Fool me twice, shame on me: The oil industry repackages the fake abundance story (from the late 1990s)

[I]f you're still operating under the assumption that the earth's petroleum--or at least the cheap stuff--is about to run out, you're not going to thrive in the new oil era. Technology is making it possible to find, produce, and refine oil so efficiently that its supply, at least for practical purposes, is basically unlimited.
                                    --BusinessWeek, December 14, 1998

That was the industry's story right before a decade-long climb in oil prices that ended with an all-time high in 2008. Only the oil industry would now have the audacity once again to peddle a story that it has gotten wrong for more than a decade as if it were brand new. Enlisting the media and its army of paid consultants, the industry is once again telling the public that oil abundance is at hand. And, what is doubly audacious is that it is promoting this tale as oil prices hover at levels more than eight times the 1999 low. Clearly, the industry is counting on collective amnesia to shield it from ridicule.

The industry's purpose is transparent: To ensure that the world remains addicted to fossil fuels by convincing all of us that our energy sources--more than 80 percent of which are fossil fuels--don't need to change. It's a winning strategy even if the industry's premise is wrong since the oil companies still have huge inventories of fossil fuels underground that they want to sell at top prices. And, they are only going to get those top prices if government, businesses and households fail to convert to alternatives and thus remain hostage to fossil fuels.

In a stroke of public relations genius, the industry recently sent one of its own, Leonardo Maugeri, an Italian oil executive, to moonlight as a "research fellow" at Harvard. It's hard to imagine a more prestigious name to use to propagate the industry's consistently overly optimistic pronouncements about oil supplies--even though we are told in italic type at the bottom of Maugeri's policy brief that "[s]tatements and views expressed in this policy brief are solely those of the author and do not imply endorsement by Harvard University, the Harvard Kennedy School, or the Belfer Center for Science and International Affairs." Guess how many media outlets printed that disclaimer.

You can find Maugeri's report here. What you won't find there or in current media accounts are his consistently failed predictions about rising supply in the last decade, supply that was supposed to result in a flood of oil. Here's one gem from 2006 in a piece he authored for Forbes Magazine: "A plausible forecast is that by the end of the decade the daily demand for oil will have expanded by 7 to 8 million barrels. If global production continues at present rates, it could grow by 12 to 15 million barrels per day in that period. In other words, there is more than enough oil in the ground." Maugeri's contention was that high prices would result in a supply response that would bring back the good old days of abundance. Of course, no one covering his recent policy brief bothers to mention that his 2006 prediction turned out to be wrong, and not by just a little. World oil production has been flat since 2005. His vaunted supply response never materialized.

But, it wasn't for lack of trying by the oil industry. As John Westwood, chairman of the energy consulting firm Douglas-Westwood, explained in a recent slide presentation, it is becoming exceedingly difficult to add new oil production capacity. Some $2.4 trillion in oil industry capital expenditures from 1994 to 2004 increased the worldwide rate of oil production by 12 million barrels per day. However, the $2.4 trillion in capital expenditures spent from 2005 to 2010 resulted in a decrease in the rate of oil production of 200,000 barrels per day (See slide 8).

And, yet Maugeri and the industry as a whole keep trying to convince everyone that things have now changed. Naturally, they assiduously stay away from actual data and trends which show flat oil supplies since 2005 in the face of rising prices, something that would tend to would disprove their case. And, they try to confuse the issue by adding things which are not oil to the oil supply numbers such as natural gas plant liquids and biofuels and then applaud themselves for being right about rising oil production when, in fact, they are actually wrong.

Maugeri and others argue not using facts, but fantasy. They try to sell their imagined future by conjuring vast supplies of oil from extremely low-grade sources which no one has so far figured out how to extract profitably such as oil shale (not to be confused with shale oil which is properly called tight oil). Or by projecting unrealistically low worldwide decline rates in existing fields, pretending that existing fields are somehow like factories that can be made to produce not far below current levels for an extended time instead of declining at historically observed rates. Or by engaging in fantasy projections of supply growth not based on existing data and a proper understanding of historical and technical information.

But as any good PR professional will tell you, it's the headline that counts, and Maugeri and others have gotten all sorts of headlines proclaiming a new era of oil abundance. Reporters tend to focus on the highest numbers and boldest claim in any report. And, the public often gauges the truth of such claims, especially if they are technical in nature, by how many times they hear them.

With oil still hovering above $100 a barrel in Europe, people find the stories of Maugeri and others comforting because they promise continuity. And, yet change is all around us in the oil markets and has been for more than a decade. Eventually, the volatility of those markets and the realities of constrained supply will demonstrate the truth of the matter to the public. By then, however, we may have lost another decade of preparation to the complacency created by a cleverly crafted abundance fantasy designed to lull policymakers and the public into a dreamlike trance of acquiescence.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Sloppy thinking about local food

Margaret Wente, a columnist for The Globe and Mail (Toronto), styles herself a provocateur. Naturally, columnists want to be read, and so they often write provocative things to attract and engage their readers. But sloppy is not the same as provocative, and for a journalist with Wente's credentials, the sloppiness is both surprising and disappointing.

In her recent piece "Take the romance out of farming and ditch locavorism" she advises her readers that locally grown food is inefficient and bad for the environment. Oddly, she tells us at the end of her column that she has no intention to abandoning local food for reasons that will be familiar to anyone who patronizes local growers and farmers' markets.

But before she tells us that she will continue with her guilty pleasure of visiting the farmers' market, she gives us her litany of criticisms which should by now be familiar to local food advocates:

1. It's inefficient to grow a wide variety of crops in one locale because the best soils for each crop are not available. It's better to let those who have soil best for growing say, potatoes, grow those and trade them. Of course, very few in the local food movement have said that each and every crop one desires must be grown locally, say, within 100 miles. This is merely a straw man argument meant to get opposition hearts beating. And, it reads as if it has been lifted from an Archer Daniels Midland press release. Quite sloppy for a journalist of Wente's caliber.

2. Wente tells us that she is happy that marginal farmland around Toronto has reverted back to forest and counts this as an environmental triumph for modern agriculture. Some digging--not much actually--would have informed her that great swaths of Amazonian and other forests are being felled instead to satisfy mouths hungry for fast-food hamburgers, palm oil and many other foodstuffs which now find their origin in the former jungle. Deforestation that takes place out of sight is out of mind. Wente seems blissfully unaware that her alleged environmental triumph has really simply turned into someone else's environmental tragedy.

