October 24, 2007
High oil and global politics
I’m struggling a bit today. By Wednesday afternoon, I like to have a vague idea of what my column next week will be about. But I’m feeling uninspired. Of course, it is quite likely that there will be a rush of news later this week, which will provide an obvious topic. Last week, for example, by the weekend there were three good subjects – Benazir’s bloody return to Pakistan, the Polish elections, the signature of the new EU treaty. In the end, I ignored them all. But, if required, I’m sure I could have worked anyone of them up into a column of the required standard (β++∕∂-?).
At the moment, I am reduced to reading over my dog-eared list of “ideas for future columns”. The one I feel most like reviving at the moment is the article on what’s wrong with Bono. This got quite a big reaction when I first suggested it on the blog a few weeks ago – so there is an archive of stuff for me to work through. Also, I’ve just been forwarded a new article on celebrities in global politics, which looks promising. But I have had another idea, which at least has the merit of being new – the potential impact of $100 oil on global politics.
What might that be? Here are six ideas:
1) It’s bad for democracy. The pressure for political reform in big oil producers like Russia and Saudi Arabia will decrease. The Russian government will have the money to buy off aggrieved constituencies like pensioners – see the food subsidies they have just announced.
2) America’s current bogeymen – Mahmoud Ahmadi-Nejad and Hugo Chavez will both be feeling richer and more confident. Iranian and Venzuelan oil money will pop up in odd places, like clinics in the Gaza strip and subsidised London buses.
3) Alternative energy will become even more fashionable in the US - "the moral equivalent of war". Except nobody will use that phrase because it is associated with Jimmy Carter.
4) The European Union will get even more antsy about its energy dependence on Russia. But it wont actually do anything.
5) Energy-hungry economies like China will step up their search for new fossil fuels. Expect more dodgy deals with the likes of Burma and Sudan.
6) The struggle over who has sovereignty over the Arctic will intensify.
That’s the best I can do so far: B+, at best, I would say. Does anybody have any fresher ideas on the oil and politics question?
Peak Oil could trigger meltdown of society
Energy Watch Group
London, 22 October 2007
According to a newly published global oil supply report to be presented
by the Energy Watch Group at the Foreign Press Association in London,
world oil production peaked in 2006. Production will start to decline at a
rate of several percent per year. By 2020, and even more by 2030, global
oil supply will be dramatically lower. This will create a supply gap which
can hardly be closed by growing contributions from other fossil, nuclear
or alternative energy sources in this time frame.
“The most alarming finding is the steep decline of the oil supply after
peak”, warns Jörg Schindler from the Energy Watch Group. This result,
together with the timing of the peak, is obviously in sharp contrast to the
projections by the International Energy Agency (IEA). “Since crude oil is
the most important energy carrier at a global scale and since all kinds of
transport rely heavily on oil, the future oil availability is of paramount
importance as it entails completely different actions by politics, business
and individuals.”, says Schindler.
This cautious energy outlook corresponds with statements made by
former US Defense Secretary and CIA Director, James Schlesinger, who
said at a recent oil summit in Cork: “The battle is over, the oil peakists
have won. Current US energy policy and the administration’s oil strategy
in Iraq and Iran are deluded.”
However, until recently the International Energy Agency denied that a
fundamental change of energy supply is likely to happen in the near or
medium term future. Hans-Josef Fell MP, a prominent member of the
German Parliament, is clear: “The message by the IEA, namely that
business as usual will also be possible in future, sends a diffusing signal
to the markets and blocks investments in already available renewable
energy technologies.
Remaining world oil reserves are estimated to be 1,255 Gb (Giga barrel)
according to the industry database HIS (2006). For the Energy Watch
Group (EWG), however, there are sound reasons to modify these figures
for some regions and key countries, leading to a corresponding EWG
estimate of 854 Gb. This oil supply outlook does not rely primarily on reserve data which in the past have frequently turned out to be
unreliable. Hence the EWG analysis is based primarily on production data
which can be observed more easily and which are more reliable.
Peak oil is now. “The oil boom is over and will not return. All of us must
get used to a different lifestyle.”, said King Abdullah of Saudi Arabia, the
largest global oil producer. For quite some time, a hot debate has been
going on regarding peak oil. Institutions close to the energy industry, like
CERA, are engaging in a campaign trying to debunk peak oil as a
“theory”. However, the EWG report shows that peak oil is real. The world
is at the beginning of a structural change of its economic system. This
change will be triggered by a sharp decline of fossil fuel supplies and will
influence almost all aspects of daily life. Climate change will also force
mankind to change energy consumption patterns by significantly reducing
the burning of fossil fuels.
Anticipated supply shortages could easily lead to disturbing scenes of
mass unrest as witnessed in Burma this month. For government, industry
and the wider public just muddling through is not an option anymore as
this situation could spin out of control and turn into a meltdown of
society.
“My experience of debating the peak oil issue with the oil industry, and
trying to alert Whitehall to it, is that there is a culture of institutionalised
denial in government and the energy industry. As the evidence of an
early peak in production unfolds, this becomes increasingly impossible to
understand”, says Jeremy Leggett, the Solarcentury CEO and former
member of the British Government’s Renewables Advisory Board.
http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Press_Oilreport_22-10-2007.pdf
Posted by: Anonymous | October 24th, 2007 at 3:52 pm | Report this commentAmazingly, “A Russian” and I have been debating point 1, under the thread “Inside the Kremlin” (see the last few posts under that thread).
I have posted a link to an article on the rentier states although my Russian friend is bringing up some good arguments against it.
P
Posted by: Pacifist | October 24th, 2007 at 3:57 pm | Report this commentBy the way, the Lex column on the impact on the oil price of a strike on Iran deserved an F. I don’t know who wrote that but it fell short.
P
Posted by: Pacifist | October 24th, 2007 at 4:00 pm | Report this commentLest we forget that this may cause any disagreement between the USA and oil-producing nations to be magnified. How long before they would feel forced to take ‘counter-measures’ to stop the destabilization of their economy? Iraq could seem very small… drafting would be needed… where would it end…?
Posted by: g12 | October 24th, 2007 at 5:20 pm | Report this comment7) Iraqis will continue to die to keep the price high. If Iraq comes fully online again as an oil exporting nation and if relative stability returns to the Gulf then the price of oil will drop to somewhere between $30 and $50, so arguably we can line up the usual suspects who have a huge financial interest in keeping the militias, criminals and terrorists occupied wrecking that country and in making certain the American project fails.
Food prices will inflate as agricultural output is diverted to produce biofuels, causing more poverty, famine and instability.
9) Pressure on moving forward with the ITER.org fusion reactor will (hopefully) reach populist momentum.
Gideon last week also the Dalai Lama received a congressional gold medal in the US; China supports the junta in Burma and Darfur and implements harsh measures against anyone in Tibet or Xinjiang who even hints at autonomy or is a member of the ‘wrong’ religious or ethnic group. Next year China is going to organize the Olympic games and in that spirit we might very shortly be in a quandary about whether to send our athletes to this event (regardless of our hypocrisy). I personally am not in favour of a boycot since the Chinese people themselves would never have access to information explaining why their games were boycotted; many Chinese people have very high hopes and see their own nation becoming a light to the world, The Chinese dragon will be fully awakened; this is their moment. To slap them now would be an affront. Still, that issue is looming ever larger on the agenda.
Related to that and in line with the earlier debate about imperialism I also felt I should say that it is appropriate if not required in a discussion about imperialism to discuss Russia and China, and how it is possible to call them the two remaining empires. There are many yardsticks for measuring empire; a compelling one is to have nations of people being forcibly kept subject to a central capital with which they feel little or no connection. The Tibetans and Uyghur of Xinjiang are large nations on the periphery of China that have their own language, customs, religion(s), traditional leadership and capital city but zero autonomy. Russia’s relationship with (mostly) its Muslim republics and oblasts also isn’t always quite on an equal and representative footing. You’ve still got that item in your list too!
Then apparently people want you to visit Iran, and I hope that if you do you will be allowed to visit all the places that are so much worse than Abu Graibs and Guantanamos in Iran where people are jailed for such offenses as comparing Ahmadinejad to Pinochet. I’d also like to know why the new head of the Pasdaran feels its main responsibility since this September is to counter internal threats and how Iran can be such a fun place with such a threat level.
Posted by: Felix Drost | October 24th, 2007 at 5:49 pm | Report this comment100 $ = 50 Euros….what´s the problem?
Posted by: Enrique Costas Mira | October 24th, 2007 at 5:51 pm | Report this commentEnrique’s point is pretty good. Many oil-producing countries couldn’t care less of oil at $100 as the USD is melting like snow in the sun!!! Many feel they’re getting less not more in real terms. Because most import stuff from Europe/UK/Asia and not so much from the US, hence their purchasing power not keeping up with the oil price.
