Iron Denominator News! Extra! Extra!

One of Alan Greenspan's jobs is talking in ways that are meant to warn people about trouble spots in the economy without causing a full-blown panic - such as the famous "irrational exuberance" quote. Of course, Greenspan is not the only one who needs to worry about such things.

Many are starting to wonder if the newest example of Greenspanspeak is coming from the oil industry. In a recent speech, Exxon-Mobil VP Stuart McGill said that, with declining output from existing capital and increasing demand, the investment needed to meet world demand in 2020 will be equivalent to replacing the entire existing oil infrastructure. Seeing as the current infrastructure has taken a century and more to build, replacing it in 15 years is a tall order to say the least.

So why would this be Greenspanspeak? Mr. McGill is a smart man - if he tells people today that Exxon is facing a crisis within fifteen years, the share price plummets and one of the largest corporations files for bankruptcy protection. So instead, he tries to ring a bell and say that the industry needs to accomplish the impossible to survive.

The problem with Greenspanspeak is it doesn't always work - you need to know how to hear it first. People ignored or laughed at Greenspan when he talked about "irrational exuberance". Then the bubble burst. Similarly, people may hear Mr. McGill, but they're not listening.

Side note: Jon Stewart had a man on a few nights ago claiming that Albertan tar sands held one trillion barrels of oil, and thus we don't have to worry about oil running out. He's not a geologist (neither am I, but I read them) and he's wrong on three counts:

• The tar sands are extremely difficult to extract. Currently, less than a third is commercially exploitable, and that fraction that we can exploit uses more natural gas to make the synthetic crude than the product eventually contains. As natural gas prices increase, tar sands are likely to become less profitable, not more.
• On top of all this, the tar sands are a very slow source of oil - never likely to produce more than one million barrels a day - we currently use roughly 80 million barrels a day.
• If demand for oil increases to 100 million barrels a day (a rock-bottom estimate for industrializing Asia), that will logically mean an annual consumption of 37 billion barrels of oil annually. Even if we could consume each one of those trillion barrels in Athabasca (again, this is simply impossible), that would give us 27 years of oil consumption.

So even if we managed to violate the laws of economics, physics and geology, we'd still get just over a quarter of a century - or just slightly more time than I've been alive to date. In reality, the tar sands are unlikely to provide any meaningful "lifeline" for the oil age. So anyone tells you different, get out the rolled newspaper and smack 'em on the nose. It's the only way they'll learn.