Tuesday, May 1, 2007

World Energy Status Report - One guy takes a crack

In my last blog I had mentioned how our economy was based on the premise that energy was cheap, plentiful and would ALWAYS be available. Below is a link to show where we get our oil (at least this is where the US Government says we get our oil).


I said that I believed that this was a faulty premise, and that I believed that the flow of cheap, plentiful energy could end pretty quickly. One or two major cataclysmic events anywhere in the world, and cheap energy could end.

If you look at the link, some of the top oil suppliers are also some of the most dangerous places in the world, and the LEAST friendly to the United States.

For instance, number three on the list is Saudi Arabia. The Saudis recently arrested 172 militants who were training to do damage to the Saudi oil infrastructure. It is great that they caught them, but what if even half of them succeeded and wrecked the whole Saudi oil infrastructure? What if even a handful (15 to 20) succeeded? Do you think these are the last Saudis militants who are going to try something like this?

What about number four, Venezuela? They just nationalized their oil fields. There is no telling what that could lead to, or if they are competent enough to keep their production up. That is not even mentioning the political situation between President Chavez and the United States. I have said for a long time that events in Venezuela could prove to be a previously unknown Achilles heel.

Number seven, surprisingly is Iraq. Do we even need to broach the situation with Iraqi oil and its production?

All through the list African countries are sprinkled - each of these have been in the news for oil infrastructure being attacked and shaky ineffective governments.

Even Mexico, our number two supplier can't be viewed as totally stable.

Iran, while not a supplier on the list, could be problematic for us as well, especially if we actually have a war with them (and I don't believe this is totally out of the question), or there are incidents in the Gulf.

One thing to think about is that we view this as the status of US supplies. The link above represents OUR supplies. What if a few of these sources of oil bottom out - the rising demand in the rest of the world is not going to go away (i.e. China). As supplies get tighter, world wide competition for scarce supplies might get fiercer.

In my last blog, I mentioned our aging infrastructure. One critical part of that is our gasoline refinery system. There has not been a new refinery built in this country since the 70's. And, like our power grid, this system is subject to breakdowns and damage, and will continue to do so the older it gets. The system is running in the high 80 percentile right now - but that is based on the reports of the refinery owners. Can we trust them to give us an accurate report of ACTUAL production?

This situation could easily cascade into massive shortages of food and other energies (especially heating), especially in the bigger city. A lot of people say, well, the government will solve the problem. Hello? New Orleans, post Katrina? That was ONE city, and compared to Washington, Chicago, and LA, not even a particularly big city.

I have never seen myself as an apocalyptic thinker, or a conspiracy theorist. But every time I look at these numbers, I cannot help but think our economy is on thin ice, and it's getting thinner all the time. The time to start weaning ourselves from this "dangerous oil" passed a LONG time ago. We are in a catch up mode now (and we haven't even really started).

The question is, do we have the time to make up the distance we should have been covering since the first oil shock in the 70's, and will we do the right things before it hits critical mass? Based on what I've seen, no.

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