Archive for October, 2007

Bird Opera

Tuesday, October 30th, 2007

The Mapmaker’s Opera, Bea Gonzalez, 2005

This first novel by Spanish born Canadian Gonzalez is written in the form of a granddaughter recording tales told to her by her grandmother, Sofia. The tales were very operatic so the granddaughter decides to structure her recording in the form of an opera with acts. The granddaughter always believed the tales to be fictional but lately she is coming to discover that people and events in the tales really existed so she is left to wonder if the tales were real.

The novel is inevitably compared to works of Isabel Allende and Gabriel Garcia Marquez, but the style is better described as big and operatic rather than in the style of magical realism.

Seville Plaza de Espana Seville

A boy, Diego, grows up in his great uncles bookstore in Seville Spain in the late 19th Century. The bookstore caters to English tourists and Diego’s father gives the English tours of Seville in addition to working in the bookstore. An older Englishman, Senor Raleigh, lives in Seville and collect old maps. He introduces Diego to his maps and shows how maps illustrated the beliefs and myths of the time. Diego is gifted and starts drawing maps of his own. Then, one day, Diego comes accross an 1838 book by Audubon. Raleigh also collects ornithology books and soon Diego is imerged in the study and drawing and painting of birds. When Diego’s parents and great uncle die, Raleigh arranges for Diego to go to work for his American ornithology friend Nelson of the Biological Survey who is compiling a book on the birds of the Yucatan in Mexico.

Merida Plaza and Ruins
Merida Merida

Diego goes to Mexico where Nelson’s Mexican assistant takes him under wing teaching him about life in Mexico. Nelson is friends with a fellow bird lover, Don Roberto, an absentee owner of a small Henequen plantation and owner of a bookstore in Merida. Don Roberto has a 22 year old daughter, Sofia, who has the same Audubon book also loves birds and draws them. Sofia’s female relatives are desparate to find her a suitable (rich) boy to marry and save the family which is deep in debt to the large landowners.

Passinger Pigeons passenger pigeons

Diego and Sofia meet of course, but it is 1910, and a Mexican revolution with Emiliano Zapata in the south and Pancho Villa in the north is about to hit the Yucatan. Triggering events in the novel are the discovery of a pair of passenger pigeons, nearing extinction, held in the avary of a large plantation owner. Very entertaining.

Sex Greed Calamity

Thursday, October 25th, 2007

Das Kapital, Viken Berberian, 2007

On the following day, when fuller reports came in, the market began to slide off, but even then not as violently as it should. Knowing that nothing under the sun could stave off a substantial break I doubled up and sold five thousand shares…I wasn’t plunging recklessly. I was realy playing conservatively. There was nothing that anyone could do to undo the earthquake, was there? They couldn’t restore the crumbling buildings overnight, free, gratis, for nothing, could they? All the money in the world couldn’t help much in the next few hours, could it?…Edwin Lefevre Reminiscences of a Stock Operator

As the World Trade Center fell, I was thinking what this would do to the price of gold and the money my clients would make. Wall Street commodities trader from the Documentary The Corporation.

We call them Plutonomies, countries characterized by capitalist-friendly governments and tax regimes, constant technological innovation, financial innovation, the rule of law and patent protection, … some sort of social contract most… have bought into. Bloomburg article explaining Ajay Kapur’s term Plutonomy.

Marseille Marseille

This novel centers around a love triangle. The woman is French, living in Marseille and studying architecture. She is obsessed with the architecture and structural details of landmark buildings around the world. Her sometime lover is an unemployed Corsican lumberjack and she flirts via email and provides design details of landmarks with a New York Wall Street tycoon.

Corsica Corsica

The Greenspanism spouting tycoon and his company specializes in profiting from man made and natural disasters and the panic they engender. He only bets on falling markets. He has recently helped put a Corsican corrigated paper company into bankrupsy, hence the unemployed Corsican lumberjack. The Corsican, who has some experience in anarchist activities, approaches the tycoon for a job and together they plan a scheme blow up landmark buildings to create their own market panics. They blow the Tokyo Stock Exchange and other buildings but go too far when they blow up Gordon Brown. With details of how markets operate, mathematical analysis, and Gloomsburg market information, this one is informative, humorous, and a somehow tragic view of our new global world.

