One popular new lie is that US oil production is suddenly so robust that America is about to become a leading world oil exporter again - which is completely untrue. The lie arises at the intersection of wishful thinking and the willful misuse of statistics. It was trumpeted by the appallingly credulous Tom Friedman in his Sunday New York Times column, of all places, and it shows how effective the oil and gas industry's propaganda campaign has been.
A lot of the wishing comes out of the shale oil and shale gas sectors. Those TV commercials you see around the news hours on the cable networks are designed to extract investment capital from elderly people who have been swindled in the bond markets and don't know where to stick their dwindling retirement funds. Shale oil and gas must seem like a good bet to them, especially the ones marooned in retirement housing clusters in dismal places like Arizona and Florida, where not being able to drive is a virtual death sentence.
The US government is in on this propaganda offensive, especially the Department of Energy's Energy Information Agency (EIA), which routinely issues overly optimistic reports about future oil production. The political spin is a quixotic effort to promote another commonly touted lie about the future: that the US is approaching a point of "energy independence." You'll know we got there when you have to walk to your new job weeding the potato fields. The mendacity behind this propaganda is strictly the wish of politicians to avoid telling voters the truth, out of sheer cowardice for the consequences. US Energy Secretary Steven Chu will go down in history as a pathetically passive quisling, who thought he was honest and patriotic by standing in the background and keeping his mouth shut.
In fact, a lot of the propaganda behind the current madness is based on the incapacity of Americans to imagine daily life without all the cars. One very active drummer on the propaganda scene is John Hofmeister, former CEO of Shell Oil. About a week ago he debated Tad Patzek, a petroleum engineer from the University of Texas. Hofmeister's rap is based on one central fallacious idea: that American life can only continue if we keep all the cars and trucks running. Any other outcome is unthinkable, off the table. To put a finer point on it, he insists that our national identity and destiny are tied to "personal transportation," code for car dependency. The debate was therefore absurd and Patzek was way too polite. He never challenged Hofmeisiter's core idea.
The public's gross misunderstanding of these issues arises over a set of mis-statements made in recent years especially focusing on the Bakken shale oil basin on North Dakota, the various shale gas plays around the country, and the tar sands of Canada (which so many spinmeisters seem to regard as belonging to the United States). The true state of the US oil industry is that we only barely stalled a 40-year decline in oil production by throwing massive amounts of money (capital) at oil reserves that are very expensive and difficult to get. In so far as we've entered the terminal stage of a long debt cycle, one thing we can be sure of is a shrinking pool of real capital investment. Hence the frantic propaganda effort to funnel remaining available money into the shale plays.
A companion fantasy to all this is that the US has a hundred year supply of natural gas. President Obama is guilty of this whopper. (One commentator, financier Bert Dohmen, made the ridiculous claim in a recent podcast on the Financial Sense News Network, that the US has a thousand year supply.) These are the kinds of irresponsible statements that will eventually inflame a public yet again swindled by authorities they desperately want to trust. The truth is we probably have perhaps a seven-year supply of shale gas, and maybe 20 of all gas including the regular old conventional gas. And even that could easily be reduced by the disorders in capital formation now underway in the destabilizing banking sector.
In any case, all this wishing and lying is about to collide with price volatility to make the American voting public absolutely batshit crazy with dread and anger. That, of course, will only prompt more lying, whopper-spinning, and grievance-flogging in the political arena. It will be nearly impossible for the public to evaluate reality. In the meantime, those disorders in banking and financial markets are close to running out of control. Events are tending ever closer to criticality. I believe they will be expressed in political violence around the major party conventions this summer. Those will be interesting fog-lifting weeks.