[Peakoil] [Fwd: FW: Letters to the Editor: Peak Oil]

Fri Feb 17 21:08:37 EST 2006

Where are these pretty peak oil girls of which you speak?  (apart from Sarah 
of course.)

I could do with one.  :)

----- Original Message ----- 
From: "Mike Hettinger" <mike at mikehettinger.com>
To: <peakoil at act-peakoil.org>
Sent: Wednesday, February 15, 2006 10:00 AM
Subject: [Peakoil] [Fwd: FW: Letters to the Editor: Peak Oil]

>
> I like this snippet from near the end of the article:
>
> One final comment and parting shot. If I still have not convinced you of
> the merits of the cause, you ought to know that Peak Oil people have
> better parties, and hang out with prettier girls and cuter guys.
>
> But you really should read the rest of it...
>
> Mike
>
> -----Original Message-----
> From: Whiskey & Gunpowder [mailto:strategicinvestment at agorafinancial.com]
> Sent: Wednesday, 15 February 2006 9:40 AM
> Subject: Letters to the Editor: Peak Oil
>
>
>
>  <http://www.ezimages.net/WHISKEY/WnGemailLogo.gif>
>
> Greg's Note: We've asked for your comments, and you've sent them to us. In
> this edition of Whiskey & Gunpowder, our intrepid correspondent Byron King
> reprints and replies to some of your e-mails about his articles on (what
> else?) Peak Oil. If you have more to say, just lay it on your re-patrioted
> editor: greg at whiskeyandgunpowder.com <mailto:greg at whiskeyandgunpowder.com>
>
> Whiskey & Gunpowder
> February 14, 2006
> by Byron W. King
> Pittsburgh, U.S.A.
>
> Letters to the Editor: Peak Oil
>
> My articles on Kuwaiti oil reserves, oil reserve estimation, and the
> president's State of the Union speech generated a lot of thoughtful
> commentary from the readers. We appreciate that you take the time to think
> about what we are writing, and even more that you care enough to comment.
> Here is a sampling, starting with an e-mail to Greg Grillot from Bob in
> Upland, Calif.:
>
> "Byron does understand oil. Would it be an imposition for him to tell us
> when he feels we will see $100 oil so I can look for some profits in my
> oil investments?"
>
> Byron's reply: Thank you, Bob. I have been following the oil industry for
> over 30 years. I read the geology and engineering textbooks in college,
> and got oil on my boots while working for the former Gulf Oil Company (now
> part of Chevron) in the Exploration & Production Division. I left Gulf to
> spend some time in the U.S. Navy, another story entirely. But through it
> all, then and now, I have spent time in the oil patch and kept up on the
> technical literature.
>
> In my present occupation as an attorney in Super Bowl Steelers country, I
> do a lot of things, to include working in the arenas of land and leasing
> and oil and gas development. So yes, I like to think that I understand
> oil. But I assure you that almost every day I learn new things about oil,
> its history and chemistry, and the nuts and bolts of the oil business.
> There is no end of knowledge.
>
> As to the question of when we will see $100 oil...First, the disclaimer. I
> do not have a copy of tomorrow's newspaper, let alone the newspaper for
> next week or next month. If, for example, there were a terrorist bombing
> that severely damaged or shut down a loading terminal in Kuwait or Saudi
> Arabia, you would see the price of oil shoot up on a trajectory like that
> of the space shuttle. Or if things keep on heating up with the situation
> in Iran, and the government of Iran decides to interfere with the tanker
> routes in the Straits of Hormuz, you will see the price of oil simply
> explode.
>
> Will something like this take place next week or next month? I sure hope
> not. But could it occur some time? Yes, it is possible. So there is your
> $100 oil, and a lot more. My colleague Dan Denning has written extensively
> on this topic in his monthly newsletter, Strategic Investment. Many
> Whiskey & Gunpowder subscribers are already subscribers to Strategic
> Investment, but if you are not plugged in to Dan's way of thinking, here
> is how to order  <http://www.isecureonline.com/Reports/DRI/EDRIG124/> your
> subscription:
>
> http://www.isecureonline.com/Reports/DRI/EDRIG124/
> <http://www.isecureonline.com/Reports/DRI/EDRIG124/>
>
>
> Getting back to Bob's question, absent some extreme terrorist or military
> event like the examples I used above, will market forces keep on pushing
> up the price of oil? The short answer is yes, so just wait and watch. The
> longer answer is that there are day-to-day fluctuations in the price of
> oil due to those same market forces. So the listed price for oil goes up,
> and then the price comes down.
>
> My opinion is that you should use the pullbacks as an opportunity to
> accumulate positions in well-managed companies with ownership interests in
> oil and gas in the ground. Or, equally as good over the long term, you
> should be investing in firms that provide critical services and equipment
> to the oil industry.
>
> If you attended the Agora Wealth Symposium last August in Vancouver, you
> may have heard me give a plug for one of the best-managed oil field
> service companies in the business, Core Laboratories (NYSE: CLB). Since
> last August, the price of the stock in Core Labs has increased by about
> 75%. Why? Core Labs provides services to oil producers, as well as to
> pipeline and refinery operators, that increase the efficiency of recovery
> of oil from the ground, and in throughput and output from refineries. In
