Drill Drill Drill ! ! !
Why Larry Kudlow is wrong about this
Every night Larry Kudlow goes on CNBC at 7:00 misinforming the American public about our oil situation. His mantra: "...drill drill drill...." By this he means that American oil companies should be permitted to drill on all the continental shelves offshore, up in the Arctic National Wildlife Refuge, and anywhere else.
I agree ! We should drill drill drill -- because once we give the go ahead for this, we will discover the hard way that it will not solve our oil problem. Here is what Matt Simmons wrote to me in an email (He says substantially the same thing in this CNBC "Squawkbox" clip:
I have been strong advocate for past 20 years on the urgent need to shoot marine seismic (paid for by our government so they create some knowledge of where most likely structures to drill for might be located.) Once this very extensive marine survey is taken, lease sales could take place and winning bidders would then scramble to find enough offshore rigs to begin the most extensive search for offshore oil in the industry's history.
Had all this started in the late 1980's, we might today have located two or three North Seas, and we might have merely proved there are no great hidden offshore oil and gas fields around our OCS waters.
Sadly, the Green's were violently opposed to this experiment on grounds we would spill too much oil. It was impossible to do this since exploration does not flow oil. But facts were deemed irrelevant.
So we blew this window.
It still makes sense to begin this long process of finding out what might be in our own back yard but it will take at least 15 years before any significant oil production would be likely. The longer we delay, the more irrelevant all this becomes.
It becomes irrelevant because this will never offset the depletion occurring throughout the world plus the steep fall-off in exports from Saudi Arabia, Mexico, Venezuela, Russia, and the North Sea that have already commenced.
We also don't have fifteen years to prop up the systems we are currently running for everyday life, including suburbia, Happy Motoring, the airline industry, Big Box Shopping, just-in-time food deliveries, air-conditioning places like Phoenix, Houston, Orlando, and Las Vegas, heating one-story sprawling centralized schools and fueling the yellow bus fleets that service them. . . . You get the picture? All this stuff is toast. And so is the economy that accompanies them.
By the way, forget about oil shale and the Dakota "Bakken" oil play as anything more than pipe dreams by people who don't understand the economics of oil production or geology.
Is there anything we can do?
Of course... and I've repeated it a hundred times
Rebuild the passenger rail system (and public transit at all scales) with electrification
Prepare to reinhabit our small cities and small towns, while decanting the suburbs and our supersized metroplexes
Grow much more of our food locally around these places
Rebuild local networks of retail and wholesale trade
Prepare to resume manufacturing at smaller scales
Raise interest rates to reward savings
Do not waste alt.energy production on automobile use
Matt Simmons has pretty much endorsed all of the above explicitly.
Boone Pickens, another Texas oil man has stepped out and made a bold proposal for America's energy future. He is to be commended for stepping up to the plate with genuine leadership. The plan calls for replacing America's natural gas electric power generation with wind power and then using that natural gas for cars-and-trucks. However, I have some major reservations about his plan. First of all, it's foolish to burn up the world's best energy resource in motor vehicles. Second, we'd never get a fueling network of NG stations running.
Here's an interesting critique of Pickens' plan in a letter sent to me:
WIND is a beautiful thing...but those turbines have proven to be maintenance-intensive." I lived out in California near the labs
In Livermore, an area of ideal wind passes. And to this day,
I've NEVER seen a day where all blades are turning.
But I'm with Boone- Let's build 'em!
UNFORTUNATELY, he is simply INSANE about Natural Gas. To make it real, we need to create the driver-friendly infrastructure. Even when you compress the HELL out of the stuff, BigTime pressure... you can not APPROACH the energy-density of gasoline. The implications are enormous.
As a MOTORIST, to get any useful/practical range, you've got to plant you beloved 10-year-old daughter atop a fuel tank of enormous pressure.
I've seen the impact tests of state-of-the-art tanks. Nice super slo-mo images.
BUT...when you get T-boned by the moron who runs the Red light at Broadway and Lake...I hope you have a parachute.
