[C8]

Hello

I actually have a different view of nationalization then perhaps others have. In the classic view a large government oversees and inefficiently runs oil companies. I think that this is disappearing to some extent in the world and that what is replacing it quickly is crony capitalism where oil companies use large amounts of money and influence over the government to gain advantage for themselves. In a sense this is a reverse form of nationalization. Oil companies control the government, which then controls the rules for all energy companies to follow- including oil companies. It is no secret that many officials at the top levels of our government are executives from major fossil fuels corporations.

What do these companies do with this government power? They do several things, here is a small list:

1. First they get special tax breaks the fossil fuels companies.

2. The government spends massive amounts of money subsidizing fossil fuel consumption

3. The fossil fuels companies control the regulatory apparatus in our nation and they prevent the government from enforcing many safety and environmental regulations on fossil fuel extraction.

4. Oil companies also have placed political veto power over many appointees to our nation’s courts so that companies, like Exxon which had a disastrous oil spill, find that they can get off very lightly from any damages.

5. Tax money is also used for massive military and war spending to secure areas where fuels are found in profits made.

6. Perhaps most significantly, fossil fuel companies are able to use government power to stymie any efforts to regulate carbon dioxide emissions which lead to the disastrous runaway changes observed in our climate.

There’s much talk about the inefficiencies of nationalization. But crony capitalism produces its own inefficiencies that dwarf those of the nationalism. To list a few of these:

1. Fossil fuel control of the government leads to a serious lack of research and development for alternative fuels conducted by government funding.

2. There is a lack of infrastructure necessary to be built to make alternative fuels usable.- a very serious inefficiency as the price of FF's rise

3. Corporate power elites veto any kind of legislation to restrict carbon dioxide emissions- this leads to disastrous inefficiencies of repeated climate related damage, excessive AC to deal with heat waves, etc.

4. The government turns a blind eye to reckless drilling that leads to major environmental damage and economic waste- especially for local communities devastated by spills and pipeline bursts. Talk about inefficiencies!

In my opinion, the inefficiencies of the state run oil company are minor compared to the much more long lasting, and far more serious efficiencies of an oil company running the government. I think there’s a desire to go back to a time which does not exist. People do not want nationalized oil companies and so they want an old capitalist model of free enterprise companies working on their own. But in the year of giant corporations this world is no longer possible. Fossil fuel companies have used their massive economic clout to seize control of the governments. There is no middle ground. There will be either companies run by democratic governments and fully controlled by them or companies will use their money power to run the governments. Corporations are simply too big to be willing to play the game like everybody else in the market.

I also do not believe nationalization is really happening, in a classic sense, that much in the rest of the world either. Saudi Arabia has a king that says it is saving oil for future generations, yet I do not see any evidence of this really happening. It seems to me that the powers of wealth within the kingdom are influencing the government to a remarkable degree. China is also supposed to be a state run government controlling oil companies, but in fact, China is making massive purchases of oil fields and pursuing an aggressive expansion into a source of fuel that is going to be gone in 30 to 50 years. This makes no sense and cannot be a sane policy unless oil powers have developed an inordinate control within the Chinese government. The power for bribery and influence are great everywhere- but it is an art form in China. In Russia, it seems to me that the decisions of the president are no different than the decisions made by the giant fossil fuel industry Gazprom.

I think we are entering a new era where fossil fuels become so valuable that they corrupt and lead to the takeover of any government that has serious large corporations involved in the extraction of oil, gas, or coal. I do not think it is possible to go back to the old options of free market capitalism or even state run National Oil companies. We are in the era of governments run by oil companies (case in point: see Canada’s nightmarish transformation in just 15 years to a right wing extremist exporting nation).

[ROCKMAN]

C8 – “China is also supposed to be a state run government controlling oil companies, but in fact, China is making massive purchases of oil fields and pursuing an aggressive expansion into a source of fuel that is going to be gone in 30 to 50 years. This makes no sense and cannot be a sane policy unless oil powers have developed an inordinate control within the Chinese government.”

Makes perfect sense to me. First, China is run by politicians that want to see their country grow. One should not underestimate their very strong sense of national pride/ego IMHO. This would require an ever increasing amount of energy. Second, China is run by politicians who need to maintain control by keeping the populace satisfied that they are heading for a better future. Third, oil won’t “be gone in 30 to 50 years”. Might not be a lot left but this gives China time to try to modify the economy significantly. Do you think the US will have the same opportunity to do so as China?

