Lethal Trajectories

by Michael Conley

  “Interesting question, Peter. It’s almost impossible to wrap our arms around the broader challenges of energy, environment, and economy without a structure and strategy in place to address them in holistic terms. For example, our wasteful consumption of oil generates unacceptable levels of greenhouse gas emissions, which change the climate and impact crop production. The massive overseas transfer of our wealth to support our oil addiction kills domestic economic growth and drains the pocketbooks of the American worker. In a consumer-based economy like ours, that’s a dangerous development. Again, the multiplier effect of oil is always at work, across the board. Further …”

  “Mr. Vice President,” Shillington almost screamed, “you aren’t answering my question. Your approach is taking the marketplace out of the equation in favor of big government.”

  “Well first, Peter,” McCarty said is a steely voice as he looked him straight in the eyes, “that’s the second and last time you interrupt me today. I really wouldn’t advise you to do that again.”

  The camera panned in on Shillington, focusing on a bead of sweat forming above his upper lip. McCarty pushed on, confident that the other panelists were ill-prepared to take the bullying and boorish guff they routinely doled out to their guests.

  “Now, to answer your question, Peter, our approach is all about the free market. We want to create a level playing field with a predictability in it that will enable a CFO to feel comfortable with recommending a capital investment project. I’d also remind you that both the president and I ran our own businesses and know what it takes to meet a payroll. I think it’s safe to say we understand and appreciate the financial markets and what capitalism can and should do.”

  “Isn’t the new ETCC department really a top-down approach, Mr. Vice President?” asked Fitzwater, agitation coloring his voice.

  “I don’t think so, Nelson, but it recognizes the need for the government to define the playing field and set the rules for a new economy. Heaven knows, the system isn’t working now. King Oil and the climate-change issues we face require significant paradigm shifts in the way we move forward.”

  “Mr. Vice President,” asked Wellington Crane condescendingly, “I take issue with your assertions on both energy and climate-change. You claim they are driving forces behind your new ETCC department, and yet my friends, who are knowledgeable people about energy, say it’s not the problem you’ve made it out to be. They say, for instance, that oil hasn’t peaked and that we’re sitting on more oil than Saudi Arabia if only the government would stand back and let them drill. How do you respond, Mr. Vice President?”

  He’s every bit as pompous as I thought he would be, Clayton mused. He frames his question as a speech and obviously cares more about how he looks than the answer he receives. Guys like this don’t expect to be challenged. Let’s have some fun.

  “Good question, Wellington. Allow me to respond,” said McCarty—a small concession before dropping the bomb.

  “First, with regard to peak oil, I don’t know any geologists who challenge the concept. The timing may be challenged, but not the concept. Peak oil is a proven geological concept that merely says oil production follows a bell-shaped curve. When the top of the curve is reached—usually when about half the oil from a field is gone—production starts to decline. It doesn’t mean all the oil is gone, but it means we’ll get less and less production from any given field, and what’s left will be harder and costlier to get. For example, oil in the lower forty-eight states peaked in America in 1971, going from a high of about eleven million barrels per day to something between two and three million barrels today. That number doesn’t include the deepwater oil we get in the Gulf. Do you disagree with these numbers, Wellington?”

  Wellington’s face turned beet red. He was seldom challenged so openly in public. McCarty continued, “Global oil production, for whatever reason, peaked at around eighty-eight million barrels in 2012. Since then, it has declined every year and now stands at about seventy-eight million barrels daily. The nominal demand for oil, had there been no oil shortages, would now be over ninety-one million barrels a day. That thirteen-million-barrel-a-day shortfall in global oil has starved the economic engines of growth and directly contributed to the economic malaise we’ve experienced over the past five years.”

  “So you say, Mr. Vice President,” Crane gamely responded, “but isn’t it a fact that we have more oil in the shale fields in the Rockies than in all the oil fields in Saudi Arabia combined? Isn’t it true that there’s an abundance of oil in the ANWR in Northern Alaska and offshore that remains untapped? It sounds to me like the only real oil problem we have is a government that won’t let us drill.”

  That’s great, Wellington, keep digging your own hole, Clayton mused before responding.

  “First of all, Wellington, the shale oil you’re talking about isn’t the same as the sweet crude oil the Saudis are producing, so your analogy is wrong from the get-go. The shale oil you refer to is actually a kerogen—a fossilized material that will yield oil only if heated to extreme temperatures. I suppose if we left it in the ground for a few million more years it would eventually become a liquid crude oil. In the meantime, you have to apply a lot of energy to replicate what Mother Nature will eventually do, and the costs to do so far exceed the commercial value of the oil. That’s not me speaking, Wellington, those are just cold hard geologic facts.”

  The cameraman, miffed at the browbeating Wellington had given him before the show, was all too happy to pan in on the scowling face of the “great one.”

