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A Crude Awakening

Stanford Alumni Magazine
Oil addiction threatens U.S. security and undermines its influence,
but faculty say our go-it-alone attitude is making things worse.
…when STANFORD gathered five faculty members to talk about the implications of U.S. dependency on foreign oil, we expected grave declarations of alarm. But their concern did not square with the growing chorus of citizens and elected officials about why reducing this dependency is so important.

On the next five pages, faculty from political science, economics, law and engineering explain why the debate about energy security is missing the point, and what they think needs to be done.

STANFORD: How would you frame the issue of dependency on foreign oil? What should we be concerned about?

David Victor: The problem is not dependence per se. In fact, dependence on a world market produces enormous benefits, such as lower prices. Nor is the problem that energy’s essential role in the economy means that dependence must be avoided. The real problem is that energy-oil, especially-doesn’t operate according to normal market principles. Something like 75 percent of the reserves of oil and gas are controlled by companies that are either wholly owned or in effect controlled by governments, and there’s enormous variation in how those companies perform. Some of them are just a disaster, like [Mexico’s state-owned oil company] Pemex, and others can work at world standards, like Saudi Aramco or Brazil’s Petrobrás.

Some of these governments, such as Venezuela, use oil revenues for political purposes that undermine U.S. influence. High prices do not automatically generate new supply or conservation, partly because suppliers can drop prices to undercut commercial investment in alternatives. Second, we have what has become known as “the resource curse.” There’s a lot of evidence that the presence of huge windfalls in poorly governed places makes governance even worse. Revenue that accrues to oil-exporting governments is particularly prone to being misspent, often in ways that work against U.S. interests.
(Nov-Dec 2006)
A good example of the thinking of that part of the U.S. elite that favors globalization and internationalism. Smart people, but the USA-centric thinking just sets my teeth on edge (as it does to some of our readers, to judge by the email).

BTW, the headline “Crude Awakening” is now officially a cliche, as is the quote “The Stone Age didn’t end because of a lack of stones…”


US, China failing to reach common ground on energy

As the world’s top two oil guzzlers, the US and China should have lots in common when it comes to energy policy.
But US experts see a difference in how the two countries view energy security, one that could undermine economic cooperation as the global titans vie for limited oil supplies in the future.

“Most everybody’s in favour of energy security,” said Daniel Yergin, an energy expert at the Cambridge Energy Research Associates. “There’s just a wide difference on what does energy security mean.”

To US politicians, including President George W Bush, it means cutting US import dependence by promoting home-grown fuels like ethanol, and reducing the risk of price shocks by relying on a variety of sources and suppliers.

To Beijing, it means locking up secure supplies in multibillion dollar deals, such as the ones cut in recent years in Venezuela and Canada, US officials say.
(28 Nov 2006)

U.S. Opposes Long-Term Gas Deliveries from Iran to Georgia

U.S. Ambassador to Georgia John Tefft announced that his country is opposed to a long term strategic cooperation between Georgia and Iran regarding natural gas deliveries.

In an interview, which was published on Monday, Nov. 27, by Tbilisi newspaper Kviris palitra, the diplomat said that Georgian authorities incorrectly interpreted the statement of Deputy U.S. Secretary of State Mathew Bryza that the White House won’t be opposed to Tbilisi using Iranian gas to overcome its energy crisis.

“We have understood when Georgia imported a small quantity of gas from Iran following a force majeoure situation when the gas link from Russia was broken and Georgia was left with no gas supplies in the winter. But long-term strategic cooperation in this issue [of gas deliveries] between Iran and Georgia is unacceptable to us,” the diplomat explained.

Ambassador Tefft explained that the United States put a lot of hopes on gas pipeline that will transport gas to Georgia from the Shakh Deniz deposit in Azerbaijan. “Using this project will give Georgia additional reliable energy source. We support Georgia’s energy independence and are making all the efforts in this direction,” the U.S. Ambassador said.
(27 Nov 2006)

NATO eyes greater role in energy security

Mark John, Reuters
NATO leaders will study at a summit starting on Tuesday whether the alliance should take more action to avert potential threats to energy supplies, for example by mounting patrols of key shipping lanes.

The talks in the Latvian capital Riga, the first NATO summit on former Soviet soil, come amid Western concerns that Russia is exploiting its vast energy wealth to gain political influence over import-dependent countries in Europe.
(27 Nov 2006)