The consensus conclusion of the witnesses: the United States is in deep, deep trouble, facing the emergence of an “axis of oil” that threatens to recreate the bi-polar world of the Cold War, complete with Russia as a principal actor.

Whenever relevant — as now — I have been fond of saying that regarding the "Cold War", let's see who actually won it when all the historical data have been accounted for.  

The U.S. will not even admit they have a problem until it is too late. Putin is smart, losing the cold war was the best thing to happen to them. They reduced consumption, cut military spending, and now they still have some energy reserves to help them through the next twenty years. The U.S. is stupid, needless travel, cities lit up like xmas trees, yachts, jet skis, motor racing, you name it. I hate to say it but the U.S. needs a cold slap in the face, not more war.

After watching the 2 hour video - some key points

Axis of Oil - China, Russia and Iran is a concern as Russia & Iran own half the world's gas reserves

National Oil Companies now own 3/4 of reserves - a chart was presented to show this - almost no discussion about production - maybe the senators just assume that reserves can be easily converted to production to meet demand

Transparency is needed for reserve data

Iran has significant reserves but can't be converted to production due to investment constraints

Switchgrass & cellulostic ethanol might help offset oil dependency

Nuclear energy could be used to provide electricity to charge car batteries

US military spends $US50-60billion/year on protecting oil installations and transport channels which makes the real cost of gasoline about $US7/gallon.

I think I heard the IEA economist mention declining world reserves but maybe I was mistaken.

IEA economist said that only Saudi, Iran and Iraq are able to meet any demand supply shortfalls

China and India oil companies should be encouraged to become more market oriented

I believe that the USA will radically change energy policy, but only in a reactive and not a proactive manner, when the gasoline price doubles, natural gas outages occur, Saudi Arabia admits that Ghawar is in serious decline, CERA confirms that peak oil has passed or some other supply/demand shock occurs. The optimistic long term reserve based production forecasts by CERA, ExxonMobil, IEA and EIA do not create a sense of urgency to cause radical energy policy change.

The first step in solving a problem is realising that a problem exists - this committee hearing could be a first step to the awareness of a serious energy problem.

Wow. This is probably the biggest statement I've seen/heard within the US government and world energy agencies in a long time. If you get the chance, watch the whole video, as it is ever so enlightening on a number of levels. I think the two most important are (1) The Chief of the Economic Analysis Division of the IEA, Dr. Fatih Biral, states that Peak Oil will hit within 10 years. This is not completely out of character for the IEA, but the message was directed at the US Senate Subcommittee on Energy and Natural Resources. Whether they got the message is another story altogether. (2) The opening comments from outgoing chair, Sen. Pete Domenici (R-NM) (starts at 20:08 in the video feed):

"It is important that we put into perspective who owns the oils of the world today, and who owns access to the oil of the world today. It is rather frightening when you get just that picture before you and nothing more, to know how things have changed dramatically, and how little of the oil of the world is owned by the American companies that we are constantly arguing with, and how little these oil companies of America have access and/or control over these oils."

"There is no question that private investors are already at a disadvantage with the rise of national oil companies and decreased access to reserves through the use of strategic energy agreements between governments. US companies are being squeezed out. Examples are the Chinese national oil company development of energy production agreements in Sudan and Iran. Russia's reclaiming of oil producing assets from Yukos to form a new state oil company. Just yesterday, Venezuelan president Hugo Chavez called for the end of foreign ownership of crude oil refineries within the Orinoco region. This activity further limits investment opportunities for investor owned companies."

This statement is--pretty obviously--a thinly veiled reference to the persistently declining reserves of the Anglo-American supermajors. Whether Domenici realizes what the impacts of of this truly are to the stability of the US economy (specifically the valuation of publicly traded US companies) I do not know (but severely doubt--and I've followed his legislative activity and speeches on energy issues for a couple years now). I'm sure most readers of TOD are aware of these issues and their pressing relevancy, but I'm going to include a link to a powerpoint presentation I use on undergrads every term to raise awareness of the geopolitical nature of oil/energy.

http://oregonstate.edu/~crawfose/presentations/us_hegemony.ppt

With respect to demand...