A much talked about conspiracy theory explained that the US went to Iraq to prevent Opec from pricing oil in EUR. Far fetched, yet Kuwait unpeg its currency to the USd earlier this year, Iran announced it only had 1/3 or reserves in USD and allowed the Japanese tu pay in Yen for oil… all very interesting…
In a way, I’d expect pressure for change to increase not decrease. Given many oil-producing countries govt inefficiencies, the bonanza wont be enough to keep everyone happy. In any case, if the state tried to shower niceties to everyone, it would be catastrophic! Inflation would destroy their economy. Today’s FT had russia’s price cap on food on the front page. (that’ll work for a bit, but if something isn’t done, the shops will be as empty as in Harare and people will go back to barter!) Of course, Russia isnt back to 1999, but polititians (and people alike) dont tend to understand the devastating effects of high inflation.
Posted by: a | October 24th, 2007 at 6:20 pm | Report this commentMostly, oil producing countries are aware of the risk and have set up Sovereign Wealth Funds to manage the extra oil revenue. They should go one step further and run those like Norway does, and refrain from using this capital to play power politics. Inevitably, that will be too tempting for many…
Look into the angle of how speculation is forcing up the price of oil and commodities in general. Who, where, how.
Posted by: David Seaton | October 24th, 2007 at 6:54 pm | Report this comment“it is appropriate if not required in a discussion about imperialism to discuss Russia and China, and how it is possible to call them the two remaining empires.”
It’s either fascism or empire… Freash ideas! Great brainstorming! Deep insight! Exactly what muslim republics within Russian Federation can you name?
Posted by: A Russian | October 24th, 2007 at 7:19 pm | Report this commentHi Russian; fascism is what I quoted from the economist (since Mr Rachman used to work there their views are good reference). As for imperialism, in the 17th and 18th century, Imperial Russia grew very rapidly through military means at the expense of the Ottoman and Persian empires. Areas such as Checnya, other Caucasian republics and Siberia are imperial acquisitions, much like Northern Ireland is for the UK (with comparable population and immigration issues) or Algeria was for France. As for Chechnya it’s not apparent that it is a very willing member of the Russian Federation.
The earlier discussion was about calling US foreign policy imperialist or neo-imperialist, I think that would be pointless without contrasting it with what remains of actual empires today, hence I brought it up.
For an overview of (Muslim) republics in the Russian Federation see http://en.wikipedia.org/wiki/Republics_of_Russia
Posted by: Felix Drost | October 24th, 2007 at 10:41 pm | Report this commentSir
Oil will not go above the 100 usd Pb as the Iran is with Russia and is playing cat and mouse with nuclear inspectors. What is more, the Iraq borders and the Turkey borders in the red-hot zone the oil will be looked at closely but it will not be allowed to go far above 90.00 dpb
You se the reason is simple. Politicians and not the oil producers or the suppliers make Many times these fiascos.
I thank you
Posted by: Firozali A.Mulla MBA PhD | October 24th, 2007 at 11:40 pm | Report this commentFirozali A.Mulla
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa
Peak Oil could trigger meltdown of society
Energy Watch Group
London, 22 October 2007
I read the big comment above by the EWG. There is little mention about the no oil. Here goes. Sir, we are yet to confirm if Saudi has that much oil and the hybrid cars that are pouring into the markets will definitely have impact on usage of car fuel that is a huge chunk if not very big consumption compared with the factories etc.
Let us dig up the facts about the oil then we are certain. What we are doing at the moment is we are burning more oil to avoid the global warming. Now the EWG has not vetted that picture properly. It is a loop.
I thank you
Posted by: Firozali A.Mulla MBA PhD | October 24th, 2007 at 11:48 pm | Report this commentFirozali A.Mulla
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa
.
A thing bug me , everybody is singing , the western economies are less sensitive to oil prices now , there is less oil input per GDP ….
fair enought , but there is less manufacturing in GDP now and more services , a big bubble of services wich could vaporise and leave hardly a shadow , is there a measure of ” beer ” as opposed to ” froth ” trading
jeannick Sydney
Posted by: jeannick Guerin | October 25th, 2007 at 12:00 am | Report this commentWhat Felix says about Siberia as an imperial acquisition is ridiculous because Russia´s colonization of much of Siberia took place before Britain´s colonization of America (New England=Western Siberia)
Britain´s “Far East” (Australia) and America´s Far West (California, Oregon, Washington State) was colonized at the SAME TIME of Russia´s colonization of her Far East.
Bashing of Russia comes usually from the same Europhobes who hate the EURO and the road towards an integrated European Federation. They work in two fronts serving the “divide and rule” agenda: a divided Western Europe under Anglo-saxon military control and a divided Russia.
Of course they also support the Independence of Xingiang, Guangdong (Hong Kong), Tibet, Inner Mongolia, Taiwan, Guanxi…and China knows it well.
Posted by: Enrique Costas Mira | October 25th, 2007 at 12:06 am | Report this commentIt’s not ridiculous. Enrique, I’m not bashing Russia, saying that Russia is an imperial successor state is an empirical finding that you seem to interpret as a value judgment. Incidentally I’m a very strong europhile and I also believe in anyone’s right to self determination and in federated autonomy. If the people of Catalunya, Tibet, Chechnya, Euskadi or Xinyiang want more independence and can democratically express that wish wouldn’t you support that?
The conquest of Siberia by Europeans is akin to the conquest of the Americas by the Europeans, fait accompli. For the republics in southern Russia matters are different.
Posted by: Felix Drost | October 25th, 2007 at 2:20 am | Report this commentRecent research suggest that $100 oil, could precipitate a global recession. That and a new US administration could lead to a withdrawal of US forces from Iraq leading to an isolation of the Middle East and other Islamic countries viewed as potential threats. Commerce yes, people no. Policies designed to encourage “secure” sources of oil and alternatives to imported oil from the Middle East would be implemented.
Posted by: Christian van Schayk | October 25th, 2007 at 4:35 am | Report this commentEverybody conquered a piece of land in the past: anglos and saxons- Britain, Arabs- North Africa, Turks- the Anatolian Peninsula, Japanese-Hokkaido, Chinese-Taiwan, Castilians-Andalucia and Canary Islands (precedent of the Conquest of the Americas), Romans…, Greeks…, Persians…., Germans…, Aztecs….everybody conquered something in the past.
The difference now is the legal conception to respect other nation´s sovereignty (something the US oftenly forgets)
Posted by: Enrique Costas Mira | October 25th, 2007 at 5:42 am | Report this commentI agree with your 3rd point that $100 oil will mean even more talk about alternative energy. But I am afraid that it will end with the talk. A quick “fix” for $100 barrels is not found in solar and wind, but in coal and sands.
Liquefied coal and oil from tar sands are dirtier than any oil the Arabs manage to pump out of the ground. Unfortunately, they are also faster and easier to get to than many cleaner energy sources.
Posted by: Gernot Wagner | October 25th, 2007 at 6:28 am | Report this commentDear Gideon Rachman,
Posted by: Global conditions | October 25th, 2007 at 9:22 am | Report this commentAfter your pessimistic points 1)-6), a commentator added pessimistic points 7)-9). Politics will indeed grow even nastier, maybe very very nasty, in the next few years. But suddenly, in twenty-five years, we will be able to add the following points:
10) we will be using lots of alternative energies and have developed nuclear fusion
11) our cars will use alternative fuels or hardly consume any fuel
12)Venezuelans will have ousted Chavez because he will have gone a few steps too far
13) the Europeans will have got organized in the face of Russia
14) China will export more energy efficient devices(It already started with green lightbulbs that were met with European anti-dumping measures).
We will start wondering what all this fuss was about. Optimism or wishful thinking?
Felix,
Thanks to your wikipedia link, at least we are talking some facts now. I supose that in calling Russia and empire you are guided by the following phrase from that article: “there was considerable support for secession among Tatars, Bashkirs, Yakuts, and Chechnya after the break-up of Soviet Union, resulting in war in the case of Chechnya.” (it’s continued though: “The desire for secession in many republics is, however, greatly complicated by the extent to which other ethnic groups reside in their titular republics”)
Chechnya is a case apart. I’m not going to defend it because it’s difficult to defend a war, especially when it is waged so brutally. However, teh fact that one 1% of the Russian territory, where half of population were not ethic Chechens, wanted to become autonomous is NOT a good enough argument to call the whole country empire. By the way, the current arrangement gives Chechnya much more independence than was originally demanded by Aslan Maskhadov, plus lots of federal money which are squandered by the local ethnic leaders Kadyrov & Co.
As for the rest of the muslim republics, you can see from the same wikipedia article that most of them became much more autonomous after 1991 (Tatarstan is the case). Russia is a federation, as many other states are, and nobody calls Spain an empire because it has the Basque country and Catalunya. Nobody calls France an empire because it has New Caledonoa, Martinique et Guadeloupe - although there are secessionsts there too. Britain has Virgin Islands, Gibraltar and the Faulklands, Holland has Dutch Antilles, Denmark has Greenland… There is just not enough space here to mention a dozen more empires from the EU.
