Folks,

Here’s my latest piece, originally published at Energy and Capital. It explores some of the salient reasons why the Bush administration must be panicking over its failed policies on energy, climate change, and the Iraq war.

As always, I welcome your feedback.

The Desperation of George W. Bush

By Chris Nelder
February 7, 2007

The mass of men lead lives of quiet desperation. What is called resignation is confirmed desperation. From the desperate city you go into the desperate country, and have to console yourself with the bravery of minks and muskrats. A stereotyped but unconscious despair is concealed even under what are called the games and amusements of mankind. There is no play in them, for this comes after work. But it is a characteristic of wisdom not to do desperate things. — Henry David Thoreau, Walden

 

Last week, CommonDreams published a clever, hard-left article titled “Game Over: Thirty-Six Sure-Fire Signs That Your Empire Is Crumbling” by David Michael Green. One of them was, “You know your empire’s crumbling when a massive environmental nightmare is looming around the corner, and your emperor not only ignores it, but claims it isn’t real while taking steps to exacerbate it.”

Hard criticism, but true.

And then, wonder of wonders, after a career spent casting doubt on global warming science, and favoring Big Oil at all times and at all costs, President Bush changed his tune in the State of the Union speech a few weeks ago, claiming that new energy technologies “will help us to confront the serious challenge of global climate change.”

That’s the first time he has mentioned “climate change” as if it were real.
He went on to acknowledge the great risks inherent in our dependence on foreign oil, and the necessity of developing energy alternatives—specifically mentioning solar, wind, clean coal, nuclear, biodiesel, and cellulosic ethanol.

He also requested a doubling of the Strategic Petroleum Reserve.

And he pledged to push for fuel economy standards, to cut gasoline use “by 20 percent in the next ten years.”

You might think that a renewable energy champion and peak oil worrier such as myself would have cheered aloud, or breathed a sigh of relief.

Follow the Money

Let’s just say I’ll believe it when I see it.

One year ago, in his SOTU speech, he famously declared that “America is addicted to oil.” But a few weeks later, the budget he sent to Congress actually cut $100 million from federal energy conservation programs.

And one year later, our oil dependency is in worse shape than before, by any measure.

In this year’s SOTU speech, he championed solar and wind energy. But in the budget he sent to Congress a few weeks later, investment in wind-energy research was actually cut by $9 million, down 26%, and money for solar energy was cut by $7 million, a 10% decrease from last year

The proposed fiscal 2008 budget for the National Renewable Energy Laboratory is $181.5 million–$6.1 million less than last year’s budget request.

In fact, Bush has pledged to work toward energy independence in every single one of his previous State of the Union addresses…while our dependence on imports grew from 53% to 66%.

Maybe I shouldn’t be so cynical. The $9 billion that he requested in his 2008 budget for alternative energy, especially cellulosic ethanol, is money well needed, and well spent. I’m all for it, and betting big on it!

And at least I can take some comfort that he finally dropped that nonsense about the “hydrogen economy.” After being the centerpiece of his glowing vision for the future in previous years, in this year’s speech, the word “hydrogen” wasn’t uttered once.

Oops: the budget request for hydrogen technology research is up 25 percent, to $18.4 million.

That’s right, the hydrogen economy snipe hunt just garnered more of a budgetary increase than the cuts to solar and wind put together. One has to wonder how that made sense to anybody.

And there was zero money in the budget for geothermal, arguably the cleanest and greenest of all land-based energy sources.

Yes, the President did an excellent job of sounding like he was strongly in support of renewable energy…while in the actual budget, fossil fuels and nuclear energy each got more than a 30% increase.

Game Over: Nine Sure-Fire Signs that Your Leaders are Panicking

If you just listen to the rhetoric, it certainly sounds like Team Bush has finally come around about renewable energy and climate change.

But the reality is, it’s just a “modified limited hang out”. The phrase dates to a conversation between President Nixon and his cronies, and refers to “a strategy of mixing partial admissions with misinformation and resistance to further investigation.”
Bingo.

The reality is that Bush & Co. are in a state of quiet desperation, slowly and deliberately making partially misleading, partially true statements to show that they know the truth about oil and global warming without it actually costing them too much politically, and without having to actually do anything differently.

They’re just trying to get out ahead of the issues, so they don’t get crushed by them.

Because it pays more to follow the money and the facts than the rhetoric, let’s review the case for the desperation of George W. Bush.

Exhibit A: Crude Prices Bounce Back

After an 18% plunge to the $50s in the first half of January, WTI crude has bounced back to within a buck of where it started. That’s odd, considering that it’s the world’s biggest, and most vital commodity, and nothing special happened, isn’t it?

