Peak Oil (was "petroleum geologist explains US war policy")

In the article linked here, written prior to the US conquest of Iraq, the country possessing the second largest reserves remaining, Dr Colin Cambell, discusses the relationship between the geological characteristics of existing oil and gas reserves, especially their properties with respect to depletion, and the rising international tensions centred on the Middle East.

Future historians may look back and identify a degree of choreography in the present war on terror. At all events, the US is paying for troops to defend a Colombian export pipeline; it was implicated in a failed coup to depose the Venezuelan president, who was taking a tough line on oil; it has overthrown the government of Afghanistan on a proposed pipeline route; it has established military bases around the Caspian oilfields; and it threatens to invade Iraq, one of the last places left with substantial oil.

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Together with other sources of information, some of which I'll link below a bleak overall picture starts to emerge.

Due to political constraints on Middle East production, the non-Middle East reserves, which are much smaller, are approaching depletion more rapidly than those in the Middle East. Some relatively unexploited areas also remain in places like Central Asia. The implication of depletion is that over the next decade or so, competition for Middle East oil, and any other un-depleted resources like those in Central Asia, is likely to increase greatly.

Depletion has already progressed to the point where the markets now react to tiny signals, but this just disguises the overall trend.

The major oil companies and producer countries have a tendency to lie about and otherwise distort the facts with respect to overall depletion. This tends to conceal the fact that most of the current alternatives to Middle East oil are heading towards the point where they'll be unable to meet demand, leading to increasing dependence on and competition for the remaining Middle East reserves. The US government is focussed on guaranteeing that their heavy domestic consumption can continue at everybody else's expense. This leads them to find justifications to use force to secure their ability to continue consuming, rather than working with the rest of us to find ways to deal with the enormous challenges presented by the peak of hydrocarbon production.

Further Info:

Hubbert Peak

Reading University: Oil Depletion Analysis Group

Business Week: Taming the Beast

Foreign Policy In Focus: The Oil Reckoning

The Nation: Oiling the Wheels of War

We need oil. Providing the world price is being paid, I do not see the problem in ensuring that it continues to flow.

The day will come however, when it is all gone, before this happens we need to concentrate on viable alternatives. My preference is nuclear fusion in the long term, fission in the short.

If electricity were able to substitute for oil, which it can't in many very important cases, we'd need approx 6300 new nuclear reactors by 2031 to fill the gap.

With an addtional 520 new reactors being added per year forever.

The cost of building all these reactors would be ~40% of US GDP.

source, Gunther, [url]www.holon.se. Using Cambell's data[/URL]

The assumption here is that demand doesn't change. I think it has to change.

Originally posted by Sasaferrato
We need oil. Providing the world price is being paid, I do not see the problem in ensuring that it continues to flow.

The day will come however, when it is all gone, before this happens we need to concentrate on viable alternatives. My preference is nuclear fusion in the long term, fission in the short.

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There's another problem I can see with your thinking here Sasaferrato. You seem to be making the assumption that it's either/or. Either everything is fine or oil has run out. In fact, the depletion of oil follows a bell curve. But demand is a rising curve, unless some force supresses it. The problems start to arise when the one parts company with the other. As in the picture behind that link I just gave. It appears that the US plans to keep consuming at its present rate, at gunpoint if necessary.

This means the rollover, the point where the curves intersect, tends to come closer. It also appears likely that when the two curves intersect, the US intends to have military dominance over all the main reserves remaining. This could make them unpopular.

