Skip to main content

Contrast this:

2005 Profits
ExxonMobil - USD 35 billion
Shell......... - USD 23 billion
BP............ - USD 19 billion
Total........ - USD 17 billion (est.)
Chevron... - USD 14 billion

with this:

(oil & natural gas production, from Petroleum Review, October 2005. 2005 numbers refer to first half only.)

And now note this:

BP to return $50bn to shareholders

BP said on Tuesday it expects to return $50bn to shareholders in the next two years, the most generous payout yet from the energy group, which is benefiting from high oil prices.

The estimate is based on an average price for Brent crude oil of $41 a barrel, well below today's price of $63. At an average of $60 a barrel the figure could rise as high as $65bn, compared to $40bn in dividends and share buybacks from 2003-2005.

John Browne, chief executive, made the projection in a strategy review that coincided with the company's fourth quarter results, which were below market expectations - despite breaking an annual record for the company

And that

High Profits, Sluggish Investments (NYT, behind sub. wall)

A decade ago, Exxon invested more than $2 for every dollar it distributed to shareholders. Last year the figure was 70 cents.

In 2005, it reduced the number of shares outstanding by 4 percent.

There is a phrase for that strategy: gradual liquidation. It is an excellent strategy for a company in a declining industry with few investment opportunities. Let us hope that is not the case here.

Hope is all that's left. Listen to former Secretary for Commerce Dan Evans, on Hardball (Feb. 3):

When we came out of the mid-40s, America was producing about two-thirds of the global supply of oil and we were consuming about half of that.  Today we consume about 25 percent of the oil in the world and we only produce about five percent of it.  


There is not enough supply of oil to continue to allow this global economy, as long as--as well as the domestic economy, to grow at its full potential, and so we have to change courses and we have to really begin to apply some new technology and bring some alternative sources of energy into the mix.  


And what he`s saying is we need to change courses.  We cannot continue to go down the path that we`re going down, because there is not enough supply of oil in the world to grow our economy or the global economy at its full potential.  


Chris, that is my bottom line.  The world is producing oil, the Middle East, every country at its full capacity and it`s very unlikely that we`re going to be able to see supply in the world grow from the levels where we are right now.  There`s a debate about that.  I`m one that falls in the camp that says it`s going to be very, very hard to do that.  But what I do know is China needs to continue to grow, India needs to continue to grow, America needs to continue to grow.  So what that simply says is we`ve got to develop new forms of energy for the United States and the world.

That's just one more acknowledgement of peak oil (that obvioulsy flew right over Chris Matthews' head - go read his answer to that, it would be hilarious if it weren't so tragic) in a long line, but I'd like to link it to the above numbers.

The commodity cycle goes as follows:

  • demand is growing faster than supply, and this is likely to last as China, India and others keep on growing


  • oil prices go up, in order to tame demand, which works to some extent, as this graph found on the Oil Drum shows:


  • this should also trigger new investments in production, as it has become more profitable to do so, and both lower demand and higher supply should tame prices.

Alas, as the quote above points to, new investments are NOT HAPPENING. This is certainly not a question of profitability, nor of availability of finance. It means, quite simply, that the big oil companies have almost nowhere to invest their money, and that shows in their stagnant, or declining production levels (note that BP's jump between 2003 and 2004 comes from the incorporation of half of Russian producer TNK in its numbers).

Why are they not investing? Because there are no reserves left accessible to them. A number of countries are totally closed to them, and those that are open put increasingly tough conditions - and only offer extremely difficult and costly fields, like ultra deep offshore, Kashagan in Kazakhstan, or oil sands in Canada. The fact that these fields are extremely difficult actually hides the investment situation, as the oil companies are barely investing more money in fields that cost a lot more to develop - which means that they will get less production from that money...

So the big profits of the oil majors are not the triumph of the industry, they are its swan song, and it is actually right that money is taken out of the industry and given back to shareholders to invest elsewhere.

Our task is to make sure that this elsewhere includes those industries that will help us cope with an oil-poor world.

Just a final point: if you think that gasoline prices are high, think again:

The only way we will encourage the transition to that elsewhere is to make it more profitable, and one way to do this will be to make it more attractive than burning cheap oil. Yes, oil is still way too cheap, especially now that we KNOW it is getting scarce. It needs to be taxed.

Use that money to focus on new industries instead of giving it to (dangerous) foreign producers, because prices will increase until consumption really drops - it can be forced upon us, or chosen and done in an orderly way.

It's still our choice, but it won't be for long. The oil industry is DYING.

Originally posted to Jerome a Paris on Tue Feb 07, 2006 at 05:18 AM PST.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Tip Jar - Feb. 7 (3.98)

    In the long run, we're all dead (Keynes)
    Read more on the European Tribune - bringing dKos to Europe

    by Jerome a Paris on Tue Feb 07, 2006 at 05:17:46 AM PST

    •  Unless I missed something.... (none)

      I mean, that`s what his whole speech was about, but it was really straight talk from the president.  It was--you know he`s very good at it.  I mean, he was delivering the message to the American people, which he`s been talking about since he came into office.  As you remember, in 2001 he talked about how important energy was.  

      He put out a plan in the spring of 2001, had a hard time getting Congress to respond to that, but Congress did in some ways finally respond to it.  But, Chris, you don`t wake people up until prices move to much higher levels, they can get painful, and the president has just straight talked to the American people, we cannot continue on this course.  

      What plan is he talking about besides tax cuts for the oil cartels???
      •  Big oil investing in solar, +? (4.00)
        Isn't BP one of the largest players in solar?  So I see the oil companies morphing into "energy" companies and maintaining their stranglehold on the US congress.  Their profits will continue as long as congress is available for the buying, and that will not change any time soon.

        When we see federal tax credits for solar panels, then we'll know that the big energy companies are raking in the profits from that.  The USA is a cartel run strictly for the benefit of the ultra-rich, this has been true for years but is way over the top now that the greedy Bush has been installed by the supreme scum court.

        •  millions (none)
          investments in renewables by Shell and BP, the two leaders from the industry still amount only to a few hundred million dollars per year - single digit % of their investment budgets.

          They are getting bigger, but it's still small change.

          In the long run, we're all dead (Keynes)
          Read more on the European Tribune - bringing dKos to Europe

          by Jerome a Paris on Tue Feb 07, 2006 at 07:07:52 AM PST

          [ Parent ]

          •  Jerome, People Say (none)
            that 'Big Oil' is preventing development of renewables, yet they are some of the biggest investors in the technology, right? Doesn't Big Oil to some extent already own renewables?

            Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

            by Benito on Tue Feb 07, 2006 at 07:25:19 AM PST

            [ Parent ]

            •  Not really (none)
              Some (BP and Shell) have invested, but they are by no means the biggest players in the sector, which sees strong investment from utilities - especially the big European ones, and a number of US ones (FPL, AES), and a lot of financial investors (Goldman Sachs, and man, many equity funds).

              So no, BigOil does not own renewables.

              In the long run, we're all dead (Keynes)
              Read more on the European Tribune - bringing dKos to Europe

              by Jerome a Paris on Tue Feb 07, 2006 at 11:39:18 AM PST

              [ Parent ]

        •  The "hydrogen economy" and Big Oil (4.00)
          IMO, Big Oil likes Bush's talk about the "hydrogen economy" because on the final supply end, it most fits with Big Oil's current infrastructure and most encourages people right now to burn lots of gasoline.

          (Read my review of The Hype about Hydrogen at Amazon. The book does a good job of pointing out how, IMO, not just BushCo but good environmentalists such as the Rocky Mountain Institute are all wet about the future of hydrogen.)

          Folks, we HAVE to conserve more. And that means YOU and I, not "the other guy."

          Do you have an SUV that never gets muddy? If so, to put it bluntly, you're part of the problem. I don't give a damn how liberal or smart-minded you claim to be.

