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Geopolitics - June 24

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Many more articles are available through the Energy Bulletin homepage


Tithing at the Crude Altar

Michael T. Klare, The National Interest
PRESIDENT BARACK Obama has often stated that one of his highest priorities is to vanquish the “tyranny of oil” by developing alternative sources of energy and substantially reducing America’s reliance on imported petroleum. But we will not be energy independent for the next thirty to forty years, even with a strong push to increase energy efficiency and spur the development of petroleum alternatives. During this time, America will remain dependent on oil derived from authoritarian regimes, weak states and nations in the midst of civil war.

Less and less crude will come from reliable suppliers in the Western Hemisphere. Given our continued dependence on imported oil, picking and choosing among our suppliers obviously would be ideal. But this is not an option. The oil market is thoroughly internationalized. Key traders draw on multiple sources of crude to satisfy the needs of refiners and retailers. Most importantly, a majority of the world’s remaining oil is controlled by countries that are not democracies, do not honor the rule of law and are certainly not noted for their pristine human-rights behavior. If anything, our reliance on these producers is likely to grow as output in the older producing areas of the Western Hemisphere declines and more and more of the world’s output is concentrated in Africa, the Middle East and the former Soviet Union.

In the past, the United States made an implicit bargain with our foreign energy suppliers; we will protect your government, supply arms to your military and overlook your human-rights violations in exchange for preferred access to your oil outputs. These arrangements reduce our political leverage, our moral authority and our ability to bargain with these states on other issues. We must accept the reality of our continued oil dependence and reframe our relationships so that the market, rather than guns, bloodshed and dictatorships, governs trade in crude. Contrary to popular belief, these petro-regimes need the United States more than the United States needs them. The tyranny of oil can be stopped.

ENERGY DEPENDENCE is our reality. At the beginning of 2009, the United States needed nearly three-fifths of its total oil supply to come from imports. To reduce this high level of reliance, most policy makers favor some combination of measures aimed at spurring conservation and expanding the supply of domestically produced fuels
(23 June 2009)



Oil rush: Scramble for Iraq's wealth

Patrick Cockburn, Independent (UK)
Critics said the war was all about the nation's lucrative fuel industry. Are they now being proved right? reports from Baghdad
---
For many Iraqis, the reason the US invaded their country in 2003 was to get control of their oil. I never believed this at the time. I thought that the US overthrew Saddam Hussein and occupied Iraq primarily because it wanted to reassert its power after 9/11 and believed the war in Iraq would be easily won.

It is only now, six years after the American invasion, that the battle for the control of Iraqi oil production is moving to the centre of politics in

Baghdad. On 29 and 30 June, the Iraqi government will award contracts under which international oil companies will take a central role in producing crude oil from Iraq's six super-giant oilfields over the next 20 to 25 years.

... The contracts have been heavily criticised inside Iraq as a sell-out to the big oil companies, which are desperate to get back into Iraq – oil was nationalised here in 1972, and Iraq and Iran are the only two places in the world where immense quantities of oil might still be discovered.

... The government made a serious miscalculation last year. It believed the oil price would stay around the $140-a-barrel mark. It raised government salaries and hired more employees – who now total at least two million, double the level under Saddam Hussein. Some 600,000 people work in the army, the police and the security apparatus. Expensive contracts were signed for the supply of electric plants and aircraft.

When the price of oil unexpectedly collapsed – though it has risen again in the past few months – the Iraqi government found itself broke. Its revenues are being swallowed up by the higher salaries, the rationing system and recurrent costs.

... Government in Iraq is all about oil, because it produces 95 per cent of the state's revenue.

... The government's desperate need to increase oil output, at a time when it does not have any money to invest, has given it no option but to turn to the international oil companies. The Iraqi Oil Minister, Hussain Shahristani, says he needs $50bn for investment which he does not have.
(21 June 2009)



Japan and China fight it out for right to mine lithium under Bond's battlefield

Leo Lewis, Times online
The desolate, sun-baked deserts of southwestern Bolivia are poised to become the energy battleground of the 21st century, with China and Japan staking early and aggressive claims in the great lithium land-grab.

Japan, observers say, may have won the first round, but, with its mainstream resource ambitions thwarted on the Rio Tinto deal, China could redouble its efforts to gain a foothold in the salt flats of South America and the all-important technology metals.

The flurry of ruthlessly competitive diplomatic and corporate overtures to Bolivia from both Tokyo and Beijing is driven by the same dream: ultimate control of the future global market for electric vehicles. An ample supply of lithium, at least using current technology, is the critical weapon in that quest and Bolivia is to lithium what Saudi Arabia is to oil, say geologists.

...For the two rival Asian economic giants, control of lithium supplies - or at least a firm guarantee of stable future flows - is vital. For Japan, whose export-led economy is dominated by the lithium-hungry auto and electronics industries, it is a fight for survival of the status quo. With reliable long-term sources of lithium, Japanese companies can continue producing batteries for the world's laptops, digital cameras and mobile phones. With the same guarantee, Japanese car companies will be able to convert their manufacturing prowess to mass production of electric vehicles.

Yet for China the motivation for lithium dominance is even more compelling: the United States, Germany and Japan led the world in the development of petrol-driven cars in the 20th century and it would take many years for Chinese carmakers to match that expertise. Electric vehicles, on the other hand, represent a blank slate: these are pioneering days in the post-combustion engine era and a potentially huge opportunity for China to lunge for early leadership, increasingly nervous Japanese automaker executives believe.
(15 June 2009)

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