Robert Kaplan has a book review up in the WSJ of “Crude World.”

A Gusher Of Trouble
Why nations rich in oil are often plagued by poverty and corruption.

By ROBERT D. KAPLAN

Just as there was the Bronze Age and the Iron Age, there is now the Oil Age, and we are living through its last waning decades. Juan Pablo Perez Alfonzo, a former Venezuelan oil minister who came up with the idea for a cartel in the 1960s, called oil the “devil’s excrement.” Peter Maass, in “Crude World,” a spare, engaging work of reporting and travel writing, calls oil “black oxygen.” It is a neat phrase because, as Mr. Maass demonstrates, oil is almost as essential to our lives as the air we breathe, yet its effect on the countries that produce it, and on the super-alpha males who run the oil industry, is quite sinister. This is a dark book, though not because Mr. Maass is a pessimist—he isn’t. It’s just that his itinerary (Equatorial Guinea, Nigeria, Russia, and other benighted locales) lends itself to deep foreboding about the human condition.

Oil corrupts, Mr. Maass says, because it is an “extractive” industry. The computer business and other industries actually design and produce something, but oil is simply taken out of the ground. Thus power lies in the hands of the king, dictator or prime minister who controls the real estate and with whom all sorts of unsavory deals can be struck. Extractive industries “do most of their business in compromise-inducing countries,” Mr. Maass explains. “The problem is not that extractive industries have lower principles than other industries. The problem is that they must have better principles”—something that shareholders do not necessarily encourage. Because the number of oil fields on the planet is finite, and the oil in many of them is difficult to extract, the industry is governed by a zero-sum and aggressive realism of the bleakest sort.

Read the rest.

Russia oil production overtakes Saudi Arabia
Russia is extracting more oil than Saudi Arabia, making it the biggest producer of “black gold” in the world, figures show.

The statistics, from the OPEC, reflect a trend that has seen the Russians periodically surpass the Saudis as the world’s biggest oil producers on and off since 2002.

These latest figures are being hailed in Russia as evidence that such periodic production spikes are not one-offs though and that Moscow really does have a right to lay claim to the No 1 spot.

According to OPEC, Russia extracted 9.236 million barrels of oil a day in June, 46,000 more than Saudi Arabia.

Russia has surpassed Saudi Arabia in energy exports for years, thanks to its large exports of natural gas. Now it even surpasses Saudi Arabia in terms of oil exports alone.

The BBC has Cuba finding 20 billion barrels offshore.

Background:

Cuba has suffered from blackouts countrywise since 2004. Last year, high metal prices have boosted Cuban revenue from nickel and Cobalt. Due to ongoing electricity shortages, the government has continued to invest in the energy sector. Cuba currently produces about 58,300 barrels of oil a day and consumes 150,000 a day. It acquires the remainder largely through Venezuela. As of January 2007, its proven oil reserves were 242 million barrels. The United States Geological Survey estimated in the past that Cuba holds reserves of 4.6 billion barrels of oil, and 9.8 trillion cubic feet of natural gas in its Gulf of Mexico waters. today, the USGS estimates that as much as 9bn barrels of oil and 21 trillion cubic feet of natural gas could lie in the North Cuba Basin. Currently, Canadian and Chinese companies are drilling in Cuba.

Story:

The state-owned Cuban oil company says the country may have more than 20bn barrels of oil in its offshore fields – more than double the previous estimate. Cubapetroleo’s exploration manager said drilling in the offshore wells would begin as early as the middle of 2009. Such reserves would place Cuba among the top 20 oil producing nations.

Cubapetroleo’s estimates are based on comparisons to known oil reserves found within similar geological structures off the coasts of the US and Mexico. The company said Cuba had undersea geology “very similar” to that surrounding Mexico’s giant Cantarell and Poza Rica oil fields in the Bay of Campeche.

Commentary & Analysis:

Despite currently declining oil prices, this recent find, if proven, will be both a financial and political boost for the current regime. This development is another reason the U.S. should finally pursue detent with Cuba and normalize relations. Cuba would potentially provide a stable, cheap and nearby source of energy to the United States. Additionally, Cuban revenue would be reinvested in infrastructure and development which would come at least partially through U.S. firms. If the US can buy oil from unsavory characters like Saudi Arabia, Venezuela and Nigeria, little ole Cuba can hardly be held up as worse.

Libya is no longer listed as a sponsor of terrorism by the US, but don’t forget that Libya remains a dictatorship ruled at the pleasure of Moammar Gadhafi. Just Wednesday, Libya’s state-owned oil company Tamoil said that it stopped all crude deliveries to Switzerland. Libya supplies about a fifth of all the petroleum used in Switzerland.

