What is the Next Thing that Will hit us? Brace for it, Because it may be Huge

 

Despite having ancient seers (the "haruspices") as ancestors, I don't claim to be able to predict the future. But I think I can propose scenarios for the future. So, what could be the next big thing that will hit us? I suggest it will be the disruption of the oil market caused by the recent measure of a price cap on  Russian oil.

Do you remember how many things changed during the past 2-3 years, and changed so unbelievably fast? There was a pattern in these changes: one element was that we were told they were just temporary, another was that they were done for our sake. We were told that we needed "Two weeks to flatten the curve," and that "the sanctions will cause the Russian economy to collapse in two weeks," and many more things. Then, our problems will be solved and the world will return to normal. But that didn't happen. Instead, the result was a "new normal," not at all like the old one. 

Now, the obvious question is "what next?" More exactly, "what are they going to hit us with, next time?" There is this idea that there may be a new pandemic, a new virus, or the old one returning. But, no. They are smarter than that -- so far they have always been one step, maybe two, ahead of us. They are masters of propaganda, they know that propaganda is all based on memes and that memes have a finite lifetime. Old memes are like old newspapers, they are not interesting anymore. A particular bugaboo can't scare people for too long, and the idea of scaring us with a pandemic virus is past its usefulness stage. They may have probed us with the "monkeypox" pandemic, and they saw that it didn't work. It was obvious anyway. So, now what?

Let me suggest one possible new way to hit us. You may have heard of it but, so far, it was supposed to be something marginal, not designed to create another "new normal." But it may. It is huge, it is gigantic, it is arriving. It is the price cap on Russian oil. The idea is that a cartel of countries, mainly Western ones, will agree on prohibiting the import of Russian oil unless it is priced at less than $60 per barrel. It will also make it more difficult for Russia to export oil abroad, even to countries that do not subscribe to the agreement. 

This idea is, as usual, promoted as a way to help us. Not only it will harm the evil Putin, but it will reduce oil prices, so everyone in the West should be happy. But will it actually work? Unlikely, to say the least, and it is probable that the promoters know that very well. 

Think about that: it never happened during the past hundred years that a cartel of countries had intervened to force a certain oil price worldwide. Even during the "Oil Crisis" of the 1970s, the Organization of Petroleum Exporting Countries (OPEC) never did what it is often accused of having done, fixing a high oil price. OPEC can only set production quotas or sanction certain countries, but it has no power, and never had power, on prices, which are set by the international market. 

When governments meddle with prices, the results are always bad. Typically, prices of goods are set too low, and that has two effects: the rising of a black market and the disappearance of the goods from the official market. It was a typical feature of the Soviet economy, where prices were often set at low levels to give the impression that certain goods were affordable to everyone. But it wasn't so: theoretically, most Soviet citizens could afford caviar sold at government-established prices. In practice, this caviar almost never existed in shops. But, of course, it was possible to find it in the black market if one could pay exorbitant prices for it.

Today, intervening to set a price for Russian oil is equivalent to throwing a wrench into the gears of a huge machine. Nobody knows exactly how the global oil market is going to react. The only sure thing is that the Russians are refusing to sell their oil to countries subscribing to the agreement. The overall result of having removed a major producer from the market can only be one: increasing oil prices. Exactly the opposite of what the price cap is supposed to do. But this is the very minimum that can happen: the effects of the cap are unpredictable on a market that's already unstable and subject to wild price oscillations. Europe might lose access to oil completely, and go dark. Famines have been a staple event in European history, they could come again. Things like that -- not small changes, huge changes. 

Why did the Western countries engage in this apparently counterproductive idea? Well, there may be some method in this madness. I can think of a few possible explanations: 

1. Western Governments are in the hands of idiots who act according to the principle known as "I ran naked into a cactus. Why? Because it looked like a good idea." They put into practice ideas that look good ("harming Putin"), without worrying about the consequences (destroying the European economy). 

2. The price cap has the specific purpose of raising oil prices. It will force consumer countries to switch from the relatively cheap Russian oil to the more expensive American oil, which will become even more expensive in a near-monopoly regime. This will bring huge profits to American producers. Don't forget that the American elites are convinced that the US oil resources are infinite, or nearly so. 

