Energy Question For The USA


No Vision, No Mission, No Energy


Another editorial of Paul Krugman firing volleys at republican “paranoia” for accusing Obama of driving up oil prices. As he observes in “Paranoia Strikes Deeper“: …“the president of the United States doesn’t control gasoline prices, or even have much influence over those prices. Oil prices are set in a world market, and America, which accounts for only about a tenth of world production, can’t move those prices much. Indeed, the recent rise in gas prices has taken place despite rising U.S. oil production and falling imports.”

American households tend to borrow as much as they can. Thus, when oil prices increase markedly, Americans have to cut in crucial budgets, such as house payments. I said at the time that it would lead to a peak in housing prices, and it did.

Why such a drastic influence of oil prices on the economy of the USA? Because Americans, except in a few places such as New York, commute by private car to work. So Americans have to feed the car, if they want to feed themselves.

It was not this way a century ago, or so. At the time public transportation systems using electric tramways and trains were found all over, even in Los Angeles. Car companies put an end to that outrage in the late fifties by buying, and then destroying, all the public transportation system they could put their greedy hands on.  Fossil fuel plutocrats were delighted.

But let’s set aside Krugman’s fake indignation. He is smart enough to know that Romney will do what Romney needs to do to win the Obama, I mean, the election. Waxing lyrical about Romney doing as Obama, does not beat going lyrical about sunrise.

Gasoline prices in the USA are way down in real dollars to what they used to be, decades ago. And so is the gas tax. This means that, far from adapting to the gathering multiply pronged world ecological and energy crisis, the USA has gone the other way, denying there is any crisis. “What? Me worry?” That’s got to be anti-American indeed.

Now real blooded Americans are all into strip searches and the death panel at the White House.

In Europe, gas prices are more than twice that of the USA, thanks to heavy taxes (stations in France have sported two euros a liter, that is 8 euros per gallon, or more than $10.50).

This means that far from being down and out, Europe is efficient enough to operate at that high price level. It also means that Europe is much more motivated than the USA to get much more efficient. In other words, high gasoline prices in Europe are a safety margin. The high prices force the European free market to adapt to a situation that the free market of the USA will encounter someday. Adaptation takes decades: new energies take in the average, historically speaking 50 years to become dominant. Same, one would guess, for energy efficiencies.

Basically, if oil prices doubled from here, gasoline prices would double in the USA. Whereas, even if the Europeans decided to keep the same high taxes, gasoline prices would only augment by 50%. And, in the much more efficient European economy, with plenty of public electric transportation available, the noxious effects on the European economy would be much less than one would expect from a 50% oil price rise. 

The world gets 55 × 1018 joules of useful energy from 475 × 1018 joules of primary energy produced by fossil fuels, biomass and nuclear power plants. That tremendous inefficiency (less than 13%!)  needs to be corrected. It will be, if, and only if, prices are kept high. Thus energy taxes are necessary to adapt to the looming penury.

Why looming penury? Because the reserves of other fossil fuels may have been vastly overestimated (by a factor of 5 in the case of coal). Various fossil fuel lobbies have interest to over-estimate the reserves (because it keeps the world addicted, as they present their industry as a long range solution, which it is not).

Looking at the raw production numbers, as exhibited below in the graphs paints a completely different story: production from existing fields is going down dramatically (at 5% rate, per year).

In other words we are in the treachorous waters between the catastrophe of CO2 poisoning and the disaster of running out of energy to burn.

The unavoidable rise of fuel prices will be less grave in Europe than in the USA, because many Europeans would opt for the available electric based public transportation system (the combination of much more efficient electric motors and central generation is much more efficient than distributing oil to put in SUVs all over, as done in the USA; SUVs, because there are too many holes in the asphalt. A problem partly related to high oil prices!).

Yet, the increase of the cost of imported oil corresponds exactly to the Italian deficit ($55 billion). Although that deficit increase had many causes, oil price increase was by far the most important. And the same for other Southern European countries. So the rise of oil prices was the barrel that broke the back of European debt.

In the USA, ten out of 11 post WWII recessions followed oil price spikes. Why are American minds so closed up to the looming strangulation of their economy by oil? Because the fossil fuel plutocracy is on a rampage in the USA. It uses a red hot propaganda to persuade the vast American public of undifferentiated sheep that there is no CO2 ecological crisis, and no energy crisis. (Although the latest polls indicate that two thirds of the public, in a splendid turn-around, believe that there is indeed a man-made climate change crisis; never mind that the New York Times had the latest tornado rampage, with 40 dead, presented as discreetly as possible.)

