The collective state of mind in the USA these days may be
even more peculiar than what went on in Germany in the early 1930s, when the
Nazis were freely elected to lead the country and reconstructed the battered
national psyche into a superman cult that soon beat a path to mass death and
ruin. America has its own way of going crazy. We don't goose-step to tragedy; we
coalesce into an insane clown posse and stumble into it by pratfall -- juggaloes
dancing backwards off the cliff edge.
We've been softened up and made extra-stupid on a
60-year-long diet of TV and kreme-filled donuts. Instead of a "master
race," our political fantasies revolve around a master wish - to get something
for nothing. Want to feel good about yourself? Smoke some crank. Want to become
economically secure? Buy a Powerball ticket or drive to the local casino. Want
political esteem? Plug a flag pin into your lapel. Want status? Borrow free
money from the Federal Reserve at zero interest and arbitrage it into massive
earnings for your primary dealer bank. All these behaviors are the consequence
of a culture that elevated advertising to such a high social good, it ended up
drowning in its own manufactured bullshit.
A subset of our master wish has been on vivid display in
recent months, namely the idea that God has blessed the USA with a limitless
supply of new oil that will allow us to keep driving to WalMart forever. This
propaganda from an oil industry desperate for capital investment has been
swallowed whole by people in authority who ought to know better, just as that
same class of people in Germany of 1934 should have known better about what they
were bargaining for in economic well-being with the Nazi agenda. In our case,
the propaganda drumbeat is being led by formerly respectable news organizations.
The New York Times, National Public Radio, Bloomberg News, Forbes,
and The Atlantic Magazine are media giants that have lately spread
the "good news" that America will soon be 1) "energy independent," 2) the
world's leading oil exporter (greater than Saudi Arabia is now!), and the "go-to
nation" for cheap manufacturing.
All of these claims are false, by the way. The American
way-of-life was designed to run on $20-a-barrel oil, not $90-a-barrel oil, and
"new technology" has not changed that. The unfortunate and, to some extent,
mendacious memes about the wonders of "new technology" have only snookered the
public into a false sense of security about a future that will disappoint them
badly and probably provoke an extreme political reaction as the reality of our
predicament sweeps through daily life.
Most of the current "endless oil" fantasy revolves
around shale oil. Just to get a visual idea of what this amounts to, consider
this map. It depicts the two major shale oil production regions of the USA: the
Bakken in North Dakota and the Eagle Ford "play" in Texas. Bakken production is
confined almost entirely to four counties in North Dakota (Williams, Mountrail,
McKenzie, Dunn). The Eagle Ford region touches perhaps ten Texas counties. Now,
realize that the oil fields all over the rest of the USA (including Alaska) are
in decline. Here's where the "bonanza" of new oil all comes from:
The oil coming
out of these places is high cost and low flow-rate oil. This is exactly the
opposite of what US oil production used to be (low cost and high flow-rate) when
we were busy building all the freeways, strip malls, housing subdivisions,
suburban office parks and all of the other stranded assets that now make up the
infrastructure of daily life in this country. Those were the days when you could
pound a single pipe vertically 1000 feet down (not much deeper than many home
water wells) into the temperate wheatfields of Oklahoma (drive to work in
shirtsleeve weather!) and after that modest investment in drilling you could
kick back and depend on a great flow rate (5,000 barrels-a-day, not unusual) of
sweet light petroleum for years.
Horizontal
drilling (often more than 10,000 feet down + many "laterals" an additional
10,000 feet horizontally) and then fracturing "tight" rock for shale oil is not
only a way larger capital expense (lots of steel!) but the flow rates per well
(82 barrels-a-day average) are laughable compared to the halcyon days of
conventional oil -- little better than "stripper" wells. Consider also that
shale oil well flow-rates decline greater than 60 percent in the first year
(rapidly thereafter, too) and you can see easily that there will be no "kicking
back" to run the pump-jacks like cash registers, as in the old days. In fact,
the rapid depletion only prompts more frantic drilling and re-drilling to keep
the production at its current rate - the "Red Queen Syndrome" ("I'm running as
fast as I can to stay where I am"), which means fantastic capital expenditure to
keep drilling and fracking more wells (even more steel!). Consider also, that
the small "sweet spots" in the shale oil regions were the ones drilled first (in
earnest after 2003), for the simple reason that they were the most promising.
This was the "low hanging fruit" -- easy to pick. Outside these sweet spots the
oil may be too meager or difficult or costly to bother drilling for.
This is a picture of a boomlet that may run a few more
years -- if the banking system doesn't implode and the massive stream of capital
doesn't quit flowing to the shale counties. The excitement will all be over
before 2020, but I suspect that troubles in finance and banking will put the
schnitz on the shale gas mania long before that date. What will happen when the
American public discovers that they were lied to about yet another important
matter? The discovery will coincide with very severe changes in daily life that
won't be avoidable. Everyone will be affected. Many will be impoverished and
suffer real hardship. That's when the public goes apeshit and starts tearing
down the house.
Apart from the issue of sheer economic suffering and
all the damage that will ensue, consider that it will be generations before
anyone believes the "authorities" again -- though, like the oil age itself, the
era of giant national media will probably prove to be a one-shot deal, too.
Future generations -- if they are lucky -- may read the news on one-page
circulating broadsides, printed laboriously in hand-set type by letterpress. Or
maybe they'll be reduced to just parsing out rumors.
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Note: This blog (and JHK website as a whole)
will be getting a design upgrade in the next couple of weeks. In the
meantime, for technical reasons the comments department is temporarily
suspended.
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