Of course there will always be people inside a nation who want to become independent. In the 1990-s some politicians in the Urals, ethnic Russians (and Germans actually - to name but the governor Eduard Rossel), talked of independence from Russia! Be a realist: if all secessionist demands were instantly satisfied, the whole world would be engulfed in a constant war. Are you really prepared to satisfy the extremist minority and to sacrifice the stability and interests of the majority? Is it what democracy is about?
And by the majority I do not mean Russians - I mean the tatars and the bashkyrs and the yakuts who as a nation by far prefer to remain within Russia. You should not forget that Russians have lived with - and under their rule! - many of its ethnic minorities since 900 years. Russian empire stopped to exist 16 years ago. It let go 14 confederate states and a quarter of its territory overnight without as much as a sigh - and now it sees the same old stupid accusation thrown against it again! It’s not just unfair - it’s not clever. Again, if you want to criticise Russia come up with real problems - surely there is no shortage of those, - don’t wash over the old linen.
Posted by: A Russian | October 25th, 2007 at 9:32 am | Report this commentAnd Felix, why aren’t you being logical and don’t call Georgia an empire? Its regions, Abkhazia and South Ossetia, want to quit and join Russia. However, I’ve never ever heard european or US rights activists talking of Gerogian imperialism. Strange… Or is it the size that metters? I’ve a feeling everybody is just getting nuts about the size: Russians are illogically proud of it, foreigners are illogically afraid ot it. Many historians believe that its size is the reason why it’s so authoritarian: try to govern softly a country which you can ride across in minimum three months, meeting not a living soul for weeks!
Which does not mean we should give it away to any anti-imperialists who’d care to pick it up…
Posted by: A Russian | October 25th, 2007 at 10:18 am | Report this commentIt is true that Rusia has an appalling record of treating its minorities. By any standard, Chechnya will remain a blot on the conscience of any right-thinking Russian citizen.
However, what appears to be overlooked is the poor (racist?) treatment of the large Russian minorities in the Baltic Republics. Some might say that the Ruskies are hoist by their own petard and that they are getting a taste of their own medicine but I, for one, find this highly unsatisfactory in view of the praise that the Balts get for being democratic and part of the West.
If one wants to be consistent, one must speak against all discrimination, even when it happens in supposed democracies. (The other quite appalling case is the treatment of the Roma / Gypsy people in Czech and Slovakia which is entirely shameful in the 21st century Europe and about which you hear nothing n the West, other than condemning the gypsies who have fled to other countries.)
Best,
P
Posted by: Pacifist | October 25th, 2007 at 10:43 am | Report this commentI fully agree with the Pacifist about Chechnya. Lots of people - both Chechens and Russians - were and still are treated there like mad cows in British slaughterhouses. No politics can justify medieval torture in 21 century.
Curiously, I disagree with Pacifist about Russians in the Baltic states. Lazy bastards, they don’t even care to learn the language! I can’t help sympathising with half-a-million of Latvians who feel they are ethnically cleansed in their own country by foreigners who do not give a damn about their culture.
However, all this is not relevant to the empire accusation. It’s about human rights, and human rights of Russians are as routinely violated in Russia as human rights of non-Russians. The police are the main offenders, torture and murders by the police are wide-spread and they rarely get punished. Here’s a real problem for a change.
Posted by: A Russian | October 25th, 2007 at 11:02 am | Report this commentHowever, from purely pragmatic point of view Putin’s plan was rather successful in Chechnya. He picked up one indeginous clan, gave it an almost absolute internal power in exchange for nominal external loyalty to Moscow, and now nobody can say Chechnya is run by the Russians. It is run by a clan of the Chechens as a medieval despoty (which it would be anyway probably, be it under Doudaev, Basaev, Maskhadov or Kadyrov). Russia just provides it with billions of federal funding to steal (don’t ask me why Putin & Co do this, I’m too afraid to guess).
Something the US tried to learn from Putin in Iraque, but rather unsuccessfully it seems…
Posted by: A Russian | October 25th, 2007 at 11:30 am | Report this commentRussian, I agree with you and the points you make; Turkey is imperial in its rule over the Kurds, the same case can easily be made for Indonesia, Thailand, Pakistan, Burma, Sudan, Georgia, even Spain. The UK is still and even more intensively struggling with its imperial past within the UK itself as the English and Scottish wonder if they want to share the same countries.
And one has to be realistic and wonder if an independent Basque country, Scotland, Chechnya, Georgia, Kosovo or even the Baltic states can maintain independence in the long term; they’re far too small to defend themselves if they ever had to and many national institutions won’t scale down to such a size; they will be forever depending on the goodwill of larger neighbours, supranational institutions and the stability of the international order.
Perhaps I shouldn’t have brought the subject up because this blog’s main thrust is about $100 oil but I thought that since Gideon was looking for a topic China, the Olympic games, Tibet and the greater issue of sovereignty, imperialism, nationalism and a people’s self determination would be a good one and it brought Russia in the picture too; Russia already has shown great flexibility in allowing the Soviet Union to disband and as you said grant greater autonomy to regions and national heartlands. No doubt much can be improved in the south but by all means much has been achieved and the dreaded prospect of having a Yugoslavian breakup in Russia never materialized.
http://blogs.ft.com/rachmanblog/2007/09/american-empire.html this was the debate I was referring to and wanted to place somewhat higher on Gideon’s to-do list.
Humanity is for various reasons concentrated in areas on the planet and areas in-between these concentrations will probably always be contested. The cold war is thoroughly over and now we seem to be seeing a renewed conflict between the centers over their peripheries. Areas such as the Caucasus, Xinjiang, Tibet lie on the fault lines between large concentrations of peoples; while everyone is entitled to self-determination this has to happen realistically, countries cannot fall apart until the remaining self-determinating political unit is the human being; that would be anarchy. But we now do live in a smaller world where ideas and technologies travel fast and where conflict can be ever more asymmetrical. Small groups like Al Qaeda can cause large events to be set in motion and with ever increasing nuclear proliferation this human tendency to splinter and unite has to be understood and become part of a new political understanding. The nation state is starting to fail, but what do we have to replace it with?
Pacifist: you’re absolutely right and as I read your piece on the treatment of ethnic Russians I thought you could mention the Roma in Europe and there you went and did mention it. Our minds and our hearts might be more alike than we think; however as people who value the preservation of life above all other values we not always look eye to eye on where the problem lies exactly. I thought I’d mention that; I guess we’re both fiery people but I have to grant that your heart is in the right place. Don’t come looking for any breaks tho!
Posted by: Felix Drost | October 25th, 2007 at 11:47 am | Report this commentGood debate again this, thanks everyone.
Too much Rach-mania!
Posted by: Anonymous | October 25th, 2007 at 11:59 am | Report this commentHi Felix,
John Maynard Keynes said “Words ought to be a little wild, for they are the assault of thoughts on the unthinking.”
So let’s be unsparing in the battle of ideas
(Anyhow, fierce debating is a good way to test one’s own ideas as well as mine others for their ideas!)
Best Wishes,
P
Posted by: Pacifist | October 25th, 2007 at 12:03 pm | Report this comment“The nation state is starting to fail, but what do we have to replace it with?” - A supra-national state evidently. The road to survival lies not through more break-away minorities’ self-determination (look at constipated Belgium) but through ceding - preferably vountarily, but not necessarily - your national and even individual rights to a global decision-making authority. How can 200 members of the loose UNO come to terms? The EU is a visionary structure, a glipse of genius of otherwise dumb and egoistic humankind.
If you continue to put minorities’ rights before majorities’ interests unconditionally, you will end up with China, India and the US choking the whole world to death in pursuite of their “economic growth” and “unconstrained consumption” ideals.
Posted by: A Russian | October 25th, 2007 at 12:19 pm | Report this comment“however as people who value the preservation of life above all other values we not always look eye to eye on where the problem lies exactly.” -
How can one solve the dilemma of valuing life versus uncontrolled population growth which has become THE main danger to life on this planet? How can one proclaim that every life is precious if the world will be populated by 10 (optimistic scenario) to 15 (pessimistic) bn people by the end of the century? The poor planet is fast dying already now, with 6.5 bn on us, sacred lives which all want to be preserved and cloned through our offspring! Felix, do you really believe every newborn baby on this planet must have a chance to live to his 70-s, having along the way a happy family of 3-4 more?
Preservation of life on Earth is different from preservation of all human lives on Earth. We are still a biological species, not immaterial virtual minds, and as such we continue to pretty materially destroy our own and our neighbours’ homes.
