Current Events

Join us as we watch the crisis unfolding

September 12, 2001

The horrendous events at the World Trade Center and the Pentagon could result in continuing troubles. The Bush administration is going to be under enormous pressure to initiate an impressive retaliation. The surprising effectiveness of yesterday's attack may inspire additional terrorist activities. At worst, we may be in for continuing rounds of violence.

If it turns out that yesterday's attacks came from the Middle East, the continuing consequences might involve the oil supply. In the first hour after the World Trade Center was hit, the near-term futures contract for North Sea Brent crude oil jumped from $27.30 per barrel to $31. By the end of the trading day in Europe, the priice fell back to $28.80 (NY Times, page C-1, Sept. 12, 2001). If the oil supply from the Middle East does get involved, there will be widespread confusion between the political disruption and a genuine shortage in the world supply of crude oil.

On a personal note: On Sept 11, Emma Domingo (to whom Hubbert's Peak is dedicated) and her mother were bound for Newark Airport to catch a morning American Airlines flight for their return to San Diego. They were driving north on the New Jersey Turnpike, listening for traffic reports on CBS radio, within sight of the World Trade Center, as the whole tragedy unfolded. They made an illegal U-turn on the Turnpike and were safely back in Princeton before most of us even heard about the attack.

In other news: The June 2001 issue of Geotimes, page 23, has disturbing news for anyone who thinks that new technology will overcome the expected oil shortage. Research and development expenditures by petroleum companies has fallen from $4 billion annually in 1990 to $2 billion in 1998. It looks like a straight-line decrease headed for zero R&D in the year 2007. Here are two interpretations:

1. The concern over quarterly earnings is so immediate that companies abandon research and development that would pay off 3 to 5 years hence. Farmers called this, "Eating your seed corn."
2. The major oil companies might be recognizing that the good oil discoveries have already been made, and there will be only limited rewards for finding the leftovers.