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Global energy policy - July 18

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Many more articles are available through the Energy Bulletin homepage


"Energy security will be one of the main challenges of foreign policy "
Interview with Daniel Yergin

Der Spiegel
In a SPIEGEL interview, United States oil expert Daniel Yergin discusses fears of a global energy crisis, the growing confidence of oil-rich nations and changes in world politics caused by rising energy prices.

Spiegel: Mr. Yergin, Europe is dependent on Russian gas, Venezuela and Bolivia nationalize their oil industries, Iran threatens to use oil as a weapon. How secure is the world's energy supply?

Daniel Yergin: We are living in a new age of energy supply anxiety. A premium in the oil price of somewhere between 10 to 15 dollars a barrel reflects this heightened anxiety. What we see is the rebirth of 1970s-style resource nationalism that is riding on this crest of high energy prices. The balance of power has changed, the exporting countries are in a much stronger position today.

...Spiegel: What is the consequence of this shift in power?

Yergin: ...There is a significant re-orientation. The Russians are turning east to the Chinese -- to the Europeans' surprise. It always seemed to me that the relationship between Russia and China would shift from being based in Marx and Lenin to being based in oil and gas.

...We are currently experiencing a slow-motion supply shock, the aggregate disruption of more than 2 million barrels per day. This has a lot to do with the unrest in Nigeria, but also with the production loss after the hurricanes in the Gulf of Mexico, the decline in Iraq since the 2003 war, and the decline in Venezuelan output since 2002. So today we're standing at a historic juncture: After a quarter century, the great cushion of oil surplus production capacity that was created after the turbulences of the 1970s has been largely spent.

...The sky is not falling. We have done a worldwide field-by-field-analysis of exploration projects, which indicates that the production capacity could increase by as much as 20 to 25 percent over the next decade, including greater output of nontraditional sources like Canadian oil sands, and increased recoverability from existing wells.

Spiegel: So the whole idea of peak oil is nonsense?

Yergin: The image is misleading. A more relevant description would be a plateau in production capacity that might be reached in the fourth or fifth decade of this century. So the major obstacle to the development of new supplies is not geology but what happens above ground: international affairs, politics, investment and technology.

...In a world of increasing interdependence, energy security will depend much on how countries manage their relations with one another. That is why energy security will be one of the main challenges of foreign policy in the years ahead. Oil and gas have always been political commodities. But right now, it is more political than it has been for years.
(18 July 2006)


Temper tantrum
(The unrealistic view of the elite towards Russia and energy)

Jerome a Paris, European Tribune
It's been a bit frustrating for me to be away during the G8 summit as it was meant to discuss subjects that I know intimately (Russian gas and energy security) and that are prone to in my view erroneous and misleading coverage in the Western press. So I've decided to come out of my self imposed silence to react to a FT article, by Philip Stephens, whom I identify, rightly or wrongly, with the voice of the UK political establishment, and which I will presume reflects the common wisdom of these elites on the topic.

...The underlying theme is one of frustration, directed both at Putin for exerting his (undeserved) power, and our at own leaders, for failing to define and implement the energy strategy they should.

It reflects a number of assumptions and inconcistencies that I would like to flag, going throught this article line by line.

...as long as we are desperate for more energy, then Russia having oil and gas, and the means to deliver them to us via their transport infrastructure, then Putin holds 4 aces, and has no reason to indulge our silly fantaisies that Russia should provide us with Russia's oil and gas, no questions asked.

So far, Russia (and before it, remember, the Soviet Union) has been an extraordinarily reliable supplier of gas, and I see no reason to believe that this will change. Gas infrastructure creates co-dependencies and neither party can use the mutual dependency to any lasting profit - both lose out from conflict. Russia is currently benefitting from much higher oil and gas prices, caused by our reckless push for ever more energy to be burnt, and is reacting mostly benignly to what can only be described as the self-indulgent tantrums of a spoilt kid. We have no God-given right to the energy resources of the rest of the world, and Russia, despite their supposed decline or weakness, is unlikely to have its hand forced.

It's time to drop the sanctimonious tone and speak in good faith with Russia - or to work on reducing energy demand. Why is that so hard to understand - and to do?
(17 July 2006)
Not the most diplomatic of headlines, but I think Jerome is right to point out that the elites are confusing the world they would like with the world as it is. The big picture is that power is shifting as energy becomes more valuable. Countries dependent on foreign gas and oil and at a disadvantage. Related story with a similar point of view: The New American Cold War by Steven Cohen (Nation).

Also posted at Daily Kos
-BA


Russian energy model challenges OPEC

John Helmer, Asia Times
...The US-backed OPEC model assigns international priority to the Arab states. The Russian model assigns priority to the Central Asian alliance, including China, India, and Iran;
secondarily to Latin America (Venezuela, Brazil); andultimately Africa.

... Russia is offering a role (short of control) in upstream development of Russian energy resources. In exchange, he [Putin] wants to agree on a reciprocal role for Russian
state companies elsewhere, including the regional economic blocs that are represented at the G8 table - China, India, South America, and Africa. This framework
creates a mutual interdependency to protect the energy partnerships that are formed from unilateral pressures or attacks of the US type - economic, political, or military.

The security of Russian energy supply is thus to be contrasted with the unreliability of US behavior.

...Putin was responding to attacks on the Kremlin for not being democratic enough, according to the US model. But the Russian energy model is a counterattack that is much
broader in scope, and more fundamental. It is an invitation for the resource-rich developing states to join in the challenge to colonial-style relationships in the global energy market.
(18 July 2006)


Worldwatch report says rate of economic growth is destructive to environment

OnPoint, E&E TV
As the energy demands of the United States and other developed nations continue to rise, experts warn of the potentially damaging effects on the environment. During today's OnPoint Erik Assadourian, project director of the Worldwatch Institute's "Vital Signs 2006-2007," discusses the findings of this latest report and predicts a collapse of resources if the use of fossil fuels is not diminished. Assadourian talks about major societal destruction if the current rate of economic growth is not slowed. He also says a sustainable planet will not be achieved until there is a transition to renewables and biofuels.
(17 July 2006)

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