Tuesday, July 19, 2005

Peak Oil And The Problem Of Sky High Fuel Prices

There is a populist notion to blame the oil industry for unbridled greed that is creating the current high gasoline and heating oil prices. Yet there is a far more complex set of problems that is contibuting to this situation that is putting a severe financial squeeze on the poor and elderly of America.

For a poor person to drive to work, it may cost $40 or more dollars a month more than a year ago. And for elderly poor on a little Social Security check, many will have difficulty keeping their homes warm this coming winter. A fireman once told me that a danger for many elderly is that they require more heat and warmth as they age, and sometimes dangerous house fires can result from efforts to keep warm or even the opposite, those elderly who will freeze in their homes from the lack of funds to keep warm. There are some religious run heating assistance programs, such as the Catholic St. Vincent DePaul drive to collect donated automobiles to use for heating assistance for the poor and elderly.

But there is also some real world conditions that have caused the oil prices to become so high. There is a scientifically precise term known as "peak oil" which refers to point at which the highest possible easy production of oil has been reached, and once this point is passed, then extra means to achieve as high of production must be reached by more expensive injection of gas or water into oil wells or reserves in order to maintain production.

This "peak oil" point was reached about 1977 according to some geologists and other scientists in the world's largest oil field in Saudi Arabia, the Ghawar oil field. This field's production of 4.5 million barrels of oil a day is only maintained by pumping 7 million barrels of sea water into this oil field each day to raise oil levels .

And other major world oil wells and reserves offer equally dire news. The giant Russian Samotler oil field has decreased in output from 3.5 million barrels a day down to just 325.000 barrels a day. The Prudhoe Bay oil reserve has decreased from 1.5 million barrels down to 350,000 barrels a day. The Forty Field in the North Sea area has decreased from 500,000 barrels a day down to 50,000. And the once promising Cruz Beana oil reserve on Columbia, has decreased in output from 500,000 to 200,000 barrels a day. And in each case more and more extra means of gas or water injection is used to maintain output levels.

And another problem is that oil futures prices have topped $60 dollars a barrel recently. In one barrel, 46.4 gallons of gas may be produced, but only after 500 man hours of refining work per gallon of gas produced per barrel. So there are real higher fixed labor and production costsas well as higher raw product costs in one gallon of gas, thus raising the prices.

At one time there were either political or profit driven production cutbacks of oil to the U.S., such as one by Saudi Arabia in the 1970's. But the higher world commodity market prices for a barrel of oil, coupled with a world past the the scientific "peak oil" point, in which increased costs to maintain even current production levels must be done by more expensive gas or water injection processes, not needed at an earlier time only serve to create increased prices.

Certainly some in the oil industry appreciate it if less product can be used for higher profits. And with 42 members of the Bush Administration either former oil company executives, paid consultants, or major stockholders, there is nothing standing in their way if they seek to maximize profits. And the average local gas station only makes about 9cents on a sale of a $2.50 gallon of gas. And in the "good news/bad news" world of oil commodity and futures trading, any storm or international event only serves to increase oil futures prices.

The only real solution to this world past the "peak oil" point of production, which means that world oil supplies are getting more scarce and a booming economy like that of China with one billion citizens requires more and more of the world's supply putting further pressure on the world's strained supplies, is for a future of alternative powered automobiles.

Not only for the sake of oil scarcity, but for pollution control, fuel cell automobiles which are powered by hydrogen and whose only exhaust output is merely water are a future necessity. In the meantime, higher production of high mileage gasoline and gasoline/electric hybrid automobiles are necessary to reduce oil demand for future automobiles until fuel cell automobiles powered by hydrogen can be perfected. But in the meantime, the working poor will be stuck with older automobiles that offer poor mileage and stuck with high fuel prices. And this is indeed a serious concern. And all plastics related products will increase in cost and often shelf price as higher oil prices drive these once cheap products upward in price.

The poor will need compassion and financial assistance in the switch from high fuel consumption vehicles to a future of cheap and abundant hydrogen powered fuel cell vehicles. And the MidEast may face further turmoil as the leaders of nation's such as Saudi Arabia watch oil profits disappear, and populations will sink into further poverty and may embrace more Islamic fundamentalism to cope with loss of hope and in turn could be a concern for more Islamic revolutions and conflict in the MidEast. This period may bring in great political or military problems for the Western world. Less dependence on MidEast oil may not pay dividends in peace, but be a cause for more conflict and war.

But in the meantime compassion for the poor. Support for religious heating assistance programs. And wise foreign policy towards the MidEast is greatly needed. And some serious prayer for MidEast peace is always needed.


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