It's been a busy week for Russian diplomats. First, Russia has taken a further step in repairing its troubled relations with Georgia. Russia's ambassador to Georgia, Vyacheslav Kovalenko, has just returned to his post in Tblisi after a disagreement over the deportation of Russian soldiers accused of spying led Russia to recall him. Kovalenko is optimistic, but no doubt tensions will remain high as recent flare-ups over gas prices and South Ossetia remain fresh in the memory.
Second, for the first time in four years, top Russian and Japanese foreign ministers are meeting in Moscow this week for the first round of a new "strategic dialogue" between the two countries. Russo-Japanese relations have historically been strained due to an intractable territorial conflict over four islands in the north Pacific controlled by Russia, which are also claimed by Japan. Hostilities between the states rose again last month after Russia's state-owned Gazprom recently acquired a majority share stake in the $20 billion Sakhalin-2 liquefied natural gas project, halving the stakes of Japan's Mitsui and Mistubishi conglomerates in the project. Nonetheless, Tokyo has a keen economic interest in improving its relations with Russia as it seeks to reduce its dependence on Middle Eastern oil, and Russia clearly has a lot to gain from any deal to supply its oil and gas to Japan.
Energy is also at the top of the agenda as Russian President Vladamir Putin visits India this week. The trip has already produced an agreement whereby Russia will to build four nuclear power reactors in India, and the two countries will also work together in developing aircraft and fighter plane engines.
Do you lack the money to pay for heating oil this winter? If so, there's a friend who can help you out—Venezuelan president Hugo Chávez. His country's oil company, Citgo, is offering Americans 40 percent off on heating oil. The mastermind behind the deal is former Democratic Congressman Joseph Patrick Kennedy II. Sounds too crazy to be true? Just check out the TV commercial below to learn that "help is on the way" from "our friends in Venezuela at Citgo."
Rich folks who feel guilty about all the resources being sucked up by their excess will soon have a respite. An exclusive hotel being built in on the East African island of Zanzibar by luxury resort company Per Aquum plans to be the world's first "zero-carbon" 5-star resort. London's Observer explains a few of the enviro-tricks planned, including (perhaps optimistically) harnessing energy from equipment in the hotel gym for electrical power:
The infinity pool in front of each villa will use water that has been naturally filtered by reeds in an adjoining pool.
To create natural air-conditioning, the villa walls will be shaped to draw the sea breeze into the bedroom, after being cooled by passing over the pool. Cold water pipes will run through the inside of the bed to cool it, and each villa's water supply - from rainwater and desalinated seawater - will be stored in its own tank. Hot water comes from pipes which run beneath the solar panels on the roof, and so are naturally warmed. Waste water will be reed filtered and recycled.
The resort will be built from local earth, renewable timber and reclaimed stone; the 100 staff will be given bicycles, and electric cars will transport guests to and from the airport.
Luxury has not been sacrificed to environmental goals.... There will be a spa, a large swimming pool and a solar-powered restaurant, which will use food from its own farm and put waste into a biomass generator to produce energy. When guests use the gym's machines, the energy they produce will feed back into the electricity supply, and any surplus will be sold to the national grid.
Sounds like guilt-free luxury. Just try to ignore the poverty on the nearby continent.
Last week, the Economonitor noted that the European market for CO2 emissions had gone from a high of €31 per tonne in April to just €4.75. These prices are for the emissions trading scheme that allows countries and firms to trade their carbon emission allowances on the free market. Firms will invest to reduce their emissions, the theory goes, not only to avoid penalties for exceeding their allowance, but also to sell credits to others who can't easily afford a reduction. Similar cap and trade schemes have worked brilliantly elsewhere.
So, what's with the price plunge? A glut of credits on the market. Too many credits were allocated when the scheme began in 2005, so countries and firms are easily meeting their allowances with the credits available. Hence they have little need to buy extra credits on the open market, and the price keeps falling. Firms thus can't profit by lowering their emissions, either. With European countries already objecting to plans to cut credits in the next phase of trading slated to begin in 2008, the system looks unlikely to be the silver bullet it was intended to be.
That's why the EU's latest announcement calling for an "industrial revolution" to cut greenhouse gases should be viewed with extreme skepticism. If they can't get the economics right, the reductions in emissions won't follow.
