The mass of men lead lives of quiet desperation. What is called resignation is confirmed desperation. From the desperate city you go into the desperate country, and have to console yourself with the bravery of minks and muskrats. A stereotyped but unconscious despair is concealed even under what are called the games and amusements of mankind. There is no play in them, for this comes after work. But it is a characteristic of wisdom not to do desperate things.
-Henry David Thoreau, Walden
Last week, CommonDreams published a clever, hard-left article titled "Game Over: Thirty-Six Sure-Fire Signs That Your Empire Is Crumbling" by David Michael Green. One of them was, "You know your empire's crumbling when a massive environmental nightmare is looming around the corner, and your emperor not only ignores it, but claims it isn't real while taking steps to exacerbate it."
Hard criticism, but true.
And then, wonder of wonders, after a career spent casting doubt on global warming science and favoring Big Oil at all times and at all costs, President Bush changed his tune in his recent State of the Union speech, claiming that new energy technologies "will help us to confront the serious challenge of global climate change."
That's the first time he has mentioned "climate change" as if it were real.
He went on to acknowledge the great risks inherent in our dependence on foreign oil and the necessity of developing energy alternatives-specifically mentioning solar, wind, clean coal, nuclear, biodiesel and cellulosic ethanol.
He also requested a doubling of the Strategic Petroleum Reserve.
And he pledged to push for fuel economy standards to cut gasoline use "by 20 percent in the next ten years."
You might think that a renewable energy champion and peak oil worrier such as I would have cheered aloud, or at least breathed a sigh of relief.
Follow the Money
Let's just say I'll believe it when I see it.
One year ago in his SOTU speech, Bush famously declared that "America is addicted to oil." But a few weeks later, the budget he sent to Congress actually cut $100 million from federal energy conservation programs.
And one year later our oil dependency is worse than before, by any measure.
In this year's SOTU speech he championed solar and wind energy. But in the budget he sent to Congress a couple of weeks later, investment in wind-energy research was actually cut by $9 million, down 26%, and money for solar energy was cut by $7 million, a 10% decrease from last year
The proposed fiscal 2008 budget for the National Renewable Energy Laboratory is $181.5 million-$6.1 million less than last year's budget request.
In fact, Bush has pledged to work toward energy independence in every single one of his previous State of the Union addresses . . . while our dependence on imports grew from 53% to 66%.
Maybe I shouldn't be so cynical. The $9 billion that he requested in his 2008 budget for alternative energy, especially cellulosic ethanol, is money badly needed and well spent. I'm all for it, and betting big on it!
And at least I can take some comfort from his finally having dropped that nonsense about the "hydrogen economy." After being the centerpiece of his glowing vision for the future in previous years, in this year's speech the word "hydrogen" wasn't uttered once.
Oops: The budget request for hydrogen technology research is up 25%, to $18.4 million.
That's right, the hydrogen economy snipe hunt just garnered more of a budgetary increase than the cuts to solar and wind put together. One has to wonder how that made sense to anybody.
And there was zero money in the budget for geothermal energy, arguably the cleanest and greenest of all land-based energy sources.
Yes, the President did an excellent job of sounding like he was strongly in support of renewable energy . . . while in the actual budget, fossil fuels and nuclear energy each got more than a 30% increase.
Game Over: Nine Sure-Fire Signs that Your Leaders are Panicking
If you just listen to the rhetoric, it certainly sounds like Team Bush has finally come around on renewable energy and climate change.
But the reality is it's just a "modified limited hang out." The phrase dates to a conversation between President Nixon and his cronies, and refers to "a strategy of mixing partial admissions with misinformation and resistance to further investigation."
Bingo.
The reality is that Bush & Co. are in a state of quiet desperation, slowly and deliberately making partially misleading, partially true statements to show that they know the truth about oil and global warming without it actually costing them too much politically, and without having to actually do anything differently.
They're just trying to get out ahead of the issues so they don't get crushed by them.
Because it pays more to follow the money and the facts than the rhetoric, let's review the case for the desperation of George W. Bush.
Exhibit A: Crude Prices Bounce Back
After an 18% plunge to the $50s in the first half of January, WTI crude has bounced back to within a buck of where it started. That's odd, isn't it, considering that it's the world's biggest and most vital commodity and nothing special happened?
Not really. As I have argued before, I believe the recent low price of crude was simply due to the groupthink of Wall Street, having little to do with the underlying value of the commodity. In the low 50s oil was oversold, and now we're going to follow a similar trajectory to where we were this time last year . . . only, as we will see shortly, I think it will go well past last year's highs.
Exhibit B: Passing the Peak
The first reason is simply that the world's number-one oil field, Saudi Arabia's Ghawar, is in decline.
According to Jeffrey J. Brown, an independent petroleum geologist, the well-respected Hubbert Linearization Method of oil field production analysis shows that Saudi Arabia is 58% depleted and the world is 48% depleted . . . about where Texas and the lower 48 states peaked and started irreversible declines in production. "Based on the HL method and historical models," he says, "I believe Saudi Arabia and the world are now on the verge of irreversible declines in conventional oil production."
This is something that Matthew Simmons, founder and chairman of the world's largest energy investment banking company and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, has been saying for several years now. He has been running himself ragged traveling the globe and warning about a Saudi production collapse.
Well, in a January 31 interview on Bloomberg television, he dropped the bomb: "We have hit peak oil."
That's it. The party is officially over.
