World oil and natural gas consumption vs discoveries: Diverging trends mean trouble

Herbert Stein was an American economist who served in both the Nixon and Ford administrations. He is probably most famous for formulating Stein's Law, namely, "If something cannot go on forever, it will stop." This is, of course, an obvious statement. But I think it cannot be stated too often in a global society that believes in infinite economic growth.

I propose to take a subset of that growth to demonstrate Stein's point. The subset is world oil and natural gas consumption versus discoveries. It turns out that Rystad Energy, a major consulting firm at the heart of the global oil and gas industry, has taken note of the fact that "just 25–30% of the oil consumed each year is currently being offset by new discoveries."

In a separate piece on both oil and natural gas, the advisory firm notes:

Venezuela's goo-in-the-ground isn't usable oil at current prices (and may never be)

In the wake of Trump administration's prosecution of a war and blockade against Venezuela and the administration's promise to vastly increase oil production in the country, it's worth knowing why claims about Venezuela's oil "reserves" being the largest in the world are problematic. It's also important to understand what this implies for the future of oil production in Venezuela.

Consider the following:

1. Official oil reserves are just that. They are numbers reported by official government sources. Where these numbers come from large state-owned oil companies—as is the case with Venezuela—they are rarely verified through independent audits. And, those numbers tell you nothing about the economic viability of the claimed reserves.


2. There is a pattern among several OPEC countries including Venezuela of suddenly claiming vast increases in oil reserves without evidence of additional economically viable discoveries. Just to be clear, reserves are known deposits of minerals demonstrated to be extractable using current technology and profitable at current prices. The term "reserves" does not appear to apply to most of Venezuela's extra heavy crude at current prices which is believed to be 90 percent of its supposed reserves. This is true especially if upgrading facilities have to be built from scratch—Venezuela has only one extra heavy crude facility that began production in 1947. Such expensive long-term investment requires a belief that prices will reach and maintain much higher levels than today and that political and social conditions will remain calm and favorable over long periods. (For a comparison of Venezuelan crude oil with others in the world, see this infographic.)

Venezuela and Greenland: 'Smash-and-grab' diplomacy in the age of scarcity

The United States is now engaged in what I am calling "smash-and-grab" diplomacy in Venezuela, and it will perhaps soon do the same in Greenland, a territory of the Kingdom of Denmark. In case you have never heard the term, smash-and-grab refers to robberies undertaken by smashing store windows and/or display cases and taking what is readily available without concern about alarms going off or people on the street or in the store seeing what the robbers are doing. The phrase seems more descriptive than the older one of "gunboat diplomacy" in which, not infrequently, the mere display of force was used rather than actual attacks to obtain concessions from a weaker nation.

The current practitioners of the U.S. form of smash-and-grab diplomacy leave little to the imagination, prefering big displays of violence and simply taking what they want with no pretext that the target country is accepting terms through negotiation. Witness the brazen taking of all exported oil from Venezuela, the proceeds from which are supposedly going to be used "for the benefit of the American people and the Venezuelan people" (whatever that means), according to U.S. President Donald Trump.

Readers certainly know that in the past there have been other more subtle ways that major powers have taken the resources they need for their industries and militaries. For instance, what followed the era of gunboat diplomacy—which more or less ran from the late 19th century through early 20th century—was a era of less direct bullying of weaker countries by major powers. As empires crumbled, newly independent countries were strongly encouraged to install leadership friendly to American and European foreign policy and economic interests—or else! One of the "or else's" was detailed in a book called Confessions of an Economic Hit Man, written by one of the unofficial emissaries from the United States who carried a message of consequences if the target countries' leaders did not acquiesce. The author began the book with this:

Autonomous vehicles: Is necessity really the mother of invention?

Aesop's Fables date back to the 7th century BCE and may be the first known written expression of an often repeated proverb, namely: Necessity is the mother of invention. In the story called "The Crow and the Pitcher," during a terrible drought a thirsty crow finds water in a partially full water pitcher. But the mouth of the pitcher is too small to allow the crow to reach the water. The crow discerns that if it drops enough pebbles in the pitcher, this will raise the water level. So the crow proceeds with this plan and finally gets a drink.

Aesop's Fables come in many versions which often include a "moral" or "application" at the end. Hence, we have the summary of the lesson of the story that we recognize today.

Trouble is, it's all too easy to apply this idea to any invention and assume that "necessity" refers to some common problem that, if solved, helps the entire community or society. So, when I saw that Waymo's autonomous taxis had shut down, not once, but twice about five days apart in the same city—the first time from a power outage that darkened about one-third of San Francisco and the second due to concerns that a coming storm would create flash floods—I asked myself what necessity is pushing the deployment of autonomous vehicles forward. (To state the obvious, cars with drivers were still able to move about San Francisco during the blackout and adapt to the outage of traffic signals.)

Taking a holiday break - no post this week

I am taking a holiday break this week and plan to post again on Sunday, January 4.

