American Energy Policy, Asleep At The Spigot

The New York Times reports:

Just three years ago, with oil trading at a seemingly frothy $66 a barrel, David J. O’Reilly made what many experts considered a risky bet. Outmaneuvering Chinese bidders and ignoring critics who said he overpaid, Mr. O’Reilly, the chief executive of Chevron, forked over $18 billion to buy Unocal, a giant whose riches date back to oil fields made famous in the film “There Will Be Blood.”

For Chevron, the deal proved to be a movie-worthy gusher, helping its profits to soar. And while he has warned about tightening energy supplies for years and looks prescient for buying Unocal, even Mr. O’Reilly says that he still can’t get his head around current oil prices, which closed above $145 a barrel on Thursday, a record.

“We can see how you can get to $100,” he says. “At $140, I just don’t know how to explain it. We’re surprised.”

For the rest of the country, the feeling is more like shock. As gasoline prices climb beyond $4 a gallon, Americans are rethinking what they drive and how and where they live. Entire industries are reeling — airlines and automakers most prominent among them — and gas prices have emerged as an important issue in the presidential campaign.

Ninety percent of Americans, meanwhile, expect the pain at the pump to pose a financial hardship in the next six months, according to a recent Associated Press-Yahoo News poll. Stocks now trade inversely to crude prices, and the Dow Jones industrials are in bear-market territory. Old icons have been written off, with Starbucks boasting nearly twice the market value of General Motors, which some on Wall Street say faces the possibility of bankruptcy.

Outside the thriving oil patch, it makes for a bleak economic picture. But it didn’t have to be this way.

Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.

Even as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways.

Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress.

So despite the fierce debate over what’s behind the recent spike in prices, no one differs on what’s really responsible for all that underlying demand here for black gold: the automobile, fueled not only by gasoline but also by Americans’ famous propensity for voracious consumption.

To be sure, the American appetite for crude oil is only one reason for the recent price surge. But the country’s dependence on imported oil has only kept growing in recent years, undermining the trade balance and putting an added strain on global supplies.

Although the road to $4 gasoline and increased oil dependence has been paved in places like Detroit, Houston and Riyadh, it runs through Washington as well, where policy makers have let the problem make lengthy pit stops.

“Much of what we’re seeing today could have been prevented or ameliorated had we chosen to act differently,” says Pete V. Domenici, the ranking Republican member of the Senate Energy and Natural Resources Committee and a 36-year veteran of the Senate. “It was a bipartisan failure to act.”

Mike Jackson, the chief executive of AutoNation, the country’s biggest automobile retailer, is even more blunt. “It was totally preventable,” he says, anger creeping into his affable car-salesman’s pitch.

The speed at which gas prices are climbing is forcing a seismic change in long-held American habits, from car-buying to commuting. Last week, Ford Motor reported that S.U.V. sales were down 55 percent from a year ago, while demand for its full-size F-series pickup, a gas guzzler that was the country’s best-selling vehicle for 26 consecutive years, is off 40 percent. The only Ford model to show a sales increase was the midsized Fusion. A Ford spokeswoman says the market shift is “totally unprecedented and faster than anything we’ve ever seen.”

If the latest rise in oil prices isn’t just another spike — like those of the 1970s and 1980s — but is instead a fundamental repricing of the commodity responsible for much of modern American life, the impact of that change will affect everyone from home builders and homeowners in exurbs to corporate leaders, landlords and commuters in cities.

Although Asian consumers have begun emulating America’s love affair with the automobile, with the commercial booms of China and India playing pivotal roles in increased oil demand, the largest energy appetite in the world is still found in the United States. Home to only 4 percent of the world’s population, the nation slurps up about a quarter of the planet’s oil — and Americans’ daily use is nearly twice the combined consumption of the Chinese and Indians, according to an annual energy survey published by BP, the British oil giant.

Indeed, low-priced gasoline has long been part of the American social contract, according to Newt Gingrich, the former House speaker and Republican leader. While in office, Mr. Gingrich battled efforts to modulate demand through tools like increased gas taxes and tighter fuel standards, and he argues that voters won’t support such measures even now.

“They will work if you coerce the entire system and if you pretend the American people are Japanese and Europeans,” Mr. Gingrich says. “Our culture favors driving long distances in powerful vehicles and the car as a social expression.”

In 2002, General Motors workers opposed legislation to increase fuel efficiency standards because they thought it might eliminate the S.U.V.
Perhaps, but on Capitol Hill, members of both parties now say they are furious with Detroit for fighting so hard, and for so long, against higher fuel-efficiency standards.

Though analysts say automakers who shoveled out highly profitable and highly inefficient road hogs like S.U.V.’s and pickups deserve much of the blame, they also criticize legislators who failed to provide an incentive for consumers to switch to fuel-sipping cars. Some politicians are quick to acknowledge the problem.

“We’ve got to fix it or our standard of living will change within a decade,” says Senator Domenici, who is retiring this year. “Oil was too damn cheap, it’s too high now and it’s going even higher. I hope I’m wrong, but the problem is, we can’t catch up soon enough.”

According to energy policy experts, it was in the late 1980s and early 1990s — during the administrations of President George H. W. Bush and Bill Clinton — that things began to go wrong.

