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Posts tagged "Geo-politics"

US Energy Security Council Inaugural Event 2011

Posted by Matt Beer - December 14, 2011 - Energy, Geo-politics, Level 4, Oil, Peak Oil Level 4
0

This 105 minute informal talk with a panel of about 10 members of the US Energy Security Council which includes many former heads of the military, US Senate, oil industry and governmental bodies most of which have “honorable” before their names (Ex CIA Boss James Woolsey, Senator and Professor Gary Hart and Alan Greenspan to name a few).

While this is not a new subject, this event attempted to frame the debate as there being a monopoly in one of the most profoundly important sectors in our economy and that monopoly is a great weakness which leave us all exposed if we do not do something about it. I am of course talking about oil being the only real source of energy for all the cars, trucks and airplanes currently operating in the world today. This council argues that the principle role of government is to create markets and have them work. A monopoly is an example of a market not working. In this regard they argue that they are not being anti-oil but rather pro choice or pro fuel choices.

The decades of inaction on developing a proper energy policy has meant that the US has developed one by default. That is: “We do have an energy policy. We rely on a single fuel. We buy it from a cartel controlled by people who don’t like us very much. And every five years we go to war to maintain that privilege”. The council members are deeply worried about the effects that an inevitable oil price shock will have on the US economy and the people within it as history has shown these price spikes help trigger recessions (I will assume they are also concerned about the rest of the world but as they are talking to an American audience we’ll let it slide).

Talk covers a range of issues, such as:

  • How there are many hidden costs to oil – the War on Terror, 30-40% of the US military budget directly and indirectly securing oil, climate change, social tension when oil prices rise, etc.
  • Another supply shock is on the cards. As most of the oil reserves are located in the MENA (Middle East and North Africa) region where there is great political instability, especially after the Arab Spring.  How long will it be until the next Libya occurs? There have already been attacks on oil infrastructure in Saudi Arabia, when will there be a successful one?
  • Rise of developing nations. China is securing first rights to purchasing oil around the world meaning when a supply shock comes they will be more insulated and the world market will be that much tighter.
  • Alternative fuels. There were a few on the panel gunning for methanol though some of their arguments sounded a little too good to be true for me. While it theoretically makes a lot of sense the actual practical and economic reality is less clear.

Perhaps the most important point is that all cars built today should be flex fuel vehicles. It only costs $100 to add in a sensor chip that detects the fuel on board and makes small changes to the fuel injection and spark plug timing to enable the engine to burn whatever mixture of ethanol or petrol/gasoline is in the tank. $100 buys flexibility for the fleet of the future and may in the long run save us billions, potentially trillions of dollars. This has happened successfully in Brazil and should be an easy mandate to pass by governments in the rest of the world. Key word should.

The same goes for developing a sensible policy on energy.

Biofuels, Conventional oil, Crude Oil, fossil fuel, Gasoline, Geo-politics, Oil, Transport, United States, Video

Overcoming the Resource Curse – Stanford Uni

Posted by Matt Beer - September 10, 2011 - Economics, Economics Level 4, Energy, Geo-politics, Level 4, Peak Oil, Peak Oil Level 4
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Terry Karl, Gildred Professor of Latin American Studies and professor of Political Science at Stanford University, discusses overcoming the resource curse. Also known as the paradox of plenty it is the fact that most resource rich, in this case oil rich countries are performing far poorer than non resource rich countries in terms of development and governance indicators, defying logical economic thought. This is largely a phenomenon in countries which have poor governing systems and high incomes (from the oil) increasing the likelihood of corruption. These oil rents/income break the traditional relationship of governments and people with the tax, representation, accountability dynamic found in developed countries such as Europe and the US. When government coffers are not dependent on taxes and are almost exclusively dependent on secret transactions between oil companies and governments it leads to the continuation of this corruption cycle. Government leaders can spend this money however they like, building up military and buying off certain key sections of the population (religious, ethnic, regional groups, etc.) and keep control of government through more autocratic means. A story that exists in the majority of oil producing countries.

Terry argues that transparency in disclosing payments made from oil companies to countries is a key first step in breaking the cycle of secrecy which helps shape the current political situations of civil war and conflict in many of these oil producing countries. Without it, development and democracy will be permanently hindered. It also has large ramifications for the world as a whole. Reporting on oil production and reserves is highly dubious in terms of accuracy and the biggest, most profitable market in the world uses this extremely bad information to predict oil prices. This helps breed uncertainty, speculation and ultimately volatility in the marketplace which is bad for every consumer of oil but also completes a viscous circle with oil producing countries as their incomes yoyo up and down, causing any budget planning to go out the window. This also helps breed mistrust between the various parties, particularly with the left out sections of the population of the oil producing countries, increasing likelihood of conflict, interruptions in oil production and further market volatility. The resource curse affects us all.

Africa, Economics, Geo-politics, Oil Companies, Oil Producing Countries, OPEC, Peak Oil, Reporting, Resource Curse, Video

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