Lethal Trajectories - Michael Conley [29]
I’m probably getting into more detail than I should, Clayton thought, but I’m tired of the Wellington Cranes of the world oversimplifying complex problems they don’t understand.
“Now here’s the rub, Wellington: most of the proven oil reserves today are held by national oil companies. NOCs, as they are called, are owned by OPEC and other oil-producing countries. These NOCs hold about ninety percent of today’s proven oil reserves. Their thinking goes something like this: ‘Why should we invest in expensive new drilling and production today when we know we’ll get more from that same oil tomorrow as oil prices go up? The NOCs hold all the cards, and if they choose not to ramp up production, there’ll be less oil available and we’ll pay more for it. There’s oil out there, to be sure, but it may become too costly to use. That’s what peak production is all about.”
Wellington was getting creamed, and Fitzwater finally bailed him out with a question: “Mr. Vice President, the Bakken Oil Field has gazillions of barrels of proven reserves that don’t require expensive offshore drilling. Have you forgotten about this field?”
“No I haven’t, Nelson, but I’m reminded of an old saying in the oil business: ‘It’s not the size of the tank that counts, but rather the size of the spigot.’ Essentially, this means that the thing that counts most is not the potential reserves within an oil field, but rather the affordable flow rate of oil you can get out of the field. There are physical and economic constraints to what we can reasonably expect to get from any one field, and the affordable oil that can be extracted from a field is the one metric that trumps all others. You’re a financial guy, Nelson. Think of it this way: it’s financially equivalent to having a billion dollars in a savings account but only being able to draw out one hundred grand a year. It’s the hundred-grand flow rate that matters most. The Bakken Field is important, but the upside flow rate may never exceed one million barrels per day—about six percent of America’s daily oil consumption.”
Peter Shillington, having learned his lesson, waited until McCarty finished before asking his next question. “Mr. Vice President, we’re hearing every day about new oil fields opening up. This Chunxiao Field, causing all the commotion now, is but one example. Wouldn’t you concede that even though some fields are depleting, new discoveries are made every day to replenish supply?”
“Good point, Peter,” said McCarty, mindful of Shillington’s newfound manners. “Unfortunately, we are now using up about eight barrels of oil for every new barrel we discover. It’s like having a savings account where we draw out eight dollars for every dollar we put in. It’s unsustainable. Furthermore, we’re no longer finding the giant fields like those discovered back in the 1960s, and it now takes a huge number of smaller new fields to replace the oil that’s been depleted from a few of these old giants.”
Fitzwater could see they were getting trounced on the oil issue and redirected the discussion to friendlier terrain. “Mr. Vice President, you still haven’t addressed our economic doldrums. Could you comment on them please?”
“I have, Nelson, but maybe not as directly as you would like. In broad terms, the nations of the world have experienced negative growth for five years. The driver has been the access to and affordability of oil, or lack thereof. Oil is a special gift of nature that took hundreds of millions of years to make and less than a couple of hundred years to use up. It’s been so hard to replace because, quite simply, there’s nothing like it in terms of its portability, functionality, and power punch. A barrel of oil, for example, has an energy equivalent of about 1,700 kilowatts of electrical energy, and it’ll take a lot of alternative energy and new energy systems to replace the oil we no longer have. We’ve dragged our feet by not developing these systems while there was still time, and now we’re behind the eight ball and paying a fierce price for our inaction. Our economy