3. The price cap is thought of as a way to save the US tight oil industry. So far, tight oil has been almost a miracle, bringing back the US to a position of dominance among oil producers. But it is now facing difficulties with oil prices declining in the world market. With higher oil prices, Europe will finance a new round of tight oil extraction in the US, while the profits will remain in the US. It sounds diabolical, and maybe it is. Let me add that there may be a reason why the tight oil industry was recently declared "dead" in the mainstream media. Call me a conspiracy theorist, but this article on "Oilprice.com" may have had the purpose of scaring the US producers and making them accept the risky measure of forbidding Russian oil from entering the Western market. 

4. There may exist a "hidden force," somewhere, that's acting with a plan at the global level. The plan involves a forced reduction of fossil fuel production and consumption to mitigate the damage generated by global warming or, perhaps more likely, to leave energy for the elites while taking it away from commoners. The recent events, the Covid crisis, and the Russian crisis, both have the effect of impoverishing some of the major consumers of fossil fuels, Western middle-class citizens, and so reducing overall consumption. The price cap on Russian oil may be just the first step of a new plan that will force Westerners to abandon for good their addiction to fossil fuels, whether they like it or not. This may not be a bad idea for several reason, but it is a kind of global medicine equivalent to lobotomy or radical mastectomy for single humans. Let's say, a bit heavy-handed. 

It may be that all four of these factors are at work. In any case, it is a powerful convergence of interests that is materializing, likely to be successful in pushing the cap on Russian oil to worldwide acceptance. Considering how easily European citizens have been led to believe the most absurd things during the past two years, it is unlikely that they will understand what's being done to them (and let me not use the appropriate words for the concept). Not that the American citizens will fare much better: the huge transfer of wealth from Europe to the US will go all into the pockets of the American oligarchs. As for the European governments, they are the structures that should oppose this giant wealth transfer, but they are staffed by traitors, idiots, or both; so they will enthusiastically adhere to the idea. 

Is this what the crystal ball shows? Not necessarily. Let's just say that there are reasons to think that what I just described is a likely scenario. Then, the best-laid schemes of mice and men gang aft agley. There is a limit to how hard you can push something before it goes to pieces or bites you back. Will European citizens continue forever to be happy to be economically raped by the US? The future is always full of surprises, but the crystal ball always shows the same thing: the world goes where the money is. 

 

The Most Amazing Graph of the 21st Century: How the Empire is Striking Back!

 

In 1956, Marion King Hubbert predicted that the US oil production would follow a "bell-shaped" curve, starting an irreversible decline around 1970. He was basically correct but, around 2010, the production curve restarted growing. This abrupt rebound was an amazing event that propelled the US back to the role of largest world producer of crude oil, and to become noticeably more bullish in geopolitical terms. Buoyed by its large oil production, the Empire is striking back. But for how long? (image by Paul Kedrosky)

Years ago, James Schlesinger noted that human beings have only two operational modes: complacency and panic. It is an observation that rings true and that we can generalize in terms of groups: some humans are catastrophists, and some are cornucopians. I tend to side with the catastrophists, to the point that I created the term "Seneca Effect" or "Seneca Cliff" to define the rapid decline that comes after that growth stops. Indeed, catastrophes are a common occurrence in human history, but it is also true that sometimes (rarely) a catastrophic decline can be reversed: I termed this effect the "Seneca Rebound." 

There is an impressive example of rebound with the story of the US oil production. You probably know how, in 1956, Marion King Hubbert proposed his idea of the "bell-shaped" curve. He turned out to be approximately right in his prediction: the US oil production started to decline after peaking in 1970, following a trajectory that seemed to be irreversible. In the early 2000s, after nearly 40 years of decline, no geologist sane in his/her mind would have said that the decline could be stopped, to say nothing about reversing it. It was not a question of being catastrophist or cornucopian: the members of both categories would normally agree that extracting large amounts of oil from "non-conventional" sources was simply unthinkable in economic terms. 