But let's ASSUME the VEHICLE tanks are 100% foolproof. NOW you need to refit all the gas stations with, presumably, immense high-pressure tanks. And again, DENSITY is NOT your friend.
The standard corner station with all tanks topped off will only be able to service a FRACTION of the customers he/she can handle today with energy-rich gasoline.
SO...to keep TOPPING OFF all these corner NG stations, our highways will be CLOGGED with NG tankers...ALL filled with of LOTS of gas under LOTS of pressure.
To be blunt, an NG nation is a terrorist's dream come true.
Traditional accidents will take out enough NG tankers...and they'll deliver a helluva' lot of collateral damage.
Coordinate a suicide attack on tankers fueling up the corner stations... and America is literally blown apart with crude low-yield bombs.
AND IFFFFF the technology becomes OUR savior, it will likely become THE WORLD's savior. So the international traffic in NG is only feasible by using tankers of super-cooled spheres to liquefy the stuff, our beloved LNG tankers. But even TODAY, no one wants to even THINK of an LNG facility. Yes, it will take a more sophisticated attack...like maybe a Cessna 172. But the ensuing destruction is unimaginable.
That's why the West Coast Ports are facing intense public opposition. The attempt to build an offshore facility in Long Island Sound was simply
torn to shreds from every hill and dale.
Dallas Geologist Jeffrey Brown of TheOilDrum.com has some additional thoughts about the "drill drill drill" mantra, including the erroneous charts about potential offshore and arctic oil reserves shown by Kudlow on CNBC:
Jim,
Matt can probably give you a better answer than I can, but the numbers are highly speculative, and I suspect way on the high side. Also, the industry, and especially the offshore industry, is pretty much fully deployed, so we are probably at least 10 years away from seeing any material effect from production from new offshore leases. In 10 years, our middle case is that the top five net oil exporters will be down to about 12 mbpd in net exports, versus a 2005 rate of about 24 mbpd. In October, Venezuela and Mexico accounted for more than 20% of total US imports, and the most current data show that combined oil exports from Venezuela and Mexico to the US are dropping at an annualized rate of over 30% per year.
But if we are focusing on offshore regions, consider the North Sea--developed by private companies, using best available technology, with virtually no restrictions on drilling. The North Sea has declined at 4.5%year since peaking. As Matt has pointed out, the North Sea peaked in 1999, when the majors were predicting a peak in 2009 or later. So, peaks occur, even in the best of circumstances.
The problem with the ExxonMobil, CERA, et al, position, i.e., that we don't have to worry about Peak Oil for decades, is that they are in effect suggesting that we just keep increasing our consumption until we peak and crash at some future date. If we peak at some data
, shouldn't we be working now on transitioning away from fossil fuels?
In any case, I think that we should open up more areas for drilling. Among other reasons, we need the jobs, but the key question is how we use or our remaining fossil fuels. Do we continue driving until practically no one can afford it, or do we use the remaining fossil fuels to build out a more sensible electric streetcar and light system, powered by solar, wind, nuclear, etc.
One other point to keep in mind is that in most cases, but not all, offshore producing regions were developed because of existing onshore production. For example, both California and the Gulf Coast had significant onshore production prior to offshore fields being developed.
The obvious application to this is the East Coast, from Florida to Maine. There is very little onshore production along this fairway. While this does not condemn the offshore areas, it is not encouraging.
So, in all likelihood, the most promising (currently off limits) US offshore areas are in the Eastern Gulf of Mexico and off California. And then you get back to Hubbert's original Lower 48 observation, that large increases in reserves only postpone a peak for a few years--plus the huge delay in bringing new fields on line.
Jeff
Matthew Simmons reply on that:
The USGS numbers are an embarrassment. To pretend anyone could guess at undiscovered resources in such precision is as naive as banks lending mortgage money to folks with no money.
But the senior USGS folks are adamant that their models are precise, just like the EIA modelers are for future supply of flowing oil.
The blind are leading the blind. What a Fool's Paradise they created.
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