Last week, US Secretary of Energy Bodman spoke to participants and the press at the Society of Automotive Engineers (SAE) 2006 World Congress and a curious thing happened, after his
prepared remarks someone asked him a
real question.
QUESTION: What would be the effect on the US economy if there were a sustained price of oil of $95 per barrel?
SEC. BODMAN: (long pause) I don't know, but it would be a bad time to be the Secretary of Energy. I guess the President would be asking `what have you done?'
Out of the gaggle of reporters only two were paying close attention to what Energy Secretary Samuel Bodman said. Bodman publicly acknowledging the possibly of sustained high oil prices, an oil shock and the Department of Energy's inability to do much about it. He was "surprised" that the oil shock caused by a reduction of some 2.4 million barrels of refining capacity due to hurricane Katrina had not had a "greater impact" on the US economy.
Continues... Bodman's Statements, Canning of the DOE Science Advisory Board and Oil Shockwave Tour...
And Terry Kosdrosky for the Dow Jones, whose story "
US Energy Secretary: Oil Prices Eventually Will Impact Economy" unfortunately was promptly buried:
DETROIT (Dow Jones)--U.S. Energy Secretary Samuel Bodman said Thursday that he's "surprised" that oil price increases over the last year haven't had a greater impact on the U.S. economy but said, eventually, sustained high prices will have an economic effect.
Speaking during a question-and-answer session during his speech at the Society of Automotive Engineers World Congress, Bodman said he's "worried" that the economy will suffer if oil prices stay above current levels.
"At some point in time we're going to reach a limit and we will see a real impact of increased oil prices on our economic activity," Bodman said. "Whether its $95 or something north of that I don't know. I can tell you I'm worried about anything above the current levels."
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Bodman said the administration's Advanced Energy Initiative, which calls for increases in research dollars for bio-fuels, hybrid battery technology and hydrogen fuel, has the country "on the right track" in terms of mitigating the impact of oil prices.
But he warned there are no quick fixes.
"We think we're on the right track," he said. "But this country has been decades in getting itself into the fix we're in now. And it'll be a significant number of years working our way out of it."
The Car Connection's Paul Eisenstein, who wrote under the heading "Energy Dept. Fears Oil Shock":
The real question is why last year's sharp run-up in oil prices didn't do more damage to the economy, said Samuel Bodman, the Secretary of the U.S. Dept. of Energy. Speaking at the closing session of this year's SAE World Congress, Sec. Bodman said he was "surprised," but warned that if prices keep rising, they ultimately will cause problems. "At some point in time we're going to reach a limit and we will see a real impact of increased oil prices on our economic activity," the Secretary said during a Q&A session. "Whether its $95 or something north of that I don't know. I can tell you I'm worried about anything above the current levels." The Bush Administration's top energy official defended the pace of the Advanced Energy Initiative, which aims to wean the country off imported oil. "This country has been decades in getting itself into the fix we're in now," said Bodman, "and it'll be a significant number of years working our way out of it."
Another energy rocket scientist, the last Bush Energy Secretary, Spencer Abraham, also a former Michigan Senator, was also among the crowd of oilmen on hand. Abraham delivered the keynote speech at the SAE World Congress dinner that very night with more of the same, the standard oil industry and Bush Administration pitches that further frustrated automotive researchers and engineers, who in the end have the task of transforming America's automobiles to meet the challenges of the looming oil market meltdown. He remains as clueless out of office as he was in office when Dick Cheney and his cronies were calling the shots through that infamous Energy Task Force.
The very same day Bodman and Abraham were telling the automotive industry don't worry, be happy, this report April 7, 2006 appeared in the back pages for the New York Times under the heading "Science Advisory Board Abolished":
Energy Secretary Samuel W. Bodman has decided to abolish his department's Science Advisory Board, a panel of experts that has served energy secretaries since the Carter administration. The board includes scientists, business leaders and former government officials who assign thorny technical questions from the secretary to subcommittees that respond with detailed reports. A spokesman for Mr. Bodman confirmed the decision, first reported in the journal Nature, and said Mr. Bodman, a former chemical engineer, judged the board to be unnecessary after President Bush set the department agenda in his State of the Union address.
Surprised Secretary at State too?
Bodman was not the only one in the Bush Administration who's `surprised. Secretary of State Condoleezza Rice in her
opening remarks before the Senate Foreign Relations Committee on the US-India Civil Nuclear Cooperation Agreement in Washington, DC, on the morning of April 5, 2006:
"We do have to do something about the energy problem. I can tell you that nothing has really taken me aback more, as Secretary of State, than the way that the politics of energy is -- I will use the word 'warping' diplomacy around the world. It has given extraordinary power to some states that are using that power in not very good ways for the international system, states that would otherwise have very little power."