And lastly, as far as I can tell, there is no Chinese govt AND Chinese oil industry. They are one in the same. The Chinese leadership doesn’t have to be bullied/bribed by their oil patch…they are the oil patch. I still view the current Chinese govt model to be more similar to that of the Mafia: different "families" but you follow the rules or you end up "sleeping with the fishes". LOL

And so you don’t think it’s a sane policy for a govt to try to secure future energy supplies. So then I gather that you feel the current US policies that allow the export of US oil, refined products, LNG and coal to be the epitome of sanity. Others might see it as the patients are now running the asylum.

[C8]

But Rockman: the Chinese are going to waste an enormous amount of energy retooling their entire infrastructure after this fossil fuel debacle is over. China isn't just going for oil, it is building the gigantic infrastructure that goes with it- miles of freeways, pipelines, parking lots, dealerships, suburbs, etc. Its not that China is just going for oil- it is building its world around oil- just as people are becoming aware that this will entail a huge loss in the future. imagine I live in the country, but get my food from the store- it is one thing for me to not farm, but it is incredibly far more stupid to pave the land I will be needing for fields.

The whole idea of a centralized government economy is that at least it can make plans thinking about the long term. This is what Russia did under Stalin (at great human costs), they realized they needed to become an industrial powerhouse. And it saved their but when Hitler invaded. I see no real long term thinking in this giant Chinese oil infrastructure build out. What they aren't building will cost them dearly in the future (hint: much more of other energy sources- like about a thousand nuke plants, not @ a hundred as they have planned) They are really throwing oil away, and when energy gets scarcer they will have little to use to build for the future.

This is what makes me think short term greed and nationalism are more behind this Chinese oil rush than long term planning. This is crony communism.

[ROCKMAN]

C8 – “The whole idea of a centralized government economy is that at least it can make plans thinking about the long term.” You can throw away your little red book. From what I’ve seen that has never developed. Commies or not they are still politicians. And understand I’m not arguing China is on a sustainable path. But IMHO they are beating the crap out of the US at our own game. And in doing so they may have more time to alter the BAU plan than the US does.

BTW you didn’t answer my glib question: do you consider current US govt energy policies sane?

[C8]

Actually no, the US policies are not sane but driven by short term profit seeking and a lack of a future vision of any sustainability among political leaders. Uncle Sam needs a dose of Ritalin. But I think China has major problems with environmental degradation and being able to feed 1.3 billion people on land where water tables are falling rapidly- China is in a worse position to begin with than the US and needs to play a smarter game just to survive. I don't see much sense from either government. I only have hope for Germany, France and Japan- maybe Brazil if they wise up.

If they republicans get the white house back- you may see China challenged by the US. They have a lot of scared hawks in their party that see a showdown and want it sooner than later.

[ROCKMAN]

C8 - "the US policies are not sane". Good...didn’t think so. I knew you had a good head on your shoulders. As far as who is more hawkish I have no doubt that when the situation becomes really severe and if the D's control the WH there's equal potential for violence. A lot of folks in the ME would agree today.

And I disagree: China doesn't have a problem with environmental degradation. Just the acceptable cost of doing business. Yeah...I know that's not what you meant. LOL. But I see China pursuing growth no different than the US did in the early 20th century. Except they have one advantage: they understand the POD and know their plan is unsustainable. How they deal with it long term remains to be seen. But in the short term they are acquiring energy assets in one form or another that might allow them a transition to something other than BAU. I see no such similar plan of any significance by the US govt. So on the ISS China is also beating the US IMHO. That’s the International Sanity Scale, btw.

[C8]

Rock- I think this is one of those situations in history where not having resources will give a later competitive advantage. Germany and Japan will plan for the energy future because they have no choice, China and the US have no real sense of urgency about this.

I do think there is a real possibility of a rapid oil decline within 30 years BTW. I believe that the current extreme methods of extraction may lead to huge decline rates. I am not a geologist like you- but I understand a little about underground liquid formations. I have studied how water tables in aquifers deplete, and I know that oil is different, but I think there are similarities. If I could draw a 3-D picture, an aquifer or oil reservoir would look something like a tooth, somewhat a bumpy plateau on the top and deep spikes down into the base. This is due to the fact that as liquid sinks deeper into rock it encounters diagonal geological folds of various levels of mineral- some of which will dissolve or displace more than others, some of which is more dense than others. The point is: once you go deeper and deeper the volume can shrink dramatically depending on where you are in relation to the "tooth's roots". This is happening already in a dramatic fashion in the Ogallala aquifer. I realize that oil is stickier, traps in bubbles within rock, and that much new extraction is happening near the "crown" due to horizontal drilling, etc. but those methods seem to bust out in dramatic fashion too, with fast decline rates.