Why are the fossil plutocrats hysterical? Well we are past Peak Cheap Oil. Moreover, the “majors“, the world’s largest oil companies, have been pushed out of more and more countries, and replaced by national oil companies. Desperate, the majors have gone for riskier and riskier drilling in the deep ocean. Now Chevron, and Transocean, after a 4 day leak off Brazil, see prosecutors asking for lengthy prison sentences and enormous fines.  

Most of these oil companies are American, so they have pushed for fracking (destroying the underground with poisons to extract fossil fuels). Superficially, it works: USA imports of fossil fuels went quickly from 60% down to 40%.

However, that did not make a dent in the world price situation, because the demand keeps rising, but the world, overall, is PAST PEAK OIL (as I have long argued and the Nature article alluded to below confirmed, using the obvious argument found in the graphs).

So, basically, American fracking finances Chinese oil consumption. Here are some graphs extracted from Nature and the USA government:

[From James Murray and David King in Nature, 26 Jan 2012, vol 481, p. 435.]

When the horrid sun of diminishing resources rises over the parched American oil desert, while fracking reveals itself to be an unfathomable catastrophe, the howling is going to be very great, and one more reason for a depression will blossom.

Much of the USA’s superiority, in the last 150 years, has come from abundant and cheap oil. First in the North-East, then down to Oklahoma, Texas, Colorado, California. Compare with Western Europe, which had basically no oil.

Oil was not just a question of cheap, convenient energy. Oil has, short of nuclear energy, the highest energy density of any material (OK, nuclear energy is millions of time more energy dense).

Oil gave the USA enormous diplomatic and conspiratorial leverage. American oil plutocrats helped Lenin and Stalin develop their colossal fields in the Caucasus and Caspian. One of those plutocrats, Harriman, son of a railroad magnate, and brother of another Harriman, was one of the main operators of the democratic party. Let alone banker to Hitler. He was decorated both by Stalin, and by Hitler. He then went on as U.S. ambassador to major European capitals, and stayed one the main operators of the government of the USA for decades. “Democrats” have long been impure.

Interestingly, I searched the Internet for a document mentioning Harriman’s Stalino-Hitlerian decorations, but could not find it (I have seen the pictures in the past). All I could read is how much Harriman resisted Stalin each time they met, and that was all the time (a total lie that Harriman resisted Hitler, or Stalin: Harriman was an accomplice of Stalin, and helped give him half of Europe, in exchange for manganese and other stuff. But now Internet agents are obviously paid to reconstruct a truth where American plutocrats look good,  knights in shining armor, fighting Stalin or Hitler, each time they met for tea, dinner, lunch, breakfast, and interminable conferences, for years on end, decade after decade).

A famous example of the clout oil provided the USA with: Texaco fueled Hitler’s conquest of the Spanish republic (this one is hard to hide, because the U.S. Congress slapped Texaco with a symbolic fine, well after the deed was done). That used to amuse Hitler a lot (Hitler gave elaborated reasons to his worried supporters for being in bed with American plutocrats; as the Nazi Party was officially socialist, and anti-plutocratic, that awkward situation may have led him to declare war to the USA on December 11, 1941, to ward off the German generals’ argument that he was just a little corporal in above his head).

Another example: Mussolini was hanged from an American gas station in Milan. Italian communists hanged him from his sponsors’ works.

The fueling of the fascists by American fossil fuel companies helped bring the American Century to the world in general, and Europe in particular. Without Stalin and American plutocratic oil, Hitler’s Panzers could not have moved in 1939 or 1940.

The dignified Elie Wiesel, instead of crying crocodiles tears, wondering how such a thing as Auschwitz was possible, should ask how and why the Nazi extermination machine was fuelled by American plutocrats, and how come he, himself, never talks about that.

Wiesel got the Nobel Peace Prize, just as Jimmy Carter (who launched the American attack on Afghanistan). Was it for disinformation? (And how come waging war in Afghanistan is a big plus for the Peace Prize? Is it related to the same mood which made Sweden help Hitler before and during WWII, and never having a serious look at that, ever since? I know the prize is ostensibly given by Norwegians.)

Wikipedia is big on the notion of “weasel words“, and rightly so. Deeper than that is what I would call weasel logic. And ever deeper, weasel worlds. To talk about Hitler without ever wondering who his sponsors were, and what they were after, is to live in a weasel world.