And then, something happened that changed everything. It took a few years before the new trend was clear but, by the mid-2010s, it couldn't be ignored anymore. By 2018, the US production had returned to the levels of its 1970 peak. In 2019, it had overcome it, and it kept growing. The production of natural gas followed the same trend, shooting up rapidly to levels never seen before. In 2020, the Covid crisis caused a new drop in production, at present only partially recovered. But let's forget the Covid story for now. What happened that changed things so much in the US oil industry?

You probably know that the cause has a name and a story: it is called tight oil or "shale oil," extracted by "fracking". It itself, it is nothing especially new, the concept was already known in the 1930s. The idea is to use high pressure to fracture the rock that contains the oil. That makes it possible for the liquid to flow to the surface. The problem with fracking is that it is expensive. So much that it is commonly said that nobody made any money on it. In 2017, an analysis by the Wall Street Journal arrived at the conclusion that, since 2007, “energy companies have spent $280 billion more than they generated from operations on shale investments.” Other analysts expressed the same concepts: you can extract oil from shales, but don't expect to make any money out of it. So, why are people insisting on pouring good money into bad wells? 

There are good reasons. The people who discounted the possibility of extracting tight oil were perfectly able to evaluate the economic convenience of the process, but they didn't consider that the "market" is an abstraction that doesn't always work, actually, almost never works. So, those financial entities that provide money for oil exploration are part of a mix of interests that include the oil industry, the aerospace industry, the military industry, and others. This mix is what keeps the US economy alive. But there would be no aerospace or military industries if the oil industry could not produce enough oil. 

It is impossible to say how the decision to pour immense amounts of money into tight oil was taken. Maybe it was a strategic decision taken by the military lobby in the US government (you may also note something curious: why was the US the only country that invested in shale oil extraction? After all, there are shale oil deposits in many other countries. I can think of an explanation, but I leave it to commenters to harp on conspiracy theories.) Or maybe the financial lobby recognized that they could survive losses in their investments in oil if these investments kept other sectors of the economy able to generate profits. Or, perhaps, it was a collective decision created by the great panic of 2008, when oil prices spiked up to 150 dollars per barrel. That event scared everyone enough to convince some of the key players that investing in oil was a good idea. In any case, with the second decade of the 21st century, the world changed.

The image above is by Michael Roscoe. It is not updated to the latest levels of oil production, but it shows how the US dominated the oil market (and the world), up to the 1960s. For a while, it was challenged by Russia and Saudi Arabia, but now the US is taking the lead again. Like all complex systems, the American Empire depended on the inflow of energy from the outside. So, it's not surprising that the Empire is striking back!  

One of the visible consequences of the return of the Empire is that it abandoned Afghanistan, which it had invaded 20 years ago in search of new oil resources in Central Asia. These resources turned out to be elusive, perhaps not existing, but the US stubbornly insisted on staying in the area. Then, with tight oil, the powers that be realized that the US didn't need those resources anymore. And that they could concentrate on juicier targets, moving aggressively to push its main competitor, Russia, out of the European gas market. The US is also behaving aggressively toward China, which it correctly considers its main long-term competitor. Whether this will lead to a war, is all to be seen. But it is energy that makes wars possible. 

But for how long will the shale bonanza last? As always, the future is obscure, but not completely. Shale oil remains a limited resource, no matter how often we hear that it will give us centuries of prosperity, or even that technology made it unlimited. After the Covid tsunami, shale oil production restarted to grow, but it has not yet reached the level it had in 2019. Also, its growth is clearly slowing down, while the Empire is facing new constraints in terms of overexploited resources: land, water, food, fertile soil, and more. 

Is tight oil going to peak again and, this time, forever? We cannot say. We can only say that the American Empire is following the ebb and flow of the resources that make it exist. Such is the power of energy, and empires are but slaves to the forces that govern the universe! 

 

 

Colin Campbell (1931-2022). A tribute to the father of the "Peak Oil" concept

 

Colin Campbell died at 91, on Nov 13th, 2020, in his home, in Ballydehob, Ireland. He loved to illustrate the concept of peak oil using beer. No fancy theories, no ideology: beer is a real thing that you can't create out of thin air. And after you have drunk it, there is no more of it! 

