The task force’s work helped produce the Energy Policy Act of 2005, which set rules that contributed to the current surge. It prohibited the Environmental Protection Agency from regulating fracking under the Safe Drinking Water Act, eliminating a potential impediment to wide use of the technique. The legislation also offered the industry billions of dollars in new tax breaks to help independent producers recoup some drilling costs even when a well came up dry.All these measures encouraged oil companies to start investing in new exploration technologies to access the more difficult oil and gas sources, especially deep drilling for oil through high-pressure hydraulic fracking and horizontal drilling to unlock gas reserves beneath shale rock formations. Once the oil prices started rising in 2005 and 2006, these newer technologies suddenly became attractive and a boom ensued in deep drilling and unlocking shale gas reserves. Deep drilling and fracking opened up large new oil fields, including off-shore fields. Similarly, horizontal drilling and high-pressure fracking opened up massive reserves of gas underneath layers of shale rocks.
Separately, the Interior Department was granted the power to issue drilling permits on millions of acres of federal lands without extensive environmental impact studies for individual projects, addressing industry complaints about the glacial pace of approvals. That new power has been used at least 8,400 times, mostly in Wyoming, Utah and New Mexico, representing a quarter of all permits issued on federal land in the last six federal fiscal years.
The Bush administration also opened large swaths of the Gulf of Mexico and the waters off Alaska to exploration, granting lease deals that required companies to pay only a tiny share of their profits to the government.
How the country made this turnabout is a story of industry-friendly policies started by President Bush and largely continued by President Obama — many over the objections of environmental advocates — as well as technological advances that have allowed the extraction of oil and gas once considered too difficult and too expensive to reach... Some areas of intense drilling activity, including northeastern Utah and central Wyoming, have experienced air quality problems. The drilling technique called hydraulic fracturing, or fracking, which uses highly pressurized water, sand and chemical lubricants that help force more oil and gas from rock formations, has also been blamed for wastewater problems. Wildlife experts also warn that expanded drilling is threatening habitats of rare or endangered species.In the US, the consequences of this aggressive industrial policy push has been hugely beneficial,
Not only has the United States reduced oil imports from members of the Organization of the Petroleum Exporting Countries by more than 20 percent in the last three years, it has become a net exporter of refined petroleum products like gasoline for the first time since the Truman presidency. The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia.
National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly seven million barrels by 2020. Some experts think it could eventually hit 10 million barrels — which would put the United States in the same league as Saudi Arabia.
The newfound wealth is spreading beyond the fields. In nearby towns, petroleum companies are buying so many pickup trucks that dealers are leasing parking lots the size of city blocks to stock their inventory. Housing is in such short supply that drillers are importing contractors from Houston and hotels are leased out before they are even built.The contrast with the flip-flops and prevarication that characterises the central government policy on mining and environmental concerns in India could not have been more stark. The source of one of the biggest infrastructure bottlenecks, the relatively slow electricity generation capacity addition, can be traced to the failure to open up new coal mines in the face of environmental opposition. The consequent impact on the national economy has been devastating.
SUV’s accounted for 18 percent of new-car sales in 2002, but only 7 percent in 2010.Incentives matter. Americans have responded to the sharp increase in oil prices since the middle of the last decade by cutting down on their oil consumption.
Gas emits slightly more than half as much carbon dioxide as coal and 70 per cent as much as oil, per unit of energy output. Emissions from gas of carbon monoxide are a fifth as much as from coal. Emissions of sulphur dioxide and particulates are negligible. In any plausible scenario for managing emissions of greenhouse gases, natural gas will have to substitute for other fuels, though development of cheap carbon capture and storage would also strengthen the case for coal.