The same thing happened in July. The reason? A dispute over the arrest of Hannibal Gadhafi, Moammar Gadhafi’s son, at a luxury hotel in Geneva on suspicion of beating two of his servants. Gadhafi Jr. was released on bail three days later and returned to Libya with his wife, but the episode prompted a series of diplomatic recriminations that included Libya recalling some of its diplomats from Switzerland, suspending the issuing of visas for Swiss citizens, reducing the number of flights to Switzerland and detaining two Swiss nationals. The two were later released on bail but ordered to stay in Libya.

Is Switzerland in trouble? Not quite.

“It’s annoying, but the delivery stop won’t cause fundamental problems for Switzerland’s oil supply,” said Rolf Hartl, managing director of the Swiss Petroleum Association, noting that Swiss petroleum buyers would switch to other suppliers if Tamoil runs out of stock.

“In the end it’s an economic own-goal because the only ones who suffer will be Tamoil, which is owned by Libya,” Hartl said. “Sooner or later all parties have an interest in returning to business as usual.”

Thanks to Dr. A. R. Wallace for passing on the AP story.

No, I’m not talking about the Olympics. Angola recently beat out Nigeria to become Africa’s largest oil producer, exceeding its 1.9 million barrel a day OPEC quota.

Angola shows that, while mega producers such as Saudi Arabia cannot meet the expectations of a decade ago, a number of other potential producers such as Angola, Chad, Brazil, and elsewhere have the capacity to produce with the right technology and investment.

1974: 172,000 barrels per day
1991: 490,000 barrels per day
1995: 635,000 barrels per day
2001: 800,000 barrels per day
2006: 1,460,000 barrels per day
2008: 1,970,000 barrels per day (approximately, expected)

Nigeria is meanwhile struggling to meet its monthly OPEC commitment following repeated attacks on its oil infrastructure by militants which has suspended—hopefully temporarily—output from some of its major fields.

Almost all of Angola’s oil is exported to the United States.

In the novel World Made By Hand, authour James Howard Kunstler (interviewed here by Stephen Colbert) argues that American daily life will change drastically when the oil runs out. He sees no future for the city infrastructure that has grown up around the popularization of cars (ie. suburbs), and is pessimistic about the industrial economic infrastructure that depends so much on transcontinental shipping.

When oil becomes too scarce, America collapses into 18th century-esque plantations, and a dystopian culture one reviewer describes as:

[an] uneasy Darwinian jostling, local warlordism and gangsterish Machiavellian counterpunching among various ugly power cells, with a bunch of religion leavening the stink, er … the stew.

I submit that an alternative infrastructure is already being put into place that will take over more and more from the hydrocarbon-based economic infrastructure. This burgeoning infrastructure is already helping to relieve the burden on the industrial infrastructure as well as maintain the cultural infrastructure. More and more the networks tying the national economy together are based on communications technology, particularly wireless communications. I have talked previously about WiMax and Africa. Once these technologies become widespread in industrial nations as well (hopefully before the post-oil collapse of civilization), they will be leveraged to maintain communications networks accessible even to the lowliest plantation owner. This network has an economic impact that we can already see.

For example, more and more economic consumption takes place in bits and bytes. Between the iTunes Store and Amazon’s Kindle (which I would own if I were in the US), my personal carbon imprint has been drastically cut, whereas my consumption (and thereby contribution to the economy) has actually increased due to the convenience of the devices. The megastores and malls of suburbia are no sanctuary to the digital consumer.

Note that I don’t think that ICT will solve the problem of oil demand and scarcity. Obviously food, clothing and other physical objects will have to be shipped or made (in “resilient” communities?) for consumption in alternative ways, possibly as described in the book. My argument is that more digital consumption will help soften the “shock” of Kunstler’s future scenario. Rather than isolated plantation fiefdoms scattered randomly about the countryside, imagine a post-modern collection of tightly networked communities, openly sharing information to survive and coordinate a loose, “international” economy.

DISCLAIMER: I have not read the book myself, so forgive me if something like this appears in Kunstler’s writing. If anyone has read the book we would like to hear from you in the comments.

With the current primaries and upcoming presidential election, on top of rising oil prices, one favorite phrase of candidates and media outlets is energy dependence and energy independence. Yet, outside of buzz words, how dependent is the US on foreign producers? In fact, since energy independence is secret code for independent of the Middle East, just how much of the US’s oil imports come from that region?