Kimono Trading TokyoStockExchange

Greenspan and Brown Greenspan Brown

Wordsmith of Africa

Monday, October 22nd, 2007

My Mother’s Lovers, Christopher Hope, 2006

Stinson 108 Pontoon
Stinson 108

This is the story of a white South African boy, born during WWII, to a single non-maternal mother nearly widowed by three South African Air Force pilots. The mother is 6’2″ tall, a bush pilot and big game hunter, boxer of Ernest Hemingway, friend of Albert Schweitzer, colorblind and the collector of countless “uncles”, with a wanderlust that takes her flying throughout Africa leaving the son abandoned in a Johannesburg suburb.

Like some great schooner she skimmed over life, over lovers, over family, over Africa… She had simply sailed over the top of it, and so made good her escape… disdaining even to regard colour; she did Africa without doing race.

Flying Station Wagon
Stinson 108

The son develops a wanderlust of his own when he grows up and he travels throughout Asia selling air conditioners.

On his grandfather’s decision to stay in South Africa rather than return to Ireland:

After blowing up half the Transvaal with his dynamite (mining and sabotage), he reckoned he’d made enough of an impression on the place to call it home.

Johannesburg Gold Mine

On the English who colonized South Africa:

‘You lot are bloody useless, can’t find work, can’t feed yourselves, can’t cross the street unaided. So here’s a free passage to Africa – where you can pretend to be important.’ So off we went, and the rest was history. We became marooned ex-sailors or failed farmers in a place where we were not prepared to work, or kill, with sufficient energy. We were never even a tribe: the best we managed was a kind of B-team. The sort of people who’d rather be murdered in our beds than make them ourselves.

On violence in South Africa:

But there is an old tradition in my country that some important truths can also be delivered by bullet. In essence it goes like this; if you come across something or someone you don’t like, then you shout; if that doesn’t work, then break something; and if the stupid bastards still refuse to be reasonable, start shooting.

About rule under Apartheid:

The guys in far-away Pretoria who ran our lives were just another gang pretending to be a government.

On South African intellectuals:

Generally, our intellectuals lived by proxy; they were like long-range radio receivers; their inspiration, their books, their films, and their language, their Marx and Fanon and Gramsci, their New Statesman and their African Communist, their pamphlets, posters, slogans and songs came from far away, picked up as faint signals mixed in with lots of static…If ideas didn’t come from there they were not worth knowing…

On the difference between colonialism in Africa and Asia:

The Portuguese, the Chinese, the Dutch, the British in Malaysia were powerful, yes, but somehow never insistent, and so the poison of their presence was less toxic than it was in Africa; from the peaks of their pride they looked down on the people of Asia but never did they assume they did not exist. In Africa they saw nothing human; they stripped it of its people, polished them off, not just with guns and germs but also by truly and honestly doubting they ever were truly alive, and so they became nothing.

On the Africanization of names after independence:

So the president, Joe Desire Mobutu, became ‘Mobuto Sese Seko Kuku NgBendu wa ZaBanga’ which roughly translates into ‘the all-powerful warrior who, because of his inflexible will to win, will go from conquest to conquest leaving fire in his wake.’

Do you know what Veseveete means in Herero? It means “Let them die for the good of the liberation…” Good revolutionaries always toss their kids into the bonfires of their good intentions.

Johannesburg Skyline

The son returns to South Africa as his mother, then in her eighties, is dying of cancer. In the rest of the novel, we are given a tour of post-apartheid South Africa. On AIDs in South Africa and the new rulers who think that Anti-retro viral (ARV) drugs are a plot from the West to kill Africans:

We were watching death by ideology. Koosie was dying, persisting in saying that he was not ill, in line with party dogma.


