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James Schlesinger on peak oil

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In August 2012, I interviewed James Schlesinger over the phone as part of research for my upcoming book, The Oracle of Oil, the first biography of maverick geologist M. King Hubbert. Schlesinger and Hubbert shared a deep interest and concern in the issue of peak oil—specifically, the question of when world oil production might reach an all-time high, and then begin to decline, marking a turning point between an era of plenty to an era of scarcity.

During Schlesinger’s time in office as the United States’ first Secretary of Energy—a post President Jimmy Carter created specifically for Schlesinger —he’d spoken about this issue of peak oil. He saw that such a peak of world oil production would have profound effects on the U.S. and the world. (Before becoming Secretary of Energy, Schlesinger had held various positions in the Nixon and Ford Administrations, including Director of Central Intelligence and Secretary of Defense.)

Schlesinger then went quiet about the issue of peak oil for many years— until around 2005, when prices were unmistakably soaring. From then on, Schlesinger spoke and wrote about his peak oil concerns in many forums—at a meeting of the National Academy of Sciences, for example, and in the pages of the foreign policy journal The National Interest.

Schlesinger was a complicated man—brilliant and insightful, yet arrogant and, by his own admission, often “autocratic.” Although trained as an economist, he was highly critical of the optimism that many economists have about availability of resources. He respected and admired scientists, yet wrote a 2005 opinion piece for the Wall Street Journal, “The Theology of Global Warming,” questioning the scientific evidence that humanity’s greenhouse gas emissions are the main cause of global warming.

In light of Schlesinger’s death yesterday, I’m posting an edited transcript of my interview with him, which focused on M. King Hubbert and peak oil.

Q: In April 1977, a couple of weeks before Carter gave his “moral equivalent of war” speech, Anthony Lewis of the New York Times wrote that the U.S. government “accept[s] Dr. Hubbert’s thesis as the premise of its policy.” Were you and others in the White House familiar with Hubbert’s forecasts? Or were you following others who were saying similar things?

Schlesinger: I’m looking at the first couple of questions you sent in here. And really getting down to your fifth question, which I think is most directly relevant: Hyman Rickover.

[Hyman Rickover was a U.S. Navy Admiral who was the father of the nuclear submarine, and was Carter’s boss during his time in the Navy.]

Rick was, as you know, mentioned in Carter’s campaign biography, Why Not the Best. He was quoting Rickover, or allegedly quoting Rickover. He had high regards for Rickover—not entirely shared by Rick, by the way. And I think… Rickover was a much greater influence than anything that [Carter] heard from Hubbert.

Carter said to me that Rickover had said to him, there’s a limit on the production of oil. Now, this was Rickover in his role as an advocate of nuclear power…. Rick, according to Carter, said something along the lines of there were probably 10 million cubic feet of oil in the ground, and we’ve used up, you know, one-fifth of it. I don’t remember exactly what the number was, but [Carter] had me actually try to figure out how much of this alleged 10 million cubic feet of oil had been used.

And that was what Carter talked to me about…. I cannot remember that he ever mentioned King Hubbert to me. Now he might have been aware of him. I think that Tony Lewis in the New York Times probably was extrapolating…. We were familiar with [Hubbert’s forecasts], but we weren’t dealing with them, you know, specifically.

It was becoming accepted in general that U.S. oil production was past its peak—but [of] conventional oil. And the peak of world oil production would be coming in the foreseeable future.

Let me go back to a more general point, though. Our concern was less, at that time, about running out of oil, than it had been driven… [by] the Arab oil embargo, and the implications of that for American security.

Q: Were people more concerned about political limits to oil production, rather than actual limits in how much could be produced, if everyone was trying as hard as they could?

Absolutely. Absolutely. As you may recall, Prince Abdullah—then Price Abdullah—was concerned about the corrupting effects on Saudi Arabia of oil production and the inflow of foreign money. And at that time, he was talking about establishing the three million barrel a day limit on production. And you couldn’t think about that without thinking about political limits as well as geophysical limits.

Of course [laughs], in subsequent years, Prince Abdullah become Crown Prince Abdullah and ultimately the King. And we are seeing him producing upwards of ten million barrels a day [laughs]. But the concern that the Saudis would limit production was certainly there. It was not reflected in the C.I.A. study that you mentioned.

[This was a reference to a pair of C.I.A. reports on oil that Carter had partially declassified at the same of his April 1977 “moral equivalent of war” speech: “The International Energy Situation: Outlook to 1985” and “The Impending Soviet Oil Crisis.” Schlesinger said on other occasions that he didn’t trust the C.I.A.’s analyses on oil supplies during that era.]

Q: It seems the CIA study was too pessimistic about Soviet oil.

Yeah, absolutely. It turns out it was wrong. I was, as you may remember, the former Director of Central Intelligence, and I told Carter, “Don’t let that thing become public knowledge!” But Carter wanted the CIA study to be public knowledge, to be publicly released, which it subsequently was. And the benefit of that, of course, was that it drew more attention to the overall problem. The defect was that it overstated the Soviet problems.

