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Beyond BP: Michael Klare on US Energy Policy

Jim Cabral, Valley Advocate
The disaster engendered by the explosion and subsequent hemorrhaging of British Petroleum’s Deepwater Horizon oil rig in the Gulf of Mexico has thrust energy costs—economic and environmental—back into the public discourse in a way not seen since gasoline prices went ballistic in the summer of 2008. That summer, with prices hovering in the $4-per-gallon range, Hampshire College’s Michael Klare published Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books, Henry Holt & Co., New York).

Klare’s book could not have been more timely. After all, his warnings about the dire implications of the world’s growing reliance on finite energy sources—especially petroleum, natural gas, and uranium—seemed all too painfully validated by those record-high gas prices. However, shortly afterward, an epidemic of real estate foreclosures and the subsequent financial crisis and recession contributed to a near-50 percent reduction in the price of gasoline. (Of course, prices have since rebounded somewhat.)

Was Klare’s ominous portrayal of the problems attending energy extraction and consumption an overstatement? Hardly, if the current crisis in the Gulf is any indication.

In view of recent comments made by BP officials—such as CEO Tony Hayward’s claim that the sheer “vastness” of the world’s oceans would render the environmental costs of virtually any oil spill negligible—it is easy to imagine them and other defenders of the fossil fuel status quo dismissing Klare’s warnings as alarmist. But today’s geopolitics of energy is in fact a scary state of affairs, and that is certainly not due to any embellishment on Klare’s part.

Rising Powers is a cogent, accessible, well researched (e.g., relying on energy trade publications and statements from energy officials both in and out of government) expose of the intensifying, heavily militarized competition among the globe’s largest energy-consuming nations for finite—and soon to be dwindling—sources of energy. Moreover, Klare makes clear that these remaining sources, like the oil currently gushing out of the well in the Gulf of Mexico, are becoming increasingly remote and hazardous to extract…
(12 August 2010)
Related: Labor wants sole national oil and gas regulator

Scientists Allege Federal Gov’t Tried to Muffle Plume Findings

Marian Wang, ProPublica
When news first spread about the huge plumes of dispersed oil discovered by scientists in the deep waters of the Gulf, the federal government’s reaction was to criticize the media’s reporting. Here’s the head of the National Oceanic and Atmospheric Administration, on May 17:

Media reports related to the research work conducted aboard the R/V Pelican included information that was misleading, premature and, in some cases, inaccurate.

Now, scientists behind some of the plume research have spoken out about what went on behind the scenes with the federal agencies that sponsored their research. The St. Petersburg Times relays this from one scientist at the University of South Florida:

“I got lambasted by the Coast Guard and NOAA when we said there was undersea oil,” USF marine sciences dean William Hogarth said. Some officials even told him to retract USF’s public announcement, he said, comparing it to being “beat up” by federal officials. [Update 8/13: Hogarth later backtracked a bit, telling the Washington Post: “I don’t ever remember being told not to” talk about the findings. It sort of caught [NOAA] by surprise, and they would…have liked to have a discussion of it” before the news was released.]..
(10 August 2010)

Oil sands toxins growing rapidly

Nathan VanderKlippe, The Globe and Mail
Canada’s oil sands mining operations produce vast and fast-growing quantities of deadly substances, including mercury, heavy metals and arsenic, new data released by Environment Canada shows.

The information on pollutants sheds new light on the environmental toll exacted by Canada’s bid to extract oil from bitumen, showing in stark relief how many nasty substances are being laid on the northern Alberta landscape in the process – and how quickly those are growing.

In the past four years, the volume of arsenic and lead produced and deposited in tailings ponds by the country’s bitumen mines – run by Syncrude Canada Ltd., Suncor Energy Inc., (SU-T32.970.060.18%) Canadian Natural Resources Ltd. (CNQ-T33.540.070.21%) and Royal Dutch Shell PLC (RDS.B-N53.46-0.28-0.52%) – has increased by 26 per cent. Quantities of some other substances have increased at even faster rates.