I like Elie Wiesel personally. Yet, just as I like Krugman, Obama, and countless others, such as the infamous Jean-Paul Sartre, he likes power even more than truth. OK, It is unfair to put Sartre, who really espoused the most abject terrorism, with the others… As long as individuals prefer power to truth, the spontaneous generation of infamy is insured.

Total oil sales, per day are about 100 million barrels (in truth the cap is lower, see graph above), at, say $100, so ten billion dollars a day, 3.6 trillion a year. The USA uses about 25% of that. Some have incorporated the price of the part of the gigantic American war machine and (what are truly) bribes to feudal warlords insuring Western access to the oil fields, and found a much higher cost up to $11 a gallon.

Ultimately, and pretty soon, in 2016, specialists expect oil prices to explode up, from the exhaustion of the existing oil fields. Then what?

Moreover, in 2016, the dependence upon OPEC, or, more exactly Arab regimes, is going to become much greater than now. What’s the plan of the USA? Extend ever more the security state, and go occupy the Middle East with a one million men army? To occupy, or not to occupy, that is the question.

Is it time for a better plan? And yes, any better plan will require consumers to pay higher energy prices. As consumers apparently want the army to procure the oil, they ought to pay for it.


Patrice Ayme


Note 1: Flying cost at least ten times more in CO2 creation than taking a train. And jet fuel is not taxed, at least until the carbon plan of the European Union starts charging next year, in 2013. In spite of the screaming from the USA and its proxies: it’s funny how attached to subsidies American society can be.

Note 2: Refusing to pay for necessary military expenses through taxation and mobilization, was a big factor in the downfall of the Roman Principate.

The Principate then tried to accomplish defense on the cheap, by using more and more mercenaries. Many of these mercenaries or their children and descendants were poorly integrated in Roman republican culture (say emperors Diocletian or Constantine, let alone Stilicho the Vandal, a century later), so they established the Dominate, itself a negation of the Roman republic. Amusingly the Western Franks, those salt water (“Salian“) Franks remembered the Roman republic better than all these imports from the savage East… who could not remember it, they, and their ancestors, having never known it.

Guess what? The USA’s army presently employs 300,000 “private contractors” (aka, mercenaries). Curiously, in that case, it’s not so much to save money, than to extract more money from the system (but that’s another story). Still, it will have the same effect.

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21 Responses to “Energy Question For The USA”

  1. Paul Handover Says:

    You closed with the question and premise, “Is it time for a better plan? And yes, any better plan will require consumers to pay higher energy prices.”

    Any alternative plan has to be considered. Here we are as a planet receiving well over a kW of energy per square metre of the earth’s surface so sufficient energy is just not an issue. Our recent solar panel installation on the roof here has taken our electricity demand down from 1,479 kWh last month to 753 kWh and in the summer it will be close to a zero net demand.

    The challenge is getting the world’s leaders to see that the present approach is utterly unsustainable, both politically and environmentally. Paul


    • Patrice Ayme Says:

      Right, Paul!
      I think the leaders see it, but they don’t care. They are more into their peers. Himmler could see that killing the Jews was not smart, and not morally correct, but he went along, because peer pressure of one, namely Hitler (at least that’s what he said, but there is corroborative evidence).

      Getting drunk on peer pressure allows to forget one’s insignificance in the order of things.

      It is expected that by 2015, off the shelf photovoltaics will be cheaper than diesel, from plants which are presently under construction. That, up to the latitude of Spain.

      However, as mentioned here and there, the electricity storage problem is unsolved. Only hydraulic storage can be used, but that presents lots of problems.

      It is extremely important to pursue more advanced nuclear fission and fusion, for a number of reasons, some philosophical, some ecological. Ultimately nuclear will allow us to conquer, exploit, and survive thanks to, the Solar System. Nuclear is also the only sustainable base energy system, barring spectacular progress with electricity storage.

      I am suspicious of any ecologist who is not open to this, because then they are deprived of the most elementary reason. As we are taxing the planet with roughly ten times more people that she can sustainably afford, we do not need the Solar System (say when we run out of Helium 3 for our fusion plants, etc.)


  2. Paul Handover Says:

    Patrice, first, could you please edit my first comment to replace ‘a kW of energy per square metre’ with over 1.3 kW of energy per square metre’? Thanks – finger trouble!

    With regard to your reply, it’s difficult for me to respond in any competent manner because of a lack of real knowledge about the topics you touch upon.

    But what is clear is that every year that sensible, viable alternative energy plans are relegated to secondary national importance for a whole range of countries, the costs of those alternatives will keep ramping up. My little grandson was one-year old last Wednesday; I fear for what may lay ahead for him!


