March 30, 2017

Oil and What it Means For Our Future

 

For better or worse our economy is tied to oil, so I want to connect a few dots and explain, in part, why that is and what it means for our future.

 

Why Are We So Dependent On Oil?

To fully understand this, we need to go back to oil tycoon John D. Rockefeller.  Mr. Rockefeller believed that oil was a gift from God and he was determined to find as many uses for it as he could.  Don’t get me wrong, he wasn’t completely altruistic.  This also meant higher profits, as he could make money from the parts of oil that many other people were dumping in rivers and lakes as waste.  Some of the uses they discovered were gasoline, tar for paving streets, lubricating oil, Vaseline and paraffin for making candles.  Today oil and oil byproducts are used in those things listed above as well as polyester and other clothing blends, many plastics, many medications, such as cortisone and aspirin, not to mention the gasoline, diesel and jet fuel, which is reported to make up 2/3 of the oil that is used.

 

Harvesting Oil

The theme song from the Beverly Hillbillies said that Jed Clampett was “shooting at some food, missed and up from the ground came bubbling crude”.  While this is an exaggeration as to how easy it used to be, it’s not a huge one.  It used to be very easy to find and drill for oil, and the very first attempts to refine it weren’t much more than boiling it.

The same cannot be said today.  All easy to harvest oil has long been harvested.  Crews have to drill many miles deep into the ocean, which is dangerous and expensive.  There are vast amounts of oil shale, but oil shale is mined in the form of rocks that have solid bituminous materials that are released as petroleum like liquid when the rock is heated in the chemical process known as pyrolysis.  So, while it is there, is it harder to get than traditional oil deposits.

Due to several federal regulations on oil exploration, drilling and refining, the United States will always be a net importer of its oil.

 

Peak Oil

There is some confusion when it comes to this term, so let me define my use of it.  Peak oil is simply the point at which we have reached the peak of oil production.  This could but doesn’t necessarily mean that an oil field that has hit peak oil is running out of oil, just that it has hit the limit in the amount it can produce.

The problem that peak oil causes is that, in the last decade, China, India and some other developing countries, have seen a massive increase in the amount of cars and drivers, which means a massive increase in the amount of gasoline and diesel needed to fuel them.

This is nothing to worry about as long as the largest oil fields and the world’s leading oil producing nations stay out of peak oil.  As you can see from this story, Mexico’s Cantarell oil field, which is the world’s largest oil field, has reached peak oil and is, in fact, declining in production.  This report from CNN says “WikiLeaks cable: Saudi oil estimates may have been exaggerated”

It reports that:

“Saudi Arabia’s oil reserves may have been grossly overestimated and its capacity to continue pumping at current capacity exaggerated, according to a U.S. diplomatic cable sent from the kingdom in 2007.”

 

Alternative Energies

I don’t know of any alternative energy that could replace oil.  Some might say “what about solar?”  Solar panels are very expensive to make, thus very expensive to purchase and install.  I have seen estimates of $20,000 on the front end, which could take 20 years to pay for themselves.  By that time you would need to start replacing panels and would have already been replacing batteries.  There were several solar companies who were given millions of tax payer dollars by our current administration.  We have all seen the reports of them going bankrupt.

Wind just doesn’t produce enough energy for it to be viable to replace oil.  Sure, it could be used in tandem to reduce some of the oil consumption, but I haven’t seen enough information to know if this would be cost effective or be like solar and pay for itself near the end of its life.

Don’t get me wrong, I think we should keep looking for ways to make alternative energy a viable option.  I have to be realistic and say that there is a very good chance that America will be tied to oil to meet our energy needs forever.

 

What Does All OF This Mean For Our Future?

Simply put; higher prices for everything.  Remember all of the items I listed that oil are used in its production?  That was just a fraction of the many items.  I have seen lists with over 6,000 items on them.  Even if you find an item that used zero oil in its production, there was still fuel used to bring the parts together or to ship it to its destination.

Remember that I said an estimated 2/3 of oil is used for fuel, including the fuel you use to drive your vehicle.  It is also used to power the ships, planes, trains and trucks that deliver goods all over the world.

There are places in the world right now where a gallon of gas costs $7.  I don’t know about you, but I don’t have that much in my gas budget.  That means if prices ever get that high here, the money will have to come from something else.

 

What Can We Do?

I think the best thing we can do is pay attention and be thinking about it.  Be conscious of the electronics that are left on 24/7 and how much power they soak up.  As gas prices rise it may be prudent to look for car pool opportunities to get to work.  I know MNDOT has initiatives to put car poolers together and your state may as well.

What other ideas do you have on things we can do to prepare for rising energy costs?

 