First, the local opportunity costs of water; second, the abilities and reliability of the operators; third, the capacity of the regulators; fourth, the benefits of any extra gas, compared with those of alternative fuels (or conservation), including for security; and, fifth, better knowledge of the impact of the technologies.Update 4 (23/4/2012)
Natural gas is composed largely of methane, and 3.6% to 7.9% of the methane from shale-gas production escapes to the atmosphere in venting and leaks over the life-time of a well. These methane emissions are at least 30% more than and perhaps more than twice as great as those from conventional gas...
The footprint for shale gas is greater than that for conventional gas or oil when viewed on any time horizon, but particularly so over 20years. Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon and is comparable when compared over 100 years.
This post is dated. But better late than never. One of the biggest challenges for electricity utilities with optimizing electricity usage is to get consumers to exercise demand-response and manage their consumption patterns in response to changes in load conditions and variations in tariffs. Standard solutions have involved massive awareness campaigns, and even more invasive e-mail and SMS messages and telephone calls to inform people about their consumption patterns. However, the results have been dismal, at best marginal.
In this context, the Southern California Edison electricity utility has developed a device, Ambient Orb, that seek to nudge consumers into optimizing their energy usage. The Ambient Orb is a glowing globe that changes color to represent changes in any streaming data. This device when linked to the local grid, becomes an Energy Orb, a device that can be used to represent current grid load and the relative price of electricity at any given moment. 
The device signal changes in electrical rates, being programmed to glow green when the grid is underused — and, thus, electricity cheaper — and red during peak hours when customers pay more for power. An initial sample of 120 devices reduced peak energy consumption by 40%.
Unlike text messages, telephone calls, and other intermittent and invasive signals to remind people about their behaviours, Ambient Orb like devices are constantly in communication with its audience, forming a part of the natural environment in which those people live. Such devices help communicate dynamic information or address the problem of information over-load in a cognitively salient manner.
Such devices help bring to the immediate and direct notice of its target audience certain information they are not likely to observe (and therefore act on). The Orbs were apparently originally used to monitor financial portfolios - set it to shine a serene sky blue when your stocks were going up or pulse an alarming red when they were tanking. Its cognitive salience was thought to help investors overcome their inertia and actively manage their investments by selling off deadbeat stocks and buying better-performing ones.
The power of such devices, especially in areas like energy conservation, can be amplified if its users are networked and information on each other is made available to all. In this context, a design firm DIY Kyoto has been selling a device called the Wattson, which not only shows your energy usage but can also transmit the data to a Web site, letting you compare yourself with other Wattson users worldwide.
Other uses of such ambient devices include monitoring dynamic environments like monitoring water consumption, tracking weather changes, even tracking household grocery stocks. Here are a few other examples of where it could be used
1. Over-speeding - Orb device connected to the speed governors can remind drivers when they are over-speeding
2. Drunken driving - Orb device connected to an alcohol detection sensor can remind drivers about the fact that they have alcohol levels beyond permissible levels.
3. Monitoring pending files/issues - Orb device placed on the office table and attached to an Excel sheet (which contains information about file or other pendencies) can remind officials when their pendencies cross the limits.
4. Project monitoring - Project heads, especially those at the highest levels, or Government Heads of Departments could use such devices to keep an eye on the progress of execution of their Project. The device could be connected to the PERT/GANTT charts to generate the required color changes that indicates progress of work.
Here is a list of ambinet orb devices that are being sold by the firm Ambient Devices. The Ambient Umbrella looks the most interestingIf rain is forecast, the handle of this umbrella glows so you won't forget it. The Ambient Umbrella continuously displays forecast data for 150 US locations. Embedded in the handle is Ambient's wireless data-radio. This chip receives accuweather.com data and pulses when rain is forecast.
