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ECONOMICS -
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"Peak oil" determined to strike inside U.S.: Yet another memo that Bush didn't read

Posted in the database on Friday, October 28th, 2005 @ 17:07:51 MST (2523 views)
from Attytood  

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Today is one of those days -- everybody has a conspiracy theory. Lots o' people in the blogosphere speculating that the Miers withdrawal was timed to take the media off the trail of the likely indictments of key White House staffers. We don't agree, but there is actually one story out there that the adminstration doesn't want you to hear. Actually, two stories -- but like everything else with Bushco., it's all connected.

And since they don't want you to hear about it, we'll have to tell you.

It's all about oil.

With all the Miers/Rove/Libby/Wilma clutter, you probably only heard in passing, if at all, that the world's largest oil company, Exxon Mobil, announced its third quarter results today. They did pretty good:

NEW YORK, Oct 27 (Reuters) - Exxon Mobil Corp. on Thursday posted a quarterly profit of $9.9 billion, the largest in U.S. corporate history, as it raked in a bonanza from soaring oil and gas prices.

Record profits for Big Oil at a time when consumers are paying sky-high prices for gasoline have brought calls for a windfall profits tax or other penalties on oil companies.

The companies have been enjoying an unusually rosy environment for months. In the third quarter, oil prices and refining margins rose sharply after Hurricanes Katrina and Rita ripped through the Gulf of Mexico, disrupting energy operations in the region.

Exxon Mobil made an extra $4 billion -- give or take -- over last year's third quarter without really lifting a finger. It's because the world oil supply is tight, and traders bid up the price. And so all that extra money came from us, money that we used to spend on, say, dinner or a movie, but now disappears every week at the gas station.

The people who run Exxon Mobil didn't invent a new product, or discover a major oil field, or even come up with a brilliant new marketing scheme. They simple used the basic laws of supply and demand to take billions of dollars of your money and stuffed it into their own pockets.

In fact, everyone made out like bandits. Poor Royal Dutch Shell -- they netted a mere $9 billion. Profits at Conoco Phillips are up a whopping 89 percent.

But you might have more cash, and the oil companies might have less, if the Bush administration had even started to adopt a more realistic energy policy -- one that addressed the now-hard-to-ignore fact that the world is getting close to burning more oil than it has the capacity to produce.

They didn't.

In fact, a report in the New York Times today proves that the Bush White House went out of its way to avoid or ignore pointed warnings that the world was running out of excess oil capacity. Remind you of anything? How about 9/11. Or maybe Hurricane Katrina.

The Times article finds several instances where Bush or his aides ignored warnings about a lack of spare oil production capacity -- the precursor to what many experts call "peak oil," the day when demand exceeds capacity for good.

In Saudi Arabia:

Just before meeting with Prince Abdullah in April, President Bush said he wanted "a straight answer" about how much extra oil the Saudis could pump.

At that session in Texas, the prince reaffirmed the previously announced expansion plans. Saudi Arabia's capacity now stands at about 11 million barrels a day. The Saudis pump about 9.5 million barrels, leaving a cushion of about 1.5 million barrels, mostly of heavier grades not very usable in the West. There is virtually no other global spare capacity.

Stephen J. Hadley, the national security adviser, told reporters after the meeting that the Saudi program was "a very good plan because it addresses the underlying issue you have when you talk about price, which is an issue of availability of oil and availability of capacity."

But there are doubts about the Saudi assertions about how much oil they have. Data about reserves is tightly guarded, and the Saudis dismiss skeptics as uninformed.

But they do not dismiss Edward O. Price Jr., the former head of exploration for Saudi Aramco and an adviser to the United States government on Persian Gulf oil during both Iraq wars. He questioned future reliance on Saudi capacity in an article in The New York Times last year and wanted to know from his former colleagues how they reached their estimate of more than 150 billion barrels of extra oil. Twenty years ago, a detailed study by geologists from four large American oil companies then in partnership with Aramco found little in the way of undiscovered oil resources, he said.

In the United Arab Emirates:

An energy policy report by Vice President Dick Cheney in May 2001 recommended that the president actively support initiatives in Persian Gulf nations allowing foreign investment that could lead to increased production. The United Arab Emirates was cited as one of the few countries that could increase its oil-production capacity.

A status report on Mr. Cheney's task force, released in January by the Energy Department, said administration officials moved to carry out the recommendation in four countries. The U.A.E. was not among them, however, and the president was not mentioned in the report.

When Mr. Bush spoke after the Iraq war with Sheik Zayed bin Sultan al-Nahayan, the emirates' ruler until his death late last year, he discussed security and Iraq, not oil investment issues, according to a Western diplomat, who spoke on condition of not being identified because of the sensitive nature of discussions between heads of state. A White House spokesman declined to comment.

And lastly, in Iraq:

In Iraq, too, the Bush administration's hopes have been disappointed. The removal of Saddam Hussein in 2003 changed Iraq from a pariah into a possible backstop for global oil markets. Soon after the invasion, top administration officials were bullish about Iraq's production: they said it would exceed the prewar level of 2.5 million barrels a day and reach 3 million barrels by the end of 2003 or late 2004.

But a report in July by the Government Accountability Office found that Iraqi production had declined since late 2004 to 2.1 million barrels a day from 2.5 million barrels, despite White House legislative requests for almost $3 billion to restore the oil industry there to its prewar abilities.

An important reason for the decline, the report found, was improper management of the reservoirs. Gary Edson, then a deputy national security adviser, was told two years ago that Iraqi production would drop, not increase, according to an outside report presented to him.

During all this time, the White House dithered -- poo-poohing conservation and alternative energy. The task of dealing with our reliance on foreign oil, and of addressing the very real possibility of "peak oil," was merely left to future generations. So far, the only ones to benefit from the administration's "energy policy" has been Big Oil.

There's been a lot of talk of incompetence within the Bush administration, on the handling of the hurricanes or the badly botched nomination of Harriet Miers. We don't think so. We think these people know exactly what they're doing.

And we can give you about 9.9 billion reasons why.



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