Monday, October 15th, 2007

The Age of Turbulence, Alan Greenspan, 2007

Memoirs of a Naive City Kid
Confessions of a Naked Bad Numbers Ideologue Zealot
Pray with us to the Invisible Hand that Steadies the Economy

Was there something about George Washington High School where Alan Greenspan and Henry Kissinger were classmates that produces ethically challenged citizens with zero empathy?

Enrolled in a PhD program at Columbia in 1950, Greenspan apparently managed to navigate the campus without meeting a single liberal professor. His doctoral adviser Arthur Burns admonished his students “Excess government spending causes inflation.” Greenspan learned econometrics which he treats like a religion from Jacob Wolfowitz, father of Paul, architect of the new Iraq and discredited former president of the World Bank. Not satisfied with his conservative professors in the liberal hotbed that was Columbia see, Greenspan develops a thirty year admiration for Ayn Rand and still calls himself a libertarian Republican. Greenspan was sorry that Soviet hating Rand did not live to see the economic collapse of the Soviet Union. Greeenspans spends many pages gloating over the demise of central planning on her behalf. He particularly enjoyed Putin’s economic adviser wanting to talk to Greenspan about Rand.

On the origins of Greenspan’s notorious Fedspeak, he offers this book inscription written by his father:

May this my initial effort with constant thought of you branch out into an endless chain of similar efforts so that at your maturity you may look back and endeavor to interpret the reasoning behind these logical forecasts and begin a like work of your own.

The skill is obviously inherited. On his honeymoon:

Venice, I realize is the antithesis of creative destruction. It exists to conserve and appreciate a past, not create a future… The city caters to a deep human need for stability and permanence as well as beauty and romance… Silicon Valley is without question an exciting place to work, but its allure as a honeymoon destination has, I would guess, thus far gone largely unrecognized.

Chinese learn creative destruction during .com bust
Creative Destruction

He spends a lot of time talking about creative destruction as a driving force for economic expansion. It is a little like Blood and Guts Patton’s grunt’s comment; “Yeah, his guts, my blood.” The costs of creative destruction are largely borne by the worker, the little guy who gets crushed in the process. Yet Greenspan is highly skeptical of social safety nets to protect the falling workers. He talks about cultural differences where Germany, France, Italy, and Japan are more sensitive to the plight of the workers. He seems proud that Americans can be so indifferent to suffering in the greater interest of economic expansion.

Greenspan becomes FED Chairman 3 days before Black Monday. Guess he didn’t have time to perfect his Fedspeak yet.
Black Monday

He formed a close working relationship with Clinton’s Bob Rubin and Larry Summers and the Clinton era resulted in record budget surpluses projected to increase indefinitely into the future. By 2006, the national debt would be totally paid off. Greenspan and Bush’s about to be fired treasury secretary Paul O’Neill worried about what to do with the huge surplus. It is strange that someone who can’t figure out what to do with the government surplus strongly recommends private social security accounts where every busy American gets to figure out how to invest his surplus (retirement funds), especially since the retiree won’t be able to borrow his way out of a fiscal mess and will starve if they guess wrong.

Evidence of his incredible political (and social) naivety is given in this summation from the New York Times in 2001 concerning his testimony to Congress:

Just as his hedged backing of Mr. Clinton’s plan provided invaluable political cover… as [the Democrats] voted to increase taxes, his guarded endorsement of a tax cut today gave new impetus to the efforts by Republicans to push thought the biggest tax cut since the Reagan administration.

National Debt

A monumental failure of econometric measurement and projection was about to occur. Tax Receipts for 2002 shrunk from estimates by $376 billion. Of this only $75 billion could be attributed to Bush tax cuts. Most of the rest was due to blown estimates of revenue from capital gains as stocks went south taking stock options with them. A projected debt to the public of $1.2 trillion under Bush policies, by 2006, turned into a debt of $4.8 trillion. Oops! That’s a 400% projection error! No apologies.