          "There is no god, and I am his prophet." SocraticGadfly

          by steverino on Tue Feb 07, 2006 at 07:44:29 AM PST

          [ Parent ]

    •  btw... (none)
      We are so fucked I don't even like thinking about it....
    •  RATIONS (4.00)
      People will scream about the higher prices and that will benefit the democratic vote only by those greedy, but not religious supremacist, republican.
      But the thing that will get even more people to get in touch with reality is to ration the energy.
      Both the greedy republicans and the religious supremacist right have those who have enough money now to stretch payments over a McMansion and SUVs.  They must be made to feel the reality some way, some how.

      I know rations will probably never come to be, but I dream.  Until then, I laugh at the McMansion heating bills.

      •  "McMansions" - not just the rich (none)
        I live in a majority-minority Dallas suburb which has PLENTY of 4,000-sq-foot houses being built as we speak, and largely being sold with zero down/ballooon note ARMs.

        These middle class people are going to get hammered more and more as Peak Natural Gas gets closer. Unfortunately, they too often buy into the greed advertised from above. Because my suburb -- and most across our country -- have woeful "green" sections of their building and development code, as well as not having the best general design standards code sections to force quality building, builders can build those god-awful cookie-cutter McMansions. Cities can hold them up as the one way to stop "undesirables" from the central city in relocating because they theoretically can't afford them. (Well, let's not talk the zero-down loans.) And the middle class who buys them, whether white, black or brown, buys for exactly that reason.

        The housing bubble will crush that, but then these McMansions will resell even cheaper. It's going to get horrible.

        "There is no god, and I am his prophet." SocraticGadfly

        by steverino on Tue Feb 07, 2006 at 07:49:49 AM PST

        [ Parent ]

        •  Fuck 'em (none)
          Serves 'em right for living in a "keep up with the Joneses," consumeristic mentality.

          I have NO sympathy for them.  

          None whatsoever.  They will have brought it all upon themselves.

          •  Much of society is told not to look (none)
            behind the curtain.  And, that's not been unsound advice for the majority of people - in their eyes - for even the past century.

            Sure, we know the consequences of the Industrial revolution, poorly-planned sprawl, and short-term profits cutting off so many long-term possibilities . . . among other things.

            But, we must be generous in our spirit towards those who only know a society which gets what it wants.  We've been insulated from reality by corruption up to the highest levels for decades - the pain for those losing their "US dream" homes under the Reagan-era, me-me-me-too-too-too spirit will be awful for society beyond even the poverty and uninsured situations we know of today.  Things will get so much worse before any hope of getting better, smarter and more brutally honest as a people.

        •  "Keeping up with the Jonses." (none)
          ..Joneses".  My aunt lives in the area and on a visit to her I noticed two things:

          1.  The local PF Chang's (mildly upscale Chinese restaurant, better preparation than the standard neighborhood variety) had VALET PARKING.  Numerous hot cars in the parking lot, including two Corvettes.

          2.  The local Chevrolet dealer had a line of Corvettes on lot, at least a dozen.

          My cousins down there own McMansions and big trucks/SUVs (One of the wives wanted one because she is tiny.  No joke.) and for those unfamiliar with the Dallas/Ft.Worth area, it is a very low density city, with clumps of office buildings surrounded by housing.  I won't get into how silly  having grass is down there, particularly with the resevoirs and all.
    •  Hey, Jerome (none)
      I agree with you that over the course of the next several decades the oil industry will die.

      But 'till that happens, I would suspect that there is still AT LEAST five to ten years of HUGE profitability left in it.

      So, for the short term, I don't see any death throes.

      By the time the oil industry truly begins to "die," I'm gonna be an old man and the polar ice caps will have melted.

    •  Profits don't end anytime soon (none)
      With global price escalation and the continued decline of supplies, we have a classic late-market cash cow situation. The majors will post huge profits for decades in the future. Yes, this is a mature, deadend industry. But this becomes a great cash investment for shareholders.

      These companies are very conservative, so I wonder if the Boards are just starting to deal with the issue---those that are even aware of the situation.

      Thanks Jerome!

  •  Someone please explian the economics of Oil... (none)
    I had someone tell me the oil companies are only raking it in now because prices are high, when prices are lower, and that profit margins for oil are really low.

    He went on to tell me the oil companies does not control prices. That price is controled by supply only.

    So here is the part that does not add up for me. If the margins are low, then they are low, and margins should not be effected by price. Price here being the cost per barrel to the oil company. So, if the price is higher for the oil company, they tack on their markup (profit margin) and sell the oil. Demand has not changed in the US, and there is no shortage, only higher prices. So they are selling the same amount of oil at higher prices, but with the same old margins, then why the huge profits?

    Can someone explain this in simple terms?

    •  If an oil company were... (none)

      buying crude on the open market, refining it, and then selling it, then I think you are right - margins would be thin.

      The place they really make the money is where they also control the wells, or cases where they pay a fixed and relatively low cost per barrel for the rights to extract the oil.

      •  Well (none)
        Independent refiners like Valero buy oil, refine and sell gas. Their margins have been thin in the past, but are pretty fat right now.

        Most oil companies have separate business units for production and marketing. Frequently the production is sold to the marketing unit for a price that is directly or indirectly tied to NYMEX, with a location differential. Location differential means that if it costs two bucks to ship it to market where it can be sold for NYMEX prices, the price paid at the well is NYMEX minus two bucks.

        I'm not aware of any situation where there is a fixed cost per barrel to extract oil, although there may be minimums. In the US, typically one eighth of onshore production is royalty paid to whoever has the mineral rights. Offshore, the royalty rate is one sixth and is paid to the Feds. The Feds take royalty in kind, ie they take the oil and fill the SPR.

        •  fixed cost (none)
          I'm not aware of any situation where there is a fixed cost per barrel to extract oil
          As I understand it, the 'fixed cost' is the cost of physically pumping the oil out of the ground and loading it onto a tanker. That will, in general, always cost the same amount of money. Obviously there are many fluctuations that affect the price of extraction: labor prices, energy prices, oil field conditions, etc, but in the general sense, I believe the argument is correct.

          I'm pumping oil today and selling it for $68.. tomorrow I could be selling it for $80, but nothing has significantly changed the amount of money spent to drag that barrel out of the ground.
    •  Margins are not the same (none)
      The price of producing a barrel of oil is not much higher now than it was 5 years ago.  However, instead of 2-5 dollars/barrel profit, there is a 40 dollar/barrel profit.

      Prices are higher because demand has increased significantly.  Demand has increased about 10 million barrels/day over the past 5 years.  Supply has not increased significantly.  Simple economics tell you that under those conditions, prices increase.

      Since supply will only decrease, the only mechanism to control demand is price.  Price must continue to increase (dramatically) in order to match demand with available supply.

      If you insist that oil companies and countries only make a flat profit per barrel, you destroy the ability to control demand.  Since controlled low prices will not curb demand, and since production cannot increase, you will have shortages.

    •  Two separate things (none)
      The "margins" are usually those of the refining business, when treated as a stand alone business (which it effectively is) - that's the margin from the activity of transforming oil into gasoline and other such products then sold to consumers. For many years, these margins sucked badly (razor thin), but they have been going up in recent years, as demand growth has finally caught up with spare capacity (built in theearly 80s and which has cost the oil compnaies a lot of money over the years). Now some markets are stretched, and oil companeis are not necessarily in a hurry to correct that (especially with the bad experience of the 80s).

      Then you have the upstream profits, which are usually a formula linked to oil prices, minus the taxes they pay on the extra profits. In many countries, the host government keeps 90% of the profit from very high prices, but even 10% of these amounts quickly becomes a hell of a lot of cash.

      In the long run, we're all dead (Keynes)
      Read more on the European Tribune - bringing dKos to Europe

      by Jerome a Paris on Tue Feb 07, 2006 at 06:05:34 AM PST

      [ Parent ]

      •  I would just add (none)
        That the industry built all those refineries in the late '80s with their eyes wide open, don't feel too sorry for them.  They knew they were overbuilding to "keep up with the Joneses" as it were, so their competitors did not have more refinery production than they did.  They got to eat the cost of that strategy, and now they get to reap the benefits.  For a few years.  Until the End Comes.

