Here you go: Develop the N. American (Canada, U.S., Mexico) oil reserves to MAXIMUM potential. Do that and N. America won't need anyone else's oil. Expand oil production as much as possible in South America. They can use the economic help, which in turn helps us by making themselves more stable and further weakens the arab "oil weapon". DO the same thing in Russia and "the Stans" for the same reasons. The better off they are, the less headaches we have. Finally, stick it to the ragheads.

I don't like the whole "drain America first" attitude developing across America. I would actually rather import as much as possible while the trade routes can be kept stable. The entire crude reserves of the rest of the world won't last more than another pair of generations, if that. I'm really worried that in my lifetime, there will be a serious oil crunch. This is the real reason I don't support ANWR drilling. It would be like putting a bandaid over an axe wound. I'm really annoyed that the previous generation of Congress has paid so little attention to alternative energy sources, and I'm disappointed that the attitude of passing the buck continues to be an issue. This is not a problem that we can put off until it strikes us to deal with. This is the Democrat in me coming out again; I know, often on this board I talk like one of the most hawkish Republicans. The Republicans are all about eliminating our dependence on "foreign oil." I'd like to see us reduce our dependence on oil, period. Helping the South Americans develop is definitely a priority, and I think more attention has been paid to this by Washington than has been reported in the media. South America simply isn't that salient a region in the mind of America. I'm actually surprised at the low level of coverage that the Colombia-FARC conflict and the Venezuelan revolution have received in America, considering that that is happening right in our own backyard. Helping the Russians would be one of the best PR moves we could make in the short run, and possibly one of the most fruitful international political decisions we could make in the long run. I think that Putin actually saw this as well, and threw a lot of cards on the table after 9/11 to try to make it a reality. Sadly, I would say that we torpedoed the effort, not him, his cabinet, or even the Duma. Still, if Russia forged strong trade ties with America, they would have less need to prop up their economy by selling arms and arms technology to the Middle East. As to Saudi Arabia ... well, I think we're in agreement that the less relevant we can make them, the better. The oil is the only thing standing between that terrorist fundraiser telethon they just ran and a place on the U.S. list of states that sponsor terrorism. --Phoenix Rising

"Why are we not going whole hog to build the Russian capabilities for oil production??" I'd make a small wager that an expanding Russian oil production, along with an expansion of Central Asian oil production (i.e. the parts of the former USSR which end in "stan") is mentioned in at least one National Security Council paper as a central element in reducing dependence on oil exports from countries described in that paper as "unstable" and "unreliable". Whether or not we'll see such expanded production in the near term is another question. There are certainly powerful groups in Russia who'd like that, especially the ones who own the oil companies. I *think* the Russian politicians do, to, although I'd be careful about assumptions concerning parts of that class, some of whom are off the deep end and some of whom would prefer to see America hurt even if it actually hurts Russia, too. But, I think Putin is behind the idea. It helps in many ways which matter to him, including getting big piles of foreign exchange and solving the government tax flow crisis. At least, these days, it's much easier for Russia to get modern technology. Some of the trouble with the legal system seem to be improving, too.

"Develop the N. American (Canada, U.S., Mexico) oil reserves to MAXIMUM potential" This turns out to be a losing proposition in economic terms. We're not a low cost producer and most of the undeveloped potential is expensive to exploit. Technologically feasible, but expensive. Would make sense, in a real wartime economy, but NOT in a peacetime posture. To do so would put our consumers in a serious bind. Buy cheaper foreign petroleum or more expensive domestic production. Now, people don't choose to pay much more where they have a choice. So, the local production won't sell. At that point, you have the choice of introducing government controls on the whole petroleum industry, making users buy the local production by legal sanction or letting the domestic industry go bust. (In fact, the local production which IS more expensive won't be developed in the first place WITHOUT government guarantees of a market for just this reason. How many people do you think are willing to invest in an industry which produces a product at ABOVE market costs?) This, in turn, reverbrates through the whole economy, raising the costs of not only residential consumers, but industrial customers. Prices rise, generally. Our export production is screwed up as products whose cost of production includes substantial line items for petroleum products have to be made more expensive. And, some of our markets (i.e. the EU) start enforcing sanctions if we try to subsidize that production. IOW, apart from the small amount of domestic potential withheld for OTHER than economic reasons, (principally ANWAR and some offshore sites in the Gulf), there's no way to go after the real reserves we DO have in any economically sensible way. That's WHY they're not exploited, right now. Because it's cheaper to develop petroleum overseas where big deposits are easier to get to.