In perhaps its most ambitious undertaking since James IV launched the Scottish Royal Navy in the early 1500s, Scotland plans to generate 40 percent of its total energy from renewable sources by 2020, more than double its current percentage.
Scotland already leads the United Kingdom in green power, which, despite a lot of Kyoto-related hot air from Tony Blair, only gets 4 percent of its total energy from renewables as a whole. And Scotland will soon boast the largest wind farm in the U.K., when construction finishes on a massive £300m project south of Glasgow.
But there are many hurdles ahead for the wind business in Scotland: complaints from farmers, rural residents, and the tourist industry about sullied vistas, confusing and ever-changing regulatory requirements, long waits for project approvals, and so on.
For now, it's a good time to be a Scottish wind energy entrepreneur.
Russia may have scored a gas victory over Belarus a few minutes to midnight on New Year's Eve, but its use of similar blackmail tactics in getting its hands on the huge Sakhalin-II gas project in eastern Russia is earning the country a financial slap on the wrist. In mid-December, Russia strong-armed Shell into selling its majority stake in Sakhalin, where two major fields under development are estimated to hold more than 1 billion barrels of crude and 500 billion cubic meters of natural gas, to Gazprom, the state-owned energy giant.
But Russia's fondness for re-nationalization means the European Bank for Reconstruction and Development will likely reject a $300 million loan to the Sakhalin project. From the FT:
[F]ormally walking away from the largest energy project in Russia would be considered a snub to the Kremlin and its policy of taking control over private sector assets.
Still, the FT admits that the loan would have been of mostly "symbolic" value given that much of the development on the project is already complete. So it's not a complete loss for the Russians, even if it is bad for business.
The biggest losers? Environmentalists, who relied on the bank to keep standards on the project in check. Russia cynically played the environmental card when it wanted Shell to hand over its controlling interest last year, threatening the company with a shut-down over alleged environmental damage, which the government had previously ignored. Now, as the Russian saying goes, the goats are guarding the cabbage.
Iran's oil industry could completely collapse by 2015, according to Roger Stern, an economic geographer at Johns Hopkins University. Stern writes in the latest Proceedings of the National Academy of Sciences (not available online) that Iran's failure to reinvest in its oil infrastructure is resulting in a 10 to 12 percent annual decline in oil revenue. Surveying their oil debacle, Stern believes Iran's desire for nuclear technology for power generation is genuine, and that the U.S. should just "hold its breath" until Tehran's position softens.
What they are doing to themselves is much worse than anything we could do," he said.
The one thing that would unite the country right now is to bomb them," Stern said. "Here is one problem that might solve itself."
In this year's Top Ten Stories You Missed in 2006, FP noted that "Russia and OPEC countries are moving their holdings out of dollars and into euros and yen."
And this trend will continue into 2007. The United Arab Emirates announced this week that by September, it will move 8 percent of its foreign exchange holdings from dollars to euros. The amount of money in this case is relatively small—a shift of around $2 billion. Most of the dollars in the Middle East are held not by central banks, but by state-owned investment firms. The Abu Dhabi Investment Authority, for instance, manages $500 billion.
But the message the UAE move sends is clear: the dollar is still weak and it's better to diversify.
UPDATE: See also currency expert Brad Setser's comments. Setser notes that the Saudi central bank does have huge assets, but it seems to be hanging on to its dollars... for now.
I don’t understand global warming and peak oil skeptics. What is their incentive to disprove global warming? Warming alarmists feel that they’re protecting the future of the planet—a pretty good incentive. But the skeptics don’t really get much payoff, unless they're energy majors, besides the opportunity to make fun of Al Gore. And yet people like Michael Crichton still get more press than Tyrell Owens on Monday Sportscenter.
If I were a scientist, and I knew that global warming and the oil crisis were only flukes, I’d keep my mouth shut. Why? Because there is money to be made when you know something to be true that no one else believes. Here’s my three step plan for getting wealthy fast, if you think that global warming is a hoax.
