Archive for June, 2010


light blogging this week

June 22, 2010

I am finishing a paper for the ISA-West conference in September.  I will publish the paper, “Energy Hegemony, Petro-Mercantilism, and a Global Oil Public Good: Three Models for Petroleum Markets in the Early 21st Century,” on this blog after the conference.


Green Oil?

June 17, 2010

National Review columnist Jonah Goldberg published a column yesterday comparing the environmental effects of petroleum to some other “green” energy sources, especially contrasting the mounting Deepwater Horizon damage in the Gulf of Mexico to the permanent “dead zone” in the same Gulf caused by agricultural runoff.

Goldberg very well could have mentioned bird deaths, as well.  Oil soaked pelicans are now staples of televised coverage of the spill, and the numbers of birds that will die as a result of this disaster will probably number in the hundreds of thousands, at least (an estimated 500K perished as a result of the Exxon Valdez spill).  Wind energy advocates downplay the number of birds killed by wind turbines (and the annual number is nowhere near as large as what will be lost in this event), but remember that we will be ramping up wind capacity by an order of magnitude, so the number of bird deaths will also increase.  And, the big killer associated with wind – as it will be with solar and as it already is with other means of generating power – is transmission lines.  Estimates are that as many as 174 million birds per year are killed by US transmission lines – some by collision while flying, some by touching their wings to two lines at the same time.

The point is that we live in an energy intensive society, and there is no way (short of the type of self-induced human extinction envisioned by radicals like Peter Singer) to avoid this kind of impact on our environment.  Whatever the means of generating power, modern society will always be a target rich environment for those looking for Green Issues on which to hoist their flag.

But, oil and fossil fuels can be greener than they are.  There are other non-conventional sources beyond deepwater offshore pockets that will be cleaner (if not easier and cheaper, at least initially), such as tar sands or shale oil.   If we couple exploitation of these resources with tightened environmental regulations, we can have both a cleaner environment and energy independence.

As a nation, the last thing we want is independence from oil and coal.  We want energy security, which is not the same thing.  The ascent of the US as a world power was made on the vast quantities of oil and coal with which our nation is blessed, and those same resources are the key to maintaining – and even extending – that position in the future.  “The World is Awash in Oil” is a recurring theme on this blog; I even posted on this topic yesterday, at roughly the same time Goldberg published his discourse.   To beat the drum yet again:  While we may be ending the end of the First Age of Oil (“cheap oil” that is easy to find and pump), we are approaching a Second Age of Oil – the Shale Age – in which oil will be more expensive, but it will also (with new technologies) burn more cleanly.  And, once again, the US with its vast reserves will dominate this age as well.  It won’t be tomorrow or next year, but when shale oil extraction matches the current shale gas extraction, the US will find its trade deficit suddenly turned upside down – not only will the hundreds of billions of dollars currently sent offshore for imported oil be retained, but additional hundreds of billions will be earned through the exportation of our own excess capacity.  Over the course of a couple of decades, trillions of dollars of federal revenues from leases and taxes will reduce and possibly eliminate the government debt.

The environmental costs must be addressed through technology and some sort of carbon accounting scheme, but the hard core anti-oil crowd has to be fought on this issue.  Fossil fuels are the path to a bright future and a new American century.


Why Deepwater Horizon does not mark the end of oil

June 16, 2010

Many commentators have been peddling the idea that the unfolding disaster in the Gulf of Mexico represents the “end of oil;” that is, the point in time at which worldwide dependence on oil will begin to recede.  The argument is that this spill paints in the starkest possible relief the tremendous environmental costs of our reliance on fossil fuels in general and on oil in particular.  People will recoil at the images before them and,  not only will they demand cleaner and safer energy technologies, but they will actually make the sacrifices necessary to accommodate the less efficient and more expensive renewable sources currently available.

It is on this second point that the argument falls down.   Although most of it takes place behind the scenes and out of the notice of most people, modern society is highly energy intensive.  Current iterations of non-hydro renewable energy technology is completely unable to step into left by any meaningful decline in petroleum use.  I find it not simply unlikely, but rather completely unfathomable that sufficient numbers of Westerners in general and Americans in particular will sacrifice their modern conveniences when there are other options available.  And, there are myriad other options available.

I do think that Deepwater Horizon marks the end of deep offshore drilling and exploration in US waters for the foreseeable future (I do think deep water exploration and exploitation will continue elsewhere – Brazil will not forego their own massive offshore finds, now will the British cease their drive to exploit the recent discoveries off the Falklands Islands, for example).  However, the US will not turn away from oil altogether, and not even from unconventional oil.  The big immediate winner will be the Alberta oil sands, already set to become the top source of US oil imports this year.  Over a longer time frame, the shale oil formations in the American West will gain from an increased focus on making their exploitation economical.  I firmly believe that within the next two decades, shale oil will be the major source of US oil, and Deepwater Horizon will only push that timeline up.


BP’s double failure

June 11, 2010

Failure to safely drill, and failure to admit their culpability.

Terry Barr, the president of Samson Oil and Gas, has written a devastating letter to the editor, published in today’s Wall Street Journal.  Barr lays out a very detailed case for human failure on the part of BP.  Read the whole thing


Cracks in the SCO edifice?

