Energy Is Still Key Driving Force In International Politics And Trade

Picture 16First, China warned us to not protect our industries or stop the flood of imports pouring into the US.  Now, Saudi Arabia warns us to not even think of trying for energy independence.  How far we have fallen since Jimmy Carter tried this!  Also, there is a lot of online hysteria that the Cantrell oil fields will fail by next year.  This matter is more complicated than it appears at first glance.  And Canada is set to expand gas production.  

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Why Barack Obama’s energy-dependence talk is just demagoguery – By Prince Turki al-Faisal | Foreign Policy

“Energy independence” has become a byword on the American political scene, and invoking it is now as essential as baby-kissing. All the recent U.S. presidential candidates employed it, and to this day, the White House Web site lists as a guiding principle the need to “curb our dependence on fossil fuels and make America energy independent.” Expect a whole new round of such rhetoric when the global economic recovery begins, and with it, higher oil prices return…. .

….Saudi Arabia holds about 25 percent of the world’s proven oil reserves, is by far the largest exporter of oil, and maintains the largest spare production capacity in the world. U.S. oil production started to decline in 1970, while U.S. energy needs have skyrocketed since that time, and the United States is now the world’s largest oil consumer. There is no technology on the horizon that can completely replace oil as the fuel for the United States’ massive manufacturing, transportation, and military needs; any future, no matter how wishful, will include a mix of renewable and nonrenewable fuels. .

Considering this, efforts spent proselytizing about energy independence should instead focus on acknowledging energy interdependence. Like it or not, the fates of the United States and Saudi Arabia are connected and will remain so for decades to come. This realization need not strike fear into the hearts and pocketbooks of Americans. Saudi Arabia has a long record of specific actions that prove its strong commitment to providing the world with stable energy supplies.

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We have consistently pushed for lower prices than any other OPEC members have, and we sharply increased supplies after the Iranian Revolution, during the first Gulf War to replace the loss of Iraqi production, and immediately after the Sept. 11, 2001, terrorist attacks — all in order to calm jittery global markets.

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The Saudis have us on the hook.  On 9/11 and for several days afterwards, absolutely no one in the US was allowed to fly on jets...EXCEPT for the Saudi royals and the bin Laden clan!  This fact still is quite astonishing.  There are two forces at work in the Middle East: Israel working through AIPAC, pulls Congress and our Presidents in one direction and the Saudi Royals and their fellow oil sheik buddies, pull us in yet another direction.

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 This is where the guy called 'Osama bin Laden' has inserted himself.  He seeks to overthrow the rulers of Saudi Arabia.  His war with the allies of his clan has been raging for almost 20 years now.  The Saudi Royals are not popular at home. When one of them dares to threaten us, if we disengage ourselves from Saudi oil, this warning is read carefully by the revolutionaries seeking to destroy the royal family.

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 In this assertive editorial, the Prince admits, he and his family have depressed the world price of oil.  Now, many of the people in Saudi Arabia want expensive oil exports because they live in this queer socialist-welfare state that is also very regressive and repressive.  There is a lot of anger, a tremendous amount of anger over the Saudi royals selling off this natural resource at a very cheap price!
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Saudi Arabia is a very restive place. We tend to get very little news from there but this is due entirely to it being a very, very repressive society.  So problems seethe below the surface.  The US delights in news that Iran seethes with unrest.  Which is cruelly suppressed.  But the ongoing suppressions in Saudi Arabia are studiously ignored.  By the way, more soldiers of the US/UK occupation/invasion forces were blown away this week, the death toll is rising rapidly and more bombs are blowing up hunks of the cities we claim, we have 'pacified'.  
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One of the readers here mentioned in the comments section that 'Cantrell is going to run out of oil by next year.'  As per usual, I go hiking around the web to track down this rumor.  This is an interesting story, of course, nor is it as simple as some people imagine:
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 Mexico's Declining Oil Production: Clarion Call for Cantarell -- Seeking Alpha
The eighth largest oil field in the world will be dead by the end of next year. Shall I repeat that, or did you get it the first time? Like the Time to Die Speech of Rutger Hauer at the end of Blade Runner, the Cantarell complex has surely seen its share of ocean storms, human hopes, and stars since its discovery by a humble fisherman in 1976. If you’re wondering whether that fisherman has a name, the man who saw oil floating on the surface of the ocean as he gathered his nets, the answer is yes: Rudesindo Cantarell.
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Ah, the sound of the Apocalypse!  A number of writers like to do this to everyone.  That is, spread panic and fear.  Now, I have been accused of this, too.  But I try very hard to cover all bases which is why I am never popular with anyone. People like one way streets and single-minded analysis.  Makes life simple.  But life is not simple!  It has subtle sides, too.  For example, all the major oil fields are being drained rapidly.  This is due to the natural dynamics of exploitation of resources: everyone always does this as fast as possible.
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I know for a fact that my dad discussed the concept of the Hubbert Oil Peak with the former king of Saudi Arabia, King Faisal.  Unfortunately, the king was assassinated shortly afterwards.  This is how real events work: part of the State Department/CIA wanted to preserve the Saudi oil fields so they would be available after other places went into decline.  But the oil pumping corporations wanted to exploit the Saudi oil at their own leisure.  And on top of all this, the people of America were stunned to discover, our own oil production was falling...forever! 
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We were past the Hubbert Oil Peak and on the relentless decline.  The king of Saudi Arabia was so interested in the future decline of oil, he signed on to invest in the development of solar energy systems.  'One thing your kingdom will not run out of is sunshine,' my father said.  China is also ultimately interested in solar energy systems and is prepared to totally dominate manufacturing of solar systems.  Saudi Arabia lacks something that the Chinese have in spades: a strong work ethic.  This is why Saudi Arabia and the oil sheik kingdoms have basically settled into a very passive mode.  All the building there is done by foreigners, with the Saudis who are part of the organizations being used basically as window dressing.  
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Mexico and Canada are major, major fossil fuel suppliers for the US.  The decline in Mexican oil forces the US to go further afield for oil.  The decline in the Cantarell field may be partially responsible for oil prices rising to $70 a barrel (just 10 years ago, it was below $30 a barrel!).  I decided to visit the news media south of the border to see what they are saying about the Cantarell fields:

