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Nuclear Tide
by Richard Karn 27-07-2006 |
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DETAIL 1: “…and you may ask yourself-- ‘well… how did I get here?’”
[7]
A couple years ago, we were struck by a friend’s comment to the effect that within five years only high school kids would be driving SUVs. As we go to press in July of 2006, oil is over $70 per barrel, and gasoline is fluctuating around $3.00 per gallon in California. People watch the pump with sick fascination, budgetary ruination unfolding before their very eyes. $50 doesn’t fill many cars’ tanks these days, and people are beginning to wonder if it ever will again.
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There is a mounting, pervasive edginess in our national psyche today: history is rhyming. Another hubristic administration is running low on credibility after generally running amok. Worldwide, political instability is spreading like wildfire, and regardless of intention our government seems as much part of the problem as the solution. Our foreign entanglements and the expense of maintaining them are becoming less palatable by the day. The inflation that Wall Street salesmen and government statisticians claim doesn’t exist certainly does for the vast majority of Americans who have experienced the double whammy of real wage contraction over the last five years[8] coupled with decreased buying power. We are left to ponder how things could have changed so little since the 1970’s when energy vulnerability was first revealed to be our Achilles Heel.
Although Energy Security makes regular appearances on the Sunday morning talk
show circuit, thirty years on politicians have yet to formulate a cohesive
energy policy geared toward reducing, and then ending, our reliance on foreign
oil. In fact, during the 1990’s when oil was cheap, the government actually
closed promising programs[9]. The result of all this dithering has been that nothing has changed. If anything, ignoring the problem has made it worse: during the 1975-2005 time span, as American oil production declined from approximately 3 billion barrels per year (Bbl/y) to 1.9 billion Bbl/y
[10], imports of foreign oil increased from approximately 1.5 billion Bbl/y to 3.6 billion Bbl/y
[11]. When oil was cheap and plentiful, no one cared; now that the price has increased nearly 700% off the 1998 low and there is increased competition for supply, concerns about energy vulnerability have resurfaced and people are casting a jaundiced eye on the behavior of politicians. Employing tactics reminiscent of the tobacco industry regarding the relationship between cigarette smoking and lung cancer, the last two administrations have consistently denied, dismissed or denigrated the science behind Global Warming, thereby avoiding the economic consequences of having to respond to it. This in effect has maintained the status quo, which has benefited the Oil & Gas Industry and the Electrical Industry, the two largest businesses on the planet, both of which are opposed to carbon accountability.
But there’s no conspiracy here, folks: it’s all right out in the open. The control or accumulation of energy resources dominates the political landscape today. Pick an oil or natural gas exporting nation and the odds are good it is either causing or suffering civil strife of one sort or another [12].
Judging by the way permanent members of the UN Security Council trade protectionist vetoes for energy supply, things are clearly going to deteriorate further in countries like Sudan, Nigeria, Myanmar, Chad, Equatorial Guinea, and Iran, to name but a few.
This is demonstrative of the new urgency in the Grand Game. Alliances are shifting, rebalancing the global energy structure. The US is starting to be excluded from markets we have long taken for granted, such as those in South America where leftist rhetoric has led to a wave of quasi- and de facto nationalizations.
In the last few years China has made use of its surfeit of American dollars
to purchase energy all over the globe, striking deals for long term supply in
Angola, Ecuador, Egypt, Indonesia, Iran, Kazakhstan, Kuwait, Libya, Myanmar,
Nigeria, Oman, Peru, Russia, Saudi Arabia, Sudan, Thailand, Venezuela, and
Yemen. Unless something changes soon, growth projections place the combined
US-Chinese oil demand accounting for 60 to 70% of world output, a clearly
untenable situation[13]. Hamstrung by environmental regulations and popular opposition, neither the US nor Europe is building the refining and infrastructure capacity needed to meet the ever-rising demand of the years ahead, which can only result in increased reliance on Middle Eastern supplies and OPEC.
[14]
A nightmare in the making, as far as US interests are concerned, is the Shanghai Co-operation Organization (SCO), whose charter members include China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. The SCO is apparently inducting Iran this year and plans to invite India, Pakistan and Mongolia to join in the future, promoting a “gas-and-oil arc” across Asia[15]. This puts the US and especially its allies Japan, South Korea and Taiwan, and to a lesser extent Australia, between a rock and the proverbial hard place in the quest for Energy Security.
The rapid emergence and voracious appetites of developing countries in Asia has taken the developed world by surprise. The United States and Europe have been outmaneuvered in a number of oil and natural gas deals recently, which has sparked a mad scramble to secure supply. The ETR maintains the increases in fossil fuel prices thus far are as much a reflection of monetary inflation and excess liquidity as increased global demand; when the third element of supply shortage is eventually factored into the equation, the price increases will astonish. This is currently being underestimated by the powers that be in Washington but promises to keep a bid under oil prices, indeed all energy prices, for the foreseeable future. Add in the premium attached to oil prices due to political instability, terrorism, monetary inflation, and the threat of pre-emptive invasion and regime change, and higher prices begin to assume a more permanent nature. Indeed, at the moment, the only way the ETR can envision energy prices retreating significantly would be as a result of a global recession induced by runaway energy costs.
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[7] Byrne, David: “Once in a Lifetime”; EMI Records : Talking Heads: Once in a Lifetime, 1984.
[8] Bloomberg: “Weekly wages adjusted for inflation fell 0.7% last month and are down 0.2% over the past year… Pay has been flat or declined in more than half of the 65 months since January 2001.” Bulletin: 20-06- 2006.
[9] Stanford, George, S.: “Integral Fast Reactors: Source of Safe, Abundant, Non-Polluting Power”; National Policy Analysis: no.378, December 2001.
http://nationalcenter.org/NPA378.html
[10] Energy Information Agency: “U.S. Crude Oil Field Production”; Department of Energy, 12-06-2005.
http://tonto.eia.doe.gov/dnav/pet/hist/mcrfpus1a.htm
[11] Energy Information Agency: “U.S. Crude Oil Imports from All Countries”; Department of Energy, 12-06-2006.
http://tonto.eia.doe.gov/dnav/pet/hist/mcrimus1a.htm
[12] Organization for Economic Co-operation and Development (OECD): “Multinational Enterprises in Situations of Violent Conflict and Widespread Human Rights Abuse”; OECD: May, 2002.
http://www.oecd.org/dataoecd/46/31/2757771.pdf
[13] Ridley, Bill: “China and the Final War for Resources”;
http://www.jameswinston.com: 09-02-2005.
http://www.321energy.com/editorials/winston/winston020905.html
[14] Hoyos, Carola: “Will the lights go off?”; the Financial Times: 29-05-2006.
http://news.ft.com/cms/s/df156012-ef04-11da-b435-0000779e2340,dwp_uuid=843ad722-ecd8-11da-a307-0000779e2340.html
[15] Heinberg, Richard: “Energy Geopolitics 2006”; Energy Bulletin: 22-06-2006.
http://www.energybulletin.net/16393.html
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