If global warming and peak oil are not true, but thought to be true:
|World's reaction||->||Financial Opportunity|
|1. Energy prices skyrocket as the world assumes the supply is dwindling||->||Buy oil stock and a make a fortune until the oil runs out. Which according to you, is never.|
|2. Coastal real estate prices drop out of fear that the oceans will soon rise and flood low-lying land||->||First buy up as much arid, high-altitude land as you can afford. Then, sell it at a premium to the throngs evacuating the coasts, convinced that their property is about to get swamped. Then grab that ocean-front villa you’ve always wanted at a government auction for abandoned property.|
|3. Costs of large, inefficient technologies drop as public clamours for eco-friendly products||->||Buy that big luxury SUV for $19,000 and no money down. Pick up a 72” diesel yacht on Ebay for just a little bit more.|
But above all, never reveal the secret that global warming is just a hoax, invented by Al Gore.
While nobody's happy about rising sea levels and temperatures in hotter parts of the world, the warming of the Arctic is a different story. The melting of the sea ice during the summer months has at last made the dream of 15th-century explorers—the Northwest Passage—a reality. The new Arctic passage will dramatically reduce shipping times. But as The Economist points out, the shipping industry is not the only one that will benefit from climate change:
The biggest beneficiary is likely to be Russia itself, which encircles almost half the Arctic Ocean. Currently uninhabitable areas will become more hospitable; currently inaccessible energy resources will become more exploitable.
According to the United States Geological Service, about one-quarter of the world’s undiscovered energy reserves may be in the Arctic. [...]
Russia has claimed half the Arctic Ocean, including the North Pole, as its territory. It submitted the claim under the United Nations Convention on the Law of the Sea, but had it rejected. The convention decrees that who owns what is determined partly by the extent of a country’s continental shelf, and Russia did not have enough geological data to back up its claim. Russia is now mapping energetically, as are America, Canada, Denmark and Norway, which also border the Arctic Ocean.
Ironically, major oil producers who have invested thousands of dollars promoting "research" suggesting that global warming is a hoax are also beneficiaries of melting Arctic ice. They may find, however, that the Arctic's treasures aren't quite as rich as originally thought.
For ExxonMobil, the world is rapidly changing, but somehow their business will stay exactly the same. What follows are facts gleaned from ExxonMobil’s The Outlook for Energy, A view to 2030 (PDF)
(Hat tip: Energybulletin.net)
A team of scientists at the National Center for Atmospheric Research has developed this animated scenario of diminishing Arctic summer ice through 2049. And guess what? If greenhouse gas emissions continue to build up at the current rate, it's likely that the Arctic won't have any summer ice at all in just a few decades. Check it out.
Newsweek Enterprise focuses on energy this week, with contributions from Al Gore and Fareed Zakaria. The premise of Daniel Yergin's cover story is that sustained high oil prices will lead to a renewable energy bonanza that "could rival the Internet boom." (Which raises the question: what's the Pets.com of this new craze?)
The similarities between the two eras go deeper than just spiraling stock prices, if Gore's analysis is right. Long (incorrectly) ridiculed for claiming he "invented the Internet," Gore compares our energy future to our online past:
Taking a page from the early development of ARPANET (the Pentagon's Advanced Research Projects Agency Network)—which ultimately became the Internet—we will rely on new kinds of distribution networks for electricity and liquid fuels. We will be less dependent on large, centralized coal-generating plants and massive oil refineries. Societies of the future will rely on small, diversified and renewable sources of energy, ranging from windmills and solar photovoltaics to second-generation ethanol-and biodiesel-production facilities. Widely dispersed throughout the countryside, these streamlined facilities will make the industrialized world more secure and less dependent on unstable and threatening oil-producing nations. Off-grid applications of renewable power sources can provide energy for the 3 billion people now stuck in poverty.
The Guardian is reporting that Russia's monster energy company Gazprom — with the full weight of the Kremlin behind it — has "forced" Shell to hand over its stake in the world's largest liquefied gas project in eastern Russia.
[S]enior politicians in Moscow had no doubt Shell was being harassed into reducing its 55% stake in Sakhalin-2 [the gas project] to something close to 25% through relentless pressure from ministries.
The IHT is slightly more diplomatic (or naive), reporting that Shell "offered" to sell Gazprom a major stake. But it's clear that a good deal of pressure came down on Shell. Last year, when talks on a proposed sale stalled, Russian authorities became suspiciously interested in possible environmental damage by the company. They threatened to shut Shell's operations down, as well as work by other foreign energy companies.