Not really. As I have argued before, I believe the recent low price of crude is simply due to the groupthink of Wall Street, and has little to do with the underlying value of the commodity. In the low 50s, oil was oversold, and now we’re going to follow a similar trajectory to that of this time last year…only as we will see shortly, I think it will go well past last year’s highs.

Exhibit B: Passing the Peak

The first reason is simply that the world’s number one oil field, Saudi Arabia’s Ghawar, is in decline.

According to Jeffrey J. Brown, an independent petroleum geologist, the well-respected Hubbert Linearization Method of oil field production analysis shows that Saudi Arabia is 58% depleted, and the world is 48% depleted…about where Texas and the lower 48 peaked, and started irreversible declines in production. “Based on the HL method and historical models,” he said, “I believe Saudi Arabia and the world are now on the verge of irreversible declines in conventional oil production.”

This is something that Matthew Simmons, founder and Chairman of the world’s largest energy investment banking company and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, has been saying for several years now. He has been running himself ragged, traveling the globe and warning about a Saudi production collapse.

Well, in a January 31 interview on Bloomberg television, he dropped the bomb: “We have hit peak oil.”

That’s it. The party is officially over.

He also said that oil is “unbelievably inexpensive” and that we’re “giving it away” a ten cents a cup. In some countries, he explained, they’re already paying the equivalent of $300 a barrel, and there’s no reason it couldn’t happen here: “I think the most important thing to realize is that if demand is accelerating, and there seems to be nothing on the horizon to slow down oil demand, and supply can’t…then prices don’t sort of stabilize at ten cents a cup!”

A $300 barrel of crude equates to $9 a gallon gas. Ready for your next $180 fill-up?

And we now know that our 2nd largest oilfield, Mexico’s Cantarell, is in a catastrophic, 28% annual decline. The U.S.’s number two source of imports could be finished in less than four years.

As if to prove the point, the Saudi oil company (Aramco) and the Mexican oil company (Pemex) are both cutting their deliveries of crude—selling less oil to refineries than they have asked to buy.

On balance, falling production in Saudi Arabia, Mexico, and Norway—a loss totaling up to 1 million barrels—will not be made up by new production coming on line during 2007.

With Ghawar, Cantarell, Forties & Burgan in terminal (and very rapid) decline, it’s game over. Game over. Commence the slow crawl up the other side.

Of course, none of this is a surprise to us. We knew that we had reached the peak before the Simmons interview. And we knew that the other major fields of the world could hardly be counted upon to make up the losses from the other major fields.

Exhibit C: Begging Canada

Last month, the Bush administration sent a team from the Department of Energy to meet with Canada’s natural resources agency, to ask them to bypass environmental rules in order to ramp up production from its oil sands by a factor of five…even though, as has been well recognized already, they have neither the natural gas nor the fresh water to do it.

Prime Minister Stephen Harper had the good sense to say no, refusing to implement a fast track method for environmental assessments, which would have been needed in order to meet the Bush administration’s timetable.

How desperate are you, when you come begging to Canada, little ol’ weak Canada, asking them to wantonly destroy their environment without a second thought in order to meet your energy needs, and you get denied? That’s gotta sting.

Exhibit D: Doubling the SPR

At maximum capacity, the Strategic Petroleum Reserve currently sports a grand total of 56 days’ worth of import protection, according to the DOE. Given that we’re past peak and that all five of our top suppliers have serious issues, two months’ worth doesn’t exactly give me the warm fuzzies. Apparently, the Bush administration agrees. You don’t double your SPR when you’re feeling secure.

But they’re not the only ones. China and India are quickly building their own strategic reserves.

All of which adds up to security of demand, if nothing else. Hello, higher prices.

Exhibit E: Climate Change Disinformation

On February 2, the Bush administration found itself squarely, and very publicly, on the wrong side of the climate change issue, when the UN’s Intergovernmental Panel on Climate Change (IPCC) published its much-anticipated report on climate change. Three years in the making, the report is the most comprehensive, global, and peer-reviewed study on climate change ever written, bringing together the work of more than 800 scientists, more than 450 lead authors from more than 130 countries, and more than 2,500 expert reviewers.

In short, it’s humanity’s best attempt at getting the story right.

It said that greenhouse gas emissions will continue to change the climate over the next 100 years, causing sea levels to rise by a half-meter. In turn, millions will be displaced from their coastal and low-lying communities, causing waves of environmental refugees. Snow in the mountains will disappear, desertification will intensify, oceans will die, and so will people, due to deadly heat waves, as world temps rise by some 3C – 5.8C.