  “With regard to your observations on ANWR and offshore drilling,” Clayton continued, “it gets to the heart of the issue: peak production. What am I suggesting? Just this—unlike the geologic concept of peak oil, peak production reflects both geologic and aboveground constraints such as market conditions, cost of production, geopolitical considerations, availability of deepwater rigs and labor, technological challenges, and the like. When you drill down into ten thousand feet of water and then another twenty thousand feet of ocean bottom to find oil, the cost of drilling, extraction, and processing eventually exceeds the commercial value of the oil. The easy oil is gone, and production of new oil eventually reaches a point where it can’t be economically produced. Peak production is like saying, ‘I might be able to find new oil at twenty bucks a gallon, but who’s going to buy it? ‘"

  I’m probably getting into more detail than I should, Clayton thought, but I’m tired of the Wellington Cranes of the world oversimplifying complex problems they don’t understand.

  “Now here’s the rub, Wellington: most of the proven oil reserves today are held by national oil companies. NOCs, as they are called, are owned by OPEC and other oil-producing countries. These NOCs hold about ninety percent of today’s proven oil reserves. Their thinking goes something like this: ‘Why should we invest in expensive new drilling and production today when we know we’ll get more from that same oil tomorrow as oil prices go up? The NOCs hold all the cards, and if they choose not to ramp up production, there’ll be less oil available and we’ll pay more for it. There’s oil out there, to be sure, but it may become too costly to use. That’s what peak production is all about.”

  Wellington was getting creamed, and Fitzwater finally bailed him out with a question: “Mr. Vice President, the Bakken Oil Field has gazillions of barrels of proven reserves that don’t require expensive offshore drilling. Have you forgotten about this field?”

  “No I haven’t, Nelson, but I’m reminded of an old saying in the oil business: ‘It’s not the size of the tank that counts, but rather the size of the spigot.’ Essentially, this means that the thing that counts most is not the potential reserves within an oil field, but rather the affordable flow rate of oil you can get out of the field. There are physical and economic constraints to what we can reasonably expect to get from any one field, and the affordable oil that can be extracted from a field is the one metric that trumps all others. You’re a financial guy, Nelson. Think of it th
is way: it’s financially equivalent to having a billion dollars in a savings account but only being able to draw out one hundred grand a year. It’s the hundred-grand flow rate that matters most. The Bakken Field is important, but the upside flow rate may never exceed one million barrels per day—about six percent of America’s daily oil consumption.”

  Peter Shillington, having learned his lesson, waited until McCarty finished before asking his next question. “Mr. Vice President, we’re hearing every day about new oil fields opening up. This Chunxiao Field, causing all the commotion now, is but one example. Wouldn’t you concede that even though some fields are depleting, new discoveries are made every day to replenish supply?”

  “Good point, Peter,” said McCarty, mindful of Shillington’s newfound manners. “Unfortunately, we are now using up about eight barrels of oil for every new barrel we discover. It’s like having a savings account where we draw out eight dollars for every dollar we put in. It’s unsustainable. Furthermore, we’re no longer finding the giant fields like those discovered back in the 1960s, and it now takes a huge number of smaller new fields to replace the oil that’s been depleted from a few of these old giants.”

  Fitzwater could see they were getting trounced on the oil issue and redirected the discussion to friendlier terrain. “Mr. Vice President, you still haven’t addressed our economic doldrums. Could you comment on them please?”

  “I have, Nelson, but maybe not as directly as you would like. In broad terms, the nations of the world have experienced negative growth for five years. The driver has been the access to and affordability of oil, or lack thereof. Oil is a special gift of nature that took hundreds of millions of years to make and less than a couple of hundred years to use up. It’s been so hard to replace because, quite simply, there’s nothing like it in terms of its portability, functionality, and power punch. A barrel of oil, for example, has an energy equivalent of about 1,700 kilowatts of electrical energy, and it’ll take a lot of alternative energy and new energy systems to replace the oil we no longer have. We’ve dragged our feet by not developing these systems while there was still time, and now we’re behind the eight ball and paying a fierce price for our inaction. Our economy was built on cheap energy, and cheap energy is no longer available. That’s what we’re up against, and that’s why we’re in a state of global economic stagnation.”

  Fitzwater had never been happier to go to a commercial break than he was today. It was an awkward time for his panelists. They were losing the battle but didn’t know how to respond. Wellington Crane was furious and left the set at the break to lick his wounds. The others turned their conversation to the more innocuous topic of the Washington Redskins. Wellington returned seconds before the break ended, after arranging for Fitzwater to let him ask the first question.

  “Mr. Vice President,” asked a rejuvenated Wellington Crane, reeking of bourbon, “I must confess I don’t buy into your observations on energy. They just don’t square with the reality I know. That said, I’d like to switch gears a little and ask you why your administration has put the brakes on economic recovery because of nebulous claims about climate-change.”

  “Is that a question or a statement, Wellington?”

  “I think it’s both, Mr. Vice President. Care to answer?”

  “I’ll try,” said McCarty with a condescending smile that seemed to infuriate Crane. “At this point, I doubt there are many who do not believe climate-change is happening. The debate today is more about the causative factors and not the event itself. Would you not agree, Wellington?” Crane shrugged, not knowing what to say.