Man on left has mucho oil & gas
Man on right has diddley-squat

One Senator described the testimony as “frightening.” And the outgoing Republican chair, Senator Domenici (R-NM), said that “what you told us today is absolutely startling with reference to the future.” There appeared to be a genuine sense that some members really were surprised at how bad things look for the U.S. The shock was so great that after declaring himself a “free-market conservative,” Republican Jeff Sessions (R-AL) concluded the session by admitting that if you looked at energy as a national security issue rather than as a market commodity, Congress might be justified in spending more money on energy R&D and tax credits.

It would appear the senators mentioned above fear their career politican status!

Dragonfly -

What should we do in Iraq?

I had to write that. I wrote this whole thing that was supposed to go under Dave's Putin post but then it ended up somewhere else. Sorry.

I'm not sure this is an improvement. I'm a bit dismayed at the ads I've been seeing to the left. "to the left." Hah that's funny. Odo should like that.

I'm serious Dragon. What should we do in Iraq?

A TALE OF TWO GOVERNMENTS, OR THE SPINE AND THE SPINELESSNESS OF A NATION

First, allow me to say that I have not seen the video presentation referred to, and unless it is downloaded to a CD that can be mailed, probably never will.
Due to the lack of high speed internet access at any affordable price in central Kentucky, it would take me days to download such a presentation. This by the way, is simply one more example of how America has become the CAN'T DO nation. A quarter of a century after the beginning of the "tech revolution" huge sections of America are still without good I-net service, and cut off from much of the "computer revolution". We were able to build the interstate highway system, and before that, the TVA and before that the railroad system of America in less time than we have been UNABLE to build an adequate I-net system. It should be the cause of screams of protest against the tech industry and the government regulators. Instead, we bow our heads and keep our mouth shut. Such is the SPINE of a generation.

So, I am using the description given of the presentation by others, and by some of the sources mentioned in relation to the hearings, and by the endless stream of handwringing and tooth gnashing, here not to give my opinion of the hearings, but to ask a few questions that pop into my mind:

1. Russia as a major threat to American power due to thier natural gas. Now, almost all the true peakers I have seen claim that Russia is barely gong to have enough gas to supply themselves soon, given thier own climbing consumption, and the lack of real and intelligent investment in the gas sector, as it is corrupt and being bled to death by the oligarchy. Do we now change course and say that Russia has so much exportable gas that it will reliably export, (big, BIG question of reliability with Russia, is there not? Would you enter into a 20 year contract with them given thier recent behavior, and hope for it to be honestly fulfilled?) and that somehow Russia has America over a barrel (or a pipeline, or an LNG tanker) in relation to gas?
Let me ask this? How much negotiation would it take for Russia to turn away from it's Asian and European customers, who can be supplied by pipeline, to get the chance to sell to America which can only be supplied in small doses by expensive LNG tankers? Even if the Russians could deliver the oil to port, and agreed to sell a big share of it to us, can we really build the LNG tankers, ports, expensive ships, and get them operating and keep them operating virtually around the clock? Is that really a sane scenario? Or is it the Europeans who are in dire shape due to Russian gas mechinations? Is it the Europeans who should be going into fits of panic?

2. Likewise Iran. Why would we presume that we should suddenly be terrified of Iranian oil and natural gas power plays, when the U.S. has not bought Iranian oil or natural gas since the 1970's? (Do any of the Senators at the table KNOW THAT?)

3. China. Why would we assume that oil suppliers will be any happier under Chinese hegemony than under American hegemony? The Chinese, like us, are a net consumer, not producer of oil and gas, with the only big field they have depleting fast (ask Westexas). China is a net importer of raw materials and a net exporter of consumer goods. How will crisis in the oil and gas sector benefit them? Unlike North America, China has ALMOST NO HOME RESOURCE OF NATURAL GAS. And yet many assume that a natural gas crisis will benefit them, at our expense? How? And when rhetoric ends and real pushing and shoving begins, how will it affect Chinese growth to have to spend a large percentage of it's national income on re-arming a large military? How will it's newly spoiled middle class take to that?