Phoenix, "I'm really worried that in my lifetime, there will be a serious oil crunch." I fear that it is going to happen sooner, rather than later. Once the peak in conventional (easily pumped liquids) oil production is reached there will be a permanent change in the economic underpinnings of capitalism. In spite of demand, conventinal oil production will only continue to fall, year by year because of geological constraints. It will then be extremely difficult to generate the kind of economic growth we have seen over the past 100+ years since they were built upon an ever expanding cheap source of energy, namely oil - first from the US itself, then from the Middle East. The peak in conventional oil production represents a kind of epochal "watershed" after which everything about modern life and economics will change. With the peak will come the realization that the world doesn't really "run" on money (much to the chagrin of economists), but rather that all activity in the world depends soley on available energy - a truth that scientists and engineers know, but which everyone else is ignorant of, or denies. It won't be the end of the world, IMHO, but will be a "crisis" the likes of which we have never seen. Certainly the SUV "era" will come to an end! :o) A good site which discusses this is AD

bsl, I agree with everything you say. See my comments to Phoenix in a previous message about the coming peak in conventional oil production. "Would make sense, in a real wartime economy, but NOT in a peacetime posture. To do so would put our consumers in a serious bind. Buy cheaper foreign petroleum or more expensive domestic production. Now, people don't choose to pay much more where they have a choice. So, the local production won't sell." Once the peak in conventional oil production occurs there will no longer be the cheap foreign oil alternative. We will be forced by necessity to develop our expensive fossil fuel resources (coal, oil sands/shale etc.) which will have a profound effect on our consumer-oriented economy, and on our ability to project military power abroad. AD

echeneis, Perhaps. However, this isn't the first time people have predicted a serious, long term energy bind to be imminent and it hasn't happened, yet. First, let's be clear on the question of reserves of petroleum. There are HUGE undeveloped reserves already discovered. They are not currently produced because they are uneconomic at current market prices. If there IS a longterm shortfall from the current sources, and prices begin to rise on more than a transient basis, these known reserves will come on-line. In North America, for instance, there are truly huge reserves of tar sands and tar shale in both America and Canada, both of which are developable if prices rise enough. Second, the matter of alternative energy sources has, and always has had, two elements. The first is pure technology, meaning that you need the basic ability to derive energy from other sources, at all, regardless of cost. The second element is **economic**, as opposed to technological, feasibility. This means that even if you *can* derive energy from alternate sources, what price level is necessary to make doing so a profitable proposition. In fact, we have had solar electric cells in general use for many years, now. The problem is that they are far more expensive per kilowatt hour than petroleum (or coal or natural gas) derived power. But, we DO use them where they make more economic sense than alternatives. For instance, emergency telephones on public highways have been powered by solar cells for years. So have some lighting far from the regular power grid. Some camping uses. And, for enthusiasts who don't care how expensive they are. For them to be used as a **general** power use, however, the cost per kilowatt hour would have to be comparable to the alternatives. If you are correct about the future of production, then, even without lower cost production, solar electric cells WILL come into use, for purely market reasons. And, of course, there is a feedback mechanism whereby a severe, and seemingly long term, increase in prices, itself, causes much larger capital investment in developing alterative energy sources, again, for purely economic reasons. As we speak, several of the largest auto companies in the world are investing literally hundreds of millions of dollars, each, to develop low cost fuel cells, a highly efficient, and desirable technology which will be adopted by MANY sectors of the economy, quickly, as they become available. (The computer industry is eager for them, to power laptops, PDA, etc..) IOW, the reports of the demise of the free economy are much exaggerated. There is a strong whiff of Paul Ehrlich in the air. Fair scientist who has/had no grasp of economics, at all. It's a mistake to take for granted that alternative sources will REMAIN more expensive, btw.. The history of energy production implies the opposite and concrete examples of alternative technology over the last century (or, the last generation) are to the contrary.

