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Saturday, January 21, 2006


Nope, Duh, Nope, Uh-huh, I Guess So

Those are the five most important answers to some very prevalent statements we hear today. OK, so I changed the answers a bit for the title of this post! In fact, this post is to provide the reader with enough information to develop a stronger argument against the fifth answer, "I Guess So." I intend to show that I believe the is changing drastically enough that the answer should be, "Nope."

My previous post, the giant is now awake and dancing on the enemy's head, is threaded through this post and then ends at the follow on post to come. These three posts are in order, for a reason - like a friendship bracelet! (sorry, my oldest daughter is into these things ... wha' ?? how does a bracelet ... never mind, back to earth)

Let me first provide some background for this post. Colonel Richard Fullerton's article, "The Future: Oil, America, and the Air Force", can be found in the latest Air and Space Power Journal (Winter 2005, Volume XIX, No. 4). Colonel Fullerton is professor and head of the US Air Force Academy's Department of Economics and Geography. He also credits and thanks Duane Chapman of Cornell University for some, as Colonel Fullerton puts it, "... insightful comments." There is an extensive amount of information in his article, and I have brought quite a bit of it here. The reason is that there is so much disinformation out there on this subject. To have a valid argument we need to be on the same plane with the same information, not conjecture and less than factual points of view driving the debate.

What I think is key to agree upon is a subject that many take very little time to understand, yet they feel very strongly about their answer(s). When you bring up the subject of oil, folks either in the Air Force, or not, have some idea about a world view and can argue with confidence. But to take the time to study the conflict and the facts that are rooted in economics provides a better platform from which to argue. Really, this subject has bugged me ever since I stood on the flightline launching KC-135 tankers. We sent a TON of fuel into flight! Can we keep doing this? I mean, what we hear is the old faithful line from the regurgitators of pap, "The World is Running Out of Oil":

Wrong

Did you know that these purveyors of re-pap have been saying this for more than a 100 years?! Colonel Fullerton writes that geologist Kenneth Deffeyes put a date on when the world would be out of oil. Deffeyes said that, "world oil production will reach its ultimate peak on Thanksgiving Day 2005." Yet the US Geological Survey reports "the mean estimate of the world's recoverable oil" to be at three trillion barrels. Colonel Fullerton states that is "more than three times the amount the world consumed in the entire twentieth century!" The US Energy Information Administration put a guess on the table for peak consumption to be about 2037. Just remember, there are two very large countries that are dramatically increasing their consumption of the world's oil supply - that to come later. But, what about the fact that "The United States is Running Out of Oil":

Irrelevant

The one thing we all need to understand: no matter what, the world price is set by a world market and that oil is a "fungible commodity", folks. Colonel Fullerton shows that even if the United States was completely self-sufficient and provided it's own supply domestically, we are still vulnerable to "oil shocks" from the world market. Colonel Fullerton provides proof using the British gasoline debacle in September of 2000. As he writes:
"Britain's North Sea fields produced far more oil than the country needed domestically, but when the price of oil rose, it did so worldwide. British consumers felt the same pinch in their pocketbooks that we felt in America and that the Japanese felt in Asia."
Oil prices rose in unison, worldwide, regardless of the location of source or production. The slidebars are all tied together. I think of it this way: to change the values of my Technics stereo equalizer I bought at the Audio Visual Club on base at Rhein Main AFB in 1983, I'd use a stick across all the keys (lame, I know, but that's reality). No matter what, changes take effect across the whole spectrum (worldwide) not just one frequency (country). Now this seems to always lead everyone into my favorite, "An Oil Embargo is a Threat to the United States":

Wrong

Just because the "Middle East has two-thirds of the world's remaining proved oil reserves" doesn't mean you need to get your knickers in a twist. No matter what, oil is going to end up in the hands of whoever can pay the price. In simple terms Colonel Fullerton says it best:
"Just as the global market for oil prevents us from achieving oil independence, so does it ensure that no country has a practical way of embargoing the United States, beyond a merely symbolic gesture."
I am sure that you are screaming at your monitor saying, "The oil embargo of 1973 is proof that our prices got jacked to the ceiling, you moron!" My answer is simple enough and I'll coin the phraseology of a previous administration, "It's international trade and domestic economic policies, stupid!" Colonel Fullerton provides the reason through the words of Jerry Taylor and Peter Van Doren of the Cato Institute:
"price controls imposed in 1971 by the Nixon administration prevented major oil companies from passing on the full cost of imported crude to consumers at the pump. "Big Oil" did the only sensible thing: it cut back on imports and stopped selling oil to independent service stations in order to keep its own franchises supplied. By the summer of 1973, gasoline prices were exploding, pumps were running dry, and long lines were commonplace. And that was before the Arab oil embargo or production cutbacks were announced."
Look, we are affected if production is cut and limits on the sale of oil are imposed on everyone. Oil exporters are more dependent on us, the consumers, than we are on them. Did you know that 85% of export revenues in Saudi Arabia, Kuwait, Iran, and Iraq are all from oil? There is no other primary revenue generator from these regions. Let's face it, it's an arid, desolate place - ask the troops! And no matter what you hear out there, the two largest exporters - Saudi Arabia and Iran - have different politics and differing views when it comes to dealing with the United States. That said, what about the tried and true, "Oil Will Continue to be a Catalyst for Conflict":