On the very same day that the IPCC report came out, another story broke: that the American Enterprise Institute (AEI) had sent letters out to scientists around the world, offering $10,000 to anyone who could undermine the IPCC’s report, asking for essays that “thoughtfully explore the limitations of climate model outputs.”

And who is the AEI? A think tank that has received more than $1.6m from ExxonMobil, with 20-plus staffers who have also worked as consultants to the Bush administration. Lee Raymond, former ExxonMobil CEO, is their board’s vice-chairman.

But Exxon’s efforts go far beyond that. Last month, the Union of Concerned Scientists issued a report, showing that Exxon had spent some $16 million since 1998 to “seek to confuse the public on global warming science.”

Maybe the best summation of all, about the Bush team’s denial of climate change, came just a few days ago, in a letter to clients sent by the manager of Vice President Cheney’s own personal investments, Jeremy Grantham. You read that right. (As far as I know, Mr. Cheney has not issued a response.)
In the GMO Quarterly Letter 2007, he had a sharply worded essay entitled “While America Slept, 1982-2006 — A Rant on Oil Dependency, Global Warming, and a Love of Feel-Good Data.” He wrote:

Successive U.S. administrations have taken little interest in either oil substitution or climate change, and the current one has even seemed to have a vested interest in the idea that the science of climate change is uncertain. In fact, we have spent the last large chunk of time in this country with a strong bias to feel-good data at the expense of accurate, hard data in this field. This attitude seems to be reflected in the spin on U.S. economic success, which we’ve commented on several times, exaggerating, sometimes substantially, the absolute and relative performance of the U.S. economy. It has certainly been reflected in the general desire for environmental issues to be benign and optimistic or to simply go away. The U.S. policy approach to climate change (and other environmental issues) has been similarly casual in its unwillingness to plan for the long term. There is now nearly universal scientific agreement that fossil fuel use is causing a rise in global temperatures […] Yet the U.S. is the only country in which environmental data is steadily attacked in a well funded campaign of disinformation (funded mainly by one large oil company). This campaign has used and reused the solitary, plausible academic they can dig up, out of hundreds working in the field, plus one famous novelist – without qualifications in the field, but, still, for heaven’s sake, widely quoted by the administration – and one Danish economist who really doesn’t get Pascal’s Paradox, but does seem to have shares in The Wall Street Journal.

Clearly, Team Bush is desperate to get on the right side of the climate change issue.

Exhibit F: Grasping At Straws

How desperate are they? Desperate enough to lobby the IPCC and ask them to include in the summary for policymakers some nutty strategies for dealing with climate change, such as putting giant mirrors or a giant sunscreen into orbit, or pumping tiny droplets of sulfate, or reflective dust, into the atmosphere as “important insurance” against rising emissions. The IPCC demurred, calling the ideas “speculative, uncosted and with potential unknown side-effects.”

Some observers have connected these outlandish ideas with the very real-world phenomena of aircraft vapor trails that don’t dissipate normally, so-called “chemtrails.” I will admit, there was a time that I didn’t give the chemtrail theory the time of day. But after last week’s display of chicanery, I’m not sure I can rule anything out.

Exhibit G: The Hurricane Threat

We’re six months away from the start of the hurricane season, and New Orleans and much of the rest of the Gulf is still in ruins—apparently forgotten by the Bush administration, as it merited not one word in the President’s State of the Union speech.

If, by some miracle of climate effects, we get through the coming hurricane season without further damage to the cities of the Gulf, he might get away with it.

But if the warming waters of the Gulf play the same role they did in 2005, we could see even fiercer storms. And the President’s neglect of the areas damaged by “Katrita” will serve as a stark reminder to Gulf’s residents that they had better not pin their hopes on FEMA coming to the rescue this time, either.

Exhibit H: Military Refocusing on Africa

Peak oil observers know that the only remaining places on the planet where we may hope to significantly increase oil production are Africa, and the Caspian Basin…both targets of intensive trade lobbying by China, which is rapidly sewing up long-term oil supply contracts in both regions.

So we have been watching, and waiting, for the Bush administration to go after them militarily, as they have in Iraq.

Unfortunately, due to President Putin’s iron-fisted control of Russia, and his aggressive moves to throw out the major international oil companies and nationalize all of its energy assets, the U.S. is in little position to jockey militarily for a control point on the Caspian.