Q: Do you think that the Iranian revolution and the oil price spike, and recession after that, had a big influence on the timing of peak oil for the world?

No. It drew attention to the vulnerabilities of oil production in the Middle East, in these unstable countries—and the Middle East had become the tinderbox of international politics, somewhat akin to the Balkans before World War I. And the run-up in prices had a dramatic impact on the public and its view of the world—mostly antagonistic to the run-up in prices.

Q: People cut back somewhat on how much oil they used in the developed world, or at least the rate of growth of consumption, so that’s why I was wondering if it might have delayed when the world would reach the peak of conventional oil production.

I think the cut-backs started in 1973 with the Arab oil embargo, rather than in ‘79…. And, as you imply, of course, the reduction in the rate of growth of oil consumption, of oil usage, would stretch out the time for peak oil.

I usually try to avoid making specific dates for when we would run short of oil. You quote me from Time magazine…. [the magazine quoted Schlesinger saying: “Oil production should peak out around the world in the early 1990s.”] It may have been a casual statement.

If you look at the essay I wrote in The National Interest, somewhere in the early part of 2002, or 2003, you’ll notice there that I said something along the lines of sometime in the next half-century we’re going to have a lot of problems. But that was stretching it beyond the conventional oil production….

Sometime in the 1970s, when I was at the Energy Department, I said we’re going to reach a limit of about 75 million barrels a day, of conventional oil—and that turns out to be not too far off.

Q: Yeah, that was in that Time article as well, where they quoted you saying 75 to 80 million barrels a day.

Yeah, it’s not too far off—again, going back to the definition of conventional oil. And that of course includes the new conventional oil fields like 10,000 [foot] depths in the ocean, and so on….

Q: I couldn’t find any mentions of you talking about the issue of peak oil from the time you left as Secretary of Energy until about 2005. Did you not talk about it during that time?

I don’t think I talked about it very much, other than the intervention in The National Interest…. It was on my mind, but at some point you get tired of beating the drums.

I think what tipped me off on that particular article was that the Chinese had come around to the conclusion that we would peak out around 2013. Once again, they were not taking into account Canadian tar sands.

Q: What do you think about that Chinese forecast? Was it based on good evidence? And what are other people in Washington saying about it? I know Congressman Roscoe Bartlett visited China and was surprised to hear that they saw peak oil coming soon. So I’m curious whether many other people are talking about what the Chinese think.

I don’t think it was widely known. The Chinese were just at some international conference and they came up with this. And like many international conferences, the words were forgotten, if the speaker was not prominent enough, and the Chinese speakers weren’t prominent enough.

Q: I think it was in your article in The National Interest where you said that we can assume this reflects the official opinion in China. Is that because the speaker would have had to get it cleared to give this speech?

Yeah, no one in China at that time, in particular, was going abroad issuing personal judgements on the work and the policies of the government. So, it was clear—at least to me—that the Chinese government had approved the release of those forebodings.

Q: Do you think that their forecast seems well-grounded, insofar as it refers to conventional oil?

As I said earlier, I worry a good deal about making—I think I said this when I was in Ireland, at that conference in Cork [the 2007 annual conference of the Association for the Study of Peak Oil], you really ought not to hitch yourself to some kind of specific dates. Even the advisory to the Energy Department consisting of energy people [the National Petroleum Council], if you look at their results, they said that we were going to peak out—they don’t use those terms, but they said that we were going to reach a limit of production around the early ‘20s—2022, 2023, somewhere in there. And that’s from the oil industry.

I might say in passing that one day I was sitting next to CEO from one of the oil companies, and he remarked to me, “Well, I know peak oil is coming—I just don’t know when.” And I think that that captures it. I think that the peak oilists tend to weaken their case by making specific dates. And some of them have proven to be wrong. The end [sic] of production in 2008, or 2010, or 2012.

Q: But it seems that people want to know if it’s something that’s coming in the next decade, or fifty years or a hundred years away.

Well, I think that that’s right. I think if you stick to decades, you’re on safer ground. It’s when you hear, “IT WILL COME IN 2018!” or whatever number is now being quoted around, that is just too risky. It’s like predicting the stock market to peak.

Incidentally, going back to your question about the CIA’s “International Energy Situation,” you should understand that that was a reflection of American government policy, in this sense: That if you took the logic of the report, we were running into real trouble, sooner or later, because demand was continuing to grow, and supply was not—right? And if demand continued to grow, and supply didn’t, what would you have? You would have a rise in price.

But it was the policy goal of the United States Government [laughs] to avoid any further increases in price, and probably [there] was a political calculation that you really did not want to tell the public that prices were going to go up. So the report ignored what was painfully obvious in its underlying premises—to wit, a shortage relative to demand of oil, and rising prices. But you didn’t admit it, because you were working on the international scene to try to convince OPEC and others not to raise prices.