On another thread some of us were rehashing some of the arguments for and against the Iraqi war that were made last summer. I recall, back then (and now), when holding in mind various PNAC documents, the Baker Study (done by the James Baker III Institute at Rice University), Hubbert's peak, Zbigniew Brzezinski's The Grand Chessboard, December 12, 2000, the fact that both GWB and Cheney are oilmen, speculation about 9-11 as LIHOP, the Carnahan and Wellstone plane crashes, Patriot Act I, HSA, and the draft of Patriot Act II, the many last minute ballot "surprises" in 2002, the Afghanistan War and the Unocal pipeline, and of course the march, last summer, toward war against Iraq with its Orwellian manipulation of the media -- all these things taken together led me last summer to hold in mind briefly the frightening prospect that what me might be witnessing now is a viscious and conscious circling of the wagons by elites in both the U.S. and U.K. to defend and preserve their rapacious way of life. The hell with everything else (which includes all of us)!

Could it be that leadership within these elites recognize the seriousness of Hubbert's peak and are positioning themselves now to protect their way of life? Could it be that our ME and Caspian Basin posture, enhanced by the Iraqi and Afghanistan Wars, are preparing the way for a future dystopia where the few continue to consume as they do today, enforced at gunpoint when necessary, while conditions rapidly deteriorate for the rest of us?

The GWB administration is dominated by neo-conservatives heavily influenced by the political philosophy of Leo Strauss, who believed that elites lead out of innate superiority over the led, and that it is proper and right to lie to the masses in order to keep the latter aligned with the wishes of elites. LIHOP, dissembling over WMD -- these are all consistent with Straussian political philosophy.

If we are indeed witnessing a "circling of the wagons", and projection of Strassian power is really underway, we can all kiss "democracy" and "liberty" goodbye and prepare ourselves for the growing arrival of 1984. I cannot visualize how to counter power so exercised so I'd be pessimistic about stemming its advance. Which is why I reject this dystopia and prefer instead to think that what we see now is just factional misguided power, but a power still aligned with the noble vision of our (American) founding fathers. Is this wishful thinking? Time will tell...

"Pax Americana" means the American Peace. The question is, which America? The Land of the Free of Thomas Jefferson and James Madison? Or Leo Strauss's, Ken Lay's, Richard Perl's, and Donald Rumsfeld's?

Note that, guys like phuckthewar and myself are the canaries in the coal mines. If our voices suddenly disappear -- then we have our answer, don't we?

(For that matter, didn't some canaries already disappear? Steve Kangas's "suicide"? Voxnyc? The unsealing of hurtful records against Ritter? For that matter, the impeachment of Bill Clinton for, well, what?)

Originally posted by Bernie_Gunther
There's another problem I can see with your thinking here Sasaferrato. You seem to be making the assumption that it's either/or. Either everything is fine or oil has run out. In fact, the depletion of oil follows a bell curve. But demand is a rising curve, unless some force supresses it. The problems start to arise when the one parts company with the other. As in the picture behind that link I just gave. It appears that the US plans to keep consuming at its present rate, at gunpoint if necessary.

This means the rollover, the point where the curves intersect, tends to come closer. It also appears likely that when the two curves intersect, the US intends to have military dominance over all the main reserves remaining. This could make them unpopular.

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That is rather an understatement.

Well, yes

What I'm wondering though, is this. Having secured military domination over the reserves which will be last to show the impact of depletion, what will the neo-cons in Washington do?

This could go a number of different ways I would imagine.

Certainly the most obvious would be to assume that they'll keep prices cheap at gunpoint and continue exalting the use of SUVs as a moral virtue. The impact would be an earlier crisis due to depletion, with the US in a very strong position to decide who gets what oil is still being pumped. This would give them a great deal of power over, for example the EU. So if we take seriously the stated intention of the neo-cons to impose US values and ways of life on the rest of the world, they might e.g. use this as leverage to get rid of the EU welfare state systems that they seem to hate so very much. In any case they'd have the EU over a barrel, if you'll forgive my use of that perhaps unfortunate phrase.

This is pure speculation on my part, but the question arises, what would they do with that power if they had it? One first looks to their stated views for enlightenment, maybe this is naive though.

Another assumption might be that they'd attempt to manage the depletion in a more or less sensible way, while giving their national interests priority over those of others. There is no evidence to suggest that this would be so but who knows really?