The fusion future that may never arrive

With the supposed need for vast new electricity generation to fuel the artificial intelligence (AI) boom, AI companies are pushing nuclear power as one solution to provide that power for the many data centers they plan to build. (Count me skeptical of the boom and therefore of the need for vast new electricity generation capacity. See here, here, here, here and here.) AI boosters usually talk about expanding existing nuclear power technologies, that is, fission reactors that run on uranium and (more dangerously) on plutonium.

But it is well to keep in mind that there are two kinds of nuclear power: fission and fusion. For now, there are no commercial fusion reactors since with current technology it takes far more than the equivalent of a kilowatt of energy to produce a kilowatt of electricity. This is because it takes a lot of energy just to get a fusion reaction going. The current state of affairs in fusion reminds me of the old joke about the manufacturer who admits he loses a nickel on every sale, but claims he makes it up in volume.

Fortunately, fusion researchers are smarter than this and await the day when fusion technology can produce more energy than it consumes. That waiting has spawned another well-worn joke about the coming of clean, limitless fusion energy, namely, that it's only 25 years away and always will be. (Whether fusion energy will be clean, that is, non-radioactive, is debatable.)

Informers: The new drive to get Americans to spy on one another

It should come as no surprise that governments throughout history have enlisted their citizens to spy on one another. Some publicly stated reasons have included stopping subversives from overthrowing the government, catching foreign spies and agents, and stopping terrorist attacks.

For at least the fourth time in a little over a century, the U.S. government is publicly trying to enlist its citizens into a vast network of spies who will report behavior the current administration doesn't like. For the record the previous three times were:

1. The first Red Scare between 1917 and 1920 which rounded up thousands of supposed sympathizers of the Russian Revolution and imprisoned them, proving that such activities do not depend on which party is in charge of the federal government since, Woodrow Wilson, a Democrat, was president at the time.


2. The second Red Scare, often called the McCarthy Era, in the late 1940s and early 1950s after U.S. Senator Joseph McCarthy who publicly accused many prominent actors and writers, government employees and others of being communists disloyal to the United States and asking them to name others who were communists. McCarthy was famous for having "lists" of communists in various government departments and areas of public life.


3. Operation TIPS (Terrorism Information and Prevention System), in the wake of the September 11, 2001 attacks on the United States, a proposal by the George W. Bush administration in the early 2000s to enlist U.S. workers such as cable installers, home repair technicians, and U.S. Postal Service carriers to report suspicious activities in and around the homes of private citizens.

Now we have the fourth effort. The current U.S. attorney general, Pam Bondi, has provided a brief outline of what the Trump administration says it is doing to implement the president's National Security Presidential Memorandum/NSPM-7. The supposed targets of the effort are "Antifa and Antifa-aligned anarchist violent extremist groups." (Antifa is short for anti-fascist.)*

Some key metals are byproducts of mining other metals; that's a problem

When we hear the word "byproduct," it often designates something unwanted or even negative coming out of a decision or process that provides some product or outcome we do want. In the world of mining, however, byproducts are often valuable minerals produced in the course of extracting other desired minerals from their ores.

For example, zinc mines often also produce profitable quantities of lead and silver. And, it can be the other way round; gold, silver and copper mines can sometimes also contain profitable quantities of zinc. I mention zinc, in particular, because zinc mines are one source for gallium, a metal that is important for advanced semiconductors. Gallium is also used in aerospace, optical devices and medical devices. Needless to say it is in high demand and is important for military applications.

Another source of gallium is aluminum ore, usually bauxite, and it's the biggest source. What you will not find on planet earth are any gallium mines because geologic processes in the Earth simply do not allow gallium to concentrate in a manner that would create a profitable ore body. So, it turns out that no matter how high the price of gallium goes—and the price is up by almost a factor of five since 2016—its supply depends almost exclusively on the rate of extraction of aluminum and zinc ores (and not all such ore bodies have concentrations of gallium that are worth extracting).

Proposed East Texas water pipeline and the growing thirst for distant water

One of the ways you can claim rights to water sources is to own land next to them or over them. It seems intuitive that you should be able to dip into a river running along your property to get a drink for yourself and possibly your livestock or water for your plants and possibly your farm fields. That works so long as you don't hog too much of the river flow and your downstream neighbors can do the same as you are doing. In practice there are so many humans today demanding so much water that the amounts each person or enterprise can withdraw are usually regulated by agreement or law.

The same goes for groundwater since aquifers rarely span just one person's property and can be very large, for example, the Ogallala aquifer which lies below 122 million acres of the U.S. Great Plains.

What is not so intuitive is that water rights can belong to people far from the water itself and that the rights to that water can be traded like any commodity. That's what residents of the Neches Trinity Valleys Groundwater Conservation District in the middle of East Texas discussed recently and quite heatedly in a public meeting of district officials.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, November 30.