Friday, 28 November 2014 / TRUTH-OUT.ORG

That Much Petroleum is That Much Bullshit: China Won the Oil War, and the Shale Oil Revolution is About to Shrivel Up

Tuesday, 17 June 2014 10:46 By Nicholas C Arguimbau, SpeakOut | Op-Ed

In January, 2011, this writer published a four-part article in Countercurrents and elsewhere entitled, "The War: Did We Sacrifice A Million Lives And A $Trillion Cash Just To Hand Our Jobs To China?"  It was long (around 40 pages), and I must admit a little confusing, because the information was so stunning that I had a difficult time understanding what I was reading. The gist of the article was that Big Oil had asked Congress in 1998 to remove the Taliban so as to allow the building of a pipeline that would let Mideastern oil go to "the right markets."  "The right markets"?  Guess.  The US and Europe, of course. Wrong. India and China. Those, it was explained, were "the right markets" because the oil market was stagnating in the US and Europe and actively growing in India and China.  Hardly, it would seem, something for the US to go to war for. But, then, Wall Street is the government.

We went to war against the Taliban in 2001 shortly after the US officials who negotiated with the Taliban for permission to let the pipeline be built told them, according to two well-respected French journalists, "You can have a carpet of gold [if you allow the pipeline] or a carpet of bombs [if you don't]."  Really? Yes. That's a 13-year-old story. The Taliban, as the well-documented story goes, chose the "carpet of bombs," we won the military war and our chosen successor to the Taliban, Hamid Karzai, promptly started to negotiate to get oil and natural gas to "the right markets."  

And his administration, in a reportedly "fixed" deal, also sold China the world's largest undeveloped copper deposits at a staggeringly reduced price, despite an American bidder also among those seeking the deposits. The Afghan press announced, "China won the War."  Stunning, given the level of corruption in Afghanistan, that OUR chosen successor to the Taliban gave China rather than the US the hot deals in oil, natural gas and copper. Why, unless that was what in fact the United States government (Wall Street remember?) intended, would our chosen successor to the Taliban in a notoriously corrupt country give China the goodies? George Monbiot wrote in November 2001 that the war was about oil, and we would put in a puppet who would assure we got it all and China and Russia got nothing. Nice try, George, but something was missing in your analysis: Wall Street and the US mega-corporations.

A mystery. Then we went to Iraq and undertook a "regime change" by force. If the cynics were right that the war was about oil, surely the new regime would be primed to assure the United States would get a "fair" share of the oil. Indeed, a major field, in a non-auctioned deal, was split between Russia and Exxon Mobil, but then came the auction, in December 2009, of Iraq's other major fields. There were bidders from the East, particularly a Chinese-Malaysian partnership, but not one American oil company participated in the auction. They were "noticeably absent," according to the Iraqi press. Needless to say, they got none of the oil, which instead went to "the right markets," So, "China won the war," again. Iraq laid out a literal red carpet and the whole thing was televised. Transparency in government. As for Exxon-Mobil it spent years wrangling with our puppets, finally gave up, and recently sold its share to China.

It is hard to believe that China would get everything and the US would get nothing from our chosen regimes in Afghanistan and Iraq unless that is what our government intended. What are "puppet" governments for, after all? Instead of trouncing the Chinese, "we" laid out a red carpet for them. But why? My article explored that question, too. There has been a massive flight to China of "American" mega-corporations in recent years - GM, Microsoft, Hewlett-Packard, Dell, Pfizer, the oil companies themselves, including BP. Try to find an "American" high-tech product that isn't produced in China. The manufacturing sector of the United States economy is down to 12 percent and dropping. "American" manufacturers need an assured supply of oil in an era in which conventional oil is anything but assured. We know how corrupt Congress is, so is it going to bring the spoils of war to the US when the mega-corporations don't need oil here but need it in China where they have resettled their manufacturing operations? If the wars were about oil as the cynics say, then we would have to arrange for our chosen "puppet" regimes to turn over the spoils of war to "the right markets" where "American" business is now booming. And that is what happened. It makes perfect sense in a warped way.

Anyhow, that was the gist of my January 2011 article. Just about no one read it. The article is still there if you want links to the sources.