3. Now here is the centerpiece of her critique: "Modern mass-produced, globally distributed food (not junk food, real food) is cheaper, more nutritious, safer, higher-quality, more reliably available and far less wasteful than the local kind. Modern food systems have done wonders for our standard of living and have liberated humankind from the chains of rural serfdom. They have increased, not decreased, food security and made famines (except for those that are politically induced) all but extinct. As for food miles, numerous analyses have shown that claims made for the alleged benefits to the atmosphere of eating food grown close to home are largely bunk."

Cheaper? Can't argue with that (except to remind people that you get what you pay for). More nutritious? Increasingly, no. The degraded soil upon which modern industrial agriculture grows its crops often leads to produce with lower levels of nutrients. It may not be true in every case. But it's true often enough to matter.

Safer? Depends on what you mean by safer. If refrigeration and food preservatives are what Wente is referring to, then yes the modern system is safer. And, there are (sometimes lax) inspections and safety standards for food. But the introduction of genetically modified crops and overreliance on pesticides (which are increasingly understood as endocrine disruptors that can affect human health at very, very low doses) are important caveats to this claim.

Higher quality? Does she mean appearance or taste or both? It's not clear, but many (including Wente) are flocking to local food precisely because it tastes better and is fresher than supermarket food. More reliably available? Probably, until it isn't. The complexities of the global food system are in the process of being tested by intense drought in the United States which is the world's largest grain producer. Complex systems have a way of disappointing you just when you need them most. (See Saudia Arabia below.)

Far less wasteful? Knowing what she means by wasteful would be useful. Elsewhere she says that local food is inefficient. By this I understand her to mean that it requires more inputs (which it clearly does not), more emissions per calorie (evidence cuts both ways), and more labor (almost certainly). But efficiency is usually meant as an economic term, and as Wente is a former business writer, she is probably thinking in these narrow terms. But if we consider the external costs of industrial agriculture--deforestation, enormous fossil fuel inputs (10 calories for each food calorie produced in the United States), persistent and widespread erosion of topsoil, large pesticide and herbicide inputs (309 million pounds of insecticide and 577 million pounds of herbicide worldwide in 2010) and their effects on the environment and food safety--well, then the global food system doesn't seem so efficient.

So, just as Wente's lovely Toronto woodlands mask deforestation elsewhere that feeds her, so too do these various external costs disappear so long as somebody else has to bear them or so long as they don't crash the food system altogether.

But, history tells us that every society that has depleted its soil has collapsed. I know of no exceptions to this rule. And so, this particular external cost is being displaced both in space and in time away from Wente's present-day Toronto. Let future generations deal with the devastation we are bringing currently to the soil with our industrial agriculture, she seems to say. Her unconscious logic, however, is impeccable: If they pay the price later, naturally, it'll be cheaper for us now.

As for claims that the modern global food system has increased food security. I assume Wente is talking about nations and not the world's poor who seem as insecure in their nutrition as ever. But even if she is talking about nations, how secure should Japan which imported 59 percent of its food as of 2009 feel? How secure should Great Britain which imports 40 percent of its food feel? How secure should Saudi Arabia feel after its oil wealth was unable to secure as much rice as it wanted on the world market in 2007 as major exporters held back supplies because of concerns about domestic shortages? Not surprisingly, Saudi Arabia's approach now to food security is to grow more crops of its own and not rely so much on the global food system to give it that security.

And, this brings me to a curious disconnect in Wente's logic. She somehow believes that the global food system creates more food security. But, she does NOT believe that the global energy system creates energy security. In a piece praising hydraulic fracturing used to free natural gas from deep shale layers in the United States, she wrote: "Best of all, the U.S. will become less dependent on nasty authoritarian petro-states." Why should that matter unless our global logistics systems really do NOT make us more secure in our supply of anything?

Despite this sloppy critique, you will be able to find Wente at Toronto's farmers' markets indulging in local food because, as she writes, "I love the sense of community and chatting with the neighbours. It’s much more fun than shopping at the superstore, and when the produce is in season there’s nothing that tastes better." Maybe she can start with that and rethink her condemnation of local food after considering just how flawed and incomplete her recent tirade really is.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

How changing the definition of oil has deceived both policymakers and the public

Everyone knows that world oil production has been running between 88 and 89 million barrels per day (mbpd) this year because government, industry and media sources tell us so. As it turns out, what everyone knows is wrong.

It's wrong not because the range quoted above can't be found in official sources. It's wrong because the numbers include things which are not oil such as natural gas plant liquids and biofuels. If you strip these other things out, then world oil production has been running around 75 mbpd this year. The main thing you need to know about the worldwide rate of production of crude oil alone is that it has been stuck between 71 and 75 mbpd since 2005 (calculated on a monthly basis). And, that has already had huge negative effects on the world economy and world society through high energy prices that are partly responsible for our current economic stagnation.

But because natural gas plant liquids production has been growing rather rapidly due to recent intensive drilling for natural gas and because those liquids are misleadingly lumped in with oil supplies, people have been mistakenly given the impression that world oil production continues to grow. Not true! What's growing is a category called "total liquids" which encompasses oil, natural gas plant liquids, biofuels and some other minor fuels. Total liquids are growing only because of large gains in natural gas plant liquids and minor gains in biofuels. And, this is why it is so important to understand what natural gas plant liquids are.

But first, an important question. Why do government and industry officials, oil analysts, and energy reporters equate total liquids and total oil supply? They claim that these other liquids are essentially interchangeable with oil. (I will discuss some of the not-so-savory motives behind this claim later.) In a recent report the U.S. Energy Information Administration put it this way: "The term 'liquid fuels' encompasses petroleum and petroleum products and close substitutes, including crude oil, lease condensate, natural gas plant liquids, biofuels, coal-to-liquids, gas-to-liquids, and refinery processing gains." Let's see why the "close substitutes" assumption is demonstrably false when it comes to most natural gas plant liquids and decidedly disingenuous when it comes to biofuels.