    • Patrice Ayme Says:

      Dear Paul: I am willing to change it, but why should I? It’s correct! 1.3 kW of solar energy per square meter is at the top of the atmosphere. 1 kW is what reaches the ground; the rest is rebounded out to space.
      The fear ought to come about being led by leaders who obviously do not know what they are doing. My prescription is more distributed power, and more referenda.


  3. Old Geezer Says:

    I read a book called “Petrodollar Warfare” by William R. Clark in which he posits the theory that the US Dollar is really backed by oil, and that there is a war going on for global domination by the US Dollar.

    Back in 74 while the world was watching the Watergate fiasco, Henry Kissinger was in Saudi Arabia, cutting a deal allowing them to jack the price of crude, forcing the entire world to pay more money, all of which would be deposited in Treasury Bonds.

    Did I forget to mention that the US Dollar was decreed as the sole currency used for global oil purchases?

    This single event allowed the US banking system to create instant demand for otherwise depreciating fiat money. And that was when oil went from $2.00 a barrel to $8.00.

    At $108 a barrel, there is so much demand for USDs that Bernanke was able to print about 11 TRILLION since the Lehman collapse without any inflation.


    In September, 2000, Saddam Hussein announced to the world that he would take Euros or Dollars for his oil. Since the Euro was worth about 82 cents at the time, all European buyers used Euros, thinking Saddam was a fool. Within two years, the Euro had risen to $1.25, making Saddam look a lot smarter. But I understand that he came to a bad end

    So, even though we all know we need to get off of oil, we should be thankful that it is keeping the USD from becoming toilet paper.The sad thing is that the entire world continues to bear the burden of supporting our fiat money.


    • Patrice Ayme Says:

      Dear Old Geezer: Yes, I think there is something to the whole thing. Krugman carefully avoids the subject. I mentionned countless times on his blog that the USA was profitting from having the dollar as the world reserve currency. He ignored the subject scrupulously, for years, until, finally he broached it, saying some people (?) had said it was so, but no, it was not so. I neither understood nor remember his reasoning. Very fishy. OK, more of this in a moment: child care duty urgently looming…


    • Patrice Ayme Says:

      Dear Old Geezer; yes, Saddam was too clever by half. Saddam rather naively never believed the USA would attack because “we had good laws“… The worst is that the later was true to some extent…

      That’s why one has to be very careful with Syria, although Dr., MD, Assad is a piece of trash.

      To go back to the dollar, it’s ultimately backed-up by American plutocracy, and that includes its financial and military-industrial arms. The feudal lords of the Middle East are part of it… They are secondary clogs of the system, and they are playing an obscure game with Syria.
      enforcing the whole thing are services such as the CIA which conspired with Reagan and Khomeiny (!) to insure Reagan’s victory, by refusing to release the U.S. hostages to Carter.

      In the end, these crazy conspiracies are just such intenses distractions that they throw the entire empire (of the West) on the wrong course. The right course ought to be the extreme rigtheousness of democracy supreme, equality (of whatever can be equalized, like education, or health), and an extreme high tech drive. The wrong course weakens the empire, and make miscreants believe that they have a chance, thus it invites world war.

      So you are right, the dollar is backed up by oil and the military


  4. Old Geezer Says:

    And, as a follow-up to what you said, PA, the purpose of invading Iraq was NOT to pump out the oil but to KEEP IT IN THE GROUND. It is the worst kind of oil – CHEAP OIL – because it is 1500 feet below the ground and easy to lift out.

    And there is a lot of it. 280 + KNOWN barrels, and only 30% of Iraq has ever been explored. So the Big Oil/Big Banking owned boots on the ground (and in the 14 enduring bases) will make sure that $100+ oil is here to stay. The oil in the ground is like the gold in Fort Knox.


    • Patrice Ayme Says:

      Dear Old Geezer: I think you are even more cynical than me! (It’s a compliment!) Yes, indeed, that makes all the sense in the world, that Iraq’s oil was kept in the ground to keep prices just so, AND the influence of the USA on the region up there.

      Being cynical, as the excellent site Learning from Dogs may not have emphasized yet, is an old philosophy (Diogenes…the Cynic), that explains a lot of human actions by seeing them in the most basic way, that is, from the point of view of dogs…

      Yes, tremendous amount of oil in Iraq. All the more since Saudi Arabian oil is supposed to peak in 2026. By then there may well be more oil reserves in Iraq… Certainly the Iraq oil peak is far in the future, and barring a breakthrough with, say, algae based bio-fuel, we are stuck with oil for a long time (electricity is still mostly made from coal, oil, and, increasingly CH4… there is no massive non fossil fuel based electric generation program on the horizon, high temprature nuclear being undevelopped…)

      Speaking of being cynical, all these war noises about Iran may just be a sneaky way to go back to Iraq from behind, in a foreseeable future … Just in case fracking fractures earlier than anticipated…


      • Paul Handover Says:

        Thank you, dear Sir. If I could wake Mr. Pharaoh dog up, I’m sure he would agree that humans are a very strange lot!


