Tag Archives: energy

A pipeline to …well, almost …eternity

Follow the money No. 97

A pipeline to …well, almost …eternity

Camouflaged by Congressional political badminton and Pres. Barack Obama’s demagoguery, the Keystone XL Pipeline Project represents solutions to economic and security issues far exceeding its general appreciation.

Half truths on all sides have obscured the project’s underlying fundamentals. Some are only emerging as additional research and technology is applied – most of it, for a change, good news in that it boosts estimates of access to available North American new fossil fuels reserves even if at higher prices.

Contrary to claims of Congressional proponents, the project is not an immediate positive economic bonanza. Like all natural resource development projects, construction employment will be temporary and jobs minimal when the pipeline is actually functional. Of course, given the current environment, any new jobs of any duration not added to the public payroll — the project is funded privately at something over $7 billion — is a godsend.

Its importance lies in its contribution to what should be a longer term U.S. energy strategy, a consideration often missing in heated partisan debate.

First of all, direct access to the Canadian tar sands affords fallback access for the almost bottomless U.S. energy maw – developing rapidly long- term whatever the short-term diminished demand of a temporarily crippled economy. Scandal after scandal is proving the Obama Administration’s so-called green energy strategy corrupt as well as wasteful and ineffectual. Keystone, on the other hand, would put crude into the Texas petrochemical refinery complex already absorbing Venezuela’s similar heavier oil – those reserves recently reestimated upward with spectacular finds on the Orinoco River.

That would give the U.S. not only an emergency alternative to the Venezuelan crude, fourth largest of our import sources, but leverage against the machinations of gringo-baiting Venezuelan Pres. Hugo Chavez. Given that country’s long troubled history, necessary insurance is needed even in a post-Chavez Venezuela [soon perhaps with reports the fiery demagogue may soon fall victim to cancer largely untreated so he could continue exercising his one-man rule].

The expanded pipeline proposal also now would pick up on its way the more attractive sweet crude from the Bakken strike in North Dakota, already one of the largest in U.S. history and apparently linked by new successful prospecting and new shale recovery technologies to huge neighboring regional deposits. With Bakken already having added an estimated 10% to American reserves, these could turn into the largest petroleum find in U.S. history.

As the pipeline travels south, it also aims at untangling a crude gathering traffic jam in Oklahoma and expanding the tanker delivery scene on the Texas coast.

But radical environmentalists had chosen – with the help of the usual Hollywood suspects assuaging their guilt for their gratuitously huge earnings – to make Keystone a major test. That was despite three years research by experts for the State Dept. had not turned up sufficient environmental issues to block the project. When local interests in Nebraska – ignoring the relatively clean record of the country’s vast pipeline networks – argued spills might threaten a critical local aquifer, the Canadian company countered with a $100-million-dollar detour around it.

Washington rumors are Sec. of State Hillary Clinton was not only not consulted but not forewarned when Pres. Obama, anticipating the 2011 election, threw a bouquet to enviromentalistas who had been increasingly jaundiced at his 2008 promises. But with even normally loyal trade unionists joining the outcry against the White House postponement to go ahead until after next year’s election, it was inevitable the issue would become a cudgel for the Republicans.

Canadian threats to transfer their affections to the Chinese market might have some validity – although even Chavez is arranging swaps with Iran for his Chinese sales with Venezuelan crude supposedly sold Beijing flowing into Texas. But level-headed Canadian Prime Minister Stephen Harper – an economist and native of Canada’s provincial giant oilwell, Alberta – may have overestimated American common sense. [Recent hints suggest Ottawa feels it is dealing with an overburdened, troubled U.S. and has to demonstrate inordinate patience for both their sakes. One has to wonder what the two chief executives talk about in frequent and what appear to be pleasant meetings!] But, in fact, Canada’s role as No. 1 foreign energy supplier to the U.S. – something forgotten in much of the talk about “American energy independence” – probably, rightfully, isn’t going away in the near future. The Republicans may be seeing to that.



Obama energy strategy: one part black magic, two parts propaganda

Again, and again, we must return to energy, the mother’s milk of the economy where the Obama Administration’s ham-fisted tactics are strangling the baby of recovery in the crib.