The companies also released huge amounts of pollutants into the air last year, including 70,658 tonnes of volatile organic compounds, which can damage the function of human organs and nervous systems, and 111,661 tonnes of sulphur dioxide, a key contributor to acid rain…
(9 August 2010)

The Triumph of the Amateur: Remembering Matt Simmons

Sharon Astyk, Casaubon’s Book
I didn’t know Matt Simmons personally, and after some of his frankly ridiculous claims about what was happening in the Gulf, I am a little ambivalent about writing about his demise. One is supposed to speak well of the dead, and while I think some of his work on the Gulf (including his early claims that the flow rates from the well were much higher than were reported, which was entirely correct) was good, some of it was inappropriate fearmongering, and that shouldn’ be glossed over.

At the same time, however, I think Simmons deserves to be remembered for his most stunning accomplishment – his book _Twilight in the Desert_. If you aren’t a geek like me, you may never have worked through his 2005 magnum opus – the state of the Ghawar and Saudi oil fields is a dry subject for many. But it is hard to overstate the importance of this work in two respects. First of all, Simmons book brought the earlier work done by petroleum geologists into the mainstream, and put peak oil as an idea into discussion. Simmons was the single most public face of peak oil for most of the last five years, appearing regularly on news programs.

Even more interestingly, to me at least, _Twilight in the Desert_ is a particular kind of book – a rare bird indeed. It is uniquely interesting that the single best analysis of the state of Saudi Oil at the time it was published and for some years after (and remember, Saudi oil is still tremendously important, and in many ways, representative of the state of oil in general) came not from a petroleum geologist or geophysicist, but from someone who was troubled by fundamental inconsistencies he encountered and took the time to learn and master a new field, analyze a huge body of evidence, and come to an intelligent and thoughtful conclusion. In many ways, Simmons’ work was the triumph of the amateur, proof of where passion and intent can take people working outside their field…
(11 August 2010)

Peak oil is the villain governments need

Graham Wayne, The Guardian
Could peak oil lever politicians out from between the rock of the electorate and the hard place that is climate change mitigation? As Daniel Gros wrote in the Guardian: “the climate-change bill, for which President Barack Obama had pushed so hard, will not even be presented to the US Senate, because it stands no chance of passage”. His analysis ends with a fatalistic statement: “Determined action at the global level will become possible only when climate change is no longer some scientific prediction, but a reality that people feel … A world incapable of preventing climate change will have to live with it.”

Isn’t that the trouble? Climate change is a stealthy foe, hard to feel, see or identify. Unlike peak oil. So here’s another question: did western administrations know that the International Energy Agency (IEA) had been consistently concealing the imminence of peak oil? One might hope our leaders would know about something as serious as this. But if they did, why is it that renewable energy replacements haven’t been far higher on the agenda, for much longer and addressed with rather more conviction? This is the question George Monbiot put in a freedom of information request sent to the Department for Business in February 2008, asking for details of the government’s peak oil contingency planning.

“The answer I received astonished me,” he wrote in the Guardian. Hardly surprising, considering the answer: “The government does not feel the need to hold contingency plans specifically for the eventuality of crude oil supplies peaking between now and 2020.” Eighteen months later, the Guardian published the IEA whistleblower story and the 2020 cover was blown. Were the government really taken in by the duplicity of the IEA? Or were they in on the act, making it difficult to appear sanguine about an imminent and permanent disruption to energy supplies?

