Re: Energy Policy / Junk Science Environmentalism

From: Don Winterstein <dfwinterstein@msn.com>
Date: Mon Dec 19 2005 - 02:47:09 EST

Glenn,

"There are those who seem to think that if the price rises new supplies will come along (I donít believe it because it didnít happen in the US when prices went from $2 to $32 in 10 years)."

I don't have data, but I recall back in the '70s that lots of small stripper operators were about to shut in wells because they didn't pay their way; but when the price went up, they changed their minds, kept them going and even enhanced production where feasible. What you say makes it sound like their contributions were negligible. I'm more familiar with the heavy oil situation in the San Joaquin valley: During my career the company oscillated from time to time between considering shutting in the whole operation on the one hand and drilling hundreds of new wells per year on the other hand. (There's something like a billion barrels of heavy oil in the Cymric field alone, if I remember correctly; but it's expensive to produce.) The oscillations were driven by the price of oil and technological developments. I have no idea how big a contribution such decisions might make when summed across the whole country, but there must be tens of thousands of oil wells in play here. Why wouldn't they make a detectable difference? Also, everybody knows there's a mad rush to generate more production when prices rise. Much of this will be in small quantities, but the little bits add up. Small companies can profitably produce small fields, especially when prices are high; and there are probably lots of small fields still out there to be found and exploited.

And, OK, I agree it's not nice of me to belittle the mid-size oil companies--if that's what you think I was doing. : ) But they typically didn't fund their own research, so while I was in the industry they were largely off my radar screen.

Don

  ----- Original Message -----
  From: Glenn Morton<mailto:glennmorton@entouch.net>
  To: 'Don Winterstein'<mailto:dfwinterstein@msn.com>
  Cc: asa@calvin.edu<mailto:asa@calvin.edu>
  Sent: Sunday, December 18, 2005 6:32 AM
  Subject: RE: Energy Policy / Junk Science Environmentalism

  Hi Don,

   

  Of what value is there for a politician to tell the electorate bad news? Are they going to like him better for it? No. So interacting with government is useless because look what happened to Jimmie Carter when he told the US citizens to wear sweaters.

   

  Secondly, I have studied the issue extensively but I donít know what to do about it. I donít really know anyone who knows what to do. The higher ups are more concerned with stock prices than they are with global issues. Business is not a think tank afterall. But, there is no conspiracy. There are those who seem to think that if the price rises new supplies will come along (I donít believe it because it didnít happen in the US when prices went from $2 to $32 in 10 years). There are those who donít know. There are those who donít care, thinking that they will be retired long before the worst happens. There are those who know but donít know what to do. There are all sorts of people in the oil industry. I do know that eventually alternatives will come to play but our energy usage will have to be much less. We could replace oil in the electrical generation area with solar, but transportation is the place where the problem really lies.

   

  As to government officials, donít count someone like me out. I personally know the deputy commerce minister of the country in which I currently spend most of my time, as we;; as the deputy director of the land ministry, the director of strategic planning, a deputy foreign minister etc. They donít forget me because I speak their language (poorly, but still I can communicate with them). I have been in small helicopters with several high ranking government officials and was asked to give a speech in Chinese in front of them (I said in Chinese to the person who told me to speak Chinese, that if I spoke it, she would have to translate my Chinese. They all laughed). I was at a dinner a week ago where the Minister of Commerce gave a major speech on US Chinese trade relations. I have been at dinners where George Bush (the old president) gave a speech and then walked within 6 feet of me. So we smaller (not small) companies do have the type of interactions you are thinking about, you just arenít aware of them. I do know that certain governments are concerned even if ours isnít. And I have had conversations with several senior officials on this precise issue of oil running out. I hate bragging like that, but donít be so quick to dismiss someone like me because you have a false impression of what I do.

   

  The biggest risk to energy investment is political. And I am aware of that.

   

  By the way, I am beginning to read Chinese geology books now. Very very hard and it takes much work, but I will learn their language if I am capable and able.

   

------------------------------------------------------------------------------

  From: asa-owner@lists.calvin.edu [mailto:asa-owner@lists.calvin.edu] On Behalf Of Don Winterstein
  Sent: Sunday, December 18, 2005 1:18 AM
  To: glennmorton@entouch.net; asa@lists.calvin.edu
  Subject: Re: Energy Policy / Junk Science Environmentalism

   

  By "inside information" I was thinking more of the kinds of things one might learn from interacting with entities such as governments, which the really large companies (Exxon, Shell, BP and Chevron) are sometimes able to do at a higher level than smaller companies. These executives (Don Paul, at least) are not unaware of what's been written about peak oil, but for some reason they seem wholly unperturbed if not dismissive. You write that executives of smaller companies are behaving similarly. They aren't stupid, but are they foolish? Is there a blind spot? Is there a conspiracy? In any case, in public they seem to have confidence that any crisis over oil production, if one is to come, is not imminent but maybe will come 10-30 years down the road.

   

  You make quite a persuasive case for a sooner arrival, but it's hard to digest this and the apparent complacency of oil company executives at the same time. That's why I wonder whether they may know things not available to the public. If your scenario holds, I'd anticipate severe shortages and rationing within a decade or so. Such developments would drastically affect all oil companies, so if they're going to happen, companies had better be preparing now. I've heard about ramping up hiring, exploration, research and ventures into alternatives. Maybe this is all they can do. Along with buying up other companies!

   

  Incidentally, rationing is not so far-fetched. Southern Californians experienced a form of it two years ago when electric utilities rotated power cuts. If there's not enough essential stuff for people to have all they want, then some higher authority is going to dole it out in such a way as to make sure everybody gets at least some of it. Have you figured effects of rationing into your investments? : ) Remember that price controls come with it.

   

  Don

     
Received on Mon Dec 19 02:46:11 2005

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