A week or two ago nano was suggesting that market forces would solve these oil depletion issues. I haven't seen him about lately, and would be interested to discuss these matters further with him, but meanwhile it occurs to me that market forces didn't work very well in the 1973 oil crisis. Which is likely to be a pale shadow of what happens when Saudi and Iraq can no longer pump enough to make up any gaps in supply vs global demand.

'In late 1973 the first OPEC oil shock struck, as oil prices quadrupled and the general inflation indexes shot up to 11 percent. More important, gasoline lines appeared. Waiting in line to buy a basic commodity like gasoline is something that no American had ever experienced. Shock and irritation were high, but those lines were like the first small heart attack -- an indication of mortality. Maybe the American economy was growing old and becoming vulnerable. Maybe the American economic dream of an ever rising standard of living was over. Small may be beautiful, but if that phrase meant a lower standard of living, then the average American considered it a nightmare.

The Nixon-Ford Administration responded with oil and gas price controls. As a vehicle for holding down prices, controls were bound to fail. For one thing, world prices would have to be paid on that part of consumption imported from abroad; for another, controls make it too easy for oil companies to hold oil in the ground or not to look for new supplies oil until prices rose. When controls did fail, the public's feeling that the federal government and its economists were incapable of managing anything efficiently was further reinforced.

What was worse, economists could pose no solution to the energy problem. Influential professionals, such as Milton Friedman, predicted that the oil cartel would quickly fall apart. It didn't. Other economists recommended that prices be allowed to climb to world levels, but that wasn't a solution to the problem faced by the average American. Higher prices would force him to change his life style. He might respond to higher prices with smaller cars and colder houses as economists predicted, but he liked doing neither and he could vote. No one considered a forced change in life style a solution.

Once again, falling back on the principle that higher unemployment would produce lower inflation, monetary authorities tightened the rate of growth of the money supply in an effort to slow the economy, raise unemployment, and push inflation out of the economy. This time the policies produced a credit crunch. For six months in late 1974 and early 1975 the GNP fell at the fastest rate ever recorded. Even the rates of decline in the Great Depression had been less precipitous -- although of course longer and deeper. Anxieties quickly shifted from an unacceptable inflation rate to an unacceptable unemployment rate, and the term "stagflation" was born.

Stagflation was both a term and an indictment, since economists had taught that the phenomena -- slow growth, rising unemployment, and rising inflation -- could not all exist at the same time. Yet they did.'

[Source: Dangerous Currents, Lester Thurow; Random, 1983 pp. 34-36]

Economists believe a lot of things that are patently untrue...

Here's a whopping C+P from something I linked to earlier today on a different thread:


Economists are trained to believe that "money" is to the economy what "energy" is to the physical world. This leads them to believe that whatever is "economically" possible is "physically" possible too. What economists fail to realize is that the economy is a subsystem of the physical system, and thus constrained by universal physical laws that they have not studied.

Economists do not know that something must be physically possible before it can be economically possible. Since they only study money, they have no idea where the physical limits, and thus, economic limits are.

Since economists study the prices of everything, they feel they are qualified to issue opinions about everything. But the reality is quite the opposite. Economists first abstract all commodities to money -- which of course, obliterates all physical differences between the commodities themselves. This leaves economists uniquely unqualified to know the physical relationships between the commodities they purport to study. Because of their total dependence on the measure of "money", today's leading economists do not know the difference between "libraries" and "oil":

Obviously, the economics taught by Samuelson and Nordhaus has nothing to do with science. [[10]] If it isn't science, it's ideology. Since economics has a political agenda, it becomes nothing more than politics in disguise.

The economist's political agenda is pretty simple: establish a global self-regulating economic system. In order to convert economic students into lifelong politicians, they are programmed via circular argument and "post hoc, ergo propter hoc" (after-the-fact) reasoning to believe the most flagrant violations of reality. Consider five of the most outrageous.

