Tag Archives: oil

Trying to create a bust-proof oil city

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Midland, Texas is looking for ways to utilize the benefits of the current oil boom to prevent a future bust:

In the Permian, “we don’t say boom anymore,” according to Morales, who serves as mayor of the nation’s fastest growing city. “We’re very sustainable. The boom-and-bust era is over.”…

The Permian rose from the dead with the advent of fracking a decade ago to become a market beast, producing about a third of U.S. oil as it grew to become one of the world’s most prolific oilfields.

In the process, though, local resources were stretched beyond their limits. Now, Morales and others say the region may be settling into adulthood. Employers still struggle to fill jobs in competition with the oilfields, roads are jammed, schools overflow and home prices are sky-high. But local leaders say they have plans and resources set to secure a long-term future…

The partnership being forged between the oil companies and the local communities is unlike anything achieved elsewhere, Bentley said.

Growth is good in any American community. When the population is increasing, businesses arrive in town, and money is being made, a lot of problems can be overlooked (including the issues of adjusting to sudden or rapid growth).

But, growth does not always continue or move at the same pace. This seems especially true for places reliant on limited natural resources like oil. At some point, the oil runs out or prices change and the boom is over. Reliance on any single industry or produced good – think Detroit and cars – can lead to problems.

I would guess that few communities could quickly replace or recover from the loss of a business sector that seems to be as important as oil is in Midland. At the same time, resiliency is a buzz word in many circles as cities, regions, and states consider how they might set themselves up to be more adaptable to the sudden changes that could come. Imagine New York City without the finance industry, Silicon Valley without tech, Miami without tourism and beaches, and so on. Building infrastructure now and sowing the seeds for other industries and sectors to grow in the future could be a good hedge for a time when oil is not booming.

What could kill the McMansion, SUV, and suburban way of life: $10 a gallon gas

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One of the ways that the American suburban way of life of single-family homes and driving could come to an end is really expensive oil. Here is one prediction of the fallout:

For decades, we’ve lived — and driven — in denial, somehow assuming we have the “right” to cheap gasoline, and therefore, low-cost transportation. Now it’s time to face reality and consider what will happen when — not if — gas hits $10 a gallon, not because of taxes, but because we will use up the planet’s petroleum…

Highways

Rush-hour on Interstate 95 is a breeze as half of all motorists can no longer afford to drive. But the highways are riddled with potholes as the price of asphalt — made from petroleum — quintuples, making it impossible to maintain the roads because gas tax revenues have dropped with decreased sales. With more people working from home or on flex-time, traffic congestion is a thing of the past.

Homes/offices

With home heating oil at $12 a gallon, people close off rooms in their “McMansions” and huddle in the few remaining spaces they can afford to heat, usually with wood stoves, which are also in short supply. Office buildings, by law, will be allowed to heat to no more than 60 degrees in colder months. Sweaters become a fashion rage…

Around town

Local traffic drops as people consolidate their few truly necessary shopping trips. Because farmers are so dependent on oil (for fertilizers, packaging and transport), food prices skyrocket. Food imported out of season becomes an occasional treat. Few can afford to eat out at now-chilly restaurants dealing with the same food shortages. Wagons and carts, bikes with racks, mopeds and scooters replace SUVs. Kids take the school bus daily instead of being chauffeured by mom. Suburban housing prices continue to fall as people flock to the walkable cities with good mass transit. Small town taxes rise, encouraging further migration. Schools can’t afford good teachers who must still commute from far away due to lack of local affordable housing.

If gasoline was indeed $10 or more a gallon, I imagine a lot would change. Perhaps even more so if there was a sudden spike to that price range instead of a gradual increase that would provide time for people and communities to adjust. Even with significantly higher gas prices, some would be very reluctant to give up the American lifestyle organized around driving.

One question to ask in this scenario is how quickly society could adjust. The American suburbs have been decades in the making. How quickly could they be dismantled? It is common now to hear social scientists, policymakers, and others discussing resilient cities and communities. Could the country adjust if the suburbs became unsustainable due to high gas prices? (According to this one prediction, we should all have bicycles on hand and hope we live close enough to mass transit lines.)

A second question: if the American government has spent many resources in support of the suburban way of life (such as socialized mortgages), would the various government actors try to sustain suburbia in the face of such a threat? Just because living in suburbia might be tougher does not necessarily mean Americans will stop wanting to live there.

An oil bubble and McMansions

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One commentator links the shrinking profits in the oil industry to declining McMansion values:

They lived high on the hog in Bubble McMansions near Houston and elsewhere, the economy tied to the oil industry. And now, a very different story all over Texas.

