“The Capitalists will sell us the rope with which we will hang them,” Lenin is said to have boasted.
With the attempted assassination of KGB defector Alexander Litvinenko in London and brutal murder of journalist Anna Politkovskaya in Moscow, it seems a signal has been sent that someone who angers Vladimir Putin may not be safe anywhere in the world. In the current climate, foreign companies that try to help produce Russia’s vast oil and natural gas resources clearly do at their own economic peril ([1], [2]). And yet, western countries are lining up to accept Russian energy supplies, as if the Russian bear will never exploit the resulting economic leverage to expand its geopolitical hegemony.
But where else would the world turn for energy supplies? To Iran, which declared its intention to use 100,000 centrifuges as part of its nuclear program, and whose newspapers announce that a great war with Israel is coming?
Or perhaps Saudi Arabia, which this weekend threatened to suspend diplomatic ties with the U.K. unless the country drops its investigation into alleged Saudi corruption, and whose wealth appears to play no small part in the cultivation of fiercely anti-American sentiment both here and throughout the world.
Or then again maybe Venezuela, home to President Hugo “Devil Bush smells like sulfur” Chavez?
Or perhaps we should count on Nigeria, where paramilitary attacks on the oil infrastructure have become an almost daily occurrence.
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If you selected “none of the above,” congratulations. You’ve just ruled out more than half of the world’s net oil exports.
And for those who declare that peak oil is a non-issue, I pose this question– if there’s plenty of oil, why are we handing out so much rope?
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There’s a big difference between having plenty of oil underground, and plenty of oil specifically found, with a means of getting that oil out of the ground and onto the world market.
So even if we have 100, 1000, or any number of times as much oil left to discover as we’ve now already discovered, or even if there are abiogenic sources of oil that will give us a limitless supply over time, but none of it has been developed in places not on that list of majority oil exporters, then we’d still have to hand out the rope in order to avoid shortages.
No, no, there is no problem. Iraq will be the source of supply, once we achieve victory there. No problem at all here…
James, feeling like Lenin, ropes us in.
Gladly. Here’s my rope and my neck. Let’s see if you can lasso me, black-belt lasso martial artist from wayback.
Just try it, I dare you.
The political dimension doesn’t often invade the Economics theatre or if it does, is not often given such a spotlight. Thank you for acting out…and stirring us up with some geopolitical observations.
Of those leading export countries (Canada not among them!) what is the mix of MNOilC in that production? How much international rope is tied in with these “foreign” countries, rope that has no particular over-riding national interests? Russsian hegemony may be the smallest sliver of geopolitical hegemony compared to US hegemony, yes?
Why is it that we always assume that oil revenue will be used to destroy us?
For example, what is the purpose of Russia entering into deals with “western countries [that] are lining up to accept Russian energy supplies?” Do we really believe that the Russian bear is intent on killing the golden goose? What do they end up with if they destroy the wealth of the West yet are still in the same economic condition they are in right now?
Could it be that the Russians are actually attempting to create wealth for themselves by selling to the West? Could it be possible that the West is buying the oil because it is useful for production and the creation of future wealth?
Naw, we all have the faith of Mahmoud Ahmadinejad and are rushing to kill ourselves to bring on Armageddon and the second coming. Isn’t that what you want?
I’m just baffled that the US hasn’t reached a consensus that we should establish an Apollo or Manhattan style project to move to renewable energy sources.
We’re spending a Trillion dollars in Iraq, money we would not have spent if the US were not dependent on Middle Eastern oil. Sure, we didn’t mean to spend that much, but we are….
People are afraid to travel because of terrorism caused by our foreign policies, policies intended to secure our oil supply. Why are we willing to give up our peace of mind, and our civil liberties, and yet not willing to make a major, concerted effort to end our dependence on unreliable oil supplies???
Simply, the driver has been asleep at the wheel. Especially in the UK.
Natural oil and gas reserves have peaked and declined at an “unexpected” rate, the coal industry smashed in Mrs “T”‘s fight with the NUM and subsequent “Dash for gas”.
Now we have the British Energy fleet of 30 odd year old power stations falling apart and no engineers to run or build new ones – which will face years of obtusive planning and downright opposition by the zealous nationalists in Scotland.
Now the sleeping mandarinate has belatedly discovered that the much vaunted wind farms have to be attached by a wire to the rest of the National Electricity Grid and nobody wants to pay for it.
So we go and buy some more rope – Baltic pipelines, Gazprom / ENI hookups, Belgian connectors part owned by Gazprom – who want to sink their teeth into Centrica.
..and it is not as if the intentions of the St Petersburg Mafia were clouded in deceit or there was an element of stealth , Ukraine / Georgia / Italy … Byelorussia coming nicely to the boil for this winter.
