frightening sounds, sights, and odors on the wind this foreboding snowless
winter - like emanations from some back ward of a global psychiatric hospital
- are the signs of a nation going completely mad. The traumatic rise of oil
prices above the $100 level is one irritant, prompting a range of people-who-oughta-know-better to gibber and fulminate as though
they'd been locked in the nation's attic since Thanksgiving with nothing to
do but play with a box of pencils. Meanwhile, several absurd "narratives"
circulate around the mainstream media that are sure to cause this country
more trouble - as any set of pernicious untruths will.
popular new lie is that US oil production is suddenly so robust that America
is about to become a leading world oil exporter again - which is completely
untrue. The lie arises at the intersection of wishful thinking and the
willful misuse of statistics. It was trumpeted by the appallingly credulous
Tom Friedman in his Sunday New York Times column, of all places, and it shows
how effective the oil and gas industry's propaganda campaign has been.
lot of the wishing comes out of the shale oil and shale gas sectors. Those TV
commercials you see around the news hours on the cable networks are designed
to extract investment capital from elderly people who have been swindled in
the bond markets and don't know where to stick their dwindling retirement
funds. Shale oil and gas must seem like a good bet to them, especially the
ones marooned in retirement housing clusters in dismal places like Arizona
and Florida, where not being able to drive is a virtual death sentence.
US government is in on this propaganda offensive, especially the Department
of Energy's Energy Information Agency (EIA), which routinely issues overly
optimistic reports about future oil production. The political spin is a
quixotic effort to promote another commonly touted lie about the future: that
the US is approaching a point of "energy independence." You'll know
we got there when you have to walk to your new job weeding the potato fields.
The mendacity behind this propaganda is strictly the wish of politicians to
avoid telling voters the truth, out of sheer cowardice for the consequences.
US Energy Secretary Steven Chu will go down in history as a pathetically passive
quisling, who thought he was honest and patriotic by standing in the
background and keeping his mouth shut.
fact, a lot of the propaganda behind the current madness is based on the
incapacity of Americans to imagine daily life without all the cars. One very
active drummer on the propaganda scene is John Hofmeister,
former CEO of Shell Oil. About a week ago he debated Tad Patzek,
a petroleum engineer from the University of Texas. Hofmeister's
rap is based on one central fallacious idea: that American life can only
continue if we keep all the cars and trucks running. Any other outcome is
unthinkable, off the table. To put a finer point on it, he insists that our
national identity and destiny are tied to "personal
transportation," code for car dependency. The debate was therefore
absurd and Patzek was way too polite. He never
challenged Hofmeisiter's core idea.
public's gross misunderstanding of these issues arises over a set of mis-statements made in recent years especially focusing
on the Bakken shale oil basin on North Dakota, the
various shale gas plays around the country, and the tar sands of Canada
(which so many spinmeisters seem to regard as
belonging to the United States). The true state of the US oil industry is
that we only barely stalled a 40-year decline in oil production by throwing
massive amounts of money (capital) at oil reserves that are very expensive
and difficult to get. In so far as we've entered the terminal stage of a long
debt cycle, one thing we can be sure of is a shrinking pool of real capital
investment. Hence the frantic propaganda effort to funnel remaining available
money into the shale plays.
companion fantasy to all this is that the US has a hundred year supply of
natural gas. President Obama is guilty of this whopper. (One commentator,
financier Bert Dohmen, made the ridiculous claim in
a recent podcast on the Financial Sense News Network, that the US has a
thousand year supply.) These are the kinds of irresponsible statements that
will eventually inflame a public yet again swindled by authorities they
desperately want to trust. The truth is we probably have perhaps a seven-year
supply of shale gas, and maybe 20 of all gas including the regular old
conventional gas. And even that could easily be reduced by the disorders in
capital formation now underway in the destabilizing banking sector.
any case, all this wishing and lying is about to collide with price
volatility to make the American voting public absolutely batshit
crazy with dread and anger. That, of course, will only prompt more lying,
whopper-spinning, and grievance-flogging in the political arena. It will be
nearly impossible for the public to evaluate reality. In the meantime, those
disorders in banking and financial markets are close to running out of control.
Events are tending ever closer to criticality. I believe they will be
expressed in political violence around the major party conventions this
summer. Those will be interesting fog-lifting weeks.