Two and a half years later, and four years after the auction, the New York Times announced in June, 2013, "China Is Reaping Biggest Benefits of Iraq Oil Boom." Pretty different from how George Monbiot had things figured in 2001. 

Go figure. Now is a hopeful time to discover that China won the war. After all, as the Times said, "With the boom in American domestic oil production in new shale fields surpassing all expectations over the last four years, dependence on Middle Eastern oil has declined, making access to the Iraqi fields less vital for the United States."  

Maybe, but things are a little "iffy" about the shale oil revolution, seen by its proponents to be turning the US in "the new Saudi Arabia." With Harvard University publishing its slick "Oil: The Next Revolution," with "Veritas" plastered over the cover, but with research 100 percent funded by BP, the world has gone into a frenzy of "shale revolution" rhapsody. Somehow in the din, actual numbers get lost.  French oil geologist Jean Laherrere has produced a devastating technical critique of the Harvard/BP report, "Comments on Maugeri's Oil Revolution - Part I," and Part II. He is far from alone. David Strahan, an independent blogger, interviewed Maugeri and uncovered Maugeri's misunderstanding of much of what he was relying on, and he admitted flaws in his basic calculations, "Oil glut forecaster Maugeri admits duff maths," and David Hughes of the respected Post Carbon Institute has produced a serious, transparent and detailed (166 pages) analysis of  productivity of the shale oil, shale gas and tar sands resources in the United States and Canada with the ironic title, "Drill Baby Drill." By painstakingly compiling data on drilling sites, productivity and decline rates of existing wells, he concludes that the Bakken and Eagle Ford plays, constituting 80 percent of present and expected shale oil deposits in the US, will peak in the 2015-2017 period,  and produce a total of approximately 7 billion barrels of oil, in the range of USGS estimates. Production of shale oil has yet to exceed two percent of world conventional oil production – or, to put things differently, only half of the annual decline of world conventional-oil production, and the industry is already sputtering.

Sputtering or peaking? Oil geologists Jean Laherrere and David Hughes have independently concluded that "peak Bakken" and "peak Eagle Ford" are 2014 and 2016 respectively. They now predict the ultimate production to be around 11 billion barrels. Shale wells produce heavily, but deplete rapidly, so today's dramatic rise can be tomorrow's dramatic crash. Here's how things look to Laherrere and Hughes:

The years 2014 and 2016 aren't very far away, are they? If Hughes and Laherrere (not to mention the United States Geological Survey) are anywhere close to the truth, then "Peak oil" is alive and well, and the revolutionaries have been sent packing. We shall know very soon, but presently it appears that the Harvard/BP "revolution" is only "a tale told by an idiot, full of sound and fury, signifying nothing," per Macbeth, Act V, Scene 5. People don't seem to see the difference between total production of around 7 billion barrels and a "revolution."  See, for example, Bloomberg, "Bakken, Three Forks Has More Oil Than 2008 Estimate: USGS," an article by Mark Drajem published in the spring of 2013 about US Geological Survey findings.

How is the US actually doing? Its petroleum consumption is decreasing at 4.5 percent per year, according to an April 2012 Petroleum Economist report. That is about the decline rate predicted by many not long ago to be today's anticipated global decline rate for conventional oil, as previously documented. It is in fact precisely on target for major global conventional oil fields today. The graph of actual world crude production, including both the US shale oil and the Canadian tar sands, looks all too much like the graph featured in "Imminent Crash."

This is happening at the same time as China's demand continues to increase at 8-10 percent per year. The two curves, Chinese increase and global decrease, intersect around 2025, as I pointed out in my 2011 article. This means, at least in theory, that China will be in control of the entire remaining world oil supply by that date if nothing changes. In short, everyone but China is in serious long-term trouble, and shale oil is only a flash in the pan that won't help us.

As for the New York Times, I guess we've come to expect it will take four years to hear about televised petroleum auctions, three years to read the headlines in the Kabul Press and two and a half years, if ever, to read Countercurrents. Maybe the newspaper of record prints "all the news that's fit to print," but you have to be pretty patient.

This article is a Truthout original.

Nicholas C Arguimbau

Nicholas C. Arguimbau is an environmental and death penalty lawyer who has come home to rural Massachusetts after 34 years in California.