        • Patrice Ayme Says:

          Dear Paul: Most Pharaohs made a lot of sense. They were mild dictators, more into a sustainable governance than grander schemes.

          Humans are strange in at least the sense that they forget that, a lot of what they do, is all readily explained, from the point of view of dogs… It’s a sort of ultimate denial of one’s true nature… And part of forgetting that we have just one home, small spaceship Earth…

          Alexander so-called-the-Great was delighted by his encounter with the insolent Diogenes lodged, like a dog, in his barrel… Alexander wanted to help, and Diogenes told him that only the sun could help him, so would please Alexander stop casting a shadow… A nice metaphor, valid to this day.


  5. Paul Handover Says:

    “It’s a sort of ultimate denial of one’s true nature… And part of forgetting that we have just one home, small spaceship Earth…”

    Yes, it is incredibly strange that the one most obvious fact of all, that we live on a finite planet, is absent to such a degree from every aspect of man’s consideration of living on this planet. Let alone that this rather insignificant planet just happens to, well just happens to at this moment in the planet’s geological life, harbour conditions that support a range of warm-blooded species!

    Very odd!


    • Patrice Ayme Says:

      Well the very large swarm of a particular warm blooded, space hopping species is an extremely recent fact. Human population probably passed 50 million, worldwide after the appearance of large civilizations, led by Egypt, about 6,000 years ago…
      The smallness of the planet, plus the existence of Means Of Abominable Destruction (MAD), including CO2 poisoning, means that we are entering the military age par excellence…
      The majority is blissfully unaware of this. 9/11 was just a small warning that conspiracies (which are not supposed to exist in Conventional American Wisdom (CAW, pronounced “cow”) can backfire…


  6. Old Geezer Says:

    Let’s just say that I try to un-spin the propaganda I read to make sense of it. And I always ask “Cui Bono?” as did historians about the last great empire 2000 years ago.

    Concerning Iran, right after the 2003 invasion, Iran was terrified that it was next and sent a message to BushCo offering basically ANYTHING to prevent such a second invasion. All options were on the table including stopping uranium refinement.

    Cheney ignored it.

    The US could have made a deal with Iran right then securing access to oil as well as peace in that region, possibly even peace in Israel/Palestine, since it is Iran that supplies money and arms to Hizbollah and Hamas.

    My only theory is that the US is a proxy for a bigger game which is the Sunni/Shia battle for dominance. And I guess that since Bushes and Sauds are family, they opted to support the Saudis. We have since seen proxy wars in Bahrain and Syria which can be mainly understood along Sunni/Shia lines.

    For sure the US wants to maintain “full spectrum dominance” over the oil in the ME. And I have to guess that they figure it is better to go with the Sunnis than the Shias, perhaps because they make up 80 % of all Muslims.

    I keep reading and questioning.


    • Patrice Ayme Says:

      Dear Old Geezer: Thank you for your interesting ideas.

      A German saying has it that’s not “who benefits“, but “who think they might benefit” (funny that, in spite of all this German wisdom they fell to their knees at the feet of a grossly uneducated Austrian caporal… An object of wonder, and warning, always renewed…)

      Anyway your theses are challenging. What do you mean exactly by Saudis were family to Bushes? Because they visited as if in the same family with Prince Bandar? Or because Bush had a business deal with Bin Laden’s main front man?

      However in Iraq Bush Co advantaged the Shiah. That has reinforced Iran. Maybe they want Iran to feel strong, in the audacious hope that it can be tripped? Machiavellism 101?

      It seems to me that, quite a bit like in the heydays of the Nazi Party local chiefs in the Washington war machine may have different policies, according to how the wind is blowing. Some of those chiefs were there before Obama, or even before Bush. It’s not because they change the head of the CIA that the top echellons of the NSA (subtle joke just committed) change. And a fortiori so with the Pentagon, and all the extremely well paid “advisers” hanging around (such as “Kissinger and associates”, etc.). Krugman, in an access (or was that an abcess?) of common sense, revealed to his rabid “progressive” readership that Obaromcare was the fruit of the hydra brain of the Heritage Foundation (one of these ravenous packs of well paid right wing extremists). They roared their approval.

