Consciousness of Sheep
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Imagine that you inherited £100 million from a great aunt that you didn’t even know existed. Wouldn’t that be brilliant? You can already imagine the big house in the country that you will buy, along with the new sports car. And then there’s the long holiday that you always dreamed of. Indeed, you get so carried away with these fantasies that, for a moment at least, you fail to notice the small print… particularly the clause that says that although you have inherited more money than you ever dreamed of, the maximum you are allowed to spend in any month is just £1,000. Far from being rich, in practice you will be receiving the same income as someone on the state pension.
Something very similar just happened to President Trump following the kidnapping of Venezuelan president Maduro at the behest of the neocon wing of the Trump administration. With the new Venezuelan government under coercive control, the country’s official 300bn barrel oil reserves would be available to the US oil corporations to exploit. Moreover, the oil is heavy, making it a potential replacement for the oil the US currently imports from Canada’s Alberta tar sands – allowing the Trump administration to exert more pressure on that country too.
Instead of congratulating Trump though, the CEOs of the oil corporations politely rejected the invitation to resume drilling in Venezuela. They had, it seems, read Rystad Energy’s report on the state of Venezuelan oil:
“According to Rystad, lifting Venezuela’s production capacity beyond 1.4 million bpd would require sustained spending of $8-9bn (£6-7bn) per year from 2026, on top of maintenance capital.
“Under Rystad’s so-called ‘Back to 3 million bpd’ scenario, production could reach 2 million bpd by 2032 and return to late 1990s levels of 3 million bpd by 2040.
“Rystad said that even if PDVSA could organically finance maintenance spending, international oil companies would still need to commit at least $30-35bn (£24-28bn) within the first two to three years of the investment cycle to make such a recovery plausible.”
This assuming that political stability can be maintained during that period… which, of course, is a big if.
If we learn anything at all from this travesty, it is that while the Trump administration has a better grasp than most on the importance of energy to an advanced economy, they are clueless when it comes to calculating the energy cost of energy (aka the energy return on energy invested)… the energy cost referring as much to the military cost of keeping the lid on dissent as to the amount of diesel fuel that would have to be imported to get the oil flowing again.
Not that the Trump administration is unique in this energy blindness. Here in the UK, the right-wing parties – Tory and Reform – have convinced themselves that “drill baby drill” is the answer to our ongoing economic decline. In part, this is borne out of the increasingly obvious failure of the net zero project – the UK elite’s insane belief that if the UK ceased emitting carbon (from electricity generation) the rest of the world would be shamed into following suit.
Realising that the (non)-solution to climate change is a scam, the political right has jumped to the conclusion that the crises facing us are themselves not real. And so, following China’s lead in deploying every and all viable forms of energy – or at least the Trump administration’s re-licensing of oil and gas drilling – will provide the cheap energy required for an economic revival. In practice, this means reopening what remains of the North Sea deposits, giving the go-ahead to frack the North of England, and attempting to drill for oil in the North Atlantic.
Licensing though, was never the main obstacle. Indeed, it is where we encounter Schrödinger’s oil majors – who are so rich and powerful that they can bend governments to their will but so weak that they are incapable of securing licences to drill anywhere off the UK coast. The reality is that there is not enough oil and gas left in the UK North Sea fields to cover the cost of decommissioning (not, of course, that extractive industries ever clean up their mess). Instead, the big players left the North Sea decades ago, selling their licences to smaller companies along with the liability to clean up. And over time, those small companies sold to even smaller companies which will likely declare bankruptcy long before the clean-up bill comes due… all of which gives the lie to the suggestion that we somehow missed some major oil or gas reserve in the North Sea itself.
Periodically, the establishment media gets excited about Cambo and Rosebank – two relatively newly discovered oil fields which the media mendaciously refer to as being in the North Sea. They are not, they are in the northeast Atlantic around 100 miles west of Shetland, where weather and sea conditions are far worse than anything encountered in the relatively benign waters of the North Sea. And although the reported 500 million barrels of recoverable oil sounds big, it only amounts to about a year’s worth of UK oil consumption.
More importantly, the energy cost of energy of these two fields is disastrous. In addition to the £650,000 per day cost of drilling, a pipeline to Shetland would cost more than £250 million. After that, there is the cost of building an oil terminal on Shetland, together with the cost of another pipeline covering the 200 miles from Shetland to the mainland oil and gas terminals at Aberdeen.
It is only when the price of oil threatens to rise above $200 per barrel – a price that no economy can sustain – that interest in Cambo and Rosebank perks up. But since expensive oil always causes a recession, high prices cannot be sustained for long enough to persuade investors to part with their cash.
Cost, it seems, was the main impediment to fracking in the UK too – the handful of test wells failing to produce any gas, and in one notorious incident, propane gas was imported to give the appearance (to government and investors) of shale gas being flared. Indeed, while, in an interview with the BBC’s HardTalk, Cuadrilla boss Francis Egan was able to address the various criticisms raised by environmental activists, the one time he stumbled was when the return on investment of UK fracking was raised.
Even with gas prices far higher than they had been in 2018, there is little enthusiasm among investors for fracking in the UK. Not least because any gas which might once have been there probably vented into the atmosphere 280 million years ago. And even if some gas remains, the contorted and fractured geology of the British Isles makes horizontal drilling far more difficult and expensive than was true of the vast shale plays of North America.
As with the current US administration then, the UK’s would-be right-wing government completely misses the key predicament of a rapidly rising energy cost of energy (although the recent hikes in gas and electricity prices ought to have made this obvious). One reason, perhaps, is that the price of oil and oil-based fuels has remained steady even as electricity and gas prices have reached economy-destroying levels. This, however, is likely due to the discretionary nature of much fuel use. That is, since petrol, diesel and shipping oil still account for almost all of the transport of goods, and given that when the cost of essentials (like electricity and gas) increase we collectively cut back on discretionary spending (which accounts for most of our economic activity) demand for diesel and petrol falls accordingly, giving the impression of a glut and causing prices to stagnate.
Our unfolding predicament, however, is clear enough to anyone paying attention. As access to cheap (in energy terms) energy recedes in the rear-view mirror (accelerated, but not entirely caused, by eschewing cheap Russian gas) Europe and the UK are losing what remains of their manufacturing base… a process which cannot be reversed simply by obtaining (assuming they exist) large stocks of oil and gas. It is the energy cost of getting the stuff out of the ground and transported to its point of use that matters. And since the UK, Europe and the rest of the developed world extracted the cheapest and easiest deposits first, what remains is reaching the point at which there is not enough surplus energy remaining to maintain the economy we have built over the three centuries of industrialisation.
The irony here is that in attempting an alternative to the political left’s project to reduce the current economy to rubble (in the misguided belief that the communist utopia will rise from the ashes) the political right looks set to embark on a high-speed road trip straight over the edge of the looming energy cliff. Both roads, that is, lead ultimately to the collapse of complex civilisation and the ushering in of a new dark age, red in tooth and claw.
As you made it to the end…
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