Before that point, the country reaped the benefits of the first fuel-economy standards, passed in 1975, known as corporate average fuel economy, or CAFE. Between 1974 and 1989, the efficiency of a typical car sold in the United States almost doubled, to 27.5 miles per gallon from 13.8.

Largely as a result, oil consumption in 1990 totaled 16.9 million barrels, basically on a par with the 17 million barrels consumed in 1980, even as the economy grew substantially. Oil prices were in the middle of a long downward slide that would take them from well above $30 a barrel in 1980 to a low of just under $10 in late 1998 and early 1999, interrupted only by brief spike in 1990 after Iraq’s invasion of Kuwait.

In 1990, Richard H. Bryan, a Nevada Democrat, teamed up in the Senate with Slade Gorton, Republican of Washington, and proposed lifting fuel standards again over the next decade, with a goal of 40 m.p.g. for cars. Amid furious opposition from Detroit, liberal Democrats from automaking states, like Carl Levin of Michigan, joined conservative Republicans like Jesse Helms of North Carolina, who died on Friday, to block new CAFE standards. “It was one of the most frustrating issues in my Senate career,” says Mr. Gorton, who left the Senate in 2001.

Dan Becker, then a lobbyist for the Sierra Club, still remembers his shock when he saw Mr. Levin and Mr. Helms, diametrically opposed on most issues, walk amiably together onto the Senate floor to cast their votes. “This wasn’t East-West, right-left, or North-South,” he says. “But had we passed that bill, we’d be using three million barrels less oil a day now.”

That amount may not sound like much, given total global consumption of 85 million barrels a day, but it’s more than OPEC’s spare capacity now.

Mr. Levin didn’t return calls for comment. But Representative John D. Dingell, the powerful Democrat from Detroit who chairs the House Energy and Commerce Committee, argues — as he did more than a decade ago — that tightening CAFE standards unfairly penalizes domestic automakers while rewarding foreign rivals who make more small cars.

Mr. Dingell, who has defended the automakers fiercely during his 52 years on Capitol Hill, decided to support the stronger CAFE standards last year. But he does not apologize for his longtime stance. “The American auto industry has sold the cars people wanted,” he says. “You’re going to blame the auto industry for that or the American consumer? He likes it sitting in his driveway, he likes it big, he likes it safe.”

A much more effective approach would be to simply raise taxes on gasoline, Mr. Dingell says, because higher prices are the easiest way to change buying habits. Some Europeans agree with this, noting that policy changes engineered through taxation can alter consumer choices without impeding economic growth.

Consumers overseas might not like higher taxes on gasoline, but they’ve adapted, says Jeroen van der Veer, chief executive of Royal Dutch Shell, the European energy giant. “A society can work, can function and can grow even at higher fuel prices,” he says. “It’s a way of life — you get used to it.”

In Mr. van der Veer’s native Holland, for example, gasoline sells for more than $10 a gallon, with $5.57 of that going to taxes. Even in Britain, which has substantial North Sea production, gasoline sells for $8.71 a gallon.

A substantial gas tax increase was considered during the administration of the first President Bush, recalls William K. Reilly, who ran the Environmental Protection Agency at the time. But it was whittled down in 1990 to just 5 cents after Mr. Gingrich and other conservatives in the Republican Party broke with the president.

“This was a stark lesson and people decided the gas tax was the third rail of public policy,” Mr. Reilly says.

Even as Congress idled when it came to tightening CAFE standards or substantially raising levies on gas, the Exxon Valdez oil spill in 1989 made offshore drilling yet another unpalatable option. “That caused a sea change and after that no one had any sympathy for the oil industry,” Mr. Becker says.

In 1990, three months before the effort to raise fuel-efficiency standards failed on Capitol Hill, President Bush issued an executive order making large swaths of the continental shelf off-limits to new exploration. That policy remains in effect today.

Lee Raymond, former chief of Exxon Mobil, says of today’s oil prices: “There is no quick-fix on this. By the time you panic, it is way too late.”
When Senators Charles E. Schumer, a New York Democrat, and Frank H. Murkowski, an Alaska Republican, attempted to put together a grand bargain of opening up more of Alaska in exchange for raising auto efficiency in 1998, the two couldn’t persuade enough members of either party to go along.

“It was a no-action policy,” says Lee R. Raymond, the former chief executive of Exxon Mobil, who has had a ringside seat for most of the energy policy debates of the last 25 years. “By the time there is panic, people need to realize this: There is no quick-fix on this. By the time you panic, it is way too late.”

Still, many analysts argue that increased drilling alone is no panacea. They note that many of the oil giants don’t drill in areas to which they already have access. Exxon, in particular, has been criticized as spending too much to buy back its own stock and not enough on exploration. Chris Welberry, a spokesman for Exxon Mobil, defends the company’s record, saying, “We are investing in our business at record levels — around $25 billion this year.”

In any event, added drilling is unlikely to generate sharply lower prices. A recent study by the federal government’s Energy Information Administration estimated that under the best-case scenario opening up the Arctic National Wildlife Refuge would reduce prices by $1.44 a barrel by 2027. Drilling in broader swaths off the continental United States wouldn’t affect prices until 2030.

