Archive for the 'OPEC' Category

How to achieve energy independence

Monday, November 1st, 2010

Anne Korin & Jim Woolsey talk energy independence at the Milken Global Conference

Saturday, May 1st, 2010

Geopolitics, Global Demand and the Quest for Energy Security

Wesley Clark, Army General (ret.) and former Supreme Allied Commander, NATO; Chairman, Rodman & Renshaw


How to End America’s Addiction to Oil

Wednesday, April 14th, 2010

Set America Free Coalition member Jim Woolsey writes in the Wall Street Journal:

“Oil dominates transportation: About 95% of transportation fuel in the U.S. is derived from petroleum. And over three-quarters of the world’s reserves of conventional oil are in OPEC nations. But OPEC is pumping less than it did in the 1970s, despite a doubling in global demand, because it’s a cartel maximizing its income. OPEC sets oil’s price at a level that exploits our addiction but is generally not high enough for long enough that we go cold turkey.

“Oil profits enhance the ability of dictators and autocrats to dominate their people. This is one reason that eight of the top nine oil exporters (Norway is the exception) are dictatorships or autocratic kingdoms, as are virtually all of the 22 states that depend on oil and gas for at least two-thirds of their exports.

“Saudi Arabia’s oil wealth enables it to control around 90% of the world’s Islamic institutions even though it has less than 2% of the world’s Muslims. [...]

“so far every national policy we’ve tried to end our oil addiction has failed, including picking winners. Neither the Synfuels Corporation (the early 1980s drive for coal-to-liquid fuel) nor the hydrogen highway (the push early in this decade to get Americans to drive hydrogen-powered cars long before the technology was ready) had a chance of succeeding. It was too easy for OPEC to drive prices down and crush such costly competition.

“Supporters of cap-and-trade legislation have argued that putting a price on carbon would help us get off oil. But the effect of this would be negligible. Twenty dollars a ton of CO2 equates to about 20 cents a gallon at the gasoline pump.

“Drill, baby, drill? Some suggest that if we replace foreign with domestic oil our problems will be solved. Domestic drilling does help reduce oil’s share—a billion dollars a day—of our huge balance of payments deficit, and it adds some domestic employment.

“But that’s it. OPEC has very large reserves and cheap extraction costs, while domestic drilling costs for new oil will be many times that of the Saudis. We can’t drill our way out of the cartel’s control of the global oil market.

“Shifting the way we produce electricity also has essentially nothing to do with oil dependence; less than 2% of U.S. electricity comes from burning oil. We may decide to shift from coal-fired electricity to wind or nuclear for environmental reasons, or not do so for cost reasons, but these issues are not at all central to the oil debate.

“We urgently need to reduce oil dependence in the short term. This means lowering demand and utilizing substitutes as cheaply and quickly as possible. Here are four strategies we can implement beginning today:

“First, we should take advantage of electronic modifications that are being developed for internal combustion engines in existing vehicles. Innovations in computer chips and valves hold an early promise of substantial improvements in mileage by regulating combustion much better than current engines can.

“Second, we should pay attention to T. Boone Pickens’s recommendations to switch to natural gas for fleet vehicles such as buses, and for interstate trucking. Buses and trucks are easily modified to run on natural gas and would only require new pumps at a few central locations and interstate truck stops.

“Third, we should force petroleum products to compete with other fuels as soon as possible. There are many ways to do this, and we should use them all. For example, we should deploy “drop-in” fuels produced from waste and algae. These fuels can mix freely with gasoline and diesel in existing vehicles.

“We should also require all new gasoline-using vehicles to be “flexible fuel, open standard.” What this means is that these vehicles would use a type of plastic in their fuel lines that tolerates nongasoline fuels such as ethanol and methanol. This is a cheap and simple change: Brazil accomplished it easily several years ago. Methanol made from natural gas can be produced for around $1.20 a gallon (of gasoline equivalent) today.

