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M. King Hubbert predicted in 1956 that U.S. production would peak in 1970 and "global production about half a century from now". He got ran right out of the petroleum industry for his heresy.

The Texas Railroad Commission, the United States' version of OPEC, annouced 100% allowable next month in the spring of 1971 and this has never been retracted. Hubbert's prediction was slightly late for the U.S., but slightly early globally, as our world wide oil production peaked and entered terminal decline in the spring of 2005.

 Peak Oil is now a historical event and we must understand the implications immediately.

 The first, last, and best resource for Peak Oil is The Oil Drum, a heavy duty technical analysis site dedicate to oil in particular but covering all sorts of energy issues.

 Oil Drum regular westtexas, aka Jeffrey Brown, and independent geologist working in the petroleum industry, has created a simple explanation for what will happen which he calls the Export Land Model.

ELM in a nutshell says this: As oil supplies go down, prices go up, and oil supplying countries economies grow. Oil production trends downward for geological reasons on a known curve but available supplies for importers fall off faster due to oil "staying at home".

Look at Zimbabwe. Look at Nepal. Look at Pakistan. Look at Kenya. Fuel shortages underlie at least part of their troubles.

Look at Nigeria. Look at Mexico. Yes, look at Mexico.

 The Mexican government has pretty much announced that Cantarell, the worlds second largest oil field and the source of the bulk of the country's oil revenues, is going to die within the next twenty four months.

 The Mexican people depend on remittances from their relatives working in the United States. You can inspect bonddad's efforts to see what is happening to the housing and associated service industries. This is a stake driven into the heart of the well being of the Mexicans both working here and still living in Mexico.

 The Mexican nation exists primarily within Mexico and a significant portion of them are either transient or permanently in residence here in the U.S. Their state will fail and the consequences here are going to be awful. When you see an anti-immigrant proposal like the big fence in Arizona that isn't about the workers here, its about firewalling off the coming chaos, although it will get sold politically by pandering to a certain class who feel threatened by the Mexican workers and the wage deflation they bring.

(We don't hate Mexicans. Or Arabs. We aren't particularly fond of big oil and would very much like the political support of the DailyKos community with regards to our renewable energy projects involving stranded wind. The concept of the tip jar is not mentioned in the bible and such assertions are the work of the devil, so don't ask us to post one. No updates today, as we're busy working on your food security.)

Originally posted to Stranded Wind on Thu Jan 03, 2008 at 08:19 AM PST.

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Comment Preferences

  •  This diary needs more development (3+ / 0-)
    Recommended by:
    tigerdog, xaxado, wondering if

    especially when dealing with the internal politics of Mexico and the Mexican economy and it's use of oil derived income.  You describe certain macro effects--and then jump to a conclusion without doing the factual and analytical development.  Also, you need to proofread it.

  •  Scary news about Mexico's economy (4+ / 0-)
    Recommended by:
    GW Chimpzilla, Nulwee, xaxado, Akonitum

    They enhanced the recovery at Cantrell so the decline of the field is rapid.

    Luis Ramírez Corzo, head of PEMEX's exploration and production division, announced on August 12, 2004 that the actual oil output from Cantarell is forecast to decline steeply from 2006 onwards, at a rate of 14% per year. In March 2006 it was reported that Cantarell had already peaked, with a second year of declining production in 2005. For 2006, the field's output declined by 13.1%, according to Jesús Reyes Heróles, the director-general of PEMEX.[4] Heróles also predicted a decline of 15% for 2007.

    By 2008 it is estimated that Cantarell will only produce 1 million barrel/d (160,000 m³/d) as it continues to decline. This rapid decline is postulated to be a result of production enhancement techniques causing faster oil extraction at the expense of field longevity.

    "It's the planet, stupid."

    by FishOutofWater on Thu Jan 03, 2008 at 08:32:56 AM PST

    •  Consider the Source (0+ / 0-)

      While I'm not disputing the fact that Cantarell's production is declining, please take what Jesús Reyes Heróles with a grain of salt.

      The man has no experience in the oil sector.  His previous job was head of a polling agency (GEA-ISA) of questionable repute.  Many believe that he was put in charge of Pemex to manipulate public opinion into allowing foreign investment in Pemex.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

      by PatriciaVa on Thu Jan 03, 2008 at 08:38:53 AM PST

      [ Parent ]

    •  Yep... (1+ / 0-)
      Recommended by:
      FishOutofWater

      They spoiled the field and lost a decade of production because of it.