On the taxation frontier, President Clinton did manage to get through a small tax increase on gasoline — 4.3 cents — in 1993, but with oil prices hovering between $10 and $20 a barrel for most of the 1990s, conservation ended up on the back burner.

Indeed, President Clinton did propose a broader tax on energy consumption in 1993, but it died quickly when Senate Democrats rebelled, much as House Republicans derailed President Bush’s gas tax in 1990. Still, environmentalists like Mr. Becker remain disappointed with Mr. Clinton for not doing more in his first term when oil prices were low and Detroit was enjoying a recovery in profits after the lean years of the early 1990s.

Congressional Republicans made matters worse in 1995, when they attached a rider to a huge appropriations bill forbidding the National Highway Traffic Safety Administration from spending any money to raise fuel standards. That law, in effect until 2001, made any change in CAFE standards impossible, says Representative Edward J. Markey, a Massachusetts Democrat who has pushed for better fuel efficiency.

As Paul Bledsoe, strategy director of the National Commission on Energy Policy, recalls it, “The 1990s were something of a lost decade for American fuel efficiency.” With oil prices low, consumers began snapping up pickup trucks and sport utility vehicles, which were governed by less stringent fuel economy standards, thanks to a loophole in the original 1975 law. These carried higher sticker prices and profit margins, and both Detroit and foreign automakers were happy to oblige.

Although oil prices remained low through the 1990s, consumption patterns were taking an ominous turn. By 2000, daily demand reached 19.7 million barrels a day — nearly three million more than in 1990, a 17 percent jump in 10 years that wiped out much of the fuel savings that followed the energy crises of the 1970s.

Since then, global consumption has taken off, rising to 85.2 million barrels a day last year from 76.3 million in 2000.

In recent years, Mr. Reilly says that both the White House and Congress have passed up opportunities to call for higher gas taxes and fuel standards in the name of national security, especially after the Sept. 11 attacks. “We could have, but we didn’t,” says Mr. Reilly, who describes himself as a moderate Republican. “It’s part of a long pattern in which Democrats and Republicans have not wanted to wade into this issue.”

By 2001, oil prices were slowly creeping up, but few seemed to notice, perhaps because the march was slow and steady. By 2004, crude was at $37 a barrel and the next year it hit $50. With higher prices for oil, an increase in gas taxes was political poison, but Mr. Markey says support for new fuel standards was reawakening.

Nevertheless, his efforts to pass new fuel economy legislation in 2001, 2003, and 2005 went nowhere amid continued opposition by supporters of the auto industry on both sides of the aisle as well as many conservative Republicans. Although the United States had long ceased to be energy-independent — that era ended just after World War II — Mr. Markey says he believes the memory of plentiful domestic supplies created a different mind-set here than in Europe, where oil was generally scarce.

Other veterans of those battles cite lobbying by the domestic automakers as a main factor in the failure of Mr. Markey’s legislation. “The auto companies didn’t see the handwriting on the wall,” Mr. Schumer says. “The auto companies would go to people and say, ‘If you vote for CAFE standards, the auto plant in your district could shut down.’ They got the message.”

Representative Mike Castle, a Delaware Republican whose district includes plants owned by G.M. and Chrysler, adds that “nothing was ever said directly but it would go through the minds of members that Detroit might respond.”

“Sometimes, things don’t have to be said,” he added.

Susan M. Cischke, group vice president for sustainability, environment and safety engineering at Ford, says the recollections of Mr. Schumer and Mr. Castle are “way over the top — you don’t just pull up or put down auto plants.” Instead, she says, when lobbying on CAFE, “we talked with our friends and indicated what it did with jobs. You want support.”

Oil industry insiders say they remained on the sidelines during Congressional debates over CAFE standards, although legislators from oil states tended to vote against more rigorous rules.

In 2007, with oil at $82 and gas nearing $3, Congress finally approved the first big increase in fuel-efficiency standards in 32 years, requiring the fleet average to reach 35 m.p.g. by 2020. That will save one million barrels a day by 2020, but onetime CAFE opponents like Mr. Castle now say they wish that Congress had acted sooner. Since the 1980s, fuel efficiency has flatlined at 24 m.p.g., while vehicle weight has jumped more than 25 percent and horsepower has nearly doubled. In Europe, on the other hand, fuel efficiency currently stands at 44 m.p.g. and is slated to hit 48 m.p.g. by 2012.

“It’s a shame we’re doing this now instead of 10 or 20 years ago,” says Mr. Castle, who supported the legislation last year. “It was always my hope they would just do it without a mandate.” He adds that while he still opposes drilling in Alaska, “Republicans aren’t all wrong when they talk about increasing supplies of oil. There are opportunities in the Gulf of Mexico.”

Senator Domenici, the senior New Mexico Republican, agrees that it’s time to look at new supplies but is even more critical of Detroit. “They all said to us: ‘Don’t change CAFE. It’ll come when it’s supposed to.’ That’s baloney,” he said.

Until last year’s vote, Mr. Domenici was an opponent of new fuel-efficiency standards, a stance he now regards as a mistake. “We were like everybody else,” he says. “We should have been more active on CAFE sooner.”

With Detroit again seeing profits collapse as sales of big cars plunge, Mr. Domenici says he is worried about the survival of the domestic automakers.

“They talked a good research game,” he says. “But let’s face it, little was being done. They are suffering the consequences and could go broke just like the airlines.”

