Tuesday, April 20, 2004
The Dutch hits the fan. . .and it's just the beginning
The saga at the top of Royal Dutch Shell continues today with the expected departure of CFO Judith Boynton. The tale of her departure came along with revelations of an e-mail that stated several senior bosses "knew for almost two years that the company had publicly overstated the size of its reserves."
Of course, this is a business section column dealt with as an upper-echelon-shenanigans-in-the- boardroom story. The reality is likely much worse and needs a little background.
Shell got into trouble for getting caught overstating the petroleum reserves it had, which for an oil company, is quite literally their money in the bank. This was first noticed in the oil fields of Oman, where Shell has the majority of the holdings. It became apparent that Oman just wasn't putting out the volume of oil that fields with those "proven" reserves should have been pumping. This led to Oman restating downward its reserves--an action that went scurrying up the ladder all the way to those nice folks in Holland.
The real problem starts back in 1986 however. It was then that OPEC decided to revise its policy so that the amount any nation could pump was relative to its proven (supposedly measured, although it's a very imprecise science at best) oil reserves. Eager to make the short term cash, and clearly with the tacit blessing of oil companies world wide, OPEC nations *gasp!* suddenly discovered their reserves were much higher than they thought in 1985, or any previous year. Sometimes double or even more.
The very real problem is this--when petroleum scientists and nerdy left-wingers alike try to predict how much oil is left in the ground, they use these post '86 estimates, because they are the only official numbers available.
But, as should be clear from the above, those numbers are likely gross exaggerations to begin with. Which means Oman and Shell are not just aberrations of financial greed and corrupt corporate malfeasance, rather they are also the canaries in the coal mine. The borrowed time we all knew we were living on vis-a-vis the petroleum economy just got a little shorter. So what do we do? Well, Investors Business Daily just led with an article saying that now was a great time to invest in oil futures. So that's right. . . no need to worry about how to avoid civilization-wide catastrophe in the next decade or so, no need to plan to conserve what bit of that resource remains, let's get in there and ride that oil crunch to personal prosperity!!!
Call Nero. . . we need a fiddler, and fast.
The saga at the top of Royal Dutch Shell continues today with the expected departure of CFO Judith Boynton. The tale of her departure came along with revelations of an e-mail that stated several senior bosses "knew for almost two years that the company had publicly overstated the size of its reserves."
Of course, this is a business section column dealt with as an upper-echelon-shenanigans-in-the- boardroom story. The reality is likely much worse and needs a little background.
Shell got into trouble for getting caught overstating the petroleum reserves it had, which for an oil company, is quite literally their money in the bank. This was first noticed in the oil fields of Oman, where Shell has the majority of the holdings. It became apparent that Oman just wasn't putting out the volume of oil that fields with those "proven" reserves should have been pumping. This led to Oman restating downward its reserves--an action that went scurrying up the ladder all the way to those nice folks in Holland.
The real problem starts back in 1986 however. It was then that OPEC decided to revise its policy so that the amount any nation could pump was relative to its proven (supposedly measured, although it's a very imprecise science at best) oil reserves. Eager to make the short term cash, and clearly with the tacit blessing of oil companies world wide, OPEC nations *gasp!* suddenly discovered their reserves were much higher than they thought in 1985, or any previous year. Sometimes double or even more.
The very real problem is this--when petroleum scientists and nerdy left-wingers alike try to predict how much oil is left in the ground, they use these post '86 estimates, because they are the only official numbers available.
But, as should be clear from the above, those numbers are likely gross exaggerations to begin with. Which means Oman and Shell are not just aberrations of financial greed and corrupt corporate malfeasance, rather they are also the canaries in the coal mine. The borrowed time we all knew we were living on vis-a-vis the petroleum economy just got a little shorter. So what do we do? Well, Investors Business Daily just led with an article saying that now was a great time to invest in oil futures. So that's right. . . no need to worry about how to avoid civilization-wide catastrophe in the next decade or so, no need to plan to conserve what bit of that resource remains, let's get in there and ride that oil crunch to personal prosperity!!!
Call Nero. . . we need a fiddler, and fast.
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