When what you are saying is so obviously at odds with the plain truth, it is useful to choose your words carefully to obscure this fact. This was the strategy of the Ministry of Truth, the propaganda arm of the authoritarian government depicted in George Orwell's novel 1984. The altered language was called Newspeak, a variant of standard English.
The oil industry's fake abundance story is so full of verbal legerdemain that it has become a sort of lexicon of Newspeak for oil. The public relations firms and fake think tanks behind this Newspeak have already achieved a notable goal, one styled as "doublethink" in Orwell's 1984. In an afterword to the edition I have social psychologist Erich Fromm explains the essence of doublethink: "[I]n a successful manipulation of the mind the person is no longer saying the opposite of what he thinks, but he thinks the opposite of what it true."
We now have nearly an entire population in the United States and nearly an entire media establishment that believes that oil is abundant--not because of the objective facts, but because of the oil industry's highly successful public relations campaign, a campaign that is still underway. The reason it is still underway is that it is essential to repeat the fake abundance story again and again in order to drown out any possibility that contrary facts will make their way into the public mind.
Just to assure you that there are contrary facts, let me list two key ones:
Growth in world oil production (defined as crude plus lease condensate) in the eight years from the end of 1997 to the end of 2005 was 10.1 percent according to the U.S. Energy Information Administration (EIA). During the eight-year period from the end of 2005 (an important inflection point) through 2013 that growth was 3.0 percent. The dramatic slowdown in the rate of growth occurred despite the wide deployment of new technology (such as high-volume slickwater hydraulic fracturing), record average daily prices (based on the world benchmark Brent Crude) and record oil industry spending on exploration and development. All of these things would have dramatically increased production if we weren't facing limits on what is cost-effective to extract.
From its secular low of $9.10 per barrel on December 10, 1998, the Brent Crude spot price has leapt to $107.51 as of the close on Friday. That's a 1,081 percent increase in the last 15 years. The average daily spot price of Brent Crude reached two successive records in 2011 ($111.26) and 2012 ($111.63) before dipping slightly in 2013 ($108.56). So far in 2014 through July 7, the average daily price has been $108.95. All this price data (except the Friday close) is available here from the EIA. The price of commodities that are abundant tend to fall, not rise sharply. The sharp rise indicates that buyers are competing vigorously for constrained supplies.
These two facts will give us a start on oil Newspeak. Those of you who have read 1984 will recall that the ruling party in the country depicted in the book has three simple slogans: War is peace, freedom is slavery and ignorance is strength. Appropriately, the Ministry of Peace wages war, the Ministry of Love oversees the internal security forces and conducts torture when necessary, and the Ministry of Truth, mentioned above, rewrites history and journalistic accounts of the past to conform with current positions of the ruling party.
When it comes to oil, however, we won't find the oil publicists saying things so obviously ridiculous as "low growth means plenty" or "high prices spell abundance." Instead, the oil PR machine has deftly ignored worldwide developments to focus only on the United States where oil production has been rising in the last several years. Had it not been rising, world production might well have begun to decline or at least stalled.
This PR machine likes to use the word "abundant" as much as possible. Yet, saying "abundant" won't change the fact that the average U.S. gasoline price for all grades has moved from a secular low of 95 cents per gallon in February 1999 to $3.75 as of July 7. That's an advance of 295 percent. For comparison inflation as calculated by the U.S. Bureau of Labor Statistics during that period was 43 percent.
Another useful oil Newspeak word is "resources." The word has a well-known meaning within the industry, namely, a preliminary estimate based on sketchy data (which, incidentally, is almost meaningless for determining the rate of flow). Outside the industry, however, most people conflate "resources" with "reserves." In this case ignorance is indeed strength, or at least it strengthens the persuasive power of the industry by keeping the public in the dark. (Reserves, by the way, are only the tiny fraction of resources that have been proven to exist by the drill bit and are economical to extract at current prices.)
The industry loves to say that the world's resources of oil are huge. But in recent years its spokespersons have shied away from using the word "reserves" since oil reserves (crude plus condensate) at the major oil companies have been falling in aggregate. And, not surprisingly, so has their so-called liquids production (which includes oil), about 12.4 percent from 2009 to 2013.