First, crude oil is what you think it is. It's a black, hydrocarbon-rich liquid that comes out of underground reservoirs. It can also be made synthetically from other hydrocarbons such as the bitumen found in the Canadian tar sands. Oil also includes something called lease condensate which refers to the light hydrocarbons that often occur in oil reservoirs. They are gaseous in the high-temperature environment of the reservoir, but condense to liquids when they escape the wellbore and are captured by special equipment located on the oil lease. These condensates become part of the crude oil stream. They are highly prized because of the ease in refining them, though they make only a small contribution to world oil supplies.

But what are natural gas plant liquids and are they good substitutes for oil? Unfortunately, confusion reigns because a very similar but more inclusive term, natural gas liquids or NGL, includes lease condensate, already discussed above and which we know is included in the crude oil stream. Usually, when people refer to NGL, what they really mean is natural gas plant liquids (NGPL).

NGPL are hydrocarbons other than methane that are separated from raw natural gas at a processing plant. They include ethane, propane, butane and pentane. The amounts vary. For example, raw natural gas extracted off the coast of Malaysia contains 11 percent ethane, 5 percent propane, 2 percent butane and about 2 percent of something called natural gasoline or drip gas, a low-octane fuel that is used today primarily as a solvent. Raw natural gas from the North Slope of Alaska contains a higher percentage of methane and correspondingly smaller percentages of ethane (7 percent), propane (4 percent), butane (1 percent) and other components including carbon dioxide and pentanes (2 percent). In these two cases you can see that ethane makes up about half of the NGPL, propane makes up about a quarter, butane makes up 10 percent of Malaysian NGPL and 7 percent of Alaskan slope NGPL.

So what is ethane used for? It's major use is as feedstock for the production of ethylene, one of the most widely used chemicals. Polyethylene is the world's most widely used plastic and found in such things as packaging film and trash bags. Other processes turn ethylene into automotive antifreeze. Yet others turn it into polystyrene which is used in insulation and packaging. Some ethane remains in the natural gas piped to our homes and factories, but not much. So far, it's hard to see how ethane, the most plentiful of the NGPLs, is a good substitute for petroleum-based liquid fuel products.

How about propane? Everyone is familiar with propane use in backyard barbeques and camping stoves. It's also used to heat rural homes. In addition, the Green Truck Association reports that there are 270,000 propane-powered vehicles in the United States. That's about one-tenth of one percent of the roughly 250 million vehicles registered in the country. Some claim that 17.5 million vehicles worldwide run on propane. If true, that would be about 1.7 percent of the billion vehicle worldwide fleet. Yes, propane is a viable substitute for petroleum-based fuels in transportation. But a lot more vehicles would have to be converted to propane for that substitution to be meaningful. And, then there is a ceiling on how much propane could actually be made available because as we've seen, it makes up only 4 to 5 percent of all raw natural gas production.

To the extent that propane displaces heating oil, it is a good substitute for oil. But again, limits on its production prevent it from being a panacea. Of course, natural gas itself is often a substitute for heating oil, especially given its comparatively low cost. So there can be a limited substitution effect where natural gas infrastructure is feasible.

How about butane? Everyone recognizes butane as the fuel for butane lighters. When it is mixed with propane, it is called liquified petroleum gas or LPG which is used for space heating. It's also used as a propellant in aerosol sprays. But no one can put butane into a vehicle. It's not a suitable liquid fuel for transportation. I suppose one could say that we'd have to use petroleum to make lighters if we didn't have butane. I'm not sure that's a good start for making intelligent energy policy based on the central role of oil in global civilization.

Pentanes have industrial and laboratory uses, but aren't used as liquid fuel.

The case for lumping NGPL with oil supply is not very strong. In fact, given that little substitution is possible and the growth in the substitutes that are available is limited, the merging of NGPL with oil seems more like a face-saving gesture on the part of those who have consistently been wrong on oil supplies and prices in the last decade. And, it seems to be a move of desperation by an industry that has been having trouble in recent years replacing its oil reserves. If investors caught on to the idea that oil companies are now essentially self-liquidating enterprises, valuations would be cut drastically. And that, of course, means that stock options and stock holdings for top executives would be devastated as would positions held by big investors.

NGPL currently constitutes about 9 mbpd of so-called total liquids. Biofuels, some coal-to-liquids, and a tiny amount of (natural) gas-to-liquids constitute another 2 mbpd. Turning coal into liquid fuels for vehicles is now done mostly in South Africa, a holdover from the days of apartheid when the South African government feared an oil embargo could leave the country without fuel for transportation. Turning coal into gasoline and diesel is extremely dirty and extremely expensive. But South Africa paid for the equipment to do so long ago and now must simply pay for domestic coal to supply its coal-to-liquids refineries. Only a relatively small amount of natural gas is currently being turned chemically into liquid fuels, mostly diesel. The process is capital intensive and expensive, and thought to be suitable for converting natural gas that might otherwise be flared.

As for biofuels, America is already approaching the current limit of its ability to absorb the supply of ethanol. Most cars can only run with a 10 percent mixture. Above that engine parts in the vast majority of vehicles start to degrade. Of course, we could continue to increase the ability of automobiles to burn ethanol. But the scale problem is the deciding factor. In North America it would take 1.8 billion acres to grow enough corn to supply enough ethanol to run the North American vehicle fleet. That's four and one-half times the amount of arable land available. And besides, corn ethanol takes more energy to produce than it provides. It's not an energy source so much as an energy carrier. Similar limitations apply to biodiesel which is made from vegetable oil.

The remaining volume of total liquids production, about 2 mbpd, is what is called refinery gain. Simply put, the total volume of crude oil increases once it is separated into its various fractions. This is not a source of oil so much as a consequence of spending energy to refine it.

Even when non-oil products are considered, total liquids have barely budged, up just 3.5 percent for the entire period from 2005 to 2011. Even if these liquids were interchangeable with oil, they would be making very little headway in substituting for it.

But because few of the non-oil products now being lumped in with oil supplies are genuine substitutes and the ones that are have serious limitations on the volume they could provide, we should consider the truth about oil. Its supply is stagnant which accounts for the record prices of recent years. And, the promise that high prices would bring on copious new supplies has proven to be nothing more than wishful thinking.