What Congress didn’t or couldn’t do, the free market is now doing in the form of higher gas prices: forcing Americans into more fuel-efficient cars. Ms. Cischke of Ford says that in the last two months, “We have seen more of a shift in the market than in 20 years of CAFE. People are buying what they need.”

Unfortunately, the shift is happening too fast for a company of Ford’s size. That is among the reasons Wall Street expects Ford to lose more than $2 billion this year.

Congress, meanwhile, in its bid to explain the run-up in fuel prices, is examining the role of speculation and the increased flow of investor money into commodities. Most energy economists emphasize the fundamental issue of supply and demand, rather than market manipulation, but financial factors like the weak dollar are also exacerbating the situation. Stephen P. A. Brown, director of energy economics and microeconomic policy analysis at the Federal Reserve Bank of Dallas, estimates that a little more than 20 percent of the price of oil today can be attributed to the dollar’s fall against the euro and other currencies.

Another financial factor behind the price rise that hasn’t been talked about much on Capitol Hill or elsewhere is reduced hedging by oil companies on futures markets, says Larry Goldstein, a longtime energy analyst. In the past, crude producers would offer buyers a portion of their energy output in future years in order to protect themselves if prices pulled back. But energy companies got burned as prices kept rising during the last two years and have since cut back on selling untapped production — forcing prices for energy futures even higher.

Now, the prospect of a perpetual climb in oil prices has become part of market psychology, which is notoriously hard to change. William H. Brown III, a former Wall Street energy analyst who now consults for hedge funds and financial institutions, says investors have become convinced that the White House and Congress are unlikely to do anything dramatic to bring down prices.

For example, a release of supplies from the Strategic Petroleum Reserve after disruptions in Nigeria or Venezuela might have persuaded the market that Washington was on the case and shaken some complacency out of the market. “I’ve been a little surprised at what has not been done or what has not been talked about to get a handle on the consumer situation,” Mr. Brown says.

Others say that although the push to blame market speculators rather than discuss economic realities is likely to intensify on Capitol Hill as the presidential election draws near, they believe that what the world is confronting is a momentous shift in energy supply and demand.

“Speculation and manipulation are two different things,” says Mr. O’Reilly of Chevron. “Most of where we are is because of fundamentals and concern about the future.”

And The Wind Waits ... And Waits ...

The waiting list for proposed wind energy projects in the state is 612 years. But changes are afoot.

The Star Tribune reports:

To anyone who wants to join the wind energy movement, Ryan Wolf says: Get in line.

Wolf, of Le Sueur, Minn., has been waiting almost two years for the go-ahead to build 27 wind turbines in the southwest part of the state.

It's anyone's guess how much longer he'll be waiting, given a backlog of applications that technically could take more than 600 years to clear at the federal agency that stands between him and the renewable energy marketplace.

"The queue is the biggest problem we're struggling with," agreed Clair Moeller, a vice president at that gatekeeper agency in St. Paul, the Midwest Independent Transmission System (Midwest ISO).

While the national mood has shifted to embrace renewable energy, and states including Minnesota have pledged increased usage, conditions on the ground are not making it easy. Developers point to shortages of the wind turbines, engineers to run them and transmission lines to carry the electricity they produce.

But many say the biggest immediate problem is the bottleneck at the regional agencies of the Federal Energy Regulatory Commission -- Midwest ISO, in 15 Upper Midwest states -- that give projects permission to connect to existing power lines.

And the Midwest is in the worst shape, they say, because its windy plains are prompting more project proposals than anywhere else.

Moeller's staff has adapted new procedures -- one is clustering several proposals into a single study -- so they expect to be able to clear the queue in 50 years instead of 600. And this spring he will ask federal regulators to approve more adaptations to further speed the process.

But every passing year drives up the cost of the projects -- which is passed on to consumers. And the backlog stands in the way of Minnesota's pledge to get 25 percent of its electricity from renewable sources by 2025.

"You simply can't get there on time," Moeller said.

Midwest ISO is like a combined roadway planner and traffic cop for the 94,000 miles of power lines within its borders. Moeller runs one of its two central offices out of a one-story, warehouse-type building in a residential St. Paul neighborhood.

Engineers there control the minute-to-minute activity of every utility that sends electricity through the area's power grid.

The agency also vets all the requests by new power projects to connect to the already congested transmission system.

Each request takes about two years to process, because Midwest ISO's obligations include locating any point along the grid that's already maxed out -- even hundreds of miles away. Then it has to put a dollar figure on the work needed at those points -- something similar to adding two lanes to an overloaded four-lane highway -- and then give that bill to the developer.

Federal regulators set up that process as first-come, first-served, in part because everything is so interconnected. Also, by regulation, all requests must be handled one at a time. So, technically, Moeller's staff should spend two years on the project at the top of the list before proceeding to the second one, for two years, and so on. That comes to 612 years for the 306 requests now in the Midwest ISO queue.

The system functioned better when it handled the few, big coal or nuclear power plants that came along. But wind projects are small, and there are many more of them -- three of every four proposals now on the list. And they take about as long to study as do the big projects.

Don't mess with Texas

Texas has found a better way, in the view of Rob Gramlich, policy director at the American Wind Energy Association, a Washington-based industry group.