If you didn't think that the Russians were known for being enthusiastic advocates of environmental conservation, well, you'd be right. It doesn't take a neo-Kremlinologist to read between the lines here.
They don't have bodies, but they do leave footprints.
It was only a matter of time before someone took the avatar world to task for their environmental impact. (In case you think an avatar is a new model of Hyundai, here's a brief primer. Avatars are computer-generated, physical representations of people in virtual online games or social worlds. Think Second Life, Sims, World of Warcraft, etc.)
The virtual world of Second Life, which hit one million residents back in October, is one of the most popular online games of its kind. To even call it a game is perhaps inaccurate. It's a full-fledged virtual world, complete with crime, sex, commodities, and real-world advertising. (Don't miss BusinessWeek's journey into Second Life or its great "Old Fogey's Guide to the Online Universe.") It goes way beyond the traditional online games of old: These days, politicians like former Virginia Gov. Mark Warner hold town meetings and musicians use music streaming to stage "live" concerts in Second Life in order to be heard.
So, it's fascinating to see blogger Nick Carr (also a former exec editor at Harvard Business Review) calculate whether avatars consume more energy than their human counterparts. He found that the thousands of avatars "living" in Second Life at any given moment, given the servers and computers needed to run the virtual world, use about the same amount of electricity as a comparable number of real-life Brazilians. So, here's my question: Has anyone done any research on whether avatars are much more wasteful than their human counterparts? Say, in terms of energy: Do avatars not bother to turn off the lights? Email us.
The current issue of Resources is dedicated to America's oil addiction. The writing is a little heavy, but there's some great stuff in it, especially for you policy aficionados out there.
Expanding Oil Supplies, by Joel Darmstadter and Robert J. Weiner:
There are three potential reasons why the social value of additional oil and its price may differ: increased production may lower the world oil price, increased production may enhance resilience to supply disruptions and price shocks, and increased production risks environmental harm.
Replacing Oil: Alternative Fuels and Technologies, by Raymond J. Kopp:
In the near-to-medium term, biofuels are poised to be competitive. In the longer term, hydrogen and electricity offer the technical potential to completely wean the United States from petroleum use.
The Economics of Improving Fuel Economy, by William A. Pizer:
Imagine a $10 technology that can save $15 in fuel. If that same technology can be used to provide an increase in power or size that is worth $20 to consumers, the market will push technologies toward power and size over fuel economy.
There's an interesting Bloomberg story on the oil outlook for 2007. One Lehman Brothers analyst predicts the per-barrel price to rise to $72 next year. Another analyst, T. Rowe Price Group's Tim Parker, tells Bloomberg that he thinks oil prices will stay around today's level for about a year, thanks to more output from non-OPEC countries, and then begin to rise. By the end of next year, he says, $60 crude will "feel more like a floor than a ceiling [...] It'll be difficult for non-OPEC supply to consistently meet demand growth."
And, of course, no oil-price-prediction story is complete without Boone Pickens, the oil billionaire and hedge fund manager (who has apparently signed on to support Rudy Giuliani's '08 bid). He thinks the price of oil has bottomed out: "I keep thinking we're right at the bottom on oil [...] I don't see why the run is over if the global economy continues to grow."
Though some argue that Pickens is pumping up his own investments, he's been correct about prices before, and his statements alone can't account for the price increases we've seen over the last three years.
It seems like years ago that legislators in Washington were tripping over themselves trying to quell public dissatisfaction with high prices at the pump. And even after gasoline prices fell and stabilized, the national conversation about energy continued, with debates on drilling in Congress, and a proposition in California on renewables. It'll be interesting to watch the debate heat up again when (or if) gasoline prices rise in 2007.
There's a giant cloud looming over the world of energy investing. Somehow, someday, to some extent, carbon dioxide is going to get a price tag from the U.S. government. Until then, huge, long-term investments worth billions of dollars are going to be bets placed on what that price tag -- the regulatory policy -- is going to look like. (TXU has already placed its bet.)
We're sitting on tons and tons of coal here in America, and there's a lot of energy we can get out of it. We can pulverize it -- the traditional way we've been generating electric power -- we can gasify it, and we can make liquid fuel out of it. And it's cheap. The problem is that it very cheaply cooks the planet.
