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Conservation? It’s Such a 70’s Idea
Floyd Norris, New York Times
WHERE are the plans for energy conservation? They are needed now. The markets think that the United States will not have enough refined petroleum products to meet demand for at least a few months. …
But to the extent this is a short-term problem, it needs short-term solutions.
Perhaps the politicians are paralyzed by memories of the way Jimmy Carter was mocked for wearing a sweater as he urged us to adjust our thermostats during another energy crisis. The 55 miles per hour speed limit somehow seems to be a violation of the fundamental rights of American drivers. Sacrifice speed to help avert soaring prices? Surely you must be kidding.
The prudent course now would be for a national effort to reduce demand. Urge drivers to slow down and tell the police to enforce speed limits. A campaign to raise home thermostats now, and lower them this winter, might reduce demand enough to limit the price increases that the market will have to bear.
(5 September 2005)
US must find an alternative to oil guzzling – fast
Brian Wilson, Scotland on Sunday
SELDOM can a political leader have spoken more counter-intuitively than when President George W Bush appealed to his fellow citizens that they should “only buy gas if you absolutely have to”. Not only his own career, but that of the dynasty that spawned him, has been built on precisely the opposite advice – use as much oil as you can, America, without a second thought for the consequences.
It is deeply ironic that the Bush administration has come face to face with the folly of this mentality as a result of domestic catastrophe rather than the defection of some foreign potentate on whom they had placed their bets. But the spectacle of the world chipping in to send oil and oil products to the world’s most profligate consumer of the stuff makes the same point in another way. America’s “oil-richness” is a delusion that is long past its sell-by date.
For the past 30 years, the US has been a net importer of oil on an ever-increasing scale. That is the reality that drives their geopolitical strategies – in Africa as much as in the Middle East; from Caracas to the Caspian. All of their emphasis has been on ensuring supply while the message to America has been to carry on consuming just as if we were back in the good old days of Prescott Bush, Dubya’s grandpappy, when Texas oil ruled the world. It is madness
…Britain is not immune from the fall-out generated by this crisis. Even before Hurricane Katrina struck, there was a statistic which deserved a lot more attention than it got. Powergen increased their gas prices last week by 12 per cent, which brings the year’s increases to 35 per cent. There need be no direct correlation between the price of oil and the price of gas, but there is. And there is not the slightest reason to doubt that, in the wake of Katrina and other disruptive events, wholesale gas prices will also continue to soar.
Yet it remains Britain’s intention to produce 70 per cent of our electricity from gas by 2020, by which time 90 per cent of that gas will be imported. The market has certainly acted upon this guidance and plans for Liquefied Natural Gas terminals around our coast are now proliferating. Yet surely it must be madness on a par with the US’s imported-oil dependence for Britain, with its history of energy self-sufficiency, to set out on a course which will make us massively dependent on an unpredictable global gas market?
(4 September 2005)
Katrina’s Shock to the system
Jad Mouawad,New York Times
…One problem today is the supply of crude oil. Years of underinvestment in exploration mean that producers now lack the capacity to bolster production in any significant way to make up for intermittent shortages. Even Saudi Arabia, which had millions of barrels of untapped production capability in the 1980’s, is now pumping at close to full capacity.
But far more important for the current energy crisis, a lack of refining capacity constrains the industry’s ability to turn crude oil, even when it is available, into usable products like gasoline or jet fuel. …
The economy may be able to withstand current prices, but energy markets are at the mercy of the slightest glitch anywhere around the globe that can push prices even higher. …
The Eurasia Group, a political risk consulting firm in New York, identified potential events in nine countries that could send prices higher – from terrorist attacks in Saudi Arabia, to which it gave a 10 percent probability; to unrest by oil workers in Nigeria, a 30 percent probability; or attacks on Iraq’s oil industry, with a 50-50 probability.
[ending on a global note]
In other words, said Mr. Felmy of the American Petroleum Institute: “There is no question that this is a global issue. We’re all in this together.”