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That Much Petroleum is That Much Bullshit: China Won the Oil War, and the Shale Oil Revolution is About to Shrivel Up

Tuesday, 17 June 2014 10:46 By Nicholas C Arguimbau, SpeakOut | Op-Ed

In January, 2011, this writer published a four-part article in Countercurrents and elsewhere entitled, "The War: Did We Sacrifice A Million Lives And A $Trillion Cash Just To Hand Our Jobs To China?"  It was long (around 40 pages), and I must admit a little confusing, because the information was so stunning that I had a difficult time understanding what I was reading. The gist of the article was that Big Oil had asked Congress in 1998 to remove the Taliban so as to allow the building of a pipeline that would let Mideastern oil go to "the right markets."  "The right markets"?  Guess.  The US and Europe, of course. Wrong. India and China. Those, it was explained, were "the right markets" because the oil market was stagnating in the US and Europe and actively growing in India and China.  Hardly, it would seem, something for the US to go to war for. But, then, Wall Street is the government.

We went to war against the Taliban in 2001 shortly after the US officials who negotiated with the Taliban for permission to let the pipeline be built told them, according to two well-respected French journalists, "You can have a carpet of gold [if you allow the pipeline] or a carpet of bombs [if you don't]."  Really? Yes. That's a 13-year-old story. The Taliban, as the well-documented story goes, chose the "carpet of bombs," we won the military war and our chosen successor to the Taliban, Hamid Karzai, promptly started to negotiate to get oil and natural gas to "the right markets."  

And his administration, in a reportedly "fixed" deal, also sold China the world's largest undeveloped copper deposits at a staggeringly reduced price, despite an American bidder also among those seeking the deposits. The Afghan press announced, "China won the War."  Stunning, given the level of corruption in Afghanistan, that OUR chosen successor to the Taliban gave China rather than the US the hot deals in oil, natural gas and copper. Why, unless that was what in fact the United States government (Wall Street remember?) intended, would our chosen successor to the Taliban in a notoriously corrupt country give China the goodies? George Monbiot wrote in November 2001 that the war was about oil, and we would put in a puppet who would assure we got it all and China and Russia got nothing. Nice try, George, but something was missing in your analysis: Wall Street and the US mega-corporations.

A mystery. Then we went to Iraq and undertook a "regime change" by force. If the cynics were right that the war was about oil, surely the new regime would be primed to assure the United States would get a "fair" share of the oil. Indeed, a major field, in a non-auctioned deal, was split between Russia and Exxon Mobil, but then came the auction, in December 2009, of Iraq's other major fields. There were bidders from the East, particularly a Chinese-Malaysian partnership, but not one American oil company participated in the auction. They were "noticeably absent," according to the Iraqi press. Needless to say, they got none of the oil, which instead went to "the right markets," So, "China won the war," again. Iraq laid out a literal red carpet and the whole thing was televised. Transparency in government. As for Exxon-Mobil it spent years wrangling with our puppets, finally gave up, and recently sold its share to China.

It is hard to believe that China would get everything and the US would get nothing from our chosen regimes in Afghanistan and Iraq unless that is what our government intended. What are "puppet" governments for, after all? Instead of trouncing the Chinese, "we" laid out a red carpet for them. But why? My article explored that question, too. There has been a massive flight to China of "American" mega-corporations in recent years - GM, Microsoft, Hewlett-Packard, Dell, Pfizer, the oil companies themselves, including BP. Try to find an "American" high-tech product that isn't produced in China. The manufacturing sector of the United States economy is down to 12 percent and dropping. "American" manufacturers need an assured supply of oil in an era in which conventional oil is anything but assured. We know how corrupt Congress is, so is it going to bring the spoils of war to the US when the mega-corporations don't need oil here but need it in China where they have resettled their manufacturing operations? If the wars were about oil as the cynics say, then we would have to arrange for our chosen "puppet" regimes to turn over the spoils of war to "the right markets" where "American" business is now booming. And that is what happened. It makes perfect sense in a warped way.

Anyhow, that was the gist of my January 2011 article. Just about no one read it. The article is still there if you want links to the sources.