        I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man - find out who said it!

        by TheGryphon on Tue Feb 07, 2006 at 06:23:07 AM PST

        [ Parent ]

      •  Have you been reading or talking to (none)
        oil refining industry NPRA lobbyist Bob Slaughter?  When Slaughter gets done explaining away Big Oil's profits, all you can do is say  "Huh?"
      •  Can Jerome Be Right? (none)
        Are the oil companies winding down -  devoting their cash flow to paying out dividends rather than reinvesting in the business to explore for oil and build and maintain its infrastructure.

        But, just for some cheap laughs, let's revisit the Exxon cash flow, capex and dividend numbers to find out if Jerome's theis is borne out?

        If Jerome is right, you'd expect to see Exxon's investments decreasing sharply and its dividends growing rapidly.

        Here are the numbers from the Exxon cash flow statement.

        2005/2004/2003 ($billion)
        cash flow........$40.6.......$28.5......$11.6


        Well, so much for that thesis.

        Over that last 3 years, Exxon's capital expenditures have averaged around $12 billion annually while its dividends have averaged around $6.7 billion annually. Exxon over the past 3 years has spent far more on exploration and capex ($36 billion) than it has spent on paying dividends ($20.4 billion).

        What you could say is that Exxon, over the past two years, has not yet been able to effectively deploy its substantial increase in cash flow. But - in the short term -  not being able to effectively spend an incremental $28 billion in cash flow isn't anywhere close to not being able to find anyplace to invest your cash flow.

        It always helps to check the cash flow statement.

        •  You forgot (none)
          share purchases in your equation.

          And, as I noted, projects are getting more expensive (I did a diary on this back in September but am too lazy to get it out for you), so the same investment budget gives you less new production. And meanwhile, oil prices have tripled.

          ExxonMobil bought back 4% of its shares in 2005 - something like another $12-15 bn given back to shareholders, and about as much as the investment budget.

          BP is expecting to give back $50-60bn in 2 years^to shareholders. Again, twice their investment budget.

          In the long run, we're all dead (Keynes)
          Read more on the European Tribune - bringing dKos to Europe

          by Jerome a Paris on Tue Feb 07, 2006 at 07:00:09 AM PST

          [ Parent ]

          •  Four Things You Can Do With Your Cash (4.00)
            flow. You can reinvest in the business, pay out dividends, buyback shares or stash it on the balance sheet for a rainy day.

            If you're winding down and getting out, you wouldn't devote any money to reinvesting to grow your business, you'd do the bare minimum for maintenance capex and pay out the rest to shareholders.

            Is that what Exxon, as a proxy for the oil business, is doing?

            Over the past three years, Exxon has generated roughly $90B in cash flow. Of that $90B, its allocated $36B to exploration, $20B to dividends, $19B to share buybacks and kept $15B for a rainy day.

            Usually when you reinvest 40% of your cash flow in your business you're not planning on winding it down and getting out.

            In terms of share buybacks, exxons ratio of buyback/cash flow was 22% in 2003 and 22% in 2005. No change there.

            •  I think the real question (none)
              is what is Exxon's long-term strategy to replace its reserves and so remain a viable oil business.

              Is it investment in new or existing fields, or is it by drilling on Wall Street? Buying back shares could be a sign they are preparing for a coming M&A war among the remaining majors, could it not?

              Unless there are major discoveries or radical improvements in existing field recovery rates I just don't see how they can avoid the Wall St. strategy.

              Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

              by Benito on Tue Feb 07, 2006 at 07:31:22 AM PST

              [ Parent ]

            •  Do you have the detailed numbers per year? (none)
              It's hard to make sense of the numbers you provided. They don't seem compatible with those I have seen, but you seem to have easier access to them, so any help will be appreciated!

              In the long run, we're all dead (Keynes)
              Read more on the European Tribune - bringing dKos to Europe

              by Jerome a Paris on Tue Feb 07, 2006 at 09:15:52 AM PST

              [ Parent ]

              •  Exxon Cash Flow Numbers Run Like This (none)
                Exxon sources and uses of cash taken from cash flow statement at Yahoo finance.


                $billion rounded

                Cash flow Ops.....$41....$28...$21.....$90

                Share Repo..........9.....6......5......20
                Repay Debt..........2.....2......0.......4

                Total Cash Uses....33....25.....20......78

                Inc. In Cash........8.....3......1......12

                Over the last three years, Exxon devoted the largest % of its cash flow to building and maintaining plant and equipment and exploring for oil while the % of cash flow devoted to repurchasing shares hovered around 22%.

                Looks like Exxon just can't find more that $12 billion a year worth of projects which beat its rate of return hurdle.

                •  The 'vitals signs' would appear to indicate that (none)
                  Rumors of BigOil's impending death are greatly exagerated.

                  Nice try Jerome, but my car does not run on Schadenfreude anyway.

                •  Thanks (none)

                  Looks like Exxon just can't find more that $12 billion a year worth of projects which beat its rate of return hurdle.

                  That was EXACTLY my point. They have nowhere to invest their money in their own industry (relatively speaking, of course) despite recors breaking prices - which means that we should not expect higher production from the majors any time soon.

                  In the long run, we're all dead (Keynes)
                  Read more on the European Tribune - bringing dKos to Europe

                  by Jerome a Paris on Tue Feb 07, 2006 at 11:02:40 AM PST

                  [ Parent ]

    •  It's inventory appreciation (none)
      The margins on distribution and refining are, in fact, quite low.  The current refinery crunch is probably driving refining margins up, but extraction and distribution aren't going to be high-margin business.

      What makes ExxonMobil profitable this quarter is the value of their inventories.  Depending on how they account for inventory, they're basically realizing the gains from selling oil they bought cheaply before the latest runup and sold at current prices.  It's real money (some defenders of big oil claim otherwise) but it's a one-shot gain unless prices keep going up.  A refiner probably gets a bit of a bump as they do need to hold some inventory, but not like a large vertically integrated producer.

      I'm less concerned about the profitability of oil companies per se as I am about the greediness and short sightedness of most of the executives who run them -- the leadership of big oil is a relatively small, insular, and cronyistic community.  So market forces don't work well because it's a crony-based oligopoly, and the government doesn't want set policies to incent good long term decisions because the crony network invests in expanding its political machine, not producing energy or in alternatives such as conservation.  It's not just that they're greedy but that they want it all now and they want it all for people like them (e.g., old, rich, white, male Texas religious conservatives).

      •  What BigOil Inventory? Remember SPR (none)
        (strategic petroleum reserve) spigot was turned wide  open this summer after Katrina  because George Oilwell told us BigOil told him that their oil inventory/capacity was blasted by the hurricanes.

        Presumably Bush sold our SPR to Big OIL at the current market prices. Or maybe that is too much to presume.

        •  It's still in inventory (none)
          The amount of oil released from the strategic reserve was much less than the total amount of oil sitting in the inventories of the global oil industry.  (Remember that Katrina affected only a few percent of global production, but since supplies were already tight, that loss was enough to disrupt the global markets.)  ExxonMobil is a vertically integrated global company so they own reserves in the ground whose value also appreciates.

          The inventory appreciation profits aren't paper profits; the money they make is real.  They are, however, one-shot speculative profits.  From an economic point of view, it's like winning the lottery.  Alas, the execs will get suitably padded compensation packages for basically sitting on their asses at the country club and watching oil prices rise.

          •  Maybe someone can explain the details (none)
            , in plain ordinary english,  of how Big-Oil make a real cash( (not book-keeping)  profit on [estimated] oil still in the ground [hopefully, on whose say-so? Halliburtons?] that has not been pumped or perhaps even drilled yet?

            Who payed BigOIL the real cash last quarter for this 'still in the ground', unpumped oil?

            Is this just an "Abu Gonzales" way of explaining that BigOil jacked up the price at the pump because they knew they could get away with it?

            •  Because sooner or later they sell it (none)
              The cheap oil gets sold as expensive gasoline or whatever.  That's real cash.  If it's the company's own reserves, I'd assume the price is based on the actual extraction cost (fairly low) plus the amortized cost that they paid to buy and develop those reserves.  If it's bought on the spot market, it's still a real profit(subsequent expensive oil will go into expensive gasoline and the oil company makes its usual narrow margin), but if oil prices go down they'll have to sell cheap gasoline made with expensive oil and in theory it's even.