In the civilian sector, I agree, market forces will be enough in due course (though I think it is shortsighted to wait for it, because it will inevitably cause a market crunch, which I think will be longer than people think). More and more business can be done online as well, hopefully meaning somewhat less fuel consumption is necessary as more and more people can work from home. Many jobs require people to actually come into the office, but more and more jobs are gaining the ability to leave the office every year. I do wonder about the military, however. Nuclear turbines will be improved, and I can eventually see them powering craft all the way down to size of corvettes. However, it's going to be a long time before we see a fighter or tank that runs on anything but fossil fuel. I don't lose any sleep over this, since the military will tend to get funding for new tools as the necessity arises, but I admit I have no idea how the fundamental tools of conventional warfare will be replaced. Maybe they'll actually go electric, if capacitors reach levels unheard-of today. I'm guessing it's going to require an entirely new generation of conventional warfare. Maybe even weapons that are currently the realm of science fiction. Or maybe we'll go back to zeppelins. That would be cool. :-) --Phoenix Rising

Hi bsl, some lengthy comments...I'll post them in 2 or 3 separate messages... >Perhaps. However, this isn't the first time >people have predicted a serious, long term energy >bind to be imminent and it hasn't happened, yet. You are right – previous predictions have turned out to be erroneous. But, it is also erroneous to use the past mistakes of others to argue against a current hypothesis. Many people incorrectly predicted the timing of a NASDAQ implosion but that didn’t stop if from occurring. Also, you should note that I am not predicting “when” a peak in conventional oil production will occur. Rather I am discussing what will happen as a result of its occurring. There is much debate about when the peak will happen, but there is widespread agreement that it will happen – conventional oil is after all a finite resource. >First, let's be clear on the question of >reserves of petroleum. There are HUGE undeveloped >reserves already discovered. They are not >currently produced because they are uneconomic >at current market prices. If there IS a longterm >shortfall from the current sources, and prices >begin to rise on more than a transient basis, >these known reserves will come on-line. In >North America, for instance, there are truly >huge reserves of tar sands and tar shale in >both America and Canada, both of which are >developable if prices rise enough. You are correct, there are very large reserves of “unconventional” fossil fuels which have yet to be tapped, and they will come online as the cost of conventional oil increases. However I think you underestimate the difficulty of a transition from an economy based on an “easy” source of energy to one based on a “difficult” one. The unconventional resources can only be exploited on an on-going basis if the price of conventional oil remains high, at say perhaps $ 50 per barrel. This new significantly higher price by itself will have a profound effect on the economy. Any subsequent expansion and development of the unconventional resources will have to done at that the new higher price for oil making it more difficult to scale up production than it was prior to the price “shock”. Also, one should recognize that the easiest (most economic) stocks of resources will be exploited first. In the case of Alberta tar sands for example, the sands near the surface can be accessed by strip mining at a lower cost than deeper sands which have to be processed in-situ, and will therefore be exploited first. Once we begin to move from an abundant, high quality resource like oil we will be moving into an era where exploitation of energy will be progressively more expensive over time. Finally, large scale increases in the infrastructure required to exploit the non-conventional resources will have to be subsidized by governments, and this will be harder to do in a period of acute economic stress caused by fundamentally higher energy prices. There will be many energy “lobbies” competing simultaneously for federal subsidy funds, i.e. the solar group, the ethanol group, the nuclear group, the wind group, and the fuel cell group will all be competing for funds against the non-conventional fossil fuel group which will dilute the amount available for large scale production facilities. AD - more to come