Sometimes government policy ignores what is obvious in the numbers [laughs].

Q: I guess that really gets to the heart of comments of yours, about how it’s difficult for politicians to tell people that there will be any hardship, or that they will have to make any sacrifices, as well as how we seem to swing between complacency and panic.


Q: So what do you think is the answer to that? Does it require a grassroots effort to get the politicians to change?

Well, if the public changed, the politicians would change. The problem is the public. The public does not want to hear about this—because this is an acknowledgement that prices are going to go up, and that they’re going to have more problems running their automobiles than they want…. The political process is very sensitive to telling the people what they want to hear, right? Jimmy Carter was kind of an exception to that, if I may say so—and few politicians want to emulate him.

But he kept trying to say things that were true. Well, you can do that if you’re Winston Churchill, you know. And Winston Churchill was very unpopular in Britain, right until the outbreak of the war, when what he had been saying came true….

It’s particularly tough in this country, because the Americans pride themselves on optimism, which means that you don’t really wish to acknowledge unpleasant prospective news.

Q: Do you have much hope that Americans might plan ahead for these problems you’ve been warning about the past several years?

No, nothing’s going to happen until reality hits them between the eyes like a two-by-four.

Just to go back to what 2008, I believe it was, when the Democrats took over the Congress, hmm? … Mrs. Pelosi gave her six points, [including] we are going to achieve energy independence. This is after the election—this isn’t the bunkum you get before an election, this was a pledge when Congress convened, at the beginning of 2009. You can look it up. Six points, I believe. That America would achieve energy independence. That the price of oil would be reduced. That the oil companies would lose all the benefits, because they could produce more oil, with lesser compensation, and so on.

There is a difficulty for the public to distinguish between reality and what they are promised in political rhetoric.

Q: I think that’s the job of journalists to help with that, but I don’t think they’ve been doing a very good job on the issue of peak oil.

Well, one has to remember that the American boy has been raised on his love of the automobile, and, you know, tinkering with a car was a preoccupation of young American males. And what this is saying is, “Hey, that was great fun while it lasted, but it’s not going to last forever, and you’ll have to learn to do something else than tinkering with automobiles.” And that’s bad news. That doesn’t bring in votes.

Q: What is your hope with giving speeches in which you try to warn people? Do you think that even if there’s not a big shift, at least it will help a little bit?

Maybe, but they tend to brush it off. I don’t know whether you saw the speech I gave to the National Academy of Sciences. It was some years ago. I brought this all up, and basically they kind of shrugged it off. You know, that’s the National Academy of Sciences. That’s not the generality of American voters. I also gave a talk to the U.S. Chamber of Commerce in which I raised all this, and did not get a very good response.

And I think the reason for that is complex. It’s not because they’re sucking up to the American public’s views on this. It’s because the industry really does not want to publicize the fact that oil production is not going to be available in the future the way it has been in the past. Even if we don’t have a peak, we have a plateau at some point. And a plateau, with the Chinese and Indians using more and more oil, and other developing nations using more oil, there will be less oil for the developed nations. So, the consequence is that you’re going to have to get by with less, even if you have a plateau.

Q: Do you think that people are aware of this—such as the National Academy of Sciences, or Chamber of Commerce—but they just don’t want to talk about it?

I don’t know the answer to that. They just sort of brush it off. That speech I gave to the National Academy of Sciences… I started out with a quote from one of the great scientists, who wrote a book The Next Million Years. Do you remember that?

Q: Oh, yeah, Charles Galton Darwin.

Yeah…. In that book, he has a chapter, “Things.” The things mean, are we going to have enough iron, are we going to have enough manganese, and things like that. The answer was, yeah, we’re going to be perfectly okay with regard to things, he said.

And then he goes on—and I quoted him at length—saying that the real problem is energy. We are going to run out of fossil fuels. And I would have thought at the time, that with a name like Darwin, that the National Academy of Sciences would have made more of it than they did. They made nothing of it—even though he pointed to the energy problem as the real problem for mankind.

So even in the most enlightened communities, you’ve got a tendency not to ring the tocsin and say, “Hey, public, wake up!”

Q: I know that John Holdren, the President’s science advisor, he used to talk about peak oil. But in recent years he doesn’t say anything about it. At a conference about this a couple of years ago, and he said, “There are good arguments to say that it’s coming soon, and there are good arguments to say it’s a long way off. But we need to get off of fossil fuels either way, so it doesn’t matter when it’s coming.”

Hmm, interesting.

Q: I didn’t think it was a particularly good argument.

I didn’t say it was a good argument. I said it was interesting that he said that.

Q: Yeah.

Well, one must remember one of the sagest of political comments, from Senator Russell Long, who basically represented the Louisiana oil interests. He once said: “The first duty of a politician is to get elected. And his second duty is to get reelected.”

And remember that, in the case of President, you’re dealing with four years or possibly eight years of term. Maybe it will come after the election of my successor, but it’s not going to be a problem for me….