Halfway there (to $95 per barrel
Monday morning media reports were filled with both the news of Seymour Hersh's story on the plans for attacking Iran (Factoid: 4.4M bbl/day production and 2.3M bbl/day exporter by the way) the news related to the prerelease information on the DOE's latest short-term outlook report on fuel prices due out today.
Just one of those reports from the Wall Street Journal titled "Oil Prices Show No Sign of Slowing" April 10, 2006:
Last year's hurricanes, which ravaged Gulf of Mexico oil-and-gas facilities, sent crude futures soaring above $70 a barrel and U.S. gasoline over $3 a gallon. With prices now nearing $70 again, some traders say that if market trends follow last year's pattern, crude could hit $80 this year.
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A small rebel group in Nigeria has caused a supply shortfall that is greater than a recent capacity expansion by Saudi Arabia. Politically troubled export powerhouses Iraq, Iran and Venezuela are having problems keeping up supply levels.
Officials of the Organization of Petroleum Exporting Countries have acknowledged there isn't much they can do right now to boost supply. Led by the Saudis, the cartel is pumping close to flat out. "OPEC looks in pretty bad shape now," Mr. Halff says.
On Friday, crude oil for May delivery settled at $67.39 a barrel on the New York Mercantile Exchange, down 55 cents. Gasoline futures ended at $1.9768 a gallon, down 2.31 cents. Typically, retail gasoline prices are some 65 cents a gallon above levels on the futures market. Crude briefly hit a high of $70.85 a barrel in Nymex trading after Hurricane Katrina on Aug. 30, before settling at $69.81.
On the front page of the Wall Street Journal yesterday in "Crude Tactics: As Oil Supplies Are Stretched, Rebels, Terrorists Get New Clout":
WARRI, Nigeria -- The list of people with big influence over the $2 trillion-a-year global oil market has long been an exclusive one, topped by Saudi princes and American presidents. This year, someone calling himself Jomo
Gbomo emailed his way into the club.
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That dynamic is giving new power to rebels, terrorists and ornery governments. Al Qaeda is targeting oil facilities in Saudi Arabia, the world's No. 1 exporter. A foiled terrorist attack there helped send prices up more than $2 a barrel in February. Some Iranian officials have threatened to block the flow of oil from the Persian Gulf if the United Nations imposes sanctions over Tehran's suspected nuclear-weapons program. Now even Mr. Gbomo's small group, armed with little more than machine guns and an email account, has realized that it, too, can use oil as a weapon on the global stage.
Wait a second "small rebel group in Nigeria", "problems with oil supply" and "states that would otherwise have very little power"? Hummm... that sounds strangely familiar.
Oil Shockwave Crisscrosses America: Hug a Tree, Kiss a Neo-con
On June 25th, 2005 a group of former and current government experts gathered to conduct a simulation of national importance. Their mission was to react and control an oil crisis sparked by unrest in Niger and a withdrawal on foreign personnel from Saudi Arabia. They failed.
It was called "Oil Shockwave". More on the original Oil Shockwave Event at "U.S. Fails Crisis Exercise called "Oil Shockwave".
For the last two weeks, a revised version of the Oil Shockwave made its first stop in Kalamazoo Michigan and a second in Portland Oregon. Future Powershift 2006 National Tour events are schedules for Richmond, Ft. Wayne, Lawrence and back to Washington DC.
From the PowerShift website:
"With the rise in gas prices after hurricanes Katrina and Rita, continued instability among the world's largest oil-producing nations, and indications that global warming may be reaching a "tipping point" of no return, America is ready to look at long-term solutions to our dependence on oil. 20/20 Vision is organizing a series of regional events on university campuses and a national
youth conference in Washington, DC to better understand the dangers of US oil dependency to our economy, security and environment, while exploring promising solutions. A key component of the events will be the Oil Shockwave College Tour simulation developed by the National Commission on Energy Policy and Securing America's Future Energy."
The crisis simulations, moderated by long-time neo-conservative and former CIA Director James Woosley acting as the US President, whose motivations are probably related to agribusiness interests, is drawing large crowds of everyday citizens and grassroots organizations. The attendees at the Oil Shockwave event at Western Michigan University (WMU) were very diverse, yet their concerned unified. There were students, faculty, green technology wonks, local pharmaceutical researchers, engineers and even retirees using walkers.
A small group of highly motivated WMU students, who organized the inaugural Kalamazoo event, made their commitment to fighting the status quo clear in their opening statement:
Many of us are lost, the young men and women of my generation. Some are adrift in a vast commercial sea of irresponsibility, a generation seemingly without
purpose.
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We look to elders to keep us, to make our decisions for us. Many of us don't care, and we demonstrate that apathy every Election Day. But our elders, those who control the world - who control the oil - who are burning so brightly now on borrowed wicks will fade. The winds of passing time will snuff them out.
It is not sustainable. It cannot last.