      In any case, the Roman “Divide and Conquer” seems firmly in place, as is the practice of a state of continual war, to justify a massive military-industrial complex. And they are all in it: see Sarkozy’s brother leading the Carlyle Group… from New York.

      Now, true, said unrivaled military complex maintains peace, sort of, at least in the West (if one forgets the slow erosion of civilization safegards, such as the interdiction of torture,arbitrary executions, etc.). Although 9/11 demonstrated that the dependency upon mercenaries could bring an erosion of security. OK, they have clamped down, worldwide on WMD. One cannot buy Polonium anymore to play with, like 10 years ago (after it surfaced it could kill millions easily: if bin Laden had known this, no doubt he would have used it). And the safety of water supplies has been cranked up enormously.

      So I think most of the policies right now are made by various elements of the plutocracy, each with their own agenda, showing up, and saying:”we want this, or that done!” Administration officials know that, should they wish first class life after they leave government, they better PAY attention to the wishes of their masters. So they do, and find the ideas very deep.

      And so it will keep going, until, well something of a serious nature, probably ecological comes to grip the system. In the USA it could be something as simple as $10 a gallon oil (id est same price as in France now).


  7. Old Geezer Says:

    The Bush family has been really close to the Saud family for decades. They are all in the family business – oil, and the Bushes are just carrying out FDR’s pledge made aboard the USS Quincy in 1945 to support the Saud dynasty in return for permanent access to their oil.

    Deal’s a deal.

    So, yes, I agree that the Iraq invasion was a win for the Shi’ites of Iran. I have to believe that this was known in advance. I still believe that it was to everybody’s interest to keep Iraq’s oil in the ground. Iran, while rich in deposits, has suffered from 30 years of embargo politics and is hard pressed to pump and refine that oil. In fact, the main reason Iran wants nuclear power is so that she can stop IMPORTING gasoline. She has already had to cut the subsidy (imagine that – Iran importing and subsidizing gasoline – – you can’t make this stuff up).

    And again I stress that Dollar Hegemony is at the bottom of it all. After WWII, 50% of all manufactured goods came from the USA. All the competition had been (literally) blown away. But that was then, and this is now. We still manufacture the big stuff, but nearly all clothing, shoes, electronics, furniture, kitchen and dish wares, etc etc come from you-know-where. We get to buy real useful stuff in exchange for funny money.

    The world works for us while we watch American Idol.

    Isn’t that how empires are supposed to work?



    • Patrice Ayme Says:

      Dear OGP: Well the emptying of the core (Rome, Italy) is how the Roman Principate evolved. This was the result of plutocracy in two ways: bread and circus (both freeley distributed), plus, after a while, a policy of weakening Rome, from fear of the Populus. That culminated with Constantine, who was from the periphery (Illiricum ~ Balkans, Britain) making Byzanthium into his capital.

      That model was not followed by the Franks, who insisted on a multi-polar empire (Lutetia, the initial capital, and originator of the Julian revolution, had its name changed into that of the local tribe, the Parisii…. As if to accentuate that local it shall stay.) Charlemagne went to establish his capital in the middle on nowhere (Aachen)

      True, the multipolarity went way too far.

      The present day USA is in a strange situation. Not enough immigration is bad when one’s demographics are not good (the case of the Late Roman empire, in Gallia, Italia, and overall, for reasons unclear out of italy). This has been the case of the USA (the core white population is arond 190 million and not increasing, to use an euphemism).

      However, in the case of Rome, the immigration turned to a torrent, and, in conjonction with the madness of the Abrahamist sect, Catholicism, and the folly of plutocracy, many core Roman values got swept away.

      It is not clear that the same phenomenon is not presently happening, again. It is fascinating, in particular, that the Romans never became intellectuals (the Greeks stayed the intellectuals of the empire).

      The Franks corrected that by the long term trick of making SECULAR knowledge the official mandate of the church (that’s how the university system appeared, from the CATHEDRAL schools, and why, in Europe, it still has religious like characteristics, such as no police on campuses… And also low salaries, as professors are supposed to be more like priests than businessmen).

      Yes, keeping Iraq’s oil in the ground was clearly a goal, and yes, as Keynes understood fully in 1944, the dollar was an hegemony trick, and it’s pathetic to see his would-be student Krugman unwilling to understand that.

      Oh some would say it’s anti-American (some Pakistani accused me in The economist to be “Vitriolic anti-American”) to be anti-dollar hegemony. However, it’s like saying one is anti-druggie if one is anti-drug.

