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Madagascar and the impact of high energy prices
via EnergyResources mailing list – source unknown
Madagascar’s energy crisis poses a dilemma for President Marc Ravalomanana — inflict pain now and risk losing popularity ahead of elections, or keep papering over the cracks as a crisis looms.
The economy is stalling as power outages cripple business and spark social unrest on the poor Indian Ocean island. The state energy company, Jirama, is drowning in red ink and will only survive on a hefty tariff hike or continued rationing, which is disrupting supplies, analysts say.
(24 October 2005)
We’d welcome a link or more information on the current situation in Madagascar, and any suggestions as to relevance of Madagascar says to become oil producer in 3-4 years.-LJ
Japan-China oil dispute escalates
Anthony Faiola, Washington Post
Relations Already Uneasy as Tokyo Accuses Beijing of Tapping Disputed Fields
————-
TOKYO, Oct. 21 — China has completed at least one new drilling platform in the East China Sea and may already be tapping into hotly contested natural gas and oil fields, escalating a dispute with Japan over the rights to billions of dollars worth of underwater energy reserves, according to Japanese reconnaissance data.
The Chinese action, Japanese officials charge, has aggravated a potential flash point in East Asia even as diplomatic relations between Tokyo and Beijing languish. The increasingly uneasy relationship between East Asia’s two dominant countries also includes territorial disputes and a heated row over Japan’s perceived lack of repentance for World War II-era aggression.
China is rapidly growing into an economic superpower and is hungry for sources of energy and raw materials. Economic ties have grown tremendously between the two nations in recent years, but they remain in fierce regional competition.
(21 October 2005)
Japan Focus and Asia Times recently posted a related essay: Sea of Confrontation: Japan-China Territorial and Gas Dispute Intensifies.
Gas taxes: lesser evil, greater good
Editorial, NY Times
There’s no serious disagreement that two major crises of our time are terrorism and global warming. And there’s no disputing that America’s oil consumption fosters both. Oil profits that flow to Saudi Arabia and other Middle Eastern countries finance both terrorist acts and the spread of dangerously fanatical forms of Islam. The burning of fossil fuels creates greenhouse emissions that provoke climate change. All the while, oil dependency increases the likelihood of further military entanglements, and threatens the economy with inflation, high interest rates and risky foreign indebtedness. Until now, the government has failed to connect our crises and our consumption in a coherent way. That dereliction of duty has led to policies that are counterproductive, such as tax incentives to buy gas guzzlers and an overemphasis on increasing domestic oil supply, although even all-out drilling would not be enough to slake our oil thirst and would require a reversal of longstanding environmental protections.
Now, however, the energy risks so apparent in the aftermath of Hurricane Katrina have created both the urgency and the political opportunity for the nation’s leaders to respond appropriately. The government must capitalize on the end of the era of perpetually cheap gas, and it must do so in a way that makes America less vulnerable to all manner of threats – terrorist, environmental and economic.
The best solution is to increase the federal gasoline tax, in order to keep the price of gas near its post-Katrina highs of $3-plus a gallon.
(24 October 2005)
Comments by David Roberts at Gristmill and by peakguy at The Oil Drum – NYC.
Related story: Environmental groups back gas-tax rise (AP).
Lines and signs
(Memories of the 70s energy crisis)
Kevin Kittredge, Roanoke Times
Things were getting ugly.
People were lining up at service stations across the country — the ones that were still open — hoping to get their share of gasoline before supplies ran out. They were pulling strings, telling fibs and worse to get the gas they needed. They were buying new gas caps with locks on them, so no one could siphon the precious liquid from their parked cars at night.
It was February 1974, and Americans were facing a bitter truth: We were energy dependent, and our foreign oil suppliers had us by the throat. It seems so long ago, with our highways now full of air-conditioned sport utility vehicles, monster pickup trucks and Hummers. But for some, the spot gas shortages and skyrocketing prices in the wake of Hurricane Katrina late this summer sparked bad memories of another time; a time when America had to change its habits — fast.
