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GOVERNMENT, FINANCIAL, AND POLITICAL AWARENESS OF PEAK OIL PRIOR TO 2005
FIVE RULES FOR SURVIVAL OF THE COMING COLLAPSE
(A Speech for the New York Petrocollapse Conference – October 5, 2005)
Michael C. Ruppert
© Copyright 2005, From The Wilderness Publications, www.fromthewilderness.com. All Rights Reserved. This story may NOT be posted on any Internet web site without express written permission. Contact [email protected]. May be circulated, distributed or transmitted for non-profit purposes only.
October 5, 2005 (FTW) – NEW YORK -- Most people who have come to this conference; indeed, perhaps even some of the presenters here today, have come with a serious misconception. That misconception is a belief that there is an urgent need to somehow make key decision makers and leaders of American and global life aware of the immediate problems of Peak Oil and Natural Gas.
Nothing could be more off base. The world’s key decision makers have been aware of and planning for this crisis for years.
In fact, by understanding clearly that political, economic and business elites have been aware of Peak Oil and its deadly implications, we can see that remedial actions designed to save lives and minimize the effects of collapse can and will only be initiated by individuals working through and as part of local communities.
There is a record – much too long to describe fully here – that official awareness of Peak Oil and its implications has been a distinct and well-articulated part of US political and economic thinking going back at least to 1977. I will give you just a few brief examples to make the point. Many of these examples are included in my book “Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil” (New Society, 2004). If you listen closely to these few examples you will understand that even though the term Peak Oil is rarely mentioned, it is exactly what is being described.
In the same vein, it is foolish to believe that any governmental preparation for Peak Oil will be publicly labeled as such. Most preparations, so as to avoid panic and/or political risk, have been carefully concealed in other documents and legislation such as the PATRIOT Act and the Homeland Security Act. In my earlier presentation and throughout the day today, it should be growing clear to you that official preparations for Peak Oil have been underway for some time. And – as I document in “Rubicon” – they include the attacks of September 11th, 2001 and all US government foreign policy initiatives since then.
Here are some key examples of governmental and financial concern about Peak Oil.
1977 – The Central Intelligence Agency
In March of 1977 the Central Intelligence Agency produced a Secret briefing paper entitled “The Impending Soviet Oil Crisis”. It is one of about five CIA reports that have since been declassified which mention Peak Oil by name and which came to my attention about two years ago. My newsletter “From The Wilderness” published an analysis of the CIA report by Peak Oil educator and author, Professor Richard Heinberg in which it was shown that the CIA had a clear understanding of Peak Oil nearly thirty years ago.
The CIA paper said in part:
“The Soviet oil industry is in trouble. Soviet oil production will soon peak, possibly as early as next year and certainly not later than the early 1980s…”
The Soviet Union, of course did not peak in the 1980s. Current flat-earth economists sometimes argue this point as a rebuttal to Peak Oil activists to prove that they are wrong. What happened however had nothing to do with geology and everything to do with political dirty tricks. Starting in the late 70s the United States encouraged OPEC nations in the Middle East to relax production quotas which could only be accomplished if they somehow managed to double, triple or even quadruple their stated reserves. OPEC production quotas are linked to “booked” reserves. So, with the stroke of a pen -- and very much like Saudi Arabia’s comical announcement last week that its reserves had just again magically doubled – every Gulf producer announced bountiful reserves, crashed the wellhead price of a barrel of oil, and forced the Soviets, who couldn’t produce oil as cheaply – out of the market. Every producer except one, that is. Dubai left its stated reserves as they were. So the maneuver was exposed as a mere accounting trick. OPEC production exploded and oil prices collapsed below a level where the Soviets could compete. Soviet foreign exchange sales plummeted, the Soviet economy tanked and Soviet production and infrastructure collapsed. By 1989 the Soviet Union was finished and its oil infrastructure lay in ruins.
Since the 1990s as oil prices have soared, Russia has become the second largest oil exporter after Saudi Arabia. Yet even their official press organs and reports today confirm that Russian production is now near a second well-understood and final peak. Published stories this year state that Russian production will go into irreversible decline sometime between 2006 and 2010 and that Russia will cease exporting oil.
Eighteen major exporting nations or regions including the North Sea, Mexico, Norway and Indonesia are showing steep and ever-increasing decline rates.
Later, the same CIA report acknowledged that US domestic production had peaked and entered irreversible decline in 1970. If the CIA knew it was a problem for the US and the Soviet Union, they knew it was a problem that would ultimately face the whole world.