And when those men and women pass on into the longest night, it will be left to us, to this young generation, to keep America from dying with them. And we cannot wait until then to care. We must care now. We must end our crippling dependency on oil.
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Why have out leaders failed us? Why did they not see this coming, and plan for it? Because many are ignorant, willfully so, and wish the American public to remain so as well. And some are greedy, and they hide their greed in a shroud of capitalism and patriotism. And although it is Republicans who are currently in power, this oil crisis is not about party lines. It transcends party lines.
Such massive, fundamental change will not be easy. Like Atlas, we will bear the weight of this change on our shoulders. We must end our dependency on oil.
The simulation that takes attendees through oil issues and statistics makes one thing very clear, a US administration and government has very limited options in either preventing to minimizing the effects of a future oil shock.
How close the next oil shockwave?
In a prepared statement in front of the Senate Foreign Relations Committee on March 30, 2006, Hillard Huntington, Executive Director of the Energy Modeling Forum at Stanford University stated:
Tight oil markets with minimal surplus capacity have made world oil prices particularly jumpy over recent months. In the last six months, a series of political and natural events have cascaded around the globe and left their impact on increasingly nervous oil-consuming nations. These developments have been extremely varied and include the following:
- a thwarted suicide attackin February at the Abqaiq oil processing facility ineastern Saudi Arabia,
- a string of turmoil in the Niger Delta highlighted by a recent speedboat attack inJanuary by gunmen on the riverside offices of Italian oil company Agip,
- anti-government attempts to disrupt congressional elections in Venezuela culminating in an explosion at an oil pipeline connected to that country's largest oil refinery, and
- devastating hurricanes Katrina and Rita in the United States in August and September.
Mr. Huntington continues by laying out the "odds"
Their [events/developments] sporadic nature conveys an element of unpredictability and surprise.
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Although another major oil disruption is not a certainty, its likelihood is significantly high enough to be worrisome.
Your odds of drawing a club, diamond or heart from a shuffled deck of playing cards are three out of four. In the EMF study, the participants found that the odds of a foreign oil disruption happening over the next 10 years are slightly higher at 80 percent.
Disruption events included surprise geopolitical, military or terrorist turmoil that would remove at least two million barrels per day--an amount representing about 2.1 percent of expected global oil production. Foreign disruptions of this magnitude would have more serious effects on oil prices and the economy than we have seen with the Katrina and Rita hurricanes.
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The approach identified four major supply regions where disruptions are most likely. These regions account for approximately similar shares of total world oil production. Collectively, they account for about 60 percent of total world oil production. The study lumped Algeria, Angola, Libya, Mexico, Nigeria and Venezuela as the first region, called "West of Suez." Saudi Arabia was the second region, and other Persian Gulf states--Iran, Iraq, Kuwait, Qatar, UAE and Oman-- were the third. Russia and the Caspian states comprised the fourth region.
The riskiest areas were the Persian Gulf countries outside of Saudi Arabia and several countries along the Atlantic Basin, such as Nigeria and Venezuela.
So Who's the Real Bogyman?
While other governments across the global hold serious and frank discussions on the future of their energy, the Bush Administration and our government institutions remain under the spell and control of Big Oil.
Just a little reminder, in his own words back at an Institute of Petroleum Autumn luncheon in 1999, Dick Cheney made his industry's future plans of power over Washington and the hapless Abraham quite clear:
"Oil is the only large industry whose leverage has not been all that effective in the political arena. Textiles, electronics, agriculture all seem oftentimes to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and especially steel producers in Pennsylvania. I am struck that this industry is so strong technically and financially yet not as politically successful or influential as are often smaller industries. We need to earn credibility to have our views heard."
Just
one example of how the oil industry lobby has created an environment of deception through their complete control of energy policy was in 2002, at the "Department of No Energy Data" (oilmen love to tell everyone that "nobody knows the future of oil prices") the official Department of Energy (DOE) projection for the "pump price" for a gallon of unleaded regular for the year 2020 was $1.58. According to revised 2006 DOE forecast the 2030 pump price would be $2.30/gallon.
Who are they kidding? Nobody.
The fact is that only about 14% of the world oil reserve is under direct control or is categorized as "reliably assessable" to the global oil companies. Over 70% of the world's reserve is under national control of various nations, half of which are "unstable" if not now "unfriendly" to the US.
While some speculate on US intensions on Iran, there is little doubt now that the real "shock and awe" will be at America's gas pumps this summer. Major fluctuations in gas prices and a world oil market on a razor's edge are making energy speculators of us all.
The US Economy is still in an "oil-based economy", the only trouble is that without any serious scientific discussion of what the reality of the world energy situation is, particularly in DOE where Americans spend $23B a year to monitor such things, we will continue to wake up the morning to lookup the price quotes of crude in order to see if we should buy gas today or tomorrow, or worst yet to see if the economy will be running at all.