The limitations on oil supplies are now upon us. The salient issue is the rate of production, not the supposedly huge resources that optimists may conjure up in their imaginations. How much oil you can get out out of the ground on a daily basis is what counts, and it's getting harder and harder to extract the amount of oil we desire from the Earth's crust each day. We extracted the easy stuff first. We cannot now expect to extract the difficult stuff at the same high rates as the easy stuff. And, we cannot expect that total percentage recoveries from the smaller, more complex and challenging reservoirs which we are now forced to exploit will be as high as those we've gotten from large, simple, straightforward reservoirs in the past.

Facing up to this reality will be difficult because it will require so many changes in our thinking and our society. And, it would require the immediate markdown of the value of one of the world's largest and most powerful industries because it now faces contraction in the not-too-distant future. No wonder the powers that be decided to change the definition oil instead of accepting reality.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Pincushion America: The irretrievable legacy of drilling everywhere on drinking water

Since 1949 the United States has had more than 2.6 million oil and natural gas wells drilled into its surface. Many more wells have gone uncounted since they were drilled before comprehensive records were kept. Add to that some 680,000 waste injection wells of which more than 150,000 inject industrial wastes, some of it considered hazardous. And, this may not be the full count since the U.S. Environmental Protection Agency (EPA) admits that records are inadequate on the largest class of injection wells which it says "in general...inject non-hazardous fluids into or above [U.S. drinking water]." The "in general" part is not terribly reassuring.

The concern about all these holes through the country's subsurface layers has taken on added significance with the widespread application of hydraulic fracturing to obtain oil and natural gas trapped in deep shale formations. The process injects millions of gallons of water under high pressure mixed with toxic chemicals into wells to create fractures that will allow oil and natural gas to flow to the surface. Also flowing to the surface are millions of gallons of return flow which must be disposed of. Much of it is forced down waste injection wells.

Vast new areas in New York, Pennsylvania, Ohio, Michigan, North Dakota, Arkansas and many other states are now the subject of intense interest from drillers. So, an issue that had previously been confined to hydrocarbon-rich states such as Texas, Louisiana and California has now become a nationwide concern almost overnight.

The ProPublica story referenced above makes the case that the injection process changes the underground geology because of the amounts that have been injected (trillions of gallons), the high pressures used and the fractures created intentionally or unintentionally by the process--fractures which have the potential to allow dangerous wastes to reach underground drinking water aquifers. All of this is compounded by the lax supervision by both state and federal regulators who are overburdened in any case and have too few resources to monitor so many wells. It is no surprise then that many wells experience failures and leaks.

So where does that leave the future of America's drinking water? One former EPA engineer predicts that within 100 years most of the country's underground drinking water will be contaminated. This is an observation that I want to focus on.

I had a conversation this week about this issue with a contact who frequently does environmental consulting with clients in the oil and gas industry. While he thinks the immediate dangers of groundwater contamination from hydraulic fracturing in oil and gas wells are overblown, when I asked him about the long-term integrity of all those millions of wells, both recent ones and those long since abandoned, he was less sanguine. I asked him to imagine those wells not 10 years or even 100 years from now, but 1,000 years from now. He agreed that most of them will have disintegrated allowing free flows of liquid along the drill paths. There wouldn't be much pressure, he added. But then, the liquids don't need to come to the surface to be a problem for underground drinking water.

More recent wells might maintain their integrity much longer since they are usually stainless steel, and the concrete which surrounds them is more intelligently formulated to withstand corrosive elements in the subsurface layers. He was far more concerned about the waste injection wells which he agrees are poorly regulated and poorly run. These, he believes, pose the greatest danger to underground drinking water supplies.

I suggested that we are not accustomed to asking questions such as, "Who will be monitoring all these wells in 500 years or 5,000 years?" Human civilization, that is, our settlement in cities with their complex systems and logistics, is only roughly 10,000 years old. And, many discrete civilizations have come and gone in that period, most in under 1,000 years; many have come and gone in only a few hundred.

A great number of people in our time imagine that our technological age has solved the problem of civilizational collapse. They imagine our society moving from triumph to triumph and never making fatal mistakes that could wipe our way of life from the globe. Since the mental time line these people imagine stretches out thousands of years into the future, they have no care about who will be monitoring all those wells we've drilled in America and across the globe.

But history suggests the folly of this way of thinking. And, it is therefore an almost unspeakable horror that we have already bequeathed to future generations--polluted groundwater virtually everywhere that will kill and sicken many and may make habitation based on groundwater supplies impossible in many areas of the country.

That is the irretrievable legacy of our age of pincushion America. We get the temporary benefits while all future generations pay the terrible price.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Public health and austerity: A troublesome combination

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

              --T.S. Eliot, "The Hollow Men"

The modern end-of-the-world imagination often seeks out great Hollywood-style cataclysms: an asteroid collision, all-out nuclear war, a solar flare that wipes out the electrical grid, even a worldwide epidemic that leaves few alive. Less compelling is the possibility of relentlessly rising death rates that finally overwhelm birth rates and quietly set worldwide population on a downward path.

While such a development would (gruesomely) address population pressures over time, it would be both highly disruptive--the costs of coping would be very high compared to family planning--and also morally repugnant if allowed to occur through intentional neglect.

The idea that a decline could unfold in this manner, however, is so far from any policymaker's mind that it doesn't even seem to register. And, yet the seeds for it are being sown right now. As the world economy continues to sputter, government revenues fall. More and more nations are embracing fiscal austerity and public health budgets are being cut. The situation has become exceedingly dire for Greek citizens whose health care system is being slashed to meet austerity targets demanded by Eurozone lenders as the price for keeping the government financially afloat. Because many pharmacies have not received government payments for drugs they dispense in such a long time, these pharmacies are now demanding cash up front. And, impoverished Greeks are finding it difficult and often impossible to pay.

While money is one issue and an important one, complacency is another. The amazing triumphs over infectious diseases in the last century have led policymakers to ignore the realities: 1) The prevention of infectious diseases requires constant monitoring and preventive action and 2) the treatment of such diseases requires both the judicious use of existing drugs so as not to hasten resistance and the regular development of new drugs and therapies as infections agents evolve and gain resistance to existing drugs.