Right

The Middle East can take this one to the bank: "at $50 a barrel, the estimated value of recoverable oil in the Middle East comes to roughly $77 trillion - more than five times the US gross domestic product." Yeah, he said 77 TRILLION DOLLARS Do you think there'd be a conflict? Sheesh, everyone in the world needs oil, and China and India are increasing their own demands at an ever accelerating rate. Another world war could put this whole thing into a situation that is worse than the effects of the United States and coalition forces working to stabilize the Middle East. Right from the Colonel's article regarding consumption rates, the "United States is expected to increase over the next decade at an annual rate of about 1.5 percent, oil consumption in China is forecast to grow almost 6 percent per year." Hello! That is 4x our consumption rate, folks. If you think we consume an unbelievable amount of oil, wake up! If China is at 6% what do you think is going on in India with all the outsourcing and manufacturing of US consumable products? To be honest with ourselves, this is going to be true until we get this under control, like now! And, Colonel Fullerton's last cloak room statement heard in the halls of say, the Pentagon, "Energy's Future in the Air Force Will Look Much Like its Recent Past":

Disappointing but True

Now, the Colonel states as oil prices rise and supplies become ever increasingly more volatile that:

  • R&D into "alternative energy sources and technologies will proliferate"
  • the "public will not flock to them until the become economical"
  • transition "to new energy sources will take an evolutionary rather than revolutionary path"
  • consumers "will gravitate towards more efficient diesel engines and hybrid gas/electric autos"
  • the utility companies "will move from oil for electricity generation"
  • the oil industry "will explore and develop previously unprofitable oil fields and bitumen deposits"
  • the oil industry "will begin producing escalating quantities of synthetic liquid fuels from natural gas and coal"
  • better batteries "will spur the commercial development and marketing of plug-in" hybrid vehicles using gas or "coal-based methanol engines"
  • the clunky and awkward "hydrogen fuel cells will not become a leading energy source for private autos before the second half of the century - if ever"
All these may ring true, and I believe that everything he has listed is true or will be true very soon. Colonel Fullerton asserts that the Air Force will continue to consume in the same manner. I, however, believe that there is a fundamental shift in strategy, operations, and tactics (Charlie Munn at The Officers' Club has a great graphic to help) that shapes the consumption of fuels and energy in a very significant way. He lists all the big-honkers (aircraft) that slurp fuel like a teenager on a hot day with free Icee refills at the local 7-Eleven!

I don't buy it. There are a few new birds crossing the horizon at sunset now, and there are more on the drawing board. There are changes to our defense shield that reduces our reliance and consumption of all fuels. There are changes taking place through joint forces operations that have reduced staff (combatants per square kilometer, remember?) and their vehicles required to move personnel and materiel. There are minor, and OK major, changes to equipment that make our fighting forces so much more efficient and less reliant on vehicles, be that aircraft, ground vehicles, or ships, that once again prove out to consume less and less product (fuels and other energy sources [nuclear, etc]).

I believe that we're reducing our consumption rate and capable of stabilizing the Middle East at the same time. In fact, this is the best thing we can do, for everyone!


Stay Tuned to ...

3 Comments:

At 1/23/2006 07:30:00 AM, Blogger Chief RZ said...

Maybe we can open up Anwar now?! We can also mine our schale in the west. We can also investigate the "four state" China deal done within the previous administration.

 
At 1/23/2006 09:26:00 AM, Anonymous Laurie said...

Speaking of ANWR, I read a very interesting blog entry about that recently, an engineer who actually ran to scale how much area would be affected. You can read it here.

 
At 1/24/2006 06:54:00 AM, Blogger Buck Pennington said...

Good stuff Steve; thanks for the link to Col. Fullerton's article.

 

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