      Someone honestly mistaken, when confronted with the truth, must cease to be one or the other

      by Inventor on Thu Jan 03, 2008 at 08:42:37 AM PST

      [ Parent ]

    •  however it's focusing on one set of fields (2+ / 0-)
      Recommended by:
      Nulwee, FishOutofWater

      and ignoring newer ones such as Sihil and Ku-Maloob-Zaap.

      Also ignored is the large geothermal potential of the western coast of Mexico, including Baja peninsula and gulf.  While I get less excited over geothermal than many renewables fans, the potential in that region is so large that it looks to be an important resource, and already is being developed.

      Baja could easily become an energy farm, wind and solar and geothermal plus pumped storage, all combining to give power for both Mexico and California.

    •  Mexico is Toast (3+ / 0-)
      Recommended by:
      NoMoreLies, FishOutofWater, sldulin

      Data here.

      Chris Dodd is our man to stop the Huckabee stampede!!

      by GW Chimpzilla on Thu Jan 03, 2008 at 09:24:32 AM PST

      [ Parent ]

  •  RightWing Despots at root of Problem (4+ / 0-)
    Recommended by:
    eugene, alyosha, NoMoreLies, EdlinUser

    The primary problem with Mexico is its string of RightWing "presidents", the current one which makes Bush look moderate.

    The tax take in Mexico is about 10% of GDP.  In the US, it's about 32% (federal+state+municipal).  In many Western European countries, it's as high as 50%.

    Clearly, Mexico could run out of oil in two years, raise its tax base to a level comparable to that of the US, and thrive.

    But the RightWing ruling elite (PAN and PRI) will not even contemplate such a progressive tax code, as they are in the back pockets of RightWing oligarchs who loathe paying their fair share.

    Emilio Azcarraga, owner of Televisa, could have bought 100% of Univision last year, had he become a US citizen.  But, he preferred to stay in Mexico, paying no taxes on dividends or capital gains, then to become a naturalized US citizen a buy the company which has father helped found decades ago.

    Such is the aversion of RightWing Mexican oligarchs to paying their fair share.

    Heck, I've had discussions with colleagues in Monterrey, and they consider Robert Rubin a communist.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

    by PatriciaVa on Thu Jan 03, 2008 at 08:35:33 AM PST

    •  Tax competition? (1+ / 0-)
      Recommended by:
      carolita

      Given Mexico's rate of tax evasion, how much more revenue will raising tax rates generate?  Why pay taxes when you live in Mexico?  The money is just going to go to some PAN bureaucrat's Cayman Islands bank account.

      Even if tax rates go up, could that cause capital flight as the few investors brave enough to invest in Mexico will just move their money back to Europe, Asia or North America?

    •  Since dual-citizenship is common (0+ / 0-)

      I don't see how taking US citizenship would affect anything. In fact, since most US media moguls pay little or no taxes, it would seem to work out well for him. I suspect there was a lot more going on than your analysis indicates.

      "The only thing necessary for evil to triumph is for good men to do nothing." -Edmund Burke

      by carolita on Thu Jan 03, 2008 at 10:56:09 AM PST

      [ Parent ]

  •  More about Mexico, Peak Oil and Cantarell (5+ / 0-)

    This is from Mexico: Peak Oil in Action

    The Scenario

       * Mexico's biggest oil field is Cantarell. Its 2 million barrel per day output was responsible for 60% of Mexico's production, and all its oil exports to the United States.
       * Those oil exports account for 40% of Mexico's public funding.
       * Cantarell's output is known to be crashing (see graphic above). Production has declined by 25% in the last year and is predicted to be down about 60% from its peak by the end of 2007. The field will probably lose over 75% of its production capacity by the end of 2008.
       * When this happens Mexico's economy will probably implode.
       * The United States currently exports about 20% of its corn crop.
       * Next year, 20% of the United States' corn crop is going to be used for ethanol.
       * Mexico imports a substantial amount of corn from the United States.
       * As Cantarell's output declines, oil exports to the US will drop in lockstep.
       * As oil imports drop in the US, the pressure will mount to produce more ethanol as a substitute.
       * As more corn is bought by the American ethanol industry, US corn exports, especially to Mexico, will slide.
       * At the same time the probability is high that Global Warming will result in higher temperatures in Mexico, a country already at temperature risk.
       * Rising temperatures will bring more drought conditions and a drop in Mexico's own corn production.
       * Now you have a country with a decimated economy and declining food. This is a recipe for massive migration.
       * The migration moves North as it has in the past, but this time in enormous numbers.
       * As the economic refugees cross the border what do they find?
       * In January, 2006, KBR (a subsidiary of Halliburton) was given a $385M contract to build a string of very large detention camps in the United States...