I met Colin Campbell for the first time in Italy, in 2003, when I invited him to give a talk at the University of Florence. That day, it was clear that Colin was bringing us an important message. He knew that our world, our proud civilization, and our (perhaps) great achievements, were all based on the availability of cheap oil. No oil, no energy. No energy, no civilization. 

Not everyone who listened to him understood his message, but some of us did. It was just two years after that the Twin Towers in New York had fallen in flames. It was an event that screamed for an explanation, but that could not be understood in the framework of the world that was presented to us by the official media. It was on that day that a small group of Italian scientists and researchers collected in my office to meet Colin after his talk. An electrifying experience: we all had the impression that a veil was being lifted, that we could see what was behind the propaganda curtain, that we could finally perceive the machinery that kept the world moving. A new reality was being revealed to us. 

Colin was not an academic scientist. He was primarily an "oil man," people who have practical, no-nonsense views, and can't be easily swayed by ideologies or fashionable trends. People hardened by experience, used to setting realistic goals and attaining them. Colin was not a man who could be easily intimidated or browbeaten. 

As a former oil man, Colin had access to data that for most of us are too expensive to buy, or simply unavailable. Together with his longtime friend and coworker, Jean Laherrere, they revisited an old model that Marion King Hubbert had proposed in 1956, they revamped it with new data, and they published their results in a 1998 article in "Scientific American" titled "The End of Cheap Oil." The model was simple, and the data still uncertain, but the study went straight at its target and arrived at a clear conclusion: the oil resources of the world were becoming more and more expensive, and economic growth was going to be a thing of the past in a non-remote future. The consequences were unknown, but potentially disastrous. Later, I called the descent ahead the "Seneca Cliff,"

Colin was moving along a path parallel to the one created, some 30 years before, by the authors of "The Limits to Growth" and their sponsors, the Club of Rome. Colin was a big fan of the "Limits" study, actually one of those people who brought the study back to the attention of the public in the 2000s. Sharp-minded as usual, Colin could recognize ideas that were grounded in the real world. He would never have bought the vague arguments that had been deployed against the study, such as that resources are "created" by human intelligence. No, resources are something real, something physical, something that you can weigh and measure. They do not come for free: you must pay for what you extract, and the cost may be more than what you can afford to pay. This is the essence of the idea of gradual depletion that leads to the "bell-shaped" curve. It was the basis of the "Limits to Growth" study and the basis of the "Peak Oil" theory. Below, you can see the main result of the 1998 study.

In the early 2000s, Colin went on to establish the "association for the study of peak oil and gas" (ASPO). It was a group of scientists, intellectuals, and simple citizens who had understood a simple concept: the future was not going to be what we were told to expect. It was an attempt to alert governments and everyone about the dangers ahead. 

Rethinking about that story, today, it is amazing how Colin succeeded, alone and only with his own resources, in creating an organization that arrived to have some effect on the global debate. High-rank politicians heard the message, although often reacted by criticizing it. For a while, ASPO was also a watering hole for all sorts of subversives, including the arch-conspiracy theorist Michael Ruppert, whom I personally met in Vienna at one of the ASPO meetings. I am reasonably certain that ASPO was infiltrated by the CIA, I have no proof, of course, but I would be surprised if they hadn't probed ASPO to see what we were up to. Evidently, they decided that we were harmless (they were correct) and they left us in peace.

ASPO went through a cycle of popularity that lasted about 10 years. For a while, it looked like we could influence the world, that the people who had the power to do something would listen to our message and intervene. In 2005, Colin Campbell proposed his "Oil Protocol" (also called the "Rimini Protocol") that would have put a limit on the extraction rate of hydrocarbons worldwide. That raised much interest in the mid-2000s. But that didn't last for long. 

The trajectory of ASPO went along a similar path as that of the Club of Rome and its "Limits to Growth" study. In both cases, a group of intellectuals tried to alert the world rulers about the finiteness of the material resources on which the economy was based, and that something had to be done to avoid the "overconsumption trap" that would necessarily lead to a crash. In both cases, the message was rejected and demonized, then ignored. 