#1. Economists are trained to believe that people are "rational utility maximizers" (calculate decisions according to "Bayes' Theorem"; i.e., Bentham's old "Felicity Calculus" in a new bottle). Although this belief was common one hundred years ago, only economists are still taught it: "Neoclassical economics is based on the premise that models that characterize rational, optimizing behavior also characterize actual human behavior." (R. Thaler, 1987). This premise was shown to be false several years ago. [[11]] Thus, the entire modern economic edifice is nothing but junk!

#2. Economists are trained to believe that "money" has nothing to do with politics and is simply a medium of exchange. But even the casual observer can see that money is social power because it "empowers" people to buy and do the things they want -- including buying and doing other people: politics. Money is, in a word, "coercion", [[12]] and "economic efficiency" is correctly seen as a political concept designed to conserve social power for those who have it -- to make the rich, richer and the poor, poorer.

#3. Economists are trained to believe that people always "benefit" from free market transactions. Nobel Prize-winning economist Milton Friedman explains: "Adam Smith's key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit." [[13]]

Since economists do not explicitly define "benefit", one wonders how Friedman could possibly know? In fact, he doesn't. Friedman is brainwashing his students to further his own personal political agenda. Economic professors like Friedman resort to meaningless, circular arguments to turn his students into robotic broadcasting devices.

Economists assume people make "rational" [[14]] decisions but abstain from testing that assumption. Instead of testing, economists invoke "revealed preferences theory" which states that choices are rational because they are based on preferences that are known through the choices that are made. [[15]] In other words, meaningless, circular arguments.

#4. Economists are trained to believe there are no "limits to growth". Because they abstract everything to money, even leading economists like William Nordhaus can't imagine an economy that is physically limited by energy. The best Nordhaus can do is to model increasing energy prices:

"The estimate is based on an energy model I constructed several years ago. To estimate the drag on economic growth, I calculated the difference between the economic growth rate with actual energy supplies versus a case in which current (low cost) fuels were available in infinite quantities. In the first case, energy prices would be rising, while in the second case of superabundence, relative energy prices would be constant. This study indicated that the resource-limited case would lower net output in the middle of the next century by about 10 percent."

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Although Nordhaus thinks he is modeling "energy", he is actually modeling "energy prices". There is a big difference! What would have happened if he had modeled declining energy inputs instead of rising energy prices? We already know the answer to that one! (see above post from Bernie)


#5. Economists are trained to believe that we will never "run out" of a commodity. This is because as prices increase, we will use less-and-less of it, but there will always be some available at some finite price. Practically every economics textbook teaches this. But every economics textbook is wrong because "energy" is fundamentally different from every other commodity. There is no substitute for energy. Energy is the prerequisite for all other commodities, so if we "run out" of energy, we will "run out" of everything else too.

By definition, energy "sources" must produce more energy than they consume, otherwise they are called "sinks". By definition, energy sources have "run out" when they consume more energy than they produce. This universal energy law holds no matter how high the money price of energy goes. Economists completely overlook this basic energy law and have misled government regulators all over the world.

Here is part of an interview with Nobel Prize-winning economist Milton Friedman (worth quoting at length because of his colossal stupidity):

Ravaioli: But there are many other environmental problems ...

Nobel Laureate Friedman: Of course. Take oil, for example. Everyone says it's a limited resource: physically it may be, but economically we don't know. Economically there is more oil today than there was a hundred years ago. When it was still under the ground and no one knew it was there, it wasn't economically available. When resources are really limited prices go up, but the price of oil has gone down and down. Suppose oil became scarce: the price would go up, and people would start using other energy sources. In a proper price system the market can take care of the problem.

Ravaioli: But we know that it takes millions of years to create an oil well, and we can't reproduce it. Relying on oil means living on our capital and not on the interest, which would be the sensible course. Don't you agree?

