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“Rex [Tillerson, CEO of Exxon Mobil] knows his company is in liquidation and he’s terrified his stockholders are going to find out.” — Arthur Berman. Is this what Rex sees when he dreams?
Liquidation, also known as a going-out-of-business sale, is a stunning word to use about the oil industry, unless you think about it for a minute. A company in liquidation stops making or buying its product and keeps selling until its inventory is gone, then turns out the lights and locks the doors. Oil companies don’t make oil, they have to find it, and they aren’t finding any. What’s more, take a look at their capex (capital expenditures for exploration and development) numbers and you see that after a decade of increasingly frenzied and expensive searching for new oil fields, with ever-diminishing returns, the industry has virtually stopped looking. Which brings us once again to the shoals of peak oil.
Oil hypists have been declaring the “theory” of peak oil to be dead since the phrase was first used. Never more enthusiastically than when the shale oil “revolution,” a.k.a. the fracking boom, took hold in America five years ago. The assault on logic and uncommon sense was massive, well funded and for a time successful: for a while, the term “peak oil” became synonymous with “loser.” Not any more. Peak oil is back, and Rex Tillerson is, if anything, more terrified than he was at the beginning of the year.
First of all, peak oil is not a theory, it is a straightforward expression of mathematical reality. If you are using a resource whose supply is finite, at some point you will have used half of it. And by extension, of course, at some point you will run out altogether. But peak oil is not about running out, it’s about reaching that halfway point, after which the supply of oil will steadily decline toward zero. That’s because everybody goes after the cheap and easy oil first; the second half is harder and more expensive to get.
Once we drilled a hole a few hundred feet into the ground and watched a gusher soak the neighborhood with crude. Now we drill through four miles of rock in order to wring oil by the pailful out of a sponge made of stone. As if that were not enough evidence that we are, as someone said, taking jelly beans out of a jar that is no longer even close to full, consider the torrent of reports and articles that just in the past few weeks has documented our arrival at the peak:
- The Return Of Peak Oil – Worrying Signs From U.S. And Russia — oilprice.com
- ‘Beyond petroleum’ – fracking’s collapse heralds the arrival of peak oil — Ecologist
- The U.S. Production Decline Has Begun — Resilience.org
- Kemp: US Oil Production Is Probably Peaking Right Now — Rigzone
- Oil production falling in three big shale plays, EIA says — fuelfix.com
- Debunking America’s Energy Fantasy — naked capitalism
The oil hypists would have us believe that this is all the fault of the collapse of oil prices last fall, and all will be well as soon as this temporary blip is over. But well before prices fell below $100 a barrel, the oil companies were giving up on their capex budgets and the frackers were up to their eyeballs in debt and running out of sweet spots to frack.
Where there is no liquidity, there is liquidation. Now the stockholders are finding out. Be afraid, Exxon. Be very afraid.
Fitting picture – a metaphor for modern humanity (since the Industrial Revolution, if not the Renaissance) – and another stellar essay Mr. Lewis.
Thanks for staying on top of this financial and energy topic – it’s too immediate and important to overlook. The economic collapse (remember there are currency wars, stocks and bonds markets are in trouble, and there’s the derivative nuclear bomb ticking away) should segue nicely into food shortages, collapsing governments, mass chaos and uprisings just in time for the environmental system to provide us with no pollinators, spent soil, too much tropospheric ozone and nitrogen for plants, vegetation and trees to die like the oceans from our massive numbers and our attendant pollution for going on 200 years now. Oh, then all the nuclear power plants and spent fuel depots go Fukushima when the electricity cuts out and society and civilization fail.
The energy supplied by oil is an important component of the operation of civilization but it is not the only one. Peak oil does not convey the reality that oil is becoming beyond reach because technology improvements cannot compensate for the declining quality of the remaining sources.
Tom mentions some other aspects of what is going wrong. Many would add the declining availability of potable water together with the impact of climate change and ocean acidification. The irrevocable aging of the vast infrastructure that society has become so dependent on will also cause traumas.
Denis,
Help me out here.
“The energy supplied by oil is an important component of the operation of civilization but it is not the only one.”
Can you point out to me where in this particular piece anything was written that Tom indicated that the energy supplied by oil is the “only” important component of the operation of civilization?
I’ve been reading Tom’s blog for quite a while now (and even though he an disagree regarding politics and food and permaculture) and putting all of his posts into a larger context left me with the impression that he was making the point exactly in line with what you’ve stated. That peak oil is only one situation we’re dealing with at the moment.
His posts focusing on the situation in the Middle East and Africa where the lack of food due to the lack of water has led to the exploding crises in that region demonstrate a more thorough understanding of the situations the world is facing, but chooses to pretend are not happening.
