Keep the food and that tired story...Don't loose sight of reality...We do not have an alternative fuel yet...Meanwhile I will side with the Men that run this country....
---------------------October 6, 2002
America needs 20 million barrels of crude a day, and analysts have singled out the country that could meet up to half that requirement: Iraq.
The current high price of oil is dragging the US economy further into recession. US control of the Iraqi reserves, perhaps the biggest unmapped reservoir in the world, would break Saudi Arabia's hold on the oil-pricing cartel Opec, and dictate prices for the next century.That will be good for CaNaDa as well.
This could spell disaster for Russian oil giants, keen to expand their sales to the West. Russia has sought to prolong negotiations, official statements going between opposition to any new UN resolution and possible support for military action against an Iraqi regime proven to be developing weapons of mass destruction.
While France is thought likely to support US military action, and China will probably fall in line because of its admission to the World Trade Organisation, Putin is left holding the wild cards.
Russia recognises potential benefits of reaching a deal with the US: Saddam's regime is difficult to work with. Lukoil's billion-dollar concessions are frozen and profitless to Moscow and Baghdad under UN sanctions, leading to fears that Saddam might have declared the agreement null and void out of spite. Iraqi diplomats say Zarubezhneft won its $90bn contract only after Baghdad took it away from TotalFinaElf because of French support for sanctions.
Russia stands to profit if intervention in the Gulf triggers a hike in Middle East oil prices, as its firms are lobbying to sell millions of barrels a day to the US, at two-thirds of the current market price. Moscow's trust of Washington may be slipping after what a Russian UN official calls 'broken promises' that followed negotiations over Moscow's support for the Afghan campaign. Russia turned a blind eye to US troops in central Asia, on the tacit condition that US-Russian trade restrictions would be lifted. But they are still there, and other benefits expected after 11 September have also not materialised.
'They've been making this point very strongly,' a senior Bush administration official conceded to the Washington Post , 'that this can't be an all-give-and-no-get relationship... They do have a point that the growing relationship has got to be reciprocal.'
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HOW THE OILMEN IN THE WHITEHOUSE SEE THE WORLD.
The Producers
by Gregg Easterbrook
Issue date 06.04.01
Opponents of the Bush energy plan like to accuse its authors of thinking like oilmen. They're right. President George W. Bush and Vice President Dick Cheney both worked in the petroleum industry, and its worldview permeates the energy policy they unveiled last week. Where the critics are wrong is in the unstated assumption that thinking like oilmen is an unequivocally bad thing--that all energy companies want to do is profiteer and kill caribou. On important questions of policy, the energy-industry worldview is often correct. And where the energy worldview--and the Bush plan--are wrong, it is often because they fail to face the implications of their own thinking.
To oilmen and oilwomen--as well as their counterparts in the gas, coal, atomic, and hydro industries--modern American history is about the control of energy. The United States began its rise to national greatness in the late nineteenth century, not long after the first oil well was drilled in Titusville, Pennsylvania. In the early twentieth century, the country leaped ahead of Britain, Germany, and Japan as the world's leading power by being the first to exploit petroleum on a colossal scale; it fought across the entire globe and won a world war for democratic survival partly through mastery of oil. With peace assured, cheap energy paved the way for dramatic improvement in the average American's quality of life. Today the United States brings high living standards to more than 200 million people, a historically unprecedented feat, and it does so in large measure because energy is cheap and plentiful.
But only energy types themselves, the oil worldview continues, can face this fundamental truth. Others want to wring their hands about the distasteful necessities of energy production--while demanding cheap gasoline and home heat, of course. Rather than be reviled, oilmen and oilwomen should be heroes. It is they who are out in the field struggling with dangerous rigs, or sweltering in the rain forest while dodging arrows, or heaving on austere oil platforms far out at sea: whatever it takes to keep the pump primed.