1999 – RICHARD CHENEY
In November 1999, then CEO of Halliburton, Richard Cheney, gave a speech to the London Petroleum Institute. In that speech he said:
“We as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you’ve got to turn around and find more or go out of business.… Every year you’ve got to find and develop reserves equal to your output just to stand still, just to stay even. This is true for companies as well in the broader economic sense as it is for the world. A new-merged company like Exxon-Mobil will have to secure over a billion and a half barrels of new oil equivalent reserves every year just to replace existing production .…
“…For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our 71 million-plus barrel a day of oil depletion [today it’s 84 million], but also to meet new demand. By some estimates there will be an average of two percent annual growth in global oil demand over the years ahead along with conservatively a three percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional 50 million barrels a day… So where is the oil going to come from? ....
“For most companies the majority of their profits come from core areas… but many of these core areas are now mature… Some of the oil being developed in new areas is obviously very high cost and low margin.…
“...Larger companies tend to have the highest credit ratings and therefore the lowest borrowing costs, but they also tend to have higher multiples in the stock market. The share price premium becomes a valuable currency for takeovers…
“… Energy is truly fundamental to the world’s economy. The Gulf War was a reflection of that reality… It is the basic, fundamental building block of the world’s economy…
“Well, the end of the oil era is not here yet, but changes are afoot, and the industry must be ready to adapt to the new century and to the transformations that lie ahead…”
APRIL 2001 THE COUNCIL ON FOREIGN RELATIONS
In April 2001, just a month before Vice President Richard Cheney’s National Energy Policy Development Group (NEPDG) which had been meeting in secret since January of that year, released its own public report, the Council on Foreign Relations, arguably home to the most influential policy makers and economic interests in the world, released its own energy report. Some of its admissions, even in comparison to damning ones from Cheney’s public NEPDG report, were rather stark admissions that the scope and seriousness of Peak Oil were well understood long before any public evidence of peak started to appear.
That report, titled “Strategic Energy Policy Challenges for the 21st Century: Report of an Independent Task Force Sponsored by the James A. Baker III Institute and the CFR” included the following observations:
“Strong economic growth across the globe and new global demands for more energy have meant the end of sustained surplus capacity in hydrocarbon fuels and the beginning of capacity limitations. In fact, the world is currently precariously close to utilizing all of its available global oil production capacity, raising the chances of an oil supply crisis with more substantial consequences than seen in three decades.
“These choices will affect other US policy objectives: US policy toward the Middle East; US policy toward the former Soviet Union and China; the fight against international terrorism. Meanwhile, across much of the developing world, energy infrastructure is being severely tested by the expanding material demands of a growing middle class, especially in the high growth, high-population economies of Asia.
“As demand growth collided with supply and capacity limits at the end of the last century, prices rose across the energy spectrum at home and abroad…”
Ladies and gentlemen, that is a near-perfect description of what Peak Oil is and how it is now playing out on the world scene. The CFR report also included a line which has been almost an economic mantra since the Second World War.
“… Oil price spikes since the 1940s have always been followed by a recession.”
Since we have now witnessed the largest oil price spikes in history over the last four years, including a more than 100% jump in the wellhead price of oil in just the last three years, we should reasonably be on the brink of a recession, shouldn’t we? Today we are – especially in the wake of Hurricanes Katrina and Rita – within mere weeks on an economic collapse that may well surpass the one which began with the stock market crash of 1929 and from which there will be no recovery. These devastating hurricanes are not separate from Peak Oil and do not explain it away. They are instead revealing Peak Oil in all of its deadly significance. The hurricanes are deadly catalysts which have pushed US and planetary collapse into overdrive and given it momentum that will be impossible to recover from. There won’t be enough energy available to rebuild the energy infrastructure, let alone make up for what has been lost.
There will be no coming back for a US economy which – as of today – has more than 90% of its Gulf oil production and more than 65% of its Gulf natural gas production shut in. News reports – conveniently ignored on the nightly news – have confirmed that as far as infrastructure is concerned Rita and Katrina are unparalleled disasters that would, under normal circumstances, require a decade and hundred of billions of now non-existent dollars to recover from. Before the storms hit, the world was producing oil at maximum capacity and still falling short of global demand. There has not been a single discovery of a 500 million barrel field for two years in a world that uses a billion barrels every 11 ½ days and discoveries have been in steep decline since the mid-1960s.
MAY 2001 – THE NATIONAL ENERGY POLICY DEVELOPMENT GROUP
This secret task force, which fought all the way to the Supreme Court to keeps its records and deliberations secret from the public, is for me the place where the deepest darkest secrets of both the September 11th attacks and government’s awareness of Peak Oil lie buried. The task force convened just as the first 20 out of 25 wells drilled in the Caspian Basin came up dry holes. In “Crossing the Rubicon” I discuss the meager seven pages of NEPDG records released after lawsuits which confirm the group’s obsession, not with oil discovery, conservation (economic stagnation) or energy substitutes, but with where the known oil was, who owned it and apparently who had to be dealt with to get it.
