Wednesday, April 23, 2008

A word to those who think that Big Oil is Evil Incarnate

If you live and/or work in and around Houston, your livelihood is directly proportional to the health and profits of EvilBushCo Big Oil. But even if you do not live and work in Houston, if you have money invested anywhere, odds are, you indirectly own quite a bit of energy company stock. Just like all the investment houses that figured they were fine because they didn't invest in sub-prime mortgages themselves, only to discover that the people THEY invested in DID, or they had invested in someone ELSE that did. THAT is how less than 10% of the mortgage market affected over 90% of the investment markets and caused the meltdown of Bear Stearns and others.

And even if you kept ALL of your money in a mattress somewhere, you still benefit from the O&G biz indirectly because every single one of your customers here in town (and you!) work for oil and gas companies either directly or indirectly. Even the clerk at the local Wally World works for big oil because her CUSTOMERS either work for big oil directly, or THEIR customers do, or THEIR customers do. Well over 75% of ALL REVENUE GENERATED in Houston comes from the oil and gas business. Imagine what Houston would look like if 75% of the people in this town were out of work. Would YOU have any customers that could afford your services if that happened? Could YOU keep your lights on? Could your employer? Think LONG and HARD about that.

I don't have to work real hard to imagine that, I lived through it in 1982, and only about 1/3 to 1/2 of the O&G biz shut it's doors then, because as bad as it was (and it was BAD!) people STILL needed gasoline and petrochemicals, so the biz didn't completely dry up, but on the flip side, back then even MORE of Houston's economy was based on O&G, closer to 90%. I try hard to block those memories out to be honest.

Put yourself in the shoes of "big oil" for a moment.

You have just spent close to a billion dollars bidding on a O&G lease offshore of Nigeria with little more to go on than a very low quality 2D preliminary seismic survey supplied by the Nigerian Government that if you hold your head just so, and squint just right, hints that there MIGHT, JUST MIGHT, be oil and gas there. You spend another billion on a more detailed and accurate survey that confirms the previous findings, in fact you got really lucky! There is a lot more oil and gas there than you thought, it could easily have been a lot less, or even none. And again, this is all based on a seismic survey that could still be wrong. Along the way you've had to grease damned near every palm in the Nigerian government at least once. This lease is in deep water on the edge of the continental shelf. There are no pipelines anywhere near there. You are going to have to spend close to another 15 billion to design and build pipeline infrastructure, and design and build the subsea equipment, drill the wells and complete them, and connect everything up and make sure everything works as planned (it rarely does work exactly as planned, shit happens.). You have to constantly inject methanol and glycol into the pipeline to keep it from freezing up with methane hydrates (natural gas in pores of water ice) and paraffin (wax) due to the temperature and pressure at that depth, and you can never let the pipeline ever shut down without purging it or it will freeze up solid. You've got to constantly contend with pirates boarding your vessels and holding your people hostage. You've got to constantly contend with rebels trying to tap into your onshore pipelines and causing massive fires and damage. You've constantly got to grease the palms of every minor government official to keep things going. You've got to constantly worry that a coup will happen and all of your investment will be nationalized by some pissant Marxist thug with delusions of adequacy and you will lose the TENS of BILLIONS of dollars you've invested over the last 10-15 years in one fell swoop.

Now multiply that by hundreds of similar long term investments in garden spots all over the third (and in some cases, even FOURTH) world in various stages of development.

Then on top of that the US government takes 26 cents out of every dollar of your product sold while you make about 15-18 cents, and the government complains that you are making too much money on the product and calls you to testify in front of congress. But of course since this is really so that they can show they are “doing something” so instead of allowing you to try to state your case and explain why they are wrong, they castigate you and make you sit there and take it.

Were you in that position, I think your answer to Nancy Pelosi would be a lot less printable than Exxon-Mobil's has been. I know mine would have involved her performing physiological and scatological impossibilities upon herself on the floor of the House in front of God and everybody. And that would have been after I cooled down and chose my words carefully. My initial reaction would probably have involved rushing the podium and pummeling her to a pulp on national TV with a bushel of corn, a gallon jug of ethanol, and a carbon offset.


Blogger Karen said...

Really well written post. My husband is an engineer in the evil oil drilling industry. We lived through the fun of the mid-80's, too and I'd like to know just where all the concern was for us as we scrambled to find employment and pay the bills. Oh yeah, there was none.

April 23, 2008 7:37 PM  
Anonymous Anonymous said...

You should call yourself: "Cool-hand-Luke"

It took cahonnies to write that, and it make me wanta puke on the rat infested politicals in Austin and DC....

April 23, 2008 8:40 PM  
Blogger Rorschach said...

April 23, 2008 8:45 PM  
Anonymous Anonymous said...

We should be drilling where there are proven U.S. reserves (ANWR, Gulf of Mexico, etc) instead of crackpot 3rd world countries that use profits to do evil.

We should be increasing our refining capacity.

We should stop wasting money by giving money to farmers to grow corn for fuel.

If we are still giving large tax breaks to the oil biz, we should cut those back. I'm not saying we should tax them more, but I believe they have enough profits to fund their own R&D.

I also believe they should expand their IT departments and hire smart, qualified consultants as myself. :)


April 24, 2008 7:51 AM  

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