Anyone who grew up in the Sixties knows how Jed Clampett found oil. The southern hillbilly, out shooting rabbits on his property in East Texas, had one of his bullets glance off a rock which then released a cap on a thundering oil flue. As the gusher shot into the atmosphere, Jed had to be informed by his family about the exact value of, well, ‘Texas Tea’
And the next thing you know ol’ Jed’s a millionaire……..
If only oil exploration was that simple. Today we know that oil deposits are buried thousands of feet below the surface and that sophisticated equipment must be used to both locate the deposits and then extract the oil. Eighty percent of our economy is dependent on oil – and will be for the forseeable future – but for years we have been told that we are going to exhaust the Earth’s natural supply. The ” Theory of Peak Oil” took hold of many engineers worldwide and was loudly amplified by environmental activists. Take this 2007 assessment from the Institution of Mechanical Engineers:
” There are an estimated 1.3 trillion barrels of proven oil reserve left in the world’s major fields, which at present rates of consumption will be sufficient to last 40 years.
By 2040, production levels may be down to 15 million barrels per day – around 20% of what we currently consume. It is likely by then that the world’s population will be twice as large, and more of it industrialized (and therefore oil dependent).
First developed in the 1950s by petroleum geologist M. King Hubbert, peak oil theory held that any individual oil field (or oil-producing country) will experience a high rate of production growth during initial development, when drills are first inserted into a oil-bearing reservoir. Later, growth will slow, as the most readily accessible resources have been drained and a greater reliance has to be placed on less productive deposits. At this point—usually when about half the resources in the reservoir (or country) have been extracted—daily output reaches a maximum, or “peak,” level and then begins to subside. Of course, the field or fields will continue to produce even after peaking, but ever more effort and expense will be required to extract what remains. Eventually, the cost of production will exceed the proceeds from sales, and extraction will be terminated.
Of course Peak Oil Theory was completely turned on its head five years ago when the shale oil revolution hit North America. Hydraulic fracturing (famously known as ” fracking”) as well as horizontal drilling are the new technologies which have allowed drillers to tap dense, previous inaccessible shale deposits. Because of this revolution, daily world supply has surged to 1. 2 million barrels a day, an increase of 400,000 units over 2012 daily production. And its is only going up.
The incredible boost in world supply has had the shock of bringing the price per oil barrel down as well, dropping almost by half to now a current $65 per barrel. And of course this may come down much further as the global glut forces more countries to sell their oil at lower and lower prices. We have already begun to see this reality at our local gas stations. Here in California, the price of gas in the most expensive areas in edging down below $3.00 a barrel ( from a peak of $4.85) and in some parts of the country, gasoline is selling at less than $2.50 a gallon. 
The geopolitical consequences of this development are staggering.
The first to feel the bite will be Russia. Only six years ago, the Russian economy was going through a decade-long boom, allowing Vladimir Putin’s Kremlin to enlarge subsidies, social transfers, government salaries and embarking on massive development programs including the exorbitant Sochi Olympics.
However rising consumer prices and the closure of markets in the West is having a severe impact on the average income of Russian citizens who are also fearing that the rapidly devaluing rouble could wipe out their savings. In his annual “Nation Speech” on Thursday, Putin blamed the West for trying to stymie Russia’s growth, even comparing the West’s policy with that of Hitler, and promising Russia would persevere. But even he acknowledged the dire situation when he offered “amnesty” to Russian businessmen who in recent months have transferred at least 100 billion dollars of assets out of the country. The flight of capital and the loss of confidence in Russia’s long term economic future could stop the Russian juggernaut in its tracts that no amount of nationalistic breast beating nor invasion of neighboring countries will stem.
The second country or institution to be significantly affected is the OPEC group of oil producing nations. Last week Saudi Arabia, the world’s leading supplier of oil, at an emergency meeting of the OPEC consortium, refused to reduce its supply, which might have placed a brake on prices. This was done in order to let oil prices drop as far as they can, so that that more highly capitalized drillers will be forced out because their costs of extraction will be too high ( the Saudi cost of extraction is the lowest in the world at approximately $5.00) . But the good news is that the stranglehold OPEC has exerted on oil prices since the 1970s is weakening. The United States production boom is accelerating to the point where it may become a completely oil independent by 2020 and a competing exporter of crude oil even sooner.