“Fourth, we should move to electrify automotive transportation. Plug-in hybrids are on the road now (I drive one), and production models such as the Chevy Volt, due out this autumn, can drive electrically for roughly 40 miles before needing to plug in or to use on-board liquid fuel. Three out of four days an average car in the U.S. travels fewer than 40 miles.”

Saudi to America: Forget energy independence. Depend on us.

Thursday, September 17th, 2009

Saudi Prince Turki al-Faisal, former ambassador to the United States, has a suggestion for America: drop this nonsense called energy independence. In a strongly-worded essay in Foreign Policy magazine, which coincides with the 150th anniversary of Edwin Drake’s discovery of oil in the United States, Turki lambastes American politicians for invoking energy independence, which “is now as essential as baby-kissing,” accusing them of “demagoguery.” For him, energy independence is “political posturing at its worst—a concept that is unrealistic, misguided, and ultimately harmful to energy-producing and consuming countries alike.” “Like it or not,” Turki concludes, “the fates of the United States and Saudi Arabia are connected and will remain so for decades to come.”

We’ve heard these lines before each time the United States made progress toward lessening its dependence on oil. In February, for example, Ali al-Naimi, the Saudi oil minister, warned of a “nightmare scenario” if consuming countries made progress in the development of alternative fuels. A decade ago, his predecessor, Sheikh Ahmed Zaki Yamani, called technology “the real enemy for OPEC.” This is understandable. After all, no pusher wants to see his client circling around a rehab clinic. For Saudi Arabia, a world where oil plays a marginal role is the nightmarish materialization of the Saudi saying, “My father rode a camel, I drive a car, my son flies a jet plane, his son will ride a camel.”

More troubling is the parade of prominent Americans who deride the notion of energy independence, viewing it as jingoistic, unsophisticated, naive and misleading. One cannot doubt the patriotism of former CIA director John Deutch, who said “energy independence is not a constructive idea,” or former secretary of defense and energy James Schlesinger, who called it a “forlorn hope,” or Pulitzer Prize winner Daniel Yergin who referred to it as “pipe dream,” or Andy Grove, former chairman of Intel, who called the concept “a faulty goal,” or even the members of the Council on Foreign Relations energy security task force who went so far as to accuse those promoting energy independence of “doing the nation a disservice.” But just like Prince Turki, all of those distinguished Americans misunderstand what energy independence really is. As a result, they underestimate our ability to get there.

Contrary to popular conception, energy independence does not mean self-sufficiency. It doesn’t mean not importing any oil or walling ourselves off from the global market. Energy independence is not a function of the amount of oil we consume or import. Rather, energy independence means turning oil from a strategic commodity second to none—one that underlies the global economy and determines the course of world affairs—into just another commodity to trade.

Oil’s strategic status stems from its virtual monopoly over fuel for transportation, which in turn underlies our entire way of life. Worldwide, 95 percent of our transportation energy is petroleum-based. Our cars, trucks planes and ships can run on nothing but petroleum. This is why the much-touted policies that aim to either increase oil supply through domestic drilling or decrease its use by boosting fuel efficiency, while helpful, are insufficient as they do not address the factor that gives oil its strategic status: the petroleum-only vehicle.

Energy independence thus requires breaking the virtual monopoly of oil over transportation fuels, and this can only be done via competition in the transportation fuel sector. (Think about our electricity sector, where a variety of competing energy sources—coal, natural gas, nuclear, solar and wind—can contribute to the grid.) If our cars and trucks were able to run on other fuels in addition to those refined from petroleum, Saudi Arabia’s oil would have to compete over the drivers’ wallet against utility companies, alternative liquid fuels producers and natural gas suppliers. But as long as our cars are gasoline-only, oil remains the only game in town, which is exactly what Saudi Arabia wants.

