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Peak oil and geopolitics - Jan 22

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Many more articles are available through the Energy Bulletin homepage


The Geopolitical Consequences of Peak Oil
(video and text)
Michael T. Klare, ASPO-USA via EV World
You'll forgive me if I sound a little shrill," began Professor Michael T. Klare, the author of "Resource Wars" and its sequel "Blood and Oil", who directed his presentation at the 2006 Association for the Study of Peak Oil conference at Boston University to the families and loved ones of young people under 25 "who may chose to or be coerced to put on the uniform of the United States military."

Volatile words that could easily be construed as un-American, but meant to "speak truth to power, " as another speaker at the conference, Randy Udall of the distinguished Udall family of politicians and environmentalists, put it.

Klare pointed out that there are two aspects of peak oil: the famous "Hubbert's Peak" of the oil production bell curve in which less and less oil is produced as oil fields and oil provinces go into depletion; and the fact that all the easy, safe oil is pumped first and the harder to reach, more dangerous, heavy oils are left to exploit later. The latter point, he contended, is not talked about as much. This is the oil in deep waters and Arctic regions and in politically unstable regions of the world that will be very costly to extract technically, monetarily and politically.
(published 22 Jan 2007)
Klare has just published a series on "Energo-fascism" (Part 1 and Part 2).


The new Iraq strategy

Henry A. Kissinger, Khaleej Times (UAE)
PRESIDENT George W Bush’s bold decision to order a “surge” of some 20,000 American troops for Iraq has brought the debate over the war to a defining stage. There will not be opportunity for another reassessment.

The Baker-Hamilton commission has powerfully described the impasse on the ground. It is the result of cumulative choices - some of them enumerated by the president - in which worthy objectives and fundamental American values clashed with regional and cultural realities.

...But under present conditions, withdrawal is not an option. American forces are indispensable. They are in Iraq not as a favour to its government or as a reward for its conduct. They are there as an expression of the American national interest to prevent the Iranian combination of imperialism and fundamentalist ideology from dominating a region on which the energy supplies of the industrial democracies depend.

Henry A Kissinger, a former US secretary of state, is considered the architect of US foreign policy during the Cold War
(19 Jan 2007)
The original is a long analysis and argument for continued U.S. involvement. Emphasis added. The proposition that the United States is in the Middle East to ensure energy supplies is a familiar one, and common wisdom in peak oil circles. However, it is significant that Henry Kissinger should say so.

Not sure why Kissinger's piece should show up in the Khaleej Times (United Arab Emirates). The short bio of Kissinger is rather grandiose - the Cold War lasted many decades, starting in the late 40s. Kissinger only served during 1969-1977, though it is true that his influence was considerable. -BA


The draining of Africa’s wealth

Patrick Bond and Lee Sustar, Socialist Worker viz Znet
Q: LET’S START with the process by which the new imperialism relies on the extraction of resources at ever-cheaper prices.

A: We are in a confused period, because since 2002, commodity prices--minerals, energy and even cash crops--have been on the rise. But many people will agree that it’s a small upturn in a commodity-price cycle that since the 1970s has been on a dramatic decline. It’s that sense in which multinational corporate power, and fealty to that power by African elites, has reached unprecedented peaks now.

This has become so extreme that even the World Bank has recognized that there’s no basis for economic development from the extraction of resources under the present regime. A little-known World Bank report, "Where is the Wealth of Nations?" which was published on the Web site this year, has even acknowledged the wealth drainage.

For example, in Gabon, Gross Domestic Product (GDP) per capita in 2002 was $3,370, which is fairly high because of oil wealth. But net savings per capita is negative $1,183. That’s the most extreme case. But the pattern is true of virtually all of the African resource-extractive economies. The two most intensive cases, by the way, Angola and the Democratic Republic of Congo (DRC), aren’t even listed because they don’t have enough data.

There you see the process of extraction of Africa’s wealth without reinvestment. This is combined with capital flight by African elites--as well one other factor, the incredibly high GINI coefficient [a statistical measure of social inequality]. These countries are really the worst in the world for inequality, for relative capital flight, and for the extraction of resources without reinvestment.

PATRICK BOND is a political economist and activist at the University of KwaZulu Natal in South Africa. He is the author of numerous books on Africa, most recently, Looting Africa: The Economics of Exploitation.
(21 Jan 2007)
In Africa, the Middle-East, Latin America and Russia, the trend seems to be a nationalistic re-assertion of control over natural resources, especially oil and NG. -BA


Trade, Transportation and the Chinese Finger Trap

Nate Hagens, The Oil Drum
One of the central underpinnings of neo-classical economics is trade. And one of the central tenets of trade is the the Ricardian theory of comparative advantage. Trade (in theory) benefits both parties because they are better off after the exchange. But our international trade system has, by baby steps, become completely dependent on crude oil. By air, water, land or rail, oil accounts for 99% of all transportation energy. As we move up the complexity chain in the products that make up our daily lives, are we moving further into a Chinese finger trap where there is no backing out?

This post will examine the theory of international trade and the hierarchy of goods transport, production and consumption. It is quite possible that in the next decade, the increase in price (or the decreasing availability) of oil, will offset the benefits of many types of trade.

The pursuit of economic efficiency, through increasingly diverse and extensive global trade has glossed over two important facts which this post will examine: 1)higher oil prices in long distance transport must at some point exceed (economically or otherwise) the benefits achieved from some trade and 2)a complex global trade system is gradually but pervasively decreasing the ability for localities, regions and nations to be self sufficient - so many of our supply chain inputs are imported that a large increase in oil prices may resurrect import substitution policies, not only for less developed countries, but for the US and rich nations as well.

... THE BOTTOM LINE

1. We need oil for more than just driving. It is embedded in almost everything. Unless you're Amish, Aleutian, or have alot of friends, oil is life in the USA (at least currently).

2. High oil prices will eventually make certain types of trade prohibitive.

3. Those nations, regions, communities and families that produce lower on the left graph and consume lower on the right graph will have an advantage when transportation costs increase. Those communities using predominantly rail and water transport will have advantages over those more dependent on truck and air, everything else being equal.

4. As is occuring in some South American nations currently (Peru and Venezuala come to mind), a return to the import substitution model away from the so-called Washington consensus seems inevitable. However, remember the supply/demand wedges in the Hirsch/Bezdek report showing how rapidly production shortfalls could occur. Local, regional and national action needs to be taken soon because of the required long lead times.

5. In rich nations, in addition to conserving, it will be advantageous to begin to be happier with 'less' because the delta of 'desires' may change slower than that of 'things' available in the future, relative to other countries (e.g. Europe and Africa) that exhibit lower energy footprints. In other words, though the USA can easily get by with half as much energy-intensive stuff and conveniences, an abrupt change to this level will be much more mentally painful than a gradual one.

In conclusion, as a thought experiment, the next time you go to your nearest box store, look at the gazillion products on display. Try to imagine where they come from, where their parts come from, and how that supply chain might change when new oil production fails to match decline rates of older wells. While you are there, you might notice how many of the myriad products improve yours or your friends lives, and how many do not.
(22 Jan 2007)

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