Q: Over the years, have you become more pessimistic about the possibility of people taking a different approach to this? Did you have more hope back in the ‘70s?

Yes. Yeah, I was kind of a boy scout at the time. I thought rational discussion of politics—of political problems, I should say—was going to help in dealing with those problems. But having observed politics now for 40 years, I think I was naive [laughs].

Politicians will say things that they think will comfort the public. There are many people who believe, truly believe, that that’s the case. You can read papers in the press all the time, in the Wall Street Journal and elsewhere, denigrating remarks about peak oil and peak oilists. And it’s not because they are in this politicians, soothing the public. They’re soothing themselves, because they believe that free markets always work.

I gave a talk to the International Association of Economics—somewhere or other it was printed up—in which I said: Hey, economics is not everything. It is true that markets will clear. But the real question is, at what price will they clear, and what will be the political consequences?

And from this collection of economists at that time, I didn’t get a particularly favorable response [laughs]. Because I said, geology has got to be remembered. We are not dealing simply with prices going up and supply increases, because supply doesn’t increase when prices go up [when the world is near the peak of production].

Q: Yeah, I think many economists have been particularly poor in thinking about peak oil. I know you were trained as an economist, but it seems that you have a different view on this than a lot of economists.

Morrie Adelman up there at MIT, he represents the purity of economics, which is: markets will clear, the price will go up, and supply will increase. And there’s a bit of truth in that, in that supply will increase, but only marginally, and not as much as demand will go up….

I was an optimist in the ‘70s…. I’m a child of the World War II. And I had this nonsensical belief that if the American President called on people to react, they would. That was true in World War II—but we had the help of the Japanese attacking Pearl Harbor to get public attention….

Anyway, it turned out that the public was less responsive to the President [Carter] than I had anticipated.

Q: It seems the situation is much different when the enemy is external, rather than being your own society.

Right. And, when the enemy is clear and immediate. And some of these problems of our foreign policy are a lot harder to discern than when we had the good old Soviet Union around to galvanize the public. And the situation in the Middle East is pretty confusing, from the standpoint of the average citizen.

Q: It seems to me that in the past couple of years, the U.S. has gone beyond complacency and has developed a powerful denial about peak oil. Do you think that is true? I’m thinking of the widespread attitude that fracking has solved the country’s energy problems.

Yeah. It’s in part a rhetorical denial. It’s partly [that] the industry feels that way. You read in the papers all the time about how America is going to become an exporter of oil and gas. Well, it’s true [laughs]. We can become an exporter of gas—but we’re not going to become an exporter of oil. It’s just as simple as that.

[Here, Schlesinger was apparently talking about net exports of both oil and gas.]

And once again they’re stretching beyond Hubbert because they’re throwing in more production from the Canadian oil sands than the Canadian government is going to allow. It might get up to three, four million barrels a day up there in Alberta. And they’ve been helped by all the production of gas, which makes the production of tar sands somewhat easier and somewhat cheaper….

[Hubbert was well aware of the existence of Canada’s tar sands, citing them as early as 1948 as an energy source that would likely be tapped in decades to come. But the well-known parts of Hubbert’s papers focused on conventional oil.]

I think, going back to Hubbert, that a lot of the captious remarks or criticisms of Hubbert with regard to his supposedly being wrong about peak oil—which you hear not infrequently—are based upon a misinterpretation, sometimes deliberate, of what he was saying. Which was, I am dealing with conventional oil fields, and how they are going to have a natural cycle, reach a peak, and diminish. He was not talking about oil sands, he was not talking about Venezuela and heavy oil. He was not talking about drilling down 10,000 feet below the ocean surface. He was talking about what he was talking about. And for people to criticize him for not anticipating this or that, is, I think, intellectually offensive.

Oh, I should add one other thing. I was going to give Hubbert a medal, when I was back at the Energy Department, for his contributions…. It would have been a useful thing to publicize, what the long, long problem was for the country.

Q: What kind of medal would it have been?

I forget. We had a number of medals that we gave away to people who had served the national interest in the energy area. And I forget who we gave it to. But [Hubbert] would have been more deserving than most that we did give it to.

Q: Did you run this by idea by others? Were others also in support?

I did not. I was kind of an autocrat [laughs]…. I think that by the time that I thought, “We’ve got to give it to him,” I was about the depart from the Energy Department, so I was no longer in the position to practice my autocracy.

 — Medium

25 Comments on "James Schlesinger on peak oil"

  1. Aaron on Sat, 29th Mar 2014 11:56 am 

    Excellent interview. Especially pertinent was this line;

    “No, nothing’s going to happen until reality hits them between the eyes like a two-by-four.”

  2. george on Sat, 29th Mar 2014 12:50 pm 

    I wonder how long it took the
    Fbi to swarm into his house ?