Latin American Herald Tribune - Pemex Says Investment Up 39 Percent Over Last Year
MEXICO CITY – State-owned Petroleos Mexicanos invested some 110.5 billion pesos ($8.49 billion) in the first half of 2009, an increase of 38.6 percent relative to the same period of last year, the company said in a press release Wednesday.

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Pemex, citing a report from the finance ministry, said in a statement that its “physical investment” amounted to 103.7 billion pesos ($7.96 billion).

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Of the total amount invested, 32.5 percent corresponded to the development of fields and 18.1 percent to maintenance, up 63 percent and 44 percent, respectively, compared with January-June 2008. Oil exploration costs, meanwhile, accounted for 11.8 percent of the total.

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Among its main investment projects during the year’s first six months, Pemex cited the drilling of exploratory and production wells in the Burgos basin of northern Mexico; the development of new natural gas fields; and the further development of the country’s largest oil deposit, Ku-Maloob-Zaap, which is located off Mexico’s southeastern coast in the Bay of Campeche....
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....Mexico’s oil production declined by 9.2 percent last year to just under 2.8 million barrels per day. The fall was mainly due to the continuing gradual depletion of Cantarell and to Hurricane Ike, which disrupted production at offshore platforms in the Gulf of Mexico.
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Calderon last year sought to push a controversial plan through Congress to overhaul Pemex, including allowing the cash-strapped company to take on private oil firms as full partners in the exploration and drilling of new deepwater deposits in the Gulf of Mexico.

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But leftist lawmakers fiercely opposed the initial bill, claiming that the aim of the government was to privatize Pemex, created after President Lazaro Cardenas’ nationalization of the oil industry in 1938.  After months of debate, a revised bill was passed that gives Pemex more freedom to undertake projects with private firms, but excludes the provisions of Calderon’s original initiative that would have allowed them a stake in the oil or any eventual profits. EFE

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 So, the problem seems to be technical: Permex is trapped in a sort of hostage situation.  That is, it was nationalized and is prone to many unfortunate things such as underfunding the development and control of the fields as well as political corruption (which is endemic to the Saudi system, by the way) and in general, the system isn't able to tap into recent technological advances in oil pumping.  So the field is rapidly declining due to the aging system being used.
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Of course, this is also a sign of a system being depleted!  But eventually, the government of Mexico will be forced to yield to the big oil corporations and get financing and help from them.  But watch out!  It might not be American oil corporations!  Or European, for that matter!  First, we turn to the natural gas industry for this week's news about energy systems:
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Record Oil-Gas Price Ratio May Be Set to Narrow: Chart of Day - Bloomberg.com

