Land of Make Believe
By Jim Kunstler
For the moment, it's back to business-as-usual for Easy-motoring Nation.
Yet 73 percent of oil from the Gulf of Mexico remains "shut in" or unavailable because of hurricane damage, and about 63 percent of natural gas production. Prior to the hurricanes, 24 percent of the nation's non-imported supply of crude came from the gulf. There are also eight refineries still shut down representing 2.1 million barrels a day of refined product capacity (900,000 barrels a day of gasoline, 500,000 of diesel and heating fuel, and 200,000 of jet fuel).
For the past month, the European Union has been sending two million barrels of crude a day to the US out of its own emergency reserves. The original deal was made in the brief lull between Katrina and Rita. It took a while for those tankers to get here. The EU imports over 15 million barrels of oil a day itself, somewhat more than the US did in pre-hurricane times.
The Federal government has loaned the oil companies crude from the Strategic Petroleum Reserve. The SPR contained 700 million barrels of crude when the hurricanes hit. The US uses 20 million barrels of oil a day, of which we produce altogether about seven million barrels ourselves. It is unclear how much oil is coming out of it now, but the last time a president tapped the SPR (Clinton) one million barrels a day were released.
These actions have beaten down the price of crude oil on the various futures markets. At the same time, gasoline pump prices have leveled off from the refinery squeeze. I doubt that the motoring public is driving a whole lot less. The commutes haven't magically gotten any shorter out in Dallas and Denver over the past month. The national fleet of SUVs has not been changed out either.
What's happening, therefore is that we have entered an eerie hiatus. Some band-aids have been applied to our oil and natural gas supply injuries and the bleeding seems to have stopped. But the truth is that our energy supplies are badly compromised and at the worst time of the year -- just as we slide into the home heating season. Here in the northeast, we have barely had to turn on the furnaces yet, but that will change in a week or two.
In the background of this scene, the global oil production peak lurks -- meaning that there does not seem to be any surplus production capacity anywhere in the world, including OPEC's big gun, Saudi Arabia. So all we have here in America is a temporary appearance of normality. When the furnaces go on, the WalMart aisles will be empty. If there is any reduction in car trips, it will be because Americans are making fewer visits to the Big Box stores. There will also be fewer trips out to visit the model homes in the new subdivisions.
Another unpleasant truth about the situation is that the US public wants to pretend that everything is okay as much as its leaders do. The public is not so much being misled as demanding that its leaders in government, business, and the news media continue a game of make-believe -- that we can still run a cheap oil economy without cheap oil.