Friday, July 24, 2009

ABC 20-20: "Over a Barrel: The Truth about Oil"

On Friday July 24 ABC 20-20 presented a documentary “Over a Barrel: The Truth About Oil” with Charles Gibson. The narrator traveled the country, showing the various steps in the production (exploration, refining and distribution) chain, to show Americans how vulnerable their basic mobility might be to external disruption, including terrorist attack. The documentary calls to mind an earlier CNN special report “We Were Warned” which had imagined another Katrina-like hurricane in September 2009, followed by an attack on Saudi oil facilities.

The news story is by Peter Klein and has the title “Over a Barrel: The Truth About Oil: ABC News' Charles Gibson Crosses the Country for the Inside Story on the U.S. Oil Addiction.”

The url link is here. He starts his report in Cushing OK, near a pipeline, and where the price of oil is set. He goes then on a gasoline delivery run.

He starts his report in Cushing OK, near a pipeline, and where the price of oil is set, where the ownership of the oil changes hands legally. He goes then on a gasoline delivery run.

The oil distribution business is very fungible, with brands often interchangeable. Convenience stores make less money on gas than other items, but nevertheless oil companies have found it more profitable to sell through them. Most gasoline stations are not company owned but are franchises, but loading docks are company owned.

The program then showed a refinery, with one third of them on the Gulf Coast, hurricane exposed. Regulation may account for the lack of new refineries An oil man said that the biggest determinant of the price of oil was still the crude oil price.

He shows the commodity market at NYMEX, and talks about the speculation that drove up prices in 2008, using a system set up for other kinds of businesses.
They talked about “economic jihad” and the vulnerability of pipelines, especially overseas. In 1982, there was a TV movie “WWIII” about a Soviet attack on the Alaska pipeline.

The show presented a plot to buy low, damage the Alaska pipeline, and then sell high – the perpetrator now serving 13 years in prison.

Two-thirds of the world’s crude oil is in Saudi Arabia, Kuwait, Iran, Iraq, and the UAE.

OPEC may have an incentive to keep prices moderate to keep us from weaning ourselves from oil. But Jimmy Carter had said that in the 1970s.

Not only Al Qaeda but Iran has motives to attack the Saudi Arabian oil fields and pipelines.

We pay for the political complications of oil through our Pentagon budget and the loss of soldier’s lives, and the political controversy over military policy (I would even say over “don’t ask don’t tell”).

The last part of the film showed very deep drilling by Chevron 160 miles out in the Gulf of Mexico, down to a dept of 25000 feet. This segment was shown as a preview on ABC “World News Tonight”. The film then moved to T Boone Pickens, peak oil, and his Pickens Plan to go to natural gas. Our proven reserves are decreasing. Yet the GOP is used to saying “Drill baby drill.”

Obama has promised to end our dependence on foreign oil in ten years, but ironically that would start by increasing imports from Canada and Mexico. But we need to reduce our consumption.

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