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Laughable is an appropriate word that well describes the political ass-covering going on in Congress regarding recently reported record quarterly profits of the major oil companies. The behaviour of Congress and the attendant reports come in the wake of nation-wide price spikes for gasoline after Katrina and Rita took out a significant fraction of oil and gas production facilities in the Gulf coast, something that only seemed to bump oil industry profits further.

Now, with home heating oil and natural gas prices threatening to put the financial squeeze on middle and low income households this winter, senators are suddenly adopting "concern" about the profits of an industry that Congress has done nothing but coddle for decades. This putative concern is also difficult to reconcile with recent proposals to cut back Medicaid, Medicare and educational programs as these same senators struggle for ways to stem fiscal bleeding they, themselves, are entirely responsible for. Of course, the senators' real concern lie in their re-election prospects next fall as they can well imagine that Americans won't soon forget the prices they will have paid to keep themselves warm this coming winter. This winter, many Americans may face their very own oil-for-food scandal. In reality, Americans and their representatives have no one to blame but themselves for this situation, for the oil industry has simply been doing what it does best: working the system for maximal profit.

Various ideas are floating around the empty spaces of semi-evacuated heads in Congress as senators propose windfall profit taxes, something that is higly unlikely given this Congress' alacrity for doing nothing but handing out tax breaks and corporate welfare to American oil companies. The recent "energy" bill is demonstration enough of that (see The BHC, Vol. 51, Energy Porn), wherein Congress saw fit to dole out $2 billion to oil industry leaders for funding oil reclamation research, something the industry itself should be doing with those swelling profits. Even more amusingly, Iowan Republican, Charles Grassley pleaded with the oil industry to share the profits and donate some to help low-income families with energy costs this winter. With his ass on the line next fall in the cold, cold state of Iowa, free-market Republican Mr. Grassely seems now to be taking some cues from Hugo Chavez. Though Grassely says he's opposed to any tax on profits, he just wants oil companies to be nice.

We are watching a performance by this Senate, which, by any measure, would be described as remarkable. This banal band of brothers hands out billions to an already hyper-profitable oil industry -- an industry that returns the favour with $180 million in campaign contributions to both parties -- spins around three times and asks Big Oil to please give some of those prodigious profits back to the less well off who may not be able to afford those profitable petroleum products while breathlessly proposing cuts to Medicare, Medicaid, food stamps and educational programs for those same said people. Craven, thy name is Congress.

Industry leaders are quick to defend their largesse and claim their profits are necessary to keep the go-juice flowing. This may be true, in part, but ExxonMobil chairman Lee Raymond also claims that any windfall profits tax is necessarily bad and that "our ability and willingness to invest is going to diminish." Diminish from what, exactly? A recent report by the International Energy Agency (IEA) strongly criticizes the oil industry for enjoying their profits and ignoring reinvestment for decades:

the world has seen "years of under-investment" in both oil production and the refinery sector.

The organisation estimates that the global oil industry now needs to invest $20.3 trillion (£12 trillion) in fresh facilities by 2030, or else the wider global economy could suffer.

So just what has the oil industry been doing with these bountiful profits? While it might be nice to imagine them developing alternative, i.e. non-petroleum based, energy sources with a long view to the future, it is well known that that has not been the case. The industry has been lapping up profits and corporate welfare while steadfastly refusing to seriously consider a future without oil. The above cited IEA report stipulates quite clearly that the world has oil supplies to 2030. That such a day of reckoning would come is no surprise to anyone. But the behaviour of the oil industry suffering from a profitable inertia, a Congress unwilling to take the obvious stand and an American public too used to cheap and comfortable motoring, have all managed to keep stride in a lazy stroll toward the dead end of an economy built by cheap oil.

Unfortunately even the IEA seems oblivious to what is obvious to many: the oil is running out and mere "re-investment" in production facilities is unlikely to stave off the inevitable. IEA projects that Saudia Arabia will have to increase production from the current 10 million bbl/day to 18 million bbl/day over the next twenty years just to match increasing demand. This is delusional. Despite reassuring bluster, Saudi Arabia has no apparent ability to do this and right now it looks to some like Saudi oil production is near peak as they pump millions of gallons of sea water into the Ghawar oil field every day just to keep it viable.

Not only that, but the entire Ghawar field could collapse if current extraction rates are maintained, let alone increased. Geologists are not entirely sure what might happen to the reservoir as more and more water is pumped in but the geological stress induced by a maximal pump rate can potentially damage the structure of the oil field. Collapse of the entire geologic structure is possible and if that happens, the field is finished. Ghawar accounts for half of all Saudi production.

Bank of Montreal analyst Don Coxe informs us that Ghawar, Saudi Arabia's and the world's largest oil field, is in serious decline and

the combination of the news that there's no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert's Peak has arrived in Saudi Arabia.

Coxe dismisses Saudi Aramco CEO Abd Allah Jumaa's claims that the Saudis can increase capacity to 15 million bbl/day; they have not even met previous and modest production increase promises. In fact, existing Saudi fields generally suffer a 5% to 12% decline in annual production and they have a difficult time just keeping up with this.