That state, which is an ISO unto itself, has completely separated grid issues from its vetting process. So, when Texas ISO processes power project applications, all it has to price for them is their "driveways" -- the new power lines to run between them and the grid.

That helped Texas connect three times more wind energy than any other state last year, Gramlich said.

That kind of arrangement works better in a one-state ISO, Moeller said. It's a different proposition to get the legislatures and utilities commissions in 15 states agreed and organized to maintain one another's grids, he said.

Instead, Midwest ISO has gotten permission from federal regulators to consider a "cluster" of several geographically close proposals at once, Moeller said. It also can process several proposals at the same time if they are far enough apart that they will affect different stretches of the grid.

Moeller wants the regulators to approve several more changes to the queuing system. For example, he would like some remedy to this predicament: Now, after their two-year study, project developers have three more years to decide whether to go ahead and build. In the meantime, everybody behind them in line has to wait.

The biggest change Moeller wants is to flip the process from supply-driven to demand-driven. He would like the Midwest ISO states to develop plans for how much and where its future energy needs will be. Then, developers will have to plug any proposals into those plans.

Without that, developers hot on the renewable energy trend are overwhelming Midwest ISO with more proposals than are conceivably possible in the foreseeable future, Moeller said.

For example, even though Midwest ISO's states have announced a collective stretch goal of 12,600 megawatts of renewable energy over the next several years -- half of those are Minnesota's -- Moeller's agency has proposals for 55,000 more.

Another example from Moeller: The transmission system in the Buffalo Ridge area in southern Minnesota now has a customer load capacity of 40 to 50 megawatts. The windy region logically appeals to developers, and several utilities are proposing power line expansions that would add 1,900 megawatts by 2014. But Midwest ISO has proposals in its queue for 55,000 more megawatts for the region.

"That mismatch isn't always so dramatic, but there's a mismatch everywhere," he said.

As time goes by

In the meantime, all this waiting is expensive, Wolf said. He and his 14 partners submitted their proposal for a 27-turbine, 57-megawatt project in March 2006, hoping for approval by 2007, construction of one year, then opening for business this year.

"Those dates all burned by," Wolf said.

In the meantime, they have about $100,000 in expenses tied up with Midwest ISO, as well as other legal fees, permitting fees and land agreements. And they can't commit to a sales contract with a utility until they know what price they'll need to cover the costs -- turbines and transformers, for example -- that are rising between 10 and 30 percent a year.

Industry estimates now put total installation costs at about $1.8 million per megawatt of capacity.

"Those kind of delays are almost certainly going to overrun budgets," Wolf said.

"In our case, we haven't hit the point where we've decided to walk away from the project, but I could see scenarios for others where that would happen."

Nuclear Power Plants the Solution to Climate Change?

Reasons not to glow . . . On Not Jumping Out of The Frying Pan Into The Eternal Fires

From Orion magazine, Rebecca Solnit writes:

Chances are good, gentle reader, that you are going to have to sit next to someone in the coming year who will assert that nuclear power is the solution to climate change. What will you tell them? There’s so much to say. You could be sitting next to someone who hasn’t really considered the evidence yet. Or you could be sitting next to scientist and Gaia theorist James Lovelock, a supporter of Environmentalists for Nuclear EnergyTM, which quotes him saying, “We have no time to experiment with visionary energy sources; civilisation is in imminent danger and has to use nuclear-the one safe, available, energy source-now or suffer the pain soon to be inflicted by our outraged planet.

“If you sit next to Lovelock, you might start by mentioning that half the farms in this country had windmills before Marie Curie figured out anything about radiation or Lise Meitner surmised that atoms could be split. Wind power is not visionary in the sense of experimental. Neither is solar, which is already widely used. Nor are nukes safe, and they take far too long to build to be considered readily available. Yet Stewart Brand, of Whole Earth Catalog fame, has jumped on the nuclear bandwagon, and so has Greenpeace founding member turned PR flack Patrick Moore. So you must be prepared.

Of course the first problem is that nuclear power is often nothing more than a way to avoid changing anything. A bicycle is a better answer to a Chevrolet Suburban than a Prius is, and so is a train, or your feet, or staying home, or a mix of all those things. Nuclear power plants, like coal-burning power plants, are about retaining the big infrastructure of centralized power production and, often, the habits of obscene consumption that rely on big power. But this may be too complicated to get into while your proradiation interlocutor suggests that letting a thousand nuclear power plants bloom would solve everything.

Instead, you may be able to derail the conversation by asking whether they’d like to have a nuclear power plant or waste repository in their backyard, which mostly they would rather not, though they’d happily have it in your backyard. This is why the populous regions of the eastern U.S. keep trying to dump their nuclear garbage in the less-populous regions of the West. My friend Chip Ward (from nuclear-waste-threatened Utah) reports, “To make a difference in global climate change, we would have to immediately build as many nuclear power plants as we already have in the U.S. (about 100) and at least as many as 2,000 worldwide.” Chip goes on to say that “Wall Street won’t invest in nuclear power because it is too risky. . . . The partial meltdown at Three Mile Island taught investment bankers how a two-billion-dollar investment can turn into a billion-dollar clean-up in under two hours.” So we, the people, would have to foot the bill.