Posted by: A Russian | October 25th, 2007 at 12:34 pm | Report this commentAfter all the chechens, yakuts, nenets, tuvans….are something very similar to the navajos, cheyennes, apaches….in America, with the difference they are not in reservations but in the same region as the white european population.
Posted by: Enrique Costas Mira | October 25th, 2007 at 1:19 pm | Report this commentHi Enrique,
I think the Yakuts, Tuvans etc. can stay as they have very small environmental footprints!
In fact, all 10-15 billion can stay if the realisation comes that maximising consumption is not the ultimate goal of the Human Beings.
To that end, the West, who have consumed more than others in the past few centuries, have a dual responsibility:
1-) To reduce their own consumption of resources drastically (otherwise how can you point the finger at Indians and Chinese when all they are doing is to try to consume a fraction of what you consume per head).
2-) To use their technological advantage to help the developing nations to develop in more environmentally friendly ways.
Basically, if we are less greedy, there is plenty to go around!
P
Posted by: Pacifist | October 25th, 2007 at 1:28 pm | Report this commentMr Rachman
Your thougthful commentary on the economics behind the current dynamics would be welcome, Excuse me for not taking time today to read past your own remarks, but I will add/reinforce encouragement that you attemmt to step out of your very Western shoes and look at a 21st century map that is very different from the one we trained for.
A few questions to be asked may include:
1) Is the US entering into a long and profound economic–as well as political–decline? Are its institutions suited for the 21st century? Stripping aside the divivends of corporate globalisation, is the US a performer?
2) Is Europe under the EU better off? Does it really need 20 million labourers to sustain a lead? How long can it live on its current quality-of-life factors? Exactly how would it best compete with or co-exist with an industrially powerful China or Russia?
3) Putting the current political impasses aside, would you not agree that Iran is a country of phenomenal economic potential? Would Turkey, in your opinion, not also represent vast, untapped potential in critical sectors? If one or both are so, then how ideally woul Europe, Russia and the Gulf sheikdoms best prepare to work with these neighbours?
4) Arguably, Africa is as much a failure of misguided US leadership (in decades of reliance on corporate investments and dubious partnerships)and international development economics as it is of its own absence of a professional class and sound governance. Yet it is rich. What can be done? Do expectations need to be shifted away from models emulating UD populist democracy to ones that place higher value on technical management and more rigorous and professional givernments? i.e., is it not imperative to DEVELOP a new model of governance for Africa?
I’ll leave these thoughts with you.
Best regards,
WCM
Posted by: WMC | October 25th, 2007 at 1:33 pm | Report this commenthmm, we are going away from the topic…
CHINA doesn´t have other option but trying to get new energy supplies and they can play the card of “authoritarian blindeness”. They don´t care if their supplier is a Dictotarship or a Democracy. They don´t ask questions about human rights unless Chinese citizens are threatened.
The truth is European and American multinationals (Exxon, BP, Shell, Total, Repsol, ENI) have an important advantage with most energy suppliers after decades of contracts and negotiation with the local authorities.
Total in the CFA, former Frnench colonies.
ENI in Libya, former Italian colony.
Exxon, BP and Shell in the Mideast.
Repsol in Argentina and the rest of Latin America.
Germany in Russia thanks to Helmut Kohl support of the gaz pipilines during the 80s and 90s.
So, yes, China will try to fill any gap European and American multinationals and Governments have left untouched.
That´s why China will not leave Iran now they got access to one of the World´s most precious oilfields (Germany - EON and RWE, still would like to develop Iran´s gas)
Germany, in their particular European deal, left the profitable oil industry to the French while France left the, by then not much developed but now profitable, gas industry open to Germany.
If America leaves Venezuela, China (and i would say Spain too) would fill the gap.
In Sudan, Venezuela, Iran, Russia´s Far East…China has an excellent opportunity to participate. So they will do anything possible to keep their customers-suppliers, as France did in Iraq before America´s invasion.
Iraq was an important market for European companies…now it is an American colony. Our economic and strategical interests were different and so was demonstrated in the UN Security Council.
The $ is back in Iraq after flirting with the Euro.
Posted by: Enrique Costas Mira | October 25th, 2007 at 1:37 pm | Report this commentI’m not sure if you’ll get down this far; I must confess I haven’t read every word of the above comments…
Anyway, you could do something about the rise in oil prices leading to a rise in resource nationalism that will be catastrophic for the energy producers in the long-term. From Vene to Algeria to the Gulf you’re seeing sovereigns becoming more aggressive in their dealings with international oil companies.
The sovereigns, and their national oil companies, want more of the pie (or perhaps the same share of an ever-growing pie), understandably. But with that is a coming a misguided believe that the sovereigns have what it takes to get oil out of the ground and find more oil. Generally speaking, they don’t have what it takes (adnoc in Abu Dhabi is an exception, and maybe Aramco in Saudi Arabia still is…). But the previous bout of resource nationalism, beginning in the 50s and 60s and reaching a peak in the 1970s, means that many resource-rich countries have national oil companies that are politicised or third-rate or both.
Look at Iran, whose production is stubbornly below pre-revolution levels. Or Kuwait, which has been arguing for 15 years over whether to allow foreigners into the north to develop new fields. In some cases, the resulting mismanagement has effectively destroyed reserves underground.
The same is happening again, with venezuelan production falling sharply, and gazprom unable to replace reserves.
So not only is $100 a barrel discouraging oil consumers from buying more of the stuff, it is also leading the oil and gas rich sovereigns (puffed up with billions in new revenues) to think that they can go it alone. In doing so, they are abandoning or even destroying potential oil reserves and future oil revenues.
Simon
Posted by: Simon | October 25th, 2007 at 2:24 pm | Report this commentHi Simon,
Your points are very valid. I would like to add that part of th problem is also caused by the US shooting itself and the rest of the West in the foot by their sanctions on the Iranian and Iraqi (pre 2003) oil industries.
In the case of my own country, Iran, it is certainly the case that they have wanted to develop and exploit their oil and gas resources (among the largest in the world) by co-operating with Western companies. The latter have been scared off by the US.
Best,
P
Posted by: Pacifist | October 25th, 2007 at 2:43 pm | Report this commentDear Pacifist,
“In fact, all 10-15 billion can stay…” - I think it’s wishful thinking. I cannot see how 10-15 bn can nicely fit in on Earth if scientists say that 500 mn - 1 bn is the optimal range for sustainable existence. Where will you take land for crops and pastures if we lack it already now? Where will you find new fish stocks, fast dwindling already now? Where will you get clean water, scarce already now? And NOW is when hardly half of us live (=eat and drink) decently. Wait and see till we grow to 15 bn…
“if the realisation comes that maximising consumption is not the ultimate goal of the Human Beings” - I think it’s wishful thinking too. Where will this realisation come from onto 2 bn of uneducated Chinese+Indian peasants? They want first to buy a car and a plasma TV and then listen about global warming or dwindling resources.
The West may have all the moral responsibilities in the world, as the Chinese and Indians are never tired to point out. However, “the West” is just 1 bn people at most. Chinese and Indians together are 3 times that much. They have a moral responsibility to stop breeding exponentially and to stop creating more future consumers. If they do not, just by sheer numbers the will always outdo any Western attempts at frugality and self-limitation.
Everybody talks about similarities between Russia and China. Well, for a change, here is a difference: Russian population has barely grown over the past century, while China’s has at least quadrupled, if not more. Russia does not have tens of millions of hungry eaters of tiger penises, deer testicles and tortoise - and China has. You talk about responsibility of the West! Here is one country which is ready to consume anything that moves in ever bigger helpings, and it does not feel any responsibility before anybody at all!
Posted by: A Russian | October 25th, 2007 at 2:53 pm | Report this commentHi Pfist,
Posted by: kc | October 25th, 2007 at 2:53 pm | Report this comment10-15 billion humans cannot be supported without a huge, carbon based consumption infrastructure.
Measures of world pop size on eve of transition to agriculture (10-12k yrs ago), come from estimates of max pop density that this way of life could sustain. These generally range from 5-10 million people, and the highest figure — calculated on the assumption that world was saturated with hunter gatherers is only 15 million.
Agriculture based only upon animal energy allowed human pop to grow to about 750 million by 1750.
Carbon power (coal and oil) provided the world with cheap energy to run machinery (one gallon of gas equals 3 weeks of human labor; which is why slavery still exists in poorer parts of the world) and for pesticides and fertilizer.
Large pops depend on cheap oil (or cheap coal) and a consumption society for allocation.
Think about it bro.
kc
Hi KC and Russian,
You both make very valid points which cannot be denied. However, I can take refuge in three factors:
1-) Don’t underestimate humans’ ingenuity. Didn’t Malthus predict doom and gloom some 150 years ago and haven’t Karl Marx’s predictions come to nought simply because of increased productivity?
It is easy to be gloomy now but we should be surprised if we could rise from our graves and see the world in a 100 years’ time.