Most of what supported consumer spending through this period was housing. Greenspan lauds the increase in home ownership to 69% in 2006 due to low mortgage interest rates while seemingly overlooking the sub prime variable rate mortgages that from the very beginning were ticking time bombs. So much for an econometrician’s forecasting ability.

Shenzhen Built by FDI

Greenspan spends several chapters gloating over the failures of socialism in Europe and India and the collapse of central planning in the Soviet Union and Eastern Europe. He spends several chapters on China, the Asian Tigers, and India, where economic progress is almost all due to direct foreign direct investment (FDI) which requires special zones and protection of property rights (profits) whereby foreign capital can take advantage of local low wages. Vietnam is the current record holder of highest ratio of FDI to GPD at 61%. India is 6%, Pakistan is 9% China is 14%. The Asian economic miracle is all about foreign capital seeking cheap labor.

His Latin American chapter is largely a lament that populism which led to such reforms as nationalized oil in Mexico in the 30’s and in Venezuela today has had such dire consequences throughout the region. Despite huge disparities in wealth between the few and the many, capitalism should be allowed to play out for the good growth of the economy. He forgot to mention that a rising tide raises all boats (and drowns the vast majority of the population without life rafts). Fedspeak apparently doesn’t allow mantra spouting.

He also talks a lot about a phenomenon known as the Dutch disease whereby any country with a valuable natural resource such as gold, diamonds, or oil has its economy skewed as a result as is economically harmed by the resulting distortions. The affected country’s foreign exchange value of its currency is driven up making other exports less competitive. Even Britain was affected by North Sea oil in this way.

Here are highlights from his more misguided pronouncements and predictions (I’m 81. I was paid $8 million to write this. What do I care.)

On Health Care and Medicare He has clearly not read The Health Care Mess. Based on state studies, it is estimated that 25% of health care costs go directly to HMOs that produce no health care. So 4% of GDP may go directly to an administrative function of no benefit to the health of the nation and even worse that inhibits access to health care. If this is correct, then HMOs consume the same portion of our wealth as our entire military industrial complex, that is, defense. Greenspan, the numbers man with 18 years unique access to detailed actual numbers, should know this but doesn’t talk about it. Instead:
* The cost of health care is being driven up by technology (No supporting evidence.)
*The Boomers will bury the Medicare program. It will need extensive gutting with 100% copays (HMOs pocket the government subsidy and the patient pays everything!)
On Increased Income and Wealth Disparity
* Hope that growing dissatisfaction doesn’t lead to populism and policies that might ruin the economy.
* Import more educated work force from abroad who will be grateful for their pittance pay.
On Energy from Oil He obviously has not read Twilight of Oil
* Oil production will peak in 2050. (Sorry, it has already peaked)
* Speculators control of oil supplies has grown sixfold in the last 2 years. Speculators stabilize supply and prices. (You’re kidding?)
* A stable Iraq will produce large quantities of oil. (Yeah, right!)
* OPEC has 3/4 of the world’s oil reserves led by Saudi Arabia’s 260 billion barrel reserve. (Reserves are mythical.)
* Exploration will find more oil. (The last major finds were made in 1969. Clinton bit on this one.)
* Domestic oil producers should invest in refineries (Why, when oil is running out?)
* We will never ween ourselves of oil. (We will when we run out.)
On Alternate Energy He has obviously not read Oil and Alternatives
* Build more nuclear power plants (Ignore the shortage of nuclear fuel.)
* Wind and solar is good only for small scale deployment. (No evidence.)
* The market is buying fuel efficient cars (Have you visited an SUV infested shopping mall parking lot lately?)
* Hybrids are too quiet. (He recommends adding big engine sound effects.)

Windmill Dike Windmill Dike

On Global Warming
* Build dikes. The Dutch have done it for years. (He’s not kidding!)
* Rename Glacier Park
* We will never reduce greenhouse gas emissions. (Live or die by those fossil fuels.)
* Hurricane Katrina disrupted our oil supply.