              This is all an oversimplification, of course.  But the important point that stands is that the oil industry and their executives are prospering and being rewarded for, at best, sitting on their asses doing nothing.

        •  "Inventory" ... (none)
          includes the oil that they own in the ground or for which they own the drilling rights ... it is "inventory" in terms of it is in their balance books as oil that they own for being able to extract and sell in the future.

          Thus, every dollar increase in barrel costs is a $1 additional current/future profit of that 'inventory' in the ground.

          9/11/05, Day 1469, A count worth keeping? Or, Osama Bin Forgotten?

          by besieged by bush on Tue Feb 07, 2006 at 09:49:21 AM PST

          [ Parent ]

  •  Got to just luv BigOil (none)
    Quadruple the profits from same amount oil they placed out on market 4 years ago. And barely 6 years ago gas was under a dollar a gallon.  
  •  But it ain't dead yet... (none)
    And before it dies the large behemoth will thrash around and step on a lot of people.

    Watch out for the collateral damage before the beast is dead.

    Try to not get stepped upon.

    Happy little moron, lucky little man. I wish I was a moron, my God, perhaps I am! -- Spike Milligan

    by polecat on Tue Feb 07, 2006 at 06:00:10 AM PST

  •  predictions (none)
    So what do you think will happen to the industry in the next 10, 20, 30 years if nothing else changes?

    "This...this is the fault of that Clinton Penis! And that powermongering wife of his!"

    by CaptUnderpants on Tue Feb 07, 2006 at 06:01:16 AM PST

  •  Which will happen first? (none)
    Will we run out of oil or destroy the environment using the oil. In the end, the availability of oil will not matter...

    Either we've killed everyone and earth can go on without us (as it no doubt will) or we've used it all up, and by some miracle, found other ways to power up...

    I see Kevin Costner's "Water World" becoming a reality. Let's just hope that Dennis Hopper misses the boat...

  •  No threat to Big-oil survival as long as they (none)
    essentially own the US government executive and legislature branchs.

    And with Roberts and Alito they are well on the way having a majority stake in the judiciary.

  •  tax oil coming into refineries (none)
    Pay for defense with a tax on oil coming into refineries.  

    We process about 6 billion barrels a year.  All it would take would be $100 per barrel!!!  

    Gas would cost at least $4, $5 if the refiners and distributers maintained their margins, which they probably would.  Maybe we could offset it by eliminating income tax on people making less that $80K a year (I did not do calculations on that)

  •  Jerome (4.00)
    The US government got railroads built by subsidizing with vast land grants to the railroad companies along the tracks.

    I think a 'windfall profits' tax on energy companies that the companies could avoid by investing in alternative energy projects would be a great idea.

    We could add a 'gas tax' that consumers can use to buy more efficient cars. The rebates could scale up based on the fuel mileage sticker on the car as compared to the fuel mileage of the car being scrapped.  

    We could also encourage aeronautics and automotive companies to collaborate on the design of  more efficient, light weight auto bodies and parts.

    We could subsidize the addition of alternative fuels to today's 'gas stations'. And subsidize lowering the price of such fuels as biodiesel with taxes on 'pure' petroleum diesel.

    I am sure these are ideas you and others have already come up with, but I wanted to throw them out again.


    The CHICKEN-hawk Bushiter's Iraq War- 1268 Dead, about 25K Medivacs and 9000 Maimed... Fought the Bushiter Way... Wasting other people's money and lives.

    by RedMeatDem on Tue Feb 07, 2006 at 06:16:35 AM PST

    •  I like the idea (none)
      of rebates based on the mileage of the car. Hadn't thought of that.
    •  At the State Level (none)
      Car registration costs could be linked to fuel efficiency. Make SUV, Truck, Van, and RV drivers pay more for registering their cars. Next to no registration fees for, say, hybrids or electric cars.

      Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

      by Benito on Tue Feb 07, 2006 at 07:33:05 AM PST

      [ Parent ]

      •  DC does this... (none)
        ...or supposedly did. When I went to register my Honda Hybrid last year, I was told that the law had been passed, but not yet implemented.

        This year, I hope to save 50% on my registration fees.

        "If anyone says, 'I love God,' yet hates his brother, he is a liar" --1 John 4:20 (NIV)

        by mecki on Tue Feb 07, 2006 at 08:27:51 AM PST

        [ Parent ]

      •  In Germany it is similar (none)
        But IIRC the tax is based on engine block size.  That's why you see such efficient transmission gearings on many European cars - trying to suck as many horses out of a small blocked engine.

        "now this is not the end, it is not even the beginning of the end. But it is, perhaps, the end of the beginning." W. Churchill

        by Thor Heyerdahl on Tue Feb 07, 2006 at 10:29:23 AM PST

        [ Parent ]

      •  No they can't (none)
        If I'm not mistaken, Federal law forbids states from taxing cars based on engine displacement or fuel economy.  States can raise gasoline taxes, though, which is effectively a mileage tax based on fuel economy.  However, the exurbanites who would be screwed are far more motivated than urbanites who might favor it but are unlikely to be very passionate about it.  And those SUVs have poor resale value, so they ultimately become the vehicles of choice for lower income drivers -- as a result, it's not just affluent McMansion dwellers who complain.
    •  Hey, there are and have been (none)
      plenty ideas FOR DECADES about what to do about this problem.

      The problem is not lack of ideas.

      Anyone with half a brain and common sense can come up with improvements over the present system.

      The real problem is lack of collective political will on the part of our political leadership, and also the public.

      Until that changes, you can come up with all the great ideas you want.

      Ain't NOTHIN' gonna change.

  •  Why the dinosaurs will die off THIS time: (4.00)
    They cling desperately to a reality that no longer exists except on fumes.

    They neglect to make plans for the time when their product is no longer available, let alone plentiful.

    They spend their resources fighting the very movements that ought to ensure their survival, would they only ADAPT.

    If it were I running one of these giant oil companies, I'd be pouring the bulk of my dough into research on alternative fuel -- period.

    Instead they pour their dough into fighting regulations that are inevitable and fighting the allocation of resources into that much-needed research.

    And that, children, is how the dinosaurs will die off this time.

    But this time, there aren't enough of them for us to convert into gasoline.

    •  LOL (4.00)

      But this time, there aren't enough of them for us to convert into gasoline.

      Did I ever tell you I was a fan of yours? ;-)

      In the long run, we're all dead (Keynes)
      Read more on the European Tribune - bringing dKos to Europe

      by Jerome a Paris on Tue Feb 07, 2006 at 06:20:06 AM PST

      [ Parent ]

    •  Sorry MSOC (none)
      but the truth is, they already own the patents.  They (Standard Oil - er - I mean the big Oil Companies with their interlocking Boards which are not a monopoly even though they all price identically at the producer end and the sales end) have been buying up patent rights for alternative energy and conservation devices for decades.  They have a plan to survive the end of the industy they have milked for generations, and they are likely to succeed.

      I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man - find out who said it!

      by TheGryphon on Tue Feb 07, 2006 at 06:26:30 AM PST

      [ Parent ]

      •  I have heard this before... (4.00)

        I don't have any specific knowledge, but these stories smell like urban legend.  If you can cite specific patent numbers, it would be one thing.  Vague reports of oil companies having bought up bunches of patents are quite another.

        Another point is that patents do expire eventually.  If there were things they bought up in the 1970's, they should all have expired by now.

        •  what I have is purely an example (none)
          my grandfather, while working for Mississippi Chemical in the mid- 60s, developed a valve fitting (I'm not an engineer, so sue me ... it was a pipe splitting valve thingagummy) that reduced leakage at pipe junctures dramatically (again, not an engineer) ... s an employee of MC he of course didn't own the rights, the company did.  They sold the patent to Texaco, who have renewed it several times.  They get a significant profit out of other people having topay them to use this pipe thingamajigger (not an engineer) to this day.  Not exactly "alternative enrgy" but an example of a conservation device that went from the natural gas transmission industry where it was used to an oil comapany not directly in that business.

