What's That Giant Sucking Sound?

Dr. M.(arion) King Hubbert predicted (in 1956) that oil production in the United States would peak and decline thereafter by 1970 and that global oil production would peak "about a half-century" later and decline thereafter. It is now 2008 and what little I know about the impact of supply and demand on prices tells me that demand for oil is more powerful than supply. Therefore, the price of a gallon of gasoline in the United States is going toward $4/gallon and rising. The giant sucking sound is produced by pumpjacks that aren't pumping anything out of the ground except air. The recent film about the origins of the oil business in this country was entitled, "There Will Be Blood." We are trading blood for oil in Iraq at this very moment. The invasion of Iraq wasn't about terrorism, it was about oil (and the giant sucking sound). If this is a (fair & balanced) prophecy of doom in our time, so be it.

[x NY Fishwrap]
Oil’s End
By Timothy Egan

From the steps of the Supreme Court to the White House press room, from global trading exchanges to the snowy reaches of Alaska — over the last week, you could hear the creak of history as it began to pivot in a half-dozen locales.

The Age of Oil is at an end. Maybe not this year. Maybe not for five years. But signs of the coming collapse are evident.

Start at the White House. There, a week ago, President Bush touted tax breaks for oil companies that have just posted the largest profits in the history of American business. Yet he was dumbstruck when asked about the prospect of $4-a-gallon gasoline, a price that will force many families to choose between food and basic travel.

“Wait — what did you just say?”, the president asked after a reporter solicited his advice for Americans facing that price, which was predicted by many analysts.

“Oh, yeah?” Bush said. “That’s interesting. I hadn’t heard that.”

He doesn’t get out much, understandably. But had the president been in California over the weekend, he would have found consumers paying what he apparently has yet to fathom — more than $4 a gallon at some stations.

And then on Wednesday of this week, oil reached its all-time, inflation-adjusted high on the global market: $104 a barrel. Remember that number. Because when oil was half that price, three years ago, Bush said the market alone was sufficient incentive for Big Oil to make added investments. But now that the price is over the $100 mark, Bush wants to continue giving breaks to oil companies rather than shift those incentives to alternative fuels, as many in Congress would do.

For Exxon Mobil, there was $40.6 billion in incentive. That was their profit last year — earning $77,220 a minute. Fine. Greed is good. All hail the free-market and shareholders who are seeing a nice return on their oil stocks. But asking the American taxpayer to indirectly subsidize this is grand folly at a time when the world’s oil reserves will soon be in decline.

Bush implied that the oil industry would not build new refineries without tax breaks. Wait a minute — they haven’t built a refinery for 32 years. What they have done is take refineries out of commission. Scarcity is also good, as Enron showed when they ginned up the phony California energy crisis seven years ago.

It’s hardly surprising that Bush had a bar-scan moment similar to his father’s befuddlement over something any first-grader could explain at a supermarket counter. But a man who is clueless about the price of a commodity so elemental to everyday life should not be giving advice on the value of that commodity. And it says something about the industry’s smarts if Bush, whom many Americans already see in the past tense, is the best advocate they’ve got. The world oil cartel snubbed him again this week on his pleas for more production. But no amount of Saudi hand-holding and pathetic groveling is going to change anything so long as we remain the top customer for their product.

Next scene: the Supreme Court. In the pre-dawn cold last Wednesday a group of fishermen, merchants and natives from the Alaska village of Cordova waited to get a seat for the day’s proceedings. There, the high court was hearing Exxon’s appeal of $2.5 billion in punitive damages the company was ordered to pay for the nation’s worst oil spill.

The spill, 11 million gallons of crude oil washing up on more than 1,200 miles of shoreline, happened 19 years ago this month. I was there, in the panicked port of Valdez, and saw something I never expected to see: fishermen who have faced 30-foot waves in the Gulf of Alaska crying their eyes out at paradise lost. Lives were ruined. Businesses went under. The natural world was changed in ways still unknown.

When Exxon soiled Prince William Sound, they promised to make the fishermen and others whole. To date, they have paid $400 million compensatory damages, but have used an army of lawyers to avoid paying the bigger civil verdict, which a jury awarded 14 years ago.

The amount at stake — $2.5 billion — would work out to $75,000 a piece for each of the 32,000 victims, or less than three weeks of Exxon profit.

“This has been justice delayed,” said Sarah Palin, the reformist Republican governor of Alaska. “We pray that this is not justice denied.”

Final scene: Anchorage. The largest corruption probe in state history just snared another bigwig — Jim Clark, the chief of staff for ousted Gov.Frank Murkowski. Clark, often called the most powerful unelected man in Alaska, agreed to plead guilty to felony conspiracy charges involving an oil service company that bribed Alaska’s leading politicians. You can bet he knows plenty about Murkowski.

To date, a Federal Bureau of Investigation team has brought down the speaker of the House, among other state politicians, and appears to be closing in on Alaska’s senator-for-life, 84-year-old Ted Stevens. The congressman-for-life, Don Young, is also a target, according to press reports. Both men have said they have done nothing illegal, and are running for re-election this year.

The common thread in all of this is oil. The Age of Oil brought us John D. Rockefeller’s monopoly, and corruption that reached into the White House. It may end with an industry too bloated by profit and too arrogant to pay the costs of its mistakes — and a president who is deaf to the sound an energy empire makes before it crumbles.

[Timothy Egan worked for 18 years as a writer for The New York Times, first as the Pacific Northwest correspondent, then as a national enterprise reporter. In 2006, Mr. Egan won the National Book Award for his history of people who lived through the Dust Bowl, The Worst Hard Time. In 2001, he won the Pulitzer Prize as part of a team of reporters who wrote the series "How Race Is Lived in America." Mr. Egan is the author of five books, including "The Good Rain: Across Time and Terrain in the Pacific Northwest, and Lasso the Wind, Away to the New West. He lives in Seattle.]

Copyright © 2008 The New York Times Company

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