Saturday, September 17, 2005

A Tale of Four Colors

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way . . ." not so advanced from Dickens' time, ours is a land of four colors - black and white, red and blue. Where you land on this twister board says a lot about how you see life in America today.

I remember the day I realized how privileged I was to be born white in America. After spending a year in Hawaii learning how little my whiteness meant, I returned to my parent's house. There was a wonderful woman who cleaned once a week, often bringing her children and then grandchildren with her. I remember always wanting to play with these other kids through the years, and how my grandmother and the cleaning woman never encouraged my ambitions. One day, after returning from college, I cried to this woman, because I could not afford mascara. She comforted me and reminded me that my daddy would give me anything I wanted. I don't know if it was at that moment, or days later it occurred to me she might not have enough money to spoil her children or pay her rent, but she had the goodness in her heart to comfort me in my hour of need.

Awhile back I posted that Bush doesn't hate black people, that he really just hates the poor. And for the most part, I still believe this to be true. But after spending a few days reading digby and Krugman, I realized I may just be suffering from the same kind of institutional racism as the majority of people my age. We know black people, we like those we know and therefore we don't think of ourselves as racist. Hurricane Katrina changed all that. We have all been confronted with the sad truth that had been in front of us for years. It is great to be white in America, but to be born black is an early death sentence and has been since day one.

In the early days of our nation, slaves were brought here to do the work no white man wanted to do in a free country. The Civil War was meant to end the suffering of black Americans, but it took another 100 years to free them from the laws that white men had enacted to keep them bound. The last forty years should have freed African-Americans to assimilate into the culture in which they were born, but what we have seen in the last two weeks should be enough to prove to anyone paying attention, there is a deep disparity between those who have and those who don't, and that difference delineates along racial lines more than anyone cares to talk about.

Before we engage in a New Deal effort to rebuild New Orleans or ask congress to investigate the travesty that was FEMAs response to the situation, we should as a nation look at how we can include a growing population of citizens in on the American Dream. It's time to add a little color to the red, white and blue.


Understanding the Oil Patch

Many people who are interested in Peak Oil or oil and gas production in general tend to be woefully ignorant about the companies that produce most of the oil in the world and sell it back to the public as gasoline or other products. Many, if not most, people who are not involved in the industry, at least in a peripheral way, tend to ascribe all kinds of devious, conspiratorial, and unethical if not evil intentions to these companies. They treat the multi-nationals as if they were some sort of conspiracy against the earth. This may sound self-serving, but I am going to tell you the way it really is, or at least the way that I have seen it to be observing it from the inside for the past 20 years.

First of all, these companies, like all companies, are made up of people. That may sound stupid and redundant, but some people, based on what they write, seem to think that the Exxons of the world are organized like the Galactic Empire of Star Wars with a Sith lord at the top directing all the evil. The fact of the matter is that the people who work in these companies tend to be extremely normal. For the US-based contingent of these companies the employees probably vote Republican more frequently than the country as a whole, and they tend to be a church-going lot – to a large degree because of the concentration of these companies in the South (Houston, New Orleans, etc.), however, they are concerned with most of the same things you are.

The one thing they tend to be is rather insular. These multinationals are large bureaucracies. They are organized presumably to maximize return on investment for their investors. Like all bureaucracies, however, internal politics plays a big role in ultimately how they are organized and how effective they are as businesses. Despite aspirations to put the whole company first, many parts of these organizations look like Dilbert Comic Strips crossed with the movie Office Space.

OK, so where am I going with this? One point I want to make is that many of you reading this are far more educated about the worldwide supply and demand situation for crude oil than even a large number of middle managers at most of these companies. Until recently, if I walked up and down the hallway at my office and polled people on their opinions about Peak Oil, most of the people probably would never have heard the term. Individually these people might know about drilling horizontal wells in 2500 m of water in offshore Sabah, or about the historical geology of the Falkland Islands and how it relates to West Africa, or how to numerically simulate a steam flood of a Tar Sand deposit in Alberta, but they do not understand the global business. They are technocrats focused on their jobs. They think that oil should be at $25/bbl because corporate planning tells them that is what their company is forecasting for the future. People higher up in the organization, in corporate planning, vice presidents of E&P etc. are also focused on their jobs. Most tend to be near-term focussed. What is happening this quarter, next quarter, and next year? How do we meet the targets that we told Wall Street we would meet? How do we invest this mountain of cash coming in because we planned for $25/bbl and we are now seeing $65/bbl?