2-) It is well-observed that as societies become more prosperous and more educated, the rate of population growth falls. I think as the Chinese and Indians get richer and better schooled, their rate of reproduction will also fall.
3-) And YES, it is wishful thinking that people will mend their ways. I think they will have to.
Finally, Russian, you are mean about one of the greatest cuisines of the world
I know which one I would choose, given the choice between a Chinese and a Russian restaurant (despite my liking for “piroshky” which we Iranians have adopted from Russia!).
Best,
P
Posted by: Pacifist | October 25th, 2007 at 3:24 pm | Report this commentFor a brief moment, I thought we had actually veered back onto the ostensible topic of conversation - oil and politics.
Don’t get me wrong, I thought the digression on empire was very interesting. Now we seem to be onto the sustainability of human life itself.
That’s all fine. But some of us have a column to write. Its 3.40 pm on Thursday and I’ve made very little progress today. I’m working away grimly on my celebrities column - but oil remains a strong possibility, so I can ask you all to focus a little.
Simon asks, do I read all those posts? The answer is Yes, they are all emailed to me. Reading them all is definitely lowering my productivity. God knows what writing them must be like. Pacifist, Russian - I salute your indefatigability (as George Galloway once said to Saddam Hussein). Are you engaged in some sort of informal competititon, as to who can post most in a day. In that case, can I declare it a score draw?
Posted by: Gideon Rachman | October 25th, 2007 at 3:44 pm | Report this commentI do worry, however, that your employers may take umbrage at all the time you are spending on this blog. Of course, if you are going to spend hours on the internet, this is about as high-minded as it gets. But still. Now I must get back to work. Don’t know about you.
You are right that propserous/educated societies stabilise. However, when do you forsee China and India to become propserous and educated? My guess - not less than in one-two generations. And how much will they grow in 1-2 generations? My guess - too much (say, double, to 6 bn, just them!). Will we have time to mend our ways then, with Greenland and Antarctic ice melted and sea level up by 60 metres (a rather conservative estimate)? Well, I wish you more wishful thinking and more delicious tiger penises for your dinners.
I would be quite compalcent at the time of Malthus when the worst people could do was to kill off the human balast. However, now the worst has changed - they can and very likely will kill the whole planet.
Posted by: A Russian | October 25th, 2007 at 3:50 pm | Report this commentHi P,
Posted by: kc | October 25th, 2007 at 4:11 pm | Report this commentYou are highly intelligent and seeking debate to clarify your thinking; I therefore respectfully recommend that you not seek refuge within the points you outline.
1– I don’t underestimate human ingenuity; it is infinite but we live in a world of finite resources (large pops plus a fight for resources make for a nasty and brutish existence). I am also surprised that you use “ingenuity” as a Deus ex Machina (it is a very US Silicon Valley way of thinking). Malthus and Marx are great thinkers but they wrote in a time preceding the petroleum and technology revolutions and are outdated (if still relevant in many aspects). We now know from advances in science and technology (satellites, seismology, etc.) much more about the finiteness of resources and the impact of man on his environment. Net, net, resources are finite and we can do irreparable damage. Please update your reading on population science, geography, genetics and ecology.
2– This observation does not take into account unique cultural attributes and does not take into consideration the time frame under which this will take place and the damage that will be sustained if the populations continue to scale and these economies are able to maintain their economic growth (two big ifs).
3– I agree but what crises and damage will take place before wishful thinking is forced upon us as necessity?
kc
Recall the Clinton campaign mantra — “It’s the economy stupid.” Well, as regards oil dependency, global warming, and all other evils afflicting the society of man — “It’s nuclear energy stupid.”
Posted by: Lawrence S. Schneiderman | October 25th, 2007 at 4:21 pm | Report this commentYes, nuclear energy would be the big answer if you could wave your wand and create nuclear power plants. Even if the major energy using countries went all out (given current and reasonably scaled resources and market mechanisms) to build nuclear capacity over the next 25 years, it would represent less than 10% of the electric power output of those economies. That does not seem like a complete answer. Nice mantra for the uranium futures market, though.
Posted by: kc | October 25th, 2007 at 4:40 pm | Report this commentkc
Gideon,
May I tell you what interests me about the oil topic as a reader? I consider myself somewhat knowledgeable about it, but in the end there are so many things about it I don’t know (factual things) that a person who clarifies them for me in an article format would be my hero (although I would never admit not knowing those things in a public conversation…hmmm.)
1. How are suppliers and consumers linked up:
a) what country exports to where or where a country imports oil from.
b) how does the oil get to each of these places - % by tankers, % via pipelines
c) volume
4. What are the dangers for each one of the main routes: i.e. regional conflicts, terrorism, delay of payments (like Ukraine with gas)
3. Who is the main pricemaker in the oil market - what % of oil price is driven by current supply/demand, by midterm projections, long-term projections, what percent is speculation (is there valid data to support whatever numbers you give?)
3. What are the major misconceptions? I can think of one - everyone thought that Chechnya war is all about oil, where in fact there is very little of it produced there, and it’s more about 15 miles of pipeline that go through the country.
4. What are the major things to look out for that will affect the price in the future (i.e. resolution of conflicts such as Iraq, Iran), new field explorations (Africa? Kazakhstan? Azerbaijan?), reaching capacity/lower productivity/underinvestment (say in Russia?), new demand - can anyone see another China/india appearing soon?
I wonder if you write something like that, will Pacifist say it’s redundant? In the end people have so little factual knowledge about the things they argue! I know FT is not an encyclopedia - but if you seek to educate your reader, while epxressing your opinion these would be questions to consider.
Posted by: MYV | October 25th, 2007 at 6:38 pm | Report this commentSorry about the numbering… Can you tell I work in finance?
Posted by: MYV | October 25th, 2007 at 6:39 pm | Report this commentkc,
I think nuclear is clearly one of the answers to high oil prices - recent devlp in terms of nuclear fusion, which if succesful would generate pretty much infinite amount of energy. Of course, it’s years away - if ever.
But I have to be with Pacifist on this one - in the early 20th century, the biggest threat to London’s prosperity was the tons of horse excrements piling up in the streets. Of course, the car came along - and the “problem” was solved. (soucre: the economist - didn’t check it myself, and i wasn’t around either!)
clearly, the car brought other problems along, but it seems once humanity realises things are problems it fixes them. The risk is that sometimes we overeact - (harmful gases to the environment in fridges were replaced initially and in a hurry with gases harmful to humans! - eventually that was sorted too)
It’s not that I’m against renewable energies, but I think even with $100 oil, some of them are still way off being good value. Solar energy is a v good example - it seems to me they will improve dramatically so why spend billions now?
it may sound strange but I think I somehow worry more about water than oil. If oil’s expensive, we’ve got alternatives, and we will develop more, or use more cotton and less plastics etc..
But what about water? (fresh) There are no substitutes for it and we are certainly less careful on how we’re using water. London’s pipe are said to leak 33cl for every 1l that goes through them!!! - and I’m not even talking about Oz farmers or China.
As for current oil price, my own view is that there’s probably $15/20 of speculation reflected in the price. I think it’s because it has become fairly hard to bid the USD down because the EUR, STG are overvalued, yen offers no yield and other currencies too unstable. By buying commodities and especially liquid ones like Oil and gold, (and priced in USD) it helps bid the USD down because pretty much systematically if the USD is down, oil and gold will be up!
Posted by: French_in_London | October 25th, 2007 at 7:12 pm | Report this commentThe problem is that relationship won’t necessarily last. And speculators buy oil because the price is rising not because they need it. Over the last few weeks, several end-users of large quantities of oil were said to have been expecting a fall has hold off purchases. As the days went by and the price didn’t go down, they were forced into fairly large purchases which bid the price up. I think traders might test a new high on US/Iran tension, but if (hopefully) nothing major happens there, the market will start realising that a US recession is more likely than thought previously and that supply of oil is actually higher than expected.
Gideon,
How about combining the Bono and oil columns? How does the rise in the price of oil, and that of commodities in general, bear on the fight against poverty? After all, it isn’t by pure chance that African economies have been performing well lately.
Could the new scramble for Africa finally end Bono’s proselytising?
Posted by: RCS | October 25th, 2007 at 7:47 pm | Report this commentGR,
Have you looked at the ASPO USA conference in Houston? This was a block buster of a conference. All kinds of good stuff from Matt Simmons to Stuart Saniford. Also the ASPO 6 Conference in Ireland last month. You have plenty to write about. Pickens says we have peaked. We are producing 85mbd, and use 88mbd. He says the price will go up until the world chokes on the price. The export land model or ELM is gaining credibility. Exporters like Russia and KSA will begin cutting back production in order to preserve resources. Russia is sitting pretty. They are resource rich, and smart people. They will emerge to be a leading culture in the world. I have high hopes for Russia.