June 11, 2010

Bruce Pannier, writing for RFE/RL, notes that beneath the smiling surface at the annual meeting of Shanghai Cooperation Organization heads of state this week, the natural competition between Russia and China is gaining strength.

Although the SCO was formed to reduce tensions in Central Asia – especially between Russia and China – each nation still considers the energy rich  region to be their natural back yard, and each continues the quest for influence and access among the various nations their.  However, as long as the United States has basing rights in some of those nations and has tens of thousands of combat troops in the region, Russia and China will continue to play nice.  If, on the other hand, Afghanistan is deemed stable and the US begins to exit the region in 2011 as the Obama Administration plans,  then the Russo/Sino rivalry will be made more manifest.  The SCO itself could be an early casualty, as since the 1996 founding of the SCO, the Russians formed in 2002 a parallel network in the region, the Collective Security Treaty Organization (CSTO), which is more explicitly a military/security alliance.  Also, the CSTO has recently developed an official relationship with the United Nations, which grants it additional cache that the SCO lacks.

When (if) the US vacates the region, it will be interesting to see how the balance of power between the local powers shifts.


Finally . . . large scale CCS demonstration projects to begin

June 10, 2010

Three sites were selected last year, but the Department of Energy finally announced today that the projects are about to get underway.

The commitment to CCS was one of the things that I was most hopeful for in the Obama administration, but like so many of his promises, it has largely gone unfulfilled to this point.


On the lighter side: the Geopolitics of College Athletics

June 10, 2010

With the news that Nebraska is about to accept an invitation to join the Big 10(11) conference, and that the Pac 10 is about to poach as many as 6 other Big XII schools, the landscape of college athletics is about to undergo radical change.  The Big XII conference is made up of the old Big 8 plus four Texas schools that conference acquired when they themselves raided the old Southwest Conference in the 90s  – what goes around comes around.

Many suspect that the Big 10 will not stop with Nebraska, but that they will expand further.  If the Pac 10 goes to the Pac 16, the Big 10 may follow suit and become the Big 16.  That would leave the SEC and the ACC to follow suit.  We could see the college sports world evolve into four super conferences of 16 teams each.  These conferences could then separate themselves from the NCAA and keep all the revenue that their big time athletics programs generate to themselves.  I wouldn’t be surprised if, freed from the NCAA’s antiquated belief in the amateurism of “student athletes,” they didn’t implement a basic wage scale to pay their athletes.

The problem is, in the current formulation, the “Major Conferences” are considered to be the six conferences that are automatic qualifiers for football’s Bowl Championship Series.  The six BCS conferences are:  Big 10, Big XII, ACC, SEC, Pac 10 and Big East.  There are a total of 66 “major conference” schools in these six affiliations.  If conference reorganization leads to four 16 team conferences, then two “major” schools are going to be left standing when the music stops playing.  It will be a death knell, not only for two conferences (probably the Big XII and the Big East), but also for the athletic programs of those two “leftover” schools.  Who will they be?

This is just 100% pure guesswork, but I wouldn’t be surprised if it doesn’t end up looking something like this at the end of the summer:

Big 16:  Current Big 10(11) plus Nebraska, Notre Dame, Syracuse and Rutgers.  That takes them to 15 with one spot left open

Pac 16:  Current ten schools plus Texas, Texas A&M, Texas Tech, Oklahoma, Oklahoma St. and Colorado

SEC:  Current twelve schools plus Baylor, Kansas, Kansas St. and Missouri

ACC:  Current twelve schools plus Pittsburgh, Connecticut, West Virginia and Louisville.

There may be some mixing and matching here.  Perhaps the Big 16 instead takes Pitt, and Syracuse goes to the ACC, but something like this could be the basic framework.  That leaves three teams without a home:  Cincinnati and South Florida from the Big East, and Iowa State from the Big XII.  In the last round of conference expansion, Syracuse was tagged to join Boston College and Miami in the ACC.  However, the governor of Virginia stepped in and insisted that Virginia Tech replace Syracuse, or else the University of Virginia would balk at the entire scheme.  I think something similar will happen here, and Iowa politics will insist that Iowa State be salvaged and paired with the University of Iowa.  That would leave Cincinnati and South Florida as the odd schools out.

UPDATEA Syracuse fan suggests five conferences of 16 teams that solves the problems of the two BCS orphans, plus the best of the non-BCS schools.  The problem with is is that it complicates the football playoff system.  With 4 conferences, the conference title games get incorporated into the playoff system – the top two in each conference meet, with the winners advancing to a 2 round playoff.    With five conferences, you have to introduce wild card teams into a 3 round playoff, which means that some conference title game loser is going to get a 2nd bite at the apple.  It is more likely that the 4 super conferences would expand to 18 or 20 teams each, IMHO.

However it works out, the strongest reason (for me personally) to root on the relentless destruction of these old conferences is the ability to leave the NCAA and the veneer of amateurism behind and to begin paying the athletes.  Many other outside observers agree that players should be financially compensated.  If that is really what you want, then you should welcome the coming Age of the Super Conferences.