The Chicken Little fable* was created as a cautionary tale against panic and mass hysteria in uncertain times. But there are times when the sky is failing and Chicken Little needs to be careful of taking advice from smooth talking strangers wearing Wall Street tweed. On to our story.
Once upon a time, there was a Fox named Loxy, a shrewd little fellow with a big appetite. One fine summer's day, Foxy Loxy was on the prowl for unlocked henhouses when he overheard Farmer Brown proclaim to her husband that their well was running dry. Without water for the corn, feeding the hens was going to be a big problem.
Foxy Loxy had a plan. Pass the bad news to the hens and con them to take a little journey to his den.
Before we return to our story, note that Foxy Loxy in this enactment will be played by Charles Maxwell, senior energy analyst at Weeden & Co.
Chicken Little was out in the yard eating corn like there was no tomorrow when she suddenly heard a strange sound.
"Psst. Psssst."
Her first thought was 'snake,' but this snake had four legs, a bushy tail, and a Rolex.
"Hey, baby, over here," said the well dressed fox, gesturing for her to come over to the fence.
Her mother had taught her that foxes were bad news but also told her that curiosity only killed cats. The fox smelled of expensive cologne and roasted rabbit.
"I have bad news. Farmer Brown is running out of water and soon won't have enough corn to feed you and the other hens."
Chicken Little rolled her eyes and muttered something about meadow muffins. Foxy Loxy, knowing a thing or two about the effect of doubt on action, had recorded the Browns talking about the coming shortages of water and corn on his diamond-studded smartphone. Chicken Little let fly a pile of meadow raisins as she listened to the tape.
"It is very, very bad news, but don't panic. The king can tell the Browns where to find more water and how to grow genetically modified drought-resistant corn. Round up a few of your friends and visit the king. Surely he will have mercy on a flock of succulent, I mean sweet, little hens."
Chicken Little thought for a moment and asked Foxy, "how do I find the king?" Foxy passed her a map with the route clearly marked.
At first, Chicken Little's friends laughed at her story. But then there was less and less corn. Panic was setting in. Chicken Little and her followers slipped under the fence and set out to find the king using Foxy Loxy's map.
Foxy Loxy grew fat from all the chickens that wandered right into his den.
# # #
In our story, Foxy Loxy told the truth about the crisis, but lied about the solution to the detriment of Chicken Little and friends. Charles Maxwell did the exact same thing in the interview with Forbes magazine regarding Peak Oil. No one should be surprised to find half-truths about the energy sector in Forbes, but it does illustrate the obstacles we face in moving towards a low carbon energy policy and attracting investment in clean energy. You should read the interview for he what he says about Peak Oil.
Before getting into the interview, here is a little background on Foxy Loxy Maxwell and the company he works for.
His biography:
Charles T. Maxwell, Weeden & Co.’s Senior Energy Analyst, was educated at Princeton University (Jadwin Scholar-Politics) and Oxford University (Marshall Scholar-Middle East languages, literature and history). He entered the oil industry in 1957 and worked for Mobil Oil for 11 years in the US, Europe, the Middle East and Africa. In 1968, he joined CJ Lawrence as an oil analyst and was ranked by Institutional Investor as No.1 in his field in 1972, 1974, 1977, and 1981-1986. In addition, since 1984 he has been an active member of an Oxford-based organization comprised of OPEC and oil industry executives from 30 countries who meet twice a year to discuss trends within the energy world.
Mr. Maxwell joined Weeden in 1999 and also serves as a Director at Chesapeake Energy (Oklahoma City) and American DG Energy (Waltham, MA).
I love the incest among the foxes (see bolded text).
Weeden's areas of focus:
Alternative Energy
Athabasca Tar Sands
Global Energy Policy
Global/Macro Trends In the Oil Industry
Long Life Reserve Companies – The “New Elites ”
Here is their current energy portfolio:
Baker Hughes Inc
Cameron International
Complete Production Services
Diamond Offshore
ENSCO International
FMC Technologies Inc
Halliburton Co
Hercules Offshore
Key Energy Services
Nabors Industries
National Oilwell Varco
Noble Corp
Patterson-UTI
Pride International
Schlumberger Ltd
Superior Energy Services
Transocean
Weatherford International
and on their watch list:
Canadian Natural Resources
Cenovus Energy
ConocoPhillips
EnCana
ExxonMobil Corp
Gazprom
Lukoil
Nexen
Occidental Petroleum
Petrobras
Royal Dutch Shell
Suncor
Now that you have a sense of Foxy Loxy Maxwell, let's move on to what he has to say about Peak Oil on the global market. Keep in mind that Peak Oil in terms of US production occurred in the 1970s, which is why President Carter was recommending the US pursue alternatives to oil. In 1980, Chicken Little and too many of her fellow hens chose to believe Foxy Loxy Reagan. We are now paying the price for that lapse in fowl judgment.
We're obviously in an unsustainable situation. We are now using up a greater number of barrels that we have found in the recent past and that we have reserved in the ground. We are now beginning to use it up relatively quickly--with scary consequences for the future.
Forbes, Sept 13, page 1
Maxwell predicts that peak production will occur in 2020, but demand will rise faster than production before that occurs. He anticipates demand will overtake production in the next five years with severe price shocks taking place around 2015. His projections have been echoed by others, including Kossack Jerome A Paris.
The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we're only able to produce 0.50% more with about 1.25% higher demand, so that we're 0.75% short. And now we have to raise prices enough to stop some people from using that oil because it is actually not available.