 

texas

That is not a huge drop in housing prices compared to the changes in other areas in the chart. But, the potential link between oil money and McMansions is an interesting one. Houston has long been known as a major city tied to the oil industry; I remember reading works by sociologist Joe Feagin about the effects of the oil industry on Houston written in the 1990s. The stereotype is that all of this cash was spent on Texas-sized items, like huge homes in sprawling suburbs. However, I’ve never seen data on whether Texas has more McMansions per capita than other metropolitan areas. For example, are there more McMansions in the Houston area compared to the New York area (which has its own money-printing industry in Wall Street)? Or, in the Atlanta or Las Vegas area? Going further with the chart provided, what about McMansions in Midland and Odessa?

Considering a robot superhighway from Mexico to Canada

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If driverless cars are in the near future, why not a superhighway of autonomous trucks linking Mexico and Canada?

The project is currently being considered by members of the Central North American Trade Corridor Association (CNATCA), and would consist of a robot-only corridor running along Route 83 through Texas, Oklahoma, Kansas, Nebraska, South Dakota, North Dakota and on into Manitoba.

One of the main reasons for a robot road like this, according to Marlo Anderson of the CNATCA, is that North Dakota produces a lot of oil right now, and doesn’t have a great way to get it all where it needs to go. Sure, there are trains, but there’s not enough space to be had. That, and the jury-rigged cars that carry the oil keep exploding. Trucks can help ease the pressure, especially if they don’t need drivers…

There are plenty of problems to solve before any of this would be possible though, including self-driving car laws in half a dozen US states, some way of having driver-less robo-rigs cross borders into and out of the United States, and security in place to make sure no one tries to exploit that system. But robot roads like this one—if it happens—could pave the way to wider acceptance of self-driving vehicles that really do take care of it all themselves. Even if we’re not ready to have them on the road with us just yet.

Advantages include safer roads, no time restrictions on the trucks, lower labor costs, and presumably cheaper goods and/or more money to be made. Disadvantages include lost trucking jobs, a long period of time to put this all together, and perhaps the biggest hurdle for now: what exactly would such a highway cost to build and maintain? Do we need a fleet of herding vehicles to service the trucks and highway?

I wonder what the final arguments regarding this might look like: perhaps safety on the trucking side (how can you argue with a safer driving experience?) versus the steady erosion of jobs greased by free trade (this time to autonomous vehicles).

Buy friends and families barrels of oil for Christmas

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I’ve thought about this before…

Oil prices continued to fall today, with two different measures of the commodity’s price hitting five-year lows. Oil can currently be had for $64.10 a barrel in some circumstances.

A barrel of oil is 42 gallons.

Who do you know that could use 42 gallons of freshly drilled oil? Everyone! Oil is important for producing energy, which powers cars and flat-screen televisions through a scientific process known as “pushing the button on the remote control or turning the key in the ignition.”

And what season is it? Christmas season! The season for giving things to people. Do you see where I’m going with this? Oil is this year’s hottest and most affordable Christmas gift.

The practical issues are immense – how would an individual refine the oil? how many people could easily store the barrels? These barrels can’t exactly be bought and sold at Walmart – but it is hard to argue with giving people something they need. Why give superfluous gifts when every driver could use cheap oil?

United States now #1 oil-producing country in the world

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The United States is again #1 in oil production, passing Saudi Arabia:

The United States has overtaken Saudi Arabia to become the world’s biggest oil producer as the jump in output from shale plays has led to the second biggest oil boom in history, according to leading U.S. energy consultancy PIRA.

U.S. output, which includes natural gas liquids and biofuels, has swelled 3.2 million barrels per day (bpd) since 2009, the fastest expansion in production over a four-year period since a surge in Saudi Arabia’s output from 1970-1974, PIRA said in a release on Tuesday…

Last month, China surpassed the United States as the largest importer of crude, according to the U.S. government, as the rise of domestic output cuts the U.S. dependence on overseas oil.

“(The U.S.) growth rate is greater than the sum of the growth of the next nine fastest growing countries combined and has covered most of the world’s net demand growth over the past two years,” PIRA Energy Group wrote.

Three quick thoughts:

1. People don’t often think of United States as having lots of oil though the natural resources within the US have been important throughout its history. With this new information, does this change how US residents and others around the world view the US? Does it then change how the US views the Middle East and other nations with lots of oil?

2. The article notes that this was the fastest production increase in over four years. The average person may not be terribly aware of this but those opposed to fracking should be able to use this info: this is quite a rapid change.

