Use access key #2 to skip to page content.

Peak Oil: Did You Know?

Recs

31

February 19, 2010 – Comments (25)

Did you know that U.S government technocrats have been predicting the end of oil production since oil was first discovered in America in Titusville, Pennsylvania in 1866?

In 1866, shortly after the Pennsylvania discovery, the U.S. Revenue Commission told that nation that once oil production ended in America, as it expected, there would be no need to worry about the availability of "synthetics."

In 1909, the U.S. Geological Survey (USGS) warned that if the U.S. petroleum industry continued "the present rate of increase in production, the supply would be exhausted by about 1935."

In 1922, the same agency forecast that oil supplies would dry up by 1942 at the latest.

In 1885, the USGS said there was little or no chance of finding oil in California.

In 1891, the USGS said there was little or no chance of finding oil in Texas.

In 1908, the USGS forecast the maximum future oil supply as 22.5 billion barrels.

In 1914, the U.S. Bureau of Mines warned that there were only 5.7 billion barrels of oil left.

In 1939, the U.S. Department of the Interior predicted that the United States would run out of oil by 1952. 

In 1949, the Secretary of the Interior warned that the "end of U.S. oil supplies is in sight."

In 1951, the U.S. Department of the Interior revised their prediction that oil supplies would run out by 1964.

In 1947, the Department of State warned that "sufficient oil cannot be found in the U.S."

Is Peak Oil a valid theory?

Probably not, and if you are basing your Peak Oil scenario on a government forecast, be very, very careful.  No human, government employee or not, can predict the future with significant accuracy.  However, when it comes to government forecasters, being wrong has no impact on their future income.  In the private sector, being wrong can cost you.  (That is, unless the government comes in and bails you out with stolen taxpayer money.)

Can the Government Do Anything About Peak Oil?

What if I'm wrong?  What if Peak Oil is a reality and the U.S. finds itself in another energy crisis like the 1970s?  Should we look to the government to regulate our energy production?  Can the government do anything to solve the problem of Peak Oil? 

Let's ask William E. Simon, the first energy czar.  The Federal Department of Energy was created in 1977 and quickly set upon itself the task of employing every single economic fallacy in an attempt to stop the gas shortages.  It was an orgy of arrogant, bureaucratic, conceit.  According to Simon, calling it a tragedy would be kind:

"As for the centralized allocation process itself, the kindest thing I can say about it is that it was a disaster. Even with a stack of sensible-sounding plans for even-handed allocation all over the country, the system kept falling apart, and chunks of the populace suddenly found themselves wihtout gas.  There was no logic to the pattern of failures. In Palm Beach suddenly there was no gas, while 10 miles away gas was plentiful. Parts of New Jersey suddenly went dry, while other parts of New Jersey were well suplied. Every day, in different parts of the country, people waited in line for gasoline for two, three, and four hours. The normal market distribution system is so complex, yet so smooth that no government mechanism could simulate it."

The interesting thing here is that the U.S. attempted to institute a Soviet style planning regime (the DOE) in just one industry, and yet it was a total failure.  Of course, with all government intervention there were unintended consequences.  More from Simon:

"As the shortages became more erratic and unpredictable, people began to "top off" their tanks. Instead of waiting, as is customary, to refill the tank when it is about one quarter full, all over the country people started buying 50 cents' worth of gas, a dollar's worth of gas, using every opportunity to keep their tanks full at all times. And that fiercely compounded the shortages and expanded the queues. The psychology of hysteria took over. Essentially the allocation plan had failed because there had been a ludicrous reliance on a little legion of government lawyers, who drafted regulations in indecipherable language, and bureaucratic technocrats, who imaged that they could simulate the complex free-market processes by pushing computer buttons. In fact, they couldn't."

So what is a technocrat?

My Merriam-Webster dictionary defines a technocrat as "a technical expert; especially : one exercising managerial authority."  Well, that didn't tell us much.  What about technocracy? Again, according to Merriam, it's "government by technicians; specifically : management of society by technical experts."

Now that's more like it.  Technocracy is the antithesis of free market individualism.  It's a fallacy that has been very popular throughout history, particularly in the early days of the Nation-State.  Technocrats are the modern day, scientific-looking ancestors of the Chinese mandarins, the intellectual guardians of the State's thirst for plunder. And they have always been abject failures.

