the drunken, drug-crazed twilight of its run as Leader of the Free World,
America's collective imagination swerves from one breakdown lane to the other
while the highway patrol throws a donuts-and-porn party down at headquarters
and the news media searches the gutter on hands-and-knees looking for the
spot where it dropped its brains.
other day, Larry Kudlow, the king popinjay at CNBC,
told viewers that the US has over a trillion barrels of oil waiting to be
drill-drill-drilled on our way to "energy independence." This is
the kind of malarkey that America thrives on these days, the way yeasts
thrive on sugary mash. It's a complete falsehood, of course, but the working
dead over at The New York Times said substantially the same thing in a
front-page story the week before. The Timespersons
have only one source for their stories: Daniel Yergin,
chief public relations pimp for the oil industry, because he makes it so easy
for them by providing all the information they will ever need. The oil and
gas companies would like to direct the fire-hose of loose and easy money out
there into their stock prices - building to the magic moment when, Mozillo-like, the executives can dump shares, cut, and
run for the far hills where no SEC officer or DOJ attorney will ever think to
look. This is just another racket in an all-rackets society.
fantasy of energy independence therefore takes shape as a "settled
matter" as we lurch toward elections. The arch-moron Mitt Romney will
inveigh against Obama for holding the oil dogs back while Obama pretends to
spank the oil companies for gouging the public on that alleged Niagara flow
of new oil. None of them understands the true situation, which is that the
USA is enjoying one last gulp of a very expensive oil cocktail with the last
few dollars it can prestidigitate out of the central bank's magic box, and
then there is no more even notional surplus wealth to blow on more drinks.
it isn't even much of a gulp. US production of "all liquids" -
which includes methane gas drippings, ethanol, etc
- went from 7.2 million barrels a day in 2004 to about 7.7 in 2011. We use
about 19 million barrels a day, down about a million from peak US consumption
before the financial crash of 2008. The reason it's down: Americans are going
broke, one household and one small business at a time. Shale oil production
is approaching half a million barrels a day. That's about 45 minutes of daily
go-power. It might go up to an hour-and-a-half before production of shale oil
permanently crashes on the combination of fast-depleting wells and a lack of
capital to keep drilling new ones at $8 million per well.
story for shale gas is similar, except that initial production was so
exorbitant that it drove the price down to nearly nothing (the $2 range), and
the bust from that Ponzi will be even more spectacular than the shale oil.
Everyone from Mr. Obama to the chiselers who run Citigroup maintain that
there is a one hundred year supply of gas in the USA. They are going to be
very disappointed. The public, on the other hand, will not even remember what
they said as they burn down the cornfields in anguish.
met a guy at the pumps last week who was filling up a pickup truck at least
twice the size of mine a few yards away. I asked him how things were going fuel-wise
with that monster Ram-Charger he was feeding. At more than $100 a fill-up, it
was killing him he said. His line-of-work required him to drive all over the
county incessantly. His reality was a bit different from the oil company
execs promising limitless horizons of oil to CNBC-watching retirees desperate
for some "yield" on investment in the face of ZIRP bond rates. The
price of oil (and gasoline) may well crash again, but when it does, there
will be fewer business reasons for anyone to drive around the county all the
live-long day, and that guy's Ram-Charger could fall into the hands of the
re-po goon squad. He may never be able to get
another one, either. No more money for
truck loans. Capital shortage.
oil and gas thing cuts so many ways that the public will feel like it is
gargling Gillette blue blades. Just add up the total tonnage of steel
necessary to keep this Ponzi going and you would reach a discouraging
conclusion: this thing has nowhere to go but swift and implacable
contraction. The ultimate destination of "energy independence" will
be a nation with no cars and trucks to run. We'll get there, you'll see. But
that is speaking the unthinkable.
to all readers for sending many kind and thoughtful letters about cholesterol,
diet, statins, doctors, and the medical racket in response to my two previous
blogs on those subjects.