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Comments

  1. Chris,
    Let me start my reply by saying I like your site and respect your writings very much however I will have to disagree almost totally with your summation in this article.
    I am born and breed Oilfields in Texas. My husband has worked in the oil industry a little over 40 years and the main reason the oil prices keep rising isn’t because it is harder to obtain it, it is because of the regulations imposed by the Federal government, EPA and importing. Did you know right now in the USA that we have enough oil and gas to sustain us at our current consumption levels for over 150 years? It is true.
    One of the reason the US imports oil is nothing more or nothing less than politics. We do not need to import at all. Did you know the federal government makes more on a gallon of gas than the oil company does? Yes, that’s right they do. Yet the oil company’s are always blamed for their big profits. Oil companies have to make profits in order to operate just as any company does. Let me give you an example of just what it cost for one land based well to be drilled in the US. Offshore wells cost are great deal more, plus right now in the US no off shore drilling is allowed due to our current administration. The prices I give are reflective of my area, the cost to drill in Alaska is a great deal more because of having to import much of the supplies from the lower 48 states and a limited drilling season they also have a great deal of federal land and no new permits are allowed for federal land at this time anywhere in the US.
    Oil company must purchase the oil rights of the land where they intend to drill. $ 500,000 per well
    Oil company must pay for roads and site development to and from well site
    $200,000 per well
    Oil company must retain engineer to develop well plan $ 20,000 per well
    Oil company must rent drilling rig and crews from drilling contractor
    $24,500 per day
    Oil company must hire consultant to drill the well
    $1,300 per day
    Oil company must rent or buy all pipe and equipment to drill well $ 400,000 per well
    Oil company must hire service company to do things such as wire line etc.
    $ 20,000 per day
    Misc.expenditures $150,000 per well
    for example: drill bits that cost anywhere between $ 8,000 – $ 30,000 per bit depending on the well. (most wells will use several bits per well, normally around 7) The average cost for this peculiar well is approximately $4,000,000 (million) per well.
    This is just to drill the well and not develop the well or refine it in any way. That is another whole huge cost and since I do not know these amounts I will not even make a guess as to what that would be.
    As you can see it is very costly and this would be a well without any problems, add in any type of problem and the well can go up in price exponentially and problems are not unusual. These cost are not just reflective of the US drilling but anywhere in the world would have the same types of cost. Next you would have the refining of the oil or gas of the well. Here is another little tid-bit of information most people don’t realize because of the NEW federal regulations just put into place on refineries’ NO more refineries can be built inside the USA because of the EPA laws, so now we are shipping allot of our crude to foreign refineries and having it processed and shipped back to us. Another huge cost to the consumer. If we could get the federal government out of it and the EPA off the backs of oil and gas producers you would see the price of oil and gas fall. It would not cost near as much but until that happens you will see prices keep increasing.

    I know it sounds like I think the oil company’s should have free rein without any oversight but that is not true but they really are not the big bullies and evil oil company that some people think they are and yes I do care about our lands but with today’s new technologies’ it isn’t like it once was. The oil and gas are there we just have to be allowed to go after it.

    • Jim Moore says:

      You’re so right. The oil and gas industry principles and practices are widely hidden to the public. I know I could take you to probably 50 oil or gas wells that are capped simply because they choose to wait for the really good profit margins. We do have plenty here in this country.

      Still, we need an alternative to come up with the next great thing for transportation.

    • Chris Ray says:

      Suni You may have missed the line “Due to several federal regulations on oil exploration, drilling and refining, the United States will always be a net importer of its oil.”

      How much oil we have here in the sates is arguable, but it’s mute because as you mentioned we’re not allowed to get to it.

      In either case, it doesn’t change where we are or how it’ll affect us, we’ll still pay more for it.

  2. Old John D. Rockefeller (I’m not a fan), the father of several of our controlling governmental cartels currently controlling Americans. The Oil Cartel and the Pharmaceutical Cartel. He was probably also the father of the German Eugenics program that Hitler used to purge undesirables from his society. JDR personally oversaw putting wholistic hospitals and schools out of business and assassinating anyone who stood in his way of creating the Allopathic way and it’s supporting industry of drugs. A brilliant man indeed.

    If we went back to horses those in the unemployment lines could be given a shovel and a wheelbarrow.

    This is a huge subject, of which I don’t (or can’t) even know the real truth. My personal feeling are that we need a better way that doesn’t destroy the Earth’s resources and doesn’t demand so much power and control of those so into power and control. Granted we do need to be conscious of all modes of transportation. I believe great effort in setting up localized autonomy (again) and local self-sufficiency would be of the greatest benefit to the global oil issue. In the light of this issue think with me about the exodus there will be from the large cities when (if) basic necessities are no longer available there. Many will move to the rural areas to hope to work out a life and existence. We here in the U.S. are the most dependent. Why is that? It’s because we are a greedy nation way out of touch with nature and the natural way of life that was the only way just a short time ago. Ok, all my opinion, I know. But, perhaps we could learn a lot from those who have never had a car. There are billions on this planet.

    Suggestion; a friend of mine took a challenge of turning power off in her home after dark (except for the critical power like refrigerator, water heater etc.). She would turn power on early mornings to get the kids ready for school. She did for a month I know. Perhaps we could derive some interesting insight for prepping from such an experiment. .

    • I don’t care much for Mr Rockefeller myself, it’s to bad brilliance doesn’t go hand in hand with righteousness.

      I have heard others that say the majority of people will move to big cities and others moving to rural communities. As most people are no longer cut out for the harder life that gives us liberty and self-sufficiency, I tend to think this might be right. Time will tell.

  3. I’m a huge fan of alternative energy myself, and my favorite flavor is what I call “Aldi”, that is, Algae diesel. It’s completely renewable, has been in the works since 1978, takes less than a third of the land needed for corn & soybean-based biodiesel, and can do it with minimal impact on the environment, as it can be set up to recycle all the water used back into itself, and can even use runoff water from other factories. Because demand and funding dries up the minute the price of oil drops (hail capitalism), it’s still really expensive, and there’s only a handful of companies in the US that still make it to my knowledge.

    Another impact oil has on our world that we often forget is plastic – even if you’ve gone carless, a large chunk of the American economy is effectively subsidized by the cheapness of plastic. It’s around our drinks, our shoes, clothes, half the items at discount stores, attached to everything sold at department and big box stores, and in every consumer electronic product, including the keyboard I’m typing on, and the edge around the screen you’re reading on right now! The US Energy Information Administration estimated that 4.6% of US oil consumption and 1% of US energy consumption is sent to plastics alone. Those don’t seem to be big numbers, until you realize that 4.6% equates to about 331 million barrels (all numbers from 2006). That’s big – really big.

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