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Russia-Ukraine: A Market Dispute

Steve LeVine, The Oil and the Glory, Business Week
Are the Russians and Ukrainians simply fated to go to the mat every year about this time, causing grief to their neighbors? Or is something else at work in their antagonism?

The philosophical answer is that, while it’s hard to imagine these two former Soviet states living as friendly neighbors any time soon, the current dispute is a separate matter.

It can be reduced to a difference of outlook: Do you expect oil prices to rise to $60 a barrel this year, or to drop back down to between $30 and $40 a barrel? (Oil has surged in the last two trading days to about $46 a barrel because of the fighting in Gaza.)

In Europe, natural gas prices follow oil, and Russia is clearly of the consensus view that oil will average somewhere in the neighborhood of $60 a barrel this year. That corresponds to a natural gas price of about $350 per 1,000 cubic meters. (Here’s the loose formula to get the natural gas price: divide the oil price by six, then multiply the result by 35.3).

Hence the claim by Russian Prime Minister Vladimir Putin that the demand by Gazprom, Russia’s natural gas behemoth, for $250 per 1,000 cubic meters from Ukraine this year amounts to a “humanitarian gesture.”

Ukraine, however, has embraced oil’s most recent price band. It’s arguing that oil will average $40 a barrel this year, or $235 per 1,000 cubic meters of natural gas. That’s precisely what Ukraine has counter-offered to Gazprom.
(3 January 2009)

The carbon footprint of nuclear war

Duncan Clark, Guardian
Just when you might have thought it was ethically sound to unleash a nuclear attack on a nearby city, along comes a pesky scientist and points out that atomic warfare is bad for the climate. According to a new paper in the journal Energy & Environmental Science, even a very limited nuclear exchange, using just a thousandth of the weaponry of a full-scale nuclear war, would cause up to 690m tonnes of CO2 to enter the atmosphere – more than UK’s annual total.

The upside (kind of) is that the conflict would also generate as much as 313m tonnes of soot. This would stop a great deal of sunlight reaching the earth, creating a significant regional cooling effect in the short and medium terms – just like when a major volcano erupts. Ultimately, though, the CO2 would win out and crank up global temperatures an extra few notches.

The paper’s author, Mark Z Jacobson, a professor of civil and environmental engineering at Stanford University, calculated the emissions of such a conflict by totting up the burn rate and carbon content of the fabric of our cities.
(2 January 2009)

Time to Kill the Oil Beast

Michael T. Klare, Newsweek
America’s overreliance on petroleum is the source of all its energy problems.

… The next president risks devoting weeks and months to promoting a bold energy plan only to run into gridlock as key components get bogged down in congressional squabbling. High expectations could turn to bitterness as the optimists are forced to confront political and economic realities.

To prevent that, it’s essential that the next president focus less on the nuts and bolts than on the overall objective of the new energy plan: namely, where it should lead. Although both candidates talked about energy reform with great passion, neither offered a clear answer to that question. But the next president should boldly announce that the United States will begin moving in the next few decades from a petroleum-centered energy system to one that is diversified, technology-driven and climate-friendly.

America didn’t always rely on imported oil. Back in the ’50s and ’60s, the United States was virtually self-sufficient and produced vast quantities of relatively inexpensive crude. Around this cheap and versatile fuel, the United States built an impressive civilization—one featuring universal car ownership, highways stretching to the horizon, endless suburban tracts, affordable airline travel, malls, Disneyland and other aspects of the American Dream. But the United States no longer produces enough oil to sustain this civilization—yet it continues to rely on petroleum for a huge proportion of its energy needs.

Klare is the Five College Professor of Peace and World Security Studies at Hampshire College and author of “Rising Powers, Shrinking Planet: The New Geopolitics of Oil.”
(31 December 2008)