growing
most foods close to where they will be consumed and
using technology to allow people to work at home or in
their village rather than requiring them to commute to
a central location.

Simmons also advocates jumpstarting the largest energy
R&D program ever envisioned, and “just pray that over
5-7 years it has the same impact as when people got
serious about developing radar, and developing nuclear
power, so that we could actually win World War II.”

“But if we don’t do these things, then this really
ends up being a very dark world — no pun intended,” he
added.

An interview with Matthew R. Simmons by host Jim
Puplava of the Financial Sense Newshour radio
broadcast, www.financialsense.com, contributed to this
report.

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