Enron Award 2001 Enron Logo

Greenspan was awarded the Enron Prize in 2001 as the company collapsed. Having served on many board of directors for fortune 500 companies, he is not at all critical of interlocking directors, CEO appointed board members, the insider racket that is modern corporate top management, only of management that can’t make a profit.

On Corporate Governance
* If Corporations make huge profits why shouldn’t CEO’s get huge rewards.
* Sarbanes-Oxley that makes the CEO liable for accounting fraud goes too far.
* Whistle blowers are the best way to expose bad governance. (And ruin the whistle blower)
* The best way to remove bad management is the corporate takeover, probably hostile.

Greenspan is a throwback with his Adam Smith invisible hand and Ayn Rand brand of liberalism. The invisible hand is his crutch for explaining all the things he doesn’t understand and all the monetary policy moves that failed during Paul Volcker’s and Greenspan’s terms as FED chairmen. Volcker tried everything to control inflation and at the end we still had speculators in Miami buying condominiums with 18% mortgages and 12% savings accounts. When inflation and interest finally dropped, the Savings and Loan industry collapsed and Black Monday happened.

When Long-Term Capital Management was collapsing in 1998 Greenspan and the Fed along with Rubin and Summers called on Wall Street giants to rescue the ailing hedge fund monster. When do you sit back and watch the invisible hand at work like the Savings and Loan collapse and when do you step in to intervene in the madness? For evidence that the global economy may be shakier than we think see the Shaky Globe.

Greenspan doesn’t discuss Republican runaway spending and record deficits as playing a role in leveling the market plunge after the dot com bust. Eventually, without any apparent help from monetary or government policy, the invisible hand of the benevolent father reached down to rescue and stabilize the economy. If you can’t believe your numbers and models and your political party abandons your principles, you have to believe something. You can be an idealogue where mere facts don’t matter, or you can be an econometric numbers man. You can’t be both and judging from this book, Greenspan chose to be an idealogue.

Adam smith himself only mentions the invisible hand three times but true believer Greenspan calls on it at least seven times in his book, almost like a prayer.

The modern libertarian looks, not to Adam Smith and Ayn Rand for inspiration but to John Nash and his disciples. The game theorists devised artificial adversarial games that could be analyzed mathematically. They found that the outcomes of their games were maximized when every player acted according to their individual self interest. Game theory was quickly adopted by libertarians and applied to economics. Charles Wilson old “What’s good for General Motors is good for the country.” was transformed by game theory libertarians into “What’s good for a country’s greedy corporate managers is good for the country.” Individual greed benefits everyone. For a frightening look at the effects of metricizing everything and applying the adversarial game theory approach pioneered by John Nash and first applied to economics see The Trap.

Greenspan is someone who made numbers almost a religion. How could he get so many numbers so wrong for so long? And why are so many pronouncements without statistical support? And why aren’t the reviews calling him on his errors and omissions? How could he be so audacious, with his track record, as to predict the future which he does in the final chapter The Delphic Future? This oracle is blind.

Asian Secrets

Thursday, October 11th, 2007

Certainty, Madeleine Thein, 2006

Bike Path Vancouver bike paths

Philosophy, (Bertrand) Russel had said, was a means to teach one how to live without certainty, and yet without being paralyzed by hesitation.

Vancouver Vancouver

An excellant first novel is a complex interwoven world ranging epoch of families over several generations compacted into a neat 300 pages. Particularly well done is the avoidance of referring to individual character’s race or group. Only by inference do we assume that central characters are Chinese, Malay, Canadian, or Dutch.
Sandakan memorial

Included are Sandakan, British North Borneo, a small rubber plantation sea port, capital of Sabah, and site of a notorious Japanese prisoner of war camp, Hong Kong, site of another Japanese prisoner of war camp where a British soldier kept an encrypted diary, Jakarta, Melbourne, Vancouver, the Netherlands.