We call that "the destruction of oil demand." It is important because it forces the price of oil up on an accelerated basis. This, of course, would be very attractive for the industry if the governments of the world would allow it to fully take place. But they surely would not allow it to fully take place.
Forbes, Sept 13, page 2
Maxwell expects governments to react to the obscene profits by windfall taxes to prevent all that money from reaching shareholders. Robert Rapier at The Oil Drum makes the same prediction.
I think that the rise in oil prices will be faster than the decline in production for most oil companies. Thus, they will make more money on less production. This will infuriate the public and the politicians, who will see sky-high pump prices at the same time the oil companies are raking in record profits (reminiscent of 2007-2008). Thus, there will be many calls for additional windfall profits taxes, and more calls for nationalizing the oil companies.
As for how high prices might spike within the next decade, consider what Maxwell said in an interview in 2008.
“[Maxwell] expects an oil-induced financial crisis to start somewhere in the 2010 to 2015 timeframe,” Energytechstocks.com reported. “He said that, unlike the recession the U.S. appears to be in today, ‘This will not be six months of hell and then we come out of it.’ Rather, Maxwell expects this financial crisis to last at least 10 or 12 years, as the world goes through a prolonged period of price-induced rationing (eg, oil up to $300 a barrel and U.S. pump prices up to $15 a gallon).”
Rapier makes similar points about oil price spikes and economic shock in The Oil Drum:
I view a global oil production peak within the decade as a near-certainty.
I think there is a small probability that the peak has already occurred, but we won’t know that until several years after the fact.
I don’t believe that there is anything in the technology pipeline that can prevent a growing gap between supply and today’s demand.
I believe that gap will be closed by price-induced rationing, which will be very hard on businesses and individuals.
Scared yet? I seem to recall that when pump prices reached $4 a gallon, our economy started to sputter.
One of the things that has proven difficult about engaging people on the climate crisis is that the more dire consequences are expected to occur in a distant time frame, primarily about 50 to 100 years in the future. By contrast, the energy crisis due to Peak Oil is at hand, but there is still little urgency among government officials to address the issue. Inaction guarantees big profits for Big Oil and big pain for the rest of us.
What does Foxy Loxy Maxwell suggest we do to address Peak Oil?
So we're going to have to make a switch from using oil to using more coal or more natural gas or more nuclear or other alternatives. But most alternative supplies (such as hydropower) can't be expanded quickly. Solar power is too small to be meaningful. Wind power, again, is too small, and most of the good places for wind have already been taken.
So it looks like alternative energies will plug only a very small part of the hole. And we'll have to rely more on coal. But we can't rely on coal because the emissions people will not allow us to burn coal and the various government agencies are not allowing the establishment of coal-burning plants.
Forbes, Sept 13, page 3
More fossils fuels. What a surprise. And isn't it fascinating that an oil expert is dismissing solar and wind power? Most of the good places for wind have already been taken? Give me a break, Foxy Loxy.
What is Foxy Loxy telling investors to do? Invest in Canadian tar sands energy.
Companies like Suncor Energy and Cenovus Energy, that are located, for the most part, on the great Athabasca oil sands up in the north of Canada, in the Province of Alberta. This is the second largest single reserve base in the world, second to the Orinoco in Venezuela, in oil sands terms. And it also has reserves that are really the equal of the Saudi reserves. And the Saudi reserves are perhaps half produced. But the oil sands of Canada are probably about 1% produced. So, we have an awful lot more oil to produce up there.
Forbes, Sept 13, page 4
To recap, Foxy Loxy Maxwell is predicting an economic crisis in the next five to ten years driven by an exponential increase in oil prices, but is telling Chicken Little to burn more fossils fuels and investors in the Wall Street Casino to double down bets on Canadian tar sands. All of Maxwell's predictions and assessments closely parallel the Oxford Report published in March. By the way, recent projections of Peak Oil include tar sands production in the models, so Maxwell is not suggesting that tar sands will forestall the oil price-driven economic disaster. Moreover, analysts also believe that conventional oil reserves have been exaggerated by as much as third. Maxwell is merely expecting his buddies on Wall Street to make a killing betting on companies heavily involved in tar sands production. Burning more fossil fuels to address the energy crisis also guarantees worst case scenarios for the coming climate crisis.
As an aside, Climate Zombie Lindsey Graham just returned from a trip to Alberta and Saskatchewan where he was promoting tar sands oil as the answer to our energy needs. It is ironic that activities by Suncor and Cenovus Energy were prominent in his fact-finding trip. I doubt Graham is taking orders from Charles Maxwell, but there is a disconcerting synergy between oil companies, energy investment firms, and too many policy makers on tar sands oil. Analysts like Maxwell know full well that tar sands oil is not going to prevent an energy crisis, but gullible and ill-informed government officials are sold on tar sands oil as our savior.
According the Department of Energy, "oil continues to account for more than 95 percent of all the energy used for transportation in the United States." That means drastic retooling of our transportation sector is the only way to avoid gas rationing and economic turmoil within a decade. We need a push to further increase fuel efficiency standards for all new vehicles and rapid transition to plug-in vehicles. The Obama administration has made important strides in increasing fuel efficiency standards and promoting electric vehicles. However, much more must be done. It is win-win-win proposition because it will create jobs, limit the energy crisis, and ease the climate crisis. The technology is available. It is a question of political will.
Just remember that all Republicans R L Miller has identified as Climate Zombies are also Energy Zombies who want to "drill, baby, drill" and call tar sands oil "alternative energy." Strange land we inhabit, eh Chicken Little?
*For the likely origin of the Chicken Little fable as a parable of Buddha, see here.