Iran clings to the hope that OPEC will cut output, pushing the prices back up. But with its hopes curtailed and nuclear talks with the West still unresolved, the tension between Iranian politicians in favor of reestablishing relations with the West and the hardliners prepared to risk even greater financial hardship to keep the dream of a nuclear weapon alive, will greatly intensify, together with a greater potential for food riots. Iran will also have less ability to continue supporting its regional allies, the Assad regime in Syria, Iraq’s Shiite government (also suffering from the low oil prices), Hezbollah in Lebanon and Hamas in Gaza. The weakening regime may be ripe for counter-revolution.
Other countries with oil-based economies such as Venezuela which were once ascendant are now fearful of a rapid decline. President Hugo Chavez had nationalized the oil industry and used the oil money to finance the populist-socialist-Bolivarist fiscal plans. But despite Chavez’s promises to develop a diverse economy, industry and infrastructure, Venezuela’s fortunes remain reliant on the price of oil and under his successor Nicolas Maduro, the growing deficit is already causing shortages of food and other goods that it can’t produce for itself. Dozens of citizens have already been killed in violent demonstrations which are set to get worse. Under Chavez, Venezuela generously supported other nations in Latin America which adopted his strident anti-Americanism and propped up Cuba’s weak economy. Maduro won’t be able to do the same and he will find it difficult to cling to power in his own country as basic commodities become scarcer. A realignment of South America’s poorer countries with the richest oil producing country in the hemisphere may be in the offing for those who were once in thrall to Venezuela.
The great winners of this oil lottery will be countries in the West. The rapid drop in oil prices has given American taxpayers, according to Goldman Sachs, the equivalent of a $75 billion tax savings. The growth in consumer confidence can only reignite the U.S. economy after six years of stagnation. “Self sufficiency in oil and gas,” says Mark Papa, the former CEO of EOG Resources, the leading crude oil producer in the lower 48 states, “will give the United States a two to three fold competitive advantage over Europe and Asia, leading to a revival of in-sourced manufacturing. It will result in a state and federal tax revenue bonanza and will diminish the need of the U.S. to tip toe around Russian and Persian Gulf sensitivities, giving the U.S. a leverage in the exercise of foreign policy, it has not had in years.”
Europe, still struggling with recession and with many of its Southern countries in economic free fall, will benefit from releasing itself from dependence on Russian oil and gas WHICH will buy more cheaply from the United States, Canada and OPEC. The cheaper gas prices should have the same revitalizing influence it is having in the U.S..
The great blow back to this extraordinary economic windfall is due to come from the environmental movement. Certain that that the West’s embrace of Peak Oil Theory would lead to the diminishing reliance on fossil fuels – to the benefit of alternative energy sources such as wind and solar – environmental attacks on fracking will only grow in volume and possibly violence as an attempt is made to prevent further oil and natural gas exploration and to disrupt its transport.
We have already seen the impact of the environmentalist campaign in California, which sits on one of the largest shale oil reserves in the world, and has adamantly refused to allow that resources’ exploitation. In 2011, the Energy Information Administration (EIA)published a report by INTEK Inc. which stated that the Monterey Formation contains 15.4 billion barrels of technically recoverable shale oil—64% of the entire estimated shale oil resource in the continental U.S. The EIA/INTEK report was used as the basis of a March 2013 University of Southern California (USC) economic analysis which projected as much as a $24.6 billion per year increase in tax revenue and 2.8 million additional California jobs by 2020.
And yet anti-fracking activist organizations have mounted an unending campaign to stymie the oil deposits’ exploration and extraction. Drawing on State-wide fears of increased water usage during drought, exacerbated seismic activity and pollution of the water table , county after county has enacted anti- fracking regulations.
A bill proposing a statewide moratorium on fracking failed in the California House of Assembly in May . But in January, a state law that requires oil companies to obtain permits for fracking and to estimate how much water they’ll use took effect. State agencies are developing more comprehensive regulations, but many local governments are taking matters into their own hands.
Last month, the City of Carson in Los Angeles County imposed an emergency 45-day moratorium on all new drilling because of fears that Occidental Petroleum would use fracking to drill more than 200 wells near homes and a university.