4. Having not seen the video presentation, as I said above, perhaps these issues are covered in depth, but if so, I would have thought one of the TOD posters overviews would have mentioned it. Now I have one more: Did anyone, ANYONE, ask why the United States government is providing information which is given, and taken, as authoritive, which completely undercuts any sense of concern, and destroys the ability of the alternative energy and conservation industries to raise capital and support, and ask if there should not be a SERIOUS investigation into the practices of, and the very structure of America's governmental energy agencies and information providing system. Let me show you what I mean:

I beg that you click on the link below and look at a chart. This chart is NOT created by CERA, by ExxonMobil, or by some amatuer statisticians. No this chart is on the imposing website of the Energy Information Agency of the Department of Energy of the United States of America. Tell those wise policy makers at the Senate Committee on Energy and Natural Resources' hearing into “The Geopolitics of Oil.” to LOOK AT IT. This is the United States Department of Energy chart, graph, whatever, of just how concerned we should be about the future, not of energy supply, which seem to be assumed as a non issue, but about energy prices, long term, that most important issue to the pocket books of American business and consumers.
Think, THINK about what your about to see:
http://www.eia.doe.gov/oiaf/aeo/figure_1.html

Astounding is it not? THIS is how concerned we should be about energy, if you go by the Department of Energy, United States of America. What this chart says, friends, is that THERE IS NO EMERGENCY. If, IF I assume the above chart to be correct, what the helll am I concerned about? Energy will be cheaper than the price of a new Cadillac, inflation adjusted, and my house will be cheaper to heat and cool! If the chart above is correct, our children will grow up in prosperous suburbs and and complete college in one of the greatest economic times in American history. It will rival the 1980's abd 90's. And us boomers will live in luxury safely to our dotage, never knowing a real downturn since the 1970's. So in closing, I ask, which is it? The major emergency predicted by Kunstler, Deffeyes, Simmons, and Campbell that the U.S. government buys into, or the great price stability period as predicted by the government's own Department of Energy? If they do NOT believe the type of scenarios that the DOE are publishing, do the Senators realize the death blow that these projections are to many if not most of the alternative energy/conservation industry? Should they not launch a serious undertaking to revamp the Department of Energy's information gathering and distributing system, before they do even more damage to any hope of changing our dire circumstances, IF the Sanators actually believe we face dire circumstances?

Or were these hearings, demonizing others, simply the foundation for a new round of hostile exercises around the world, and hearings of NO INFORMATIONAL VALUE WHATSOEVER as it relates to energy?

WHEN WILL OUR SPINELESS GOVERNMENT COMMIT TO ONE SIDE OR THE OTHER IN THIS DEBATE, instead of sowing confusion, distrust, and spitefull rhetoric, and get out of the way of REAL CONSTRUCTIVE ACTION?

Roger Conner known to you as ThatsItImout

Slippery Slope

"chief beneficiaries are the previously oppressed population of the hard-line Communist States."

I would hold out on this seeping generalization. From my observation of how the transformation has occurred here in Poland I would say that the primary beneficiary have been multinational companies which came here and bought dirt cheap key businesses. The primary benefit that Poles have derived is that their borders are open, however on the mico level I tend to see the average Kowalski here doing as well as he did in the Commie days or worst. A few are doing much better but this number is a small proportion of the population.

Yes many have left to work in England, Ireland, etc. and are able to make better wages, but lets not forget at what cost. Need to go far away from their families, at one time Poland was also taxing those working in UK ( after many years they changed this now ), chance for pension is gone, treated as temporary labor force, etc.