France -- the most nuclear-dependent in the world -- called for new global nuclear rules and proposed a global conference in France for May as President Nicolas Sarkozy paid a quick visit to Tokyo on Thursday to show support. "We must look at this coldly so that such a catastrophe never occurs again," said Sarkozy, who chairs the Group of 20 bloc of nations, during his brief stopover.While there is of course a humanitarian concern in assisting the Japanese deal with their nuclear woes, you can't help but believe that the French are eager to lend their disaster containment expertise to once again demonstrate their engineering prowess to would-be clients:
It was the first visit by a foreign leader since a March 11 earthquake and tsunami battered northeast Japan, leaving nearly 28,000 people dead or missing. The damage may top $300 billion, making it the world's costliest natural disaster.
Prime Minister Naoto Kan, under enormous pressure as he struggles to manage Japan's toughest test since World War II, welcomed the gesture of solidarity. "I told him a Japanese proverb -- 'a friend who comes on a rainy day is your true friend', and thanked him for coming to Japan from the bottom of my heart," he said.
France is a global leader in the nuclear industry, and Paris has flown in experts from state-owned nuclear reactor maker Areva to work with Japanese engineers. "Areva is one of the companies that will make the most out of a nuclear revival and therefore will be in most trouble if there isn't a nuclear revival," said Malcolm Grimston, an expert from London's Imperial College. "Certainly Sarkozy or France generally have a very strong interest in getting things moving as quickly as possible and trying to ensure that there isn't a major backlash (to nuclear power). France would be one of the biggest losers from that."It isn't hard to decipher where the French stand on this issue alongside their nuclear national champions. As the events in Japan unfold, they're busy lauding loan guarantees the US is making for developers of new nuclear power plants Stateside. The business of atom splitting will go on for the French.
Other nations are also scrambling to help Japan. The United States and Germany are sending robots to help repair and explore the damaged Fukushima Daiichi plant. Kyodo said some 140 U.S. military radiation safety experts would soon visit to offer technical help.
The International Atomic Energy Agency (IAEA), which says the situation at the Fukushima plant remains very serious, already has two teams in Japan, monitoring radiation levels. The Japanese disaster, the worst nuclear accident since Chernobyl in 1986, has appalled the world and revived heated debate over the safety and benefits of atomic power.
A few days ago, we had former UNDP head Mark Malloch Brown talk impressively about global events, especially goings-on at the UN in relation to the Middle East/North Africa. One of the things he pointed out was that perhaps an even worse humanitarian disaster is occurring in Cote d'Ivoire. While this is sadly and undoubtedly true, I'll take the crude Marxist route of economic determinism and suggest the difference boils down to energy. Possessed of the finest grades of petroleum reserves--light, sweet crude that is easy to refine--Libya will remain a prize far greater than the Ivory Coast. Tis the way of the world: I am afraid and ashamed of in equal measure.
Arguably, two of the countries that have pressed hardest for a no-fly zone over Libya are those with the most commercial interests there. Perhaps it's a matter of saving face. Remember that prior to leading the current international effort to penalize the Gadhafi regime, Nicolas Sarkozy was telling everyone not too long ago that it was OK to sell arms to Libya. Given its imperial history, Italy has invested in Libya and has in turn attracted investment by Libyan powers-that-be. However, the head of Italy's largest petroleum company ENI (formerly Agip), has been thinking ahead about the future implications of sanctions should Gadhafi remain in control--or at least of the key oil-producing regions. From the WSJ:
The head of Italian oil giant Eni SpA called for Europe to drop sanctions against Libya, saying it was "shooting itself in the foot" and endangering its energy security by punishing the Gadhafi regime.Indeed, it's by no means certain that the West will not eventually forgive and forget as it has done in the past. ENI thinking is simple: if the West offends Gadhafi sufficiently but he is not dislodged from power, then there are others who would certainly welcome the opportunity to take its place:
Eni Chief Executive Paolo Scaroni's comments come against a background of threats and warnings by Col. Moammar Gadhafi against foreign oil companies, especially those from countries that have backed the opposition rebels and called for a no-fly zone above Libya...Foreign companies such as Eni, which suspended production and evacuated staff when the violence erupted, are keen to resume operations in a country that holds the largest oil reserves in Africa and has long been considered one of the great unexplored frontiers of the global energy industry.