Steve
Posted by: Steve | October 25th, 2007 at 8:28 pm | Report this commentPhoenix, AZ
Unfortunately for us, especially when it comes to people on top, we are not only smart but also very gready and have a “Take all you can, while you can” attitude. So while the oil revenues are promissing, with the current levels of corruption (ever rising) it seems that a lot of this money will never serve any good purpose to the russian society but rather to a limited amount of individuals.
Posted by: MYV | October 25th, 2007 at 9:11 pm | Report this commentI only hope that $1,000 billion infrastructure development project will not disappear into the offshore accounts.
About the high price of oil: why not link this idea to the report that “peak oil” happened last year? Oil is high and will stay high. 1999 is not coming back.
High oil prices may influence the American election outcome, but which way I can´t tell. One way is for distressed SUV drivers to vote for the politicians most willing to offer reductions in gasoline taxes.
Maybe the Big Two And A Half will feel the crunch as sales of their gas-guzzlers diminish even further. That could push up unemployment.
High oil prices will drive up the price of food as the cost of fertilisers, pesticides increases. Also high gasoline prices will influence the price of grain as demand for bio-fuels grows.
High oil prices mean high natural gas prices. That´ll ruin the economics of oil-shale exploitation (thankfully). If you don´t know about oil shales, look it up.
Empires have fallen because of high food prices, I recall.
Posted by: Richard | October 25th, 2007 at 10:12 pm | Report this commentHi Richard,
Posted by: kc | October 26th, 2007 at 1:33 am | Report this commentHigh oil prices do not mean high natural gas prices. The two now trade without a close correlation to one another (check gas futures against today’s $90bbl). Ever since high natural gas prices drove down industrial use in the 1990s in the US (from almost 35% of total btus to 29% today), weather driven demand has primarily determined natural gas prices in the US. Further, high natural gas prices help accelerate development of natural gas shale formations (see for example, development of Barnett Shale formation in Texas over the last five years).
kc
“1) It’s bad for democracy. The pressure for political reform in big oil producers like Russia and Saudi Arabia will decrease. The Russian government will have the money to buy off aggrieved constituencies like pensioners – see the food subsidies they have just announced”
Why decrease, possible, but I doubt it? The Russian food subsidies have more to do about upcoming elections and inflation and they are hardly the only government using food subsidies as a political remedy. The pressure for political reform comes hand in hand with economic and legal reform, as both Russia and Saudi Arabia are beginning to diversify their economies, grapple with a legal system that is needed to support diversified economies with foreign investment, you will see more freedoms. Further, Saudi Arabia under King Abdullah is reforming courts, cracking down on radical Islamists, has a succession plan in place that ensures stability. It is also allowing public space for its rebellious youth to indulge in urban graffit art, Talal bin Abdel-Aziz, the father of Saudi tycoon Waleed bin Talal has announced that he is forming a political party. Most importantly, the King last weekend laid the cornerstone for new coed science and technology university that will be attended by Saudi and foreign students. It’s clear that he envisions women being part of he workforce and as that happens you will see other rights denied women now (in dress code, driving) fall away. Change, more freedom will not be immediate nor by western standards probably ever viewed as enough, or moving fast enough, but it is taking place. And in regard to Russia one could argue that rushing into political reforms post Soviet Union is the reason for the current perceived setbacks.
Posted by: Lisa-Helene Lawson | October 26th, 2007 at 2:20 am | Report this commentThe problem with Bono is cheap-oil and Superfund/Superflux related greed-technology based conduct that cannot be reversed by overdoing it even more.
More=less
‘More’ efforts, ‘better’ communication, ‘less’ terror, even ‘more’ and ‘better’ democracy… think good old Saudimocracy and Russian resource reserves, Qatar, Iran and Iraq.
It’s their world and we don’t belong there. Anything cheap will become very, very expensive for the western world which is going to pay dearly for the years of neglect, total arrogance, ignorance and terror.
Western economic fundamentalism based on cheap-oil strategy is rooted and consolidated in 1963, the world’s first and only energy transition imposed by the American abusive industrial-technology complex: long-distance and high-pressure technology was imposed by Exxon on the other partners of the world’s biggest public-private partnership with Royal Dutch Shell and the Dutch government upon discovery of the globe’s second largest natural-gas field at that time. Also the only and single reason why the Netherlands are partnering within the coalition of the willing.
The european currencies and hence the euro were/is pegged to the US dollar while oil and gas pricing is coupled eversince.
The only way out is Atlantic unbundling:
Europe should (continue to)do business with Russia and renegotiate US-dependency.
There is no such thing as a cheap American solution. America needs help to get of their thinkpad.
You have the right to know and understand, so compare:
www.complexxon.org
The pre-Enron machination of greed technology.
by Stephan Tychon
…and Bono
Posted by: Tychon | October 26th, 2007 at 3:29 am | Report this comment“Make Charity History, Stupid”!
Hi MYV,
I know GR said (politely) that I should shut up and stop filling his inbox but if you want factual info, you need look no further than BP’s Statistical Review of World Energy 2007:
http://www.bp.com/productlanding.do?categoryId=6848&contentId=7033471
and in particular this section:
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2007/STAGING/local_assets/downloads/pdf/oil_section_2007.pdf
It is also available in German and Russian (see the first link, lower down the page).
Best,
P
Posted by: To: MYV (frm: Pacifist) | October 26th, 2007 at 10:27 am | Report this commentGentlemen, Today I have taken the time to read the postings and to (in)digest the latest developments regarding the latest sign of the US’ strategy for the region. Please excuse yet another digression back to the title of the blog. Oil, energy and economics are what the US-Israeli Illuminati are playing for; it is not about evil regimes, threats of nuclear holocasut, or extension of democracy, apart from its marketing value. It is about sustaining a business model that has become religion.
What really is driving this determined, delusioned, bipartisan hunger for war in America? Surely, few would not agree that its fears are irrational and the shear physics of acting upon them in a destabilised region as is the entire underbelly of Asia is fundamentally wrong. Is this not evidence of a convulsive breakdown of the American institution? Are debates about the quality of governance in Iran or its obligations to the broader international community missing the point?
Sadly, I fear that the most sober of American officials–and their Israeli beneficiaries, Saudi benefactors, and now French converts–have fallen deeply into the belief that THEY have the obligation to set the world right. These are individuals who know only a corporatist construct and are being manipulated by the grand shareholders who fear long-term fading and see opportunity in strcutured chaos. Americans do believe that their multinationals are superior value delivery systems, and their faith in shareholder value means growth only can come through expansion.
Yes. Napoléon and Hitler thought similar things and arrived in the very same dilemma as Mr Bush. But the era of nation states and empires is in the past.
Philip Stephens piece todayis must reading, but even he has fallen under the some of the neocon religion in his oversimplification of Iran as a source of contemporary evil. He does conclude, rightly, that Washington seems to have misjudged recent political events there. Yet his piece remains centred on the premise that there is a stray, bad dog and a stupid homeowner. Is this right?
Lastly, I have come to the conclusion that many reasonable minds are sitting quiet today because they don’t want to go near any issue that contains the words “Israel”, “Israeli” or “Jewish”. This is wrong; neocons have been running their corporatist/post-democracy games under the cover of the name of Israël. I now can see that many Jews are waking up and recognising how much of an honoured legacy has been squandered. If America does strike Iran in Israël’s name, I fear this time that the question of the nation’s legitimacy will be once and for all concluded. It will not then exist in ten years.
America will exist, but as a failed society with a global elite living in luxury apartment towers far from its shores.
It is time to look at what is really happening while the best and the brightest argue in terms that were defined in classrooms where Henry Kissinger once taught. It is also time to hold the big multinationals more accountable for some of the powerpoint presentation matieral that is often bandied about in blogs like these.
Our ideas are failing us and many more good lives will either be lost or more likely squandered because we cannot see.
Posted by: WCM | October 26th, 2007 at 12:29 pm | Report this comment2nd paragraph/1st sentence edit to my last posting: “What really is driving this determined, delusioned, bipartisan hunger for war in America? Surely, few would DISAGREE that its fears are irrational and the shear physics of acting upon them in a destabilised region as is the entire underbelly of Asia is fundamentally wrong.”
Posted by: wcm | October 26th, 2007 at 12:33 pm | Report this commentMr Rachman
Please delete my unneceassary erratum (the second of the postings above). Brain is tired and this technology allows too many unedited ideas to travel. Of course, I am tempted to edit my full post, but will leave it as it is. Many thanks in advance!