Here’s two examples of what I consider to be Looney Tunes (and i don’t mean the cartoons from Warner Brothers).
http://www.msn.com/en-us/money/markets/latest-possible-fix-for-california-drought-water-by-rail/ar-BBj2bvf
Imagine we’re going to ship potable water from the east coast of the USA to keep the entire west coast from drying out. Wonder when the App is coming out for this?
http://naturalsociety.com/photos-how-to-produce-6000-pounds-of-food-in-small-spaces/
The usual pablum of the left foodies whose real message is that humans are the epicenter of the universe. To hell with all other species. Where is the critical thinking skills places like Deimos say leftists have? What’s going to be the result of feeding all 7 billion of us? More us. Certainly not more Dodos, Moas, or Passenger Pigeons, or hippos, elephants or coral reefs. We’re going to breed and breed and breed cause that’s the way it is. Mention vasectomies or tying tubes and the looks you’ll get are horrifying from most people.
Doesn’t matter if you’re a devout religious fanatic or a screaming democratic liberal continuing you’re blood line is where most draw that line in the sand. Of course they are screaming at the top of their lungs how much they love their children (and elderly kept in those storage units known as care facilities) and so won’t consider not having any or not doing anything to keep grandpa going when grandpa isn’t even there except as a physical unit eating, shitting and sleeping.
I think Brutus said it best in his recent post at the Spiral Staircase.
https://brutus.wordpress.com/2015/05/03/what-makes-problems-possible/
Technically, California ships water eastward an
in all directions in the form of fruits and vegetables.
To ship it back by rail would seem to fit nicely with
the polluted logic of capitalism.
Sean,
I found your comment to be hysterical and could stop laughing.
It not only fits in quite nicely with the capitalist logic, but fits in quite nicely with the ideology of permaculture experts, such as Dave Jacke and Geoff Lawton who love to talk about closing the loop, as well.
It may be a mammoth long term unsustainable loop, but it could easily be seen as a closed loop none the less now once the water gets shipped back to the west. I could easily see Jacke (a la Naomi Klein and Bill McKibben) easily speaking about this topic in his talks which would be fully funded by the same people backing 350. org (now isn’t the name of that group more of a joke than ever seeing as how we’ve “officially” broken the ceiling of 400 ppm).
Of course the caveat to this particular hopium road and for this loop to exist is massive amounts of energy in order to keep it running. No problem. For when the oil becomes harder to extract and turn into fuel we’ll merely switch to the technology featured on The Flintstones where they used dinosaur power to run their version of technology.
In our case we’d merely revert or up the ante to using ourselves in place of Dino and his relatives (those humans who are meant to have lives supplying service to other humans who are predestined for lives of ease) as there will be an overabundance of human resources on the planet (for a short while) for who we make as well make use of. It’s not as if there isn’t a precedent for this use of humans all throughout history.
“I found your comment to be hysterical and could stop laughing.”
No joke, exporting produce is exporting water, and it’s a big problem, as more agricultural regions are affected by drought:
http://yaleglobal.yale.edu/content/hidden-global-trade-water
LOVE that title, LOL!
Whatever faults the modern reader might wish to assign to the 1970’s, it was THE decade in which the population of the United States was primed and ready to make the changes required to transition from an oil economy to a more sustainable one. On many fronts, and in many ways, society was taking those first baby steps toward meeting destiny with a clear eyed gaze.
Then came the Reagan ship, with its fantasies and its hyperbole, and its anti-constitutional bias. No need to transition, we were all told, its time to party, dude!
This same head in the sand attitude has been carefully catered to by every pundit and apologist for whatever might be left of the “American Dream”.
Now, Reagan has partied himself into his grave, and after his equally obnoxious farewell, has left the current generation with the bill.
Transition into a post fossil fuel economy is now guaranteed to be grassroots, unsupported-attacked even, and absolutely guaranteed to occur without an intact society to benefit from it.
Next time you want to visit the grave of these, and other great men who told the world to squander everything while they were alive, you might want to save up some urine, they deserve it.
This is a fantastic read & I hope people read this & more of the same. Thanks for posting it.
https://industrialcivilizationacultofdeath.wordpress.com
Good article. However, the title could be revisited.
I think you intended “a fit of pique” which is a sudden feeling of annoyance or anger when someone has offended you, resentment.
Another corrupt institution – the gambling casino of Wall Street and their ties to the very people who are in a position to both profit from and regulate it, exposed here:
Congress Tells Court That Congress Can’t Be Investigated for Insider Trading
[begins]
In a little-noticed brief filed last summer, lawyers for the House of Representatives claimed that an SEC investigation of congressional insider trading should be blocked on principle, because lawmakers and their staff are constitutionally protected from such inquiries given the nature of their work. [Oh, like the telecoms and spying – retroactive immunity!]
You are describing a Seneca cliff scenario with capitalism pushing us over the edge.