      The USA was at its best when it worked and thought best, and better than the rest of the world… Around 1942. Paradoxically that was when American leadership had already embarked on the fateful, irreversible course followed today. The USA ought to have declared war to Hitler within hours of France and Britain in 1939: that was the high road not followed.

      Instead, Hitler was milked for all his worth, and now it’s the Saud, dollar, oil, etc.


  8. Old Geezer Says:

    Great chatting with you, PA. Now it’s on to the next essay.



    • Patrice Ayme Says:

      OGP: Very nice chatting with you too, you know a lot. To work, indeed! Resting from the Big Bang here… I hope that was clear enough, but i am not sure. I still have to expose the strange interversion between the USA and the Eurozone, about money creation… So much to say…


  9. JMcG Says:

    Peak Oil is a much discussed topic but so far without much confirmation as to whether the Saudis, for one have as much excess capacity as they claim. Today they claim they can just turn on a few more spigots and ramp up their production to 12.5 million bpd, no small feat, indeed. And the U.S. is willing to allow that the Saudis, as far as the talk goes, being one of our closest (and most strategic) allies in the Middle East, would do this to keep the price of oil from rising too quickly and doing damage to the world’s economy when it would not be beneficial to have energy prices rise precipitously. But make no mistake, the Saudis are doing everything within their power to get more oil out of their oilfields, sometimes successfully, sometimes not. In the long run production will decline at some point, but they haven’t lost the game yet. And it is a game. A confidence game, if you will.

    THEY CLAIM to be able to produce up to 12.5 million bpd, but to my knowledge they have not shown yet that they can do it. When there is another war in the Middle East maybe they will have to, but so far it’s just being used as a palliative. Not that oil is cheap today. It isn’t. But little besides high, even painfully high oil prices seems to discourage Americans from excess consumption. So we are joined at the hip with the Saudis until further notice. An odd couple to say the least.

    You have also said, and I agree that a little more oil production in the U.S. isn’t going to add that much to overall production, of which the U.S. is using a very significant amount. So we’re not really in control of the oil game, yet we don’t do enough about becoming less oil-dependent in the meantime, which would help our geopolitical security. Oil production in the U.S. peaked in 1970. A good book about it is called Hubert’s Peak, named after the Shell geologist that stubbornly predicted it, though he was ridiculed in the industry until it and refined his numbers somewhat until it finally came to pass. Some have tried to impute from his success when world oil production will peak but so far without confirmation.

    Before I get into technical discussions about what is done to produce more oil from a declining field, let me mention another big issue when it comes to the Kingdom of Saudi Arabia. The Saudis have claimed since the 1980’s that their proven oil reserves amount to some 264 billion barrels (maybe it’s 246 but no matter – as you’ll see it does not particularly matter so much what they say but rather whether they can maintain their credibility in the eyes of the world and perhaps especially in the eyes of the world’s governments, financiers and bankers. And the U.S. behaves as if it has an interest in helping the Saudis do just that). This is questionable, not in the least because since then they have produced some 30 billion barrels without even adjusting downward their claimed proven reserves for the 30 billion barrels. Even without the 30 billion barrels it’s still an impressive number and nobody of late has successfully challenged the Saudi’s claim to still have the world’s largest proven reserves.

    It is well known that the Saudis use a lot of what is known in oil production as “water cut” or water injection if you like the term better to increase production from many of their most productive oil fields such as the Ghawar, the largest field ever discovered, and which is estimated to contain (I presume they mean originally) some 87 billion barrels (or maybe it’s 78). Don’t ask how they came up with that figure because nobody but the Saudis exactly know the answer to that and they’re keeping tight-lipped about it. Water cut is a technique used to drive some of the remaining oil towards the center of the reservoir where it can be more easily withdrawn. It (water cut) usually isn’t needed when a new (untapped) oil field first comes into production because the natural drive of the field when it is young is often quite strong. Hence, the old photos of Spindletop and other wells drilled early in the American oil boom that issued forth a gusher – in some cases for weeks or months until they could be brought under control. Today we expect the oil drillers to explicitly avoid gushers and what happened with BP’s Macondo well to avoid the outright waste and environmental consequences of a well blowout. (In the case of Macondo, the last thing some of the workers on the rig heard before the explosions that killed some of them and destroyed the rig was that the well was coming in (literally into the rig) – meaning that gas under enormous pressure had breached the multiple barriers put into the well head, including the blowout preventer that failed to squeeze shut the pipe and was just seconds from causing a catastrophe.