So What?

So know your enemy, that's all.  Technocracy is scientific soclialism in real life and it fails as spectacularly in real life as Bohm-Bawerk predicted it would when he wrote History and Critique of Interest Theories (1884.) 

The Federal Reserve is a haven for technocrats, as are the various departments of the federal government.  Do you know how many technocrats are currently wasting taxpayer money, churing out models and formulas that have absolutely no bearing on economic reality? 

Why do they do it?  They don't care about consumers, workers or producers.  In fact, they don't care too much about freedom either.  They loathe economic freedom.  They want high taxation and high budgets.  They want to do God's work.  They are your enemy. Oh, lest I forget... they also want your money.  It sure beats working for a living.

David in Qatar

25 Comments – Post Your Own

#1) On February 19, 2010 at 2:14 PM, starbucks4ever (94.36) wrote:

Somebody is doing his best to lure speculators in...And that "somebody" is not a government employee, but rather a government employer. Someone like GS. Well, maybe some other bank. Anyway, buy oil now. Could be a once-in-a-lifetime opportunity to buy it that high. 

Report this comment
#2) On February 19, 2010 at 2:45 PM, Donnernv (< 20) wrote:

http://www.eia.doe.gov/emeu/ipsr/t44.xls

 

Report this comment
#3) On February 19, 2010 at 2:51 PM, 4everlost (29.41) wrote:

Rec #5 from me David.  IMO once the gov't learned they could lie and would never be held accountable the fallacies became bigger and bolder.

How about this one: Average household income has grown 6% from 1969 to 1996 while per capita income rose 51% over the very same period.  When the gov't wants to justify more central economic planning they cite the per household statistic as the problem they are trying to solve.  The reason both are true is that the size of the average household has shrunk - making it easy for the average household income to grow less rapidly. 

Report this comment
#4) On February 19, 2010 at 3:00 PM, djkumquat (50.09) wrote:

No human, government employee or not, can predict the future with significant accuracy.

really? i'm gonna fart in the next minute.

(wait for it)

there. significant and accurately predicted!

other than that, good post.

Report this comment
#5) On February 19, 2010 at 3:08 PM, whereaminow (< 20) wrote:

lol, dj. Nicely played.  Now, can you predict when I am going to?  That would be a talent.

David in Qatar

Report this comment
#6) On February 19, 2010 at 3:18 PM, djkumquat (50.09) wrote:

physically or metaphysically?

this is starting to remind me of the bridge of death scene in monty python's holy grail.

Report this comment
#7) On February 19, 2010 at 4:07 PM, AbstractMotion (52.07) wrote:

@whereaminow: 

Few things of note here... first of all peak oil deals with the peaking of oil production on a certain scale.  We already have hit peak oil in the US and the next decade should indicate how accurate the models for peak oil globally are.  There's still more oil in the ground, but for the most part we've tapped all the easily accessible oil at this point.  There haven't been any significant finds in quite some time.  Oil is a finite resource and though there are other ways of synthesizing none of them are really cost effective.  What will happen when production starts declining and there's a panic?  The price will go up, which as any good capitalist knows is the key rationing mechanism in a market system.  This will probably be unacceptable politically, odds we'll lean on who we can to secure our supply.  Europe will probably lift or lower their substantial gas taxes to soften the blow.  We'll probably see vouchers for public transportation handed out and guaranteed allocations for such programs.  The public will start shifting over to NG hybrids and in a few years things will pick back up again.

I also disagree with your characterization of a technocrat.  It's more a crude attempt at meritocracy then the kind of pro state/party cronyism that usually occurs under socialism.  It has it's faults, but for the most part it's better then the systems that predated it.  Realistically the alternative is having more appointments related on who helped the President's campaign or just shoving a few more lawyers into positions they aren't remotely qualified to hold.

 

 

Report this comment
#8) On February 19, 2010 at 4:32 PM, whereaminow (< 20) wrote:

AbstractMotion,

Thanks for your comments. 