IF IT IS A REAL BATTLE, WE CAN BREAK THIER SPINE

(Consider this a follow on to my prior post, THE SPINE AND SPINELESSNESS OF A NATION)

In my prior post, I attempted to make this case:
1. America is becoming a CAN'T DO nation, unable to create and implement technology on even a modest scale compared to it's once great history as technical and logistical power.
2. Russian natural gas and oil issues are of greater threat to Europe and Asia than to America, and point to the weakness not of America, but of Europe and China.
3. There was little or no chance of America ever benefitting from Russian or Iranian natural gas, and China will be more wounded by possible lack of stability in the global energy system than the United States.
4. The United States government is either willfully or accidently spreading conflicting information that is so logically inconsistant that it is doing grave damage to our nations ability to decide and change, if our government really feels that change is needed, and our energy situation is a national security concern.
5. I closed with the possibility that the recent Senate Committee on Energy and Natural Resources' hearing into “The Geopolitics of Oil.” could have been nothing more than foundational propaganda being laid by some in our government to begin a new round of hostility by the U.S. around the world.

With that last point in mind, let's get hostile. Let us say that our goal should be to to break the spine of OPEC, the world energy "axis" of Russia, Iran, and others, and to change the fundamentals of the energy game in our favor.
Let us assume that we want to break thier spine, at whatever cost. Consider some options:

1. A string of nuclear reactors, some 24 to 48 of them, to insure the continuation of baseline power and the grid system, built by contractors but under the operation of a TVA like authority. These plants would not be expected to make a profit but only to break even, and waste disposal to be handled by dilution and burial in low density in the uranium mines from which the uranium originally came.
2. Massive funding of a real carbon sequestering program for America's remaining coal fired generators. NO NEW COAL PLANTS, as these are to be made redundent by the U.S. governments nuclear plants.
3. Orders to all American utilities to expedite the allowance of distributed generation using thin film solar PV, thermal solar electric farms, wind, and small methane recapturing generators. Methane recapture on a national scale from agriculture waste, sewers, landfills.
4. Immediate tax benefits to new autos based on fuel consumption. Set standard testing program, and higher mileage cars and trucks would be rebated yearly tax paid on property tax on vehicle, and registration fee.
5. Tax benefit, and a BIG ONE on plug hybrid type autos that shift the local baseline burden of driving to the electric grid.
6. Tax allowance and rebates on low consumption earth bermed passive buildings, including office building, malls, houses, and any building built that used less than a set amount of BTU in fossil fuel per square foot.
7. Incentive and assistance on solar hot water on all new housing, and technical assist and incentive on retrofit solar hot water to replace fossil fuel heaters as they wear out and need replacement.
8. Realign tax structure to incentivise rail transport of all non perishable goods, reducing tractor trailer traffic on highways by one third.
9. Assist and work with programs, such as the WalMart program, to reduce fuel consumption by one half per vehicle mile traveled/ton hauled, and electrify truck stops to end Diesel idling for onboard appliances and loads.
10. Massive expansion of storage infrastructure, in particular for natural gas and propane. Strategic stocks of propane and natural gas to go along with the Strategic Petroleum Reserve.
11. MASSIVE funding drive, using the same type of promotional propaganda effort that was used in WWII for "Independence" Bonds, or "Energy Destiny" bonds, or "Anti Terrorist" bonds, whatever you want to call them. These would be competitive with current Treasury Inflation Protected Bonds, and American patriots and business people would be rewarded with promotional advantages if they purchased in volume. MASSIVE PROMOTIONAL effort around these, to put America's money where America's mouth is.
12. Optioning of U.S. and Canadian oil and gas, with long term contracts, locked in prices, and development agreements. STABILIZE the North American market. Storage arbitrage agreements on nat gas and propane, so that storage can be built.
13. Opening of OCS (Outer Continental Shelf) drilling to survey for gas and oil and at least find out as much as we can about what is there.
14. Educational efforts and funding at ALL U.S. Universities and Colleges, as well as state vocational and tech schools, explaining the theory of "case hardening" the U.S. energy system. By case hardening, we mean that it would be made "hard" or "armored" against the threat of disruption, it would be made redundent, with reduction of risks of technical failure, and it would be streamlined, to reduce waste, with major reduction of waste as a central goal.
"Case hardening" would mean conservation, efficiency, diversity, distributed production as well as distributed consumption, and "reserve power" oriented instead of "just in time" oriented. This will be where the jobs, the opportunities will be in the future energy industry, and the youth of America can share in creating this new industry.
15. An "asphalt" and construction reserve, to assure the material supply needed to maintain America's roads at least to a level so as to sustain commerce. Tar Sand and heavy low grade oil to be held in needed volume or by needed contract in long term reserve for this purpose.
16. Complete re-examination of bio fuel industry, using waste product, examination of smaller distributed plants using solar as a distilling heat source, and wind as augmentation to production, and confluence of this industry with waste methane recapture, and possibly other variety of fuels (such as bio-butanol or compressed methane/hydrogen) to used in small volume as the fossil fuel in plug hybrid electric vehicles. Birth of a design industry around these principles, again, taught at Universities, Colleges, an tech schools.