Nuclear power proponents like to picture a bunch of clean plants humming away like beehives across the landscape. Yet when it comes to the mining of uranium, which mostly takes place on indigenous lands from northern Canada to central Australia, you need to picture fossil-fuel-intensive carbon-emitting vehicles, and lots of them-big disgusting diesel-belching ones. But that’s the least of it. The Navajo are fighting right now to prevent uranium mining from resuming on their land, which was severely contaminated by the postwar uranium boom of the 1940s and 1950s. The miners got lung cancer. The children in the area got birth defects and a 1,500 percent increase in ovarian and testicular cancer. And the slag heaps and contaminated pools that were left behind will be radioactive for millennia.

If these facts haven’t dissuaded this person sitting next to you, try telling him or her that most mined uranium-about 99.28 percent-is fairly low-radiation uranium-238, which is still a highly toxic heavy metal. To make nuclear fuel, the ore must be “enriched,” an energy-intensive process that increases the .72 percent of highly fissionable, highly radioactive U-235 up to 3 to 5 percent. As Chip points out, four dirty-coal-fired plants were operated in Kentucky just to operate two uranium enrichment plants. What’s left over is a huge quantity of U-238, known as depleted uranium, which the U.S. government classifies as low-level nuclear waste, except when it uses the stuff to make armoring and projectiles that are the source of so much contamination in Iraq from our first war there, and our second.

Reprocessing spent nuclear fuel was supposed to be one alternative to lots and lots of mining forever and forever. The biggest experiment in reprocessing was at Sellafield in Britain. In 2005, after decades of contamination and leaks and general spewing of horrible matter into the ocean, air, and land around the reprocessing plant, Sellafield was shut down because a bigger-than-usual leak of fuel dissolved in nitric acid-some tens of thousands of gallons-was discovered. It contained enough plutonium to make about twenty nuclear bombs. Gentle reader, this has always been one of the prime problems of nuclear energy: the same general processes that produce fuel for power can produce it for bombs. In India. Or Pakistan. Or Iran. The waste from nuclear plants is now the subject of much fretting about terrorists obtaining it for dirty bombs-and with a few hundred thousand tons of high-level waste in the form of spent fuel and a whole lot more low-level waste in the U.S. alone, there’s plenty to go around.

By now the facts should be on your side, but do ask how your neighbor feels about nuclear bombs, just to keep things lively.

The truth is, there may not be enough uranium out there to fuel two thousand more nuclear power plants worldwide. Besides, before a nuke plant goes online, a huge amount of fossil fuel must be expended just to build the thing. Still, the biggest stumbling block, where climate change is concerned, is that it takes a decade or more to construct a nuclear plant, even if the permitting process goes smoothly, which it often does not. So a bunch of nuclear power plants that go online in 2017 at the earliest are not even terribly relevant to turning around our carbon emissions in the next decade-which is the time frame we have before it’s too late.

If you’re not, at this point, chasing your poor formerly pronuclear companion down the hallway, mention that every stage of the nuclear fuel cycle is murderously filthy, imparting long-lasting contamination on an epic scale; that a certain degree of radioactive pollution is standard at each of these stages, but the accidents are now so many in number that they have to be factored in as part of the environmental cost; that the plants themselves generate lots of radioactive waste, which we still don’t know what to do with-because the stuff is deadly . . . anywhere . . . and almost forever. And no, tell them, this nuclear colonialism is not an acceptable sacrifice, since it is not one the power consumers themselves are making. It’s a sacrifice they’re imposing on people far away and others not yet born, a debt they’re racking up at the expense of people they will never meet.

Sure, you can say nuclear power is somewhat less carbon-intensive than burning fossil fuels for energy; beating your children to death with a club will prevent them from getting hit by a car. Ravaging the Earth by one irreparable means is not a sensible way to prevent it from being destroyed by another. There are alternatives. We should choose them and use them.

^{An antinuclear activist in Nevada from 1988 to 2002, Rebecca Solnit just put up a clothesline in the backyard and will get around to installing the solar panels any day now. National Book Critics Circle award-winner Solnit’s most recent book is Storming the Gates of Paradise.}

Battling Over The World's Oil Reserves

Alistair Tice looks at the rivalry for access to the world's oil supplies and assesses the likely consequences for the world economy, and the continued dominance of US imperialism.

Alistair Tice reports:
George Bush invaded Iraq for power, prestige and oil. Whilst the catastrophe of the occupation has dealt a huge blow to the prestige of US imperialism around the world and its power in the Middle East has been severely undermined, US and British oil companies are still set to get their hands on Iraq's oil.

Iraq's pro-western cabinet has approved a Hydrocarbon Law that will hand over long-term control of the country's untapped energy fields to foreign multinationals, with profit rates of up to 75 per cent! Iraq has the world's second largest known oil reserves and the Middle East currently supplies two-thirds of the world's oil.
Bush's war for oil was driven by his administration's close links to the major oil companies and by the United States' oil import needs. US oil production peaked in 1970 at ten million barrels per day (bpd); today it is less than five million bpd and the US consumes 20 million bpd. That is 25% of the world's oil consumption, yet the US only has 5% of the world's reserves.