          I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man - find out who said it!

          by TheGryphon on Tue Feb 07, 2006 at 07:08:34 AM PST

          [ Parent ]

          •  Patents are not renewable (none)
            They expire 17 years after they issue and then the technology is free to the public.

            Arlington, Virginia

            by ScienceMom on Tue Feb 07, 2006 at 08:33:02 AM PST

            [ Parent ]

            •  That, and... (none)
              Every company patents ideas from their employees. My husband works at Adobe (yes, the Photoshop and Acrobat company) and employees get a patent bonus if their idea is unique enough for the company to patent. Nothing sinister, it's just how these things work. Whether the employee is employed to develop new things to patent, or the employee happens to come up with an idea as part of their job anyway, the company gets the patent rights.

              I don't like Bizarro World... I want to go home to America.

              by willers on Tue Feb 07, 2006 at 09:28:25 AM PST

              [ Parent ]

      •  There is a book by Ben Elton (none)
        on this topic: Gridlock.

        In the long run, we're all dead (Keynes)
        Read more on the European Tribune - bringing dKos to Europe

        by Jerome a Paris on Tue Feb 07, 2006 at 06:43:37 AM PST

        [ Parent ]

      •  You give them too much credit (none)
        The oil companies don't tend to fund basic research very heavily and as a result tend not to value intellectual property very highly.  They have some number of patents they've acquired during their occasional fits of diversification.  When their alternative-energy acquisitions don't make money, they license off the patents on the cheap so they can monetize them quickly.  These people have a very short term planning horizon.  In that regard, they are very similar to dinosaurs, a point made elsewhere in this thread.
    •  Meanwhile... (none)
      ...Tierney waves all of this away with a single 'when oil gets too expensive, the marketplace will deal with it'

      Ummm, sure, rich folk like you may be able to survive. But what'll it do to the economy in the meantime? Shouldn't we be planning ahead.

      Wanker. (Tierney, of course. Not you, MSOC.)

      "If anyone says, 'I love God,' yet hates his brother, he is a liar" --1 John 4:20 (NIV)

      by mecki on Tue Feb 07, 2006 at 08:40:59 AM PST

      [ Parent ]

  •  Sic Transit Gloria Mundi (none)
    Flat production and the huge shareholder windfall are canaries in the coalmine. Big Oil corporate leadership has GOT to know this -- what do you suppose they are saying among themselves? Is there an Exxon-Mobil Richard Clarke running around with his hair on fire?

    I predict another wave of Big Oil consolidation in the coming years. It'll be fun watching them eat each other into a new Standard Oil.

    Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

    by Benito on Tue Feb 07, 2006 at 06:17:33 AM PST

  •  We will die (none)
    before Big Oil does.  Big Oil will see to that.
  •  And worse (none)
    When we get to the point that there is no room to squeeze profits out of oil for the big MNCs, they will throw their weight behind other energy sources, renewable or not, and we will still be lining the pockets of the energy barons--be it biodiesel, wind, solar, nuclear, other biomass, tidal--because we're going to need their money and infrastructure to some extent, and even if we don't, it will be pretty much impossible to keep them out of it. (And even starting with a flat playing field we'd still end up with plenty of greedy corporate bastards. The system rewards it.)

    -8.38, -8.00 Moderation in temper is always a virtue; but moderation in principle is always a vice. --Thomas Paine

    by hyperstation on Tue Feb 07, 2006 at 06:27:35 AM PST

  •  A damning comment about global crony capitalism (4.00)
    What does the oil industry have going for it?

    1. About $80 billion of investment capital, give or take a few billion.

    2. Accrued knowledge of energy production and distribution.  This isn't just "how to drill an oil well" but things like "how to buy and sell real estate for energy facilities" and "how to trade commodity futures" and "how to raise capital" and all manner of other useful intellectual capital.

    3. Its marketing and distribution infrastructure.  In the US, take the total number of freeway offramps and multiply by the number of major oil companies and you've got a good estimate of the number of small retail businesses owned by oil companies.

    4. A huge business opportunity where they've got a front row seat: find enough renewable energy and/or lower-energy alternatives to make the planet work.

    The Republicans claim to be the party of free enterprise.  Their cronies run a big part of the energy industry.  And what do we get?  Nothing.  They won't invest.  They won't take risks.  They won't think creatively.  If smart and motivated people were running the oil companies, you'd see some of those windfall profits getting re-invested in alternative energy futures.  You'd also see them using their considerable political clout to push governments in the direction of renewable resources, not because they're nice people but because it's good for their business.  None of this is happening.  The same culture of corruption that infests the Bush administration affects most of big business, too.

    Maybe we need more liberals and leftists running large corporations.

    •  Remember Adam Smith! (4.00)
      People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
      The Wealth of Nations, Book I, Chapter X

      To widen the market and to narrow the competition is always the interest of the dealers ... The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted, till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
      The Wealth of Nations, Book I Chapter XI

      In a free trade an effectual combination cannot be established by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind.
      The Wealth of Nations,, Book I, Chapter X

      Now, repeat after me:

      A pro-Big Business agenda IS NOT a Free Market policy.

      Republicans are pimps who have turned Adam Smith into a whore for big business. Whenver he objects, they slap him into silence while screaming, 'where's the money, bitch!'

      Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

      by Benito on Tue Feb 07, 2006 at 07:42:46 AM PST

      [ Parent ]

      •  Adam Smith is overrated (none)
        And the Enlightenment Deism on which he built his economic philosophy was exposed as untrue 200 years ago.

        "There is no god, and I am his prophet." SocraticGadfly

        by steverino on Tue Feb 07, 2006 at 07:54:04 AM PST

        [ Parent ]

      •  Smith understood (none)
        what every honest economist since has understood . . . "free markets" only exist when regulated.  The natural nature of "the market" is to be cornered, controlled and exploited by a relatively few powerful "players".

        Whenever you hear someone expounding on the benefits of the "free market" who is not proposing regulation to insure openness and limit concentrations of power in that market you are hearing either a liar or a thief . . . (or both).

  •  Jerome - One of your BEST EVER diaries (4.00)
    Short, clear, elegant and compelling.  It already costs me over £40 to fill the tank of my modest diesel saloon - but at least I get twice the mileage of my old gasoline engine car.  

    I don't really resent the taxes which make up the bulk of that expense, as I appreciate the investment required to maintain the road infrastructure and offset the damage caused by cars and pollution.  It's my choice.  It's my government.  It's a policy that makes sense.

    I was thinking what would happen when Bush bombs Iran (foregone conclusion in my mind) and how I would get by without a car when the prices spike.  First, I ordered a bunch of 20 litre fuel cans off eBay which I will fill up and store here.  Second, I've topped off the diesel tank on the boat (my get away plan for when the Big One hits - whether bird flu or war).  Third, I realised I can get anything I need by public transport and walking as we live in a village with excellent high street shops on a direct rail link to London.  I'm prepared and I'm lucky, but I worry all the same.

    "Americans can always be counted on to do the right thing - after they have exhausted all other possibilities." Winston Churchill

    by LondonYank on Tue Feb 07, 2006 at 06:37:13 AM PST

  •  Jerome, I have a special diary request (none)
    I have seen a fair bit of info lately concerning alternative energy R & D and related investments by Big Oil, especially BP and Shell.  But, I don't have the frame of reference / experience to judge the seriousness of their efforts.  Do you have some leads on this?  

    The intrinsic nature of Power is such that those who seek it most are least qualified to wield it.

    by mojo workin on Tue Feb 07, 2006 at 06:47:00 AM PST

  •  Image pops to mind of Dubya... (none) captain of the Titanic:

    "Icebergs?  Bring it on!!"

    I recall reading that his place in Crawford is full of alternative energy features, passive solar and so on.  Possible that he knows more than he lets on?

  •  I agree with you. (none)
    I gave you a 4 and I recommended it.

    I also believe that wasting oil is wrong for three reasons, for somewhat non-scientific reasons:

    1. It's aesthetically wrong. I.e., it's like being too lazy to flip off the switch when you leave a room.

    2. It's environmentally destructive.

    3. Regardless of when oil is going to run out, it'll run out some day, so conservation is always key.

    However, let me play devil's advocate. Curious about what an intelligent response to these two questions are:

    A. "Oh, stupid scientists, liberals, and others with an anti-corporate agenda have been predicting for decades that oil is about to run out. They are always wrong, aren't they? Oil companies will always find new oil!"

