Radical Noesis - Thinking outside the box

From January to June of 2004, the U.S. imported 1,610 bpd from Venezuela and 212 bpd from Ecuador. As of June 2005, the US was importing 1,583 bpd from Venezuela and 309 bpd from Ecuador (EIA - Crude Oil and Total Petroleum Imports). Venezuela is the third largest oil exporter to the U.S. - right behind Canada and Saudi Arabia.

Note: In fact, the news came in just 15 minutes ago (8:30 am pst)that oil has jumped back up $1 a barrel on due to a refinery fire in Venezuela, and protests in Ecuador.

The continuing increase in prices are prompting calls for releases from the strategic oil supply (try a search at google news for "US strategic oil reserves"). However, there are no plans to release gas from the 700 million barrel stockpile in Freeport, Texas. In fact, politicians have no solutions.

Of course they don't have any solutions because this is a dwindling supply in the face of a growing demand issue. The easy answer would be to reduce demand, but politicians are unlikely to take any of the measures (emergency or otherwise) that would do so. Besides the profit motive, there is certainly concern about other nations - such as China - soaking up what the U.S. "saved" by such measures. One might look at the growing supply and demand issue from the perspective of demand rather than supply. The U.S. is in competition with China (and others) in terms of consumption. Demand drives acquisition. The nation that decreases its demand might "lose its place" in the oil line. The "consumption competition" is more than problematic in a world that is so fragile. It only accelerates and exacerbates the peak oil problem, and takes us closer to open resource wars - rather than the more masked ones currently occurring in Iraq, Sudan, Chad, Niger, Venezuela, etc.). For an excellent expose of the oil war driving poverty, and genocide in Africa, see David Morse's Mother Jones article "War of the Future."

You don't have to look too far to see how badly off the US predictions of global oil prices are. Take a look at the Energy Information Administration's U.S. Energy Prices: Base Case table. Unbelievably, the data includes the short term outlook as of August 2005 - yes, this month. According to the EIA table, third quarter crude prices are 51.40 a barrel, and the projection for the fourth quarter is 50.81 a barrel. That doesn't give you much confidence in their forecasts when oil is at $67 a barrel. Surprisingly, they are predicting costs to go down in 2006 to 49.95 a barrel. Nowhere in their prediction does the cost of gasoline go over $2.40 a gallon. Of course, they are excluding the taxes from that cost (which are about 27% of cost) and that takes that $2.40 up to about $3.05. Oddly, that cost is predicted in the second quarter of 2006 when they predict oil will be 55.49 a barrel. We are coasting over $10 a barrel higher than that, and I predict it will continue to increase. While gasoline demand may decrease with the end of the summer vacation season, heating oil (and gas) prices, and electricity generated by them will raise demand back up.

It is reported that instability in Iraq is part of the cost increases - both the instability itself, and the decrease in Iraqi oil production. That situation is not likely to resolve any time in the near future. Even if the "coalition" quits occupying Iraq, a hornet's nest of conflict is apparently hardening there. Meanwhile, the U.S. is making invasion threats at Iran and Venezuela. More oil wars.

The cost of oil is increasingly measured not just in dollars, but in blood and death. The famine in Niger is a prime example. Fueled by decisions not to act and thereby influence Niger's "free market capitalism," and by the oil (and oil interests) that are there, people are starving and dying while food lies within reach. The Tuareg and Fulani may face death, and the death of their cultures. How long will wars and genocides be touted up to other causes? At what point will leaders and media find it acceptable to say "We are invading X to get their oil and gas?"

Could we see gas rationing in the U.S.? I think that becomes increasingly likely. If troubles continue in Ecuador and Venezuela, and if there is some other "disruption" in supply, gasoline may not only be prohibitively expensive, but rationed. It seems possible to me that if price increases continue at the current rate, the U.S. may have to release some of the strategic supply if for no other reason than to stabilize the economy. It is that, or find some other way to subsidize gas costs. Given that the debt is so high, any subsidation would come at the cost of either increased debt or further cuts in social programs. Since China is buying much of that debt, and they are a direct resource (and economic) competitor, I'm not sure they wouldn't seize the moment - with who knows what consequences. The economy is eroding around the edges regardless of the strident upbeat "reports." You can't override the cost increases with cheery rhetoric.