But Africa is another matter, and yesterday, February 7, that shoe finally dropped. Even as Chinese President Hu toured the African continent cutting oil deals, the White House announced that it will create a new military command for Africa by September of next year, consolidating under one command the responsibilities that have been spread among three commanders.

There’s no reason to announce such a far-off program now, other than to publicly counter the Chinese. It was just another move, and counter-move, in the global game of oil chess.

If you’re following the playbook, the next move should be for the U.S. to conduct some sort of false flag operation in Africa, a Gulf of Tonkin maneuver, to give us an excuse to start building an expanded military presence there.

Exhibit I: Iraq

I have saved the most compelling exhibit for last, because most of the Bush administration’s reasons to panic begin and end there, in pursuit of its oil. The Bush and Blair teams have both repeatedly denied that our involvement in Iraq had anything to do with oil, but the facts speak otherwise. I think it should be obvious to any rational person—after all, as I like to point out, their main export isn’t broccoli—but I shall build my case as any good detective would, identifying the motive, the opportunity, and the means.

The Motive

The motive, by now, should be clear: the peaking of global oil production, the growing dependency of the U.S. on massive levels of oil imports, and our lack of control over the foreign oil producers on whom we depend.

This motive is no longer a matter of speculation. As we now know, from the many revelations of the last few years, and particularly from the ongoing trial of Cheney’s second in command, Scooter Libby, Team Bush went to extraordinary lengths to sell the war against Iraq. They knew their evidence was flimsy, and that the contrary intelligence was significant, but they went with it anyway, because they had decided long before that they must establish a strategic foothold in the oil-producing nations of the Middle East.

In March 2001, President Bush appointed Dick Cheney to head up a secret energy task force called the National Energy Policy Development Group, due to the current concerns about oil and gas supplies. But rather than push for renewables and domestic alternatives, the task force pushed to “make energy security a priority of our trade and foreign policy”…a clear reference to ensuring that the U.S. had access to foreign oil, no matter what. And, thanks to a Freedom of Information Act lawsuit filed by Judicial Watch, we know that the task force was looking specifically at “a map of Iraqi oilfields, pipelines, refineries and terminals, as well as two charts detailing Iraqi oil and gas projects, and ‘Foreign Suitors for Iraqi Oilfield Contracts.’”

Thus, the Bush administration’s intent to secure control of Iraq’s oil was clear, well before the attacks of Sept. 11.

The Opportunity

The need for a good opportunity to achieve the geostrategic imperatives of American global domination were spelled out years ago, in two reports.
The first was by Zbigniew Brzezinski, National Security Advisor during the Carter Administration, entitled “The Grand Chessboard – American Primacy And Its Geostrategic Imperatives” (1997). In it, he made this famous observation: “As America becomes an increasingly multicultural society, it may find it more difficult to fashion a consensus on foreign policy issues, except in the circumstances of a truly massive and widely perceived direct external threat.”

The other was by the Project for A New American Century (PNAC) whose primary architects included Paul Wolfowitz, Richard Perle, Richard Cheney and Donald Rumsfeld, called “Rebuilding America’s Defenses” (September 2000). In it, they recognized the same need, for “some catastrophic and catalyzing event, like a new Pearl Harbor.”

The 9/11 attacks provided the crucial opportunity, the “new Pearl Harbor.” And so the Bush and Blair teams ginned up support for the invasion of Iraq, using 9-11 as a springboard and conflating al Qaeda and the Taliban with Iraq and Saddam Hussein…connections that were endlessly repeated, never supported, and ultimately, roundly disproved.

Let us not forget that the very first thing American troops did, upon entering Iraq, was to secure oil facilities and the Oil Ministry—the only governmental agency, in fact, that was secured. They went to the oil straight away, even as an orgy of looting and destruction ensued in the rest of the country, leaving some of the most precious treasures of human history in the hands of black marketers.

The Means

The strategy for taking control of the oil is only now coming to light, after years of behind-the-scenes wrangling, as the neocons argued for wholesale privatization, and the oil majors argued against it, all too aware of the physical risks they would take by painting such a target on themselves.

Last month, in a very well-done series on “blood and oil” published by the UK Independent, we learned that new legislation was to have been passed in December by the Iraqi parliament, but it got derailed by the raging civil war. Iraqi officials were hoping to have the law enacted by March. “It would allow the first large-scale operation of foreign oil companies in the country since the industry was nationalised in 1972,” they reported.

What the law would do is legalize the plundering of Iraq’s oil fields by the international oil majors, via “Production Sharing Agreements (PSA’s)” which give the companies a share of the oil produced in exchange for investing in infrastructure.

