I came across a story in Canada's National Post entitled Suicide bomber detonates empty fuel tanker near police station in Tikrit, and there located just under an accompanying photo of a man mourning a family member killed in the attack, was an advert for the civilian Hummer, which I consider a rolling billboard of our excesses and dependence on oil.
Neither the Post nor advertisers using Akamai's network likely intended the display of the story and these two images side by side, but I thought it made for unintended, if sad, irony.
It is difficult to see any near term hope for positive change. The US Energy Bill, recently passed, completely misses the mark. The one area where the US could easily and quickly make a difference in the international energy scene is to focus on reducing demand. Since 60% of all US imported oil goes to transportation, taking steps in this area would have a positive long-term impact.
Unfortunately the energy bill tackles no tough problems, panders to agricultural lobbies and calls on no one to make sacrifices.
Is Venezuelan leader Hugo Chavez the next target for an oil hungry US administration?
U.S. Official Says Venezuela Destabilizing Neighbors “The administration has found mounting evidence that Venezuela is actively using its oil wealth to destabilize its democratic neighbors in the Americas by funding anti-democratic groups in Bolivia, Ecuador and elsewhere,’’ Matthew Reynolds, the State Department’s acting assistant secretary for legislative affairs, stated in a letter to a congresswoman.
Reynolds’s comments were in a letter July 27 to Representative Ileana Ros-Lehtinen, a Florida Republican on the House International Relations Committee. Reynolds was responding to a letter Ros-Lehtinen sent to President George W. Bush asking him to pay attention to “the troubling axis’’ between Chavez and Cuba’s Fidel Castro, Chavez’s support “for Colombian terrorist organizations,’’ and Venezuelan arms’ purchases.
These comments from US lawmakers and bureaucrats have a deja vu ring to them. Will we be looking at Contra II in Venezuela in years to come? Iraq II?
Its certainly true that Chavez is trying to use his country’s resource wealth to gain influence in the region. Currently Venezuela is a major exporter of oil to the US; but the US doesn’t like Venezuela’s president much. That Chavez is shopping around for other customers for a product which the entire world wants should not surprise us at all.
In fact in a globalized-world where the free-market reigns, we should expect Chavez to seek diversification.
Yet in the light of a world potentially facing “peak oil”, this picture takes on a different hue. There are many net-importers of oil in the region Venezeula is geographically near. A number of these nations are already suffering due to the lack of less-expensive energy, so just imagine how much influence a major producer like Venezuela could have on the region when peak oil becomes an apparent reality…
An agreement between Venezuela and Caribbean countries, dubbed Petrocaribe, has been in the works for over a year and was ratified this past July.
Even among countries that did not sign on, such Trinidad and Tobago, there are voices within who are supportive of the development:
It is not simply about Venezuela increasing its influence in the region. As far as I am concerned the region could do with a bit more of Chavez-type thinking as an influence. It is a matter of whether increased Venezuelan influence can benefit us as a whole region. (Trinidad and Tobago News)
That nation’s prime minister, Patrick Manning, is not supportive of the Petrocaribe agreement. Energy politics may be playing a reverse role here – Trinidad and Tobago are the largest exporters of Liquified Natural Gas to the US bar none. With Natural Gas use in the US expected to far outstrip domestic production, LNG imports figure prominently in the US energy future.
In a world now dealing with a tight energy supply-demand balance, one that is will as a matter of course get tigher still provided world economic growth continues to head higher, it seems inevitable that the next world-shaking conflict will flare up over oil supplies.
Its a chicken and egg problem of global proportions – staving off the peak requires investment world wide; yet political instability is not condusive to the massive multi-year / multi-decade investments required to bring on major new fields or even bring significant upgrades to existing fields and production facilities.
Juan Cole over at Informed Comment takes on the Iraq is all about oil theme from a different perspective and hits the nail on the head – bad policy, an illegal war, and a complete clusterf??k since the war begain, have contributed to increasing the US – and the world’s – dependence on Saudi Arabian oil.
Aside from oil shut in due to political instability in regions such as Iraq, Saudi Arabia remains the sole swing producer that can quickly open the taps.
Unfortunately for oil product consumers everywhere, the incremental oil available is not the light sweet crude that most refiners want to see, so even more barrels per day is not a guarantee of lower or even stable prices.
Also the overall mix of of OPEC originated oil is getting heavier and more sour:
June 15: At present the API gravity for the new Basket is heavier, at 32.7º compared to 34.6 º for the previous basket of seven crudes. In addition, the sulphur content of the new Reference Basket is more sour at 1.77%, compared to the previous basket of 1.44%. (OPEC)
Iraq has significant oil reserves and could be a swing producer at least in the short term, if only it were stable. The sad reality is this: if Saddam Hussein were still there, world oil prices would be lower today, perhaps by as much as 30 – 50% lower. Why? Supply and demand count for more than any implied terror premium that may exist.
Pre-war, Iraq – even under UN sanctions – was exporting more oil on a more reliable basis and was increasing production steadily after 1996 to a high near 2.6M bbl/d, the highest level since Gulf War I when Hussein attacked Kuwait.
Now, Iraq now imports gasoline thanks to the war on terrah, where before it was self sufficient. Iraq exports less oil now than it did before sanctions, down to approximately 1.6M bbl/d at present. Its a volatile situation with attacks on oil pipelines and facilities being routine there.
To put this in context, for a world which is already running on the knife edge of supply and demand, taking more than 1 percent of world production off-line indefinitely is why we have $60+ oil today.
Today the Bush administration can’t even be certain that its investment in Iraq, likely to topple over 1 trillion dollars by the end of the decade, will ever be recouped. Some Iraqi oil fields apparantly were managed very badly, perhaps permanently damaging their long-term viability. Iraq may not be able to ever regain its peak oil production of 3M bbl/day.
Its easy to make a case for increased reliance on Saudi oil, when the protagonists tell you its true. Today, noted an article in the NY Times via the International Herald Tribune:
Thaw reflects reality: U.S. relies on Saudi oil August 6 2005: “There has been a realization in Washington that we need the Saudis,” said Jean-François Seznec, a professor at Columbia University’s Middle East Institute.
“The tone has improved tremendously,” he said. “We cannot be enemies with everybody. We need their oil desperately.”
“The Saudis are in a great position today,” he added. “They can play the United States against other buyers, like China. And why wouldn’t they?”
Indeed.