But they face a dilemma. Libya is likely to face an era of deep international isolation, with a new round of sanctions that could affect foreign oil companies. Those from states that called for Col. Gadhafi's ouster, like France and Italy, may be singled out for punishment by the leader and his inner circle.
And those that try to rekindle their relationship with a reviled regime face grave risk to their reputations in Western markets. "Companies that go grovelling back to Gadhafi are not going to look great in the eyes of Western public opinion," said Samuel Ciszuk, a North Africa energy expert at IHS Global Insight. "It's going to be a very uncertain environment for them."
In interviews published this week, Col. Gadhafi indicated that contracts with Western oil companies could come under review. He told the Italian daily Il Giornale he felt "betrayed" by Italian Prime Minister Silvio Berlusconi, who had previously courted the Libyan leader but called for him to step down after the uprising broke out...Italy has suspended its 2008 "friendship treaty" with Libya and frozen Libyan investments in the Italian economy, including large stakes in defense contractor Finmeccanica SpA and lender UniCredit SpA.Now for more on the BRICS--all of which declined to cast their vote. Permanent security members China and Russia unsurprisingly did not vote on the resolution implementing the no-fly zone. While Russia being attracted to Libya's energy supplies is indeed like bringing coals to Newcastle as the saying goes, the Chinese would certainly welcome the opportunity to expand its access to such supplies. Are they currying favour just in case? In addition to abstaining, both countries now express "regret" over military action.
Asked whether Libya might reconsider its contracts with Eni, the Libyan strongman said he "believes and hopes" that the "Libyan people" would reconsider their economic, financial and security ties with the West. Speaking to Russia Today, the pro-Kremlin channel, Col. Gadhafi said Libya can "no longer trust the West...That is why we would like to invite companies from Russia, China and India to invest in our oil production and construction industries," he added.
Other officials in Libya have said they are eager to have Western companies back. Shokri Ghanem, head of Libya's National Oil Corp., or NOC, and the country's de facto oil minister, said last week that Libya would respect all contracts and wanted its current partners to return to work as soon as possible.
Speaking on the sidelines of a parliamentary hearing on Italy's energy ties to Libya, Mr. Scaroni said imposing sanctions was "shooting ourselves in the foot," because not taking Libyan gas would undermine Italy's energy security. Eni has been in Libya since 1955 and is the largest single foreign investor there; in 2007 it signed a $28 billion deal to extend its Libyan oil contracts to 2042. But sanctions have forced Eni to suspend shipments of the oil it produces there, which account for about a quarter of Italy's oil supply. It also shut down the Greenstream pipeline which supplies 10% of Italy's natural gas.
With Libya's political future still uncertain, Mr. Scaroni appeared to hedge on where Eni's allegiances lie. "Whatever political system there is in the future, it will have its own NOC, which will have contracts and relations with us," he said. "I don't see any reason that these ties should be compromised."
Japanese authorities have confirmed there was an explosion at the Fukushima No. 1 nuclear power plant Saturday afternoon but it did not occur at its troubled No. 1 reactor, top government spokesman Yukio Edano said. The chief Cabinet secretary also told an urgent press conference that the operator, Tokyo Electric Power Co., has confirmed there is no damage to the steel container housing the reactor. Edano said the 3:36 p.m. explosion caused the roof and the walls of the building housing the reactor's container to be blown off. He said there has been no serious damage to the steel container of the reactor...There is a Japlish press release by TEP with much the same facts. Things are still unfolding, and the letting off of pressure may have produced more drama than warranted. While there have indeed been minor incidences with such plants over the years, the Japanese tend to be meticulous about things--the anti-Homer Simpsons. It is up to Japan now to prove the Greenpeace crowd wrong. Otherwise, we will be back in that post-Chernobyl climate that led to much wariness about nuclear power for several years which took global warming and high oil prices to eventually play down.
