Thursday, June 19, 2008
Below is a dialogue I had yesterday with one of the premier members of Jack Wheeler's forum. MercuryTraveller is a self-made millionaire in entrepreneur who made most of his money in the steel industry in your, jumping him without a dime. He net has a lot of contacts in big business in Europe and the Middle East and the United States. He also has no agenda of his own. But he does supply a number of insider facts about the oil business.
If you don't want to read my drivel at least read his. I followed his responses with two quotes from Pelosi and Rep. Maurice Hinchey (D-NY). I think you will find them illuminating. Policy clearly lays out the left-wing liberal agenda on oil. She shamelessly uses outright lies to bolster her case.
The moron Maurice Hinchey (D-NY actually believes that the oil companies are controlling the supply of oil at the oil refineries, unbelievable. One wonders how stupid our congressional leaders can get. But the Democrats are talking seriously about nationalizing oil refineries to keep big oil from controlling the supply of oil to us. All this in response to Bush's timid announcement that we ought to drill more.
From Liberty or Death
MercuryTraveller good to hear from you. We desperately need your help.
I agree with you 100%, in fact I believe you're understating the problem and did not comment on the enormity of the effort it will take to mitigate this disaster that's coming. $10 gas is only two years away, somewhere between now and then the economies of the world particularly the US and Europe will collapse.
We all know the reasons how we got in this mess, Jack Kelly has stated them well. We know we have a Congress and administration that either wants the price to go higher, in the case of the liberals, or are sitting on the sidelines with their thumb in there ear like Bush. We cannot expect any help this government nor based on the words of Obama and McCain, any help from the next administration or even OPEC who is screwing us.
If we are to avoid falling off the cliff it is going to take a major organized initiative by industry to move the country on a crisis basis beginning today. I would propose the following:
Build a consortium of leaders of big oil, transportation, manufacturing, gas, electric, automobile manufacturers, the trucking industry, pharmaceuticals, plastics in all other key businesses that use petroleum. This consortium has two purposes, first to inform the American people. This must be overwhelming and without government help. I would propose several 30 minute infomercials geared to scare the hell out of the American people, which won't be hard because it will be the truth. I am already scared at four dollars a gallon. The leaders of these key people should make these infomercials as a group showing solidarity of all the American business community. That should be followed by putting the key people on every talk show in the country to hammer home the theme that we are in big trouble and are headed for a serious fall. This will come as such a shock that the American people will believe it and the weasels in Congress won't dare to stand the way of the consortium's solution.
Second the consortium needs to present both a long-term and near-term plan to mitigate the coming disaster. The long-term plan, 10 years, is more drilling and more infrastructure for transporting and processing oil. This problem is not going away and 10 years. We need coal gasification and coal to oil conversion to begin immediately.
The near-term plan is multifaceted and needs to be completed in three years. You and other of Jack's followers can think of more solutions than I but I'll offer a few. We need electric cars and fuel efficient larger vehicles in three years. We need to convert every household and business on gas and oil to electricity within the next 18 months. We need to convert every oil fired and gas-fired electric plant to coal in the next two years. This entails new boilers that can use the same turbines. You are correct nuclear would've helped 20 years ago but takes too long today with the exception of expanding existing nuclear plants which is far faster and is occurring today in the nuclear plant in Southern Maryland.
By end running the government, the industry consortium will take control of the execution of the recovery plan. After a few infomercials government will be prepared to help. The consortium should ask them for two things, first $1 trillion in startup money in year one, the elimination of all moratoriums and for government to get out of the way of industry including passing tax incentives such as one year depreciation write-offs. Government also has two spend one to 2 trillion to assist the American people to convert to the fuel-efficient automobiles in three years and convert gas and oil furnaces to electric.
Will this work? Absolutely, but not without pain we waited far too long to get out of this mess painlessly, but we need to minimize the damage. We have the coal to make this happen beginning today. Can the American economy support an additional 3 trillion on our deficit, absolutely. We can have an unlimited supply of electricity for homes, businesses and electric cars. I realize the electric car three years now will be a dog, but it will work in an urban environment. If it comes heavily subsidized the American people will buy into it. Of course they will have to because gas will be at $10 a gallon and the economy will be headed into the tank.
I am completely open to any other ideas that are more efficient than mine. My real concern is the complacency of the American people, industry and our government. MercuryTraveller, you and another big industry leaders know the train wreck is coming, and soon. I will do anything I can to help, but it will take those who know the insiders like yourself to light a fire under industry to form the consortium.