A few types of vehicle technologies allow us to break oil’s monopoly. The first, and most affordable, is the flex-fuel vehicle that can run on any combination of gasoline and alcohol (alcohol does not mean just ethanol, and ethanol does not mean just corn). It costs an extra $100 per new car to make a regular car flex-fuel. All it takes is a fuel sensor and a corrosion-resistant fuel line. An Open Fuel Standard ensuring that every new car sold in the United States be flex-fuel would not only give rise to an industry of alternative fuels and the associated refueling infrastructure, but it would also drive foreign automakers to add fuel flexibility to all of their models, effectively making it an international standard.

Electricity is another transportation fuel that can compete against oil. It is cheap, largely clean, domestically produced and can be made from multiple sources. Its refueling infrastructure is widely available. All that is needed for an electric car to connect to the grid is an extension cord. Most automakers have already committed to produce models of limited-range pure electric vehicles (EV) or plug-in hybrid electric vehicles (PHEV). The latter allow drivers to travel on stored electric power for the first 20-40 miles, after which the car keeps running on the liquid fuel in the tank, providing the standard 200-400 mile range. For the 50 percent of Americans who drive 25 miles per day or less, shifting from barrels to electrons would make the visit to the local gas station a rarity. If all of those Americans owned PHEVs, a population the size of New York, Florida and Pennsylvania combined would be off oil most days of the year. A PHEV would normally drive 100-150 miles per gallon of gasoline. If it is also made as flex-fuel and fueled with a blend of 80 percent alcohol and 20 percent gasoline, oil economy could reach over 500 miles per gallon of gasoline.

These technologies are either at or few years away from commercialization. If we only understood energy independence properly and took the relevant measures to open the transportation fuel market to competition, oil would be far less central to the world economy than it is today. If we ensure that new cars are platforms on which fuels can compete rather than perpetuate the petroleum standard, then Prince Turki’s descendants, on the 200th anniversary of Drake’s discovery, will be more likely to ride camels than private jets. No wonder he wants us to think otherwise.

OPEC Will Wait for $100 Oil Before Maybe Raising Production

Friday, June 12th, 2009

Bloomberg reports:
“OPEC, the supplier of 40 percent of the world’s oil, will only consider increasing output when the price of crude rises to $100 a barrel, according to Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah.The Organization of Petroleum Exporting Countries, due to meet again in September, wouldn’t raise production with oil at $75, “but if it reaches $100, maybe,” Sheikh Ahmed told reporters in Kuwait today.”

How many times do we need to learn the same lesson before we act to break this cartel by breaking oil’s virtual monopoly over transportation fuel? We’re in for a shock, as Set America Free’s Gal Luft wrote recently in the Baltimore Sun. Are we going to do anything about it?

Set America Free’s Jim Woolsey on turning oil into salt

Wednesday, January 28th, 2009

Watch.

Jim Woolsey and Anne Korin have an article in the fall 2008 issue of MIT Innovations titled How to Break Both Oil’s Monopoly and OPEC’s Cartel. An excerpt:

The reality is that neither efforts to expand petroleum supply nor those to crimp petroleum demand will be enough to materially address America’s strategic vulnerability, although they can help on an interim basis with such issues as the effects of our huge balance of trade deficit. But such solutions do not address the roots of our energy vulnerability: oil’s monopoly in the transportation sector as the reason oil is a strategic commodity. This monopoly gives intolerable power to OPEC and the nations that dominate oil ownership and production over the consuming nations’ economies. Policies that only perpetuate the petroleum standard, doing nothing to address the lack of transportation fuel choice, would therefore guarantee a worse future dependence on the oil cartel as the non-OPEC nations’
share of the world’s oil reserves and production further shrinks.
Not long ago, technology broke the power of another strategic commodity. Until around the end of the nineteenth century salt had such a position because it was the only means of preserving meat. Odd as it seems today, salt mines conferred national power and wars were even fought over control of them. Today, no nation sways history because it has salt mines. Salt is still a useful commodity for a range of purposes.We import some salt, so if one defines independence as autarky we are not “salt independent”. But to most of us there is no “salt dependence” problem at all — because canning, electricity and refrigeration decisively ended salt’s monopoly of meat preservation, and thus its strategic importance.
We can and must do the same thing to oil. When the British Navy made the shift from coal to oil, then First Lord of the Admiralty Winston Churchill famously remarked, “safety and certainty in oil lies in variety and variety alone.”To diminish the strategic importance of oil to the international system it is critical to expand the Churchillian doctrine beyond geographical variety to a variety of fuels and feedstocks.