Naturally, the oil companies’ shares are obscenely large, taking double (or more) the usual shares under such agreements. Even better, the agreements are irrevocable for 30 years. Bo-nan-za!

And due to the structure of the PSA’s, the Iraqis still officially have ownership of the oil fields…they are merely “sharing” the revenue with their generous foreign investors! Privatization without all the ugliness of the actual word.

Nice trick, eh?

The legislation is being written largely by BearingPoint, “an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.” Apparently most Iraqis have never even heard of the plan: “Three outside groups have had far more opportunity to scrutinise this legislation than most Iraqis,” said Mr Muttitt. “The draft went to the U.S. government and major oil companies in July, and to the International Monetary Fund in September. Last month I met a group of 20 Iraqi MPs in Jordan, and I asked them how many had seen the legislation. Only one had.”

No wonder then that Iraqi Prime Minister Nouri al-Maliki told The Wall Street Journal two weeks ago that he wanted to bow out as prime minister before his term expires. I’ll bet he does…and before his loyal citizens find out what he’s done, too!

All the Bush team needs to do now is hold things together in Iraq long enough for its parliament (before that, too, falls apart) to put the law into place. Then we have an orgy of contract-signing, and the job is done. As the Independent reported: “It’s a mad rush to get something there,” said James Paul, the executive director of Global Policy Forum, a New York watchdog group. “The companies are saying, ‘Before any troops are withdrawn, we have to have these contracts.'”

Apparently, they have been busy. According to the US-based Centre for Public Integrity, more than 150 US companies have already won some $50 billion worth of oil contracts in Our case is complete: motive, opportunity, and the means.

…And The Bill

And then there is our undisputable expenditure of blood and treasure. According to the Congressional Research Service, the Iraq war has so far cost $500bn, and Nobel prize-winning economist Joseph Stiglitz reckons the total cost of the Iraq war to the U.S. will be about $2 trillion. By comparison, the Vietnam war cost about $614bn in today’s dollars.

And so far we have lost 3,111 soldiers, and brought home another 23,417 wounded.

That’s serious commitment. Not the sort of thing you do just because, say, you’re sympathetic to those poor people over there who were suffering under that madman.

That leaves just one small remaining issue: how to maintain security such that the oil infrastructure can actually be built, and operated, and the oil exported successfully, without being blown up every 15 minutes by some insurgent?

So Bush is doing what he has always done, when he finds himself deep in a hole: dig harder! The 21,000 troop “surge” is a joke—that only rolls back the troops levels to where they were a few months ago…and they were no more effective at stopping the violence then, than they will be now.

There’s only one thing to call it: an act of desperation. Hardly anybody on the Hill supports the idea, and retired General Barry McCaffrey called it a “fool’s errand.”

I guess that’s what you get for sending a fool to do your work, now isn’t it?

So much for the bravery of minks and muskrats.

Panic Sets In

The Bush team has realized, or is about to realize, what most people already know: That there is no free lunch, and there is no free energy. That there’s no way to bully or drill our way out of these problems. And that the problems are, quite literally, lapping at our feet. And they have been on the wrong side of every single bit of it.

One of my favorite observers on energy is oil expert Dr Ali Morteza Samsam Bakhtiari, former senior adviser to the National Iranian Oil Company. “The biggest problem is the 120 million United States citizens who live in their suburbia,” he says. “They are the biggest force on the planet but no one in the U.S. is thinking about this. And when you don’t think, you panic.”

James Howard Kuntsler, a noted Peak Oil commentator, has a bit more sympathy: “Peak is making us insane and passing Peak will make us more insane. There may be no moment of clarity, only new kinds of delusion and disorder. We’ll keep behaving the way we do until we can’t, and then we won’t.”

Even the U.S. banks are showing the signs of panic. In 2006, they increased their nominal holdings of commodity futures to $1.6T as of Q3 2006…nearly tripling their exposure in just nine months.

That might be speculation…or it might be panic.

And speaking of panic, that’s what we’ve been seeing in Mexico over the last few weeks, as poor people riot over the rising cost of tortillas, their main source of calories.

Why are tortilla prices rising? Because of the increased demand for U.S. corn by the burgeoning corn-ethanol industry.

Didn’t take long for that snake to eat its own tail, did it?

I hope that Bush’s late-to-the-party support for renewable energy is effective. I hope it with every ounce of hope I can muster.

But these are desperate measures, there’s no two ways about it. And if he’s panicked…shouldn’t we be, too?

Until next time….

–Chris Nelder