Recently two writers
squared off on the Op Ed page of the San Luis Obispo Tribune giving pro and con
viewpoints about the present state of oil availability along with concurrent
politics. However, in both cases the emphasis
was on economics and missed facts.
Not long ago I received an
education in this subject from Bill Baker, editor of Gulf Oil Publication
Company whose flagship publications are World
Oil and Hydrocarbon Processing
. His on the scene observations and
contacts in the Gulf give him impeccable credentials to speak to the matter and
his information comes directly from the oil and gas industry insiders about the
availability of oil for market.
Freelancing for Mechanical Engineering Magazine (American
Society of Mechanical Engineers) at the time, I asked him about Gulf
information and disinformation.
Baker said the Saudis’ geophysical
data they’ve accumulated over the last 30-40 years has never allowed to be
released. He added they are very
tightlipped about it. In 1991 when they
kicked up production to make up for the loss of Kuwaiti and Iraq oil shipments at
the request of the first President Bush, the Saudi wells ran into water
problems. That means an oil well
producing water will gradually continue to produce more water than oil, at
which time the well would become unprofitable.
That was unexpected because
Gulf oil has been called “sweet,” a term of admiration because it rose to the
surface without any water in it at all. Global engineers immediately recognized
that water—now mixed with Saudi oil—indicated a “maturing” well field that was
running out of oil.
Baker pointed out that it
is widely believed that current worldwide demand equals current production
capacity but some of the figures normally used to determine that come from the
International Energy Association, an organization that measures capacity and
production. At one point statistics and
predictions became so rosy, the editor said he took exception to the information
the IEA put out. Baker knew that in the
late 1990s, prices had fallen to $11-12 a barrel, and the organization claimed
production was at a level so much over demand that too much oil had been pumped. Baker had his own engineer staff do the computations
and they found that global storage capacity, including shipping tankers, could
not hold all the oil claimed to having been produced.
That incident brought home to Baker that politics and
economics muddy the waters, pushing markets to be driven by speculative fear
and widely claimed information that is often incorrect.
Baker has proof that some OPEC members have ignored their
quotas for years and that action is not reported in information used by
investors. Countries like Nigeria were known
to be slipping in an additional few hundred thousand barrels a day, production
that would cause prices to collapse if it became widely publicized.
Another important area to question oil capacity assumptions
is the change in dealing with natural gas escaping from oil wells which until
recently has been flared or simply vented into the atmosphere by Gulf oil
suppliers for decades. However, the
Saudis are switching much of their country’s energy use to natural gas in order
to save their oil for sale. Natural gas
has been a stepchild to oil for years but Europe and South America are also disengaging
from oil and switching to gas and solar.
Debate over the condition
of oil availability can only be believable when facts are used instead of
economic opinions and resulting projections.
One need only point to the fix the world got into with rosy predictions
of housing and banking just prior to the Great Depression of 2008.
I am left to wonder why
American producing oil wells—closed down with the advent of cheap oil from the
Gulf—are not being reopened. While there
is great expense in regenerating them, the ultimate cost is far less than
trying to get crude from oil sands and shale.
More importantly, old wells regenerated might be the stopgap answer to
the conversion from Gulf oil to more environmentally favorable energy generation.
The preferable road in my
opinion is getting all our energy needs from utility companies and celebrating
that by burying global oil politics forever.
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