>Second, the matter of alternative energy >sources has, and always has had, two elements. >The first is pure technology, meaning that you >need the basic ability to derive energy from >other sources, at all, regardless of cost. The >second element is **economic**, as opposed >to technological, feasibility. This means that >even if you *can* derive energy from alternate >sources, what price level is necessary to make >doing so a profitable proposition. You are correct, but are missing a fundamental aspect in the equation, namely that getting or “extracting” energy depends fundamentally on spending or “using” energy. For example, in the case of conventional oil, one must spend energy surveying, drilling, pumping, transporting and refining the oil before it can be used. In the case of conventional oil, a very high quality resource, it takes relatively little oil to “produce” oil. At the other end of the spectrum, it takes quite a bit of food energy in humans to be able to produce food energy. Imagine the difficulties a person would have growing crops using only his own labor with no other inputs of energy other than food. Non-conventional energy resources by their very nature will require a greater “investment” of themselves to be able to produce useful energy for the economy. In other words, a much greater total “harvest” of energy will be needed to account for the greater production “costs”. For example, if it requires a barrel of oil to produce two barrels from tar sands, the extraction and processing facilities will only be 67% efficient regardless of the price of oil. At such a low level of efficiency, it will be difficult for a non-conventional source to substitute for conventional oil at current consumption levels. It will be exceedingly difficult to be able to then exploit the unconventional resources at a rate that will allow an ongoing growth in consumption, which is what our growth oriented economy has needed over the past 100 years. For example, if conventional oil is depleting at a rate of 3% per year and the economy needs to expand at a modest 2% per year (with a corresponding increase in energy consumed), then non-conventional resources must supply 5% annual increases of oil-equivalent energy just to maintain the economy. When the process efficiency is factored in, it will take annual increases of 7.5% in non-conventional production to maintain the economy. Finally all of this has to happen in an economy that has been “hammered” by a large jump in oil prices. [note that the numbers in the preceding are illustrative only and may not reflect the actual numbers of production efficiency and depletion rates]. Your argument is based on an economic tenant that says in effect, money can create energy resources – i.e. if the price is high enough the profit motive will cause new resources to be developed. So far this has been the case because we have been able to make transitions from lower quality energy resources to higher quality ones, say from coal to oil, or to different sources of the same resource, say North Sea oil instead of Middle East oil. However a different dynamic will occur when we are forced to move monolithically from high quality resources to lower quality ones. When that occurs, the real nature of the world will have to be recognized which is that energy is the fundamental driver of the world, and IT allows for the existence of money (not the other way around). An indicator that economics has things backwards is the fact that it makes no distinction in the energetic “value” of things. For example, a barrel of oil at $ 20 is as valuable in the economy as a $ 20 Mickey Mouse T-Shirt or a $ 20 Brittney Spears CD. This is only the case because oil is currently abundant and easy (energetically) to produce. In a world where energy is not as abundant, much greater relative value will be “assigned” to those things which are related to necessities – food, shelter, clothing (non-designer) than to the frivolities of today’s consumer society. In other words, energy abundance allows for the satisfaction of both needs and wants, whereas in a world of energy scarcity, the satisfaction of needs will be the primary driver of the economy. This of course will have profound effects on western economies with their large service, entertainment and leisure components. An environment of energy scarcity will also likely cause much reflection by society about the nature and purpose of life. The peak in conventional oil production will be a sort of “slap” in the face forcing us to realize that we are burning up precious and irreplaceable fossil fuels at an alarming rate, much to the detriment of all subsequent generations of people. This will probably (hopefully) motivate us to make radical adjustments in our consumption habits which will lessen the impact of energy scarcity, but will of course have profound effects on those parts of the economy that