    B. "Oh, there's no real worry here. As oil supplies drop, smart scientists will develop new energy methodologies as the market demands. The government doesn't need to impose any new laws and regulations."

    (Note how scientists can be at fault and the saviors at the same time.) would you all respond to A and B?

    •  OK..well.. (none) maybe they are right...since there's no response.
      •  I do have to work sometimes! (none)
        So I cannot answer every query in my diaries immediately, sorry.

        But both answers are essentially the same, a blind trust that we'll somehow find a way out and that scaremongering will always be wrong because it has been wrong (or too early) before.

        Today, the question only seems to be whether we'll run out of cheap oil in the next 5 years or in the next 30. If 30, many adults can decide not to care as it won't matter to them; others that we have plenty of time to find a solution - we've always found one so far. The "5" option is usually contested usign the argument that while physical reserves are finite, the (smaller subset of) economic reserves can be increased via technology and higher prices, which is true to a point but about to be sorely tested.

        We'll see, I guess.

        In the long run, we're all dead (Keynes)
        Read more on the European Tribune - bringing dKos to Europe

        by Jerome a Paris on Tue Feb 07, 2006 at 09:42:53 AM PST

        [ Parent ]

        •  Sorry.. (none)
          ..I figured my sarcastic comment would get a reply. ;-)

          Also, others could have replied.

          I agree with you.

          What would be nice is to have some analagous examples: Cases where a resource was predicted to be depleted, and was depleted, and the effect this had. (Even if the prediction was later shown to be too cautious.)

          There must be many good examples we can use to get people to understand: fishing, forests, minerals, food sources, etc. An Atlantic fisherman who was told that his livelihood was being depleted, and then saw it happen, would be a good spokesman for the argument that the same will happen with oil. My point is, your average Joe just doesn't comprehend what's happening. They can't wrap their minds around it. We've all grown up with oil always being here. Thus, it will never run out.

    •  You forgot C (none)
      C: "Oil is abiotically produced by the earth's core and is renewable - it literally oozes out of the earth's pores."

      Yes, there really are people who believe this. LOL

      I don't like Bizarro World... I want to go home to America.

      by willers on Tue Feb 07, 2006 at 09:32:01 AM PST

      [ Parent ]

  •  Chevron's Secret Admission of Peak Oil (none)
    Yesterday in the Wall Street Journal, Chevron had another "will you join us" ad, but this one had a graph in the background for "World Energy Demand."  It listed all of the sources of energy in the world, and showed what proportion each would contribute to supply. Chevron showed total world energy supply, excluding renewables, declinng over the next hundred years. Chevron also showed oil peaking in 2000, with supplies dropping by 25% by 2025.
  •  I'm not so sure (none)
    that it is currently in the interest of the oil majors to invest megabucks in exploration.

    Sometime late last year, the performance of the Oil Services HOLDRS became decoupled from the performance of the market index tracking oil majors. See the chart here.  Oil services have really taken off, even beyond the stellar performance of other energy companies. What this means is that a lot of money is flowing to the companies that do exploration, drilling, and develop technologies to increase recoverable yield, in the expectation that those companies will make out like bandits in the next few years.

    Why would the oil majors themselves not be on the forefront? Perhaps because they are reluctant to invest heavily in areas where the host country or the national oil cos could just raise royalties and eat away all the profit that could otherwise result from such an investment.

  •  Jim Kunstler, as usual, has some useful thoughts (4.00)
    Jim Kunstler, author of The Long Emergency, has a "blog" of sorts where he often talks about Peak Oil and its consequences.

    One of the things he has mentioned repeatedlyis the role that passenger rail can have as part of addressing peak oil - and the fact that the US needs to rebuild its inter-city rail service, pronto, if we want to be able to get around in a few years. An Excerpt:

    "     The key to the stupidity evinced by Mr. Bush's speech is the assumption that we ought to keep living the way we do in America, that we can keep running the interstate highway system, WalMart, and Walt Disney World on some other basis besides fossil fuels. The public probably wishes that this were so, but it isn't a service to pander to their wishes instead of addressing the mandates of reality. And reality is telling us something very different. Reality is saying that the life of incessant motoring is a suicidal fiasco, and if we don't learn to inhabit the terrain of North America differently, a lot of us are going die, either in war, or by starvation when oil-and-gas-based farming craps out, or in civil violence proceeding from failed economic expectations.
         I hate to keep harping on this, but Mr. Bush could have announced a major effort to restore the American railroad system. It would have been a major political coup. It would have a huge impact on our oil use. The public would benefit from it tremendously. And it would have put thousands of people to work on something really meaningful. Unlike trips to Mars and experiments in cold fusion, railroads are something we already know how to do, and the tracks are lying out there waiting to be fixed. But the reigning delusions of Hollywood and Las Vegas prevent us from thinking realistically about these things. We're only into wishing for grand slam home runs and five-hundred-million-dollar lottery jackpots. Anything less than that makes us feel like losers."

    Read the whole thing.

    How readily you become slaves - Augustus Caesar

    by mftalbot on Tue Feb 07, 2006 at 07:05:32 AM PST

  •  Monopolies never die (nt) (none)
  •  This point cannot be stressed enough (none)
    Jerome writes:

    So the big profits of the oil majors are not the triumph of the industry, they are its swan song, and it is actually right that money is taken out of the industry and given back to shareholders to invest elsewhere.

    Our task is to make sure that this elsewhere includes those industries that will help us cope with an oil-poor world.

    Now, what if oil company shareholders pocket these funds and then turn to the taxpayers to build things like Montana coal gasification plants? Massive wealth transfer in a "reverse Robin Hood" direction.

  •  Factor into this (none)
    the dependence of industrial agriculture, which now heavily dominates US production, on fossil fuels.  Not only your beloved SUV is at risk.  So are your cornflakes. Europe seems to be going the philosophical direction of small unit organic farms and so could have a sustainable food base. With the thorough demise of the family farm and the trend towards giant agribusiness the US has been rushing the opposite direction, especially with Monstanto, et al's attempt to make as such seed stock as they can proprietary.  Plus the ultra dependence on long distance transportation to get foods to market.  I can easily see a crisis developing that the US consumer isn't even considering yet.

    Theocracy is tyranny

    by Druidica on Tue Feb 07, 2006 at 07:28:56 AM PST

  •  My hobby horse (again) (none)
    Even if we know that the oil based economy needs to change there are not now any workable alternatives being offered.

    The renewables (wind, solar, tides) are a fraction of world demand and suffer from a few limitations which will prevent their being a significant energy source.

    Nuclear will be used increasingly, but only breeder reactors will provide a sustainable source of fuel. There are weapons proliferation and waste storage issues which have not be solved. Local opposition is another big factor working against expansion.

    Coal use can be expanded, but has climate change impact. The cure may be worse the disease in this case.

    My suggestion (again) is a Manhattan-Project style effort to develop controlled fusion. There have been some recent promising experiments on sono-cavitation which may produce fusion at room temperatures. In addition the magnetic confinement projects are moving ahead slowly. The world spends about $3 billion per year on fusion R&D. This needs to be ramped up to 10- to 100-fold. That is, to between $30-$300 billion per year. Just remember that Bush just asked for $120 billion more for Iraq to see what a small amount of money this is on a global level.

    The money should be spread around, large energy and military companies should be encouraged to bid on R&D contracts with the understanding that a fair percentage won't necessarily pan out. If oil companies are awash in funds that they don't know how to invest, this is a good avenue, especially when combined with some government sponsored incentives.

    Perhaps, a new international agency should be set up to promote fusion research. Either this gets figured out in the next 30-50 years or the world will be a hot place fueled by coal.

    There just isn't any other alternative.

    •  Power fusion R&D is being done--in China (none)
      China Russia, Japan, and Some european countries are making concrete national commitments . Go look on the DOE  (US Dept of Energy) website to see what is (not) being done in the US today. Mostly vaporous future "planning" plans and vaporous fig leaf PR from what I saw last time I checked.
  •  The major Oil Co.'s made ~ $1 Trillion in 2005 (none)
    Mind boggling.