In 2008, ASPO's predictions seemed to have been borne out when oil prices shot up to levels never seen before. Was it "peak oil" arriving? It probably was, at least for what it had to do with "conventional" oil, but the consequences were unexpected. The powers that be reacted aggressively to the crisis, pumping gigantic amounts of money and resources into the exploitation of new oil and gas resources in the US. It was the start of the age of "fracking." From 2010 onward, a huge amount of oil started flowing out of the "tight oil" wells, reversing the declining trend that had started 40 years before. For many, it was the delivery from a nightmare. Some spoke of a "new era of abundance" that might have lasted for centuries, if not forever. 

None of the geologists in ASPO, or outside ASPO, had predicted this development. Cornucopians and catastrophists, alike, judged that the revenues from shale oil could not justify the costs of extraction. They couldn't believe that the oil industry would embark on such an expensive and uncertain adventure. Indeed, fracking didn't bring profits: it was mostly a political decision, meant to keep the current elites in power. In this sense, it worked very well, although nobody can say for how long. 

Fracking was the death knell for ASPO. After 2010, the public rapidly lost interest in peak oil, Perhaps it was unavoidable. People easily forget unsettling truths, much preferring comfortable lies. And that's what happened. ASPO never officially died, but it declined to a much lower level of activity than it had shown at the beginning. Colin Campbell retired in his home in Southern Ireland, and his last comment on peak oil was published in "Cassandra's Legacy" in 2018.

Rethinking today about Colin's legacy, we can see that he was not always right in his assessments. One of the limits of his approach was that it was focused only on oil and gas. His models were sometimes oversimplified, and, at times, he would be too quick in disparaging new technologies that could change the picture. Perhaps his main limit was to have overemphasized the importance of the peak date as a turning point for humankind and to have believed that it could be determined by models. I know that he understood that the peak was just one point in a smooth curve, and he said that several times in public statements. But many people misunderstood the meaning of "peak oil" and saw it as equivalent to "running out" of oil. For some, it was the equivalent of the religious concept of apocalypse, and that led to accusations against ASPO of being a millenarian cult of some kind. 

It should go without saying that Colin's ideas were as far from millenarism as they could possibly have been. His approach was good, data-based science, and he was fond of quoting Keynes saying, "when I have new data, I change my mind, what do you do, sir?" (actually, Samuelson said that). Colin's capability of dispassionately analyzing data led him to avoid the mistakes that other members of ASPO made, such as putting all their hopes on nuclear energy or refusing to accept climate science as a valid scientific field.  

So, even though right now the concept of "peak oil" seems to be out of fashion, good ideas are like souls. They move from one generation to another, being reborn as new incarnations if they are good. Campbell's ideas have that power, right now they are nearly forgotten, but waiting to reappear in a suitable body, like the spirit of the Dalai Lama. We, humans, forget things so easily, especially important things. But one day we'll understand Campbell's main message that what we get from the Earth may seem to be free, but it must be repaid, sooner or later. And the debt recovery agency employed by Gaia is ruthless and cannot be bribed using money. 

From the time when I first met Colin, that day in 2003, I considered him my mentor as I moved into a field of research, resource depletion, that was wholly new to me. It was in large part with his help, which he was always happy to provide, that I succeeded in carving for myself a niche in this new and fascinating field. Over the years, I came to know Colin and his wife Bobbins well. He was not the kind of man who cared for his public image, nor he was used to boasting about his accomplishments, but I can tell you one thing: he truly was a good person. He was at the highest level of the empathy scale, as my friend Chuck Pezeshky defines it. 

Colin cared for people. For his family, his friends, his coworkers, and also for humankind as a whole -- otherwise he wouldn't have done what he did with ASPO. He understood how resources, and crude oil in particular, are at the basis of much of the oppression and suffering of humankind, and he tried to do what he could to free people from this immense burden. Today, we can see him as one of the great minds of the past decades who tried to alert humankind of the dangers ahead, such as Aurelio Peccei, Donella Meadows, Rachel Carson, Herman Daly, and many others. They were not heard, but their memory will not be forgotten.  

May Colin rest in peace in the arms of that Earth that he studied so much as a geologist. 

