SMART Letter #66
Oil Literacy
January 16, 2002

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #66 -- January 16, 2002 Copyright 2002 by David S. Isenberg -- "Enran" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Hubbert's Peak: A Guide to Oil Literacy > Advt: Seminar on Network Reliability & September 11 > Opera: An Alternative Web Browser > Quote of Note -- U.S. Representative John Dingell > Privacy as Competitive Advantage > Erratum, Apologia, Antidisembarrassmentarianism > Conference on my Calendar > Copyright Notice, Administrivia ------- HUBBERT'S PEAK: A GUIDE TO OIL LITERACY by David S. Isenberg If you like to think about infrastructure, _Hubbert's_Peak_ (by Kenneth S. Deffeyes, Princeton University Press, 2001) is an important book. If you're an investor, the book will offer guiding perspective. If you appreciate the relationship between telecom and energy, and you'd like the world to stay out of the two-cans-and-a-string zone, the concluding chapters of the book will bother you. _Hubbert's_Peak_ is a short course in oil literacy and an easy, enjoyable read. Oil, like telecom, is a critical infrastructure of modern society. Like telecom, oil technology makes a chunky gumbo when mixed with economics, politics and business. Understanding oil is a prerequisite to understanding how petrodollars and petropolitics swirl around the world's power centers. But unlike telecom, humans do not create the oil supply, and the oil supply is not -- emphatically not -- doubling every 18 months. The book is equal parts Okie and Ivy. To author Deffeyes, oil is personal. He is the son of an Oklahoma oilman who, "went to nine different grade schools in the first eight grades", but found consistency each summer with an oil- related job. Then he went to the Colorado School of Mines with the family business in his heart, began his career at Shell research and wound up as Professor of Geology at Princeton. Despite Princeton, oil remained in Deffeyes' blood. "As I drive by those smelly refineries on the New Jersey Turnpike," Deffeyes writes, "I want to roll down my windows and breathe deeply." _Hubbert's_Peak_ is more than a memoir. It is a natural history of oil. It begins with how oil is formed. Before reading the book, I knew that oil came from organic matter. Now I know something about how organic matter accumulates in pools and how it gets buried to the depth of "the oil window" a region between 7500 feet and 15,000 feet below the surface of Earth, the place where temperature and pressure are high enough to crack organic molecules, but not so high that the molecules are cracked into such small pieces that only natural gas results. There are chapters on why and how discoverable oil deposits form, how people find these pools and how oil drilling works. As I was pulled along willingly by Deffeyes' personal anecdotes, I learned about anticlines, salt domes and angular unconformities. I learned about source rock, reservoir rock and cap rock. I learned about porosity and permeability. I learned about the 'downhole logging instruments' invented by Pierre and Marcel Schlumberger, about the drilling methods of Erle Halliburton, and about the 'tricone' drill bit invented by Howard Hughes the first. I learned about seismology, gas-liquid chromatography and the study of local gravity variations. I learned about the very first oil wells, drilled with 'spring poles', and I learned about pumping mud, how to drill sideways and what happens in a 'blowout'. All of these facts are basic to oil literacy, and Huppert's Peak is a painless, effective short course. But the book is more than that. Deffeyes not only looks back, he also provides a prospectus for the future. The book's namesake, M. King Hubbert, was another Shell research geologist. For a time he was Deffeyes' mentor. In the 1950s, Hubbert took a careful look at known U.S. oil reserves, at the rate of production of these reserves and at the discovery rate of new reserves. Hubbert then made a couple of educated assumptions about statistical distribution shapes, and he concluded that U.S. oil production would peak in 1972 and decline thereafter. The orthodox geological community, having projected a more optimistic oil future, reacted with vilification and denial. The actual year U.S. oil production peaked was 1970. Deffeyes tuned up Hubbert's methodology and applied it to world oil production. He looked at world reserves, production rates, and discovery rates. A key principle here is that oil discovery is not random. Big oil fields are discovered sooner. Even if there is a huge undiscovered oil field somewhere on Earth, it is possible to estimate its size and its probability of discovery. Deffeyes refined some of Hubbert's statistical assumptions. He concludes that world oil production peaks in 2003. Then he turned his attention to the question of when oil production begins to decline -- his answer, a bit tongue- in-cheek, is 2004.7. But he sternly warns, "There is nothing plausible that could postpone the peak until 2009. Get used to it." Deffeyes is unequivocal -- his predictions are not presented as scenarios. He reveals his findings as slow- motion certainties of physical science guided by hard-core estimation methods. He says, "This much is certain: no initiative put in place starting today can have a substantial effect on the peak production year. No Caspian Sea exploration, no drilling in the South China Sea, no SUV replacements, no renewable