Yes, procuring energy is sometimes disagreeable. It has been since at least 1921, when Secretary of Commerce Herbert Hoover privately asked Standard Oil of New Jersey to ingratiate itself with Arabian culture and turn the oil sheiks away from the Brits and Germans toward the red, white, and blue. The result was Aramco, the Arab-American oil behemoth that made America the only Western country where everyone could own a car--you didn't have to be rich, as you did in Europe. Today's oilmen and oilwomen continue this tradition: While others fret, they look dictators in the eye and make the deals that are needed to ensure that the tankers sail.
In the energy-industry worldview, the story of natural gas is just as noble. In the 1970s government experts declared the fuel on the verge of exhaustion. Had the flow of gas stopped, a second Depression might have begun. Gas men and gas women answered the call, finding vast amounts and selling it for barely more than transportation costs. And what of gas and oil's cousin, coal? Everybody grumbles about mining damage and greenhouse gases, but no one hesitates to flip the light switches that coal powers. Though coal demand has approached record levels, coal men and coal women keep driving down the price so the average person can afford to sit comfortably in air conditioning.
Americans, the energy industry believes, have grown spoiled, taking their energy-based, high standard of living for granted while complaining endlessly about prices that, objectively, are very reasonable. Natural gas, heating oil, bulk coal, and residential electricity cost less in the United States than in almost every other country. With all the public moaning, you'd never guess that, adjusted for inflation, electricity per kilowatt-hour costs an average of 20 percent less today than it did 20 years ago. Gasoline sells in the United States for less than half the prevailing $4 per gallon price in other developed nations; and, even with recent pump-price increases, it remains cheap in real-dollar terms. "If you strip away the part of the pump price that's taxes and the part that is the world price of the barrel of oil, oil companies are selling today's much-improved gasoline for slightly less than they sold gas for in the 1950s," says Dennis O'Brien, former chief economist for the oil consortium Caltex. And the product itself is significantly better. Most pollutants are now chemically removed from gasoline (a principal reason why smog is declining, even in Los Angeles and Houston), and more than a dozen basic blends are now produced to provide optimal engine performance in different conditions around the country.
Yet while the computer industry is endlessly praised for innovating and holding down costs, no one praises the oil industry for the hard work and brainpower that has produced better, low-cost gasoline. For keeping children's bedrooms warm and keeping their milk cold, energy companies are slammed instead of thanked. That a member of the U.S. Senate (Barbara Boxer, last week, speaking about Cheney) can use "sounds like an oilman" as an insult drives oilmen to distraction. Americans, the oilmen and oilwomen grumble, expect unlimited cheap gasoline but whine about how oil rigs spoil coastal views. And Americans have become naive--a word Cheney uses often to describe his critics. You can't have a never-ending supply of cheap energy without disturbing the environment and making some unsavory foreign entanglements. You may not like us, oilmen and oilwomen think, but if we disappeared, you'd beg us to come back.
This is how oilmen like Bush and Cheney see the world, and their view is not without merit. They are right that energy policy requires hard choices that most Americans don't want to make. And some of those hard choices are reflected in the president's energy plan--just not enough of them.
t is to wake the public from its energy daydream that the new administration has declared a crisis. "We are now in an energy crisis," Bush said early in his presidency. In his first policy speech, "A National Report on America's Energy Crisis," new Energy Secretary Spencer Abraham used the word "crisis" eleven times. "[W]hat the people need to hear loud and clear is that we're running out of energy in America," Bush said from the White House last month. Once it was leftists and environmentalists who cried energy crisis; after the recovery from the 1970s oil crunch, some even seemed heartbroken that petroleum did not vanish, taking capitalist society down with it. Now Republicans and the energy industry have expropriated the phrase, betting that only an emergency can overcome the public's ingrained complacency.