3. When will peak oil really arrive? One article recently suggested this oil boom is not the last; there is more untapped oil in the oceans. As the article suggests, this supply may make it even more difficult to talk about the impact of oil on the environment.

North Dakota: “Little Housing Boom on the Prairie”

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A booming oil industry in North Dakota has contributed to the state leading the United States in housing growth in 2012:

According to recently released Census data, North Dakota led the nation in housing growth in 2012, increasing its supply of housing by 2.3% in just one year. Overall national growth was 0.3%.

While much of this growth has been focused on the oil patch, the entire state has seen strong economic growth, job creation, and accompanying strength in the housing market. Cities located hours outside the oilfield are reporting shortages of housing and tight markets for existing housing. Shortages of housing have also been reported in small towns throughout the state, as job-seekers move to the region looking to find work in the state’s growing oil and ag industries. A review of the new Census data bears out such reports. North Dakota is home to 8 of the top 100 counties nationwide for housing growth, including 4 of the top 10. Williams and McKenzie County, in the heart of the Bakken development, placed number one and two nationally, respectively, but counties far outside the oil patch also showed strong rates of growth.

The new shift towards more permanent housing construction will probably come as a relief to communities and officials throughout the state, who have been scrambling to find solutions to shortages. While temporary housing for oil workers has boomed throughout the oilfield, local officials have begun to explore limits on such “man camps”, citing their negative effects on local communities, impact on permanent development, strain on infrastructure, and safety concerns. The state has also seen rising rates of homelessness, and faced challenges finding enough workers to fill job openings- often due to lack of places for those interested in moving to the region to work. As estimates of the amount of recoverable oil in the Bakken continue to climb, larger, out of state developers have begun to enter the region, looking to take advantage of what may be a longer, more sustained expansion. With 21,000 job openings currently unfilled statewide and the potential for tens of thousands of wells remaining to be drilled over the next three decades, the pressure for more housing growth to meet the needs of expanding businesses is likely to continue.

It makes sense that housing is following the people and money to North Dakota. But, it is unclear what this means in the bigger picture:

1. Is this housing meant to last, meaning that it is intended to be there 50 years from now when the oil boom may or may not be there? What happens in these communities if these new subdivisions are ghost towns in ten years?

2. Are there any sort of housing innovations in North Dakota? Since this is a unique situation, it seems like a ripe opportunity for some new ideas.

3. Is this housing industry money (real estate, builders, construction jobs) benefiting people in North Dakota or does this involve a lot of out-of-town/state businesses? Growth may often be viewed as solely a good thing but we can also ask who is benefiting from the housing boom.

Risk, reward as more complexity leads to new, more problems

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In discussing the recent fine levied about BP for the 2010 oil issue in the Gulf of Mexico, an interesting question can be raised: are events and problems like this simply inevitable given the growing complexity of society?

In 1984, a Yale University sociologist named Charles Perrow published a book called “Normal Accidents: Living with High-Risk Technologies.” He argued that as technologies become more complex, accidents become inevitable.

The more complex safety features that are built in, the more likely it is that something will go wrong. You not only add technical complexity more things to go wrong but you add a human element of complacency. The more often things don’t go wrong, the more likely it is that people think they won’t. The phrase for this is “normalization of deviance,” coined by Boston University sociologist Diane Vaughan, part of the team that examined the 1986 explosion of space shuttle Challenger.

“Normal accident” and “normalization of deviance” come to mind because 10 days ago, the oil company BP agreed to plead guilty to 12 felony and two misdemeanor criminal charges in connection with the 2010 explosion of the Deepwater Horizon drilling rig in the Gulf of Mexico. Eleven workers were killed and nearly 5 million barrels of oil (210 million gallons) poured into the Gulf over 87 days…

But it requires complex systems that will, at some point, fail. Politically, the government can only seek to explain those risks, try to minimize them with tough regulation and make sure those who take big risks have the means to redress inevitable failure.

If these sorts of events are inevitable given more complexity and activity (particularly in the field of drilling and extraction), how do we balance the risks and rewards of such activity? How much money and effort should be spent trying to minimize risky outcomes? This is a complex social question that involves a number of factors. Unfortunately, such discussions often happen after the fact rather than ahead of possible occurrences. This is what Nassim Taleb discusses in The Black Swan; we can do certain things to prepare for or at least think about known and unknown events. We shouldn’t be surprised that oil accidents happen and should have some idea of how to tackle the problem or make things better after the fact. A fine against the company is punitive but will it necessarily provide the solution to the consequences of the event or guarantee that no such event will happen in the future? Probably not.