energy projects can be brought on at a sufficient rate to avoid a bidding war for the remaining oil." Deffeyes characterizes the coming energy gap as a "bidding war" but I fear he understates. In contrast to oil production, world energy use 1999-2020 is expected to rise 66% (USA Today, 1/10/02). Where will this new energy come from? Ominously, Deffeyes entreats, "Let's hope that the war is waged with cash instead of with nuclear warheads." _Hubbert's_Peak_ concludes with a chapter on the future of fossil fuels and another on alternative energy. It is a hard-nosed look -- after all, Deffeyes is an oilman, not an environmentalist or a slow-growth advocate -- but it leaves no cause for comfort. To those who believe in the supremacy of market forces, who believe that more capital for exploration will yield more oil, he reminds that the 1930s were lean depression years when capital was scarce, but these years saw the largest increase in oil production in history -- and, for that matter, for all time. He warns that alternative energy schemes are too little too late -- that we will necessarily face a decline in our standard of living. He proposes that nuclear energy is the strongest future energy alternative, that it has a bum rap for being so closely linked to nuclear terror, and that it deserves re-examination and renewed efforts by scientists and engineers. I wish it weren't so. I wish Deffeyes had devoted more than token attention to conservation, to efficiency, to Buckminster Fuller's principle of 'doing more with less'. But no matter what I wish, and no matter how hard the world tries to deny or discredit Deffeyes' message, _Hubbert's_Peak_ is due to arrive on Earth in 2003 -- next year! After that, there will be less energy for our telephones, our computers, our servers, our LANs, our automobiles, our airplanes, our factories, and the heating and cooling of the air that surrounds us. We will need to get used to it. Fast. ------- ADVT: NETWORK RELIABILITY & SEPTEMBER 11 -- A SEMINAR by David S. Isenberg SMART People Roderick Beck (see SMART Letter #20) and Andy Snow (see SMART Letter #62) have put together a half-day seminar that speaks to network reliability in the face of disaster. Andy Snow, an Assistant Professor at Georgia State, has been working with FCC reliability guru Whitey Thayer to understand FCC outage data. The FCC has collected years of ILEC mandatory outage reports (where over 30,000 people lose service for over 30 minutes). Snow has put together evidence that all over the PSTN there are subtle and not-so-subtle single points of failure where there shouldn't be, and he draws conclusions aimed at network remediation and future network design. Roderick Beck, formerly with AT&T's Office of the Chief Economist and now independent, has crafted a detailed analysis of what stayed up and what didn't on September 11, and why. Beck's photos of dusty daylight shining into Verizon's West Street (NYC) switching facility speak loudly. Snow and Beck just presented their findings to a major Asian PTT. They offer to present their seminar at your company too. I'm telling you this because, inc. is serving as agent for this seminar -- if you think you'd like the Beck and Snow Show at your company, please contact ------- OPERA: AN ALTERNATIVE WEB BROWSER by David S. Isenberg I'm a mid-tech kinda guy; software diversity is a Sunday religion for me. That is, I'm hooked on Windows98 because I don't want to spend Wednesday evenings at the local Linux user's group. But I use Eudora because it is easy to get, easy to use, and it helps control Outlook-spread viruses. On the other hand I tried Netscape 6, but it was bad -- so bad that I became an exclusive user of Microsoft's Internet Explorer -- until I discovered Opera. Opera is available no-charge at (surprise) It installed glitch-free the first time under my Windows 98 system and ran glitch-free from the very first try. It comes up fast, and operates fast. It has some cool features, like a search window that is part of the navigation bar, which defaults to Google, comes with a bunch of popular search engine alternatives, and lets you specify new search engines as you wish. As a bonus, one set of Opera bookmarks automatically point to my previously established Internet Explorer Favorites. You can operate Opera with gestures (e.g., hold the right button and sweep right-to-left to see the previous page) that become addictive once learned. After a couple of weeks, I ponied up the optional US$39.00 to become a registered Opera user. Opera has other features I do not find on Netscape 4 or Internet Explorer. It tells you how fast your page-snarf is progressing in a window at the bottom of the screen. It has a magnification function, so you can enlarge the entire page -- much more useful than Internet Explorer's "text size" function. It comes with a set of bookmarks, some of which I never heard of before, that seem to be selected on usefulness rather than business payola. I still have not tried many of Opera's features. For example, it comes with an email client that I haven't fired up. And there are Opera clients for Linux, BeOS, Mac, OS/2, etc. On the downside, occasionally I find a page that Opera does not render correctly that appears fine in Internet Explorer. But all in all, I have found that my effort to download, install and use Opera has been well repaid. [, inc. and Opera have no business relationship. The Opera folks have no knowledge