Ensuring that new cars sold in the U.S. and, by extension, the rest of the world, are platforms on which fuels can compete will spark a competitive market in fuels made from a wide array of energy sources, thus breaking oil’s transportation fuel monopoly and eventually stripping oil of its strategic status.

IEA: Oil Crunch around the corner

Wednesday, July 11th, 2007

In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said the world is facing an oil supply “crunch” within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec. “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade,” said the agency’s Medium-Term Oil Market Report, which is published every six months. “Low OPEC spare capacity and slow non-OPEC production growth are of significant concern.” Global oil demand is forecast to expand by 2.2 percent a year on average, reaching 95.8 million barrels a day by 2012. The fastest growth will occur in Asia.

The report also showed that Chinese oil demand will reach almost 10 million barrels a day in 2012, compared with its domestic production that year of about 3.9 million barrels a day.

OPEC declares war on biofuels

Tuesday, June 5th, 2007

The Financial Times reports today that Opec warned Western countries “that their efforts to develop biofuels as an alternative energy source to combat climate change risked driving the price of oil through the roof.” Preempting the G-8 meeting where energy security and global warming will be central issues, Abdalla El-Badri, OPEC’s secretary-general, said the powerful cartel was considering cutting its investment in new oil production in response to moves by the developed world to use more biofuels. He said OPEC members had so far maintained their investment plans but he warned: “If we are unable to see a security of demand…we may revisit investment in the long-term.”

Mr El-Badri statements and warnings that biofuel production could prove unsustainable as it competed with food supplies reveal a deep rooted fear among OPEC members that the West’s biofuels project will ultimately reduce global demand for their product and eventually break their economic backbone. We are probably doing something right.

Ahmadinejad’s plan to subvert sanctions

Friday, December 22nd, 2006

excerpt from a recent oped by Gal Luft and Anne Korin:

What do you call a world leader who faces a strategic threat stemming from his country’s energy dependence and introduces a crash program for energy independence that taps into his country’s domestic resources?

Ahmadinejad.

With 43 percent of Iran’s gasoline imported, Iranian President Mahmoud Ahmadinejad knows that a comprehensive gasoline embargo could cause social unrest that could undermine his regime. In response, he recently announced a three-part crash program for energy independence.

One tenet of the plan is massive expansion of the country’s refining capacity. While no refinery has been built in the United States in decades, Iran’s refinery infrastructure is undergoing one of the world’s fastest expansions, including the construction of two large new refineries.

A second pillar is to secure imports of refined products from Venezuela, one of Iran’s staunchest allies against the West.

The third, and most innovative, part of the plan is to convert Iran’s vehicles to run on natural gas rather than gasoline within five years. Iran has the world’s second-largest natural-gas reserve after Russia – 16 percent of the world’s total – which guarantees an uninterrupted supply of cheap transportation fuel for decades. The cost of conversion of both the cars and refueling stations is heavily subsidized by the government.

To read the full IAGS report on Iran’s strategy to subvert sanctions, click here.

Doing business, Saudi style

Monday, December 18th, 2006

The short version:
1. The British were investigating a 60 million British Pound slush fund set up to bribe Saudi princes into buying British military jets.
2. Saudis got mad. Saudis said they’ll call off the 10 billion Pound deal unless the investigation is called off by, well, yesterday and buy French planes instead.
SURPRISE!

Longer version.