Two and a half years later, and four years after the auction, the New York Times announced in June, 2013, "China Is Reaping Biggest Benefits of Iraq Oil Boom." Pretty different from how George Monbiot had things figured in 2001. 

Go figure. Now is a hopeful time to discover that China won the war. After all, as the Times said, "With the boom in American domestic oil production in new shale fields surpassing all expectations over the last four years, dependence on Middle Eastern oil has declined, making access to the Iraqi fields less vital for the United States."  

Maybe, but things are a little "iffy" about the shale oil revolution, seen by its proponents to be turning the US in "the new Saudi Arabia." With Harvard University publishing its slick "Oil: The Next Revolution," with "Veritas" plastered over the cover, but with research 100 percent funded by BP, the world has gone into a frenzy of "shale revolution" rhapsody. Somehow in the din, actual numbers get lost.  French oil geologist Jean Laherrere has produced a devastating technical critique of the Harvard/BP report, "Comments on Maugeri's Oil Revolution - Part I," and Part II. He is far from alone. David Strahan, an independent blogger, interviewed Maugeri and uncovered Maugeri's misunderstanding of much of what he was relying on, and he admitted flaws in his basic calculations, "Oil glut forecaster Maugeri admits duff maths," and David Hughes of the respected Post Carbon Institute has produced a serious, transparent and detailed (166 pages) analysis of  productivity of the shale oil, shale gas and tar sands resources in the United States and Canada with the ironic title, "Drill Baby Drill." By painstakingly compiling data on drilling sites, productivity and decline rates of existing wells, he concludes that the Bakken and Eagle Ford plays, constituting 80 percent of present and expected shale oil deposits in the US, will peak in the 2015-2017 period,  and produce a total of approximately 7 billion barrels of oil, in the range of USGS estimates. Production of shale oil has yet to exceed two percent of world conventional oil production – or, to put things differently, only half of the annual decline of world conventional-oil production, and the industry is already sputtering.

Sputtering or peaking? Oil geologists Jean Laherrere and David Hughes have independently concluded that "peak Bakken" and "peak Eagle Ford" are 2014 and 2016 respectively. They now predict the ultimate production to be around 11 billion barrels. Shale wells produce heavily, but deplete rapidly, so today's dramatic rise can be tomorrow's dramatic crash. Here's how things look to Laherrere and Hughes:

The years 2014 and 2016 aren't very far away, are they? If Hughes and Laherrere (not to mention the United States Geological Survey) are anywhere close to the truth, then "Peak oil" is alive and well, and the revolutionaries have been sent packing. We shall know very soon, but presently it appears that the Harvard/BP "revolution" is only "a tale told by an idiot, full of sound and fury, signifying nothing," per Macbeth, Act V, Scene 5. People don't seem to see the difference between total production of around 7 billion barrels and a "revolution."  See, for example, Bloomberg, "Bakken, Three Forks Has More Oil Than 2008 Estimate: USGS," an article by Mark Drajem published in the spring of 2013 about US Geological Survey findings.

How is the US actually doing? Its petroleum consumption is decreasing at 4.5 percent per year, according to an April 2012 Petroleum Economist report. That is about the decline rate predicted by many not long ago to be today's anticipated global decline rate for conventional oil, as previously documented. It is in fact precisely on target for major global conventional oil fields today. The graph of actual world crude production, including both the US shale oil and the Canadian tar sands, looks all too much like the graph featured in "Imminent Crash."

This is happening at the same time as China's demand continues to increase at 8-10 percent per year. The two curves, Chinese increase and global decrease, intersect around 2025, as I pointed out in my 2011 article. This means, at least in theory, that China will be in control of the entire remaining world oil supply by that date if nothing changes. In short, everyone but China is in serious long-term trouble, and shale oil is only a flash in the pan that won't help us.

As for the New York Times, I guess we've come to expect it will take four years to hear about televised petroleum auctions, three years to read the headlines in the Kabul Press and two and a half years, if ever, to read Countercurrents. Maybe the newspaper of record prints "all the news that's fit to print," but you have to be pretty patient.

This article is a Truthout original.

Nicholas C Arguimbau

Nicholas C. Arguimbau is an environmental and death penalty lawyer who has come home to rural Massachusetts after 34 years in California.


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blog comments powered by Disqus