of this review. I just published it because I like their product. -- David I] ------- QUOTE OF NOTE -- U.S. REPRESENTATIVE JOHN DINGELL (D, MI) "They felt me up and down like a prize steer." U.S. Representative John Dingell, age 75, co-author of the Tauzin-Dingell War-on-Telecom-Competition Bill, upon being strip-searched when his metal hip prosthesis triggered the metal detector at Washington DC National Airport. Quoted in Newsday, January 8, 2002. [I wonder how literal his prize-steer analogy was -- they must have felt his large, prominent bells. -- David I] ------- PRIVACY AS COMPETITIVE ADVANTAGE by David S. Isenberg These days you can Find Out Anything About Anybody With Your PC! Privacy, what's that? Back in 1997, AT&T floated a draft privacy policy past some of its employees, including me. I suggested that AT&T would attract customers with a strong declaration that customer privacy was absolute. It seemed patent to me that customers would choose a company that pledges privacy in preference to competitors that might use personal information intrusively. When I saw a recent EarthLink TV commercial, I had to laugh -- and applaud. The commercial shows a man and a woman flirting at a bar. In an intimate moment signified by promising eye contact, the woman writes her telephone number and gives it to him. The bartender says, "Hey, can I have that number?" and the customer down the bar says, "I'd like it too." The lucky guy with the phone number says, "Sure, five bucks." The woman looks hurt and angry. The announcer says, approximately, "If you're disgusted with how other ISPs treat your personal information, try EarthLink." Go EarthLink! I am proud to declare that, inc. inc. has a small, non-exclusive reciprocal business relationship with EarthLink. (I'm their customer and they're my client.) Notwithstanding, the paragraphs above have nothing to do with that relationship -- I never discussed this story with anybody at EarthLink. I trust that when my EarthLink friends read this piece they will understand that I'm sucking up sincerely. ------- ERRATUM, APOLOGIA, ANTIDISEMBARRASSMENTARIANISM by David S. Isenberg In SMART Letter #65 I said, "The most important telecom event in 2001 was that the Incumbent Local Exchange Carriers lost lines." I was wrong. Not only was I wrong, anybody reading it would have said, "Gaw! 'Most important', my elbow. What an idiot." I'm embarrassed. Undoubtedly I've lost credibility among my most perceptive readers. A writer who edits his own work edits the writing of a fool. So what *was* the most important event of telecom in 2001? It was this: I invested $100.00 in the stock market, mostly in telecom services and technologies, and I lost $92.50. Owa tafu liam. (Say this three times fast.) The most important event *in*incumbent*telco-land* in 2001 was the loss of second lines. I'm standing by this one. Scott Moritz was kinder to me (in Moritz Dispatch #91, 1/10/02) than I can be to myself. He said: "Last year, for the first time in telephone history, there were fewer local phone lines in operation than the year before. Astute industry gadfly and former AT&T scientist David Isenberg, of, calls it 'the most important telecom event in 2001'. "Hyperbole? Perhaps, but then Isenberg tends to see the big picture rather clearly, while the rest of us muddle through in the immediate haze. Sometimes it takes a guy like Isenberg to confront us with the significance of what's right below our noses." I'm flattered, because if you think Moritz is a nice guy, Chambers, Schacht, Armstrong, et al will disagree. But I'm still blushing. ------- CONFERENCE ON MY CALENDAR April 8-11, 2002, Seattle. VON (Voice on the Net). On April 10, at 9:35AM, I'll be leading a panel on "Financing Disruption" that was inspired by SMART Letters #64 and #65. The panel will feature CIBC analyst Stephen Kamman, an extremely rare public appearance by Roxane Googin, some other SMART People as I confirm their participation, and yours truly. My bottom line is that voice is a diminishingly tiny deal on The Stupid Network, but it still accounts for a disproportionate share of revenues. Come for the Googin-Kamman show, but stay to get the latest on SIP, the technology that will disrupt telco voice whether or not we get Fiber-to-the-X. More info at ------- COPYRIGHT NOTICE: Redistribution of this document, or any part of it, is permitted for non-commercial purposes, provided that the two lines below are reproduced with it: Copyright 2002 by David S. Isenberg -- -- 1-888-isen-com ------- [There are two ways to join the SMART List, which gets you the SMART Letter by email, weeks before it goes up on the web site. The PREFERRED METHOD is to click on and supply the info as indicated. The alternative method is to send a brief, PERSONAL statement to (put "SMART" in the Subject field) saying who you are, what you do, maybe who you work for, maybe how you see your work connecting to mine, and why you are interested in joining the SMART List.] [to quit the SMART List, send a brief "unsubscribe" message to] [for past SMART Letters, see] [Policy on reader contributions: Write to me. I won't quote you without your explicitly stated permission. If you're writing to me for inclusion in the SMART Letter, *please* say so. I'll probably edit your writing for brevity and clarity. If you ask for anonymity, you'll get it. ] ** David S. Isenberg, inc. 888-isen-com 908-654-0772 ** -- The brains behind the Stupid Network -- **