  3. paulo1 on Sat, 29th Mar 2014 1:37 pm 

    “Well, if the public changed, the politicians would change. The problem is the public. The public does not want to hear about this”

    and: “It’s particularly tough in this country, because the Americans pride themselves on optimism, which means that you don’t really wish to acknowledge unpleasant prospective news.”

    The article was worth reading for these two statements by themselves. I was also really interested to see Pelosis 6 points after 2008. This was an awesome read and very informative. Thanks.


  4. ghung on Sat, 29th Mar 2014 1:38 pm 

    “…. but at some point you get tired of beating the drums.”

    Yeah I can relate to that.

    “Sometimes government policy ignores what is obvious in the numbers [laughs].”

    Ya think? This is why the 2×4 moment will be necessary to get the public’s attention. The cognitive dissonance is going to be interesting to watch; already is, actually, as the peak oil reality is creeping in through the cracks, like the angel of death.

  5. rockman on Sat, 29th Mar 2014 1:47 pm 

    Yes…smart guy. But he still seems to have a few blind spots. Or, in his defense, maybe he didn’t want to go into greater detail: “We can become an exporter of gas—but we’re not going to become an exporter of oil. It’s just as simple as that.”

    We are an exporter of NG today…but not a net exporter. We only produce 93% of the NG we consume. If we are going to become a net NG exporter we’ll have to drill a great many more shale wells and continuously replace them. And that will take a much higher and sustained price IMHO. I have serious doubts that we’ll ever reach that stage especially if we do convert more of our infrastructure to being fueled by NG.

    As far as exporting oil the US currently exports a lot of oil in the form of refined products. A significant portion of our oil imports are re-exported as products. Part of this dynamic is due to differences in consumption requirements: we ship a lot a lot of diesel to the EU and they ship a lot of their surplus gasoline to the US. But to a significant degree crude refining has been outsourced to the US by much of the world. And that’s not a bad thing with respect to employment and taxes. It also allows the US consumer first crack at buying those products less the expense of transport.

    But the bottom line with regards to importing/exporting oil from the US: US consumers don’t consume oil…they consume refined products. That’s the critical number IMHO…not the bbls of oil count.

  6. Nony on Sat, 29th Mar 2014 2:25 pm 

    We can make up that 7% lickety split on the natural gas. Look how few rigs are drilling for dry gas, with how much production is there. (There’s also factors of geography for some of the import/export from and to Canada and with Mexico. We are a continent.)

    And there’s no requirement to make it up, before we export. We could import 7% and export 2% or 5% or 20% and still keep importing from Canada. Perhaps that makes most sense given the geography of where Canada gas comes from and then of the proximity of the Haynesville to the Gulf ports.

  7. Davy, Hermann, MO on Sat, 29th Mar 2014 2:26 pm 

    Rock said – But to a significant degree crude refining has been outsourced to the US by much of the world. And that’s not a bad thing with respect to employment and taxes. It also allows the US consumer first crack at buying those products less the expense of transport.
    But the bottom line with regards to importing/exporting oil from the US: US consumers don’t consume oil…they consume refined products. That’s the critical number IMHO…not the bbls of oil count.

    Well put Rock, let us be happy for the refinery business. The sites are already ruined for anything else but refining being brown fields. The air and water quality are always an issue but hey that is the price of industry, jobs, and economic development. Rock is completely nail on with the product differences. Europe is full of efficient diesel cars we have lots of big 4×4 trucks that burn gas. Refining infrastructure is a huge macro investment for the US that needs to be utilized. We have to turn away with this idea of building out new and looking at utilizing what we have through its useful life. If not we have wasted much imbedded energy and will waste much on any new build out. We must recognize the reality that the US and the rest of the global world is going broke. Our politicians and general public are completely incompetent when it comes to energy. We need to leave these issues to the experts and markets that is with other experts keeping the greed and market distortion to a minimum by critical investigation.

  8. Nony on Sat, 29th Mar 2014 2:27 pm 

    Nice interview with Schlesinger, but would have been nice to dig into some of the fiascos of the 70s (price controls, gas lines, etc. and what we learned from them and of the 1985-2005 low price regime). Also discussion of the cartel function dictating price or the running out of oil.

  9. Northwest Resident on Sat, 29th Mar 2014 2:58 pm 

    Again it is worth pointing out that the issue of peak oil has been known by the highest levels of government at least since Carter’s presidency. There should be no doubt at all that the U.S. Military, the intelligence services (CIA, NSA, etc..) and top political leaders around the world are all well aware that the consequences of peak oil are bearing down on us, and that they have been highly aware of it at least since 1977.

    But where is “the plan” to deal with the consequences of peak oil?

    The answer is, “the plan” is to allow BAU to just drive itself into the abyss and self-destruct, taking “the public” and the hapless masses down with it BECAUSE there is no way, no chance whatsoever that “the public” can be informed about this sharp bend in the road of human civilization and rationally deal with it.