Concerning the oil industry, working from a range of practical scenarios, I agree with you. There is not a lot than can be done under the current climate.  On the other hand, one of the reasons I blog here is to open people's eyes to the totality of government intervention in areas of our life that are rarely grasped.  I wonder how many people are aware of how completely the government dominates the oil industry, and how far back that domination stretches?  Do they know about Standard Oil?  How illegal, harmful and unnecessary the Antitrust legislation was? How the industry was cartelized during World War I, then re-cartelized under Coolidge and more completely under FDR? 

Technocrats, however, are the bane of my existence.  I have to say that I really can't stand them.  Sure, there are a lot of parasites on this planet that I could easily point to as enemies of freedom.  Why do I choose technocrats so often for my wrath?  I can't honestly say.  I think I get extremely annoyed when the accepted view of a particular profession so radically differs from what they accomplish in reality.  For civil servants, the generally accepted view is of a honorable, hard working, diligent, and selfless servant of the People.  How far from the truth it is!

Perhaps modern day technocracy appears less crude than the workings of early socialist planners.  However, I would contend that their "evolution" has been only in appearance.  The results have remained equally tragic.

David in Qatar

Report this comment
#9) On February 19, 2010 at 5:54 PM, checklist34 (99.71) wrote:

12th rec from me.

In 3rd grade I was told how we'd be out of oil by now (2010) and how by sometime around now new york city would be underwater from global warming.  

It never ends.  The #1 human love is to panic and worry and believe in boogie men.

Report this comment
#10) On February 19, 2010 at 5:56 PM, SockMarket (36.49) wrote:

"Did you know that U.S government technocrats have been predicting the end of oil production since oil was first discovered..."

Do you know what peak oil is? It isn't the end of oil production but simply when, due to a lack of enough economically viable oil in the ground production enters and irreversible decline. In fact this is only the halfway point in historical (and future) oil production. It is not going to run out. 

Also it wasen't developed by the government (do some research!) but rather by Shell Oil, more specifically their scientist Marion King Hubbert. 

 

then you go on to list a bunch of examples of poor predictions from the USGS and other governmental organizations from 1866-1947

Peak oil was theorized  by a private scientist in 1956. Let me repeat it was theorized by someone who did not work for the government AFTER all of your examples occured. 

The USGS is still in wonderland, claiming there are 3T of recoverable oil, a total not even the most optomistic companies will back up. 

 

"The interesting thing here is that the U.S. attempted to institute a Soviet style planning regime (the DOE)"

Heck, every gas station has regular, premium, unleaded, and some even have diesel. It must be soviet central planning... Lets take a look at what they actually do:
- fund research
- contuct research themselves
- work on anti-terrorism threats as it relates to energy
- house an emergency supply of fuel

darn that does sound communist. Where do you get this stuff? Do you just make it up?

 

"So know your enemy, that's all."

Well I wish you luck in finding your "enemies". If you think the government was the one to theorize peak oil, or if you think they are the only ones (or even the main ones) researching it now you are severly misguided. You remind me a lot of Colonel Klink from Hogan's Heroes trying to convince General Burkhalter to allow him to make a Know Your Enemy speech...

 

"They don't care about consumers, workers or producers.  In fact, they don't care too much about freedom either.  They loathe economic freedom.  They want high taxation and high budgets.  They want to do God's work.  They are your enemy. Oh, lest I forget... they also want your money.  It sure beats working for a living.

Just a tad bit off the deep end are we? Everyone in government wants to lie cheat and steal, while everyone in industry is a saint (maybe we should pin wings on their backs so people get the picture) and of course they never try to exert the power to corrupt that they hold over congress and the executive branch. Gee, I just wish our politicians could be as honest as those CEOs...

Report this comment
#11) On February 19, 2010 at 6:01 PM, checklist34 (99.71) wrote:

Abstract, we live in a society (the US) that has been blindingly completely dominated by liberal interests for nearly 50 years.  don't drill alaska, think of the caribou!  don't drill offshore, think of the corals!  don't use oil shale, think of me and how my purpose in life is to fight against society and economic progress!

push comes to shove, mankind (and americans in specific) may well prove, again, to be a resilient and crafty bunch.  Can we get petroleum substittues from coal?  Run cars on natty gas?  Use that shale, eventually economically?  Someday a new technology lets more oil be extracted from existing wells?  Us to drill deeper?

