Wednesday, May 09, 2007

big oil ain't no dummy

It is quite common to hear “experts” explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production. In reality, geological peaking is driving the geopolitical events that constitute the most significant “above-ground factors” such as the chaos in Iraq and Nigeria… -Jeff Vail

The mass media is back at it, trying to explain high prices at the pump to the average American. If their lack of understanding weren’t so scary, we could all have a laugh. This time its being blamed largely on problems at petroleum refineries. We Americans do like simple answers. If prices at the pump rise rapidly, we assume there must be an easy explanation. It couldn’t be a more comprehensive problem with the way we use energy and our reliance on a finite resource.

How about this question. If you knew, as the supplier of a finite resource like oil, that the oil you sell was about to become physically less available each year forever, would you continue building refineries? Of course not. Any industry that understands it doesn’t have a long term future will act with blatant disregard for it’s long term well being in favor of greater short term profits. I think big oil is doing just that and it points out peak oil like a tattletaling two year old.

This includes failing to plan for any expansion in refining capacity over the last 30 years. Of course now I’m over simplifying the answer. As Alexander says, “Refineries are not particularly profitable, environmentalists fight planning and construction every step of the way and government red-tape makes the task all but impossible.” So there are other reasons not to build but I do find it interesting that that last new refinery came on line in 1976, just six years after U.S. oil production peaked. Like I said, why build ‘em (and go through all that trouble) if you know you won’t need ‘em.

Of course an industry that understands its days are number might not worry about properly maintaining important infrastructure either. Why does that sound familiar?

North America’s largest oilfield remains shut down for a fourth day and it could remain shut down for several months. Up until this week, the Prudhoe Bay oilfield in northern Alaska produced 400,000 barrels of oil a day… The oil company BP closed the oilfield on Sunday after discovering what it described as “unexpectedly severe corrosion” of the oil pipeline… Two years ago, a longtime oil industry watchdog named Chuck Hamel warned BP about corrosion problems. But his warning appears to have been ignored. Link

And they wouldn’t be especially concerned about having enough equipment to adequately supply enough oil if they knew it was peaking in availability.

Each piece that is needed to find, drill, pump, carry, refine and ship hydrocarbons has been stretched by years of underinvestment. Today, just about everything between the wellhead and the gas pump is in short supply. Link

And an industry whose time is up because of irreversible decline in feedstock would neglect to plan for skilled workers in their industry.

As an aging generation of workers retires, industry experts say the resulting shortfall in skilled labor could lead to an increase in delays and problems on mega oil and gas projects… the manpower shortage could cause production problems in the future. But equipment shortages and the rising costs associated with the lack of resources are more fleeting. Link

Some people are easily convinced that the oil industry is just stupid and has done a poor job of managing the most precious and most profitable energy resource this planet has to offer. I think there’s another, simpler explanation. Big oil knows its days are numbered and its just not willing to spend big bucks to maintain infrastructure, purchase needed equipment and train skilled labor. And yes it stands to reason that they are also not interested in building refineries because world wide oil production is peaking.

When will the mass media and the public recognize that the cough is a symptom not the sickness?


Kaat said...

Hi there,
Thanks for powering down and keeping us informed. I was just wondering: are you the same Aaron who writes for Groovy Green? I just read exactly the same article there.

nulinegvgv said...

Hello kaat,

You are welcome. I try. Yes I am indeed the same aaron. I sometimes cross post. I have a much larger audience at Groovy Green but I like to make some of the articles I post there available to those who read here.

And some articles seem more appropriate here and some seem more appropriate there. But some seem relevant to both audiences.

The pseudonym is just a hold over from the creation of this blog. My name is aaron joesph newton.

Barbara Rubin said...

I was just introduced to your blog by a friend and am always grateful to see such informative posts written with such clarity of insight.

My research has been concentrated around the manufacture and sale of products which are harmful, many of which contain petrochemicals. Industry is striving to wrench those last pennies (billions, actually), of profit via deceptive marketing practices, as we count-down the years in which American consumers continue to be used and workers abused.

Thanks for your efforts here!

Barbara Rubin