Earlier this year Dr. Margaret Chan, director-general of the World Health Organization, warned that overuse of antibiotics might mean that minor cuts and infections could once again become deadly since resistance to today's antibiotics is rapidly on the rise and few new drugs are being developed to replace them.

India is now the third country to report what is being called totally drug resistant tuberculosis. Part of the problem is poor disease management. Too often patients are given the wrong treatment regimen. But also more than 50 years have passed since new drugs designed to defeat TB were developed. Our success to date has been our undoing. It has not been all that profitable for drug companies to do the extensive research for a new drug to treat a disease that has been largely under control.

In the United States, whooping cough, thought to be a problem banished by a vaccine in the 1940s, has reappeared in what the state of Washington calls an epidemic. Budget cuts are preventing local health departments from even tracking the epidemic accurately. The state believes far more cases go unreported than have been catalogued. If we can't even keep track of an epidemic, how can we expect to fight one effectively?

Perhaps the poster child for the collapse of the public health system is Russia where the breakup of the former Soviet empire led to major disruptions of public institutions including public health. A country in which AIDS is rampant as well as tuberculosis, Russia has experienced persistent population declines since the breakup. (I covered this previously in this piece written in 2010.)

Part of what makes public health spending a hard sell is that it simply cannot supply the kind of compelling narratives that such routine medical miracles as heart valve replacements and cochlear implants (which restore hearing in some deaf patients) are able to supply. Public health successes are about what doesn't happen, about people who don't get sick, epidemics that don't get out of control, about the healthy and problem-free delivery of newborns, about the birth defects that are avoided. (I've written on this problem several times, but especially applicable is a piece entitled "Asymmetrical accolades: Why preventing a crisis almost never makes you a hero.")

The notion to date is that cutbacks in public health are part of a broader but temporary austerity. But persistent strains on the world's oil supply suggest that the engine of global growth will no longer be cheap or plentiful. (All the hand waving about new discoveries and new extraction techniques aside, world oil supplies remain flat. The industry's cheerleaders and dupes conveniently forget to mention depletion which is constantly eating into the production capacity of existing fields by at least 4 to 5 percent per year.) That means growth will have to be fueled by some other energy source though it's not clear what that is. And, the financial headwinds of too much debt could mean that no matter what happens on the energy front, the world is stuck in low or no growth mode for another decade and possibly beyond.

That means waiting for growth to return and replenish government coffers so that governments can in turn increase public health budgets will open a long window of vulnerability--just when all factors suggest we will need increased public health vigilance. The gradual degradation of public health services will never make good Hollywood material. The trend is more in line with T.S. Eliot's ending of "The Hollow Men." The world may indeed end with a whimper, the whimper of souls expiring one by one for lack of appropriate public health measures--but at a rate that throws global society into a constant turmoil from which it will be difficult to recover.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Are we moving toward a fact-free future?

Psychologist Daniel Kahneman likes to pose the following problem to audiences to illustrate our habitual modes of thinking:

A bat and a ball cost $1.10 together and the bat costs one dollar more than the ball. How much does the ball cost?

It turns out that about 50 percent of students at the Massachusetts Institute of Technology got the answer wrong. The proportion reached as high as 90 percent at other unnamed universities. Okay, now that you've had time to reflect on the answer, you'll realize that your instinct was probably to answer 10 cents. But, of course, that's wrong. And, all you have to do is some elementary math to realize it's wrong, and then arrive at the correct answer: The ball costs 5 cents.

What's in operation here are two systems of interpreting the world, one associative and one logical, often referred to in psychology as System 1 and System 2, respectively. System 1 picks up the numbers $1.10 and $1 and makes an incorrect leap that the ball costs 10 cents. System 2 does the math and then corrects the error. It's something that happens every day in our lives. But, in this case what is at stake is regarded by most people as so trivial that even very smart ones fail to engage System 2 to check their answer. If, instead of being faced with a trivial problem that has no impact on your life, you were considering which house to buy, you would probably be engaging System 2 on a regular basis. You would be trying to determine if you were getting a fair price by, for example, checking home values nearby, comparing square footage and evaluating features such as a swimming pool or finished basement.

And, this brings me to my topic. Issues such as climate change and peak oil seem so abstract to most people that they do not see them as pressing issues that require a thorough analysis and immediate action. This is true because the effects are not immediately impinging on them or, at least, they are unable to connect what effects there are to themselves. And, the usual fact-filled analysis that is often thrown at them therefore doesn't interest them much. As it turns out, information that is new, but not consistent with one's current belief system, is normally discarded by most people. Typically, only some exceptional concrete change of circumstances will cause people to open their belief systems to contradictory information.

You might say System 1 is the storytelling function and System 2 is the investigatory, scientific function. To succeed, stories need to be concrete and evocative of experiences and feelings that people can identify with. Since we operate most of the time using System 1 and since it serves us well in the vast majority of cases, the conclusion we can draw is that climate change and peak oil activists must create a narrative that can simultaneously tap into people's existing belief systems while giving them new information. This is no small task. And, it would be hard enough without all the pernicious and omnipresent propaganda emitted by the fossil fuel industry. That propaganda, incidentally, tells stories that reinforce the status quo and so don't challenge the basic worldview of most people.

In an attempt to eliminate contradictory information, the fossil fuel industry and their political allies have made a spate of attempts in the last year to shut down research and information about climate change and environmental degradation. The alarming nature of recent scientific findings has the industry fearful that people may actually be aroused from their propaganda-induced torpor and seek change. In North Carolina, state lawmakers are considering a bill that would prevent estimates of sea level rise based on climate change models from being incorporated into development plans. The state has a long Atlantic coastline and many barrier islands that are threatened by rising seas. Mere pretending, of course, won't prevent bad things from happening. But it may allow developers to do whatever they please instead of preparing North Carolina for the inevitable deluge.

The anti-science Harper administration in Canada has decided to disband the government's ocean contaminants program which monitors pollution and its effects in the three oceans the touch Canada's shores. Naturally, this move was portrayed as a cost-cutting measure. But the real intent is to prevent the dissemination of scientific findings that might lead to new environmental regulations which would impede oil and gas exploration.