Imports have risen from 36% of its oil needs in 1970 to two-thirds today. A recent submission to the Senate Committee on Energy and Natural Resources stated "there is no economically plausible scenario for a strategically meaningful reduction in the dependence of the Unites States and its allies on imported hydrocarbons during the next quarter century."

The major oil companies, mostly US-owned, are collectively known as 'Big Oil'. Closely connected to the Bush regime, many were originally based in the key oil state of Texas and are an essential element in the 'military-industrial complex'. Their profit-driven objectives have played a decisive role in Bush's aggressive, interventionist policy in the Middle East and Central Asia. Big Oil makes huge profits. In 2005, ExxonMobil became the world's biggest company, overtaking Wal-Mart. Five of the world's top ten corporations are now oil majors.

However, they face long term problems. Last year, the private oil corporations only replaced 75% of their reserves and now they only control 10% of world oil reserves.

State ownership
Despite two decades of neo-liberalism, national oil companies (wholly or partly state owned) control 90% of world oil reserves. And that share is rising.

On 1 May 2006, Evo Morales, the recently elected leftist president, announced the nationalisation of Bolivia's gas industry. Whilst it ended up as only partial state ownership, it was hugely significant after two decades of privatisation and was referred to as "the first nationalisation of the 21st century." Hugo Chávez, the radical president of Venezuela, has announced that by 1 May 2007, PDVSA (the Venezuelan state oil company) will take a 60% majority stake in the extra-heavy oil fields in the Orinoco Basin.

Vladimir Putin, the Russian president, has taken state-capitalist measures against the oil multinationals to increase his government's revenues and standing internationally.

Shell was forced to accept reduced shares in joint ventures in the giant Sakhalin oilfield. And now BP is under pressure from Gazprom, the Russian state gas company, over a new gas field project in Eastern Siberia.

The oil companies are having to accept lesser shares in future profits or risk expropriation and miss out altogether.

Even in the central African country Chad, last year the government created a new national oil company and threatened to expel Chevron for not paying taxes. In less than three years of exploitation of Chad's recently discovered oil resources, in a deal brokered by the World Bank, the foreign consortium had earned $5 billion for a $3 billion investment and Chad only got $588 million!

Globalisation
This retrenchment from globalisation is likely to increase with more governments nationalising or at least taking majority state holdings in their energy resources. Russia is now the world's biggest oil exporter (it overtook Saudi Arabia last year) and Gazprom is now the highest valued company outside the US.

But the Big Oil companies, and through them US imperialism, still control the international oil market: trading, transportation (tankers and pipelines) and refining. So Russia and China are trying to challenge their domination, and their state-owned energy companies could even make hostile takeover bids for Big Oil companies.

These would not be successful for political reasons. Last year for example, the US Congress blocked an attempted take-over of US energy company Unocal by the Chinese state oil company.

However, Russia and China have made a number of bilateral energy agreements and are planning to open their own oil and gas market exchanges to rival the US.

The world oil price peaked at around $80 per barrel last year but has now fallen back to $50-$60, still way above the $20 per barrel before the Iraq war started four years ago.

In the coming world economic slowdown or recession, the oil price is likely to fall further as energy demand falls, although probably not back to $20. However, any significant fall in the oil price below $50 a barrel will cause big economic and social problems for producer countries. It would also lead to another slump (as in the 1990s) in oil exploration and production (the economic viability of reserves is very much conditioned by the oil price) - paving the way for further shortages of supply and refining capacity later.

Would the leftist governments in Bolivia and Venezuela cut back on their social programmes for the poor or would they be forced into more radical policies of expropriation of capitalist interests?

Similarly, would Putin threaten to cut off western energy supplies if the west did not pay more for its gas and oil?

70% of Iran's state revenues comes from its oil exports so any fall in price would undermine President Ahmadinejad's already failing social promises and popular support. Saudi Arabia and the Gulf states too would face big social upheavals.

Whilst these would be the likely consequences of a fall in oil prices in the short term, in the longer run the price is likely to increase and could jump dramatically in response to internal crises.

The four biggest oilfields in the world (which account for 14% of world supplies) are all over 30 years old and in decline.

Saudi Arabia's Ghawar field, the world's largest, is over 50 years old and over half depleted (some observers say 90% depleted but the Saudi oil industry is shrouded in secrecy).

Daqing is the largest oil field in China and its major source of domestic oil; its decline will only make China even more desperate for imports. China is now the world's second biggest oil importer after the US, hence its deals with Iran, Sudan and Venezuela.

Last year, two senior US senators initiated a computerised simulation exercise called ShockWave to study the effects on the US economy if the oil price rose to $100 a barrel. Their inescapable conclusion was that it would lead to recession.

Many analysts believe that due to 'Peak Oil', prices could rise as high as $125-$150 a barrel. The Peak Oil theory is that a time will come when half the discovered and produced oil in the world has been consumed and after then the oil supply will decline. Some oil experts believe that time has already come, others that it may not be for another 30 years.

Either way, the reaction against neo-liberalism already evident in Latin America will spread to other continents as workers and poor people demand action against the super-profits of Big Oil.

There will be pressure from the masses for more windfall taxes and outright nationalisation.

The intensified rivalry between the declining and desperate US empire and energy-rich Russia and energy-hungry China will intensify, most immediately over Iran, and in Central Asia and Africa, leading to trade wars and further military conflicts.

