Warning: Oil Supplies Are Running Out Fast
By - August 07, 2009

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned. Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr. Fatih Birol, the chief economist at the respected International Ene rgy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries. – Independent (UK)

Dominant Social Theme: Better trade in the ole gas guzzler.

Free-Market Analysis: The monetary elite has every reason to develop and sustain the meme that oil is running out. The wealth to be garnered by controlling such a basic substance is phenomenal. The perception that such a substance is rare and getting rarer only adds to its value.

Yet there is plenty of oil in the world, we have come to believe. We think, in fact, it may be abiotic – a naturally reoccurring substance (why else the reports of oil fields filling back up?). In any event our suspicions are based on a variety of factors. Here's another: Those involved in the production of oil, and its analysis, have gone out of their way to label it a "fossil fuel."

This is not merely a serendipitous phenomenon, such labels never are. In fact, it is naïve to believe that producers should be pro-plenty while those who oppose a product or service should be pro-scarcity. Most large-scale producers have a vested interest in a public perception that their good or service is in short supply.

We have pointed out that the monetary system is manipulated. We make this statement regularly and with some confidence because central banks are taxed by governments with the blunt mandate to fix the price of and volume of money. Likewise, we believe it is obvious that the price and quantity of oil is manipulated. There is, in fact, probably as little a free market in oil as in money.

Huge discoveries, for instance, are made around the world, and yet most of these are not acted upon. Meanwhile, there is plenty of reason to think that oil companies are among the most generous givers to environmental groups. The more agitation against energy producers, the scarcer the product and the better the price.

How is it that most of the oil in the Western world has ended up coming from the notoriously militarized Middle East? A single bomb, properly placed, sends the price of oil skyrocketing. Is this a prudent way to produce energy? Yet the situation has persisted so long that there are only two logical reasons for it. Either there is no more or better place to find oil than the Middle East, or the industry and associated players are determined to sustain such a tenuous situation for pricing purposes.

We do tend to favor the second alternative, in large part because there is plenty of evidence that oil is present in copious quantities around the world. Yet, somehow the Middle East has become the repository of Western energy along with oil development off-shore. It is almost impossible for anything other than a major multinational to drill in the Middle East. And to drill offshore cost billions. These are artificial barriers to entry in our opinion, massive ones. Yet other avenues to drilling are stymied by environmental and political concerns.

The scarcity is seemingly artificial. The barriers to entry are apparently legislative, military and diplomatic. There is plenty of oil, in our opinion, were individuals allowed to exercise human action to drill for it. Here's an excerpt from an article in the Wall Street Journal from March 2008 ("The World Has Plenty of Oil").

What are the global resources in place? Estimates vary. But approximately six to eight trillion barrels each for conventional and unconventional oil resources (shale oil, tar sands, extra heavy oil) represent probable figures — inclusive of future discoveries. As a matter of context, the globe has consumed only one out of a grand total of 12 to 16 trillion barrels underground.

What percentage of global resources is ultimately recoverable? The industry recovers an average of only one out of three barrels of conventional resources underground and considerably less for the unconventional. This benchmark, established over the past century, is poised to change upward. Modern science and unfolding technologies will, in all likelihood, double recovery efficiencies. Even a 10% gain in extraction efficiency on a global scale will unlock 1.2 to 1.6 trillion barrels of extra resources — an additional 50-year supply at current consumption rates.

The impact of modern oil extraction techniques is already evident across the globe. Abqaiq and Ghawar, two of the flagship oil fields of Saudi Arabia, are well on their way to recover at least two out of three barrels underground — in the process raising recovery expectations for the remainder of the Kingdom's oil assets, which account for one quarter of world reserves.

We could go on and on. But take a step back and look at the bigger picture. The monetary elite deals in dominant social themes – and each theme, we have come to believe, is intended to increase control and to generate voluminous, staggering, profits over time. Peak oil, global warming, over-population – even (and most importantly) central banking, all of these are in our opinion a great deal less problematic than they are made out to be. It is the relentless propaganda that makes them so seemingly formidable.

Yes, propaganda … How can you tell a dominant social theme? It is one that is treated as a given despite the lack of scientific and popular consensus. It is likely to be announced as a certainty by the same individuals that stand behind central banking and other kinds of questionable monetary memes. Most importantly, the proposed solutions are inevitably those that affect billions and yet are always administered by a talented handful clad in good, gray suits and belonging to an alphabet-babble of global institutions.

After Thoughts

It is for this reason, among others, that we so consistently suggest that a market-based money standard is far preferable to the central banking standard that exists today. Money is at the heart of modern memes. The only way to do reduce their prevalence and impact is to insist, theoretically anyway, on free-market solutions. Otherwise each meme only propagates another. Each solution only produces another problem.

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