Nobel Laureate Friedman: If we were living on the capital, the market price would go up. The price of truly limited resources will rise over time. The price of oil has not been rising, so we're not living on the capital. When that is no longer true, the price system will give a signal and the price of oil will go up. As always happens with a truly limited resource.

Ravaioli: Of course the discovery of new oil wells has given the illusion of unlimited oil …

Nobel Laureate Friedman: Why an illusion?

Ravaioli: Because we know it’s a limited resource.

Nobel Laureate Friedman: Excuse me, it's not limited from an economic point of view. You have to separate the economic from the physical point of view. Many of the mistakes people make come from this. Like the stupid projections of the Club of Rome: they used a purely physical approach, without taking prices into account. There are many different sources of energy, some of which are too expensive to be exploited now. But if oil becomes scarce they will be exploited. But the market, which is fortunately capable of registering and using widely scattered knowledge and information from people all over the world, will take account of those changes...

From http://dieoff.org/page185.htm

I'm still trying to get my head around the likely outcomes. We have two limiting cases, which we might call the Friedman case, and the die-off case. In the Friedman case, everything is fine because economics makes new energy sources available. In the die-off case, capitalism follows the classic bacterial growth curve.

I don't believe either of them. The economic argument as posed by Friedman is pretty obviously a bunch of theological dog-doo, but in some of the more realistic cases, clearly human ingenuity will do what it can, especially if investment is stimulated by higher prices. I don't think humans are bacteria, even corporate rentiers.

The reality is likely to be somewhere in between those two cases. Already we're seeing what I believe to be a fairly clear indication that the most aggressive capitalist economy is using military force to a) secure its own over-consumption for at least the short term and b) secure its own economic dominance in the face of a screwed-up deficit-laden weak economy, by taking a firm grip on the economic aorta of its major economic competitors in the form of controlling their access to vital hydrocarbon reserves.

Whatever happens therefore, it's not going to be the pure ideal of the sado-monetarists, because of this massive government intervention. Equally though, inquiring minds across the world are realising that there's a train-wreck up ahead and are looking for some solutions. For all we know nano is off in his lab cooking one up right now. But meanwhile, I'm studying solar heating systems and learning how to grow my own organic fruit and vegetables.

Human systems are fearfully complex, for example, how fragile is our food security under these conditions? At a certain price-point, I've seen it plausibly argued, industrial agriculture breaks down, due to its dependence on oil energy, notably for distribution and for phosphorous mining and fertiliser manufacture and we get food riots. How quickly and effectively could we move to a different model? What would be the political constraints on this? I'm pretty sure Lord Sainsbury and Monsanto would want a large piece of that action, but the best model for food security is very decentralised, shortening the distance between producer and consumer by introducing urban farms and redistributing people.

Maybe some freeper nutcase at Fort Dietrich has decided to solve the problem unilaterally and is busily trying to develop a novel plague that kills everybody but people who can speak in tongues.

The immediate worry though, at least in my mind, is that the corrupt and very likely insane US government just took control of Europe's economic lifeblood.

Suddenly Tony and his Cronies look almost rational...

One interesting wrinkle in this whole argument is that the US might conceivably be basing its strategy here on bum information. Here's an article, again by Dr Campbell, suggesting that under its recent change of management, and with helpful advice from Exxon, the USGS seems to have been cooking the books after a history of 30 years of competent and reliable work.

Flawed conclusions based on USGS 2000 study

It's not as if the United States Geological Survey have the monopoly on feeding disinformation...

The US Department of Energy / Energy Information Administration's 'International Energy Outlook 2001' (IEO2001) is also riddled with misleading inacuracies.


Analysis of the IEO2001 Non-OPEC Supply Projections

I'm seeing a certain amount of wider awareness though. A friend sent me this article today. I do think people are slowly catching on.

Brilliant thread, guys.