It began in October 1973, when Arab members of the Organization of Petroleum Exporting Countries announced they would not ship oil to nations that supported Israel in the Yom Kippur War. (OPEC countries produce about 40 percent of the world’s crude oil.) The embargo lasted five months. In February, it erupted into a full-fledged energy crisis in this country, as service stations across America found themselves unable to meet customer demand.
(24 October 2005)
An oil-rich test for Bush
Fair elections in Azerbaijan and Kazakhstan could energize a region
Jackson Diehl, Washington Post
In the past two weeks the Bush administration has launched a concerted attempt to translate its pro-democracy rhetoric into action in two little-known Eurasian countries whose importance is about to soar. Within six weeks, it could pull off a political feat that would electrify a region, and energize the president’s freedom doctrine. Or it could find itself with yet another messy and possibly dangerous foreign policy dilemma.
The test comes in Azerbaijan and Kazakhstan, two former republics of the Soviet Union that hold all of the early 21st century’s big cards: huge unexploited oil riches; a majority Muslim population; location between Russia, China, Iran and Afghanistan. Thanks to large investments by Western oil companies, and in Azerbaijan’s case a newly completed pipeline, both are about to become very, very rich. In a few years their names will be as familiar to Western energy consumers as Saudi Arabia and Kuwait.
Both are also ruled by autocrats who would like to follow the Persian Gulf states’ example and forge a strategic partnership with the United States. And both of those strongmen have scheduled elections: Azerbaijan for parliament on Nov. 6 and Kazakhstan for president on Dec. 4. The Bush administration could have ignored those events; both countries, after all, have been staging fraudulent votes for years, just like the friendly autocrats of the Middle East.
Instead, President Bush chose to engage.
(24 October 2005)
Hurricanes take oil firms from disaster to windfall
Steve Quinn, Associated Press via Seattle Times
DALLAS — Offshore oil platforms were destroyed, refineries were flooded and gas stations were sporadically out of fuel.
Although hurricanes Katrina and Rita created compounding headaches for energy companies over the summer, the storms ultimately benefited them because, as supplies tightened, prices for gasoline, diesel and jet fuel soared.
Exactly how much money was made will become clearer next week, when the industry begins to detail its third-quarter performance, though analysts are expecting huge profits.
“They are just printing money right now,” said oil analyst Fadel Gheit at Oppenheimer in New York. “They are making so many trips to the bank because they can’t take all the money there at one time.”
(22 October 2005)
GOP and Big Oil
Mike Viqueira, The Daily Nightly (NBC)
House Republican leaders are calling on oil companies to reinvest some of their record profits into the construction of new domestic refineries. In an unusual scene, House Speaker Dennis Hastert, R-Ill., invited the media into his office to announce: “These are tough times that call for tough measures. We expect oil companies to do their part to help ease the pain American families are feeling from high energy prices.”
Hastert and Republicans are anxious about the prospect of high profits for oil companies, set to be announced over the course of this week. “Oil and gas companies are enjoying record profits. That’s fine. This is America,” Hastert said, later adding that “we need to get our domestic capabilities up to par. It’s time to invest some of the profits.”
Asked directly whether he favored a windfall profits tax, Hastert left the door open. “I hope that we don’t have to do a windfall profits tax,” he said. Last summer the House barely passed a controversial measure that sought to make it easier for companies to invest in new pipelines and refineries. That legislation contained provisions to fight price gouging, which Repubs highlighted today. The measure faces dismal prospects in the Senate.
Hastert says that offices around the Capitol are doing their part by turning off lights and computer screens when not in use.
