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National energy policies - Dec 6

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To Sow the Oil, or Give it Away?

Jonah Gindin, Alberta Views via Znet
Canada and Venezuela are pursuing very different oil policies. In the war of the wells, whose investment will bring the biggest return?
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With the recent surge in oil prices, long-standing debates about Canadian and Albertan oil policy have been infused with new vigour. Is Canada getting the most out of this precious natural resource? What are we doing with our wealth?

Canada and Venezuela represent the most important sources of oil outside the Middle East-and as heavy oil extraction methods improve, they may surpass even that black-gold mine. But their approaches to oil revenue could not be more different.

Venezuela's oil industry was very similar to Alberta's in the early- to mid-1990s, when US-promoted neo-liberalism-“free trade” and the privatization and deregulation of the oil industry-was implemented. But when the controversial yet popular Hugo Chávez was elected in 1998, Venezuela embarked on a transformative experiment, “re-nationalizing” the state oil company.

With the country’s oil-based income increasing exponentially, Venezuela has invested heavily in social programs. According to the Venezuelan National Statistics Institute, poverty rates have declined from 49 to 37 per cent since Chávez assumed office. The Chávez administration has presented a serious challenge to neo-liberalism in Latin America by developing a social-democratic model with a sharp revolutionary edge. This process was made possible by Chávez's successful mobilization of poor Venezuelans into a mass movement.

Canada’s oil sector is highly regionalized, with royalty rates and the bulk of corporate taxes set and collected at the provincial level. Alberta Premier Ralph Klein has pursued diametrically different policies than Chávez. Despite its business-friendly approach, the Klein government has presided over huge surpluses over the past few years. Nevertheless, though social spending has increased marginally over this period, it remains below the level it reached in 1993 before being slashed by Klein.

Were Alberta to begin demanding a bigger piece of the oil-revenue pie, would it end up being invested in the public good? Would it inspire (or require) popular mobilization along the lines of the Venezuelan experience?
(4 Dec 2006)


Australia's energy future more costly

Benjamin Lester, Cosmos Online
Australia can help in the global effort to fight climate change without ruining its economy, according to the final report of the Energy Futures Forum.
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SYDNEY: Reducing carbon greenhouse gas emissions now will be cheaper for Australia than cleaning up the environmental damage that results from doing nothing, according to a new report.

The report, entitled The Heat is On: The Future of Energy in Australia is the final report of the Energy Futures Forum (EFF), a two-year long research project into the future of energy in Australia.

"We looked at how much it would cost to do mitigation in a range of different scenarios out to 2050 and we asked, 'what's the minimum damage that could be done that would [offset] the cost of the mitigation?'" said EFF member John Wright, of the CSIRO, Australia's national science agency.

...For consumers, retail electricity prices will increase between 7 and 20 per cent by 2050 due to carbon offset costs, but those increases will be below the change in real income per capita in Australia, which is expected to rise by over 100 per cent in the same period.

While electricity for households will likely remain affordable, energy-intensive industries like steel and aluminium production could suffer. According to Wright, "There's no doubt about it: if we want to make some serious cuts in greenhouse gas emissions there is going to be some pain to some parts of industry. The question is how do we minimise that pain?"

Worldwide cooperation in addressing climate change could lessen those effects by reducing the economic disadvantage caused by high energy prices.

Unlike the group behind the British report, the EFF brought together stakeholders in the future of energy in Australia, from government, industry and the community, to discuss and work together on the issue. "That was the whole point of the EFF," said Wright. "We decided that we would get together as diverse a group as we possibly could." The CSIRO modelled the scenarios that the Forum came up with, and then returned their models to the Forum for discussion.
(5 Dec 2006)


Spending spree in Russia is fueled by its oil and gas

James Brooke, Bloomberg News
Even Putin concedes: 'This golden era... can't last.'
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In central Moscow, construction cranes loom over the Kremlin, as hotel and office towers rise to accommodate Russia's newly minted companies and the flood of foreign business visitors. Downtown apartments that cost $100,000 a few years ago now go for $1 million.

On weekends, shoppers by the thousands line up behind cash registers at the 150,000-square-meter Tyoply Stan suburban mall, loading up on home furnishings, televisions and cell phones. Stockholm-based Ikea, which owns the mall, reported it welcomed 52 million shoppers in 2005, making it the most-visited shopping center in Europe. Moscow is adding 100,000 cars to its roads every year.

Across Russia, consumer loans doubled in the first nine months of 2006 to $80 billion. The country has seen eight straight years of economic growth, with expansion for 2006 estimated at 7 percent, according to Economy Minister German Gref. Bankrupt a decade ago, Russia wrote $23.7 billion in checks Aug. 21 to repay government debt run up during the 1998 ruble crisis, in which it defaulted on loans and bonds.

Much of Russia's new prosperity can be traced to a single source. "Russia's economy is about oil," says Natalia Orlova, chief economist at Moscow-based Alfa-Bank. Oil and gas account for 65 percent of Russia's exports and 60 percent of federal tax receipts. "Consumption is financed by oil revenues," she says.

Russian President Vladimir Putin is the first to point out that this golden era of energy can't last. "The main task of the government in the near term is to diversify our economy," Putin said Oct. 25 in a three-hour, nationally televised question-and-answer session.

Russia is the world's largest gas exporter and second-biggest oil exporter, after Saudi Arabia. The 92 percent rise in petroleum prices in the last three years has swelled the coffers of the big oil and gas companies and of the government.

The Kremlin's hard-currency reserves jumped more than 65 percent in the year ended Nov. 17, to $279 billion, more than the reserves of the entire euro zone. Russia has also profited from high prices for aluminum, gold and copper. Oil, gas and other commodities now account for 80 percent of Russia's exports.
(3 Dec 2006)


Venezuela: Minister Counselor Kabboul discusses effect of Chavez's re-election on energy policy
(video and transcript)
E&E TV
With Hugo Chavez being re-elected to another term as president of Venezuela this week, the future of the U.S./Venezuela relationship remains in question. During today's OnPoint, Fadi Kabboul, minister counselor for energy affairs at the Venezuelan Embassy to the United States, discusses Venezuela's desire to keep energy policy and politics separate. He talks about the CITGO-Venezuela Heating Oil Program offered to low-income U.S. households, describing it as a "people to people" program created outside of the political realm. Kabboul also addresses concerns over the rising price of oil.
(6 Dec 2006)


Chavez wants to build longest gas pipeline in the world

JENS ERIK GOULD, The New York Times
GÜIRIA, Venezuela - President Hugo Chávez is not modest about his energy plans. He wants to build a 5,000-mile natural gas pipeline that stretches from this remote northern tip of South America to the bottom end of the continent.

Erecting possibly the longest pipeline in the world is the centerpiece of a broader effort by Mr. Chávez to strengthen ties among Latin America’s economies and shrink their dependence on the United States.

But from the outset, the $20 billion “great gas pipeline of the south,” planned to be more than twice as long as the United States border with Mexico, has generated political and environmental controversy at home and abroad.

...Though Venezuela could reap higher profit margins by exporting liquefied natural gas to higher-price markets like the United States, Venezuelan officials acknowledge that is not their goal.

“It’s not that the economic part doesn’t matter,” said Ángel González, general director of exploration and production at the Energy Ministry, “but it’s really not the most important part of this project.”
(2 Dec 2006)

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