But as a recent BusinessWeek article noted, it's new technology, not just global warming, that is changing the way we think about coal's competitiveness in the energy mix. Venture capitalist Vinod Khosla, who backed the failed prop 87 in California earlier this year, may offer a glimpse into investments to come.
Khosla is taking a hard look at the economics of electric power and says he has come away "totally shocked." The era of coal may be ending, he declares: "Nobody in their right minds should be building a coal plant."
Has Khosla gone off the deep end? If so, he's not alone. "It's the definition of financial insanity to invest in a new coal plant," agrees Marc Brammer, head of research for consulting firm Innovest Strategic Value Advisors. Even some utility executives see big risks. "It's very likely the investment decisions many are making, to build long-lived high-carbon-dioxide-emitting power plants, are decisions we'll all live to regret," warns Vice-President Gary Serio of Entergy Corp. (ETR ), which owns several coal plants.
Without coal, where will power come from? Khosla's grand vision is to repower the U.S. via solar plants in the American Southwest. The idea: Use thousands of acres of mirrors to focus solar energy, heating water to drive turbines. An analysis of new Australian solar technology suggests that it is cost-competitive even with today's coal plants. "I'm almost convinced that the cheapest plant would be solar thermal," says Khosla.
A WaPo business section story today struck a similar tone on solar, seeing it as potentially competitive without government subsidies.
Yesterday, I put up a post urging Microsoft to force computers worldwide into a higher power savings mode in order to reduce CO2 emissions. The article was featured on Slashdot.org, and the discussion over there is very lively. We've received several great comments on the piece, so we're highlighting a few here.
Ric L., who writes from a Microsoft.com email address, notes, as I did in my post, that Microsoft Vista runs efficiently right out of the box.
This means hundreds of millions of computers will blissfully sleep their unused hours away every day…"
Again, I applaud Microsoft for including this software in their next update, but it will be many years before hundreds of millions of computers are upgraded to Microsoft Vista. More power could be saved by updating today's machines."
Sean F., who develops software for air-traffic controllers, assures me that those systems don't run on Microsoft Windows:
You mentioned that critical systems shouldn't have this hibernation mode go into effect. I thought I'd mention for clarity, that most critical systems do not use Microsoft software. I personally like MS, I'm not bashing the company or its products. I use them all the time, including right now. But they are very buggy, and most critical systems require more reliable software and hardware.
I don't run any Unix or Unix-variant software at home, but that is what most critical systems run on. I should know, I develop software for the FAA for air traffic control centers, your prime example of a system that shouldn't go into hibernation. Just a friendly email to give you some information. I completely support your idea for MS to do some code changes, just wanted you to have more accurate data.
It is estimated there are 660 million computers in use worldwide, the majority of which run some iteration of a Microsoft operating system. Generating the electricity needed to power those computers requires hundreds of power plants that produce billions of tons of CO2 emissions. Many of those machines sit idle for 12 to 16 hours per day, burning electricity, but not doing any work, because businesses habitually leave their computers running overnight.
Microsoft has already announced that they will build aggressive, energy-saving technology into their next operating system, Vista. But that's not enough. These days, most computers are networked and can accept software upgrades over the Internet. Also, most machines already possess software that allows them to run more efficiently—to "sleep" in a low-power mode when not in use—but few people enable this feature.
So, Microsoft should issue a software upgrade to every computer running Microsoft Windows worldwide. The upgrade would adjust the machine's energy-saving settings for maximum efficiency. Of course, this upgrade would have to allow critical systems to opt out. Nobody wants air traffic control computers to suddenly go into deep hibernation. But correcting for critical systems should be very simple for a company that churns out millions of lines of code every year.
It's conservative to estimate that 100 million computers worldwide are running Microsoft software, currently running inefficiently, being used in non-critical applications, and ready to accept an upgrade. The savings in energy, outlay and emissions generated by a hypothetical software update would be staggering. Microsoft estimates that it costs $55 to $70 per year for an average business to allow one computer to sit idle. Multiply that times 100 million computers and you realize that the world spends $5 to $7 billion* dollars every year powering inactive computers. Shifting 100 million computers into low-power sleep mode for 12 hours per day could easily cut worldwide C02 production by 45 million tons per year. That is equivalent to wiping away a year's worth of CO2 produced by every household and industry in a country the size of Ireland. Dozens of power plants would no longer be needed.
