A Fog of Mendacity
Those frightening
sounds, sights, and odors on the wind this foreboding snowless winter -
like emanations from some back ward of a global psychiatric hospital -
are the signs of a nation going completely mad. The traumatic rise of
oil prices above the $100 level is one irritant, prompting a range of
people-who-oughta-know-better to gibber and fulminate as though they'd
been locked in the nation's attic since Thanksgiving with nothing to do
but play with a box of pencils. Meanwhile, several absurd "narratives"
circulate around the mainstream media that are sure to cause this
country more trouble - as any set of pernicious untruths will.
One popular new lie is that US oil production is suddenly so robust
that America is about to become a leading world oil exporter again -
which is completely untrue. The lie arises at the intersection of
wishful thinking and the willful misuse of statistics. It was trumpeted
by the appallingly credulous Tom Friedman in his Sunday New York Times
column, of all places, and it shows how effective the oil and gas
industry's propaganda campaign has been.
A lot of the
wishing comes out of the shale oil and shale gas sectors. Those TV
commercials you see around the news hours on the cable networks are
designed to extract investment capital from elderly people who have been
swindled in the bond markets and don't know where to stick their
dwindling retirement funds. Shale oil and gas must seem like a good bet
to them, especially the ones marooned in retirement housing clusters in
dismal places like Arizona and Florida, where not being able to drive is
a virtual death sentence.
The US government is in on
this propaganda offensive, especially the Department of Energy's Energy
Information Agency (EIA), which routinely issues overly optimistic
reports about future oil production. The political spin is a quixotic
effort to promote another commonly touted lie about the future: that the
US is approaching a point of "energy independence." You'll know we got
there when you have to walk to your new job weeding the potato fields.
The mendacity behind this propaganda is strictly the wish of politicians
to avoid telling voters the truth, out of sheer cowardice for the
consequences. US Energy Secretary Steven Chu will go down in history as a
pathetically passive quisling, who thought he was honest and patriotic
by standing in the background and keeping his mouth shut.
In fact, a lot of the propaganda behind the current madness is based on
the incapacity of Americans to imagine daily life without all the cars.
One very active drummer on the propaganda scene is John Hofmeister,
former CEO of Shell Oil. About a week ago he debated Tad Patzek, a
petroleum engineer from the University of Texas. Hofmeister's rap is
based on one central fallacious idea: that American life can only
continue if we keep all the cars and trucks running. Any other outcome
is unthinkable, off the table. To put a finer point on it, he insists
that our national identity and destiny are tied to "personal
transportation," code for car dependency. The debate was therefore
absurd and Patzek was way too polite. He never challenged Hofmeisiter's
core idea.
The public's gross misunderstanding of these
issues arises over a set of mis-statements made in recent years
especially focusing on the Bakken shale oil basin on North Dakota, the
various shale gas plays around the country, and the tar sands of Canada
(which so many spinmeisters seem to regard as belonging to the United
States). The true state of the US oil industry is that we only barely
stalled a 40-year decline in oil production by throwing massive amounts
of money (capital) at oil reserves that are very expensive and difficult
to get. In so far as we've entered the terminal stage of a long debt
cycle, one thing we can be sure of is a shrinking pool of real capital
investment. Hence the frantic propaganda effort to funnel remaining
available money into the shale plays.
A companion fantasy
to all this is that the US has a hundred year supply of natural gas.
President Obama is guilty of this whopper. (One commentator, financier
Bert Dohmen, made the ridiculous claim in a recent podcast on the
Financial Sense News Network, that the US has a thousand year supply.)
These are the kinds of irresponsible statements that will eventually
inflame a public yet again swindled by authorities they desperately want
to trust. The truth is we probably have perhaps a seven-year supply of
shale gas, and maybe 20 of all gas including the regular old
conventional gas. And even that could easily be reduced by the disorders
in capital formation now underway in the destabilizing banking sector.
In any case, all this wishing and lying is about to collide with
price volatility to make the American voting public absolutely batshit
crazy with dread and anger. That, of course, will only prompt more
lying, whopper-spinning, and grievance-flogging in the political arena.
It will be nearly impossible for the public to evaluate reality. In the
meantime, those disorders in banking and financial markets are close to
running out of control. Events are tending ever closer to criticality. I
believe they will be expressed in political violence around the major
party conventions this summer. Those will be interesting fog-lifting
weeks.