In his June 29th press conference, the President again singled out rebates to push U.S. fossil fuel production in his demand for tax increases for an economy already threatened by double-dip recession. The proposal compounds regulatory mischief: blocking oil and gas in the Gulf of Mexico while Chinese and other foreign companies drill off Cuba almost within sight of Florida beaches, forfeiting 250,000 jobs. “Regs” threaten West Texas fields contributing 20% of U.S. new production because of an obscure lizard. The White House dallies over a pipeline to bring Canadian oil sands crude to Texas refineries. While Moscow pushes Arctic prospecting, Juneau can’t get Washington to open up 14.7 million acres of state land with the critical Alaskan pipeline faltering from declining throughput.

Mr. Obama’s token strategic oil release – into the international crude pool rather than reducing U.S. pump prices – was one more feint in Mr.

Obama’s ideological war on fossil fuels. [Never mind ignoring the reserve’s national defense character; it was never meant as a price instrument – nor political toy.]

All this is done under the rubric of protecting the environment. “Junk science”, as many highly qualified skeptics believe, may underpin claims fossil fuels consumption decisively impacts climate change. It will take decades to know, given our shallow data for changing climate through the ages.

But “junk economics” is all too evident in the Administration’s energy strategies. Granted, impediments to cheap energy were inherited from previous governments and imperfect markets. But Mr. Obama’s drive for “renewable sources” mimics earlier Carter Administration’s abandoned “alternative energy” skeletons still littering the landscape.

Mr. Obama’s wind power subsides are indeed producing jobs – for China and Spain – with transferred American companies’ technology. Chinese windmills and solar panels are exported to the U.S., often replacing American manufacture.

The vignette of former Gov. Arnold Schwarzenegger entertaining the possibility of Chinese “high-speed rail” proposals with federal stimulus funds – just before California all but bankrupted — is quintessential of a mind set. High salaried propagandists for tax free non-governmental organizations [NGOs] promote “the environment” through advocacy of “mass transit”, citing China’s example. They fail to note deficit-ridden Chinese government railways – whose two top executives recently were arrested for stealing tens of millions – blackmailed European and U.S. companies for technology transfers in exchange for a phantom Chinese market. Now Beijing attempts exports while their own projects operate with anemic passenger loads — at lower speeds because of faulty engineering. The misrepresentation is all too typical of limitless, mindless propaganda pumped out on a daily basis, for example on that other Washington subsidized enterprise, National Public Radio, by the Obama cheering section.

In fact, a whole new era in fossil fuels is beginning. So-called “peak oil”, the crisis posited when diminishing reserves supposedly would meet rising consumption, has vanished. New vistas have developed worldwide with expanding deep-water drilling technology – a Norwegian billion-dollar floating platform in deep water off Rio de Janeiro, a good example. New fields await discovery in our own Gulf of Mexico – the less than cataclysmic British Petroleum oil spill notwithstanding. Recovering Iraq with the world’s second largest reserves, many yet untapped, is returning with 10 million barrels a day.

Even more spectacular, a new era for natural gas suddenly has emerged with new technology exploiting vast shale reserves lying deep below rock formations in a dozen countries, not the least the U.S. [An ironic comment on priorities: Beijing is investing government billions into American companies to get at that technology.] Of course, there already has been a half-baked university “study” by enviromentalistas arguing “fracking” – the process of getting at that gas – would poison ground drinking water. The study produces not a single instance nor does it explain the risk with most such deposits lying well below aquifers.

“Politically correct” spokesmen and the mainstream media promise black magic energy solutions, for example, electric cars, ignoring almost three quarters of our electricity for recharging batteries is met with coal and gas – much less the enormous costs and problems of grid expansion required for a massive changeover.

This conjuror’s trick has gone wrong; Mr. Obama is actually cutting the beautiful young lady in half as he cripples the energy sector.


“Allez, Alphonse ..” “Mais non! après vous, mon cher Pierre …”

A tiny mid-July ballet among American, Chinese and UN statisticians camouflages a growing geopolitical threat: China’s unquenchable thirst for and America’s dependence on imported oil.

When a UN’s International Energy Agency official named China the world’s No. 1 energy consumer, surpassing the U.S., Zhou Xi’an, a Beijing energy official, quickly snapped: “We should be on guard with those exaggerated statistics, and what’s more, prevent the issue from being politicized.”