History repeat and the monster gas price scare of a few years ago lead to a prolonged period of reduced demand for oil?  

 

Report this comment
#12) On February 19, 2010 at 6:17 PM, whereaminow (< 20) wrote:

danielthebear,

Thanks for your comments.

You have to put your rage aside and re-read my post.  I never said that the government invented the Peak Oil theory.  I said, "U.S government technocrats have been predicting the end of oil production since oil was first discovered"

Then I presented evidence to support that.

Next, I never said that Shell Oil was a bunch of communists or that oil companies were communists.  Again, re-read the post.  In 1977, the DOE was created to institute a Soviet-style central planning authority.  And they did. And it failed. Spectacularly.  How you jumped from there to "oil companies are communists" I have no idea.

Anyway, thanks for reading the post... sort of... since you didn't really read it.

David in Qatar

Report this comment
#13) On February 19, 2010 at 7:00 PM, SockMarket (36.49) wrote:

perhaps it was a bit over the top but I did read it and I would suggest you read mine. I did not claim oil companies were communists. So far as I know their "spectacular failure" was not soviet style, why do you think it was?

and why do you always blame the government when frequently they are not the culprits?

Report this comment
#14) On February 19, 2010 at 7:24 PM, whereaminow (< 20) wrote:

danielthebear,

Ok, here is the deal.  The "spectacular failure" I was referring to was the DOE's intervention in the 1970s energy crisis.  That was all.

Now, let me offer an apology.  Sometimes I write very detailed, planned, and thought out blogs.  People come to expect these after a while. However, this is a blog, not a professional writing gig.  So on occasion I'll just throw out some thoughts after I read something interesting, as I did today.  So today's blog isn't my usual stuff and I apologize for that.

But you asked a fair question: "why do I always blame the government?"

Well, for starters, I do blame industry executives for many of our problems.  Many of them are political entrepreneurs, in that they use the government to help them compete because they couldn't cut it in a free market.  They are pathetic and I offer them no quarter.

However the government gets the bulk of my wrath.  The government is merely an conduit for extortion.  It is in immoral institution.  There is no such thing as good government. 

Question for you: how do you think governments originated? 

David in Qatar

Report this comment
#15) On February 19, 2010 at 7:28 PM, AbstractMotion (52.07) wrote:

@checklist34

I don't know that I really argued against anything you've said.  There are alternatives out there and I do believe in the long run we'll be fine.  But as with most things in this country we aren't very forward looking, there will be a point where as you put it "push comes to shove" and a lack of forward planning or slow migration to newer technologies will lead to a real squeeze.  I don't believe there's just gobs of easily obtainable oil out there to be exploited.  The very fact that we're willing to look to the arctic of all places pretty much confirms that we've exhausted a lot of the easily (cheaply) accessible stuff.  Everyone knows it at this point, even the oil industry and they freely admit it.  

I doubt this pinch will go down 1970's style as that was pretty much related to political events and an artificial lowering of production.  What we're talking about here is scarcity, the very foundation of economics.  Oil extraction as we know it today is very likely to peak in the next 10 years, maybe 12 depending on the fallout of this recession.  After that prices will continue to rise, I'm sure there's a ceiling at some point where it would be cheaper to synthesize it from coal then take it out of the ground.  But that in itself is an extremely energy intensive process.  NG seems like the obvious alternative to me, once we reach the tipping point between the two prices will probably stabilize as demand gets shifted from oil to NG.  It's not the end of the world, but it will be a game changer.  

Report this comment
#16) On February 19, 2010 at 8:43 PM, SockMarket (36.49) wrote:

and here is my apology:

i jumped down your throat and should not have. I should have understood your opinion/position better before I opened my figuritive mouth.

 

I would tend to agree with the political entrepreunuers idea, and that government is an evil, but a necessary one. I would say that a well run (low level of corruption) government is more important than the size of the institution, although in an unfortunate number of cases oversized government has led to corruption. 

as to how governments originated; honestly, i don't know but this is my best guess:

we are naturally hirearchical creatures. Most of us look to someone (or a group of people) to send us in generally the right direction. We all seem to have an aspiration for the power of leading/being among the group who leads. The urge is stronger in some and these people were usually the leaders or in the group of leaders.