The ratio has more than tripled this year amid a 67 percent increase in crude prices, bolstered by speculation that Chinese demand will climb. Gas prices have fallen 48 percent on reduced demand from industrial companies and the start of production at new U.S. fields. . “History clearly suggests that the price gap will eventually narrow, through some combination of oil prices falling and natural-gas prices rising,” Donald Marron, a former member of the Council of Economic Advisers, wrote in an Aug. 21 posting on his blog.
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What Bloomberg news is suggesting is that natural gas prices will force down oil prices. We are still poised on the peak of easy energy exploitation.  This is temporary. But the time to panic isn't here...YET.  Naturally, we should be redesigning all our systems so they are more functional and self-sustaining.  This means, not listening to the Saudi prince's snarls.  Ahem.
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Canada has national health insurance and a big trade surplus with the US.  We have to work out with the Canadians, how we intend to balance things out.  Right now, they simply accept our paper IOU money and then palm this off to the Asians.
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The big drill
What energy crisis? Despite what you may be hearing about a global peak in oil production, waning reserves, and $100-plus oil prices, North America is suddenly awash in fossil fuel.

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Sophisticated new drilling methods and a shared epiphany among exploration companies about the vast potential for new natural gas production from deep underground shale deposits have overturned decades of gloom about waning gas supplies.

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“Natural gas will displace coal. It will displace oil,” said Mike Graham, Canadian foothills division president for Calgary-based gas giant EnCana. “There is no reason North America shouldn’t be energy self-sufficient if we can displace a lot of the oil with natural gas.”  British Columbia is emerging as a major player in this new enterprise.
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I didn't know this news until I searched for it!  And this is what ails many doom and gloom sites: they don't dig around to see if there is some alternative news that balances things out again.  So, Canada can look forwards towards some very interesting leverage opportunities vis a vis the US.  Especially if Mexico's oil is unavailable.  And what if Mexico's government votes to have Asians develop their declining oil fields?  This is quite likely, not unlikely!
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Daewoo to transport Burmese gas to China - Times Online
A consortium of South Korean and Indian companies is to invest $5.6 billion (£3.4 billion) in producing natural gas in Burma for export by pipeline to China.

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Led by Daewoo International, the South Korean conglomerate, the consortium has agreed to supply China National Petroleum Corporation with the output of a giant Burmese gasfield for 30 years, a deal that underlines the increasing influence and importance of China to the economy of Burma, the impoverished and isolated state on its southwestern border.
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As well as Daewoo, which owns 51 per cent, the consortium includes ONGC, India's state oil company, and GAIL, India's state gas company, as well as Korea Gas and MOGE, the Burmese state oil and gas company.

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The manufacturing nations of Asia are prospecting for oil, big time.  They intend to go all over the place, seeking deals.  The US media and political pundits have spent quite a while, bashing Burma.  The government there is nutty as all hell.  Vicious and nasty.  But they are selling something the other Asian powers desire.  So, they overlook the human rights issue….EXACTLY AS THE US DOES WITH DESPOTIC RULERS IN SAUDI ARABIA!  And that is how the world conducts business: rather amoral.

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World energy systems are being sold off to the highest bidders and the US can’t simply make endless trillions out of thin air via Bernanke’s magic wand waving.  We can’t do this and buy oil.  Unless we want the oil to shoot up to $200 a barrel due to the dollar losing much of its value.  After all, the yen is 94 to the dollar which is far too strong for Japan’s Total Export Economy!  They want it to be 120 yen to the dollar.  But first, we have to make the dollar scarcer.  And that just is not happening at all.  More about that tomorrow.

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11 Comments

Filed under energy

11 responses to “Energy Is Still Key Driving Force In International Politics And Trade

  1. nah

    Burma… i know a chick that works with me from burma… says the japs would throw babies in the air to land on their swords ‘not a big japanese fan’…. and the modern burmese government is like totally out of SG1 like with rangoon or whatever the myanmar government military dynasty is drawn from… the dollar is a crack pot, but theres alot of ‘patents’ in there, just look at our gunships, our business is not just loosing afghanistan or iraq or whatever, its a nation of politics, risk, fucking capitalism, and more freedom by the day ‘i truly think so’…
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    personally i see the US in transition… paper money is a strange technology of needs, but still it surpasses all ideologys of unitary human success… capitalism is what is truly fascinating, risk,reward,income,outflows,debt,crisis, 10,000 points of light… of the nation, of the motion of human thought…
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    our transition to a ‘favorable’ modern international body of equals is filled with nearly 200 countries ‘most of which are dead beets’… nothing is easy, less so vanity and energy
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    i dont buy we are running out of oil in 10yrs ‘maybe 100’ its just not supported in price… theres alot of people holding out for higher prices and thats all it is… tier 2 who can make money but want to milk tier 1 for all its worth…
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    nuke the shale till it plasmas for christ

  2. Humans are one big loony bin. I’d say that about sums it up.

  3. w.c.