Another metric that indicates declining ability to match production with demand is the "spare capacity." Oil analyst L. Bruce Lanni of AG Edwards says,

The world has anywhere from 500,000 to 1.5 million barrels a day of spare capacity -- the bulk of it in Saudi Arabia -- that could be tapped instantly to offset a temporary loss of supply. This is an exceptionally low ratio for an 81.4 million-barrel-per-day supply system and is well below the 10-year average of 5.0 million barrels per day.

This is grim news for a world oil demand that is expected to rise by 50% to 120 million bbl/day by 2030.

Even if Saudi Arabia can match its promise of 18 million bbl/day every other producer will have to do the same and this seems unlikely. And right now, no other current producers seem to have the capacity to fill the expected void. This means that as oil prices continue to rise under demand pressure, the price, at some point, becomes a blocker to economic activity. For an economy based on ceaseless expansion, that is not a happy scenario. Other exploration activities may bring new supply on line but neither is that a solution in the short term as it generally takes years to bring new sources to market. One thing that may become more economically viable will be the Alberta tar sands and western oil shale.

All of this talk of impending oil future doom misses the larger point, however. Though the current administration has steadfastly ignored any calls to conservation vis-a-vis fuels standards, public transportation infrastructure, or green energy technologies in favour of larding the oil industry with tax breaks and exploration grants, this is not a uniquely salient feature of this particular administration. American governments have routinely chosen to ignore this impending problem in favour of simply expecting things to keep on they way they have been for the last sixty years. If anyone should doubt that assertion, Republican deep thinker Charles Grassley's (R-Ia) recent views about America's future consumption habits should ease such doubt:

You know, what--what makes our economy grow is energy. And, and Americans are used to going to the gas tank (sic), and when they put that hose in their, uh, tank, and when I do it, I wanna get gas out of it. And when I turn the light switch on, I want the lights to go on, and I don't want somebody to tell me I gotta change my way of living to satisfy them. Because this is America, and this is something we've worked our way into, and the American people are entitled to it, and if we're going improve (sic) our standard of living, you have to consume more energy.

It seems like it would be nearly impossible to pack more arrant stupidity into such a small number of words than Grassley has managed with this utterance.

The world economy is now quite dependent on cheap oil and more so every day as China ramps up its energy demands, but it will be US economy that will suffer the greatest hit when the price of oil reaches the point at which the current transportation-based economic model delivers diminishing returns. All that crap at WalMart won't be cheap anymore as the cost of getting it to the US from China will simply be too great.

The above cited IEA report contains another prediction that, considering the ever-growing evidence of global warming trends, should also cause considerable consternation. Global greenhouse gas emissions will rise, of course, with increasing petroleum consumption and will do so in lock step. Along with the projected 50% rise in oil consumption will be a 50% increase in greenhouse gas emission. Unless, that is, we choose to do something about curbing the ever increasing emissions. Hope for that, however, is dim and the choice has been sedulously avoided for far too long.

The oil industry may very well be pleased with some results of global warming as potential arctic oil reserves are becoming more readily accessible as the polar ice cap melts. If large reserves are discovered under the Arctic ocean, the inevitable day may well be postponed, but such a situation is nothing but a positive feedback loop for yet more global warming, the ultimate results of which are not at all known. In fact, they can barely be guessed. Some have called this newly exposed arctic territory and its accessible oil the "positive side of global warming," as though our ability to extract and burn even more oil and thoughtlessly produce more greenhouse gases is just a big, happy plus sign that indicates we should just keep on keeping on.

But it doesn't have to be like this. Although, instead of adopting a mentality of localised or reduced energy inputs for production, it can be expected that Congress, the oil industry and the pubic will opt for the path of least resistance -- the land and the sea. The Senate Medicare-cutting bill just passed contained an amendment that now permits ANWR drilling (though this did not pass in the House, there is no certitude that it will never pass. Republicans have been wanting to dive into ANWR for years and this can only be viewed as, at best, a stalled effort). This is not surprising. Since Katrina, Americans have been up in arms about gas prices and the Senate, sensing an opening, jumped at the chance to let Big Oil drill in the wilderness. The amount of oil there is paltry and will do nothing to ease oil prices anywhere. It will do one thing, though. As oil becomes more and more expensive, the oil companies will make out quite well. Our only model upon which profits are made is oil profligacy and if there is one thing that ANWR drilling is making more than apparent it is that the world's economy, i.e. us, is driven by a headlong rush for profit no matter the cost to "externalities."

It seems also likely that the Alberta tar sands will continue to be developed and, if not this administration then the next, will encourage more mountain top mining for coal. California has never allowed off shore drilling near its shores and recently that has been raised as another possibility, another way to extend the gas-guzzling high. Indeed, there may be any number of ways to extend the petroleum-based debauchery but are we willing to ravage everywhere and anywhere to do it? If ANWR drilling is any indication, then it would seem so. If we choose not to change how and with what we drive the world's economy, these and other previously untouched places will all be future targets. If this seems like a unsatisfactory solution to problem with no end, well, that is because it is. We should no longer entertain the madness of drilling and scouring the surface of the earth for every drop and dram of oil when we know, right now, that there is an inevitable end to that supply. If there has ever been a time for a paradigm shift, now would be it.