… and the stupid lawmaking architects of the EU ETS carbon trading scheme like the dim – witted Margaret Beckett, inoccent of the swindling schemes of the city money jugglers in their vast and hugely profitable casinos, funded by everyone’s pensions, sleep soundly at night, confident in the belief that they are saving the planet.
God help us.
Nick wrote, “I’m just baffled that the US hasn’t reached a consensus that we should establish an Apollo or Manhattan style project to move to renewable energy sources.”
Well, according to previous posts by JDH, this is totally unnecessary because the market will always make the best possible decision about what programs to pursue. The market apparently believes that we should be buying oil from unreliable suppliers, so that must, ipso facto, be the best possible course of action. Do I have that right, JD?
Avo, perhaps you are referring to remarks such as the one I made last month:
The U.S. has the largest coal reserves in the world, enough to last about 200 years at conservative estimates. The technology exists to turn this coal into relatively clean burning gas for electricity generation. Turning coal into clean burning diesel fuel is also economic with oil above $40 a barrel, or so I’ve read. The coal is here. We own it. We know exactly where it is. But it is a politically incorrect fuel, only slightly above nuclear in the environmentalists’ list of villains. The greens won’t let us drill for oil or natural gas here in the U.S. and they blanch at the thought of mining coal or building nuclear-powered electrical generators. But don’t worry: the problem will solve itself. Global warming will soon have all of us energy-wasting Americans living in caves – caves that will not need to be warmed because we cannily refused to sign the Kyoto Protocol and turned the whole world into a tropical paradise! Then the Saudis and Russians can sell all their energy resources to the Chinese, who will oblige by keeping the world’s temperature balmy with their CO2 emissions. It will all work out – and we have the often-ridiculed ulta-green nut cases to thank!
The thing to watch is when these producers stop accepting dollars for oil (because they realize those same dollars are just going to prop up the US). When that happens, we’ll be in a real bind….
Such an eleoquent post (from UK?) ziz, but God help us if you think we should be going to church or prayin instead of this…lassoing with the rope we have. [Thank you for that compelling overview of UK Energy btw.]
That US Energy policy that was placed in Cheney’s hands so that the market could have their way with us (siding with Avo) was unlike the gov support of housing enacted in 97? that cost the gov serious revenues (the $.5M/principal residence tax shelter) and laid the foundations for a thriving (and more) real estate market.
No such tax incentives were provided to the commuter or home fuel burners who all gravitated to investing in RE rather than alternative energy or, heaven forbid, alternative lifestyles where the car is not the centerpiece.
This business of government support is tricky.
“I’m just baffled that the US hasn’t reached a consensus that we should establish an Apollo or Manhattan style project to move to renewable energy sources.”
I could not agree more. President Bush is the first President to admit we are addicted to oil. If we can develop a distribution infrastructure for ethanol that is similar to the existing one for gasoline, we could make a major dent in our dependence on hostile foreign oil producing nations. Government involvement is necessary to build distribution networks. For example, could the free market have built our national electric grid? Not without the involvement of government.
About that “major dent” from the (still controvertial) Wikipedia:
Realistically, peak corn-ethanol would likely top out at between 1115 billion gallons per year – only a fraction of the 140 billion gallons of gasoline consumed each year in the United States.
But it is only since 2005 that this oil-centric administration has made any steps, big or small, away from the oil companies.
Carl: Jimmy Carter beat Bush to admitting the relationship between oil and the US eocnomy:
From Carter’s 1979 speech: “This intolerable dependence on foreign oil threatens our economic independence and the very security of our nation. The energy crisis is real. It is worldwide. It is a clear and present danger to our nation. These are facts and we simply must face them.”
To answer your question in regards to the rope + peak oil, as you’ve pointed out it’s not a matter of how much oil but at what cost. And to add to it I don’t see that we need to take immediate political action in regards to them. It’s unlikely that there is much we could in the short run to address these issues. And there are risks to acting on them that go beyond oil. For example, Japan and China would still be lookign to Russia for a lot of raw materials beyond oil. The US would likely still be trying to work with Saudia Arabia to try to address terrorism + keep at least a country or three in the Middle East that is friendly to the US. Oil may be the proverbial 800 pound gorilla. But it’s no the only gorilla in the room.
Also remember that this dependence can go both ways. Oil is fungible. Saudia Arabia cutting off Britain may simply mean that they increase their imports of oil from Norway. And that increased demand may simply drive the Germans, Italians and others to get less oil from Norway and more from Saudia Arabia. It would probably have some affect on oil prices but in the grand scheme of things it may not have a large negative affect on Britain.