The Daily Nightly “aims to provide a narrative of the broadcast day and a window into the editorial process at NBC Nightly News. Regular contributors include Brian and NBC News correspondents around the world…”
(25 October 2005)
Nice to see another country tiptoeing in France’s footsteps (with windfall tax threats).-LJ
Tough flying for the global economy
Stephen Roach, Global Economic Reformer via Japan Focus
Not surprisingly, an unbalanced global economy is struggling under the weight of the energy shock of 2005. This has not been lost on world financial markets. Stock markets have sagged on the fear of demand risk and bond markets have backed up as central banks sound the alarm over incipient inflation.
This underscores the inherent risks of the fabled four-engine global airplane. This gigantic 747 is now flying on just two engines, fueled by the American consumer on the demand side and the Chinese producer on the supply side. If the demand engine sputters, added thrust from the supply engine may be destabilizing. That’s a legitimate concern in late 2005. If US consumption falters in the face of ongoing vigor from Chinese.
… The current energy shock is a very different threat to a wealth-based consumer than it is to an income-supported consumer. That’s especially the case since it hits US households when they are running a negative saving rate. In the three previous energy shocks — 1973, 1979, and 1990 — the personal saving rate averaged about 8%. US consumers had a cash cushion they could draw upon in order to support lifestyles. A negative saving rate offers no such cushion. Dick Berner has estimated that higher energy product prices are the functional equivalent of an annualized tax of around $130 billion on US consumers, or about 1.4% of total disposable personal income. With a negative saving rate, a significant portion of that tax will undoubtedly be funded by a retrenchment of discretionary consumption. The world’s consumer is now facing major cash-flow pressures heading into the all-important holiday buying season.
Stephen Roach, Chief Economist, Morgan Stanley, wrote this in the October 24, 2005 Global Economic Reformer. Posted at Japan Focus October 24, 2005.
(26 October 2005)
Also posted at Asia Times.
Where Chaos is King
Commentary: Who Benefits from Disorder in the Middle East?
Mark LeVine, Mother Jones
…A less Pollyanna-ish view of the coming chaos was expressed in Vision for 2020, the mission statement of the U.S. Strategic Space Command (published in 2000). Globalization, that document suggested, was producing a global zero-sum game of winners and losers. In such a context, Americans must prepare to do whatever it might take to “win,” including, of course, dominating space in order to “protect US interests and investment.”
What the Space Command didn’t mention, though it has since become a predominant concern of the Bush Administration (as the secret files of the Cheney Energy Task Force reveal) is how the expected arrival of the era of “peak oil” and the levels of global energy chaos sure to accompany it have exponentially increased the stakes involved in controlling Iraq’s immense oil reserves. Growing competition with an energy-thirsty China and, to a lesser extent, the European Union has only amplified this concern, and helped produce a situation where the blowback potential from the invasion and long-term occupation of Iraq seemed, at least on paper, well worth the risk.
Mark LeVine, professor of modern Middle Eastern history, culture, and Islamic studies at the University of California at Irvine, is the author of a new book, Why They Don’t Hate Us: Lifting the Veil on the Axis of Evil (Oneworld Publications, 2005). His website is www.culturejamming.org
(25 October 2005)
IT energy crisis reaching critical mass
Matt Stansberry, SearchDataCentre.com
This is the first in a series of articles on the price of power in the data center.
The 2005 energy crisis has businesses running for cover. …According to energy experts, the cost of producing electricity with natural gas, coal and uranium accounts for 90% of the price of power. Natural gas has the largest impact on the electricity market, however, and its prices have fluctuated from $2 per million British thermal units (BTU) in January 2000 to over $12 per million BTU recently. …
And as the price is going up, so does demand. According to AFCOM’s 2005 survey of its members, data center power requirements are increasing an average of 8% per year. Power requirements of the top 10% of data centers are growing at over 20%. The Energy Information Administration projects commercial demand to grow at a more modest rate of 1.9% over the next 20 years. But it acknowledges that the most rapid increase in demand is going to come from IT equipment.