With one notable exception: a monarchical model in which 2 or 3 generations establish themselves at the top of the political pecking order and frequently they hang on to power longer than they should while supressing the natural urge/will of others to lead.

So I would say that government has existed as long as our species has been a distinct group and it arose naturally. 

what is your theory?

Report this comment
#17) On February 19, 2010 at 8:52 PM, whereaminow (< 20) wrote:

danielthebear,

Cool. I'll drink a beer for you when I get home.

As for the origin of government..... since you asked... (smile)..... I have this little book.... perhaps you wouldn't mind taking a look.

The State by Franz Oppenheimer.

And down the rabbit hole you go :)

David in Qatar

Report this comment
#18) On February 19, 2010 at 9:09 PM, SockMarket (36.49) wrote:

i guess little is a relative term. ill look through it but I doubt ill have time to really read it.

incidentally you are only the 2nd person I have ever heard use the phrase rabbit hole. shot in the dark but did you grow up in colorado?

Report this comment
#19) On February 19, 2010 at 9:47 PM, whereaminow (< 20) wrote:

No, I'm from Chicago.  I went to see Avator and Book of Eli this week, and the preview for the new Alice in Wonderland movie showed before each of them, so I probably have that stuck in my head????

Skim the book. Read the intro.  Give it a shot. 

David in Qatar

Report this comment
#20) On February 20, 2010 at 11:24 AM, djkumquat (50.09) wrote:

does this mean you have movie reviews for us fools?

Report this comment
#21) On February 20, 2010 at 4:00 PM, FleaBagger (28.16) wrote:

As a libertarian concerned about peak oil, let me just say that the libertarian case for peak oil concern is twofold:

First, if oil is as nonrenewable as many leading geologists believe,* there is a point at which all oil production will become more capital intensive, and therefore more expensive, as new finds become smaller and more difficult to reach, and old wells peter out.

Second, the effect of government in the energy market distorts signals, and could leave us unprepared as traditional energy sources dwindle and alternatives are robbed of capital by taxes, government deficits, and inflation.

In other words, peak oil is a term for how this time of transition makes the usual government bungling interference far more dangerous than ever. 

*Some geologists have presented evidence that oil could be a byproduct of thermophilic bacteria living deep in the earth's crust, where proximity to the upper mantle has warmed the rock to temperatures exceeding 80 degrees Celsius.

Others have proposed that geologic forces deep in the earth's crust act on hydrogen and carbon to form the hydrocarbons we know as petroleum and coal.

I am in no position to pontificate about the likelihood of either of those scenarios, but I believe that our level of understanding of fossil fuel formation is less than or equal to the level of other theories that have been overturned in the past once better information has come to light.

Report this comment
#22) On February 20, 2010 at 4:00 PM, FleaBagger (28.16) wrote:

What did you think of Book of Eli?

Report this comment
#23) On February 20, 2010 at 5:56 PM, whereaminow (< 20) wrote:

Flea,

I liked it. I saw it on a whim, not really knowing anything about it.  Entertaining at the very least.  Denzel was cool.  Meg from Family Guy was very good (forget her real name.)  I could, of course, have a lot more to say on Hollywood's bizarre love affair with post-apocalyptic visions of the human race that always seem to have us devolving into mindless animals, but I won't mention any of it :)

David in Qatar

Report this comment
#24) On February 22, 2010 at 1:37 PM, nzsvz9 (< 20) wrote:

David, 

I'm reminded of Michael Nesmith's video album "Elephant Parts" where he talks in the beginning about the cost of gas. He waxes eloquently about where's all the gas, and then as prices go up, suddenly there's lot of gas but the price doesn't go down.

He's told by the producer/director to do music and comedy ... and the rest is quite funny.

I myself have asked "Where is all the oil?"

Known as proud hydocarbon consuming nzsvz9

Report this comment
#25) On February 22, 2010 at 2:45 PM, whereaminow (< 20) wrote:

nzsvz9,

Sorry I missed that post!  I will have to check out those links.

David in Qatar 

Report this comment

Featured Broker Partners


Advertisement