Jakarta Jakarta

Characters are a Sandakan rubber plantation manager, his wife and son and the son’s best friend, a girl who becomes a talented fisherman and later becomes a photography shop assistant in Jakarta. The son goes to university in Melbourne where he meets the daughter of a Kowloon restauranter. They marry and move to Vancouver. Their daughter becomes a radio documentary maker and marries a Canadian pulminary disease specialist. The novel explores the costs of surviving the war and Japanese occupation, the end of colonial rule, both British and Dutch, in the region, the resulting family secrets, and the efforts of the younger generation to find those secrets. Also an exploration of death and loss.

Ysbrechtum Cottage Ysbrechtum House

Oil Twilight

Thursday, October 4th, 2007

Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, Matthew R. Simmons, 2005

Here’s a sleeper only discovered after watching the recent Sundance channel apocalyptic documentary A Crude Awakening: the Oil Crash which heavily featured comments by energy expert Matthew Simmons.

A Crude Awakening makes some startling revelations about alternate energy sources. Hydrogen fuel is 50 years away from solving the problems of production, storage, and distribution. Hydrogen today requires five times the energy to produce that it supplies. If all automobiles in the world were replaced by hybids tomorrow, the oil supply would extend another two years at best. Replacing current electric generation facilities with nuclear power would require the building of 10,000 nuclear generators that would run out of fuel in 10 years, far sooner than oil. Biofuels have the potential to replace only a negligible quantity of oil. The apocalyptic documentary points out that we are now dependent on oil not only for power, transportation, and heat, but for the very food supply needed (chemical fertilizers) to support our exploding population. Ironically, without oil, the crops needed to produce biofuel cannot be grown. Solar energy is virtually the only viable alternative, but solar energy will require massive investments in research to make it viable on a large scale. Today solar energy is half the efficiency of oil but will soon be as efficient to produce. Wind power is also economically viable but not on a large scale.

Without oil we may be reduced to the population and lifestyles that existed at the beginning of the 20th Century. But evolution only goes one way; forward. What will life look like without oil? If global warming doesn’t get us first, we’re about to find out.

A Crude Awakening openly accuses the Bush administrations of starting a very expensive war in Iraq simply to assure access to a continuing supply of Middle East oil. Oil at any cost. Future and continuing oil wars as oil becomes scarce are one of the forecasts of the documentary.

We have now come to understand that Sadam’s weapons cache was a figment of our brilliant intelligence imaginations. To the people who got us into the Iraq war, the important intelligence probably did not concern the mythical weapons at all but concerned the equally mythical 115 billion barrel proven Iraqi oil reserve. Yet the Kirkuk oil field was discovered in 1927 and is now 78 years old, poorly maintained, and damaged repeatedly by sabotage. It is very unlikely there is anything approaching 115 billion barrels of proven reserve oil in Iraq. Evidence from next door Kuwait is that the world’s best technology from Chevron-Texaco has been unable to revive production in old fields.

Matthew R. Simmons is an oil expert and an industry investment insider. His book does not deal with the environmental impact of oil consumption such as global warming see and here. In fact his only mention of environmentalists is to note their impact on U.S. oil exploration on both coasts and Alaska. No, here is an expert calling attention to the failure of other so called energy experts to understand much less predict the future of oil exploration, production, and demand beginning with the start of big oil after WWII. The failures of the experts to understand oil rivals the failures of the CIA to understand the world over the same period.

King Saud
Abd al-`Azīz Āl Sa`ūd 1876-1953 First King of Saudi Arabia father of all kings

In the 1930’s oil sold at the unbelievable price of 10 cents a barrel. When oil stabilized at around $1 a barrel after WWII, experts predicted worldwide economic collapse if oil ever went above this level. The brief OPEC oil embargo of 1973 sent prices to $12 from which they continued to climb through the Iranian Revolution in 1979 to peak at $40 in 1980 after which it dropped into a $12-$20 range until 1998. Prices are now setting records above $80 a barrel. None of this was predicted and the impact on the world economy is unknown. So much for the experts.

