BIKE: beating Mr. Baker to the punch

[Roger Baker]

On Mar 12, 2005, at 5:50 PM, Phil Hallmark wrote:

>  
> Does this article say what I THINK it says?? Has OPEC reached  
> production capacity now?
>  
> http://news.yahoo.com/news?tmpl=story&ncid=749&e=1&u=/ap/20050312/ 
> ap_on_bi_ge/algeria_opec
>

(I'll get to that issue below).

First of all, you should be aware that EVERYONE has a chance to sign up  
to speak up on the $22 billion CAMPO 2030 transpo plan at the JC  
THompson Conference center on Monday at 6 pm. This is a plan that  
openly admits that car congestion in the central city will be nearly  
three times worse if the plan is fully implemented! (see page 53).

In no way is this PLANNED level of central city, angry commuter traffic  
congestion compatible with safe bike transportation, or with envision  
Central Texas goals.

We really do have a bunch of special interests tied to road building  
and suburban real estate in cahoots with Perry and TxDOT -- trying to  
greatly expand the rate of road building in Texas. The local toll road  
high pressure sales pitch is based on the idiotic theory that road  
building is an effective or affordable way to relieve traffic  
congestion caused by the suburban sprawl that rings Austin. The $22  
billion CAMPO plan is the sad end result, filtered through CAMPO's  
mysterious computer models on loan from TxDOT, of trying to expand our  
future population on that same basis.

The CTRMA promoting the toll roads is a bunch of local good old boys,  
largely from Williamson County, doing what TxDOT and the road lobby  
wants.

But the stink has gotten so bad that Texas comptroller Strayhorn sees a  
way to get political points by exposing a ton of  sleazy CTRMA doings  
in her report. Sort of like Elliot Spitzer in NY state. A ton of  
insider connections weren't hard to find; I've been posting similar  
stuff here and even McCracken and the council have now started their  
own an investigation.

Here's the Comptroller's report link if you want to see the details of  
how the road lobby operates as revealed through documents:

<http://www.window.state.tx.us/specialrpt/ctrma05/>

The road lobby isn't actually doing anything illegal for the most part,  
as the report admits, but only because as probably the most powerful  
lobby in the state, they can easily get laws like HB3588 passed to  
legalize doing whatever they want.

                 *****************************************

As for OPEC capacity, We're bumping into the limits now, so close to  
the oil peak at 84 million barrels a day production that a million  
barrels a day spare Saudi capacity doesn't mean much. Another big  
factor is the discount on sour crude oil and how its own refining  
constraints affect price. And labor shortages are an important  
bottleneck to increasing rweserves. See the interesting article at the  
bottom

Any way you cut it, world oil demand is now growing faster than world  
oil supply and this is what is causing the US oil price to rise as we  
bid against China and and the rest of the world for oil. Which then  
runs up huge US trade debts that cause the dollar to devalue even  
further, which then means that we have to pay more for the 60% of oil  
we must import.

It doesn't matter that oil has not peaked yet so long as demand is  
growing faster than supply, which it is, which is why price is rising.  
You can easily be in economic trouble before oil peaks if the gap  
between supply and demand widens and spikes the price.

And Bush and TxDOT and CAMPO together ignore all this and even tell us  
to take the plunge and greatly accelerate the building of oil-addictive  
toll roads with borrowed money. This is as bad and short-sighted as  
public policy can possibly get, in my opinion. -- Roger

             *********************************************

<http://www.energybulletin.net/4466.html>

Published on 21 Feb 2005 by Urbansurvival.com. Archived on 23 Feb 2005.


A letter from oil exploration insider

by Anonymous

  I work for a major international oil company, in the exploration area.  
Peak oil is a fact – we are all on the back side of the bell curve.

  While this is true, it might be better to term it the “Cheap-Oil  
Peak”. The US/UK/Western Europe are the entities primarily responsible  
for using up most of the oil prior to the mid-1980’s. Around that  
point, Asia and China got into the mix. As their economies heated up –  
more oil was used. This trend is still in effect.

  I followed the link to that “Beware of the Peakoil Agenda”, which I  
probably shouldn’t have done. The ignorance of most of the world about  
what we do in oil exploration is amazing. Even the DOE has no idea how  
or what we really do – they are academics, and exist in their own  
government-funded bubble.

  Provided the world can resist pulling the trigger on our debt, and we  
can resist pissing them all off in unison, we just might be ok for  
another 10 years, basically rolling along “as-is” but with higher  
oil/gas prices. We do have some untapped resources here, but there are  
some facts that most people do not understand with respect to the  
exploration industry.