  “It’s hard to look at greenhouse gas levels north of four hundred parts per million and not think something is happening. It’s hard to look at the polar ice melts and mounting tensions over who owns the mineral rights under them and not believe there’s a problem. The geopolitical conflict over freshwater rights from melting ice in the Himalayas and elsewhere is of great concern. Water shortages and loss of arable land to desertification are accelerating famines all over the world and displacing hundreds of millions of people. Climate-change impacts are visible everywhere and can’t be ignored, so of course it’s a consideration in any economic policy decision.”

  “Perhaps so, Mr. Vice President,” Crane responded, “but is it in the best interests of the American people to let climate issues get in the way of economic progress?”

  Boy, you really stepped in it this time, Clayton mused. “Let me answer your question in two ways, Wellington. First, when you ask if it’s in our best interests to factor in climate-change, I’d have to say it all depends on whose best interests you’re referencing. If it’s Wall Street looking at quarterly earnings, there’s no question there’s a short-term cost impact for adopting cleaner energy practices. If it’s your children or grandchildren, there’s no question it’s in their best interests. We have an intergenerational responsibility here we can’t ignore.”

  Again, the camera panned in on a scowling Wellington Crane. He could hide his body language on the radio, but the camera was definitely not his ally today.

  “Second, the development of renewable energy systems is far more than just a nice thing to do for the environment. It’s imperative for at least two reasons: first, we need to develop everything we can to replace a depleted stock of global oil or risk returning to the Stone Age, and second, this could easily be America’s greatest economic engine for new growth. We need to move ahead with an effort equivalent to our transition from a peacetime to wartime economy in World War II.”

  “Our time is almost up, Mr. Vice President,” said a battered and wary Nelson Fitzwater. “We have fifteen seconds left and will give you the last word.” Again, the camera caught an apoplectic Crane, so used to having the last word on any show.

  “Thank you for having me on your show, Nelson. I’ve really enjoyed it. I’ve talked a lot today about oil, energy, the economy, and the environment because they are all so entwined and interrelated. We believe the new Department of Energy, Transportation, and Climate-change will get at many of these challenges in a comprehensive manner, but it will take time. In candor, does anyone really think the sands in the Middle East or the ocean waters in the East China Sea are what young men and women all over the world are fighting and dying over? Of course not, it’s the oil that’s underneath. The quicker we realize this, and the sooner we develop environmentally friendly fuel alternatives to replace oil, the better off we’ll all be.”

  With that, the background music played and the camera panned the panel before the fade-out.

  As Clayton exchanged pleasantries with the other panelists, Wellington Crane left in a huff without a word to anyone. It had been one of the most humiliating experiences in his career, and he vowed right then and there that Clayton McCarty would pay dearly for his disrespect.

  11

  Beijing, China

  18 September 2017

  Wang Peng checked his watch as he hurried over to the chairman’s office following the emergency Politburo Standing Committee meeting. A 10:30 meeting with Lin Cheng did not mean 10:31. He tapped on the chairman’s door with two minutes to spare.

  “Good morning, Peng, please come in,” said Lin Cheng. He seemed almost cheerful as he poured the obligatory tea.

  “Thank you, Mr. Chairman,” Wang replied, anxious to rehash the PSC meeting and consider the subsequent actions required.

  “What did you think about the meeting today?” Lin asked with the casual tone of an elderly grandfather asking his grandson about his day in school.

  “They were far more supportive of you today, Mr. Chairman, than they were following the Chunxiao Incident. They seemed pleased you were able to keep America from openly siding with Japan, and they liked the part about freezing Japan’s assets and expelling their ambassador. They also agreed with your United Nations strategy, and I thought that was significant.”

  “It is important,” said Lin with a nod, “but the UN part will take a lot of work if we are to beat Ja
pan to the punch. We’ll need to prepare a resolution for the UN Security Council condemning Japan for its territorial violation and demanding reparations for the loss of the Dragon II and lost oil production from the platform.”

  “Do you have any thoughts on the reparations we should request?” Wang asked as he pulled up a new document on his laptop.

  Thinking for a moment, Lin Cheng replied, “Let’s figure what the Dragon II would have produced in the time it will take us to float in another platform. Actually, Peng, I’m not as concerned with reparation amounts as I am in using Chunxiao as a springboard to a more favorable long-term strategic position.”

  “You’re referring, of course, to the United Nations Law of the Seas Convention,” Wang replied.

  “Yes,” replied Lin. “Until we can codify the 1982 UNCLOS protocols to once and for all establish and legitimize China’s Exclusive Economic Zone claims in the East and South China Sea; we’ll have ongoing conflicts like Chunxiao. This is the prize we most covet, Peng, not reparations.”

  “Could you clarify for me, Mr. Chairman, why you have chosen to take our resolution to the UN Security Council rather than the General Assembly as we know Japan will do?” Wang knew the answer, but his boss always found it useful to verbalize his positions.

  “That’s a question the Politburo failed to raise, Peng. The answer is that the real power lever in the UN is the Security Council, not the full General Assembly. As a permanent member of the Security Council, China can veto resolutions of a substantive nature. Japan is not a member and knows China could tie up their resolution in the Security Council for years with its veto power. They have little choice but to try an end-run in the General Assembly. China, on the other hand, has direct access to the Security Council, and we will exploit this structural advantage.”