hat you don’t know CAN hurt you – bad.


Thomas Jeffers & Co., LLC
November 7, 2006

The people have spoken. You may or may not like what they had to say, but it was hard not to hear. I worked for several campaigns when I was young – I even held elective office for a 2-year term as a councilman (we called them “trustees”) in small town America at a time when our largest employer and taxpayer, General Motors, was pulling up stakes and leaving town. Sometimes the only options available to you are bad and worse. I learned the best advice ever during those 2 years – stay the heck out of politics.

One of the things I like best about the Internet is that it gives people with absolutely no influence a venue to shout into the wind. However, if any of the new members of Congress were to give me 30 minutes to make my pitch it would be this:

America faces a permanent Natural Gas (“NG”) shortage in the near term, perhaps as early as winter 2008. The continent has approximately 9 years of reserves at today’s level of consumption and therein lies the rub: We will not be able to produce the NG at today’s level of consumption. Production will decline each and every year from NOW ON. Life Sentence, No Back Room Deals, No Recall Vote, No Tax Credits… No earthly power is going to change this unfortunate circumstance, and it is not up for debate. Yes, we will find new reserves, no we will not "run out" of NG in 9 years, or 15, or even 25 years. That is not how hydrocarbon extraction works, We will simply have a little less, each year, and every year, of NG to work with. Yet we would have demanded more and more if it were available.

We cannot even engage our usual fall back position of relying on imports. We don’t have the Liquid NG infrastructure here in North America and the potential exporters do not have the infrastructure on their end, either. And even if we could rely on imports – do we want to put ourselves in that position? Well, that is a policy decision and I will defer to you, Members of Congress. But don’t worry, you are decades away from being able to put yourself in a position of relying on others for NG – and by then they might not be willing to sell the NG to us in any event.

We won’t run out of NG in 9 years – because we will not be able to extract the NG at the same pace as 2006. The extraction rate will decline each year, stretching out the time between here and empty – but not increasing the total NG extracted.

NG accounts for just over 25% of electricity generated in the U.S., and nearly 60% of the country’s space heating needs, and these inputs are coming to a close (well, for the most part) by 2020. Besides being grumpy from being cold and dimly lit, the economy is going to reel from the effects of NG’s decline.

Right on the heels of the NG crisis comes the peak in world oil production. No, we are not going to run out of oil. We are going to have less and less available in the aggregate starting sometime between now and, lets say 2010, and, in any event –WE WILL HAVE LESS AND LESS AVAILABLE ON A PER CAPITA BASIS FROM THIS POINT FORWARD. That will be followed by a permanent pattern of declining availability of liquid petroleum products.

Despite the best efforts of the automobile and oil industries to generate misinformation it has become accepted scientific theory that the carbon released into the atmosphere from all of the hydrocarbons we burn is causing some significant negative climate change and all of the economic models for continued growth require an ever increasing amount of hydrocarbons to be burned. Even if we had unlimited oil and gas to burn – at some point we would have to stop doing so, or risk the world’s food supply, coastal areas, fresh water…

Yes, we have plenty of coal. Anybody remember Rickets? Only partly kidding. Yes, we have “clean coal” technology – an oxymoron if ever there was one, but without carbon sequestration technology and infrastructure this is quite moot.

Ethanol is a net energy loser. If it were energy positive, ethanol plants would run on ethanol – not fossil fuels. We have had access to alcohol for thousands of years, without anyone figuring out how to harness it mechanically to scale. Oil dominated the planet in less than 150 years (Col. Drake’s well, 1859).

Hydrogen is the equivalent of energy jail-bait. It consumes more than it contains and, by the way, you guys ever hear of the Hindenburg disaster? We would not need tow trucks to clear accident scenes. Bulldozers, maybe, to fill in those 90 foot craters, but not tow trucks.

If you purposely slow the economy to slow consumption of fossil fuels to give technology a chance to develop you might destroy the financial markets and real estate markets, the U.S. Dollar, and other various and sundry unintended consequences. If you do not, at some point in the very near future geology will do it for you – but the rubber band will be stretched that much more.

Then there are those pesky trade and budget deficits, You will want to reward your constituents in the time-honored manner of dipping into the public trough. Declining energy availability is going to be tough on tax receipts doing no favors for the federal budget deficit, and as energy prices rise we will need to borrow more and more to finance our international energy purchases, tightening that other rubber band, the trade deficit, but If you don’t reward your constituents, you won’t be around after the next election…

So as one astute observer of the game asked about the federal government's stratregy on the present energy front "WIll it be an organized retreat or a forced march back?" Don't count on the Department of Energy to solve this for you. When they were commissioned in the late 1970's the U.S. was importing less than 1/4 of it's oil. We now inport almost 2/3, leaving us one terrorist attack, one embargo, one ploitical flap, one geological miscalculation away from economic disaster.

Or you could ignore all of this, call me a quack, and hope it all goes away. Heck, that strategy worked for the past 30 years, should be good for another 30, right?

Oh, and by the way… Congratulations!


Greg Jeffers

Mentatt (at) yahoo (dot) com