Saudi Arabia Goes the way of the Garamantes. Google Earth Confirms the Collapse of the Water Supply

 

In 2008, I noted the decline in Saudi Arabian water production and I published an article in "The Oil Drum" titled "Peak Water in Saudi Arabia." Using a simple version of the Hubbert model of resource depletion, I noted how the supply of "fossil water" had peaked in 1990 and had been declining ever since. This is the typical behavior of "fossil" resources: they tend to peak and then decline. It had already happened to the ancient Garamantes, inhabitants of central Sahara, who had developed sophisticated technologies of water extraction during the 1st millennium BC. That had allowed them to prosper for about one thousand years, but then depletion had its revenge and they vanished among the sand dunes. Something similar (but probably much faster) is going to happen in the Arabian peninsula. 

 

The old Hubbert model was developed to describe the cycle of extraction of crude oil. It may be oversimplified if you want to use it for detailed predictions. But, as a quick tool for understanding the situation of the production of a non renewable resource, it tells you a lot of what you need to know. That first stab of mine on water production in Saudi Arabia turned out to be correct. 

It is impressive how, today, you can use Google Earth to look at the situation "from above." You can see the collapse of the agricultural fields as depletion progresses. Here are the images of an irrigated area for a region East of Al Jubail, in Saudi Arabia,  26°48'29.60"N and  49° 8'47.58"E. 

Let's start with an image of the desert in 1984. There is absolutely nothing there:

One year later, 1985. Someone has started extracting water and irrigating the land. There are two active fields there. 

Below, you see an enlargement of the 1985 situation. Someone has built a road and you can see six irrigated areas, of which two are active. Each circle is almost exactly 1 km diameter. It is called "center pivot irrigation" -- there is a long arm that turns around the central pivot and irrigates the area.

Below, the situation in 1986 -- there are now 31 active circular fields. 

And now the area in 2002. There are now 46 active or partially active fields. Note the dark spots among the circular green areas. It is not clear what they are, could they be small ponds of brine? The water they are using probably has a high salinity and they have to dispose of it, somehow. 

 Below, the situation in 2015. The cultivated area is clearly declining. There are now only 17 active fields.

 

And, finally, the situation in 2020. It is gone. No green fields anymore. They simply ran out of water.

That doesn't mean that agriculture in Saudi Arabia is completely over. Scanning the desert using Google Earth, you can still find irrigated areas. Here is a place called Qariat al Olaya

There are several irrigated circles, but note the number of "ghost" fields, not irrigated anymore. It may be a seasonal effect, but it may well indicate big problems with water supply. 

Finally, some data about wheat production in Saudi Arabia, the most recent I could find (from "actualitix")

As you see, they had two peaks: the first one is the one I had already noted in my article on the "Oil Drum" of 2009. The second one was ca. 2005. As it often happens, when a resource starts declining, people tend to apply more capital to keep things going. It happens also with crude oil, the case of "shale oil" is a classic example. In Saudi Arabia, they succeeded in creating a second peak. But now, it seems to be the final decline. 

Just like the ancient Garamantes, the Saudi Arabians were able to overcome the aridity of their land by using fossil water. But when they ran out of it, it was time over for them. The Saudis still have crude oil and can import food despite not being able anymore to produce it. But oil is a fossil resource, subjected to depletion just like fossil water. And the destiny that befell the Garamantes is going to befall all those who depend on fossil resources. 

 

The Death of Ahmed Zaki Yamani, the "Oil Sheik" who Understood Everything

Ahmed Zaki Yamani, oil minister of Saudi Arabia until 1986, died in London last week. In memory of the "oil sheik," I reproduce here a comment that appeared on the ASPO-Italia blog in 2006. The interview of Yamani by Oriana Fallaci in 1976 is a good example of how the oil problem is misunderstood in the West and of the many lies told about it. Yamani, despite all the accusations and insults he received, was always a moderate who sought compromise. He managed to prevent his country, Saudi Arabia, from the disasters that befell all oil-producing countries in the Middle East.  