> other words, Core Labs provides services to people who already have the
> oil in hand, so there is no geological risk, or no "dry holes."
>
> Core Labs assists operators in determining the best way to produce oil
> from the rocks in the ground, such as to maximize ultimate oil recovery.
> In addition, Core Labs assists pipeline companies in improving efficiency
> in transmission, and assists refiners in maximizing the product yield from
> a barrel of oil. As the price of oil rises, the value of the services
> provided by Core Labs increases in tandem. The company is a moneymaker in
> this business. Obviously, you should do your own research on any
> investment, but Core Labs has been a great company during the past run-up
> in the price of oil.
>
> If you will indulge me just a bit more on the subject of investing, my
> colleague Justice Litle publishes a monthly newsletter called Outstanding
> Investments, which focuses on exactly these types of opportunities in
> natural resource and energy companies. Justice's newsletter has been rated
> No. 1 in its class by the authoritative Hulbert's Financial Digest. Here
> is a link to obtain more information, including how to order a
> <http://www.isecureonline.com/Reports/OST/EOSTG222/> subscription:
>
> http://www.isecureonline.com/Reports/OST/EOSTG222/
> <http://www.isecureonline.com/Reports/OST/EOSTG222/>
>
> A reader named Roger from West-by-God Virginia e-mailed me to say the
> following:
>
> "In your article on the State of the Union speech, you referred to the
> 'so-called free market' for fuels and energy sources. Why did you
> characterize it that way? Do you think that the government should plan and
> run the energy markets of the country?"
>
> Byron's reply: Good question, Roger. Why did I use the expression
> "so-called free market?" To paraphrase former President Clinton, It
> depends on how you define "free market." First of all, we denominate all
> of our economic activity in U.S. dollars, which are also Federal Reserve
> notes. (Just look at what it says on the face of your greenbacks.) So
> right away, we run our economy via a government "plan" for the currency.
>
> The Federal Reserve has done a poor job of managing the U.S. dollar over
> the years, which is why a nominal dollar from 1913, the year when the Fed
> was established, is now worth about 4 cents. And this figure is straight
> from the records of the U.S. Treasury Department. So right away, you might
> figure out that the United States is having a long-term problem with its
> currency.
>
> I do not want to get into a discussion of monetary theory, but the
> inflation in the currency supply over many decades and the decline of the
> U.S. dollar over the years has done much to corrupt what would otherwise
> be the natural flow of funds into energy investment. My Agora Financial
> <http://www.isecureonline.com/Reports/RCH/ERCHG202/> colleague Dr. Kurt
> Richebacher, macroeconomist extraordinaire, is fond of stating that
> "inflation destroys capital."
>
> http://www.isecureonline.com/Reports/RCH/ERCHG202/
> <http://www.isecureonline.com/Reports/RCH/ERCHG202/>
>
> If inflation destroys capital, then we have a big problem. There are few
> industries more capital-intensive than the energy industry. How does one
> plan for long-term energy investment in an era of monetary inflation and
> corruption of the currency?
>
> The U.S. government is running massive deficits. The national debt is out
> of sight. Interest payments on the national debt are not quite, but
> approaching, the size of the budget for the Department of Defense. The
> U.S. economy, and the U.S. government in particular, relies upon over $2
> billion of foreign loans every day just to keep the lights on. And we
> flatter ourselves to think that we live in a "free market" economy? I
> don't think so.
>
> Getting more specific to oil and gas and related hydrocarbon fuels, let's
> take a look. Over a period of many years, the federal and state
> governments have been taxing gasoline at the pump and using the funds to
> build highways. The highways have not just provided access to relatively
> undeveloped countryside, but subsidized the expansion of human activities
> distant from the nation's traditional urban cores.
>
> For a long time, we called it "growth." But now we have a nation that is a
> landscape of urban sprawl, and an associated lifestyle of commuting. Would
> the present state of cities like Los Angeles, Las Vegas, or Phoenix be
> possible, particularly in such arid climates, without cheap gasoline and
> subsidized roads? No way.
>
> Compounding the problem, most freight in the nation travels in
> over-the-road trucks, with an average fuel burn of 4 miles per gallon of
> diesel. Author James Kunstler refers to the "3,000 mile Caesar salad,"
> meaning that the lettuce you ate with your lunch came to you via
> refrigerated truck, over a 3,000 mile road network. All of this rests on
> the depleting resource known as oil. Is this mixture of tax policy and
> government roads really the hallmark of a "free market" economy? Or ask
> the related question, is this sustainable over time, considering the
> rather rapid depletion of the world's known oil reserves? No way.
>
> Roger also asked if I think that the government should run the energy
> markets. No, no, a thousand times no! Let private industry drill the