Last year the U.S. Congress saw fit to cut the budget of the U.S. Energy Information Administration (EIA) in the face of historically unprecedented oil prices that are telling us we need to keep careful track of energy markets and supplies. Again, the excuse was cost-cutting. It's less clear that this move was inspired by the desire to keep the public in the dark rather than by the ideologically driven desire to shrink government and make it ineffective.

North Carolina, of course, will simply be a laughingstock if it goes ahead with its plan to outlaw the truth about sea level rise. That information will still be available from other sources. But Canada's ocean contaminants program will mean the loss of vital data about the health of our oceans, especially about the Arctic Ocean. As for the EIA budget cuts, the information it will no longer compile could be compiled by others and made available for a fee. But the central purpose of the EIA is to make energy information available to policymakers and the public free of charge to encourage broad participation in debates about energy policy.

But the purging of facts doesn't always come from governments. Privately funded propaganda--these days coming from so-called "think tanks" that are funded by right-wing billionaires--can also obscure our view. If you want testimony from inside one of these think tanks, read this piece from conservative David Frum who was fired from such a think tank for disagreeing with Republicans on strategy--not even policy--during the debate over the Affordable Care Act. The message was clear: "We don't pay you to think. We pay you to repeat."

All of these moves by governments, corporate interests and elites are really aimed at cultivating and disseminating compelling stories which appeal to System 1 to reinforce the status quo. These moves are also designed to withdraw resources from government departments and drown out nonprofits that provide contradictory System 2 information which might be useful in checking the System 1 stories peddled by these groups.

The late Senator Daniel Patrick Moynihan once said, "Everyone is entitled to his own opinion, but not his own facts." Apparently, in the our new age of extremist ideologies, there is no longer any place for facts, only opinions.


P.S. I want to relate an encounter I had with an energy analyst from a highly regarded think tank, not a fake one, but a real one that does real consulting for corporations and government agencies. When I mentioned to him that the EIA reports that crude oil plus condensate (which is the definition of oil) has been flat since 2005, he responded that I couldn't be correct. I suggested that he look it up himself and see that production has bounced between 72 and 74 million barrels per day during that period. He stated that that number must not include tar sands production. I told him that it indeed includes all crude plus condensate from whatever source. But, he was simply not prepared to accept what the publicly available data told him.

There are three things I took from this conversation. First, I was frankly astonished that someone whose job is energy analyst at a bona fide think tank did not know the EIA number for crude oil plus condensate. After all, that's his job and that number is probably the most important number in the world for an energy analyst to know. Second, this person did not know the EIA definition of oil. I realize that this definition is not something the average person would know. But for someone who eats, drinks and breathes energy, it really ought to be essentially top of mind. Third, this encounter was a perfect illustration of how System 1 thinking--a broad narrative about there being plenty of oil for decades to come--can completely overshadow System 2 thinking even in persons whose work involves heavy emphasis on System 2.

UPDATE: One reader asked about the EIA definition of crude oil. The EIA has a glossary which defines oil as follows:

Crude oil: A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Depending upon the characteristics of the crude stream, it may also include 1. Small amounts of hydrocarbons that exist in gaseous phase in natural underground reservoirs but are liquid at atmospheric pressure after being recovered from oil well (casing head) gas in lease separators and are subsequently comingled with the crude stream without being separately measured. Lease condensate recovered as a liquid from natural gas wells in lease or field separation facilities and later mixed into the crude stream is also included; 2. Small amounts of nonhydrocarbons produced with the oil, such as sulfur and various metals; 3. Drip gases, and liquid hydrocarbons produced from tar sands, oil sands, gilsonite, and oil shale. (my emphasis)

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Everything is bullish (in its own way)

My apologies to Ray Stevens, writer of the 1970s hit "Everything Is Beautiful," the lyrics and title of which I've morphed into the title of this piece. But with that I note the perpetual bullishness of the financial industry in the face of what is really an ongoing debt deflation. Every incident, every turn of events is summarized by the industry as a "bullish development."

If the stock market goes up, that's bullish. If it goes down, that's bullish, too, because the world's central banks are just waiting in the wings to create more liquidity to support a rally. If crude oil goes up, that's bullish because it means the world economy is hitting on all cylinders. If crude oil goes down, that results in a decline in the costs we all pay for energy and that's bullish, too. (Never mind that a decline in energy prices can also mean declining demand and thus a weak economy.)

If the Greek government is getting loans to keep it running for another few months--until things get better, of course--that's bullish. If the Greek economy is about to collapse, if the Spanish banks are about to collapse, if Italian bond rates are about to skyrocket, all of these things are bullish, too, because, of course, the European Central Bank will have to ease in some way or the Germans will have to relent and agree to bail out the Greeks, the Spanish banks or the Italian bond market.

If the U.S. economy is growing that's bullish. If it is weakening, that's bullish, too, because the U.S. Federal Reserve will add more liquidity to help it grow.

But, here is the point. Unprecedented government spending and central bank easing have led to an extremely tepid economic recovery when history would suggest that a strong, vibrant recovery should have occurred. Neither action is solving the underlying problem: too much debt. Now, to most neoclassically trained economists (which is virtually all economists these days), debt is absolutely no problem because, they will tell you, one person's debt is another person's asset. The two cancel each other out. Sounds nice, doesn't it?

But when there is too much debt, it means that people who have that debt are unable to service it, that is, they are unable to pay even the interest payments on it. Of course, not everyone who is indebted is in this situation. But it doesn't take everyone to create an ongoing debt deflation. Here's the simple way to think about it: Every debt must be resolved in one of two ways. Those carrying a debt will either pay it back or default, handing the lender a loss, sometimes partial, sometimes complete. Those who can are generally paying down their debt. Hence the contraction in private debt worldwide since 2008. Those who can't pay their debts are defaulting. This includes individuals, companies and countries.

But the global economy is entirely dependent on the continuous expansion of debt in order to grow spending and consumption. That's just the way we've set things up. And, the only substantial expansion of debt we've seen since 2008 is in government debt. Without it, we would already be in a deep worldwide depression. The expansion of government debt and the purchasing which resulted from it have counterbalanced the shrinkage in private debt so far. But this expansion has not led to a robust economy recovery.