Unfortunately, Yamani's legacy has been somewhat lost over the years, but it is only now that Saudi Arabia is seeing bombs falling on its territory -- a destiny that so far the country had avoided. Now, things are going to become very difficult as Saudi Arabia faces the unavoidable decline of its once abundant oil resources.

Yamani is remembered, among other things, for having said that “The Stone Age did not end because the world ran out of stone, and the Oil Age will end long before the world runs out of oil.” And, with that, he demonstrated that he had perfectly understood the concept of "EROEI" and the consequences of gradual depletion. 

 
 

http://aspoitalia.blogspot.com/2006/11/fallaci-intervista-yamani.html 

(Fallaci's interview is available in full at this link.)

Fallaci interviews Yamani: thirty years later
Di Ugo Bardi - September 2006 (slightly edited for publication on "The Seneca Effect")

About thirty years ago, at the height of the first "Oil Crisis," the Italian journalist Oriana Fallaci interviewed the Minister of Oil of Saudi Arabia, Sheikh Ahmed Zaki Yamani. The text of the interview appeared in the newspapers and can be found today in the book "Interview with History" (BUR 2001).  

The interview with Yamani is just one of the many interviews that Oriana Fallaci had obtained from the various powerful men of the 1970s (among them Henri Kissinger). Somehow, being interviewed by her seems to have been fashionable, or perhaps it was something that they could not avoid. According to what Fallaci herself tells us, Ahmed Zaki Yamani hesitated for a long time before agreeing to be interviewed. In the end, however, he invited Fallaci to his home in London, then in Jeddah, and received her with great courtesy, and introduced her to his wife Taman and his daughters. 

Fallaci's interview is interesting because it reproposes the elements that have characterized the debate on oil from then until today. On the one hand, the political interpretation of the crisis, as due to a conspiracy with ideological or religious roots. On the other, the pragmatic interpretation of the crisis, as due to the impossibility of production to satisfy demand and maintain a low price. 

There was also a human side of the interview and, from what she writes, it doesn't seem that Fallaci was particularly grateful to Yamani for his kindness. On the contrary, her antipathy towards him is evident. You see it in all her questions and her comments, but also when she describes his eyes as "Only his eyes alert one to his true self: brilliant, darting, crafty. Eyes that know how to lie, to caress and pierce one with ruthlessness." Fallaci, evidently, thinks she has supernatural telepathic powers. 

She defines Yamani as, "The man who can take us back to the days when we traveled on horseback, who can close our factories, make our banks fail ..." Or consider when she bluntly tells him: "You wanted money and you got it: ruining us." Then, she accuses Yamani of blackmail, of wanting to buy an atomic bomb, of being " diabolical," and things like that. Later on, Fallaci accused Yamani of having attempted to seduce her while she was in his house, although this accusation does not appear in the interview.

It's not so much a question of insults. What is striking about this interview is how Fallaci had not even minimally prepared herself on the subject of crude oil. She was unable to ask questions that were not simply based on the various legends of the time (the same as today). To illustrate how the interview looked most of all as something in the style of a gossip magazine, here are some excerpts.

"Where is the money? I see many gold watches in your shop windows and gold lighters, gold rings, I see big cars in your streets, but I don't see houses, I don't see real cities."  Fallaci apparently believed that the Saudi were still living in tents in the desert

"We know very well that the emirs use the money to buy golden water closets" Again, Fallaci doesn't seem to be bothered by the need of verifying her assertions.

"In Saudi Arabia people dig for water and find oil." If you think that it could be true, note that the oil fields of Saudi Arabia are typically located at depths of a few kilometers, far more than the depth of water wells.

Throughout the interview, Fallaci revolves around the concept that the Arabs were plotting against the West using oil as a weapon. Several times he tries to get Yamani to admit that, yes, there is a plot against the West to ruin us and to establish the world Islamic dictatorship. If possible, she would like to make him admit that it is him, Ahmed Zaki Yamani, who is the leader of the plot. It is as if she saw the interview as part of a Hollywood movie, where the villain usually confesses his crimes out of pure bragging.  

In partial defense of Fallaci, it must be said that, in those years, almost everyone in the West believed that the crisis of the 1970s had purely political origins. Today, we clearly see from the data that the crisis was instead caused by the US peak production, which took place in 1970. But the vehemence with which Fallaci attacks Yamani in the interview does not seem to be based on any data.