As a consequence oil prices will become increasingly volatile, with falls and big rises, each with the potential to cause economic crises and social upheaval.

Just before the invasion of Iraq, media magnate Rupert Murdoch expressed his support for war to maintain oil prices at $20 a barrel and help sustain world economic growth (and his profits!). Like most things in his media, Murdoch got that one wrong and Iraq and oil will prove to be sources of world economic and political instability for years to come.

Oil & Poverty

In 1995, two Harvard development economists, Jefferey Sachs and Andrew Warner, produced a paper that suggested that the more dependent on the export of natural resources a country was, the worse its economy would perform. They called the phenomenon, the Resource Curse. Further research indicated that the problem appeared particularly acute for countries primarily dependent on oil exports.


Platform reports:
PLATFORM's work in this area has focused on the UK's Department for International Development (DFID) and its support for oil projects in developing countries. In 2005, PLATFORM Research produced Pumping Poverty, a report that detailed DFID's role in these projects and questioned the benefit that this support has brought to the poor in those countries. The assistance that DFID has given to these projects appears to benefit the UK's biggest oil corporations rather than the poor.

The impacts of the Oil Curse occur at the local, national, regional and global level. At all these levels it is the poor that bear the heaviest burden. These impacts include:

At a local level, oil production damages people’s livelihoods and health – through direct pollution, by threatening food production and water supplies, and through the spread of disease.

At a national level, there is a growing consensus among economists that the disruptive economic effects of oil investment act to drastically reduce growth and undermine the non-oil economy, as well as often leading to declining governance structures and a weakening of democracy.

At a regional level, oil is frequently associated with greater militarization and conflict –through disputes over the control and ownership of resources, through the use of revenues to purchase arms, and through the targeting of oil infrastructure by terrorists and other armed groups.

At a global level, fossil fuels are the primary cause of climate change, which threatens catastrophic damages including massive sea-level rise, rising incidences of flood, drought and other extreme events, major water and food supply reductions, and the spread of disease.

These impacts undermine the poverty alleviation goals of development aid.

Following the release of Pumping Poverty, our partners in Plan B launched a campaign to end UK development aid for oil.

American To Oversee Iraqi Oil Industry

The US is preparing to install an American chairman on a planned management team of the Iraqi oil industry, providing further ammunition to critics who have questioned the Bush administration's agenda in the Middle East.

The Guardian reports:
The administration is planning to structure the potentially vast Iraqi oil industry like a US corporation, with a chairman and chief executive and a 15-strong board of international advisers.

According to a report in the Wall Street Journal, it has lined up the former chief executive of the US division of Royal Dutch/Shell, Philip Carroll, to take the job of chairman.

Large scale decisions on investment, capital spending and production are likely to need the approval of the advisory board, which will act like a board of directors. The day-to-day management team will be vetted by US officials and is likely to be made up of existing and expatriate Iraqi oil officials.

The structure is likely to anger opponents of the administration who argue that the US is wielding too much power in Iraq.

By involving non-Iraqis, the US could also expose itself to the accusation that it is attempting to take control of the industry and open the door to foreign investment by major western oil companies - a perception the Bush administration is keen to avoid.

The Middle East has, since the early-to-mid-1970s, largely closed the door on foreign oil firms - but contracts have been awarded to engineering and construction firms such as Bechtel, which was recently handed a $600m (£380m) commission in Iraq by the US Agency for International Development.

US and Iraqi engineers have resumed modest oil production in the south of the country, in fields close to Basra.

The other major field in the north, near Kirkuk, has yet to be restarted, but is expected to begin pumping oil in the next few days. The Basra fields produced 60% of Iraq's pre-war production of around 2.5m barrels a day.

The US is pushing for an end to economic sanctions to allow the oil to be freely exported.

A handful of Iraqi oil officials have been attempting to restore some order to the country's energy infrastructure and have been meeting regularly with the US military in Baghdad. The US has been eager to get the cooperation of the skilled Iraqi oil administration, but an attempt to impose a structure on the industry with outside involvement could cause friction.

The oil minister in the ousted Saddam regime, Amer Mohammed Rasheed, is on the US's most-wanted list.

Iraq, with 112bn barrels of proven reserves, is second only to Saudi Arabia, and has the potential to become a superpower in the oil industry. Experts believe that with billions of dollars of investment in the nation's crippled infrastructure it could produce up to 6m barrels a day within five or six years. There are believed to be 200bn barrels of probable reserves.

The oil beginning to pump in Iraq is being used for domestic purposes. Once exports are up and running again, US and British officials have said the aim is to put the proceeds into a fund to pay for the reconstruction of Iraq. But details of the fund, including who would administer it, have been scant.

The new management team and part of the advisory board are expected to be named next week. The chief executive would play a similar role to the former oil minister and would represent Iraq at meetings of Opec, the organisation of oil exporting nations. The position of vice chairman is expected to be filled by Fadhil Othman, who led Iraq's oil marketing group before Saddam came to power 24 years ago.

Thamir Gadhban, a senior oil ministry official working to restore order to the industry in Baghdad, told the Journal that he expected the chief executive to come from the ranks of the existing hierarchy. "The Iraqi oil industry is not a new one, and there are experienced people in the ministry of oil and its organisations," he said.