Outside of the fossil fuel industry, it is hard to know to what extent commerce is aware of the impending crisis or the speed at which it would envelop us. Either way, industries appear to have woken up with a start, at least if the white paper, Sustainable energy security: strategic risks and opportunities for business, is a guide. Produced by Lloyd’s of London and Chatham House, their assessment is sobering. They identify opportunities for the quick witted, as well as risks to the somnambulant. One statement by professor Paul Stevens in particular caught my eye: “A supply crunch appears likely around 2013 … given recent price experience, a spike in excess of $200 per barrel is not infeasible”…
(11 August 2010)

High Oil Prices: Quantification of direct and indirect impacts for the EU
Schade W., Fiorello D., Beckmann R., Fermi F., Köhler J., Martino A., Schade B., Walz R.,
Wiesenthal T., European Commission 6th RTD Programme

The HOP! project addresses the impacts of high oil prices on the European economy. The assessment is performed on a model-based analysis of various scenarios corresponding to oil price shocks with a range of 150 €2000/barrel to 800 €2000/barrel by the year 2020. The emphasis of the analysis is on assessing the impact of such high oil prices under different characteristics varying the height, the lead time and the steepness of the oil price shock; it is not on estimating the probability of such an oil price being reached or on forecasting the oil price in the future. In particular, the extraordinary oil price shocks are assumptions developed for analytic purposes and should not be considered as forecasts of a likely oil price development. The overall conclusion is that high oil prices have a significant economic impact in the shortterm and may have a limited impact in the medium- and long-term. In general, the impact on employment is more severe than that on GDP. The effects on investments are critical in shaping the final macroeconomic outcome. In the first instance, a high oil price will have a negative effect due to cost increases in many areas of the economy, but this can be offset by the boost of investment induced by the search for alternatives to fossil fuels and for efficiency technologies. The key messages that can be derived from the HOP! scenario analyses can be summarized as:

  • GDP and employment are negatively affected during the peak period of the oil price increase, employment will be reduced significantly more.
  • The impact after the peak period of oil price increase strongly depends on the mechanisms kicked-off by the price increase. Mitigating the impacts by investing into energy efficiency and alternatives could even lead to a positive economic impact in the medium to long-term, while a world recession or a situation with insufficient energy supply could multiply the negative impacts by factors of 5 to 10.
  • A rapid price increase over a few years would have different effects in the short and the medium-term. In the short term, the lack of response time due to high inertia of the industry hampers the mobilisation of alternative sources, leading to a more profound impact on GDP growth. In the medium term, a rapid price increase, if not reaching the extreme levels of 600-800 €2000/barrel, would be advantageous compared with a smooth price increase since the shock most effectively triggers the compensating mechanisms in particular the investments into energy efficiency and alternatives. This presupposes that investors expect a sustained oil price increase and not a temporary one, and that governments do not take actions to lower the fossil fuel prices artificially distorting the price signal.
  • The most relevant actions to counterbalance the negative impact of high oil prices are investments into energy efficiency and alternatives. As first, they directly provide a positive stimulus for the economy as part of final demand. As second, they indirectly help to reduce the vulnerability of the economy to oil price increases by reducing energy demand, energy cost and imports of fossil energy.
  • In terms of impacts on employment, the most important issue is how the energy sector can forward the price increase to other sectors. Full forwarding of the price increase causes the strong losses observed for employment and boosts the profits of the vertically integrated large energy companies. Limiting price forwarding would strongly reduce the negative impacts on employment, either indirectly by the energy companies reinvesting their profits into efficiency technologies and alternatives that are produced domestically in the EU or directly by the government taxing the profits and creating investment incentives into efficiency technologies and alternatives by subsidies.

EB reader Paul Nellan writes:
Tonite we had here in Germany a 10 minutes TV report about peak oil and the possible impact of high oil prices in the near future. Interestingly, the renowned German FRAUNHOFER INSTITUTE FOR APPLICATION AND INNOVATION RESEARCH did already in 2008 a study co-funded by the EU commission about “Macro-economic impact of high oil price in Europe”. The study’s results, however, have been almost completely ignored in public, but the report showed it shortly on a PC screen when one of the involved FRAUNHOFER scientists, Wolfgang Schade, talked in an interview about one of the major impacts of “high” oil prices, “a 10% reduction in economic growth and employment”.

{For the report} or go straightforward to

This study, which I couldn’t read due to the shortness of time, seems to be a valuable addition to the Hirsch report.
(August 2010 communication)