March 02, 2008

The oil may get low sooner than we think

For all the talk about drilling our way to energy independence, which is little more than than rambling by ridiculous little people with ridiculous little ideas, there is one inescapable fact. The well will always peak and from there on out that oil is going to get more and more expensive to the point of production costs going asymptotic, mostly because the reservoir pressure drops to the point where you are spending more and more to lift the next barrel of oil. It's happening in Mexico in the Cantarell field and in the Ghawar in Saudi Arabia.

The other inescapable fact is that as oil increases in value, those states that produce it will find themselves more and more affluent. And affluent people tend to become rabid consumers, especially when gasoline in 7 cents a gallon.

The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

“It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,” said Amy Myers Jaffe, an oil analyst at Rice University.

The best part? Consumers in these countries care less about pollution than the rest of the world...

In Mexico City the other day, a bricklayer named Jaime Guerrero arrived at a local Chevrolet dealership. His extended family cried “bravo!” as he signed the papers for his first car.

“To have a new car in my name is a dream transformed into reality,” said Mr. Guerrero, 26. He and his family piled in and weaved through the chaotic traffic of the capital, hunting for a priest to douse the car with holy water.

“I don’t worry about the climate or shortages of oil in the world,” Mr. Guerrero said. “I just worry if gasoline prices go up.”

Frankly, it's a little hard for me to criticize Mr. Guerrero because he's representative not only of people in Mexico, but of people in the US and around the world. Given that, it's damn time we give him a cheaper, cleaner, long-term alternative.

And just FYI, no damn interior decorator is going to do that. It's going to take someone like Dale Henry.


Posted by mcblogger at March 2, 2008 11:34 AM

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