Just two questions. The neo-cons do seem to be hegemonic in the US govt. at the moment; there's a very good piece in the current New York Review of Books about them. But that piece also notes that they don't always get their own way, and I get the impression that unlike the xtian right for example, they don't have much of a mass base in the Rep. party. What are the implications of that for their long term influence?

Also, can US military power really save the US economy from itself? After all, civilian keynesianism has so far not revived the Japanese economy, so can we really assume that military keynesianism would revive the US economy?

Originally posted by Idris2002
But that piece also notes that they don't always get their own way, and I get the impression that unlike the xtian right for example, they don't have much of a mass base in the Rep. party. What are the implications of that for their long term influence?

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The neo-conservatives have long been a marginal group within the Republican coalition, even now. A few key individuals, however, are unfortunately in key positions of power (Cheney, Rumsfeld) and influence (Wolfowitz, Libby, Perl), and it shows.

The Republican coalition consists "crunchy" conservatives (idealogical based), pro-business factions, the Christian Right, and marginal groups like the neo-conservatives and various racist right elements. The Christian Right serve as the "foot soldiers" for the party and are a critical element of the coalition.

A good survey of these elements can be found in Sara Diamond's The Road to Dominion.

Selected articles by Sara Diamond about the crucial electoral role of the Christian Right in the Republican party here (scroll down past the book ads)

Here's an instructive article on Christian Right energy policies

Then of course, we have the chamber of commerce types and the military industrial complex, who actually pay for them to get elected. Given that they're all trying to make a short-term profit, they're probably not even thinking about this stuff, with the possible exception of oil companies, who will make lots of money.

Finally, an article from Le Monde, which I've posted elsewhere about the ideological foundations of the neo-cons here

My guess is that it's mainly the think-tank types, both in civil and military policy areas, and probably also some smarter energy industry people, who are actually trying to anticipate oil depletion.

The moves they've been making certainly suggest that somebody is paying attention to this issue, but for some reason deciding not to share it with the rest of us. Of course, it could be coincidence and just regular greed for money and power, but the explanation does fit rather neatly if you assume that they aren't all greedy idiots, but that the guys operating Bush are willing and able to exploit the greedy and stupid in what they percieve to be cause of making sure that the impending crisis has the 'right' outcome.

Originally posted by Bernie_Gunther
The moves they've been making certainly suggest that somebody is paying attention to this issue, but for some reason deciding not to share it with the rest of us.

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Apply Occam's razor, and what do we get: A circling of the elite wagons in preparation for the inevitable. Such is my belief. (An grayer area, to me, is just how "inclusive" that elite tent will be...)

The British American Project for the successor generation springs to mind.

Excellent stuff peeps!

Carry on....



Woof

A stimulating article concerning the potential fields of response to this stuff. I'm not convinced that the author has totally understood the potential seriousness of depletion issues, but he has some interesting response ideas.

I read a speech from a Bush cabinet guy that he gave in 2000 I believe. He talked about doing something as drastic as shrinking our economies in fact. It was obvious the administration knows of the problem facing us. I think a lot more people know of the future prob then we may think. Hopefully, they can somehow thwart it.

"The US geostrategic view is that all crude oil is good, and all non-Opec oil is especially good. The goal is to take the Saudi hand off the spare oil capacity spigot," said Duncan Clarke, chairman and chief executive officer of Global Pacific and Partners International, an independent energy advisory group.

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Interesting couple of articles in the Guardian today (17/6/3), concerning the destabilisation of local economies, by the increasingly corrupt and chaotic US-led African oil boom. Guardian Special Report on Oil.

Very interesting article added to that Guardian Special yesterday - wasn't there first time I looked:

US oilmen fight Blair on transparency

US oil companies were fighting yesterday to prevent an anti-corruption initiative being made mandatory at an industry forum meeting in London assembled by Tony Blair.