    "Why quit our own to stand upon foreign ground?" -George Washington

    by House on Tue Feb 07, 2006 at 07:45:45 AM PST

    •  And that is just 'on-the-books' profit, (none)
      Imagine what their gross revenues are, and what their true full full profits must be, if you take into account all the "off-shoring" and creative book-keeping you know they must also be doing.
  •  Those not scared enough.... (none)
    ...may want to have a look at this.

    Read more about it here.

    Who will be brave/stupid enough to try to un-shit Bush's bed?

    by Abby786 on Tue Feb 07, 2006 at 07:50:30 AM PST

  •  Old School (none)
    Now that I've added a couple feet of insulation above and below, I'm starting to really love my century-old house.  It was designed and built when only wood provided heat and air-conditioning was only a dream.

    The plaster walls serve nicely as a heat sink, moderating the household temperature without fans.  The high ceilings allow the heat to float above people's heads in the summer (ceiling fans turned on every couple of hours pull it back down in the winter).  And the mature maple and walnut trees towering above provide shade from much of the hot Kansas sun in the summer.

    I suspect most McMansions won't fair so well without their very active heating and cooling systems.

  •  Matthews sounds like a fifth grader (none)
    Chris Matthews seems to have no idea what the actual subject is here. He struggles to grapple onto some kind of partisan talking points floating around, which might be applied to this issue. He expects the topic to be just another meaningless blank slate on which to tack sticky notes containing insults to Democrats.

    Evans is not interested in that kind of non-discussion; he comes from the era when there was still a fair amount of content hiding behind the rhetoric. No wonder Matthews likes him. Evans is a Republican, and of course one is not allowed to have a serious conversation with a Democrat on Hardball, so that part is good.

    And Evans is talking substantively, rather than just hurling insults, which must be a relief once in a while -- even if Matthews himself has forgotten how to speak in that dialect. He might be able to relearn the skill, but since there is no demand for it, he normally gets no chance to practice.

  •  Capitalism can fix some things (none)
    I am in favor of taxing oil and subsidizing alternative energy for national security reasons (not giving money to foreign dictators who then give money to anti-american terrorists) and for environmental reasons.  

    But the idea that we need to do it because the world is running out of oil is not a good reason.  It isn't running out of oil tomorrow.  It is slowly running out of oil.  As it does, the price will continue to rise.  The rise in price will justify exploration in more expensive oil sites, and will also get people to buy more energy-efficient cars and items.  After the oil shocks of the 1970's, American oil use went way down and didn't get back to where it was despite a growing economy until about 20 years later.  In the last few years, Americans have started to abandon their love affair with SUVs as gas prices shot up.  Ask Detroit how planning on how relying on big gaz-guzzling SUVs is going with gas prices higher now.

    Like I said, there are valid reasons to get us off of our oil "addiction" -- but the fact that oil fields are going to run dry is not one of them.  

    •  Hmmm (none)
      It isn't running out of oil tomorrow
      Maybe not. But "fifty years from now" tends to come around a lot sooner than people think it will.

      We invest routinely in infrastructure, both personal (McMansions out in suburb land) and societal (freeways, transportation networks), which is expected to last for fifty years or more. And, thanks to increasing lifespans, a lot of us end up being alive fifty years from now when we didn't originally expect to be.

    •  TAX IT (none)
      You are correct in observing that a rising price for oil will gradually wean consumers off of it . . . the question is where do those dollars (the price increase) go.  Do we give them to Sheiks and scoundrels (oil companies) as increased profit, or do we retain them for the commn good, as taxes.

      Either way rising price at the pump eventually reduces consumption . . . why enrich the few in the process ? ? ?

  •  Re: China's research (none)
    It will be interesting to contemplate what will happen if, say, China develops fusion technology and then refuses to share it with the west. It would be to their economic advantage to have a lower cost supply of energy than their competitors.

    Just look at how tightly the US want to control nuclear technology, and how much resentment it causes with developing countries like Iran and India to see what the situation might look like if the shoe is on the other foot.

  •  Solution: War as Resource Grab (none)
    Alternative energy sources likely cannot be developed to come on line in sufficient quantity before the price of oil skyrockets due to dwindling supply and increasing demand, leading to a huge commodity inflation and rising interest rates, which coupled with wage deflation owing to global labor arbitrage would threaten to cripple the economy. The reality is that wealth/power distribution in the world is now in the process of being reconfigured owing to globalization. The US is determined to preserve economic and military hegemony. So look for the US to grab as many resources as it can while it can in order to remain king of the mountain.

    Iran? Here's a view of a former German intelligence officer published in Asia Times on the coming (possibly nuclear) war with Iran, culminating with the US and Britain taking over the Iranian oil and gas fields:

    Iran and the Jaws of a Trap

    If not now, when? When they come for you, then it will be too late. Shout it from the rooftops, take it to the streets.

    by tjfxh on Tue Feb 07, 2006 at 08:55:37 AM PST

  •  Oil Firms attacking SEC rules on reserves (none)
    Also today, behind the WSJ subscription wall, was this story:

    Oil Firms Want SEC To Loosen Reserves Rules

    The article says

    Thanks to record profits, oil companies are finding it easy to fatten up their bank accounts. But they're having a tougher time convincing skeptics how much oil and natural gas they have in the ground, which is the measure that Wall Street uses to gauge the companies' future profitability.

    Big Oil's proposed solution to this dilemma? Change how reserves are measured.

    In essence,the oil companies want the SEC to allow them to state probable reserves in addition to their proven reserves.  Under the new accounting, Exxon would have replaced 112% of the oil it pumped last year, but under the SEC accounting, it was only able to replace 83%

    From the Article:

    Exxon Mobil Corp., the world's biggest oil company, last year said that its own calculations showed it had succeeded in adding 1.8 billion "oil-equivalent" barrels to replace the 1.6 billion barrels it had pumped in 2004. In other words, by Exxon's calculation, it had replaced more than 112% of the oil and gas it had pumped out of the ground the year before. But using the SEC rules, the oil giant actually fell behind, replacing only 1.3 billion barrels, or 83%.

    "Ah, what an age it is when to speak of trees is almost a crime for it is a kind of silence about injustice" (Brecht)

    by tsackton on Tue Feb 07, 2006 at 09:03:53 AM PST

  •  Change energy fund mandates (none)
    Hurray hurray hurray for the guy who manages the Vanguard energy fund. I totally love that dude. He makes my capitalist heart sing.

    But, as far as I can tell, all of the assets are in companies known as fossil fuel companies. Maybe some of those companies (example: British Petroleum) are actually big alternative energy investors, but it's hard to figure that out from the prospectus.

    Of course, many of the mutual fund managers are in Boston, Philadelphia or New York or other nice places and, in their private lives, are about as progressive as we are.

    I've tried e-mailing Vanguard to tell it that it should put a little of its energy fund assets into alternative energy investments, both to help invest in the future and to protect against fluctuations in fossil fuel energy markets. (Example: solar energy operations would not correlate that much directly with a war in the Middle East that would disrupt oil deliveries.)

    Of course, I got a stupid form letter back.

    Anyhow, are there folks like you (Jerome), Stirling and others here who are in a position to make waves in the asset-management industry?

    If so, could you go and try to persuade Vanguard, Fidelity, et al. that alternative energy investments belong in energy funds?

    Also: it seems as if companies like Exxon ought to be strongly encouraged to invest profits in alternative energy research. Are they giving money back to shareholders just because they don't believe they're cut out for alternative energy work or because the tax laws and other legal/regulatory/whatever incentives are designed badly?

    •  Clean Energy fund (none)
      Check out the PowerShares Wilder Clean Energy Exchange Traded Fund (ETF) - it's an index fund that trades like a stock.

      Ticker symbol: PBW

      [the fund] seeks to deliver capital appreciation through companies that focus on greener and generally renewable sources of energy and technologies facilitating cleaner energy

      Its top ten holdings include Evergreen Solar, Suntech, Active Power, and Hydrogenics.