Yet where exactly is the crisis? No form of primary energy stock is in short supply, nationally or globally, which is why prices are generally low. The international coal market is glutted. Twice in 2001, OPEC has cut production in response to a mild global surplus of crude. Yes, pump prices have been rising lately, but this results mainly from the fact that refinery capacity has been straining to keep up with the SUV craze, not from lack of oil to refine. California's rolling blackouts are the products of a spectacularly wrongheaded deregulation scheme, not an underlying shortage. Though some analysts foresee a global oil-production peak in about a decade (see "Opportunity Cost," May 15, 2000), there's no sign of that peak yet in production statistics, and other experts believe the world holds at least another century's worth of oil at affordable prices. The United States has several centuries' worth of coal reserves, thousands of years of uranium, at least several decades of gas, and probably much more. Renewable and alternatives fuels are improving, while their costs continue to decline. If this is a "crisis," grade inflation has come to the concept of national emergency.
To underscore the urgency, Bush has repeatedly accused Bill Clinton of "years of neglect" of energy policy, saying, "For too long we have had no energy policy." And it's true that Clinton spent little time on energy issues. But that's because he left energy supply to the market, something Republicans usually recommend. Bush's energy plan, by contrast, represents a substantial market intervention--a reason Jerry Taylor, director of natural resource studies at the libertarian Cato Institute, opposes it. Bush's plan brims with new Washington authority, including the power to force local governments to accept power lines on their land, as well as cumbersome new rules, including an "energy impact statement" federal agencies must file--the latter after years of complaints by conservatives that environmental-impact statements create costly red tape.
The last president to intervene so aggressively in the energy market was Jimmy Carter, and, as Pietro Nivola of the Brookings Institution has observed, almost every central assumption of Carter's policy turned out to be wrong. (Some assumptions, such as an irreversible decline in the supply of natural gas, were wrong even before the Carter policy was unveiled.) It's possible that central assumptions of the Bush energy plan--especially the need for federal intervention to inspire more production--will also turn out to be wrong because the market will fix its own problems. Tellingly, the Bush energy plan comes as companies are already acting to increase supply in response to price signals.
For instance, the White House proposal anticipates that the United States will need 1,300 to 1,900 new power plants over the next 20 years, a construction pace of up to one per week. Cheney dwells on this figure to accentuate the gravity of the situation. But Cheney's numbers sound hauntingly like a 1973 study released by Richard Nixon, which projected widespread national electricity shortages unless 1,000 new atomic power plants were built over 25 years. Only a handful were completed, and electricity supply was fine--at least until some California government officials with a sense of humor got an idea for a new regulatory system. Cheney's high estimate is derived essentially by projecting current power-use trend lines as if none will ever change. But if we've learned one thing about energy, it's that "irreversible" trends change quickly. Unpredictable combinations of market action, consumer decisions, and world trends are almost certain to overturn Cheney's assumptions that America needs 1,900 new power plants; the assumption may not even last the year.
ut, though it's possible that market forces would compensate for energy problems on their own, Bush and Cheney are correct to say that the country needs increased energy production, including a new, rational look at atomic power. More domestic oil drilling and gas drilling is needed to meet higher demand and to replace existing fields that are being depleted. Even assuming better efficiency, U.S. oil demand may rise by one-third by 2020, according to the Energy Information Administration. Demand for natural gas is expected to rise as much as two-thirds in the same period.
To produce this new energy, America needs more infrastructure. No large petroleum refineries have been built in the United States in 20 years. When Clinton released some oil from the Strategic Petroleum Reserve in 2000, it had to be shipped overseas to be refined. Many parts of the country need to invest in power lines. During some recent Northern California blackouts, spare power was available in the southern part of the state but could not be zapped north because of a shortage of grid capacity. Because of "not in my backyard" (NIMBY) lawsuits and junk-science alarmism about magnetic fields (the fields around transmission lines are weaker than what everyone is continuously exposed to from Earth's magnetic field anyway), construction of new power lines has become almost impossible in much of the country. The country also needs more natural-gas pipeline capacity, something opposed by NIMBYs and junk-science hysterics. Infuriatingly, as natural-gas supplies grew tight on the West Coast last fall, years' worth of gas sat unused in wells at North Slope fields around Prudhoe Bay, Alaska, because there was no conduit to carry it to the lower 48 states. |