The top government spokesman said Tokyo Electric Power has begun operations to fill the reactor with sea water and pour in boric acid to prevent an occurrence of criticality, noting it may take several hours to inject water into the reactor. In addition, it will take about 10 days to fill the container with sea water, he said. Officials of Japan's nuclear safety agency said there was no sign that radiation levels had jumped after the explosion.
Events across Middle East, especially the rebellion in Libya and resultant disruption of oil extraction, and expectations of similar events in other major oil producers have naturally increased market uncertainty and put upward pressure on oil prices. Last week crude oil prices breached the psychologically important $100 per barrel mark. 
There are widespread fears of a repeat of the $147 peak in 2008, which would adversely affect recovery in the developed economies. However, unlike then, when spare capacity was just 2% of daily production, it is now at a more comfortable 6%, or 5 million barrels per day. But there are also market specific factors that puts pressure on prices. For example, Libyan "sweet" crude, with its low sulphur content, is not easily replaced with the "sour" crude produced elsewhere since many European and Asian refineries are not equipped to refine "sour" crude. The resultant increased demand for "sweet" crude from Algeria and Nigeria will invariably push prices up.
If oil prices remain high for long, it is feared that the already weak economies of the developed world will slip further into recession. It is estimated as a thumb rule that every $10 increase in the price of a barrel of oil reduces the growth of the GDP by half a percentage point within two years. Its ripple effect on the developing economies, in terms of reduced exports and resultant lower economic activity, can be considerable.
In a reiteration of its critical, albeit less appreciated, role in stabilizing global oil prices, Saudi Arabia has responded to higher prices by increasing its crude output to more than nine million barrels a day, roughly 700,000 barrels more than at the end of 2010. Saudi Arabia has a total production capacity of 12.5 million barrels per day (bpd) and uses its 3.5 m bpd excess capacity to cushio the global oil market from supply shocks. Its officials are also asking European refiners, who are most directly affected by the drop in Libyan exports, how much and what grades of crude they need for quick shipment.
Update 1 (9/3/2011)
See this NYT Room for Debate which discusses why oil prices have are going up.
As you can read in his introduction to the series, the motivation is triple: 1. Give these pioneers some of the recognition they deserve; 2. Convey the flavor of life in contemporary China; and 3. Inspire similar leadership in others.
Given that he is Hollywood's most bankable director--or among the top 3 at least--Avatar and Titanic director James Cameron certainly isn't an unknown quantity. As the former film would suggest, he is very much in the conflicted movie star mold: he makes a living selling commercially successful titles while deploring the surrounding commercial infrastructure that enables his very success. Certainly, he is no Charlton Heston--an actor with strong conservative conservative leanings.
However, one of the surprising things you may want to know about him is that, despite his left-of-centre and environmental stylings, Cameron does feel regret about the plight of poor old BP. Here is a guy who, in a Bono-esque frame of mind, is protesting the proposed construction of the Belo Monte megadam in Brazil. (If constructed, it would be the third largest dam in the world in terms of output.) A few days ago, I cam across an interesting interview of him with the Wall Street Journal's technology correspondent Kara Swisher that nobody else seems to have noticed. Among other topics, Cameron (James, not David) describes how he has offered help to BP as one of his interests is operating submersibles that may aid in the spill control efforts:
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MS. SWISHER: Let's talk a little bit about BP.
MR. CAMERON: It goes back to loving exploration and underwater technology.
For 22 years, I have been working with a number of the top people in the very small deep-submergence communities. They build the subs and I go in them or I build a robotic vehicle, take it down in a sub, do exploration, do forensic wreck surveys. I then have this hobby called directing movies that I do occasionally. Over the last few weeks, I have watched, as we all have, with growing horror and heartache, what is happening in the Gulf.