    Peak oil, global warming, food, biofuels and authoritarianism — all rolled up into one neat but ugly little package.  Coming to a border near you within 3 years.

    The American Response

    The fact that the United States has put in place a number of detention camps across the Southern and Central United States seems to indicate that the administration is aware of  an impending immigration crisis.   What is significant and instructive, as well as worrying, is the nature of the official response to this insight.  The camps that have been contracted are explicitly characterized as detention camps, not as refugee camps.

    The official attitude underlying this approach is an illustration of the growing tendency to criminalize and militarize social problems in the United States.  The current administration's prevailing ethos of control, punishment and retribution pervades such programs as "The War on Drugs", 'The War On Terror" and "The War on Poverty" (which is characterized by many on the target side as a "War on the Poor").  To this can now be added "The War on Immigration" which, while as yet undeclared, is in full swing along the Mexican border, under the auspices of the DHS and INS.

    Countries like the Philippines, Chad and Pakistan have hosted large refugee processing centers under the direction of UNHCR.  The mandate of such camps is protective: to safeguard the rights and well-being of refugees and provide physical care for them.  By contrast, the purpose of the detention camps established in the United States is primarily one of movement control and the segregation of refugees from the indigenous population.

    The fact that this is widely perceived as appropriate by American citizens is yet another illustration of the shifting tenor of American public discourse since 2001: a shift away from the values of inclusivity, generosity and freedom to those of exclusion, parsimony and control.  A return swing of that pendulum would be most welcome but does not, unfortunately, seem imminent.

    The Spectre of Revolution

    When contemplating Mexico's future you should always remember her past.  Mexican history is full of revolutionary episodes: the War of Independence of 1810; the Mexican Civil War or War of Reform of 1857; the Mexican Revolution of 1910;  the Zapatista actions in Chiapas in 1994; and the recent violent confrontations in Oaxaca.

    The effect of NAFTA on the lives of the Mexican poor has been devastating.  In an echo of the enclosure movement in Britain many have been forced off land they traditionally occupied, either by economic circumstances or legislation. A good overview of Mexican agrarian history, including the impact of NAFTA, is available in this FAO document.

    The 100+ year-old push-pull effect of the US economy on Mexican migration is a very well documented historical phenomenon. This time, circumstances are somewhat different. Many Mexican campesinos — subsistence farmers that either owned their own land or held it jointly in a collective called an ejido — were forced off their land due to NAFTA rules that allowed the dumping of highly subsidized, below market-priced US corn on the Mexican market.  The land is still there, but now sits idle. In the event of a severe economic downturn there would likely be a large movement to return to the land as well as increased northward migration.

    Cantarell's crash and PEMEX's impending bankruptcy present a political crisis of the first magnitude for Mexico's elite and threaten the stability of the small middle class.  This crisis presents a great opportunity for the long downtrodden majority to gain power as has happened in Bolivia, Ecuador and Venezuela.  Conditions will be ripe for a resurgence of revolutionary sentiment in Mexico, which will probably take the form of an import of the Bolivarian Revolution championed by Hugo Chavez.

    Of course, having such an incendiary political movement on their very doorstep will not sit well with the American industrial/political establishment.  The probability of direct American political, economic and even military involvement in Mexican affairs as a result should not be lightly dismissed.

    •  It is really about fairness (0+ / 0-)

      In your post you stated the following: "a shift away from the values of inclusivity, generosity and freedom to those of exclusion, parsimony and control.  A return swing of that pendulum would be most welcome but does not, unfortunately, seem imminent." I think this statement misses the heart of what the ordinary American citizen is facing in terms of low wages and an underemployment. Why can't our friends South of the border immigrate legally? Why is that such a challenge? I think helping others is a wonderful thing, but you have to get your own house in order first.

