Save and Conserve

I just read an interesting piece by Tom Whipple comparing America's (read: American intelligence department's) inability to connect the warning dots in the months leading up to 9/11 with America's current inability to connect the dots pointing to the onset of global peak oil.

Just like there were many signs that an attack was imminent in summer 2001, there are signs that global oil production is headed for a continual, terminal decline -- albeit a slow one. We know Mexican oil production is crashing. We know North Sea oil production has peaked. We think Saudi Arabia might be on the verge of production decline. At The Oil Drum, these issues are discussed, analyzed and debated all day everyday. Check the site out for the granular details.

While some recent production data looks ominous, the price of oil has recently declined from its peak in 2006. Fairly cheap gasoline is always available. The Saudis state that they can ramp up production to 12 million barrels per day in the near future (and why should we doubt them? They have always delivered in the past ... first Iraq War being a perfect example). Chevron discovered a huge oil reserve in the deepwater Gulf of Mexico last year. Production is held back by political problems in Iraq and Nigeria (and therefore should be 1-2 million barrels per day higher). Smaller players like Angola and Brazil are poised for production growth. The Artic beckons with vast potential.

Whipple's right. There are a lot of dots out there, but they aren't all warning dots.

What we have is the "fog of oil". Lots of noise out there in the system. Some data, but not nearly enough data. Tough to understand what's happening. No incentive to be proactive. Confidence in our ability to react if the situation changes.

In The Fog of War, which by the way is a great documentary that I highly recommend, Robert McNamara presented eleven lessons:

1. Empathize with your enemy.
2. Rationality will not save us.
3. There's something beyond one's self.
4. Maximize efficiency.
5. Proportionality should be a guideline in war.
6. Get the data.
7. Belief and seeing are both often wrong.
8. Be prepared to reexamine your reasoning.
9. In order to do good, you may have to engage in evil.
10. Never say never.
11. You can't change human nature.

Number six is critical to cutting through the "fog of oil". Unfortunately, we'll likely never get the data about oil production. Number six tells us why we aren't able to connect the dots.

People like Matt Simmons have been calling for increased data transparency in the oil industry. He's right. Hard data is the only thing that will convince people a problem lies ahead. Until then, the "fog of oil" will dictate inaction.