If anything, we might conclude that oil is such a cheap energy source compared to anything else that demand is almost perfectly elastic, that is, demand continues to rise and is almost completely insensitive to the price. In the perhaps near future, not only price but armed conflict and force will determine who gets the remaining shrinking supply.

Pilgrims to Mecca were the major source of Saudi revenue before oil

This book focuses on oil reserves, particularly in Saudi Arabia and predicts a rapid decline in worldwide oil production that no price can remedy. No major oil discoveries have been made since 1969 when the Prudhoe Bay, Caspian Sea, and North Sea deposits were discovered. With modern exploration technologies including seismic surveying and computer modeling Simmons argues it is unlikely that there are large undiscovered reserves left somewhere in the world.

Saudi Arabia gets most of its oil from six super-giant oilfields led by Ghawar at 174 miles long and 16 miles wide by far the largest oil field in the world which has alone produced 55 billion barrels of oil to date. To tap these enormous super-giants, very few wells were drilled. To increase or decrease production, operators simply turned the values of these few wells. The American operators, knowing they would soon lose control of the fields to the Saudis greatly increased production starting about 1970. The Saudis took control of oil in 1979, producing through their giant national Saudi Aramco, the largest oil company in the world. Saudi Aramco is a world class company that still employs 8,000 western petroleum experts. Their technology is state of the art. Unfortunately, in 1982, Aramco and the oil ministry made the decision to keep production and reserves secret. Other OPEC members followed and today our knowledge of true production and reserves is limited.

As an example of the unintended consequences of this secrecy, in 1997 OPEC announced increases in quota for all members. A market myth grew to fill the data vacuum created by production secrecy that there was a glut of oil. By 1999, accompanied by an Economist cover article “Drowning in Oil”, prices plummeted. The resulting myths to explain the glut included secret oil reserves and lost tankers wandering the oceans. Oil experts arose everywhere including a company Petrologistics claiming to have spies in every oil port counting the movement of tankers. Petrologistics was one guy working out of his apartment over a bakery in Geneva.

We know that Saudi reserves, said to be 110 billion barrels in 1978 when American oil companies handed over control to Aramco, grew to 260 billion barrels by 1988. These figures have no substantiating details and were probably woven out of whole cloth. During this period, from 1978 to 1988 46 billion barrels had been produced. Simmons believes these almost 200 billion barrels of new proven oil reserves are imaginary. Simmons also notes these supposed reserve discoveries were all made before the technological breakthroughs of 3D seismic analysis. Of Aramco and Saudi oil secrecy Simmons notes:

History has frequently shown that once secrecy envelops the culture of either a company or a country, those most surprised when the truth comes out are often the insiders who created the secrets in the first place. Such surprises may well have occurred within the ranks of Aramco and even at Saudi Arabia’s Petroleum Ministry.

Don’t smoke your own dope!


To get to the truth of Saudi oil production and reserves, Simmons made a close study of more than 200 technical papers published by the Society of Petroleum Engineers (SPE). Many of these papers were written by Aramco scientists and engineers and Simmons wondered why they were allowed to be published when careful reading would contradict official oil statements. I suspect the country is proud of this world leading company and feels its own prestige is enhanced by allowing its technologists to contribute and attend conferences.

