Brittle Power- PARTS 1-3 (+Notes) - Natural Capitalism Solutions

Chapter Nine: Oil and Gas 101portation, manufacturing, electric power generation and the petroleum and naturalgas industry, [so] that one can hardly exist without the other. Each depends on andeach serves the other. A widespread failure of one industry is certain to seriouslyaffect another. The natural gas industry cannot function without pipe, electricmotors, pumps, chemicals and a host of other items, nor can many manufacturingindustries exist without the products of the gas system or that of the closely relatedpetroleum system. 4The natural gas industry also provides the feedstock from which is made “allor most of the rubber, plastics, fertilizer, paint, industrial solvents, medicinesand many other items used daily in the United States. A loss of this [feedstock]...wouldbe devastating in time of a national emergency.” 5 (Sixty percentof our nation’s petrochemical capacity is clustered on the Texas Gulf Coast.) 6The functioning of the oil and gas industries in turn depends on internal linkages:“the links between segments could be the major frailty.” 7Oil and gas fields and shipping facilitiesThe vulnerability of the oil and gas system begins (exploration aside) atthe wellhead and in the reservoir. These are exceedingly valuable assets. Theoil reserves in the Persian Gulf region, as of October 1980, were worth, at amodest thirty-five dollars per barrel, some thirteen trillion dollars, 8 or morethan one Gross World Product-year. Nearly half those reserves lie in SaudiArabia. The Gulf’s estimated ultimately recoverable resources of oil are twoor three times as large: 9 at least half the total of all oil that will ever be foundin the world. There are few more concentrated assets anywhere. There is noeconomic motive to extract the oil quickly. A barrel lifted at the beginning of1974 and sold for eleven dollars would by 1980 have been worth about eighteendollars if invested in U.S. Treasury bonds, while the same barrel left inthe ground could by 1980 have been sold for at least thirty-two dollars. 10 Theproprietors of the oil have so far been earning, in this sense, a negative returnon their liftings—that is, oil appreciates faster in the ground than in a Swissbank. But the oil happens to be in the Gulf rather than in Switzerland, and inthat unstable region, the Gulf governments understandably worry aboutwhether they will be around to enjoy the future revenues.The cultural, political, and military volatility of the Gulf 11 —a concern toAmerican military planners since at least 1947—needs no emphasis here. Arabarms orders during 1978–81 totalled about thirty-five billion dollars—morethan seventy years’ worth of the entire United Nations budget. Even friendly,relatively stable exporters of oil to the U.S. cannot be considered entirely reliable:Canada’s provincial/federal tug-of-war in 1980–81, for example, cur-