When people look at a historical oil production curve, they see the upward ramp. What I see is the enormous amount of oil being extracted every day this year. I don't know the figures (maybe someone here does) but I would guess that we have consumed more oil in the past 27 years than in all the time before that (before 1985). I believe all these extreme methods of extraction will lead to extreme decline rates- sending the world into an economic tailspin (like the Red Baron type). I hope this isn't the case- but if it happens, Japan and Germany will be readier than many.

[ROCKMAN]

C8 – No…oil and water don’t act the same and an oil reservoir has some unique aspects compared to an aquifer. But in general you have a good grasp of the dynamics. The combination of super straws and fracture reservoir develop will lead to rapid declines but globally those situations still represent a relatively volume. Thus I’ve never been a proponent of a production cliff.

But I think there are other factors at play that will produce a profile more similar to a cliff…or at least cliff like. First, rapidly increasing demand (and the ability to pay for it) by some countries like China, India and now, possible Brazil. Second is ELM we all understand. And third is the amount of oil that will be removed from the open market by the actions of China and a few other counties. Each of these components, including natural decline, is not individually large but in combination it may be much more significant than many are expect. Which is exactly why a simple focus on gross global oil production is just too simplistic IMHO.

I get your point about scarcity producing the Mother of All Transition. But then there’s the question of paying for that transition. A simplistic analog: a high school dropout wants to improve his lot in life by getting a college degree. Looks good on paper but how does he do this while still supporting himself with a minwage job. Can't quit work and go full time, can’t afford expensive tutors, etc. etc. so he takes advantage of his savings and assistance from his family. But what if those resources aren’t available?

Maybe Germany and Japan have the resources/time to make the transition. But does Greece, Spain, England, etc? The US may have the resources available today but are we making the big push to make the transition? I don’t think so. Lots of verbiage but I’ve yet to see any significant change in BAU. So my basic question remains: at the point where the US govt/the citizens understand the need for a serious change away from BAU will we have the resources to make the transition. That's great for Germany and Japan if they are more ready for transition. But how does that help the US?

I get a little frustrated with folks who offer the solution of taking the monies we spend on ff’s and use them to develop the alts. We can’t deny the system of those ff’s and divert those funds and expect the system to not collapse. This is not a doable plan.

Eventually TSHTF for all the economies: Greece, England, the US and even China. But at different times. Greece’s appears to be now and they don’t have the resources to evolve. England…may be their day is 10 years off…will they have the ability to make the big change? The US and China may reach that brick wall about the same time. But China is essentially stockpiling resources to perhaps help the leap that wall and reach a more sustainable regime.

What has the US stockpiled to help breach that inevitable barrier? An SPR that would satisfy our demand for just a few months? A very active effort to make as many offshore GOM leases available today instead of saving those reserves for the future transition period? N Dakota allowing many $billions of NG to be flared today to increase oil production now? Zero effort by the US govt to claim right to future overseas oil production? Exporting US oil and refined products to other countries including China? The US govt installing even minor barriers that encourage export N American oil to other countries? Wall Street rewarding companies for developing resources as fast as possible instead of holding them for future development? A US tax code that fully support the “Drill, baby, drill” effort? And, as much as many don’t like it as an energy source, increasing exports of coal to other countries? Countries like China and India who are expanding coal consumption as a method to conserves as much of their oil resources as possible.

In the grand plan can you point to one significant activity/policy of the US govt that will help us when we eventually accept the necessity of transitioning from BAU to a more sustainable transition? Hmmm….seems to be more verbiage coming out of DC as well as corporate America to convince the citizens that there will be no energy crunch in the future. In fact, “energy independence” may be just a few years down the road.