Take 30 seconds and make a mental list of your guesses for the top 15 crude oil importers into the US.

Read the rest of this entry »

I was just checking out the wikipedia article for the “Great Game“, a phrase coined ala-”World War II” to describe a series of political and military events and which all the namesakes to this blog were contributors. In the article, I saw this sub-section:

New Great Game
Main article: New Great Game

With the end of the Second World War and the beginning of the Cold War, the United States displaced Britain as the global power, asserting its influence in the Middle East in pursuit of oil, containment of the Soviet Union, and access to other resources…

The New Great Game? That phrase has been thrown around for years to describe the Cold War, the post-Cold War 1990s, the current exploration of resources in the Middle East, but how does it warrant it’s own article? Clicking the main article I found this priceless content:

The New Great Game is a current competition between the United States, Russia, China, Iran, Turkey, India, and Pakistan to secure reliable long-term sources of petroleum and natural gas through the construction of oil pipelines in the post-Soviet nations of Central Asia. The term was coined by Pakistani journalist Ahmed Rashid in reference to the original Great Game between the British Empire and the Russian Empire for strategic supremacy in Central Asia in the 19th and early 20th century.

And so begins a blog post posing as a wikipedia article. After this opening it goes on for pages, breaking out a Risk-style categorization of allies and neutrals, balancing interests, and an inexplicable temporal breakdown into three “phases.”

At this point it has been edited by dozens of editors and contributors, but examining the history of the article you can see how the kernel of this nonsense was first written by a now-deleted user “RoyalDutchEmpire,” and the bulk of the current nonsense was written by another now-retired wikipedia contributor KazakhPol (most edits since have been minor and grammatical). Both these contributors noted the primary inspiration for the article as “The New Great Game: Blood and Oil in Central Asia” written by Lutz Kleveman. And that’s how a random opinion becomes a complete wikipedia article.

As for the CA view on Mr. Kleveman, to quote Younghusband from 2003 before this blog was started and when discussions of this nature were limited to email:

I think Lutz is a putz with an axe to grind.

First he steals Ahmed Rashid’s idea for the title of his book, and then he goes all imperial in a region that has floundered for the past few years. There is a lot of geopolitical posturing etc in Central Asia, but it is not as significant as the original Great Game…

In my opinion Lutz is just being alarmaleftist. Washington has started “waiting” in the Caspian region for the last couple of years.

If I had more time I’d nominate this blog-style essay posing as a real article for deletion. As it happens I’ve just made a note in the discussion section.

With so much talk about energy and so much focus on the US, here’s a short overview of the situation in Germany. Being at the forefront of alternative energy and in fact the largest producer and user of it, does not mean Germany isn’t largely dependent on oil. About 12% of its overall needs comes from nuclear power and another 5% from renewable sources. The rest is imported.

Interestingly, in 1991 Germany passed the Renewable Energy Sources Act which allowed producers of renewable energy to sell it back to the grid at fixed rates. This includes individuals so that a household with solar panels (or even small wind generators) can sell excess energy back to energy companies at a fixed and above-market price. By reducing the risk in investing in new energy sources and technologies, Germany has become a, if not the, leader in renewable energy. A similar and more recent law was passed in 2004, the details of which I won’t get into If interested, you can read an official summary in English here.

On October 17, 1973, members of Organization of Arab Petroleum Exporting Countries chose to embargo the United States, Western Europe and Japan for their support of Israel in the Yom Kippur War. Both the United States and Japan responded by looking into alternative energy sources and improving energy efficiency. However, while Americans quickly forgot the lessons of 1973, the Japanese did not. As Peter Schwartz notes (p145)

In 1973, the United States and Japan were hit with the same challenge: a quadrupling of oil prices. The United States responded with a winners and losers scenario in which it was, it eflt, the winner. “This is temporary, we will surely will,” said American policymakers. “We don’t need to worry about it.” Within a year, the United States was importing half its oil. Japan responded instead by completely rebuilding its capital structure to become the most energy-efficient economy in the world.

Americans still saw environmentalism as zero-sum. You could either have economic growth and prosperity, or more environmentally friendly policies, but not both. This is why we are still struggling with what the Japanese figured out over three decades ago.

Today, while Americans are beginning to realize that environmentalism isn’t zero-sum, we are polarized in another crucial national security debate: terrorism. You can either fight terrorists and failed states with force and be safe, or you can avoid force and be overrun by jihadis and rogues.

Americans once thought “sustainable development” was a contradiction. Economic growth and environmental quality couldn’t go together. Yet, we’ve learned they can. What will be our “sustainable counter-terrorism” ?