Monthly Archives: August 2012

Saudi Arabia – America’s Real Strategic Petroleum Reserve?

As oil prices ticked above $115 per barrel last week, a White House leak revealed that President Barack Obama may dip into the Strategic Petroleum Reserve (SPR), the United States' 695 million barrel stockpile of emergency fuel supplies.

The leak might have been a signal that Washington wants Gulf countries to take action to lower oil prices. It might also have been an attempt to wring the risk premium out of current prices by reassuring the market that America won't let a potential war with Iran shut off the spigot. The one thing we can say for sure is that the announcement highlights two interrelated problems with U.S. energy policy: that every president since Ronald Reagan has used Saudi Arabia as his de facto SPR and that there exist no clear standards for when to dip onto the actual SPR. Both problems have the potential to bite us — badly.

Over the years, the United States has been surprisingly reluctant to release SPR during times of crisis, preferring instead to let Saudi Arabia handle the problem by simply increasing its production. For decades, in fact, U.S. presidents have been able to count on the Middle Eastern petro giant to pre-release oil in anticipation of times of war. For example, Riyadh flooded the market ahead of the first Gulf War and, though many do not remember, it also put extra oil on the market ahead of the U.S. invasion of Iraq in 2003. Saudi Arabia even increased its oil production after the 9/11 attacks, which badly strained U.S.-Saudi relations. Likewise, this spring, when the Obama administration was debating whether or not to release the SPR ahead of the tightening of sanctions against Iran, Saudi Arabia helpfully boosted its production above 10 million barrels per day, causing oil prices to fall more than $10 a barrel and eliminating the need for the White House to make a firm decision.

But relying on Saudi Arabia, while politically convenient, is not without risks. The most obvious is that the Saudis have come under increased pressure — both internal and external — as a result of their longstanding oil-for-security alliance with Washington. Iran has warned its fellow Gulf producer not to make up the slack resulting from American and European sanctions, threatening direct retaliation if it does. Saudi Arabia isn't taking any chances. In recent months, it has arrested prominent Shiite dissidents — always suspected of possible ties to Iran –and doubled the number of Saudi National Guard forces in the Eastern Province, home to the vast majority its 2 million-plus Shiite citizens as well as the close to 90 percent of its oil production.

America's ability to fall back on the Saudis is further imperiled by the inherent instability of the kingdom's political and economic system, and is the elephant in the desert that no one talks about.

Oil markets might have taken solace in Saudi preparedness until rumors surfaced of an assassination attempt aimed at the kingdom's intelligence chief, a move purported to be a revenge killing by Iranfor similar assassinations of senior military leaders in Syria. The rumors proved to be false, but like much of the region's murky political intrigue, it moved markets and served as a reminder that a tit-for-tat game of high level assassinations is not out of the realm of possibility. The oil implications of this unpredictability are clear: It will be hard to keep global oil markets calm in the coming weeks and months. Deaths of rulers can change dynamics overnight virtually anywhere in the region, and Israel's defense policy remains an ever-present black swan. Saudi Arabia's own rumoredpursuit of new nuclear-style ballistic missiles from China adds an additional layer of uncertainty about a nuclear arms race in the region.

America's ability to fall back on the Saudis is further imperiled by the inherent instability of the kingdom's political and economic system. Saudi Arabia is going to need more and more oil revenue just to keep its population from growing restive. Riyadh-based Jadwa Investment predicts that Saudi Arabia will be forced to run budget deficits from 2014 onwards, even at a break-even price forecast of $90.70 per barrel in 2015. Other forecasts are even bleaker in the medium term, estimating the breakeven price at $110 a barrel in 2015. Either way, the kingdom's thirst for cash is likely to mean that U.S. and Saudi interests diverge. The oil-for-security deal between the two countries has destabilized the kingdom in the past by igniting support for al Qaeda in the Arabian Peninsula and it could be used again by agents of internal opposition groups. Moreover, the recent pro-democracy upheavals in Egypt, Syria, and above all Bahrain are bound to influence U.S.-Saudi relations over time in ways that are hard to predict. More

 

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New UN climate fund must work for the poor – NGOs

LONDON (AlertNet) – As the board of a new U.N. climate fund for developing countries meets for the first time, civil society groups are pushing for it to be managed in a way that is transparent and accountable to poor communities likely to be hit hardest by climate change.

Nouakchott, Mauritania

Anti-corruption watchdog Transparency International (TI) urged the Green Climate Fund’s board to give citizens a much bigger voice at its meetings, as it begins to work out how to administer up to $100 billion a year to help developing nations adapt to a warmer world and curb their greenhouse gas emissions.

“We need a balance between the urgency to achieve results and the due diligence required to protect climate money and ensure its effectiveness,” said Lisa Ann Elges, head of TI’s climate governance integrity programme.

The proposed arrangements allow just two civil society observers to participate actively in board meetings, one each from the developed and developing worlds – the same level of representation allotted for the private sector. Guidelines say an active observer may speak but not vote.

Researchers and climate activists are concerned that the private sector may be given too large a role in running projects financed by the fund, and it will be difficult to track what businesses are doing.

But access to the fund's resources for companies and private financial institutions is regarded by some debt-laden wealthy governments as a carrot to raise additional money from private sources – without which they are reluctant to loosen their own purse strings.

