The Adventures of Mr. Chris

The Dirty Price of Oil Politics

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Current US crude oil consumption (Billion BTU’s)

“There’s evil in the world, and it just happened to touch down in Sidney, Montana…”

 

BP was slated to start their hearings this coming week in the case against them for the April 2010 Deepwater Horizon oil spill in the Gulf, but BP announced on Friday that it plans to settle with thousands of plaintiffs in a massive case against the company, saving it a prolonged and embarrassing legal battle, but with a hefty price tag: as much as $37.2 billion by some estimates. But the real question, even if the New Orleans judge accepts the agreement, is what have we learned from all of this?

Bloomberg reported the following this week about oil volatility and market futures:

“Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 28.2 as of 2:30 p.m. in New York, up from 27.9 yesterday. Puts were 60 percent of the volume. Implied volatility for 25-delta calls, which gain 25 cents for each $1 rise in futures, was 28.6, up from 27.8 yesterday.”

Lisa Margonelli argues that the answer is, unfortunately, not much. If the Bloomberg reports on oil prices and volatility, and recent crimes in Sidney, Montana and elsewhere in the growing oil and gas explosion fallout zone are any indication, we can expect the dirty politics of oil and gas addiction to continue into the future.

 

Lisa Margonelli: The Political Chemistry of Oil

 

Are we learning from our mistakes?

I’d like to be optimistic and say we are, but the sad truth of the matter is, we are not. Besides the explosion of new developments driven by the Tar Sands in Canada and the Marcellus and Utica shales in the midwest and Northeast, there are many other growing zones of energy development and exploration that are expanding this oil production conflict throughout the US. One such example is evidenced in what some folks are calling the “Bakken Boom,” after the Bakken oil fields in the upper Midwest. Here’s more on that story, as a bit of background to incident like the one discussed below in Montana:

The Bakken Boom

 

But the story goes much deeper than just an oil boom, as there is a dark underbelly to the Bakken success story, and that includes an increase in crimes, including kidnapping, and a huge jump in gun permit applications.
“A glimpse of Sidney’s future can be seen in the experience of Williston and surrounding Williams County, N.D., where more than 9,000 beds have been permitted for man camps, sprawling compounds of trailers or mobile homes that companies temporarily erect in open fields for worker housing. Williams County Sheriff Scott Busching said that calls to his department have risen sharply during the last three years, forcing him to double patrol deputies from 10 to 20.That includes spikes in traffic accidents and aggravated assaults linked to bar fights. In response, many local residents are arming themselves against potential danger. Concealed weapon permit applications in Williams County soared from 156 in 2010 to 550 last year, the sheriff said. Arnold’s disappearance has further accelerated the trend, with 126 new applications coming in January alone.”
And what’s the cause of all this recent oil and development boom, as well as the linked crime? As it tuns out, the answer in part is hydraulic fracturing, better known as fracking.
“Oil production in the Bakken dates back decades but ignited into a boom a few years ago when horizontal drilling techniques coupled with hydraulic fracturing, or “fracking,” made it easier to pull oil from a geologic formation that holds an estimated 4.3 billion barrels of oil.“
So what we are seeing is a self-fulfilling energy prophecy–we are reliant on hydrocarbon energy because it is cheap. When that model of cheap energy runs out, then we turn to the less than ideal energy reserves, which is precisely what the latest oil and gas boom in places like the Tar Sands, the Marcellus and the Bakken represent. These are effectively second-tier energy sources which were not economically or technically feasible in the past, but now with oil at record highs–$106.50 a barrel for WTI crude–suddenly become feasible to explore. Since we destroyed the industrial manufacturing sore of the US economy, and are slowly in the process of outsourcing the second level service jobs, what Americans increasingly have as options are low-pay, no security jobs in places like fast food and consumer retail, or increasingly high-paying but unsustainable energy sector developments like the kinds above. And when this cycle goes bust in about 30-50 years, what will we be left with for work?
“Rising energy prices to be “one of the major risks to the economy this year,” according to Deutsche Bank chief U.S. economist Joseph LaVorgna.“
In our rush to develop every dirty energy source possible to keep our thirst for consumption and development going, we are building an economic revitalization strategy on a blind gamble–that we can either continue on hydrocarbons indefinitely, or that we will find a quick tech fix to replace coal, oil and gas before we run out of fossil fuel energy–is clearly another sign of the approaching collapse of the US lifestyle as we have know it. Any strategy for the future development of a nation built on a resource with a 50 year job horizon is ridiculous at best, and outright insane when you get right down to it. There is absolutely no future in a plan for jobs and energy that only lasts 50 year (100 if you believe the technocapitalist sycophants).
So what will we do when 2050 rolls around and we realize we have no long-term energy strategy, no long-term economic strategy, and a massive amount of national debt (one can only guess how massive the US debt will be by 2050, perhaps twice what it is now–making it something like 30 trillion)? At that point, will we finally decide maybe we should worry about something like a long-term plan for the nation, or will things have fallen apart so much by then that the discussion will be a moot point? Only time will tell, but I’m not hopeful if we continue on the current path the elite of this country are dragging us down.
Until next time…