Re: Hummers

["lvnadal" <lvnadal@xxxxxxxxxxxxx>]

----- Original Message -----
From: "Jon Flanders" <Jon_Flanders@xxxxxxxxxxxxxx>
> >
> "About 1 trillion barrels, and that first trillion barrels that we've
> extracted is the easy stuff. It's the stuff that's easy to find, it's
> under high pressure, you just have to stick a straw in the ground and it
> comes bubbling up. What's left, the oil that's left is going to be more
> costly to extract, so the net energy profit from that oil, instead of
> being, you know, 100 to 1, 200 to 1. Oil exploration and extraction are
> already down to by some figures 20 to 1, 30 to 1, 40 to 1 in that range.
> And within the continental US, the activity of oil exploration has an
> energy profit ratio that by some estimates is down to about 1 to 1. In
> other words it costs as about as much energy to search and extract a
> barrel of oil in the continental US as that barrel of oil actually
> contains. So what this means is the net energy available to industrial
> societies is being reduced year by year." Richard Heinberg, author of
> "The Party's Over, Oil, War and the Fate of Industrial Societies"
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This is an old, old argument, advanced first by M King Hubbert who predicted
that 1970 would mark a peak in US onshore production based on his offset
analysis between discovery and production rates.  Much to everyone's surpise
, except some hardcore Marxists, Hubbert was right.  Onshore production did
peak.  The Marxists however maintained, and maintain that it was due to the
fall in the rate of return on investment due to the tremendous level of
development of US onshore exploration and extraction.

Incidentally, has anyone ever seen, read, found a copy of Hubbert's original
paper produced in 1956 while working for Shell Oil?

In my many years intimately associated with oil extraction and development,
I never saw it, nobody I know ever saw the original paper.  Not that I doubt
its existence....

I did find and read many other things by Hubbert:  his predictions that
somewhere around 1983 the international industry extraction would peak and
begin a steady decline-- wrong; that 1995 would mark the peak and start of
the decline-- wrong again.  No further predictions were made as Mr. Hubbert
had passed to that great seismic model in the sky.

However, his legacy lives on-- particurlarly in the Colorado School of
Mines' M. King Hubbert Center, where petroleum engineers produce numerous
studies of the impending depletion of oil reserves. The coordinator of the
Hubbert Center, one L.F. (I think) Ivanhoe picked up Hubbert's banner and
predicted 2000 as the ultimate and the decline year, then 2003.  Perhaps
he'll die too before he gets off another prediction.

But the legacy of Hubbert is just not that of resource depletion, or an
interesting analysis relating discovery to production, but in abstracting
both from investment, the legacy is also a political legacy:  Hubbert was a
technocrat who explicitly argued that "people" had to be disabused of this
notion of "growth',  that people had to learn that the economy could not
satisfy their needs and thus live with less (try telling that to the growing
number of homeless children), and that technocrats should be in charge of
such life-critical decisions like determining levels and areas of
investment.  His successors are slightly less enlightened and are uniformly
and consistently conservative with a vengeance.

Regarding the issues of reserves:  reserves are never an absolute,
immutable, estimation of supply-- reserves are an economic, not a physical
determination.  The calculation of reserves has to satisfy a specific series
of demands:  the oil that can be produced in a given time frame, generally
10 and no more than 20 years,  with the current technology, at current
costs, and with an acceptable RATE OF PROFITABILITY.  This is a social
definition then, economic, a relation to capital, not to geological
pre-history.

Consequently reserve estimates change as has recently been the case with
estimates of the Caspian Sea fields. As another example, for the past few
years PEMEX has been forced to reduce its reserve estimates, based on the
lack of funding for exploration, development, and technological innovation
of its productive apparatus.  The Fox regime is intent on reversing this
trend and is increasing allotments to PEMEX and we will see reserve
estimates start to increase.

This also explains why so much of the increase in reserves is obtained
through the "drillbit," at the "well-head," already existing, productive
fields where more oil can be accessed through improvements of the existing
productive plant.

And it should help us see how much more of the globe can be explored for
oil.  80 percent of all oil wells, existing, pumping, shuttered, abandoned
exist or existed in the onshore areas of the United States.  Even Iraq with
its 112 billion barrel est reserve has hardly been explored.  Only 15 of 73
fields have been developed.  The Western Desert Region has not been
explored.  And the total number of wells in Iraq is estimated at 2000 vs.
1,000,000 wells that have been drilled in Texas.  In addition Iraq has not
had widespread access to 3D Seismic technology for exploration.

Perhaps the most sophisticated successor to the Hubbert Method is J.
Laherrerre who has made himself quite wealthy providing seminars to OPEC and
consulting services to the majors with elaborate variations on the offset
curve between discovery and production.  However, one of  his programs
concerns Russia which he argues is on the downward slope of the production
curve since 1991.  Laherrerre ignores the collapse of the USSR economy, the
decline in resources available to maintain the Soviet industry from
1986-1991 when Gorbachev let the industry pump itself into exhaustion
without maintenance in an attempt to obtain hard currency; Laherrerre
ignores that collapse of the Russian economy from 1992-1998 during which
time production, gdp, and even agricultural output declined by some 40%, and
Laherrerre ignores the recovery, the up turn in the curve of production in
precisely those areas, i.e. Kazakhstan, where significant investment has
been made.

In summary, the depletion of oil is not a new argument, not even for
Marxmail according to the archives I've read.  It's just not a very good
argument.