    Top political, military and business/financial elites the world over have nothing but scorn for “the public”, and that scorn is well deserved. A single human might be very smart and aware and adaptable. But “the public” is a stupid herd of cattle standing in the middle of a pasture, chewing their cuds, wanting only to be left alone, totally unaware of the wolf pack that is prowling around the perimeter waiting to attack.

    The elites do have a plan, it seems to me. And that plan is to gather and secure assets, and make preparations to ride out the collapse and re-emerge once the smoke and stench of billions of dead has cleared. Given reality and the inability of “the public” to act rationally, what other plan could there be?

  10. Davy, Hermann, MO on Sat, 29th Mar 2014 3:07 pm 

    N/R, these “IN the Know folks” know better than to panic those who cannot understand the real world dynamics. This has always been the case. Things stop in panic and control is lost. With 7BIL and weapons in plenty and vital services needed by “Joe 6Packs” what else can they do. This is end game talk. The type of talk that once people connect the dots depression, pessimism, and anger sets in. Best to just hope for the best in their mind. Plus they are self-interested and generally old. If you are old and have 20 years do you want to F**k with that by “Burning down the House”?

  11. Nony on Sat, 29th Mar 2014 3:09 pm 

    Rickover was a smart guy and created an incredible operational and engineering program (USN nuclear power), even having impact on the civilian sector. But nukes have not come down in price yet and are not a good transportation fuel. They’re pretty much ideal for a submarine. But other than that…oil seems to be beating nuclear a lot more than Hubbard/Rickover thought.

  12. Northwest Resident on Sat, 29th Mar 2014 3:27 pm 

    Davy — I totally agree. I’m sure that many of the elites have idealistic notions of somehow guiding “the public” into the safety of a new way of life, but the reality is, “the public” is incapable of making the hard adjustments needed. One wrong move, a little too much information, and “the public” quickly turns into “the mob”.

    Getting back to the “herd of cattle” analogy, that herd is incapable of rational behavior and highly prone to mindless stampedes. They are highly animated by fear and anger, but not much else. They need to be controlled and manipulated to prevent panic-driven stampedes of irrational behavior. And guess what, they ARE being controlled and manipulated.

    Those of us who are smart know to stand away from the main body of that ignorant herd, to keep a sharp eye out for the predators that are circling, and to secretly build up stores of goods and secure places to ride out the coming storm to the best of our abilities. Because once that herd gets hit in the face with that proverbial two-by-four, chaos and mayhem will surely ensue. That moment is coming and will be here soon enough.

  13. Davy, Hermann, MO on Sat, 29th Mar 2014 3:32 pm 

    Yea, NR, wondering how idealistic guiding there is in their hearts or just self preservation. Many of them may be on the wrong end of the noose when that panicked mob starts looking for justice and scapegoats!

  14. Northwest Resident on Sat, 29th Mar 2014 3:57 pm 

    Davy, no doubt, some may (or may not) in their wildest daydreams contemplate leading the huddled masses to safety, but reality intrudes, so they are no doubt preparing to save themselves and to position themselves for whatever comes after collapse — same as you and me.

  15. Aaron on Sat, 29th Mar 2014 4:42 pm 

    NR – In most cases, being part of the herd benefits an individuals survival – think schooling fish or herds of wildebeast. However, I believe you are correct, and when we finally have our two-by-four moment the darwinian thinning will act on the main body of the herd, leaving those skeptical individuals and their associated gene combinations to repopulate.

  16. rockman on Sat, 29th Mar 2014 5:36 pm 

    Nony – “We can make up that 7% lickety split on the natural gas.” I think you underestimate the magnitude of the situation. Back of the napkin estimate: We would have drill at least 15,000 MORE NG wells than we are now to just make that extra 7% just to reach zero imports. And that’s only if we drill the better shale plays that come in at 5,000 to 6,000 mcf/day. And that’s the initial rate. Given the high decline an equally large number of wells would have to be drilled the following year to just stay flat. And that model still leaves no net excess NG to export. And to add those 15,000 new wells it would take at least 70% more drill rigs then we have running today. And with the utility rate so high today that would require many tens of $billions to build the fleet out. And that won’t happen (and thus those wells won’ be drilled) unless much higher NG prices are seen as well as the confidence they stay high for some years.

    And:”…still keep importing from Canada.” Hmm…am I misreading you? We export almost twice as much NG to Canada as México. IOW we exported around 73,000,000,000 cubic feet of NG to Canada last December according to the EIA.

    But hey…I’m all or exporting as much NG from the US as possible. Anything that let’s me charge for my production is great. But I think I’ll skip he hypotheticals until the US is producing as much NG as we consume. As I mentioned before my company participated in $400 million drilling projects during our first 3 years. In the last 18 months: exactly $zero for NG wells.

  17. paulo1 on Sat, 29th Mar 2014 6:01 pm 

    Plus, a lot of Canadian NG remains located/proven waiting until prices rise and/or the much touted LNG plants are built on the west coast. No sense in supplying the market at a loss.