There are two reasons, neither of them bullish, for this result. First, it will take years for private debtors, both household and corporate, to bring down their debt (either by paying debts off or defaulting) to a level that would make them feel comfortable with expanding their debt again. Until they do, the economy will remain sluggish at best. But it will only remain sluggish--instead of falling off a cliff--if huge government spending and central bank easing continues. Governments around the world have probably reached the limit of what they can do without destroying their finances. And, in fact, a few already have destroyed them and more probably will.

As for central bank easing, with short-term interest rates hugging zero in major countries around the world, interest rates cannot go lower. Central banks could continue to buy dodgy collateral such as home mortgages or better quality collateral such as government bonds. This would provide more funds to the financial system meaning more cheap money made available for private borrowers. But few private borrowers see a reason to borrow. Either they are too indebted already and so banks will not lend to them or they are capable of borrowing, but see no reason to borrow. Businesses, for example, see little reason to expand in the face of continuing economic weaknesses, so they borrow very little. Individuals who can borrow are choosing not to because they are concerned about job security in such a weak economy.

Analyst Doug Noland has demonstrated that each fresh round of stimulus and easing has had a palliative effect for a shorter period. The initial stimulus turned the economy around starting in 2009 until mid-2010 when the European sovereign debt crisis exploded. Measures taken then worked until late summer 2011. To quell the second crisis in Europe additional stimulus in the form of $1 trillion in low-interest bank loans was made available that fall. This created a new precarious stability for about six months. We are now in the throes of yet another chapter of the European debt crisis. How long will the measures ultimately taken work this time? Three months? Three weeks? At some point, Noland believes, the market players will realize that these measures are not addressing the heart of the problem and make moves that will crash the system á la 2008.

The second reason for ongoing economic weakness is high oil prices. I've been wondering when $100 oil prices would finally place enough stress on the world economy to create weakness and even outright contraction. With the recent rapid decline in oil consumption and prices--indicative of economic softness--I think that weakness has finally arrived.

Even if the world's governments and central banks manage to avoid a catastrophe this time, high energy prices and two much debt will continue to bedevil the global economy for years to come. World oil production has been on a plateau since 2005 and shows no signs of growing despite all the hand waving about new tight oil production (often referred to misleadingly as shale oil). Production declines from existing fields continue to equal growth from new fields. Hence the oil production plateau.

Debt levels have much further to fall to reach levels that are manageable for households. And, total credit including government debt continues to be far outside the norm.

While it is conceivable to me that in the next decade the world will achieve marginal gains in petroleum production (as distinct from so-called total liquids which include natural gas liquids and biofuels), I do not believe those gains can return us to an era of cheap oil. That means the path to resolution of our current economic woes rests with debt reduction. The problem could be resolved more quickly if there were a coordinated worldwide debt forgiveness on a very large scale. But rich people own that debt, and they appear to control most of the world's governments. Don't look for them to agree to a debt jubilee. Instead, the economy will likely limp along for another decade or so while people continue to retrench, paying down debt or defaulting when they cannot pay.

The result will be continuing high unemployment, social unrest and wildly gyrating markets. There is a better path. But, we will not take it as long as we are deluded into thinking that we can grow again as we did when oil was cheap and that the key to ending this slump is to add more debt.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Antibiotics, the war on weeds, and the medical model in agriculture

Modern agriculture and modern medicine go hand in hand. And, perhaps one of the best-known ways they interact is the use of antibiotics. If we humans get an external infection, we can now easily reach for topical antibiotics to kill the infection without harming ourselves. And, of course, we can take oral or injected antibiotics for internal infections.

In agriculture, antibiotics are used on livestock, in part because the drugs enhance growth and in part to prevent disease in close conditions typified by confined animal feeding operations, known as CAFOs--in which animals live so crammed together that they are constantly exposed to an array of infectious agents.

Now the director-general of the World Health Organization, Dr. Margaret Chen, says that we are facing a world without antibiotics because of increasing antibiotic resistance brought on by overuse. Increasing antibiotic resistance is actually old news; but the idea of living wholly without antibiotics is really the news here.

That's the medical model applied to animal agriculture. But the same model is being applied to crops. In the medical model pathogens identified as the cause of a disease must be eliminated. Of course, there are plant diseases. But they tend to be treated through a much more wholistic approach than human and animal disease. The emphasis is put on prevention since treatment, once a plant is infected, is very difficult. So, the general approach to plant diseases doesn't exactly fit the medical model.

Instead, if we look to the farm field as the subject to be diagnosed and treated, we can see right away what is considered an infection: weeds. Weeds are considered the equivalent of pathogens in the farm field, something that must be eliminated because they drain the vitality (i.e., lower the yield) of the crops in question.

And, this is where a parallel problem is arising. The genetically engineered crops of the 1990s were designed to allow herbicides to be used for chemical weeding while the crop is growing since the crop itself is genetically engineered with resistance to the weedkiller. The most popular combination has been Ready Roundup soybeans and Ready Roundup herbicide.

Now, however, the weeds are evolving and, just as insects do, becoming immune to the chemicals used to kill them. The solution apparently is to go back to old herbicides for weed control such as 2, 4-D which comes out of the 1940s. So much for Ready Roundup (which is a trade name for the weedkiller glyphosate).

But 2,4-D is difficult to use when crops are growing since it can kill both the weeds and the crop. To solve this The Dow Chemical Company, the world's major producer of 2,4-D, has now created corn that is immune to the company's herbicide. Many farmers and environmental groups are opposing the increased use of 2,4-D because of its toxicity, its ability to drift and fall on areas where it's not being applied, and--you guessed it--the fact that it will inevitably result in superweeds that are resistant to 2,4-D--thereby rendering that herbicide less and less useful.

In the same manner, drug companies have developed new antibiotics through the years to combat the resistance problem. But at least they were developing new drugs. In the case of Dow Chemical and the Monsanto Company, the leading producer of genetically modified seeds, both are reaching back to the past. And, this points up a very interesting disconnect between the path of the drugmakers and that of the agricultural chemical manufacturers and seed developers (which are usually one and the same). Herbicides appear to be a tougher sell to regulatory authorities than genetically modified crops which--so long as they do not act as a "pest" themselves--sail to approval under the doctrine that they are "substantially equivalent" to other crops. Of course, such crops aren't pests themselves; they just create new kinds of weeds that become a giant headache for everyone else.