After the BREAK: The numbers behind the savings.
Jerry Beilinson reports for Popular Mechanics on his visit to a General Electric plant in NY state. It's a nice little update on what's going on:
...Nuclear energy is doggedly making an image comeback. And returning to the stage are wind power, solar, conservation, and gasification of coal and other fuels. All of these have been energy darlings during one era or another (gasification goes back to the 18th century, and in its modern form to World War II) and all of them received attention yesterday as a group of reporters and academics were led around the labs in Niskayuna.
It's a bit ironic, but the dirtiest of these technologies could have the biggest impact. Gasification is the process of taking one fuel—coal, often—and turning it into a gas (syngas) that can be burned, plus a bunch of other chemicals. An "integrated gasification combined cycle" (IGCC) system burns the syngas in one turbine, as though it were natural gas, and uses excess heat to boil water for a steam turbine.
While windmills look like glowing harbingers of a clean utopia, a gasification plant looks like a cross between an oil refinery and a coal-burning plant. Oh, well—let's not be squeamish. IGCC plants are very efficient. The other advantage is that you get to capture most of the pollutants that would go up a smokestack if you were simply burning the coal. And it doesn't have to be coal. You can gasify grass clippings, cattle slaughtered after a mad-cow-disease scare, old tires—nearly anything.
In the wake of North Korea's nuclear test, Ayatollah Khamenei reiterated Iran's right to continue developing its own nuclear program. Here's a radical idea. If the world was really interested in countering Tehran's nuclear ambitions, maybe it should go after its sector most vulnerable to foreign investment: oil. Last week negotations between the Iranian oil ministry and the Japanese company Inpex to jointly develop the Azedegan oil field failed, prompting reports that Inpex would be limited to a 10 percent stake. Then, over the weekend, Iranian oil minister Kazem Vaziri-Hamaneh hinted that Inpex, which is nearly 30 percent owned by the Japanese government, might be permitted its original 75 pecent stake, under certain conditions. He placed the onus on the company to solve "its domestic problems."
The thing is, Iran can't increase (or perhaps even maintain) current levels of oil production without foreign assistance. Petro-dollars sustain the Iranian economy, nuclear development included. So call me crazy, but maybe the United States should call for a worldwide ban on all petroleum products from Iran. Sure, prices at the pump will skyrocket, but the Iranian nuclear program would be stopped cold. It may just be the shock the world needs to spur the serious development of alternative sources of energy.
An excellent post earlier today by my colleague Travis Daub highlighted China's ventures into the Iraqi oil market. But the IHT article that Travis linked to seems overly alarmist in predicting that China will rely on illiberal regimes to feed its insatiable demand for energy. The reality is likely to be far more mundane.
If you look at China's crude imports by region, what you see right now is rather impressive source diversity. Here's a breakdown using 2005 data:
That picture, of course, will soon change as China's demand grows. But, at least according to one leading expert with whom I spoke recently, it's unlikely that obscure, anti-Western, illiberal regimes in the remote corners of the world will have reserves large enough to feed China's demand. Rather, their primary source is likely to be a very familiar one: the Middle East. In fact, one recent analysis I saw suggested that by 2015, nearly 65% of China's crude imports will come from the Middle East.
That's hardly oil adventurism. China and the United States may compete for reserves, but such competition is unlikely to be taking place in the "backwaters of the world." And the real question prompted by these numbers isn't whether China is on a crash course with America. Rather, it is how long China's leadership can continue to pretend that events in other parts of the world have no impact on its own financial and political future?
Remember the huge oil field discovery in the Gulf of Mexico that Chevron announced earlier this week? The one that oil lovers and energy independence advocates everywhere breathlessly championed as the savior of American energy? Well, it turns out everyone should take another breath.
The Energy Bulletin released a clarification on Wednesday raining on Chevron's parade and even suggesting that there are "political motivations behind the announcement":
The September 5th announcement by Chevron and Devon and Statoil of the huge Gulf of Mexico discovery should be clarified. The announcement claims that the discovery could increase US proven reserves of oil by as much as 50%. However, the total amounts are highly speculative. ...