“There is an understanding that the more the Green Climate Fund is private investor-friendly, the more likely it is that developed countries will put money in,” said Janet Redman of the Washington-based Institute for Policy Studies.

RIGHT TO OBJECT

She and other experts want rules to ensure that private-sector activities financed by the fund will not undermine the development of poorer nations and vulnerable people who rarely get a say in such decisions.

“The private sector has its motives, but these have to line up with the interests and priorities of developing-country governments and what the people who are going to be most impacted by climate change want and need,” Redman told AlertNet. More

 

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Building Resilience In A Changing Climate – Richard Heinberg

Climate shocks are on the way. We’ve already spewed so much carbon into the atmosphere that a cascade of worsening crop failures, droughts, floods, and freak storms is virtually guaranteed. You, your family, and your community will feel the effects.

Ironically, however, avoiding climate change also has its costs. It makes sense from a climate-protection standpoint to dramatically and rapidly reduce our use of fossil fuels, which drive global warming. But these fuels largely, well, fueled the spectacular economic growth of the past 200 years, and weaning ourselves from them quickly now—while most industrial economies are over-indebted and starved for growth—could risk financial upheaval.

Oil, the most economically pivotal of the fossil fuels, is getting more expensive anyway. Cheap, onshore, conventional crude is depleting; its replacements—deepwater oil, tar sands, and tight oil—cost more to produce, in both dollar and environmental terms. Though high oil prices discourage driving (good for the climate), they also precipitate recessions (bad for the economy). While renewable energy sources are our hope for the future and we should be doing everything we can to develop them, it will be decades before they can supply all our energy needs.

In the face of impending environmental and economic shocks, our best strategy is to build resilience throughout society. Resilience is the subject of decades of research by ecologists and social scientists who define it as “the capacity of a system to tolerate disturbance without collapsing into a qualitatively different state that is controlled by a different set of processes.” In other words, resilience is the capacity to absorb shocks, reorganize, and continue functioning.

In many respects a resilient society defies the imperative of economic efficiency. Resilience needs dispersed inventories and redundancy, while economic efficiency—in its ruthless pursuit of competitive advantage—eliminates inventories and redundancies everywhere it can. Economic efficiency leads toward globalization, resilience toward localization. Economic efficiency pursues short-term profit as its highest objective, while resilience targets long-term sustainability. It would appear that industrial society circa 2012 has gone about as far in the direction of economic efficiency as it is possible to go, and that a correction is necessary and inevitable. Climate change simply underscores the need for that course correction.

Building resilience means helping society to work more like an ecosystem—and that has major implications for how we use energy. Ecosystems conserve energy by closing nutrient loops: plants capture and chemically store solar energy, which is then circulated as food throughout the food web. Nothing is wasted. We humans—having developed the ability to draw upon ancient, concentrated, cheap, and abundant (though ultimately finite) fossil fuels—have simultaneously adopted the habit of wasting energy on a colossal scale. Our food, transport, manufacturing, and dwelling systems burn through thirty billion barrels of oil and eight billion tons of coal per year; globally, humans use over four hundred quadrillion BTUs of energy in total. Even where energy is not technically going to waste, demand for it could be substantially reduced by redesigning our basic systems. More

 

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Energy Security: Navy Demonstration of Alternative Fuels

For years, the U.S. Navy has been studying alternatives to the increasingly expensive fossil fuels that power its ships, boats and planes and last month (July) the service got to test its research and theories on a grand scale.

The aircraft carrier USS Nimitz (CVN 68), heading a strike force of four other ships as well as a jet fighter wing, helicopters and other aircraft, demonstrated the viability of alternative fuels in the waters off Hawaii during Rim of the Pacific 2012 (RIMPAC), the world’s largest annual international maritime exercise.

Click here to view the complete article at the IDGA website.

 

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US criticised on 2C climate ‘flexibility’ call

The EU and small island states have criticised the US for saying the target of keeping global warming below 2C should be removed from climate talks.

Todd Stern Special Envoy for Climate Change

At the 2010 UN climate convention meeting, governments agreed to take “urgent action” to meet the target.

But last week the chief US climate negotiator Todd Stern said insisting on the target would lead to “deadlock”.

Spokesmen for the EU and the Alliance of Small Island States (Aosis) said the US should stick to promises made.

“Suddenly abandoning our agreement to keep global warming below 2C is to give up the fight against climate change before it even begins,” said Tony de Brum, Minister in Assistance for the Marshall Islands.

“‘Flexibility’ on our 2C limit would set the world on a path to irreversible, runaway climate change.

“For many low-lying island states, including my own, that is not a solution – it is a death sentence,” he told BBC News.

Isaac Valero-Ladron, the EU’s climate spokesman, said governments including the US had to live up to prior promises.

“Also, consolidated science continues to remind us of the dire consequences of going beyond such a temperature increase,” he said.

The core objective of the UN climate convention (UNFCCC), agreed in 1992, is to prevent “dangerous” climate change.

Scores of governments believe that 2C is a realistic indication of where “dangerous” climate change begins, although a greater number – principally those highly vulnerable to impacts such as sea level rise – say even 2C is too high. More

 

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