  18. Northwest Resident on Sat, 29th Mar 2014 6:40 pm 

    Well, there goes Nony’s “easy for America to become a natural gas exporter” assertion, right into the dumpster where it belongs. Or, more likely, Nony will dig for more information to convince himself that his belief in America becoming an NG exporter is still valid and just waiting to happen, if only the industry experts knew what he knows.

  19. Stilgar Wilcox on Sat, 29th Mar 2014 7:05 pm 

    “The political process is very sensitive to telling the people what they want to hear, right? Jimmy Carter was kind of an exception to that, if I may say so—and few politicians want to emulate him.

    But he kept trying to say things that were true. Well, you can do that if you’re Winston Churchill, you know. And Winston Churchill was very unpopular in Britain, right until the outbreak of the war, when what he had been saying came true….

    It’s particularly tough in this country, because the Americans pride themselves on optimism, which means that you don’t really wish to acknowledge unpleasant prospective news.”

    That last paragraph regarding optimism in America. Yeah, that’s great until the news just happens to be negative, then what?

    Best summed up by this quote; “No, nothing’s going to happen until reality hits them (the public) between the eyes like a two-by-four.”

    Then they will get angry and find someone to blame.

  20. energyskeptic on Sat, 29th Mar 2014 9:11 pm 

    Nov 1, 2010 Dr. James Schlesinger: “The Peak Oil Debate is Over” at ASPO-USA Conference

    first Secretary of Energy, from 1977 – 1979, Chairman of the US Atomic Energy Commission, US Secretary of Defense, and Director of Central Intelligence.

    May I start with a bromide. A resource which is finite is not inexhaustible. If you think that over, it should not be a revelation. That was a bromide; some people think a keynote should never rise above a bromide.

    Some five years ago in Italy, I concluded a talk by saying that like the inhabitants of Pompeii, who ignored the neighboring volcano Vesuvius until it detonated, the world ignores peak oil at its peril.

    Two years ago, in addressing ASPO, in Cork, Ireland, I argued that the “Peakists” had won the intellectual argument, except for some minor details about precise timing, but that, by and large, everyone recognized that there were limits on our capacity to increase the production of crude oil, as we have, steadily, since World War II. That Peakists were no longer a beleaguered minority, that they had won, and that consequently, they should be gracious in victory.

    There is an old Spiritual, that is relevant here, the walls of those who doubted the peak, seemed to be impregnable. Nonetheless, you marched around the walls seven times, and then blew the trumpets, and the walls of Jericho came tumbling down.

    But acceptance by knowledgeable people is not enough. The political order should respond. Nonetheless, our willingness, let alone our ability to do anything serious about the impending inability to increase oil output is still a long way off. The political order responds to what the public believes today, not to what it may come to believe tomorrow. It is also resistant to any action that inflicts pain, or sacrifice, or those who vote. The payoff in politics comes from reassurance, perhaps precluded by a rhetorical challenge. Still, the challenge is clear, in both logic, and in the evidence.

    Let me start briefly with the logic:

    First, if something cannot be sustained, it will eventually will not be sustained. Ultimately, it will shrink.

    Secondly, you cannot produce oil unless you first discover it, a contribution by Colin Campbell.

    Third, a resource that is finite cannot continually have its production increased.

    What is the evidence? First, we remain heavily dependent on supergiant and giant oil fields discovered in the 50s and 60s of the last century. (I might add, of the last millennium.) Only rarely in recent decades have discoveries equaled production. Mostly, it has been one barrel discovered, for every three barrels produced.

    Second, old supergiants like Bergan in Kuwait and in Mexico have gone into decline earlier than had been anticipated, and going into decline have been Alaska, and the North Sea, Western Siberia, and the like.

    Third, while it is not yet twilight in the desert, as you may have read, still, we are well into the afternoon, even in Saudi Arabia. Even the Ghawar oil field is increasingly hard to sustain.

    Fourth, in 2004, we experienced our first demand-driven price spike, as opposed to the previous price spikes, driven by supply interruptions. We still operate at about the level of production capacity of 2004.

    Next, given projected decline curves, running from 4% to 6%, and the projected increase in demand during the next quarter century, we shall require the new capacity equivalents of five Saudi Arabias.

    Even the International Energy Agency, which previously had been sanguine, now suggests that we can no longer increase production of conventional oil in the course of this decade. Note that it is conventional oil. That is all that Hubbert talked about.

    Somewhat disingenuously, the debate has been turned on him, by talking about fuel liquids in general, throwing in tar sands, heavy oil, coal liquids, oil shale, and so on. But clearly, large conventional oil production is increasingly no longer part of the future, unless there is a technological breakthrough, which Mr. Gilbert talked about just a few minutes ago, raising the ultimate recovery rate from existing fields, which at this moment we cannot expect.

    Of course, there are uncertainties, which make timing predictions with regard to the peak risky: Iraq, which has been held back for a variety of reasons, may come along as one of those five new needed Saudi Arabias. Offshore Brazil and offshore oil elsewhere are promising. Shale gas, which is apparently coming in abundance, but is not of course oil, may somewhat alleviate the pressures on liquid fuels.