(4 September 2005)
Excerpts from subscription-required article sent by kind reader, who rightly points out theres still plenty being left unsaid in the current seriousness over US fuel supplies.-LJ
The Katrina Crisis
A hurricane produces an integrated energy disaster
Daniel Yergin, Wall Street Journal (opinion)
Man’s technical ingenuity has collided with nature’s rage in the Gulf of Mexico, and the outcome has been an integrated energy disaster. The full scope will not be understood until the waters recede, the damage to platforms and refineries is assessed, and the extent of damage to underwater pipelines from undersea mudslides is determined. Yet what has happened is on a scale not seen before, and the impact of the price spikes and dislocations will roll across the entire economy. Even as we confront the human tragedy, the consequences will also force us to think more expansively about energy security, and to focus harder on a matter which other events have already emphasized: the need for new infrastructure and investment in our energy sector.
What makes it an integrated crisis is that the entire energy supply system in the region has been disabled, and that the parts all depend upon each other for recovery. If the next weeks reveal that the losses are as large as some fear, this would constitute one of the biggest energy shocks since the 1970s, perhaps even the biggest. Unlike the crises of the ’70s or the Persian Gulf crisis of 1990-91, this does not involve just crude oil: It includes natural gas, refineries and electricity.
…All of this has a knock-on effect: Boats can’t get out to the platforms without diesel fuel; and refineries can’t operate without electricity or people. Those last two are the preamble to recovery. With communications broken down, companies are still trying to make contact with the missing employees who run the different parts of the energy infrastructure. As for electricity, a frontline manager summed up the problem: “You can’t overemphasize the absolute enormity of the undertaking to put this place back together again.”
…Fortunately, the Strategic Petroleum Reserve, with 700 million barrels, can compensate for an extended period for the missing oil. The SPR is certainly demonstrating its value here. Without it, people would be apprehensively asking how deeply into recession the resulting $80- or $90-a-barrel oil would push the U.S. While the trigger for its use is not what was anticipated, the SPR is proving its role–not as a tool of market management, but to offset a major disruption, protect gross domestic product, and maintain the viability of our economy.
…a host of developments–from terrorism to the California power crisis to the East Coast blackout to Katrina–have emphasized a return to what might be called the World War II model of energy security, assuring the security and integrity of the whole supply chain and infrastructure, from production to the consumer. (The gravest energy threats during World War II were when Nazi U-boats came close to cutting the tanker pipeline across the Atlantic that supplied U.S. military forces). This more expansive concept of energy security requires broader coordination between government and the private sector; more emphasis on redundancy, alternatives, distributed energy and backup systems; planning and pre-positioning of vital supplies (“strategic transformer reserves” for electric substations); and methods that can quickly be applied to promote swift market adjustment. As with the August 2003 blackout, this crisis underlines the need for modernization and new investment in the energy infrastructure that supports our $12.4 trillion economy. A strong push in this direction may come from the new energy legislation, rather than from the idea of “energy independence.”
…Disruption on the scale of Katrina was never anticipated, neither for the gulf’s energy complex nor for the larger tragedy that unfolds. And hurricane season is not over. From now on, a hit of this scale will not be unexpected. But what else is out there? That is a question for the world’s entire energy supply system. For surely, somewhere, the unexpected is brooding, and waiting to happen.
Mr. Yergin, chairman of Cambridge Energy Research Associates, is author of “The Prize: The Epic Quest for Oil, Money and Power” (Free Press, 1993).
(2 September 2005)
Mentioned by Prof. Goose in The Oil Drum. Says PG: “[Yergin’s] change of tone is definitely noteworthy.”
U.S. May Have to Reconsider Oil Stockpile
Associated Press via Forbes
The devastation wrought by Hurricane Katrina could force the U.S. to reconsider its oil stockpiling policy, the deputy head of the International Energy Agency said Friday as 26 governments agreed to release emergency reserves to cope with the disaster.
The Paris-based IEA, a club of mainly industrialized oil-importing countries, said member states unanimously backed a decision to release the equivalent of 2 million barrels per day from their strategic stocks – equivalent to the refining capacity that Katrina has shut down. The measures will take effect for an initial period of 30 days.
The damage to crude oil production was lighter, at 1.5 million barrels per day, the IEA said, urging member countries to release refined products such as gasoline rather than crude.
But Katrina may have exposed a flaw in the 700-million-barrel U.S. Strategic Petroleum Reserve, which is almost entirely crude oil and contains no gasoline, according to the IEA’s American deputy head, William Ramsay.
Until now, “it’s always made more sense economically to have the crude on hand and then refineries can turn it into products depending on the requirements of the market at that time,” Ramsay, a former U.S. ambassador to Congo, told The Associated Press in an interview.