> wells, run the pumps, refine and ship the product. Let private industry
> build the plants of the future, and market and deliver the energy supplies
> that the population will require. The government should seldom be in the
> business of turning wrenches on the main stack of plumbing.
>
> But that does not mean the federal and state governments should not play a
> role in developing a national energy strategy. There are innumerable
> issues that need to be addressed in such a strategy, far more than I can
> detail in this article. But I should say that a national energy strategy
> needs to address current and future demand patterns, sources of supply,
> future levels of technology, as well as how we intend to pay for it as a
> nation. And let me add that it will not be cheap.
>
> Sweden, for example, is presently taking the most significant strategic
> step of any advanced Western economy by trying to wean itself off oil
> completely within 15 years. According to the "energy committee" of the
> Royal Swedish Academy of Sciences (the same people who hand out the Nobel
> Prizes), there is a growing awareness that global oil supplies are peaking
> and will shortly enter into the phase of irreversible decline.
>
> In connection with this impending Peak Oil event, the Swedish government
> believes that a global economic recession will result due to oil shortages
> and high oil prices. Thus the official policy of the Swedish government is
> to replace all fossil fuels with renewable energy sources before climate
> change destroys economies, and growing oil scarcity leads to huge new
> price rises.
>
> According to Swedish Minister for Sustainable Development Mona Sahlin,
> "our dependency on oil should be broken by 2020... There shall always be
> better alternatives to oil, which means no house should need oil for
> heating, and no driver should need to turn solely to gasoline." Another
> Swedish government official has been quoted as saying, "We want to be both
> mentally and technically prepared for a world without oil. The plan is a
> response to global climate change, rising petroleum prices, and warnings
> by some experts that the world may soon be running out of oil."
>
> Sweden has an energy committee composed of the people who award the Nobel
> Prize? Sweden has a minister of sustainable development? Sweden wants to
> become mentally and technically prepared for a world without oil? Very
> clever, those Swedes. (And have you driven a Volvo lately?) You did not
> hear anything like this in the State of the Union speech, now did you?
>
> I received another e-mail from David, a professor of chemistry at an Ivy
> League university. David said:
>
> "What I would like to know is how many of those guys out there promoting
> ethanol know that an ethanol-based fuel is energy-negative by a mile? And
> even if you could make it energy-positive, the very act of growing ethanol
> to burn as motor fuel would turn the world into one big dust bowl. I guess
> the question is, how many of those guys are clueless and how many are
> simply liars? ...
>
> "It would be great if the Peak Oil crowd was as nuts as people say (ed: Oh
> yeah? Smile when you say that, pal). But I've looked at it as much as a
> non-oil specialist can look at it and still hold down a job. I concluded
> that it is a scary scenario. What is particularly problematic for me is
> that my training as a physical scientist helps me see the proposed
> alternative energy technologies for what they are -- a load of baloney in
> many cases.
>
> "I spent a particularly harrowing hour with a high-ranking official from
> the U.S. Environmental Protection Agency who answers directly to President
> Bush. He was not a tree hugger but he sure took Peak Oil seriously. I
> asked him for his best guess on the date and he said, '2010.' Of course,
> that answer is becoming a little too common for comfort. It is scary. We
> talked about the alternatives and he could not have painted a more
> gruesome picture. He also expressed utter amazement at the complete lack
> of attention to the issue."
>
> Byron's reply: This is why I love reading the e-mails from our readers. I
> happen to know who David is and where he works. He is a top-notch
> researcher in the field of chemistry and chemical biology, and firmly
> established in the upper echelons of American science. David's e-mail
> speaks for itself. Do me a favor. Read it again. It is that good.
>
> There is no lack of attention to the Peak Oil issue from me here at
> Whiskey & Gunpowder. I have been banging this drum, in one way or another,
> since Bill Bonner invited me onboard and I published my very first
> article, entitled "The Ghost of Colonel Drake." (Thanks Bill!) And neither
> is there any lack of attention to the Peak Oil issue from my colleagues at
> Agora Financial. We are there. We are onboard. We are serious. And, to be
> purely mercenary about it, we have made some money off the issue. But if
> you wait for the band to start playing "Nearer My God to Thee," it will be
> too late.
>
> One final comment and parting shot. If I still have not convinced you of
> the merits of the cause, you ought to know that Peak Oil people have
> better parties, and hang out with prettier girls and cuter guys.
>
> Until we meet again...
> Byron W. King
>
> _____________________________________________________________________________
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