Posted by: WCM | October 26th, 2007 at 1:04 pm | Report this commentUS behaviour is truly irrational, it acts against its own interests and into the hands of its opponents. The Iraque war has done an enormous good to Russia by winding up oil prices and providing tens of billions of petrodollars for it. At the same time, domestic US fuel prices have - what, doubled, tripled? Oil exporters throughout the world prey to God that Bush acts on his fiery demagogy and strikes Iran, pushing the price up through 100 USD…. I’m wondering whether this idealistic irrationality is because the US is such a deeply religious country? (no irony). Only blind religious extremists are ready to stop at nothing for their ideals. Americans are really no different from Iranians in that respect: both Bush and Ahmadinejad speak and prey to God in public speeches and press conferences all the time.
Posted by: A Russian | October 26th, 2007 at 1:05 pm | Report this commentDear WCM,
I applaud your post (although as you say it is not directly relevant to the topic of the thread).
In another thread I suggested to Mr. Rachman that he should pay Iran a vast and try to see things for himself. I should now like to add that he should drag Philip Stephens along too.
Whilst people who write for a paper like FT tend to be of the highest calibre and possess excellent academic credentials, I feel that on some topics (such as Iran) there is a tendency to run with the herd and accept the the received “wisdom” too easily. The easy, outright condemnation of Iran and Iranians by Mr. Stephens is one example. The other is the headline on the front page of the FT that “US punishes Iran”, as if Iran is guilty and America has been appointed judge, jury and executioner.
This attitude may be due to a contempt for the subject matter (e.g. “how can those rag heads in Iran ever be up to any good”), or simple laziness (Philip Stephens wrote an article on how dreadful it was for him to travel on the London Underground, so I doubt if he is up for the “schlep” (a good Yiddish word, btw) to Tehran.
Apologies again for diverging from the thread, but now that I have “sinned” anyway, I like to post this link about Iran for people who assume it to be a nasty, dusty, hell hole full of miserable people. Enjoy:
http://picasaweb.google.com/aatrvash/Iran02/photo?authkey=WHfBV-cDZ2E#s5096647212490134130
All the best,
P
Posted by: Pacifist | October 26th, 2007 at 2:10 pm | Report this commentWhat does $92 bbl oil do to the US?
Posted by: kc | October 26th, 2007 at 2:28 pm | Report this commentSome facts for thought:
1– before cheap (easily recoverable) oil began being exploited in the Middle East by the Western oil companies, oil production from shale in the US was a significant percentage of world oil production (early 1900s). The shale oil industry collapsed because Middle East oil was so much cheaper. Now, Estonia has 70% of the world’s shale oil production.
2– At $70-95 bbl, shale oil production again becomes profitable. After 1,000 million bbls production, scale and efficiencies would cause that price point to fall by 15-20%.
3– The US holds shale oil reserves of around 2.25 trillion bbls of processed oil (Saudia Arabia, holding 25% of the world’s cheap, known reserves, has 260 billion bbl in reserves)
4– The US Government owns the land on which 70% of the shale oil reserves are located.
5– Will a severe spike in oil prices (>$100 bbl) driven by a war with Iran cause scaled production to shift to oil shale?
6– Will #5 in turn finally drive energy independence for the US and (in combination with a very cheap dollar) make the US the Saudi Arabia of the 21st century through shale oil production?
7– Isn’t Russia/Putin buddying up with Iran and India because it doesn’t trust the US to help it out over the long term if China decides to re-create the Ming/Qing dynasty “historical” border and recapture East Asian Russia (and all its delectable resources) when the China/Russia border treaty ends in 2020?
Thoughts?
kc
Re: posting by kc: I think it is a mistake to think Putin is “buddying up” with Iran. Symbiotic interests exist. There is no basis for a deeper love. Putin did not get what he wanted in his run to Tehran, but both played it smart. Nonetheless, I think Putin is an investor and sees more value in playing a few hands with the US and Sarkozy’s Europe in the near term. Russia is more of a de facto ally of Israel than it will ever be with Iran. Iran’s most strategic allies today are Turkey and Dubai, and a cadre of business and Congress Party leaders in India. Other friends are only as good as the weather.
Does anyone think that this latest move (financial sanctions) on the part of the US has been taken outside of consultations with Riyadh, Dubai and Beijing? If so, could this turn out to be a shot in the foot for the US?
Also, I would ask the FT to take a more critical look at Condoleeza Rice. Is she not just a spokesperson or marketing director for US, Inc.? Or is she a serious player in the foreign policy establishment? She talks tough; she deserves tough scrutiny. Her cute American-girl style is building a political base that we may need to live with in future.
Posted by: WCM | October 26th, 2007 at 2:50 pm | Report this commentHi KC,
If the current spike is really only a spike (i.e. it falls back to lower levels in the $30-50 region within a year or so), then there is not enough time to move on with a big expensive project like the US oil shales.
On the other hand, if it lasts longer, together with the other high commodity prices and the credit crunch, we will probably face a recession that will cause the prices to fall.
Either way, the high prices appear temporary.
Posted by: Pacifist | October 26th, 2007 at 3:10 pm | Report this commentRe: your point #5 and China’s long desired hegemony over Burma and stealth strategy in the heart of Africa.
As Australians and Pacific Rimmers know, it is sometimes nice to look at the map from different angles or upside down. Visually, the image from Burma to Iran offers a very timely context. Perhaps one that is more relevant than an Israël-centric view.
Putin knew this when he stifled mumblings about a US deal with China to bring the Rangoon junta into line. Condoleeza Rice, I suspect, understands little about Burma. The FT is not enlightening the world on this extraordinarily rich piece of land. May I suggest you begin with a look back at the days when the British pulled out and burned millions of hectares of rice paddies from the upper reaches of the Irrawaddy in Kachin down through Mandalay and Rangoon’s suburbs. Why? Lord Mountbatten’s lack of forgiveness for General Aung San’s collaboration with the Japanese? Should the FT not also look back at the unresolved accounts of the subsequent assassination of the father of Aung San Suu Kyi? These were not the best days of Empire, were they? Do not lingering embarrassment and resentment stifle current policymaking in London, which is still considered the intellectual centre of Burmese hopes?
Chinese ambitions in Africa are serving manby interests quite well, but they are laying the foundations for future nightmares. Your attention on what is actually playing out here is needed, as you seem to have realised.
Posted by: WCM | October 26th, 2007 at 3:14 pm | Report this commentHi P,
Posted by: kc | October 26th, 2007 at 3:26 pm | Report this commentThree points:
1–A US/Iran war would have a long term impact on oil prices.
2–Oil is a depleting resource and sooner or later (and certainly over the next 25 years oil production will peak, if it hasn’t already) there will be >$100 bbl oil for the long term — making the US’ oil (shale reserves that are 8.6x Saudi’s reserves) and coal reserves (by far the world’s largest and also capable of being turned into oil/liquids at >$70 bbl) the most valuable energy reserves on the planet (for better or worse).
3–Please use numbers and facts rather than vague, politicized assertions.
Best,
kc
kc: “… when the China/Russia border treaty ends in 2020″
Does it really end in 2020? Sounds strange that it would.
Posted by: A Russian | October 26th, 2007 at 3:29 pm | Report this commentPacifist,
Exquisite photos from Iran. Interesting, though, that they are mostly images of natural scenery; we are spared the street scenes from Tehran.
Posted by: RCS | October 26th, 2007 at 3:29 pm | Report this commentRussian, Yes, the treaty expires in 2020. You can verify this via Wikipedia or many other sources on the internet. kc
Posted by: kc | October 26th, 2007 at 3:33 pm | Report this commentI fact I’ve tried, but in vain. Here is a good article on the whole Sino-Russian border conflict history but it does not mention any expiry date either:
http://src-h.slav.hokudai.ac.jp/coe21/publish/no16_2_ses/02_maxwell.pdf
I’d appreciate if you could point me in the right direction…
Posted by: A Russian | October 26th, 2007 at 3:39 pm | Report this commentLet me add that this week I was on a trip to Jerusalem. The Dome of the Rock is impressive, but Isfahan seems to be more so. Watching the photos, I could understand Iranians’ strong sense of national pride. The ancient Persian ruins have an eerie surrealist feel to them. I always wondered why Iranians abandoned that part of their history - but viewing the mosques, you can begin to feel why (even if you do not accept it).
Posted by: RCS | October 26th, 2007 at 3:42 pm | Report this commentHi KC,
Re your point 1, FT’s Tuesday Lex article concluded that after a superspike, an attck by the US on Iran will cause the longer term oil prices to drop:
http://www.ft.com/cms/s/1/89756d4e-8069-11dc-9f14-0000779fd2ac.html
I thought the above is quite misguided. Any comments?
P
Posted by: Pacifist | October 26th, 2007 at 3:44 pm | Report this commentHi RCS,
Visiting Isfahan is quite a surreal experience. I wish people could go before the Yanks bomb it to dust
The most beautiful Mosque is Isfahan is named after a Lebanese cleric because when the Safavid Dynasty converted Iran to Shi’ism in the 16th century, there were not enough Iranian clerics who knew about Shi’ism and they had to import them from Lebanon. This is one of the many links between the Iranians and the Shia Lebanese (as well as many families who emigrated in both directions, one of which is of the arch NeoCon, Fouad Ajami).