Yamani, for his part, always replies without losing his temper. It is clear that he considered Fallacy as a kind of time bomb, to be treated with caution and handled with gloves. It must have really taken a lot of patience for him to answer the series of questions that came to him: many were simply silly, some offensive, and others indiscreet. An example of the last kind is the one about the feelings he had experienced witnessing the execution of the killer of King Feisal. But Yamani is always courteous and answers without ever dodging the question, even though in his heart he must have wondered more than once what was that led him into such a situation. Fallaci, instead of appreciating that, accuses him, saying that "spontaneity was forbidden."

In the end, what makes the interview interesting is not Fallaci, but Yamani. Despite the lack of knowledge evident from the questions he received, Yamani manages to give a complete and organic picture of the oil situation of the time, which already foreshadowed today's world. At the time, Saudi Arabia produced three and a half million barrels a day, but Yamani said it could have produced 11. In fact, Saudi Arabia has managed to produce nearly 11 at certain times.  

Yamani was clear about the strategy that Saudi Arabia would adopt in the years to come: that of "swing producer" or needle of the balance that would have stabilized production and avoided further crises in the future. He had perfectly framed the world oil situation as it would be for at least three decades to come. Fallaci was unable to appreciate the value of what she was told but, reading the interview, one is struck by the clarity with which Yamani had predicted the events of the next thirty years and even more.

Are Yamani's considerations still valid today? Overall, yes, but they won't continue to hold for very long. Today, Saudi Arabia faces a very difficult future. It is said that the country will still be able to increase production, but it is also said that the current fields have reached their limits and that the decline is about to begin. Sooner or later, Saudi Arabia will no longer be the tip of the balance it has been since the time of Yamani. The exhaustion of resources is the real problem and not the "emirs who buy water closets of gold" as Fallaci said, perhaps really believing it.

Oriana Fallaci is gone today. Yamani has no longer been oil minister since 1986, today he is an elderly gentleman who lives in London and deals with Islamic studies (n.d.a. this was written in 2007, Yamani died in 2021). The world goes on, the events of the past always present themselves the same but in always different forms. One thing changes, however: there is less and less oil to extract).

 

The Seneca Cliff goes mainstream

The concept of the "Seneca Cliff" seems to have gone mainstream. Below, it is mentioned in a recent post by Dennis Coyne on "peakoilbarrell" as an obvious concept. Just as when you say "Gaussian Curve", you don't have to specify what shape the curve has, so it is for the "Seneca Curve". It looks like I started some kind of avalanche with my 2011 post when I introduced the term. See also my blog wholly dedicated to the subject.

Here, the projections by AEO (annual energy outlook) seem to me very optimistic; can production really keep growing until 2035-2040? If that were to happen, however, the subsequent collapse would be truly abrupt.

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EIA’s Annual Energy Outlook and the Seneca Cliff

by DENNIS COYNE posted on 05/19/2016

The scenario above shows an Oil Shock Model with a URR of 3600 Gb and EIA data from 1970 to 2015 and the Annual Energy Outlook (AEO) 2016 early release reference projection from 2016 to 2040. The oil shock model was originally developed by Webhubbletelescope and presented at his blog Mobjectivist and in a free book The Oil Conundrum.

The World extraction rate from producing reserves must rise to 15% in 2040 to accomplish this for this “high” URR scenario. This high scenario is 100 Gb lower than my earlier high scenario because I reduced my estimate of extra heavy oil URR (API gravity<10) to 500 Gb. The annual decline rate rises to 5% from 2043 to 2047 creating a “Seneca cliff”, the decline rate is reduced to 2% by 2060.

The scenario presented above uses BP’s Energy Outlook 2035, published in Feb 2016. This outlook does not extend to 2040, maximum output is 88 Mb/d in 2035 at the end of the scenario. This scenario is still optimistic, but is more reasonable than the EIA AEO 2016. Extraction rates rise to 10.6% and the annual decline rate rises to 2.5% in 2042 and is reduced to under 2% by 2053.

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