The other thing about bureaucracies, especially large ones, is that they are averse to change – any kind of change. The reason why companies go out of business is that they refuse to see the change coming until it is too late to do anything about it. Compare IBM , US Steel, Delta Airlines or AT&T to where they were in the early ‘80’s. External forces that were clearly visible to other parties, were invisible to these companies. Or if they weren’t invisible, the decision makers in those companies were deer in the headlights, frozen with fear. Those forces transformed those companies and turned them into shells of their former glorious selves.

These multi-national oil companies are a whole herd of deer grazing on a bounty of spilled corn in Interstate 10 outside of Houston at 5:00 AM. There is a giant semi-truck cresting the hill with its bright lights on called Peak Oil bearing down on this herd. Some may make it off that highway. Some definitely won’t.

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Thursday, September 15, 2005

Gasoline Demand Freefall

Occasionally I like to do an "I told you so" post, especially if I can rub some salt in to the wounds of my blog partner's (stc) husband (aka English Bubba). Back on August 13 I made the prediction that a recession is on the way and it will be triggered by high gas prices. OK I will admit that there is no proof that we are yet in a recession, and to compound things, Hurricane Katrina may have sped up the timetable, but clearly as James Hamilton notes, gasoline demand in the US has taken a huge hit in a couple weeks - a trend that started before Katrina hit. Of course my friend English Bubba will state that all bets are off because of the extreme effects of Katrina. However, the price of oil today is approximately the same as it was before the storm, and as JDH also notes, the wholesale price of gasoline has also dropped to pre-Katrina levels. What do you have to say now EB?

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Wednesday, September 14, 2005

View from the inside

For those of you who aren't Peak Oil disciples, The Oil Drum is becoming one of the main sites these days for day to day discussions about Peak Oil. Today there was a discussion going on there that I feel I would like to share here, mostly because it expands on my own view of the world. Here is an exerpt:

I called 6 different people last month, with 6 different companies. We all work in the oil field as drillers or geologists or petrophysicists. We all operate in various domestic and international areas. Everybody has the same outlook, and Bubba summed it up, but let me explain it once more for those new to the site.


We have found almost everything there is to find of consequence. What we are doing now is scraping the bottom of every known reservoir, and drilling almost any prospect that might have a shot. Our dry hole rates are all rising in spite of the new technologies. The real warning shot to the world should have been the mergers of the majors - the only logical reason to do this is because it is easier to buy reserves than to find them!


Is there more oil to be found? Yes, but not enough to prevent Chevron and Texaco from buddying up, or Exxon and Mobil or BP and ARCO. Those facts, in and of themselves, should make any thinking person realize that this industry has limited extraction options. When we got to places like Colombia (1992), where we have to fence in rigs and put up razor wire around the perimeter and hire mercenaries to secure a drilling site - it means this is the most economical field we can find, and THAT should tell people the state of exploration. When we go to places like Angola (1995), where you can have your throat slit for being the wrong color or because someone is having a bad day, THAT should tell people how difficult it is becoming to find oil.

Just to let you all know, I never heard of Peak Oil until I started my recent job which gave me a very up close and detailed look at nearly all of the exploration and development opportunities my company had in its portfolio. The emptiness staggered me. Moreover, because we partner with most of the other big oil companies throughout the world, I get to see many of their projects also, and from what I see, they are no better off. I came to the realization very quickly that reserves of oil were going to become very valuable as soon as the excess OPEC capacity was drawn down. I had no idea, however, that that time would happen so soon.