    But in general, we must expect to get along without what has been our critical energy source, in expanding the world’s economy for more than half a century.

    Can the political order face up to the challenge? There is no reason for optimism. We are likely to see pseudo solutions, misleading alternatives, and sheer sloganeering: energy independence, getting off foreign oil, and the like. All of that sheer sloganeering we have seen to this point.

    The political order, which abhors political risk, tends to rely on the Biblical prescription, “Sufficient unto the day, is the evil thereof.”

  21. Peter Eckhoff on Sun, 30th Mar 2014 12:23 am 

    The success of a rain dance is all in the timing. I see a lot of cloud on the horizon. Maybe its time to dance in earnest.

    I think deep down we know what we need to do: conserve, install solar energy capture units, create electricity and heat storage units, and use electric motors instead of internal combustion engines. Think globally, act locally.

    We are told that the stone age did not die out because of a lack of stone and the petrol age will not die out because of a lack of oil, gas, and coal. If we are lucky enough and by working earnestly to solve our energy problems, we will transition to a solar based energy future without much hardship.

    I think the governments of this world know about “Peak Oil” as exemplified by the movie “Three Days of the Condor (1975)”. Back in the early 2000’s, the TPTB as exemplified by Cliff Robertson killed the electric car and us Robert Redfords were chased from the field. Nowadays, GM, Tesla, Nissan, BYD (China), BMW, etc. are all working on building electric vehicles and are needing better batteries. Yet back in the mid 1990’s, the tZero was able to go (barely) over 300 miles on a charge. The tZero was the prototype for the Tesla drive train. What has changed?

    I think the TPTB see the writing on the wall and if they are to sell cars in the future, they need to run on something other than gasoline and diesel.

    Those in the know are taking steps. The rest will follow due to the Titanic effect. When your feet are cold and wet, you’ll scramble to the life boats. Hopefully, we will have enough life boats. I know we have a number of good oarsmen to steer us clear.

    I think the rest will take their cue when Fox News starts preaching about the good effects of solar energy; how much fun it is to drive one of the versions that follow Tesla’s Model S; and how we can be conservative by actually conserving rather than consuming. It’ll be the “patriotic” thing to do.

    Note to self:
    Plant some popcorn.
    Trade for locally churned butter.
    Invite friends over.
    Rerun “Three Days of the Condor” or
    “Who Killed the Electric Car?”

    Hopefully, there won’t be any serious interruptions.

  22. Nony on Sun, 30th Mar 2014 3:49 am 

    We won’t export until the terminals are built and the permits approved. Obviously we are a net importer now (with Canada having no other outlet for their gas which is much more than they can consume).

    Rock, look at production versus rig count. So, yes, it will be easy to add more production if there is a demand/market/price signal. The gas is there…we’re just not drilling for it now.

  23. Nony on Sun, 30th Mar 2014 3:52 am 

    NR: I linked you to several analyst reports and discussions by industry leaders who think we have the capability for export. Heck, why would someone invest billions of $$$ in the compressors and terminals if there was nothing to sell? You need to get outside your comfort zone. The vast majority of analysts (including EIA) think the capacity is there to do LNG exports and the market backs it up. That some bunch of TOD refugees disagrees just shows their biases. Heck most haven’t faced up to all the Simmons/ELM/Campbell/Etc./Etc. failed predictions of 10 years ago.

  24. Nony on Sun, 30th Mar 2014 4:12 am 

    MArcellus is maintaining (slightly growing at expense of other fields) production with 100 rigs, down from 150. And it’s not from having low decline wells (the opposite). It’s from MONSTER IPs. And from efficient drilling.

  25. Northwest Resident on Sun, 30th Mar 2014 3:50 pm 

    Nony — “…industry leaders who think we have the capability for export.”

    … Is a million miles away from “easy” to become a net NG exporter. But you probably don’t want to think about that.

    Have you considered that those “industry leaders” are merely making public statements to boost confidence in oil stocks and investment, targeting people such as yourself who are incapable of seeing the big picture?

    A quote from the article you posted above:

    “For natural gas, EIA has no doubt at all that production can continue to grow all the way out to 2040,” Sieminski said.

    That is a local driller repeating something that the EIA may or may not have said. Big deal. And you believe him?

    But I can see how you reading articles like this little fluff piece could tend to make you think that all is well in the world of oil. That is what the article is intended to convey, to people like you, and it is working. The reality is far different, but I realize you’ll never get it. We’ve gone around and around several times already, and you always circle back to your comfort zone and hold on tight to what you want to believe, backed up by “feel good” articles like the philly one. As long as you’re buying into articles like that one, yeah, I can see how you would believe America becoming a net exporter of NG is “easy”. Keep on believing.

    Good luck, Nony. You’re a nice guy — just deluded.

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