I know really, really smart people that work at depths much greater than what that well is at. They do not drill for oil, but they operate all kinds of vehicles, all kinds of electronic optical-fiber systems, and have all the remote manipulators and so on. Most importantly, they know the engineering that it requires to get something done at that depth. I thought, "Why don't I get all these people together for a brainstorming session?"
MS. SWISHER: You had gone to BP first?
MR. CAMERON: They could not have been more gracious, but they basically said we've got the assets on site that we need. We sat in a room for 10 hours and worked this problem out. It is a very, very complex problem. What you find out is there are things that hold [BP] back from the obvious things like, put a clamp on it, put a valve on it, screw something onto it. It is not a plumbing problem. If they make a mistake, they can blow out down below. It could come up in 30 places and then you will never contain it.
I never thought I would be defending BP. I think they have got some very good engineers working on this problem. I think there are a lot of political shenanigans going on, and there was no transparency whatsoever. I started to shift my perspective to this idea that the government really needs to have its own independent ability to go down there and image the site, survey the site, and do its own investigation and monitor it.
MR. MOSSBERG: So, what is the result of this?
MR. CAMERON: We are writing it all up and putting in reports to various agencies. This was done privately. This was not done under our government process.
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Is James Cameron merely America bashing like he did with the overt Iraq references in Avatar? Even Americans enjoy this "sport" which is perhaps more popular than football. Certainly, his environmental credentials would be put under doubt if he were siding with the pantomime villain here of BP. After all, Avatar was about resource exploitation. If a highest-profile environmental activist of all people could say that BP is tackling matters in good faith, then the US hysteria looks rather less justified, doesn't it?
A few days ago, some bozo predicted that matters would come to a head between the US and UK over the nefarious BP spill:
It will be interesting to see how transatlantic relations will be affected by this spill. The Tories are usually sycophantic towards the Yanks, but their coalition partners the Lib Dems aren't. Perhaps Deepwater Horizon will finish off the hoary notion of a "special relationship" once and for all.As I noted well before the American press did, the British public is up in arms over the way the Yanks have blackballed BP. Ever one to channel negative sentiment given his inability to do anything constructive to mitigate the oil spill, Barack Obama has labelled British Petroleum a "recurrent environmental criminal" while searching for "whose ass to kick" at the company. While the exceedingly litigious Yanks attempt to sock it to BP by tying it up in litigation sure to cost billions of dollars, the British are pushing back for the understandable reason that Britain's plight is very much tied to BP. Depending on whom you listen to, £1 out of every £6 to £8 in dividends paid out in the UK come from BP shares. What's more, UK pension funds have large holdings of BP stock. With the stock price of BP dropping like a blown offshore platform, let's just say many Britons are up in arms over American bellyaching over BP. Somewhat surprising to me is that the normally transatlantic-friendly Tories are leading the charge:
Senior Tories today warned Barack Obama to back off as billions of pounds were wiped off BP shares in the row over the Gulf of Mexico oil spill. [London] Mayor Boris Johnson demanded an end to “anti-British rhetoric, buck-passing and name-calling” after days of scathing criticism directed at BP by the President and other US politicians.Here's a fair warning to the Yanks: the British are coming to kick Obama's ass on BP as my post title goes. By comparison to what I'm hearing, other Evening Standard articles are almost sedate with titles such as "American attacks on BP help nobody" and "PM must counter this US jingoism that threatens our pensions." Meanwhile, the Telegraph says "Gulf of Mexico oil spill: David Cameron fails to back BP in fight with Barack Obama." Meanwhile, the Daily Mail is even more strident - "Stand up for your country, Cameron: PM ducks chance to speak up for BP after cynical attacks from Obama."
Former Conservative Party chairman Lord Tebbit branded Mr Obama's conduct “despicable”. And with the dispute threatening to escalate into a diplomatic row, Mr Johnson also appeared to suggest that David Cameron should step in to defend BP. He spoke as the US onslaught against the firm became a “matter of national concern” — especially given its importance to British pensions, which lost much of their value today as BP shares plunged to a 13-year low.