Tuesday, September 13, 2005

Suffer the Little Children

Another one to file under This can't be right, the federal government has said it will not help Texas pay for additional textbooks or teachers needed to educate the 29,000 evacuated Louisiana students the state has enrolled thus far (or the several more thousand expected in coming weeks). While FEMA has money to pay for increased transportation costs, portable buildings, school computers and mental health counselors, the state must bear the primary costs of teaching additional children (the state mandates 65% of monies be spent in the classroom), at least for the time being. How long a time do you reckon that's going to be? My guess is as long as it takes to measure the political fallout of the decision. The greater the heat, the more likely funds will be made available.

Complicating the funding dynamic is the dismal fate of the Texas' state education funding. Three legislative sessions down and no remedy for what ails it. Add a Gubernatorial primary season started early by two high-powered Republicans, and the chaos is more apparent. Governor Rick Perry believes his good buddy W will eventually reimburse the state for these additional costs and does not plan to do anything about funding at present (too tired from his wasted summer). State Comptroller Carole Keeton Strayhorn (little Scotty McClellan's mom) has her eye on $1.2 billion surplus revenue the state has collected in higher oil and gas receipts, which would usually go into the "rainy day" fund, but could be earmarked for disaster relief for schools, police and hospitals, if the legislature decrees it. Only problem, Governor Rick Perry would have to call for a special session, and he doesn't want to. Not only did the ones he held over the summer really bum him out, he doesn't want to give the comptroller the political edge.

As if that were not enough burden for the beleaguered, Secretary of Education Margaret Spelling, who no doubt has spent countless seconds pressing Bush and Congress for money to help states pay for the their recent additions, has not yet determined if displaced students will be held to the strict No Child Left Behind guidelines, which mandate already underfunded testing, and retention of students who do not meet their criteria. She claims that exceptions may be made on a case by case basis, but we all know what that means.

Who do you think will suffer most in all the bureaucratic nonsense? Got it in one; the children, of course. They are the ones who will sit in over-crowded classrooms without textbooks, while underpaid teachers force-feed them the uninspired pablumn our government mandates. Many of them have just come from a trauma more painful than most adults can process, have lost family members, their homes and possessions, are living in shelters and learning lessons in compassion and caring from total strangers in the form of volunteers and classroom teachers. Wouldn't it be nice if our government considered these lessons as valuable as those on the TAKS test. Wouldn't it be really great if those who have given freely were not made to pay for their generosity by having to stretch the already meager government dollars paid to education. Wouldn't it be fabulous if those who have already lost so much were not subject to losing even more to a government test that can not hope to show the true measure of children.

Lets turn up the heat on this one and let there be no misunderstandings, before education in Texas and across the country becomes another unintended catastrophe.


Sunday, September 11, 2005

Fighting Mother Nature - A Losing Proposition

Shorter version of post:

New Orleans = Atlantis

Conclusion: Let it go

If you are a scientist, and especially if you are a geologist, it quickly becomes apparent that the physical laws that govern weather, landforms, oceans, etc. are not well understood and are mostly ignored by humans. Human beings tend to have very short attention spans and very short frames of reference. People are mostly interested in the here and now. They could care less about what is going to happen in 50 years or even in 10 years. This is really true in the US where the overall savings rate is less than 2% of personal income, and credit card debt has skyrocketed. We don't care about global warming, social security and medicare solvency, and peak oil because all of the consequences of these things are beyond our "give a shit" time span.

However, let me say this to all of those people who are talking about how we are going to rebuild New Orleans. Don't ask for any of my money to do that! You might as well go out into the ocean and dump the money overboard.

That city has been sinking into the Gulf of Mexico since the first homestead was built there. The geologists and meteorologists have been telling you for 30 (or more) years that the tragedy that just happened was a certainty - the only uncertainty was when. If the idea is to rebuild the city in place and just build higher levies with bigger pumps, I will tell you that this catastrophe will happen again, and it will be worse next time.

Anyway, kudos again to the Houston Chronicle for raising this important topic now before the political steam starts to build on what to do with N.O.

P.S. - I'm pretty sure that one of these days I will be writing a similar post about San Francisco. The destruction of that city, like N.O. is not an if, but a when.