At the same time, I wonder if such events are more difficult for us to understand today because we do have strong narratives of progress. Although it is not often stated this explicitly, we tend to think such problems can be eliminated through technology, science, and reason. Yet, complex systems have points of frailty. Perhaps technology hasn’t been tested in all circumstances. Perhaps unforeseen or unpredictable environmental or social forces arise. And, perhaps most of all, these systems tend to involve humans who make mistakes (unintentionally or intentionally). This doesn’t necessarily mean that we can’t strive for improvements but it also means we should keep in mind our limitations and the possible problems that might arise.

Should oil reserves be used to build developments in “glittering cities”?

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A commentator looking at Venezuela and the use of the money from its oil reserves suggests oil money should be spent on development in “glittering cities”:

While oil has ushered in spectacular construction projects for glittering Middle Eastern cities, including the world’s tallest building in Dubai and plans for branches of the Louvre and Guggenheim museums in Abu Dhabi, it’s brought relatively meager changes to Venezuela, which holds the world’s largest proven oil reserves.

Nearly 14 years after President Hugo Chavez took office, and despite the biggest oil bonanza in Venezuela’s history, there’s little outward sign of the nearly one trillion petrodollars that have flowed into the country.

It would be interesting to hear experts talk about whether the urban development projects in the Middle East are really the best use of money from natural resources. On one hand, the cities look impressive. Dubai is now on the map partly because of the Burj Kalifa. American universities and European museums want to locate in such new cities. The buildings are all so new and exciting. At least in appearance, these cities can now compete with the best big cities in the world. Going further, some would argue cities are the engines of innovation and growth so spending money there on infrastructure and facilities could go a long way. Similarly, glittering cities might the result of financial and economic power.

On the other hand, money spent on buildings and cities is money that could be spent on education, health care, the development of human capital, and sustainable projects that will outlive the oil reserves. Cities may only be as good as its workers and residents who can contribute to social, economic, and political life. Could glittering cities simply be facades that mask a host of underlying social ills papered over by mineral wealth? Money may be spent in urban centers and yet residents in slums and in more rural areas may be essentially forgotten. More broadly, does a city necessarily have to be “glittering” to be successful? Indeed, are there cities in the world that are clearly successful and offer a high standard of living but are not glittering such as the Scandinavian capitals?

Making Iranian oil as unpopular as the McMansion

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Here is an argument that compares McMansions to Iranian oil:

The United States would like to perform a magic trick, and our economy might depend on its success. The illusion? We want the world to think Iran’s oil is practically a Las Vegas McMansion.

Now, nobody is going to confuse a barrel of crude with a four story desert abode. Las Vegas houses have been widely shunned and practically unsellable. As a result, their prices have plummeted for the few remaining buyers. We want the same thing to happen to Iran’s oil: We want it to become so unpopular that Iran is forced to sell it only at a significant discount.

Perhaps it seems odd that the United State should hope Iran sells any of its oil. After all, we’re using sanctions to turn Tehran into a pariah within the global financial system, making it next to impossible for them to actually export crude, with the hope that it will force the country’s leaders to drop their nuclear program. But you can’t cut the world’s fifth largest oil producer entirely out of the global petroleum market and not expect prices to surge even more than they already have.

Instead, our government wants Iran to keep shipping oil to some of its major customers — but for cheap. “Policymakers need to ensure that they are not creating an embargo of Iranian oil but, instead, implementing these sanctions so that Iranian oil becomes a distressed asset,” Foundation for the Defense of Democracies Executive Director Mark Dubowitz, who advised Congress while it drafted the sanctions legislation, told Bloomberg today.

An unusual comparison. I can see the general point: we want Iranian oil to stay in the market but we don’t want Iran to benefit from being able to sell it for high prices. So we need Iranian oil to carry a stigma so that the price has to be dropped.

But the comparison breaks down if you think this through to the end. Most critics would argue that McMansions shouldn’t be built in the first place. At this point, we can’t stop Iran from producing oil but we can effect how it is sold, similar to the ways in which McMansions have publicly been denigrated. However, we have more control over McMansions: if we really wanted to as a country, we could ban the construction of McMansions (though this would most likely have to happen at the local level).This makes me wonder if McMansions could ever be considered okay or even popular. If I remember correctly, the New Urbanist authors of Suburban Nation suggested McMansions might be acceptable if they were modified slightly to fit into traditional looking neighborhoods that encouraged civic participation. This particular comparison ties the popularity of the McMansions to their price; so they would be acceptable as long as they are cheap? Perhaps then the housing could be considered affordable housing, not just the province of the wealthy or nouveau riche, even if critics are correct in suggesting that such houses are poorly built, poorly designed, and are often in sterile neighborhoods.