You would have to be a specialist to understand most of these papers although Simmons does his best to educate us in the fundamentals of oil production and geology and to summarize and translate the technical papers but its still tough going unless you have a background in petroleum and geology. Greatly simplified, oil is found underground under high pressure. The pressure is sufficient to force the oil to the surface through vertical wells. If oil is overproduced, the pressure drops and there is a risk of oil being lost. To maintain pressure, water is injected via water injection wells. In 1956 40,000 barrels of water per day were being injected. By 1998 12 billion barrels a day were being injected into the two biggest fields. The initial water came from salt water aquifers. Starting in the 70s salt water from the Persian Gulf was piped to the fields for injection. As oil is depleted, more and more water is mixed with the oil extracted. The ratio of oil to water varies but recently about 1/3 has been water. Special processing is required to remove the salt water from the oil. To maintain production Aramco has done extensive horizontal drilling out from the main vertical wells. Care must be taken not to drill through fissures which might water out the well. Papers also describe insoluble tar layers encountered and studies of the effects of changing pressure on seismic activities (narrowing or widening of fissures). These 200 papers, covering research and events over all the major oil fields of Saudi Arabia paint a picture of maturing fields and ever increasing problems trying just to maintain production.

These papers report problems with production consistent with aging oil fields near the end of their productive life. They wrestle with the major problems: When will the giant field water out leaving billions of barrels of oil still in place? Can new technologies recover the oil left behind? What would be the cost of new technology? Can a few remaining years be stretched to a few decades? Simmons major conclusions rely on two factors known to be true outside of secret OPEC and Russia:

First, Eight super giant oilfields including Prudhoe Bay fields and North Seas fields have exhibited the same lifetime production pattern of increased production followed by the peak followed by a decline toward zero. The time frame of useful productivity is typically twenty years with the sole exception of Slaughter in Texas that has lasted sixty years and is still producing. Typical are reserve estimates from Prudhoe Bay. Aramco’s super giant fields have been in production for fifty years.

Prudhoe Bay

Second, no giant or super giant oil fields have been discovered since 1969 despite improved exploration technology. That is long enough with enough serious effort to project that the era of discovering giant oil fields is past. These last discovered giants all quickly reached their maximum production and then plummeted to enter secondary or tertiary production phases which is much more expensive and produces far less oil. Simmons believes Saudi and other Middle East production is in decline or soon will be.

The Saudis themselves have periodically increased production to stabilize worldwide oil supplies, for example after the Iranian revolution and resulting drop in Iranian production, and during Iraq’s invasion of Kuwait, the gulf war, and oil disruption in Kuwait. Simmons gives elaborate explanations how increased production from Saudis super giants has damaged the fields, increasing the difficulty of future extraction, and reducing the amount of oil that will ever be extracted from these fields. This is called the risk of overproduction.

Simmons does not believe Aramco can increase production to meet further shortfalls in production elsewhere but most experts naively believe the Saudis can produce any amount they choose. Oil production in much of the world, including the U.S. where production peaked in 1970 is in decline. Where will the oil come from to meet increased demand even in the next few years? Simmons doesn’t know.

Simmons also points to the social impact of oil on producing countries. There were 4 million Saudis in 1970 when the price of oil starting climbing rapidly. The Saudis were able to greatly improve the standard of living for their citizens with subsidized or free social services. Unfortunately, their Wahhabist brand of Islam encouraged birth with an average of 6.3 children per household resulting in a population explosion approaching 30 million today. Even at today’s prices and levels of production oil revenue per Saudi is one fifth what it was in 1970. Oil and petrochemicals dominate the Saudi economy and neither require much labor. Without developing other sources of employment, the country is left with massive unemployment and the few jobs that exist are often taken by foreign nationals who are willing to work at menial jobs Saudis are unwilling to take. But even sophisticated Norway, huge beneficiary of North Sea oil, will need to plan carefully for when the oil runs out.


Monday, October 1st, 2007

The Solitude of Thomas Cave, Georgina Harding, 2007


This is a novel exploring what happens when a man is faced with his own solitude. Set in the early 1600’s, a whaling man bets his shipmates that he can survive alone through the winter on a small island off Greenland. The novel is written with two voices, the solitary man and a young whaler on his first whaling expedition who is befriended by the older solitary whaler. We live through the winter with the whaler as he wrestles with his own demons and memories. Then, years later we find the young whaler, now married with a family, curious about what happened to the solitary whaler after his experience in the north. A poetic and vivid look at man, solitude, and man’s impact of pristine wilderness.

Greenland Lakes