CONCLUSION: The goal: The gradual turning tight the screws on the fossil fuel supply industry, so that it must compete for every drop of sales against alternatives, and the gradual starving out of monopolies, including OPEC, Gasprom, and the "national" state owned oil companies of the world, Aramco as a major target. In other words, even if it is never said out loud, the goal would be to BREAK THIER SPINE, to reduce them to the level of power they had in the late 1980's, that is to say, marginal.

Notice that none of the ideas mentioned above require breakthrough or radical technology. There is no nuclear fusion, no "zero point" or "fusion in a jar." All the methods discussed above are viable today, the components and technology are there. Would we still burn and use oil and natural gas? OF COURSE. We will burn and use oil and natural gas for the rest of this century, and probably well past when all of us on Earth now are dead and gone. But we can streamline, mix and match, and lean out our consumption to the point that we are able to choose among options, and regain market leverage. Despite the pathetic whinings of the Kunstler's of the world, MUCH CAN BE DONE, IF, IF the will is there. BUT THE WILL WILL HAVE TO BE STRONG, AND THE GOAL CLEAR.
We cannot concern ourselves with whether those who produce oil and gas will be made uncomfortable. We have to admit (at least to each other) that our goal is clear: We are out to break the spine of the fossil fuel producers, to break thier will, to retake power from them. There is no other way for any real alternative to succeed. Do we have to do it? Probably, but maybe not...we can accept slavery, to live at the option of the fossil fuel providers, obeying them out of fear of being "cut off. Or we can begin, in a thousand small ways, to pursue DESTINY, the destiny of our age, the DESTINY our children deserve....and that is not as serfs to the energy providers, and it is certainly not as yeomen serfs behind the ass of an ox or mule back on the farm. We, and our young must state clearly, THAT IS NOT A CHOICE, NOT A ROMANTIC OPTION OF "POWERDOWN". That is surrender. Many would choose a fight to the death before willingly accepting such a degradation of a once great culture. Death will come anyway, but DESTINY does not. It must be chosen. For many, if, as our Senators at the Senate Committee on Energy and Natural Resources' hearing into “The Geopolitics of Oil.” seem to be saying, the battle is to break them or be broken, it must be said, we have the methods, the science, the technical skills, the shops, the ingenuity and a still huge reserve of home materials: If we assume the adversary's goal is to break us, WE CAN BREAK THIER SPINE before they have the chance to break ours IF WE CHOOSE.

Roger Conner Jr. known to you as ThatsItImout

I hope that the senators catch on to the central issue responsible for the present mess. It is the Private investors. Demanding or suggesting that national companies need to allow them in on energy deals in the energy industry is completely missing the point. It is precisely the skewed investment into production that is the problem.