It may be the first time Beijing with its piquancy for gigantism – from population overcounts to the Olympics extravaganza to the elaborate Shanghai Exhibition to its growing bloated infrastructure — has tried for second place. True, America does consume per capita five times as much energy. But as the IEA notes, as with most Chinese statistics, Beijing’s 2009 energy numbers don’t match its GDP claims. It’s no secret that subsidies, general inefficiency and corruption have gorged Chinese consumption.

There are other reasons for Beijing’s sensitivity. In 2007 China zoomed by the U.S. as the world’s largest greenhouse gases emitter. Getting most of its electricity from coal, the most polluting fossil fuel, Beijing is under growing pressure to clean up its act.

But Zhou’s irritability hints at something far more significant.

In the early 1990s, Beijing became a net oil importer. And demand is growing exponentially as China moves into the motor age. [In 2009 China produced 13.79 million cars, the world’s largest market.] By June this year, China consumed almost 10 million barrels daily, half imported.

In several ways the U.S. and China may be returning to an old petroleum symbiosis. In the industry’s earliest years, John D. Rockefeller’s flamboyant distribution of millions of free kerosene lamps [mei po] to create Chinese consumers was part of building his monopoly. [Alice Tisdale Hobart’s novel, Oil for the Lamps of China, is a good read on an earlier generation’s fascination with the Marco Polo myth of an inexhaustible China market.]

Today, despite President Barack Obama’s highly subsidized “renewable energy resources” schemes, most experts agree the U.S. for decades will continue to depend on fossil fuels. U.S. oil imports plateaued in the new century because of increased domestic production from diminishing reserves, and more efficiency, in part produced by higher prices and mandated auto mileage standards. There is, of course, the present dip — due, only temporarily one hopes, to the economic downturn. But in 2008 America consumed almost a quarter of the world’s petroleum, more than half imported. Between them, the U.S. and China now burn nearly a third of the world’s total. Predictions for a flattening of China’s growth and improved energy efficiency are largely speculation.  So both are likely to increase their imports rapidly if and when the world economy recovers.

Beijing, despite its success in nailing deals – some real, some ephemeral – with would-be suppliers from Cuba to Angola to Kazakhstan, faces some hard realities. As with most consumers, China’s oil spigot turns on in the Persian Gulf. China is already best customer for Saudi Arabia – with the world’s largest reserves – and Beijing has bought heavily into renewed Iraq production – the world’s second.

Ironically, that energy lifeline depends on the U.S. Navy’s policing the Indian and Pacific Oceans and technology transfers from U.S and Europe-based producers. [Beijing’s refusal to honor the UN Iran embargo has left it stranded alone in the huge but stalled Persian Gulf South Pars reserve with partners retreating before Washington sanctions.]

Beijing is busily attempting detours. But pipelines from Central Asia into troubled westernmost Singkiang province, thousands of miles from coastal industries, off and on deals with Moscow enmeshed in disputes over routes and pricing, a proposed Burma pipeline to isolated Yunnan province to avoid the Malacca Strait chokepoint, an even more ephemeral pipeline from a Pakistan port at the entrance to the Persian Gulf, would still be Band-Aids.

So as domestic energy costs rise, oil is increasingly a major concern for Beijing planners, as it is with Washington.

The fact that Beijing now has just had its largest accident – but no competitor to the BP spill in the Gulf of Mexico – and pollution of north China fisheries adds another parallel.

China’s no-holds-barred attempts at access to foreign oil already have complicated Washington foreign policy from Nigeria to Sudan to Burma. In fact, Beijing’s growing consumption is the primary cause of rising world fuel prices. [And, adding spice, that is impacting China’s competitive export pricing for Western and Japanese markets.]

Competition for access to world oil will grow. Add that to growing friction over Beijing’s refusal to help block North Korean nuclear weapons, export subsidies aggravating the U.S. balance of payments hemorrhage, and growing public truculence of Chinese military spokesmen and you have more than combustible oil.

It was, after all, petroleum access that was the final straw in Japan’s 1930s conflict with the U.S. when Washington’s oil embargo brought on the attack on Pearl Harbor. No one would argue that Chinese and American relations have reached that stage. But that history is all too familiar to be dismissed.