      (Not an investment advice, do your own dd).

      •  Get the fund into Vanguard (none)
        First, because I'm too lazy to invest in anything that's not in Vanguard. Second, because Vanguard, Fidelity, et al. have a lot more assets.

        If Vanguard would add Wilder Clean Energy or a variation onto its menu, that would be a big deal.

  •  Good video (none)
    I've plugged this film a thousand times here but if you really want a good overview of where things are going, get a hold of:

    The End of Suburbia

    I forced my family to watch it and it was a great wakeup call to how this country is heading for disaster.  The main message is that if you live in one of those new sprawling suburbs you're screwed and should plan on selling and moving closer to an urban center and better resources.

    Anybody whos still holding on to a McMansion and an Escalade when the bill comes due is going to look like a total idiot.  

    My favorite line: "We have a railroad system in this country that the Bulgarians would be ashamed of".

    (if by "criminalization of politics" you mean politics being taken over by criminals, you are absolutely correct)

    by Drezden on Tue Feb 07, 2006 at 09:45:23 AM PST

    •  Yes, it's life changing (none)
      My husband was skeptical and thought I was flipping out until I showed him this video -- now he's at the forefront of our shift to self-sufficiency! It will put the fear of God (or belief of your choice) into you.

      We are hosting a public screening of this film in our town and starting a local self-sufficient living group this coming Saturday. Building community is better than gold -- if you have reliable neighbors that help and trust each other, you can't go wrong. I'm already starting to barter with the local soap lady for my handspun wool yarn and fresh veggies! Yeah!

      I don't like Bizarro World... I want to go home to America.

      by willers on Tue Feb 07, 2006 at 10:07:15 AM PST

      [ Parent ]

  •  We never talk about plastic (none)
    and all of the million other convenieces that also spring from oil--look around you--oil spun into a gazillion things--everyday things we need to make our modern world function.

    Not to mention agriculture.

    the coming oil FREAK OUT will mean a lot more than being unable to afford to transport and move goods--it will mean the inability to GROW food (on the scale we now expect) and the impossibility of packaging that food in ways most Americans expect.

    Cheap keyboards, toys, soda bottles, milk jugs, most of your car, clothes, plastic sheeting--all made from oil.

    WHAT will all of THAT do to our economy!

    •  Absolutely (none)
      We will need to return to waxed paper, metal, fabric, glass, ceramics, and other natural methods of storing and packaging things. I still miss the wax paper around the Ritz crackers and cereal boxes -- I detest those new plastic wrappers! Cereal bags were voted 4th most difficult type of packaging to get open in the latest issue of Consumer Reports. 8-(  

      But I digress. Yes, look around you at how much plastic or foam there is in your home, car, office, or businesses you visit.

      You know that new TV commercial where anything made of plastic is melting away from the doctor's office or the house? Take another look -- it's a preview of the end of the oil age.

      And of course, trying to keep 6 BILLION people in paper, fabric, glass or other natural packaging is impossible. But dieoff is a separate topic...

      I don't like Bizarro World... I want to go home to America.

      by willers on Tue Feb 07, 2006 at 10:14:13 AM PST

      [ Parent ]

  •  Oil Industry is very Efficient (none)
    Oil is pumped out of the ground from a couple miles, and put on a tanker, shipped across the ocean, refined, transported hundreds of miles and sold in gallons for a price that is less than a gallon of water that came from local rainwater last week.

    I think oil should cost a LOT more to force us to conserve and switch to permanent types of energy.

    A President in his own league. The Bush League!

    by Tuba Les on Tue Feb 07, 2006 at 10:08:38 AM PST

  •  a random, absurdly long question... (none)
    So I've been thinking about this for some time, and I'm not sure if you've done a diary on what I'm going to ask about before.  If you have, I'll go read it.  But...

    ...I've been wondering what the affects on individual, specific local economies might be in the wake of a severe oil crisis - where gas prices get up into the 4-5 range and stay there, or worse.  It occured to me that there are a few cities that would stand to fare reasonably well as compared to other U.S. cities if this happens...

    • Chicago
    • Pittsburgh
    • Cincinnati
    • St. Louis
    • New Orleans (if it ever gets rebuilt)

    My reasoning for this was that they're all in vaguely reasonable climates (unlike say, Phoenix or Dallas), at least 3 of those (PGH, CIN, NO) are not horribly large in land area (walking/biking is possible, although not fun in the winter for the first of those 3), and all of them have good options for alternate transportation for trade.  Chicago, AFAIK, is still a giant rail hub; all the other 4 are on te Ohio-Mississippi river complex - hell, Pittsburgh is still the largest U.S. inland port last I checked.  Moving stuff down the river would almost be practical again if trucking things about is too expensive.  I almost would even expect the PGH steel industry to start picking up again, although it'd take a while to get some of the old mills running, likely - as by now many of them probably don't have a lot of the machinery left.

    Is this anywhere close to correct?  The logic seems sound in my mind, but I'm nowhere near an expert on this stuff.  There are probably a couple other cities that should be on this list too, but I can't think of what they'd be.  It just occured to me that this would be a good time and place to get some feedback on this.

    "...but the people aren't looking for a handout/they're America's working core, can this be what they voted for?" - Bad Religion - Let Them Eat War

    by Fraction Jackson on Tue Feb 07, 2006 at 10:17:52 AM PST

    •  Say what? (none)
      Chicago and Cincinnati have better climates than Phoenix or Dallas?? How are you defining "better"...?

      I don't like Bizarro World... I want to go home to America.

      by willers on Tue Feb 07, 2006 at 10:52:29 AM PST

      [ Parent ]

    •  So-called safe areas (none)
      There is a book called Strategic Relocation Guide: Safe Places in North America that you can order from the "Life After the Oil Crash" site. (Disclaimer: I can't vouch for its contents. Nor am I a peak oil expert. Your mileage may vary).

      In the final chapter of The Long Emergency, the author (James Kunstler) provides a light analysis of which areas of the US are likely to do OK, and which ones are likely to have problems. An adapted essay from his book was published by Rolling Stone Magazine.

      "Some regions of the country will do better than others in the Long Emergency. The Southwest will suffer in proportion to the degree that it prospered during the cheap-oil blowout of the late twentieth century. I predict that Sunbelt states like Arizona and Nevada will become significantly depopulated, since the region will be short of water as well as gasoline and natural gas. Imagine Phoenix without cheap air conditioning.

      I'm not optimistic about the Southeast, either, for different reasons. I think it will be subject to substantial levels of violence as the grievances of the formerly middle class boil over and collide with the delusions of Pentecostal Christian extremism. The latent encoded behavior of Southern culture includes an outsized notion of individualism and the belief that firearms ought to be used in the defense of it. This is a poor recipe for civic cohesion.

      The Mountain States and Great Plains will face an array of problems, from poor farming potential to water shortages to population loss. The Pacific Northwest, New England and the Upper Midwest have somewhat better prospects. I regard them as less likely to fall into lawlessness, anarchy or despotism and more likely to salvage the bits and pieces of our best social traditions and keep them in operation at some level."

  •  methinks these modern day robber barons (none)
    just want to profit off of every last drop, build their aaron spelling mansions and create their own little edens separate from the burned earth left in their wake.

    hey, give the people what they want, right?

    Fixing Republican screw-ups: it's what Democrats have been doing for 100 years

    by SonofFunk on Tue Feb 07, 2006 at 10:23:39 AM PST

  •  trust us (none)
    "Oil and gas reserves are classified based on how sure the company can be that they exist and can be produced profitably. The SEC allows companies to report only "proven" reserves -- energy that can be estimated and produced using
    standard technology and market prices. Oil companies want to be able to add in some of its "probable" reserves, a less-conservative measure using longer-term price assumptions and more advanced technology to estimate underground stores."

    Outside Audit

    Oil Firms Want SEC To Loosen Reserves Rules

    Staff Reporter of THE WALL STREET JOURNAL
    February 7, 2006; Page C1

    Valle Vidal - A real soldier died in his Hummer so you could play soldier in yours.

    by environmentalist on Tue Feb 07, 2006 at 11:10:33 AM PST

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site