According to Richard Sneider, managing director of Concord, Mass.-based InterUnity group — the research firm that produced the AFCOM survey — the primary reason for new demand is the increased densities of servers and switches. More powerful machines packed into tighter footprints is causing cooling headaches, and cooling that equipment eats up a lot of power.
“It’s the other side of Moore’s Law,” Sneider said. “As the cost of [buying] these machines decreases, the cost of powering and cooling them increases.” According to IT infrastructure vendor, West Kingston, R.I.-based American Power Conversion Corp., the total cost of ownership for a rack of servers is between $80,000 to $150,000 per rack, and power consumption accounts for 20% of that cost.
(24 October 2005)
Rising natural-gas prices pinch companies
Deirdre Gregg, Seattle Business Journal
For Dillanos Coffee Roasters, the cost of buying natural gas for its Sumner plant has shot up about 20 percent in the past three months.
But the real pain may still be ahead, as natural-gas prices jump sharply higher this fall.
Dillanos doesn’t want to raise its prices, Vice President Keith Hayward said, in part because its coffee-retailer customers are facing increased costs of their own, including a higher minimum wage that begins in January.
That’s a calculation many businesses may be making this fall, when all four natural-gas utilities that supply Washington will increase their prices by amounts ranging from 12 percent to 26 percent.
The cost of natural gas has gone way up — a result of hurricane disruptions and high demand for gas from other sectors, including power companies.
(24 October 2005)
Hillary and her [energy] fund
David Roberts, Gristmill
Well, I managed to wade through Hillary’s whole speech to the Cleantech Venture Forum, and let’s just say … she’s no Barack.
The vast bulk is a fairly tepid summary of current conventional wisdom: energy crisis, get free from foreign oil (grr), promote clean energy and clean cars and energy efficiency, etc. This is all boilerplate stuff, but it’s worth celebrating, I suppose, that it is conventional wisdom now. As much as environmentalists lament their own failures, it’s pretty remarkable how quickly the green line on energy has taken over and become centrist — and believe me, despite her reputation in wingnut circles, Hillary wouldn’t say it if it wasn’t safe and centrist.
Unfortunately, the conventional centrist wisdom is not translating into action, as illustrated by Hillary’s attempt to list her accomplishments on these issues.
…Basically, all the particulars — demonizing the oil companies, accusing them of “price gouging,” creating a specialized fund through a “fee,” etc. — strike me as an elaborate kabuki dance to achieve goals we could achieve more directly by simply taxing people at a reasonable rate and spending the money on what we agree is the public good. But that would be a sane country, in which politicians were allowed to say sane things. Sigh.
(25 October 2005)
In another post, Roberts inveighs against the framing of the energy issue as “dependence on foreign oil.”
Hyperinflation starts – food prices going up fast in India
Balaji Reddy, India Daily
Doubling of onion prices in the past week due to a severe shortage
India is on the verge of a hyperinflation. The food prices have started doubling in a week or so! The reason is primarily escalated transportation price due to high petroleum costs. That translates into seeds of higher prices and finally that leads to gouging and hoarding. The shortage finally translates into doubling of food prices. A doubling of onion prices in the past week due to a severe shortage made headlines Saturday in India, causing concern among politicians who fear angry consumers could again take to the streets in protest.
The onion, known as India’s most “political” crop is a key ingredient in almost all everything that lands on the Indian dinner table. The rise is sharply felt in a country where more than 800 million people survive on less than US$2 a day. “Onion Tears” read the front page headline in the Hindustan Times newspaper. “Onion prices soar, India in tears,” was the headline in The Asian Age. …
The current shortage was caused by devastating floods that struck the country in August, particularly in the Maharashtra State, the county’s main onion growing region. …In the capital New Delhi, onions were trading Saturday in some markets at 30 rupees (US$ 0.66; A0.55) per kilogram, double their price from the previous week.
(22 October 2005)
From here its hard to tell if this really is the ‘start’ of hyperinflation in India, but theres no doubt its bad news for India’s poorest, and its government.-LJ