ExxonMobil, ConocoPhillips and ChevronTexaco made clear they wanted a proposed code on the transparency of payments made to host governments left voluntary.

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Something else I keep running across reference to (but alas, not many details) is recent attempts being made by the US Securities and Exchange Commission (SEC) to clarify the definition of hydrocarbon 'reserves' and highlighting 'reserves reporting issues' within the industry.

I've long known that the way hydrocarbon reserves are reported by the industry tend to be a little on the optomistic side, but for the SEC to go banging heads together, there must be something seriously wrong.

Maybe they have drawn conclusions from the data they gathered during this excercise last November... who knows? At least the appear to recognise that there are 'issues'.


PS another good Colin Campbell article re: USGS

Article on reserve reporting

I was about to give this a sly bump () to try and provoke a little neo-con response, as none of the usual champions of free-market economics seem to want to touch this one with a sh*tty stick... but... there's no need to worry about it anymore... cos...

Guys!!! Guys!!! Listen up!!!

I may have solved the global energy crisis!!!

All we need is huge dynamo, a huge elastic band, a shovel and directions to George Orwell's final resting place...

Originally posted by Backatcha Bandit
I was about to give this a sly bump () to try and provoke a little neo-con response, as none of the usual champions of free-market economics seem to want to touch this one with a sh*tty stick... but... there's no need to worry about it anymore... cos...

Guys!!! Guys!!! Listen up!!!

I may have solved the global energy crisis!!!

All we need is huge dynamo, a huge elastic band, a shovel and directions to George Orwell's final resting place...

Click to expand...

Woof

One of the unspoken reasons for joining the Euro, is that there is a movement among many Oil producers to start trading Oil in Euro's and that UK involvement (as a relevant producer) is essential.
Of the many upsides, it means that the US can't just going on printing money to pay for !! ( insert your own bogey), and would have to obey economic standards.

newharper

Good point, Newharper.

Oil trading, whether from Norway to the Netherlands, Britain to Bermuda, or Bahrain to Bangladesh, operates through the US greenback.

The oil-dollar nexus is one of the foundations of the world economy that inevitably filters through to geopolitics. Recycling so-called petrodollars, the proceeds of these high oil prices, has helped the United States run its colossal trade deficits. But the past year has seen the quiet emergence of the 'petroeuro'.

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When will we buy oil in euros? (The Observer, Sunday February 23, 2003)

IIRC the UK is the 6th biggest exporter of oil to the US.

If the UK were to adopt the €uro, the tax levied on North Sea Oil would change from this:

Oil reserves are legally the property of the crown. In most countries, companies which extract reserves pay the country for what they take away, through royalties and taxation. Yet in Britain, the only charge oil companies pay to the government is corporation tax, which they have to pay anyway. In other words, they take away the oil for free, and go on to sell it at a healthy profit.

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Pump and circumstance (The Guardian, Wednesday October 4, 2000 - very informative article).

Also of interest is the US EIA page on Norway, who 'was the third largest oil producer in the world' (in 2001) and, like the UK, draws on the North Sea reserves.

Proven Oil Reserves (1/1/02E): 9.4 billion barrels
Oil Production (2001E): 3.4 million barrels per day (bbl/d), of which 3.1 million bbl/d was crude oil
Oil Consumption (2001E): 0.2 million bbl/d

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(According to the French and American method of numeration, a thousand millions, or 1,000,000,000; according to the English method, a million millions, or 1,000,000,000,000. It's a US website, so I make it around 7 1/2 years).

"In most countries, companies which extract reserves pay the country for what they take away, through royalties and taxation. Yet in Britain, the only charge oil companies pay to the government is corporation tax, which they have to pay anyway. In other words, they take away the oil for free, and go on to sell it at a healthy profit."

Er... What the fuck!?

BB, got any links or anything that explains this more... I don't get it.

Well, there's the Inland Revenue...

...not sure it counts as an explanation, tho.