MercuryTraveller, please rattle your contacts one more time. Enlist Jack's help and any others you know to go with you. This needs to happen before November's elections. Lay out the plan. The government is too stupid and too slow to do anything and will get out of the way when industry demands it. With the help of the American people big business will get everything it needs out of Congress or get voted out in November.
In principle you are right, but not in this case. By personal experience I know the oil industry was caught with their pants down by the raising consumption of China, India and others. I told vice presidents of the oil industry to expect this already in 1995. They textually replied that they hoped to God I was right but they couldn't see it. I even had a big argument with Premier Oil from the UK when they closed a gas field in Pakistan, not intresting enough at those low prices.
That field would take today 4 years to produce.
Occidental told me exactly the same and sold several old fields, "not intresting enough at those prices".
The growth of China, India, Pakistan and others is exponential and their GDP grows at approx. 8 %. This figure means minimum 3% growth in oil consumption. There is no oil producer in this world who can raise the production by 3% per year, none.
Forget the speculators, you cannot speculate the same commodity for 2 years without taking a profit, it would be extremely dangerous to hold a speculative position for 2 years and this shortage market has now created its own momentum. Prepare yourselves for a big bust when the world economy cannot stand the oil price anymore and grinds to a halt. Then of course will you have overproduction, created by a flat economy. But boy will there be pain in the world markets.
The only solution would have been nuclear but it is too late now, the nuclear power plants will never be on stream in time.
The policy of the big US oil companies has been, since WW2, to use first the foreign oil reserves and have the US reserves, if possible, intact. This dates from the time everybody thought the oil reserves would deplete by the turn of the 20th century. I told here before that since WW2 new wells were drilled and immediately capped for decades.
Today the strategic importance of oil is even bigger than in those days, China and India would choke to death without oil.
The powers that be know this and calculate each step in that direction. That's why the price is less important than the strategy behind it, and that's why the price will never again drop below 50 US$/bbl
BTW the politicians have absolutely no control over this and the administration which would try to change this strategy would immediately face more rising oil prices by the actions of producers worldwide.
The Bush family is right in the middle of this strategy, together with others, less publicly known.
From Pelosi’s web site
Pelosi Statement on Bush Call for End to Ban on Offshore Oil Drilling
Wednesday, June 18, 2008
Contact:Brendan Daly/Nadeam Elshami, 202-226-7616
Washington, D.C. -- Speaker Nancy Pelosi released the following statement today in reaction to the President’s comments at the White House urging Congress to end a federal ban on offshore oil drilling and open the Arctic National Wildlife Refuge for oil exploration:
“Oil companies are sitting on 68 million acres of public lands they have already leased, but President Bush and Senator McCain want to award them with even more.
“Americans are suffering under the Bush-Cheney-McCain policies that were written by Big Oil: $4 a gallon gasoline; $134 per barrel oil; increased reliance on foreign sources of energy and on hydrocarbons that contribute to climate change.
“Americans use one quarter of the world’s oil consumption every day and we possess less than 2 percent of the world’s supply. We cannot drill our way to energy independence.
“Our nation must move toward a new, cleaner, and more affordable energy future that focuses on renewable and increased energy efficiency. The New Direction Congress has already passed innovative energy legislation and will continue to develop other proposals to address high energy costs and shift our nation to a more energy efficient economy.
“We look forward to having a President in the White House whose energy policy can no longer be described as ‘drill and veto.’”
Fox News quotes from Capital Hill 6-19-2008
Per Pergram-Capitol Hill
House Democrats responded to President's Bush's call for Congress to lift the moratorium on offshore drilling. This was at an on-camera press conference fed back live.
Among other things, the Democrats called for the government to own refineries so it could better control the flow of the oil supply.
They also reasserted that the reason the Appropriations Committee markup (where the vote on the amendment to lift the ban) was cancelled so they could focus on preparing the supplemental Iraq spending bill for tomorrow.
At an off-camera briefing, House Majority Leader Steny Hoyer (D-MD) said the same. And a senior Republican House Appropriations Committee aide adds that "there were multiple reasons for the postponement" including discussion on the supplemental. But the aide said there was the thought that Democrats may wish to avoid a debate today on energy amendments.
Here are the highlights from briefing
Rep. Maurice Hinchey (D-NY), member of the House Appropriations Committee and one of the most-ardent opponents of off-shore drilling
We (the government) should own the refineries. Then we can control how much gets out into the market.