He also said that oil is "unbelievably inexpensive" and that we're "giving it away" at ten cents a cup. In some countries, he explained, they're already paying the equivalent of $300 a barrel, and there's no reason it couldn't happen here: "I think the most important thing to realize is that if demand is accelerating, and there seems to be nothing on the horizon to slow down oil demand, and supply can't . . . then prices don't sort of stabilize at ten cents a cup!"
A $300 barrel of crude equates to $9 a gallon gas. Ready for your next $180 fill-up?
And we now know that our second largest oilfield, Mexico's Cantarell, is in a catastrophic 28% annual decline. The U.S.'s number-two source of imports could be finished in less than four years.
As if to prove the point, the Saudi oil company (Aramco) and the Mexican oil company (Pemex) are both cutting their deliveries of crude-selling less oil to refineries than they have asked to buy.
On balance, falling production in Saudi Arabia, Mexico and Norway-a loss totaling up to one million barrels-will not be made up by new production coming on line in 2007.
With Ghawar, Cantarell and Forties & Burgan in terminal (and very rapid) decline, it's game over. Game over. Commence the slow crawl up the other side.
Of course, none of this is a surprise to us. We knew that we had reached the peak before the Simmons interview. And we knew that the other major fields of the world could hardly be counted upon to make up the losses.
Exhibit C: Begging Canada
Last month the Bush administration sent a team from the Department of Energy to meet with Canada's natural resources agency, to ask them to bypass environmental rules in order to ramp up production from oil sands by a factor of five . . . even though, as has been well recognized already, they have neither the natural gas nor the fresh water to do it.
Prime Minister Stephen Harper had the good sense to say no, refusing to implement the fast-track method for environmental assessments that would have been needed in order to meet the Bush administration's timetable.
How desperate are you when you come begging to Canada, little ol' weak Canada, asking them to wantonly destroy their environment without a second thought in order to meet your energy needs, and you get denied? That's gotta sting.
Exhibit D: Doubling the SPR
At maximum capacity, the Strategic Petroleum Reserve currently sports a grand total of 56 days' worth of import protection, according to the DOE. Given that we're past peak and that all five of our top suppliers have serious problems, two months' worth doesn't exactly give me the warm fuzzies. Apparently, the Bush administration agrees. You don't double your SPR when you're feeling secure.
And we're not the only ones. China and India are quickly building their own strategic reserves.
All of which adds up to security of demand, if nothing else. Hello, higher prices.
Exhibit E: Climate Change Disinformation
On February 2 the Bush administration found itself squarely, and very publicly, on the wrong side of the issue when the UN's Intergovernmental Panel on Climate Change (IPCC) published its much-anticipated report. Three years in the making, the report is the most comprehensive, global and peer-reviewed study on climate change ever written, bringing together the work of more than 800 scientists, more than 450 lead authors from more than 130 countries and more than 2,500 expert reviewers.
In short, it's humanity's best try at getting the story right.
And the report said greenhouse gas emissions will continue to change the climate over the next 100 years, causing sea levels to rise by a half-meter. Millions will be displaced from their coastal and low-lying communities, causing waves of environmental refugees. Snow in the mountains will disappear, desertification will intensify, oceans will die-and so will people, due to deadly heat waves, as world temps rise by some 3 to 5.8 degrees Celsius.
On the very same day that the IPCC report came out, another story broke: The American Enterprise Institute (AEI) had sent letters out to scientists around the world, offering $10,000 to anyone who could undermine the IPCC's report, asking for essays that "thoughtfully explore the limitations of climate model outputs."
And who is the AEI? A think-tank that has received more than $1.6 million from ExxonMobil, with 20-plus staffers who have also worked as consultants to the Bush administration. Lee Raymond, former ExxonMobil CEO, is their board's vice-chairman.
But Exxon's efforts go far beyond that. Last month the Union of Concerned Scientists issued a report showing that Exxon had spent some $16 million since 1998 to "seek to confuse the public on global warming science."
Maybe the best summation of all of the Bush team's denial of climate change came just a few days ago in a letter to clients sent by the manager of Vice President Cheney's own personal investments. You read that right. (As far as I know, Mr. Cheney has not issued a response.)
In the GMO Quarterly Letter 2007, Jeremy Grantham had a sharply worded essay titled "While America Slept, 1982-2006-A Rant on Oil Dependency, Global Warming, and a Love of Feel-Good Data." He wrote:
Successive U.S. administrations have taken little interest in either oil substitution or climate change, and the current one has even seemed to have a vested interest in the idea that the science of climate change is uncertain. In fact, we have spent the last large chunk of time in this country with a strong bias to feel-good data at the expense of accurate, hard data in this field. This attitude seems to be reflected in the spin on U.S. economic success, which we've commented on several times, exaggerating, sometimes substantially, the absolute and relative performance of the U.S. economy. It has certainly been reflected in the general desire for environmental issues to be benign and optimistic or to simply go away. [ . . . ]
The U.S. policy approach to climate change (and other environmental issues) has been similarly casual in its unwillingness to plan for the long term. There is now nearly universal scientific agreement that fossil fuel use is causing a rise in global temperatures [ . . . ] Yet the U.S. is the only country in which environmental data is steadily attacked in a well funded campaign of disinformation (funded mainly by one large oil company). This campaign has used and reused the solitary plausible academic they can dig up, out of hundreds working in the field, plus one famous novelist-without qualifications in the field, but, still, for heaven's sake, widely quoted by the administration-and one Danish economist who really doesn't get Pascal's Paradox, but does seem to have shares in The Wall Street Journal.
Clearly, Team Bush is desperate to get on the right side of the climate change issue.
This is only the first half of our case. We'll explore the second half next week.
Until then . . .
-Chris Nelder
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