Kinda reminds me of the Titanic’s crew telling those Irish immigrants in steerage there was nothing to worry about…this ship is unsinkable. Just as the American economy is unsinkable. In the meantime the Chinese are commandeering most of the lifeboats. OK…one more goofy analogy: it isn’t important how fast the PO bear can run. It’s whether China can run faster than the US. At the moment it looks like China is 30 yards down the path and the US is bending over tying a shoelace. LOL. And may, just maybe, China will be able to climb that transition tree before that bear gets hungry again. Maybe.

[C8]

Rock- you have definitely nailed the US lack of any plan other than "free market magic". Part of that may be because, as a nation, we still have immense natural resources as playing cards in our hand. America can play a good game of Texas hold 'em if we want to. We have mass amounts of coal (which can be liquefied, gasified at great costs), natural gas, oil- but also arable land which will provide one of the biggest trading cards of all in the next 50 years- food! Add to that, methane ice (thank you Tsar and Seward!), arctic access, the biggest military ever seen by far (that still has to be useful somewhere in the future), massive wind, tidal and solar potential, rare earth metals, minerals of all kinds, excellent universities that are good at new inventions, and Brad and Angelina.

Now take China- a nation that is mostly unusable desert/semi-desert (which is expanding at an alarming rate), a ridiculously large population that is all crowded on an earthquake belt, massive soil and groundwater depletion, limited arctic exposure, mainly coal and not much else (maybe methane ice) as a trapped power source, semi-hostile neighbors on all sides and good renewables potential. Their main goal has to be to massively educate their giant population to turn them into an army of problem solvers- because they are facing a huge number of problems. They must become a Japan with 10 times the number of people. if they pull this off, could easily become the dominant world power- but in a world that is in rapid decline in terms of living standards due to runaway global warming and increasing energy costs. China may become history's last superpower.

[ROCKMAN]

C8 – And that’s the worst thing about American attitudes. Look at what they are constantly hearing: increased US oil production; decreased US consumption; many billions of bbls of oil in the Eagle Ford and Bakken; 100’s of billions of bbls of oil just across the border in Canada; so much domestic oil and gasoline we’re exporting it; increased motor fuel economy; “energy independence” just around the corner; alts are growing by leaps and bounds; etc; etc. Given all that how many politicians are going to try to raise a red flag with the public particularly if they think they’ll be out of office when TSHTF?

Now try to get them to believe that without current imported oil our economy would collapse. We do have a lot of resources and the most skilled and well-funded oil industries on the planet. Having a lot of oil isn’t the same thing as having you’re your economy requires to function. Those of us who believe differently can’t compete with the message put out by the govt, the oil corporations and the vast majority of the media.

The food angle is interesting though. The more income the Chinese develop I suspect the more they’ll want to eat. Not a lot of details but China has been buying ag lands in other countries. That may be one of the better trading positions the US has with China as long as we still export a lot of food products. Of course, what we sell to China we won’t be selling to other countries that had been historical trading partners.

Again, that “Mutual” part of the new dynamic.

[C8]

You know Rockman, you seem awfully outgoing for a geologist, most of them seem kinda shy. Here is a little joke for you:

Q. How can you tell if an engineer (or geologist) is an extrovert?
A. When he talks to you he looks at your shoes, not his

[ROCKMAN]

C8 – Outgoing, eh? I’ll take that. Better than being referred to as a big mouth who doesn’t know when to shut up. As my cohorts would describe me. LOL

To be rarely serious for the moment, when I was in high school had a problem even riding public transit. If it got to crowded I would get off before my stop. But some significant life experiences when I was 18 changed all that. Haven’t shut up for 5 minutes since then. Which obviously is why I post so much: my wife and the dogs stopped listening to me long ago.

[Keith_McClary]

$this->bbcode_second_pass_quote('ROCKMAN', 'A')nd so you don’t think it’s a sane policy for a govt to try to secure future energy supplies. So then I gather that you feel the current US policies that allow the export of US oil, refined products, LNG and coal to be the epitome of sanity. Others might see it as the patients are now running the asylum.

[ROCKMAN]

Keith - A very good point. When problems start getting very serious many folks will wonder why just don't do "A" to fix with our problems not realizing there are trade treaties, laws, policies, etc. in place that can't be ignored. There may be processes to deal with them but that would take time, negotiations and a lot of political will. And then there are the unintended consequences of changing rules upon which assumptions were made dealing with $trillions in trade agreement. What might help one segment of our economy could do a lot of harm to another. Unfortunately many Americans aren't capable/willing to look at the big picture and will just focus on heir immediate needs.