The point here is that the agricultural chemical and seed producers are not developing new weedkillers which would require enormous research, regulatory approval and then capital expenditures to build the necessary factories. They are taking the easier route of implanting resistance to their existing herbicides into crops. So you can forget about a new generation of herbicides that might be less toxic or quicker to break down in the environment.

Of course, this war on weeds is one that we cannot win. Weeds in a farm field are not an infection. They are part of natural succession, and farming, as ecologist William Catton Jr. once said, is "a war against succession." (Succession, you'll recall, is the progression of any ecosystem toward its climax or stable state.) There are many better ways to control weeds on the farm including crop rotation and the planting of cover crops. Neither have the deleterious effects of the relentless chemical applications central to the war on weeds.

But that approach wouldn't enrich the agricultural chemical giants who figure they can make quite a bit of money--while pushing the costs off onto others--between now and the time they and their allies in the farming community lose this pointless war.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

Memorial Day Break--No post this week

I am taking a holiday break and expect to post again on Sunday, June 3.

How the fracking mess is about to make the mortgage mess worse

One fact ought to tell you all you need to know about the risks faced by homeowners signing leases for natural gas drilling on their property: Wells Fargo & Company, both the largest home mortgage lender in the United States and a major lender to the country's second largest producer of natural gas, Chesapeake Energy Corp., refuses to make home loans for properties encumbered with natural gas drilling leases.

This salient fact comes from an article (PDF) written for the New York State Bar Association Journal by attorney Elisabeth N. Radow. Written in the form of an even-tempered legal brief, Radow relates one astounding finding after another. Perhaps most relevant to homeowners who either have signed drilling leases or who may be asked to sign them in the future is this: "Signing a gas lease without lender consent is likely to constitute a mortgage default." You read that right. Default.

Her conclusion stems from something which most homeowners probably don't even realize: Standard residential mortgages prohibit:

the use, disposal, storage, or release of any hazardous substances on, under or about the mortgaged property. In mortgages, hazardous substances include gasoline, kerosene, other flammable or toxic petroleum products, volatile solvents, toxic pesticides and herbicides, materials containing asbestos or formaldehyde and radioactive materials.

Of course, homeowners often have and use some of the above-mentioned materials. But the lenders may invoke their rights should industrial-sized activities such as hydraulic fracturing or fracking occur. Fracking, a process often associated with natural gas drilling, utilizes a cocktail of hazardous chemicals mixed with water. Millions of gallons of the mixture are pumped under high pressure into each well to fracture deep shale formations and thereby release the embedded natural gas found there. Beyond this, homeowners with mortgages are prohibited from violating any environmental laws, federal, state or local. Can they always count on drillers to observe those laws?

Now, here's how the fracking mess intersects with the ongoing mortgage mess. Most mortgages are sold into the secondary market to federal lenders such as Fannie Mae and Freddie Mac, and some are packaged in groups as mortgaged-back securities and sold to investors. The mortgage lenders make representations to buyers in the secondary market that the mortgages they are selling conform to widely accepted standards that prohibit the kinds of activities listed above. In Radow's opinion it is likely that many residential mortgages with natural gas leases on the underlying properties have already made there way onto the books of Fannie Mae and Freddie Mac or into investor portfolios. And, with shale gas found across many states, there are likely to be many more compromised mortgages sold into the secondary market in the future.

None of this might matter if the drilling and production did not affect the value of the underlying property. Some of those who signed leases for drilling so-called coal-bed methane in Colorado and then experienced problems ended up with losses on their homes that reached 85 percent. In some instances, property owners merely situated near drilling and production have suffered. A Pennsylvania couple was recently denied a new mortgage on their home and hobby farm because according to the lender "gas wells and other structures in nearby lots...can significantly degrade a property's value." The owners came to the logical conclusion that if they cannot refinance their own home, no potential buyer would likely be able to get a mortgage to purchase it should the couple ever want to sell.

Others who've had their water supply contaminated but could not prove it was due to nearby natural gas drilling are facing a wipeout since their homes are now worth far less than the mortgages on them. Some of those people will simply end up walking away in order to protect the health of their families.

But why not turn to one's insurance company to pay for damage to one's property? It turns out that homeowners insurance almost always excludes damage from industrial operations on one's residential property, Radow writes. And, that's what natural gas drilling is, an industrial operation. Even for those who escape the problems of water contamination and human and animal health effects, there remains the ever present possibility of damaging explosions and fires from drilling and production operations. Homeowners insurance won't pay for that either.

Surely, the drilling companies are responsible for explosions and fires linked to their operations. Unlike water contamination which is usually an underground phenomenon and often difficult to prove, it should be obvious that the companies are responsible for damage from explosions and fires caused by their actions. Don't count on it, Radow seems to say. In such circumstances, homeowners may have to sue for damages and even if they win, they may not get paid for all damages since the natural gas drillers admit in their regulatory filings that they may not carry enough insurance to pay for damage due to such mishaps.

One more twist has been the sale by a major homebuilder of entire subdivisions of new homes stripped of their mineral rights. Obviously, the homebuilder hopes to make a second fortune by leasing those rights should they become valuable. Naturally, the newly aware homeowners worry about the possible loss of value in their homes should that come to pass. It's no wonder. Homebuilder D.R. Horton's energy subsidiary has been given “the perpetual right to drill, mine, explore … and remove any of the subsurface resources on or from the property by any means whatsoever."

Now, we come to who will ultimately pay for any cleanup on abandoned, underinsured properties contaminated and otherwise made uninhabitable or at least, undersirable. Perhaps you've already figured out that it will be in almost all cases U.S. taxpayers who now own the two largest mortgage companies in the country, Fannie Mae and Freddie Mac. When these mortgage giants finally take possession of all the contaminated and impaired properties, they will be obliged to clean them up and simultaneously bear the losses in the value of the mortgages issued on those properties.

In this way, the average citizen will be subsidizing the natural gas industry by bearing the costs associated with devalued property and hazardous waste cleanup. When all of this starts happening in a big way, you can count on those in charge saying that nobody saw it coming.

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.