Copyright 2015, Chuck Dorris, all rights reserved.
There’s an old adage that adaptation in the energy market occurs when sweet crude averages $70 a barrel. At that cost point, the alternative-energy folks (tree-huggers) suddenly find wind and solar to be profitable and practitioners of black magic (frackers and slant drillers) start making money hand over fist. For the last four years the latter have walked off with license to plumb the continental US, groundwater concerns be damned, while the former have mused at the prospect of constructing giant seagull mincers off the coast of Massachusetts.
Then crude plummeted to below $60 a barrel. A decline in demand dovetailed with a flood of exports from the remnants of OPEC; seems the Arab oil barons have finally figured out supply and demand. They supply at an overwhelming rate that drops prices enough to drive off more expensive options. Customers return to the Persian Gulf. Pentagon funds ensure Baghdad adds to the supply chain, while the White House cuts a deal that reopens Tehran’s market contribution. In six months, North Dakota devolves from its brief stint as a US employment Mecca back to a source of cheap beef and wheat.
At first glance, bad karma. But take a second look. Saudi Arabia has reached peak oil. That reservoir has maybe another 15 years, before it runs very dry. Iraq promises a large supply but has political problems that make the current US Congress appear absolutely functional. Iran’s promise for cheaper natural gas is to run a pipeline to India and be sucked dry as a vodka-laced Big Gulp in a car full of teenagers on Saturday night.
This is a run to oblivion for the Middle East, unless OPEC can make Europe sweat delivery. Welcome to the current Libyan refugee crisis. Rightfully worried by their dependence on Putin’s natural gas monopoly, and unwilling to copy the French nuclear option (Paris generates 90% of the country’s electricity with Admiral Rickover’s dream power source), Rome helped pay for a pipeline that runs under the Mediterranean from Tripoli to Italy’s sunny southern shores. Smart move…until the “Arab Spring” drove off all the expats who know how to operate this kind of equipment. Now the Italians clamor for Iranian and Qatari natural gas along with their neighbors. And I haven’t even touched on the Ukrainian problem. Yet.
Coal would seem a natural response, but look at the nightmare that China’s urban population faces with every breath. My cigar habit—four a day, plus a couple of cigarettes on a worksite—is positively healthy in comparison to the atmosphere in Guangzhou (rated the 12th worst place on the planet to live work because of environmental conditions—I spent two weeks there a couple of years ago, filtered all my lung activity through Marlboro Reds.) So coal is out for Europe and probably will be here in the USA too. Just as soon as Congress shuts down its own power plant six blocks from the Capitol and the representatives from West Virginia are put back in a box.
Oblivion, then, is to be avoided by keeping oil at something above $70 a barrel. That means my work trucks—at 14 miles to the gallon—are expensive to operate, while your 25-mile commute is going to suck away 10% of your family budget, but the alternative energy industry stays in business and in the end, we may not in fact have tidal flows that wash onto the National Mall. (That’s not a joke, they just finished building a flood-prevention dam and a road closure just to the north of the World War II memorial—get on Google Maps and check out 17th Street. The flat-Earth types may deny global warming, but the urban planners in your nation’s capital are already completing construction projects that concede the inevitability of disaster.)
The race to oblivion is fed by short-term profit-taking and export-dependent countries (see Iran, Iraq, Nigeria, Saudi Arabia, South Sudan, and Venezuela). Push the prices back to a higher level (hint, hint—taxation to pay for infrastructure) and we buy a different future than one starring Mad Max. No 18-wheeler with 3,000 gallons of petroleum is worth more than a human life. Time for a cigar.
* Featured Image Copyright 2015, Chuck Dorris, all rights reserved.
Eric C. Anderson has returned to his roots—and is learning the art of traditional wooden boat construction in the great Northwest. Prior to his return to carpentry, he was a long-standing member of the U.S. intelligence community. He produced over 600 articles for the President’s Daily Brief, National Intelligence Council, International Security Advisory Board and the Department of Defense. In addition, he is the author of numerous books, including Take the Money and Run: Sovereign Wealth Funds and the Demise of American Prosperity (2009), China Restored: The Middle Kingdom Looks Forward to 2020 (2010), and Sinophobia: The Huawei Story (2013). He has served as a senior intelligence officer in the US Air Force, with assignments to the Multi National Forces-Iraq (Baghdad), the U.S. Pacific Command (Hawaii), Japan, Korea and Saudi Arabia. He has a PhD in Political Science from the University of Missouri, where he has taught, as well as teaching at the University of Maryland, the Air Force Academy, and National Intelligence University. A longtime Harley rider, he claims over 300,000 miles on two wheels in the past 30 years.