This has resulted in a series of oil Newspeak terms designed, so to speak, to put lipstick on a pig. Oil companies now report reserves as "barrels of oil-equivalent" or boe. They calculate the energy content of their natural gas reserves, convert that to its equivalent in oil and then add that number to their oil reserves. If we had to compose a slogan for this in Orwell's 1984 that is consistent with such gems as "war is peace" we might say: A gas is a liquid. But, of course, it's not. And natural gas sells for considerably less per unit of energy than oil. So, the entire picture misleads those investors who don't know how to read between the lines. It's another case where ignorance (on the part of investors) is strength for the company.
But perhaps the most audacious oil Newspeak term ever is now emerging just as the conflating of oil and natural gas reserves fails to spark enthusiasm in investors anymore. "Return on invested capital," not profits, not reserves, is the Newspeak term being marketed to investors as the proper indicator of a shrinking oil company's success. (Of course, the word "shrinking" would never be uttered by oil company representatives with proper Newspeak credentials.)
As the majors cut back on exploration and development expenses, they hope to increase their "return on invested capital." That sounds much better than saying that it has simply gotten too expensive in many places to find and extract oil. The easy stuff is gone; now only the hard-to-get, expensive stuff is left, and no one can make a profit on it or only a very meager one. How much better it sounds to investors who've been told for years that oil reserves are what to watch (and then boe) that companies are now pursuing "return on invested capital."
One bit of oil Newspeak appears almost singlehandedly to be keeping oil supplies growing even though they may not be. "Total oil supply" is being treated as interchangeable with "total liquids supply." To see what I mean, check out this page of oil statistics on the EIA website. Click on the dropdown menu for "product" which by default reads "total oil supply" and see what's actually included.
Beneath the words "total oil supply" (and sometimes "total liquids supply" in other sources) lie substances which simply cannot be sold as oil on the world market, substances such as natural gas plant liquids, condensate, and biofuels. There is also a mysterious liquid called "refinery processing gain" which conjures additional fuel volumes (but no more actual energy) because crude oil inputs expand when separated into their constituent parts during the refining process.
Without these additions to the oil supply statistics, it is a good bet that the trend in worldwide oil production would be reported as nearly flat from about 2005 onward. Despite this (or maybe because of this), both the industry and the government seemingly without embarrassment spout an oil Newspeak phrase that Orwell's Ministry of Truth might have authored: Total liquids supply is total oil supply.
Perhaps the most obviously ridiculous piece of oil Newspeak is "U.S. oil exports." Now, if I have to buy (read: import) 10 steaks from the store and I give three to you, I suppose you could say that I'm exporting my steaks to you. But, once I've eaten my steaks, if I want to replenish my supply, I must go to the store and buy some steaks again and then import those steaks into my freezer (from where I can export them to you once again, perhaps after I grill them for you).This is essentially what those in the industry who are calling for an end to the ban on U.S. oil exports are advocating.*
With just a few mouse clicks, however, any curious person could arrive at the EIA's U.S. oil import and export statistics and see that we are a long way from ever becoming a net exporter of oil. By asking the right questions, such a person might arrive at the most recent projections by the agency which have U.S. oil production peaking and then declining after 2020 at a level far below anything that would allow the country to export more than it imports. In keeping with Orwell, perhaps we could style this as "exports equal freedom." It makes about sense as what the industry is saying.
If you want to corrupt a people, corrupt the language. I'm not sure who said that, maybe me. Once it becomes impossible to say the truth with the language we have, it will ultimately be impossible for us to adapt and survive. That's almost certainly what we risk as we slide down the oil Newspeak slope unable to understand what is actually happening to global society's most critical commodity.
*There is an argument for lifting the U.S. ban on oil exports that has to do with maximizing market efficiency, getting the right grades of oil to the refineries best suited to refine them (and thus willing to pay more for them) wherever those refineries are in world. But this isn't the argument the industry is making to the public since the effect of allowing such exports would be to raise domestic oil prices and thus lift profits for domestic oil producers, not exactly a winning argument with the American public.
Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at email@example.com.