      •  You have to be kidding (0+ / 0-)

        Why is that such a challenge?

        Because under the existing Immigration laws, most of the undocumented immigrants could not even APPLY for immigration status if they had the thousands of dollars that takes. And the employers who bring them here/hire them are unwilling to pony up the additional $2000-$4000 a head to "sponsor" them and there are no Visa slots for chicken processing workers or landscape laborers anyway.

        But, hey, if you know someone who wants to stand 10 hours per day (with mandatory overtime) drenched in chicken guts cutting and gutting 27 chickens a minute on an overhead conveyer belt, there are jobs in rural northern Georgia still available. And Gov. Sonny and his buds in the Labor Dept. will be sure there are no pesky unions to try and control workplace abuses or wage issues. And the Homeland Security folks are too busy driving around Orogrande in their shiny new up-armored Hummers to worry about checking on hiring violations.

        "The only thing necessary for evil to triumph is for good men to do nothing." -Edmund Burke

        by carolita on Thu Jan 03, 2008 at 11:13:01 AM PST

        [ Parent ]

  •  Of course (3+ / 0-)
    Recommended by:
    alyosha, GW Chimpzilla, NoMoreLies

    Peak oil's effects on the US will be far more damaging than it will be on Mexico. The ultimate failed state produced by peak oil will in fact be the United States of America.

    I'm not part of a redneck agenda - Green Day

    by eugene on Thu Jan 03, 2008 at 09:09:39 AM PST

    •  Ya Really Think So? (2+ / 0-)
      Recommended by:
      FishOutofWater, sldulin

      Surely, the Captains of Industry have been planning for peak oil, haven't they?

      Chris Dodd is our man to stop the Huckabee stampede!!

      by GW Chimpzilla on Thu Jan 03, 2008 at 09:29:28 AM PST

      [ Parent ]

    •  The "first derivative" of Peak Oil will get you (4+ / 0-)

      The USA imports 2/3 of its oil.  The analysis of the net oil export crisis by Jeffrey Brown in his "Export Land Model" linked above hints that the international oil market could be trading zero oil in 30 years.  That would mean your oil consumption would drop to domestic supplies only within that time, and your domestic supplies are declining as well, at about 2% per year.

      So you could lose 13 million barrels per day from the international market, and another 3 mbpd from domestic production.  The end result would be that by 2040, instead of consuming 20 million barrels per day, you're trying to get by with 3.5 - less than a fifth of the oil you're using today.

      That's a recipe not only for a failed state, but for a failed state that wrecks everyone nearby as they go down.  I'm not looking forward to the experience.

      Paul in Ottawa

  •  Mexico (1+ / 0-)
    Recommended by:
    mariachi mama

    I wish I knew where to post these damn things- but that being said I live in Mexico (although that doesn't necessarily make me an expert) and have done a great deal of observing/ asking questions/ interviewing people for either a blog or article. Mexico is not a failed state nor will it be in the forseeable future, but there are economic issues certainly pressing itsef upon it. First Mexico exports 80% of its industrials/ base to US. A slow down/ recession in US spells difficulty for Mexico. Housing is a major concern. Where I live (gringoland/ Lake Chapala) the housing market has slowed to a crawl and rentals as well as sale signs (Se Vende) just sit there. People (mostly norte Americanas) have not dropped prices in any draconian fashion (yet) but I believe that they will,
    This area, because of so much US/ Canaadian wealth, has fueled a fairly large Mexican middle class who have nice cars, clothes, homes, and entertainment money left over.
    What has begun to occur is that housing starts have slowed and that could be catastrophic for the economy here and throughout the state of Jalisco as well. What do these Mexicans do when the housing industry completely shuts down- where do they go for work. I am speaking of truck drivers, construction workers, people (Mexican) who own their own real estate firms, retail industry personnel who cater to Norte Americanas and wealthier Mexicans.
    Is this situation going to play out in other states as well? Probably- and so 2008-2009 does not bode well for Mexico. But I have not met more resilient people and they will weather this storm.
    Peso is still very strong.

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