The area will not come online for at least 4 years and, at a full rate, for at least 7 years. Further, it is likely that there are political motivations behind the announcement, as the vote to open offshore drilling in the United States is upcoming in the US Senate.
The Bulletin goes on to state that the discovery is probably not oil, but natural gas. And Chevron gets a thinly-veiled slam for announcing such a "discovery" just weeks before Congress is due to decide on whether to lift a 25-year ban on coastal drilling. The Bulletin continues:
[T]he announcement is reminiscent of the Mexican "huge oil discovery" announced last year, of a possible 10 billion barrels, which was quietly revised this year to around 43 million barrels, a downward revision of 99.57%. This similar "discovery" was made in Mexico last year a few months before the Mexican parliament was to vote on Pemex (state oil co)'s budget and rights to expand drilling.
Chevron and two of its partners reported yesterday that they may have stumbled upon a deep reserve of oil in the Gulf of Mexico. The well test, which drills five miles down into the ocean floor, was so successful that some believe it might contain more crude than Alaska's Prudhoe Bay reserve, which was discovered 40 years ago. The LA Times reported that the finding could boost U.S. petroleum reserves by up to 50 percent. Chevron's announcement came just a day after President Bush made a speech warning about U.S. dependence on foreign oil. To quote the Church Lady, "How conveeeeeenient!"
Seriously, though, if this oil discovery turns out to fulfill its promise, it could have a large impact on oil prices, which tumbled by $1.10 today to close at $67.50. Last month, FP reported on the shrinking oil reserves around the world. It sure would be nice to add an oil field to the list that is actually growing in production, instead of falling off.
A sign of things to come post-midterms? From the current Time:
Previewing the final quarter of Bush's presidency, officials disclosed to TIME that the Administration is formulating a huge energy initiative designed to "change the whole nature of the discussion" and challenge the G.O.P., Democrats, the oil and electricity industries, and environmentalists. An adviser said Bush's views about global warming have evolved. "Only Nixon could go to China, and only Bush and Cheney--two oilmen--can bring all these parties kicking and screaming to the table," the adviser said.
Graham Lees over at World Politics Watch thinks so. He's been tracking the high-stakes poker game that the country's ruling military junta has been playing with its 10 trillion cubic foot natural gas reserve (probably the largest in Southeast Asia). If you're not up to speed, China and India both want the gas in order to feed their insatiable energy appetites. And Burma is playing one off the other, which is throwing a wrench in the Year of India-China Friendship. Whichever country wins out, it's sad to watch democracies such as India coddle illiberal regimes in order to gain access to their resources. Of course, that's one democratic tradition that's hardly new.
The price of oil has settled back down at $73 since the Middle East cease-fire, and it turns out that BP only had to shut down production on half of the oil field at Prudhoe Bay, Alaska. But all this "good" news hardly means that the future looks bright for oil. FP decided to take a look at some of the other major vulnerabilities that could affect the world's fields of black gold. In this week's List, we investigate the problems that could take major oil fields offline.
The fact that the Bush administration acknowledged yesterday that they'd known about Pakistan's efforts to build another large nuclear reactor - which could produce enough plutonium for 50 bombs each year - and failed to tell Congress about it would be unfortunate on any day. That this news comes just ahead of a vote in the House on the U.S.-India nuclear deal - an agreement Bush has strenuously supported - should make everyone a little suspicious. Congress shouldn't have learned about the new reactor from independent analysts who just happened to spot the construction on satellite photos.
The reactor has been under construction for awhile (that's a different plant in Pakistan pictured above) so the special treatment Pakistan's neighbor is receiving from the U.S. hasn't pushed it to break new ground. But the last thing anyone wants is a renewed South Asian arms race. Pakistan upping its weapons production is certainly something that India will pay close attention to, and something that should be considered carefully by Congress before voting on the U.S.-India deal, which allows the US to sell nuclear materials and technology to India, in exchange for safeguards on civilian nuclear facilities in India. But there's a lot of concern among experts about the continued lack of oversight over India's weapons program. In a new ForeignPolicy.com exclusive, nonproliferation experts Thomas Graham, Leonor Tomero, and Leonard Weiss debunk the so-called benefits of the deal and argue that giving India special nuclear treatment will just complicate efforts to get Iran, North Korea, and others to avoid the nuke route.
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