You see why we think it ridiculous that supporting the Hizbullah is considered terrorism?
Well, maybe not!
Best,
P
Posted by: Pacifist | October 26th, 2007 at 3:52 pm | Report this commentPacifist, higher energy prices are (1) not temporary (because the underlying drivers are not temporary: in coming decades billions of Asians will enter the ranks of the middle classes) and (2) will not cause a recession (the global economy is much more resilient than in the 70’s and 80’s; more importantly, this is a DEMAND shock, not a supply shock).
Posted by: RCS | October 26th, 2007 at 3:54 pm | Report this commentRe: energy prices: 1) To what extent is there a lack of transparency in oil contracts, particularly with the US where it seems that consumers have not yet felt the full impact of current price trends?; and 2) Is current coverage of energy and related-derivatives markets adequate? My guess is there is a veritable back-room where Iranians, Americans, Gulfies and Venezuelans are furtively fornicating in the dark.
Posted by: WCM | October 26th, 2007 at 3:58 pm | Report this commentRussian, Please see Articles 6 and 25 of the Sino-Russian Friendship Treaty (signed by Mssrs. Jiang and Putin).kc
Posted by: kc | October 26th, 2007 at 4:25 pm | Report this commentI see. It’s not a border treaty (as you initially called it) but a cooperation treaty. While the expiry of cooperation provisions in 2020 makes sense, I was surprised that border issues could be settled only temporarily. However, I presume that the border demarkation is final.
Posted by: A Russian | October 26th, 2007 at 4:56 pm | Report this commentRussian, If you read these post-Soviet treaties, you will see they are all interconnected and that the borders have neither been completely agreed nor permanently finalized. Rather than presuming, please read the treaties. kc
Posted by: kc | October 26th, 2007 at 5:00 pm | Report this comment“6) The struggle over who has sovereignty over the Arctic will intensify.”
Indeed…but how will it be reported?…
Posted by: Lisa-Helene Lawson | October 26th, 2007 at 7:14 pm | Report this commentUnfortunately, this will be reported in the West as most things are dealing with Russia as another dastardly deed by the Russians… no doubt the stage is being set for some highly contested claims over the ownership of the North Pole……however, it is very interesting how all this is reported… I have been filing little articles and reports on this due to my interest in energy issues as a global geopolitics driver for some time…actually Canadian PM Stephen Harper made developing the artic a major part of his campaign and he announced on July 9 “formal plans to construct up to eight Polar Class 5 Arctic Offshore Patrol Ships — armed icebreakers — and establish a deepwater port from which they will operate in the Far North” In this speech you literally lost track at how many times he used the words “sovereignty” and “national identity,” as he drove home Canada’s territorial claims in the Arctic. There is no doubt that Global Warming is changing the Canadian North which will make it easier to reap the riches of the artic…and under the UN Convention on Law of the Sea, countries have “full rights to minerals within their “exclusive economic zones of 200 nautical miles…and special considerations for long continental shelves can extend those rights even farther now with the exception of a small disputed area on the U.S. border, the vast bulk of the resources under the Arctic in the Western Hemisphere belong to Canada”. While Canada has been laying claim to the Artic for sometime, it was on August 2 that the first reports appeared about the 2 mini -submarines planting the rust proof titanium Russian flag on the seabed approx 14,000 feet below the North Pole….and of course headlines around the world screamed about the latest aggressive actions of the Russians. Personally, this Putin as yet another boogey man and Russia as some dark sinister country is getting tedious…You would think that even if most of the western press can not be accurate and objective, they could at least be more creative.
Gideon: blogs can be organized so that people can either respond to your post, or to responses. If then a post is not in response to your initial blog but to a response, you could opt out of receiving those by email. In fact you could omit them from the blog so that the debaters can have a debate here without filling up your blog (branch out) - your techies at the FT can help you with that.
I’ve seen many blogs end because of sheer volume that develops while it is technically simple to allow debaters to continue the debate in the sidelines. You might not be able to sustain this level of activity otherwise (78 posts and counting for this one alone)
You have good people there in your techie department who can help you save tons of time and save your blog as well, go have a chat with them; ask them to think about how you can organize information and relevant links in topics: these guys can save your life.
Posted by: Felix Drost | October 26th, 2007 at 8:55 pm | Report this commentkc, while you generally demonstrate an impressively detailed info on a number of topics, apparently you are not up-to-date on this one (Russian-China border).
1. The China-Russian cooperation treaty does NOT expire in 2020. It expires in 20 years from the date of its signature, and as it was signed in 2001 it expires in 2021. However, it will be automatically prolonged for 5 years (and so on) if neither party objects.
2. While border issues were mentioned in the above treaty, they were not regulated by it. Instead, they made subject of three other treaties between Russia and China: the Agreement on China-Soviet border in its Eastern section of 1.05.1991, the Agreemnt on China-Russian border in its Western section of 3.09.1994; and the Additional Agreement on China-Russian border in its Eastern section of 14.10.2004 (settlement of the last disputed 4300 km).
3. The above Additional Agreement was ratified by both Russia’s and China’s legislatures in 2005. The demarkation of the China-Russian border has thus been final and is not subject to any time expiration clauses (see the Joint Declaration of PRC and RF in Beijing signed by Hu Jintao and Putin on 21 March 2006, part III, pp. 1&2)
Be more carfeul with international treaties in the future, kc. Ignorance can start wars
Posted by: A Russian | October 27th, 2007 at 9:35 am | Report this commentDear Russian, You’re right, I wasn’t up to date. Thank you for the clarification. Best,kc
Posted by: kc | October 27th, 2007 at 12:39 pm | Report this commentLet me propose a question. When will our valiant Nobel Prize winner Al Gore dare to utter the suggestion for an increased tax on gasoline/petrol in the USA?
Posted by: Per Kurowski | October 28th, 2007 at 2:03 pm | Report this commentFormer Fed Chairman Alan Greenspan just stated that $100 bbl oil will break the US of its “oil dependency”.
Posted by: kc | October 29th, 2007 at 7:11 pm | Report this commentHowever, the price in the oil futures market first has to translate into a crack spread that raises the price of gasoline in the US at the pump, which, so far, it hasn’t.
kc
Interesting article in Fortune, Nov 12, 2007 re shale oil deposits in US. Head of Shell shale research states, “So many Americans have no idea that they’re sitting on a resource several times the size of Saudi Arabia’s. The fact is that it’s entirely possible to produce [light crude from shale deposits]. Our technology works. There’s no doubt about it.” Are these resources not being exploited because 1– they are 80% (according to the article) owned by the US Government (The People), rather than by the oil majors and 2– they would impact the majors existing business? kc
Posted by: kc | November 1st, 2007 at 7:46 pm | Report this commentIt would be interesting to see you write about the merits (or lack thereof) in placing national strategic oil reserves under the control of central banks.
Oil reserves (and derivative financial instruments thereof) would then become an actively managed, apolitical tool for maintaining price stability.
This does not solve long term problems with energy supply or carbon release. However, it may decrease political and economic uncertainty by decreasing price volatility.
Posted by: William Mitchell | November 2nd, 2007 at 3:37 pm | Report this commentThe best answer to John Gapper´s question should be an American Great Colation between the Democrat Party and the Republic Party to tackle the problem of American overdependency on oil.
There should be a cross-party coaliton to tell clearly Americans that taxes on oil will reach half the European average (just 50%) in THREE YEARS.
Posted by: Enrique | December 2nd, 2007 at 6:30 pm | Report this commentper Enrique: “The best answer to John Gapper´s question should be an American Great Colation between the Democrat Party and the Republic Party to tackle the problem of American overdependency on oil.”
Which two full-bodied actresses would you cast respectively as the Elephant and the Donkey (why is it not the “jackass” for the Democrats?)? This reminds me of listening to two overwieght secretaries in the office deciding to diet together.
Gapper’s piece was an excellent, and sadly unsurprising read. Karl Rove’s advice to Barack Obama in today’s FT remains unread since I first saw it late last night. No stomach for the possibility that Rove and Obama could become an item.
Projecting oil pricing is as futile as projecting the dollar. Rational pricing is the exception, not the rule.
(Actually, I think the US parties have dropped their animal mascots and go by Red and Blue. Boring, but perhaps best not to implicate other species.)
Posted by: WCM | December 3rd, 2007 at 10:00 am | Report this commentWCM,
From a European point of view the ideological difference between the Democratica and the Republican Party are so thin (if there is any difference among them) that we don´t find any difficulty about a cross-party coalition at least just to tackle that problem agreeing to increase the taxes on oil to half (50%) the european average in THREE YEARS.
Posted by: Enrique | December 3rd, 2007 at 10:33 am |