(2 September 2005)
Wolfowitz at the World Bank: A New Leaf?
Anonymous, MRzine
[The author has been a senior official in this field and must withhold his identity. — Ed.]
I believe in redemption. Never give up on anyone. And besides, like many of us, I was told that Paul Wolfowitz [new president of the World Bank] might turn out to be another McNamara (well . . . ). On June 1, Mr. Wolfowitz addressed the World Bank staff and did say (when prompted by a question) that he believed in the Bank as a politically neutral and objective institution (and “. . . I will do everything in my power to preserve that objectivity”).
So, I have waited with an open mind for his first acts. …Now we have Mr. Wolfowitz’s first major public act. Let us not rush to judgment, but the first sign is ominous. It also requires commentary.
…The Ecuadorian government has had a long-running dispute with Occidental Petroleum over non-performance of its contract to operate Ecuadorian oilfields and over non-payment of taxes ($75 million). In the new government, the left-leaning Finance Minister (Rafael Correa, a U.S.-trained Professor of Economics) indicated that since Occidental has been intransigent he will move to rescind their control of the oilfields, in accordance with the terms of their contract. The U.S. administration has responded with alacrity, including threatening to terminate all of Ecuador’s trade quotas and exclude Ecuador from the upcoming Free Trade Pact with the Andean countries, along with other, unspecified, consequences.
Mr. Wolfowitz has had little previous involvement with international development or Latin American economic issues.22 However, he has had a deep involvement with Occidental Petroleum (who upon the withdrawal of Texaco from the Andean region became the principle U.S. oil company in the region). In addition, Mr. Wolfowitz “launched” his reputation in the 1970s by advocating the overriding need for the U.S. to secure its access to overseas oil (he was the principal author of the U.S. Defense Department’s landmark Limited Contingency Study23). Secure access, for the U.S., to foreign sources of petroleum has been one of his strongest policy pre-occupations for the last 30 years.
Occidental Petroleum was granted control of large oilfields in neighboring Colombia, including control of Cano Limon (which is one of the largest oilfields in the world) and the lengthy pipeline leading from it. Both are situated in the jungle that is the heart of the Colombia’s conflict zone. Protecting Occidental’s holdings has been one of highest Latin American priorities of the Defense Department with Mr. Wolfowitz as its Deputy Secretary. He helped form what Mr. Wolfowitz calls “the Pipeline Brigade,”24 a Columbian brigade backed by U.S. Special Forces on the ground with about $150 million in special Defense Department spending and U.S. intelligence support. Their sole purpose is to defend the Cano Limon assets, fighting alongside the private forces of Occidental itself.
(25 August 2005)
Very long article by an insider about oil, Ecuador and the World Bank.
Nigeria fuel price hike: Uniben students threaten to storm Abuja in protest
Simon Ebegbulem, Vanguard (Lagos, Nigeria) via allAfrica.com
Benin City – STUDENTS of the University of Benin (UNIBEN), yesterday, vowed to storm the Federal Capital Territory, Abuja, to register their protest over the recent increase in the prices of petroleum products, warning that the Federal Government should be held accountable for any crisis that may engulf the nation if the increase is not reverted, vowing to “resist them even with our blood.”
The students who described the increase as “ludicrous”, argued that the government must initiate a commensurate measure that would cushion the effect of the increase, which, according to them, “will be a miracle if the government of President Olusegun Obasanjo does that”, adding that Nigerian students will use every means to resist the fuel price increase.
(2 September 2005)
Why the oil price is a hurricane in a teacup
Alan Kohler, The Age (Australia)
…It is not a genuine crisis. In fact, in a couple of ways the 2005 oil shock is a good thing. Unlike the hyper-inflation episodes that followed the oil shocks of 1970s, oil in 2005 is taking the pressure off interest rates as the main tool for reducing inflation; it acts like a rate rise or tax increase.
That means the burden of boom-control is shifting from borrowing to transport, which means it is much more broadly spread and the transmission more direct (everybody travels or buys products that have been delivered, but not everybody borrows — in fact nearly half the population lends).
More importantly energy in general, and fuel in particular, is too cheap. The price does not reflect its true cost (the depletion of finite reserves or pollution). The fact that sales of SUVs (four-wheel drives) have plummeted is fine with me.
So the price of transport fuel is getting closer to what it should be. We have to get used to it.
(3 September 2005)