    The reason (sorry if this is beginning to sound academic) is that an oil field’s natural drive comes from the natural gas entrained in it. And the liability for the length of time and quantity of oil that can be produced from the field is that if the field’s natural drive is damaged or falls below the thresh hold level necessary for it to produce oil profitably, the field might never again produce oil reliably in significant quantity. (There are always tradeoffs between the amount of money one must spend for a given level of production and what the eventual output might be and so on. Suffice it to say there are lots of potential oil wells that could produce a million barrels that are not of much interest to the oil majors because they have stockholders who are concerned about how much new production they are bringing on to replace that which is diminishing and the majors thus are interested in making outsized profits from wells or fields that can reliably produce lots of oil. Not that a few oil wells producing a million barrels would make much of a dent in the new demand coming from China and India. They wouldn’t.

    Which gets us to your comments about oil dependency in the U.S. vs. Europe. What you’ve said is true, but you have overlooked the fact of oil being priced in USD. This means explicitly that as the oil price rises the dollar weakens. The Euro therefore is not subject to the extent of oil price volatility as the USD and so neither is the economy of the Eurozone. It’s true that Europeans countries that do not produce oil themselves have endeavored more than the U.S. to conserve oil consumption by producing on average cars which get better fuel economy and by the widespread use of electric trains (mostly powered by coal or nuclear energy) for hauling both people and freight, compared with diesel trains in the U.S. and passenger miles that are small by comparison with Europe. To sum up and I think you have tried to make the point as well but without stating it so explicitly, the U.S. economy has more leverage when it comes to the oil price. When the oil price is low, consumers have more disposable income they would have been spending on motor fuels, and the opposite is true as well. Also true is that when the oil price is low it usually means economies are in recession. In Europe there’s a relationship there, but it’s a weaker correlation. My point is that it is not only because of waste or excess consumption but also because oil is priced in dollars. The consequence of that is that when the oil price rises and the dollar is becoming weaker, holders of dollars that got them from selling oil have a natural inclination to lay off some of their dollar risk and exchange those dollars for a stronger currency. It could be the Euro or the Yen or the Swiss Franc or another, but it is a strong probability. The U.S., being that the dollar is still the world’s reserve currency and still considered a safe haven has benefited greatly from very low interest rates since the finance crisis because of the amount of its borrowings. China holds a lot of its foreign currency reserves in dollars and with a lot of that they have bought U.S. Treasuries.

    My last point is that in the current situation where there is excess demand from India and China but in the U.S. unemployment is still high by historical standards comparing it with times of relative prosperity, the oil price appears to be higher than it should otherwise be. Even the CEO of Exxon has said that as much as 40% of the oil price is due to nothing more than speculation. So if governments indeed want to lower the price of oil to put more money in consumers’ pockets and spur economic growth – and I’m not agreeing implicitly this is a good thing because it encourages waste and contributes to the release of greenhouse gases – why not simply curb some of the speculation? I ask first is it possible and second if it would be good to do so. The outcomes do not seem clear to me as they entail some effects that are not simple to sort out. But if the case could be made – perhaps one day in the future when Americans do not rely so heavily on personal autos and Germans lose their love of driving at 150 km per hour on their Autobahns – that a lower oil price would have only beneficial effects maybe the government would be wise to take some steps to rein in speculation on oil. Otherwise, though it is sometimes tempting for politicians to tap this reservoir of popular revulsion at high oil prices, it might not prove productive to do so.

    As concerns releases of oil from the Strategic Petroleum Reserve(s), the hope is that simply saying one will do so will telegraph to the oil market that some of the speculation should cool down or the consequence will be (if only temporarily) excess supply. The problem with this is it might only work once or twice and then they might find it is like the boy who cried wolf once too often.


    • Patrice Ayme Says:

      Dear Jeff:

      Wow, yours is a long and very cogent comment! I agree with most of what you say, but naturally, I will talk about the different appreciations I have.

      You assert several times that when oil goes up, dollar goes down.

      I don’t see what it should be so. And, indeed, recently the dollar went up while oil went up, and that explains gasoline went to 2 euros/liter, $10.50 per gallon, in France…

      I did not know Exxon said 40% of price rise was speculation. In the long run, though, it’s irrelevant, as prices will angle sharply up by 2016, except if we have an even bigger catastrophe before that.

      What I know is that the majors are getting desperate. See Total getting very hot enormous pressure CH4, 6,000 meters below the sea floor. I hear that the deep layers ruptured, 4,000 meters down…


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