Liberty or Death
I've been thinking a bit about oil lately. There is no monetary reason that we need to depend on any foreign power for oil.
- We could radically increase our generation of electrical power with a combination of an increase in nuclear power plants, an increase in wind/sun generation of power, and increased efficiency of electrical devices.
- Our transportation could be electrically powered, powered by fuel cells using hydrogen, or powered with bio-fuel.
Even if we managed to move our electrical power generation and transportation to other fuel sources, there would be some requirement for some domestic oil for some applications. However, we have enough domestic sources left in hand to cover those requirements.
Our current technology could handle these requirements. The problem would be that even at $10 gas would still be cheaper than implementing this solution.
The government of the United States could start moving us to this kind of solution. With some monetary incentives, you could get some of this to happen in very short order.
However, the powers that be in Washington and especially the Bush Administration have no interest in any such program. The Bush Administration has a very high proportion of officials from the oil production community. These guys have a vested interest in demand for oil staying high. Their fortunes go up when the price of oil goes up.
The Japanese use about 45% of the energy as a standard American. I could reduce my energy consumption by 50%.
- Buy a Kawasaki Ninja 250. This motorcycle gets about 65-70 miles per galleon and most of my driving comes from commuting.
- Replace the truck and car I own with one fueled by bio-diesel.
- Re-do the insulation around my house. Up the R-value and replace the windows.
- Buy new appliances and heat pump.
- Buy a bank of solar cells for the roof and a battery back up system.
The wife has nixed the motorcycle. She has convinced herself that I will be dead in a week if I drive a motorcycle. The other three options would run me $75k-100k. If America would cut her consumption by 50% oil prices would come down. However, we don't really want to pay the bill and the current administration likes the profits being made by their fiends back in Texas.
I agree with your sentiments to start a government stimulated program to convert the American people to alternative forms of energy, not that stupid corn ethanol, but real viable alternatives some of which you listed. I also support the conversion to nuclear power plants for electricity especially for electric cars.
The problem is timing. The crisis we have today is very real and immediate. A barrel of oil is now $145+ and climbing. Just as serious a crisis exists in the natural gas market which percentagewise has gone up even higher than oil due to an even smaller supply created by insufficient wells and insufficient infrastructure to transport the gas around the country where it's needed.
Current government regulations, and environmentalist suits significantly delay all forms of fossil fuel development. Given this environment the following is more or less true:
Coal-fired electric plant takes four years.
Nuclear power plant in addition to an existing plant takes five years.
Nuclear power plant new from scratch, seven years.
Gas drilling and extraction, five years.
Oil drilling and extraction seven years.
Infrastructure and refining capacity seven years.
Alternative energy methods, five to 10 years. These are guesses because we don't know when science will solve some of the efficiency problems with alternative energies.
Given this input a prudent decision maker would bet on everything rather than bet on one solution. Only the government has the resources to develop all these sources on a crisis basis. As I said in my blog $3 trillion could be spread against all of these alternatives. The president needs to declare an emergency to get around the regulation of Congress. He should do that immediately. I am not adverse to the government owning the wells to mollify the Democrats and industry owning everything else including wells on private land such as the Bakken oil fields in Wyoming, the Dakotas and Canada. A declared emergency is required to bypass federal moratoriums and the enormous red tape required to get any project approved.
Unfortunately it takes a president with guts to take on Congress. Bush does not have it in him. The price of gas at the pump is over four dollars here. Don't be surprised in the next two years to see $10 gas. There is nothing to stop it. The only thing in next 12 months that can help us is OPEC going to max production. After that the increased demand from India and China will drive the price to $10 a gallon.
It is safe to say that our economy and the world's economy will collapse at $10 a gallon. America has the greatest untapped reserves in the world. It is literally criminal for the US to be sitting on their oil when the entire world needs it desperately. Oil has an enormous ripple effect in the economy spurred by other products including medicines that are made from petroleum. Transportation alone impacts almost every commodity that is made including food which needs petroleum for fertilizers, tractors and transportation. At $10 a gallon the price of everything else will go up at least 50% or more. Plastics for example.
The world economy will collapse, with the Third World starving to death due to increased food prices and the enormous increase in transportation costs since they have to import their food. The case could be made that if we do nothing in the next 12 months there will be massive economic disruption, personal bankruptcy and world starvation. The president could use these facts and the American people would support his emergency measures. All it takes is will.
Liberty or Death