    oil is in a peak condition .. the mexican oil field will be close to running on empty in months ..

    wars and the hunt for this oil .. will drive prices higher as will the monetary infusion and debasing of curriencies

    the militarys of the world will have first dibs on the supply.

    we have experts studying this … folks who have spent theri lives working in the energy area..

    what a few weeks supply .. when the china area sells more cars than the usa .. all the biproducts of the oil use..

    emc is spot on right about this ,, on target,,

  4. w.c.

    sharkbabe

    yep another human lol

  5. RobG

    I’ve been an avid reader of TheOilDrum and PeakOil.com. My understanding is that Cantarell is declining, true. But Mexico (Pemex) has anticipated this and has been shifting investment to other areas. Cantarell was a unique ideal oil reservoir. Like an upside down cup or cone (I think from a volcanic formation) and a super giant field, it could produce lots of oil and quickly without damage. Of course now it is depleting and there is just nothing to be done. In a disperse field they do horizontal drilling, water and NO2 injection, etc. But that doesn’t help in this case. So be careful about the statement Catarell is declining – that is because Pemex has shifted drilling and exploration elsewhere. And further, I don’t think they are on schedule to replace the production from Cantarell.

    ΩΩΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: You are probably correct. All the major fields will be depleted in the next 25 years. This is why China is already making moves to do other things, after cornering the oil markets using capital they accumulated (US dollars).

  6. JSmith

    “Energy Is Still Key Driving Force In International Politics”

    Indeed it is. Did you notice recently that Scotland released that chap who was serving a stretch for the Lockerbie plane bombing (purely for “humanitarian” reasons, you understand)?

    So this fellow goes home to Libya, where he receives a hero’s welcome. Meanwhile… there are allegations that this was part of a back-channel deal to get on Libya’s good side – and just possibly, some influence from Whitehall was involved in the release.

    My view? Britain wants a reliable supplier of energy this winter. Russia is NOT a reliable supplier, as all Europe knows. Consequently, the Brits would like to do some oil and gas deals with Libya so they can tell Poots to go pound sand.

  7. emsnews

    Yup, Europe will make many deals with many devils. They are trapped. The English North Sea Oil pumping is in deep trouble. It ran out much faster than expected.

  8. Exchell

    Lockerbie… the hand of the CIA appeared to be guiding matters behind the scenes.
    A leaked letter from Downing Street to the Libyan leader makes clear that Al-Megrahi’s homecoming has been brewing ever since the G8 summit held in Italy early in July. The question is would Gordon Brown really give in to the release of a ruthless convicted terrorist just for supplier of energy? Well, he might if he had a suspicion that Al-Megrahi’s conviction was unsafe and feared the upcoming appeal would turn out to be an embarrassment.

    Last October, the Scottish Criminal Cases Review Commission announced that “a miscarriage of justice may have occurred and identified six grounds for an appeal.
    A key piece of the prosecution’s material evidence is believed to be a fake after Ulrich Lumpert, a Swiss engineer, admitted that he lied about its origins.
    Tony Gauci, a Maltese shopkeeper, who said he recognized Al-Megrahi as the man who bought clothing in his shop, fragments of which were later found in the incendiary suitcase. Gauci failed to identify Al-Megrahi. He was then instructed to focus on Al-Megrahi’s picture when he insisted that the person who bought his clothes was much older than the man in the photo. He is also said to have been coached by prosecutors prior to giving testimony and is thought to have been offered millions of dollars in bribes to testify at trial.

    Police chief: Lockerbie evidence was faked http://www.globalresearch.ca/index.php?context=va&aid=14908
    AN AMERICAN citizen is to be named by the Lockerbie bomber as the man who really carried out the terrorist attack on Pan Am Flight 103. http://www.express.co.uk/posts/view/122299/-I-ll-reveal-true-identity-of-bomber

  9. Pingback: Energy Is Still Key Driving Force In International Politics And … | Headlines Today

  10. @Elaine,

    What compounded the North Sea running out faster than expected was the fact that then-PM Maggie Thatcher decided that burning off the natural gas as the oil was being pumped out was the most moral thing to do.

    Had she decided otherwise, and ordered BP to pump the gas back down or otherwise store it or sell it, the UK would be sitting a lot prettier today.

    BAD Thatcher!

  11. RobG

    Current article here on Pemex’s plans: Mexico’s Pemex sees oil output down in 2010: paper

    Mexican oil output has fallen by nearly a quarter since 2004 as output from the aging Cantarell field has slumped. Pemex is betting billions of dollars on the unconventional onshore Chicontepec oil deposit to stem the slide in crude output.

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