And in February this year Los Angeles became the first oil-producing city in California to ban fracking technologies.
The joke is how little water is used in fracking and how senseless is the idea that drilling will set off tremors and earthquakes along the San Andreas Fault.
“They’re skilled at marketing and skilled at hyperbole,” said Rock Zierman, CEO of the California Independent Petroleum Association in Sacramento, a group that represents 550 companies and individuals in the oil industry. “But we use less than a total 300 acre-feet of water a year for fracking. That’s equal to what all golf courses in California use in half a day.”
And polluting the water table?
A landmark federal study , released by the Energy Department and issued in July, 2013 found no evidence that hydraulic fracturing contaminated drinking water in western Pennsylvania. Study after study has turned up little evidence that fracking is unsafe or that it harms suburban or rural water supplies.
“About a third of the 2,000 new oil wells in California are hydraulically fractured,” Zierman said. “They also talk about air pollution from methane leaks. Our air [quality] laws established regional air districts that regulate all our service equipment, every joint, every coupling [that’s] permitted.”
Reeling from years of business flight and economic recession, if there is a State that could use the injection of economic stimulus afforded by the new drilling technologies, it is the State of California.
Wise Jed Clampett, who moved to Beverly (Hills, that is) after his lucky strike, would probably look upon this blood feud with some amusement. He knew that economic success is a matter of luck on the one hand and good timing, the right location and the perfect (gun) technology on the other. He might shake his head and whisper:
” Jes’ dang stoopid, ain’t it? ”
Posted by avidavis 
The Intermediate Zone 
Toyota and its U.S. Battles
February 24, 2010No guy ever forgets his first car. It could be a clunker, a jalopy, a chugging, grinding bundle of nuts and bolts – but a teenager’s reverence for his first wheels never diminishes. That car somehow lives on in technicolor memories of a hard won freedom that at one time opened the road to weekend travel, pounding rock music, uninhibited carousing and girls.
My first car was a white, used, Toyota Corolla, a gift from my dad received a few months following my eighteenth birthday. About to commence my first year at University and still living at home, my father grudgingly conceded the necessity of providing me with a means of transport for the 20 mile commute to campus, having absolutely no intention of undertaking that task himself.
The details of my adventures in that little car are now of course a legend in my own mind. But for whatever else those first few halcyon years of driving left me, they made me acutely aware of differences between various makes and models of cars. I started to notice how my friends had increasing problems with their Australian and British made cars, while my Japanese Toyota barely registered a mechanical fault. I drove that car for five years, never longing for anything else and never experiencing any other problem other than a blown gasket or occasional overheated radiator.
Perhaps that reputation for reliability is why I feel such anguish at the seeming crucifixion of Toyota as it struggles to clear it itself of charges of negligence in the deaths of 34 people caused as a result of sudden unintended acceleration in its vehicles. I have been waiting for weeks to read a defense of the car manufacturing giant, something our commentators seem loathe to do for fear of being seen supporting the avarice and incompetence of big business.
So it was with some satisfaction that I read Holman Jenkins Jr.’s wonderful column in today’s Wall Street Journal. Jenkins, who uses the device of inhabiting Toyota chief Akio Toyoda’s mind to reflect on the absurdity of the case that is being made against the company, points out some salient facts of which I was unaware:
Moreover, the one thing that no one seems to be ready to investigate is actual driver error. What about when a driver becomes disoriented and pushes the wrong pedal, as occured on July 17, 2003 when 86 -year-old Russell Weller became confused, hit the accelerator instead of the brake and ploughed into the Santa Monica Farmer’s Market killing eight people?
Of the non-floor mat incidents, were there any other factors which could have led to sudden acceleration? Unfamiliarity with a new vehicle? Drowsiness? Inattention? As drivers, we all know that these things happen. They also occur while drivers are at the wheel of Toyota vehicles.
That is not to suggest that a thorough examination of the Toyota vehicle manufacturing process isn’t in order or that extra trouble shooting measures should not be undertaken.
But as we witness Akio Toyoda and his lieutenants twisting in the wind, perhaps we should spare a thought for the 50 years of exemplary service and superb craftsmanship of their company. It certainly does not deserve the opprobrium and disdain it is receiving today.
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