The public report of the NEPDG told us, just four months before the 9/11 attacks:
“ America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s.
“Estimates indicate that over the next 20 years, US oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent.
“ US energy consumption is expected to increase by about 32 percent by 2020. Between 2000 and 2020, US natural gas demand is projected by the Energy Information Administration to increase by more than 50 percent. Yet we produce 39 percent less oil today than we did in 1970, leaving us ever more reliant on foreign suppliers. On our present course, America 20 years from now will import nearly two of every three barrels of oil — a condition of increased dependency on foreign powers that do not always have America’s interests at heart.”
February 2005 – SAIC Report of Robert Hirsch
Science Applications International Corporation is one of the most elite military and intelligence technology companies in the world. It controls a significant part of the Internet and is one of the core companies in the field of data mining technology used by the US government to spy on potential enemies – us. In 2004 the US government commissioned SAIC to look at Peak Oil and to recommend various strategies for dealing with it. That report – published this summer – revealed some the immediacy of the pending collapse. While refusing to take a position as to when actual peak would occur, the report -- PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT – made the picture pretty clear.
“Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades…”
“…If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship…”
Ladies and gentlemen, there is a plan to deal with Peak Oil. It has been formulated for some time and it is being carried out right in front of our very eyes this minute. It contains none of the aspects you would like to see or hope to initiate but it is irreversible, etched in stone, and nothing is going to deter it. While I have met with Congressman Roscoe Bartlett of Maryland and while I applaud his singular and sincere efforts on the subject I hold no optimism that he will have any influence on public policy. He is truly a good man, I believe. But one member of the House of Representatives who chairs no relevant committees and who does not enjoy the total support of either his party’s leadership or the White House can do little except educate and warn the public. We cannot look to Mr. Bartlett, however good his intentions, to solve anything for us.
We are witnessing government response to Peak Oil now. In my earlier presentation I have made it clear that that response will include only measures which protect the financial elites and major corporations. They include:1. Rationing
Accordingly, I have developed five rules which should be used as a guide for all who understand Peak Oil, who appreciate both its imminence and significance, and who wish to do something to increase their chances for survival as our long emergency now begins:
1. There is no combination of alternative energy sources anywhere that will enable current consumption and growth to continue.
2. Even if there were, it takes 30 years and lots of capital investment to change an energy infrastructure. Peak Oil is here now. The current infrastructure will not be rebuilt or even well maintained. The return on that investment for the financial elites is “uncertain” and they will not spend any more than they have to on band aid solutions until the crash becomes apparent.
3. No government entity (federal or state) will do (or be able to do) anything to solve Peak Oil and energy shortages. The political system is utterly and irretrievably broken.
4. Until you change the way money works, you change nothing. It will be more profitable to let decline, starvation, wars, disease and famine occur than it will be to prevent them (Disaster Capitalism).
5. All real solutions will be place-based, local and originate at the grass roots, independent of government. What saves you and your family will be determined by what and who is in your own neighborhood and what kind of cooperation has been achieved there.
These are stark and harsh words, I realize. But for many years now I and “From The Wilderness” have had an uncanny record – around 80% -- of accurately predicting future trends and events. We are today just weeks away from one of the largest economic crashes to ever hit the United States. It is a crash that has actually been encouraged for some time through reckless fiscal policy, soaring deficits both in Washington and in our balance of payments accounts, the unbridled and inexcusable inflation of the housing bubble, expansion of consumer credit and a negative net savings rate to name a few.
It is in this way that massive demand destruction will be achieved to maintain a degree of broader global stability as Peak Oil begins to claim casualties as it already has in Zimbabwe and Indonesia. With the United States consisting of 5% of the world’s population consuming 25% of the world’s energy output, it has been clear for some time that America was the only profligate spender which mattered and which needed to be “adjusted” before broader global desperation measures could be implemented.
With all of the sincerity and fervor I have; with every ounce of credibility I have established over these many long years of activism and painstakingly documented research, I urge all of you to take these warnings seriously and to take action now. Understand that the only productive efforts you can make are to look at your own lives and your own communities and to start taking the actions that will expand your options and increase your support bases there.
Because I assure you that there is no one in Washington capable, and no one on Wall Street with even the slightest bit of concern, about how you will come out of this, except as a crippled vehicle – perhaps a bankrupt indentured servant – to maintain an economic paradigm that demands infinite growth and the sacrifice of everything that is human and good to achieve it, even human life itself. Even with as little time as now remains before reality hits, there are steps you can take, and which you can determine for yourself, which may make a difference in how you fare through this. But the only way to begin that process is to understand that no one, except perhaps your neighbors and your family, is going to do anything to help you and that this, has been the real plan for many, many years.