  1) We are drilling rig limited – we are at full capacity world wide in  
the offshore rig market, and even the small number of new drilling rigs  
they are building will not improve that appreciably. No drilling  
contractor is going to build rigs rapidly ever again – not after the  
disaster of cheap oil in the late ‘70’s and ‘80’s. Assuming oil jumped  
to $100/bbl tomorrow, little in our industry would change, because the  
drilling infrastructure has been cannibalized for 20 years…..we are  
already drilling as fast as we can!

  2) We are personnel limited – in 1982 there were 1.6 million Americans  
working in the Oil & Gas sector, and today there are roughly 500,000.  
Imagine the hue and cry from any other industry at a job loss of well  
over 70% nationally!! The average age of people like me is 45 years old  
or older, with a great many facing retirement in the next 10 years. The  
age bracket between 30 and 45 is basically empty – who enters a  
consolidating, shrinking field intentionally? We simply do not have the  
available manpower to ramp-up in response to any stimulus - we are  
currently each doing the work of 2 or more people as we exist today!!

  3) The notion that we are sitting on “capped wells” of oil or gas is  
utterly ludicrous. We simply do not drill and sit on reserves – they  
must be produced to pay for the enormous expenditures we have in  
drilling them, or shareholders would evaporate as our bottom lines  
became nonexistent. Wells are drilled based on the estimated oil price  
6-12 months ahead, and that estimate is very bearish due to what  
happened in the 1980’s oil bust. Oil and gas actually move through rock  
– “sitting on capped wells” must have been invented by some  
environmental nut-basket, because there is no business or geological  
sense to it, and smart people follow the money.

  4) We are finished with most of the “second tier” exploration  
domestically. What we have left in the ground is either uneconomical  
due to depth, temperature, technology or “other”. “Other” includes  
those wonderful people who NEVER want to see a drilling rig anywhere  
near them (NIMBY) or in their view. Thus we have been essentially  
“frozen out” of the west coast, the east coast, all of Florida and the  
Arctic frontier. If we were “turned loose” on all this acreage, it  
would require well over 36 months for the first drop to get to market.  
We must find it, delineate it, build a producing structure, and then  
ship it in states or areas that have no oil transportation or drilling  
support infrastructure!

  5) Many people foolishly believe that higher prices will make the oil  
as valuable as gold is today. What they fail to realize is this: as  
liquid energy (oil) prices rise, all associated prices rise! Even if  
oil sells for $100/bbl, everything built with this $100/bbl oil will  
experience the same price increases, and likely more. This includes all  
plastics, steel, transportation and chemicals! We are currently  
bypassing the drilling of certain wells right now because the cost to  
get them out of the ground cannot be recovered. If our material costs  
(what we buy or rent to actually build an oil or gas well) rise with  
oil prices, many fields will never be produced, as it will always be  
uneconomical due to the small size of the oil trap.

  6) For the most part, the biggest fields have been discovered world  
wide. What remains is technologically prohibitive (water depth,  
downhole temperature or sheer depth of the deposit). We are all  
fighting for the scraps as things exist today, with the exception of  
the African coast. There, we are fighting for our lives as well as oil.  
I have personally been shot at during overseas stints, and once held  
hostage by guerillas as they blew up our rig while we watched. We are  
not a bunch of sissy-boys in this industry, but we also have wives and  
children. West African production will never increase appreciably until  
their governments achieve stability. In other words, West Africa cannot  
help us in the foreseeable future.

  Some numbers for the number bunch to crunch: The average offshore rig  
cost $24,000 per day to rent in 2003, and today the same 30  
year-old-rig costs $40,000 per day to rent due to rig availability.  
Yes, most of our rigs are 30 or more years old – would you rent a cabin  
on a 30 year-old cruise ship? Yet this is what we drill oil wells with  
in the new millennium…..

  Multiply that times the average 45 days to drill a “second tier” oil  
or gas well, you get $1,800,000 just for renting the drilling rig! No  
other mining industry or industry I know of has such tremendous  
up-front costs. The average price for a typical offshore well is around  
3.7-4 million dollars. A production platform to bring the oil to is  
easily in excess of $10 million…….and these prices will escalate with  
energy costs!

  It is not a question of “if” peak oil has occurred – it has! The  
better question might be “when are the crows coming home to roost?”  
When will we begin to actually experience the shortages and the rising  
prices? I think we might make a decade, if everybody plays nice across  
the world. But when has that ever happened when something got scarce?

  Just wanted to get that off my chest. I have been maligned and spit on  
by too many people who drive cars and use electricity, and then bitch  
about prices or claim some kind of “Big Oil Conspiracy”…. I can tell  
you that the collective consensus within my business will be “let the  
bastards freeze in the dark” when the big wail arises.

  Respectfully, (name withheld)




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