Production has been such a easy game to play for such a long time
that it has left the US and others far away from investing in alternate energy technologies. The trend started in the
80's and has STILL not been reversed.

I would suggest that the senators should concentrate how to break this grip in investing mainly in highways, expanded air travel, greater reliance on the motor vehicle and start to look into how to ween the consumer from oil and gas as much as POSSIBLE. The consumer is not going to take the lead since the the energy costs
have for such a long time been extremely low and in no way reflected the nonrenewable nature of HC.

What Putin, Chavez, Morales, Chines are doing is obvious. They are looking after their own interests. Why should it be otherwise? To bind ourselves to these players is sheer stupidity. What is needed is another Manhattan Project to "kick the habit"

STORMY I think that you have hit a home run there with your comments. Globalisation is the ill in the US, not lack of cheap oil. Bravo to you.

Wow ThatsItImout . That EIA chart is REALLY scary.

If someone believes that and spreads that to body politics of the US than "Houston we have a problem". That is not good.

No wonder people are confused. OR perhaps that is the desired effect :-(

Word DOC files (including charts) of the contributors are available at:

http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&He...

Rick

Editors,

This a great site and a solid article. Glad I found you on the web. There's little coverage in the mainstream media about the stirrings of the long-hibernating Russian Bear.

FYI - Tuesday was the 106th anniversary of the discovery of oil at Spindletop, an event that marked the birth of Big Oil in America. I've written a short piece about this event, and invite comments from folks here at The Oil Drum.

http://cr4.globalspec.com/blogentry/909/January-10-1901-Drilling-for-Oil...

Regards,

Steve Melito

Yesterday Westexas said, "Connect the dots." There are a few dots that are concerning me.

Did the President Declare "Secret War" Against Syria and Iran?

Washington intelligence, military and foreign policy circles are abuzz today with speculation that the President, yesterday or in recent days, sent a secret Executive Order to the Secretary of Defense and to the Director of the CIA to launch military operations against Syria and Iran.

The President may have started a new secret, informal war against Syria and Iran without the consent of Congress or any broad discussion with the country.

Pentagon abandons active-duty time limit

As part of Bush's plan for boosting U.S. troop strength in Iraq, a brigade of National Guard soldiers from Minnesota will have its yearlong tour in Iraq extended by 125 days, to the end of July, and a Patriot missile battalion will be sent to the Persian Gulf next month, the Army said Thursday. (emphasis added)

Maj. Randy Taylor, a spokesman for the 3rd Battalion, 43rd Air Defense Artillery Regiment, at Fort Bliss, Texas, said the Patriot unit was aware of the announced deployment. He said no formal order had been received Thursday.

The dispatching of a Patriot missile battery, capable of defending against shorter-range ballistic missile attacks, appeared linked to Bush's announcement Wednesday that he ordered an aircraft carrier strike group to the Middle East, which would be in easy reach of Iran, whose nuclear program is a U.S. concern.

The former is a rumour, the latter a fact that helps fuel the rumour. I don't like the rumour or the facts one little bit. I'm not a doomer, honestly, but I don't like all the provocation and adventurism either. I understand I'm supported in this view by the majority of Americans these days. After the last election, news like this (just the latter factual article) must be extremely demoralizing.

I think that this session/video is VERY significant.

If anyone out there remembers the Firesign Theater's comedy sketch of "Beat the Reaper", we are at the point when the people in the TV studio were starting to whisper "Plague, the Plague" a little louder and louder.

It has not hit OUTSIDE the TV studio yet(following the comparision), BUT the people INSIDE, have got the message(finally), and in a little while more people on the street will be shouting it too.

VERY important session I think.

Goldman Sachs was there, the CFR was there, the Movers and Shakers were there and got the message.

"The Plague, The Plague"

(How do I get out of Turkey now that I have learned my first three words in Turkish?).

Sorry for the Firesign Theater reference but it seemed right to me.

John

Does anyone have a link to an ipod version? I've not seen this pop up on veideo.google.com yet