Asked on BBC Radio 4's Today whether he thought the Prime Minister should intervene, Mr Johnson said: "Well I do think there is something slightly worrying about the anti-British rhetoric that seems to be permeating from America. Yes I suppose that's right. I would like to see cool heads and a bit of calm reflection about how to deal with this problem rather than endlessly buck-passing and name-calling.
"When you consider the huge exposure of British pension funds to BP and its share price, and the vital importance of BP, then I do think it starts to become a matter of national concern if a great UK company is being continually beaten up on the international airwaves. OK, it has presided over a catastrophic accident which it is trying to remedy but ultimately it cannot be faulted because it was an accident that took place. BP, I think is paying a very, very heavy price indeed."
Downing Street steered clear of criticising Mr Obama's conduct but in an apparent reference to concerns over UK pensions highlighted the “broader impact” of the spill and the need to deal with it swiftly. British business chiefs are alarmed that tough talking by Mr Obama and other US politicians is undermining the battered oil giant.
BP's shares fell by 12 per cent at one point today on the London market, after hitting their lowest level since 1997 in New York trading overnight, amid intensifying political attacks in the US. Their price dropped to 345p in early London trading before recovering to 370p — still down five per cent. The slump means the firm's share price has almost halved since the spill started in mid-April, when a well ruptured and the rig exploded, killing 11 workers.
Mr Cameron is due to speak to Mr Obama at the weekend over the issue. Among the President's criticisms of BP was his suggestion that chief executive Tony Hayward would have been axed if he had been working for him. BP said its latest effort to capture oil from the leak with a cap was now collecting about 15,000 barrels a day.
The US government's decision to bring criminal charges against BP as a result of the oil spill in the Gulf of Mexico is a characteristically American reaction to a crisis: if something goes wrong, sue. But it is questionable whether that approach at this point will do anything at all to address the real problem, which is that every effort that BP has made to stem the leak has failed.Agreed--criminal charges are a nonsense. All the same, the usual suspects--Senators Charles Schumer (D-NY) and Ron Wyden (D-OR)--are calling on BP not to pay $10 billion out in dividends in anticipation of further obligations arising from this spill. I wonder how those UK pensioners would feel if BP is turned into a "growth stock" via American legislation:
Bringing criminal charges against company executives will do nothing to add to the urgency with which BP is attempting to put matters right. Deep-water drilling is patently risky and, when it goes wrong, has potentially devastating environmental consequences. Almost certainly, better contingency plans should have been in place and may have prevented 11 deaths. But they weren't, there was an accident and there can be no doubt that BP, which has most to lose from this crisis, has done everything possible to put things right.
It has failed, but not from want of trying. And the notion that the US government can succeed where BP has failed by "taking over" the operation seems illusory. The US reaction is political, an attempt by the President to respond to increasingly angry calls in the US for him to be seen to do something. But sometimes this approach is downright damaging.
An attempt retrospectively to get tough with BP by bringing criminal charges will not help us now. Indeed, the prospect of a hugely expensive lawsuit in addition to the damage to the company's reputation in the US has already driven the BP share price down; there are likely to be cuts in the dividend. Some 40 per cent of BP profit is derived from the US.
One in every six pounds that UK institutions earn in dividends is derived from BP: a reduction will have a direct, adverse effect, not just on fat cats, but on British pensioners. This is bad for all of us. We can understand American anger at this environmental and human catastrophe but the punitive approach to BP will help no one.
Two Democratic senators pressed BP on Wednesday to delay plans to pay shareholder dividends worth an expected $10 billion or more until the full costs for cleaning up the oil spill in the Gulf of Mexico are calculated. Sens. Chuck Schumer of New York and Ron Wyden of Oregon called it "unfathomable" that the oil giant would pay out a dividend to shareholders before the total cost of the cleanup is known. In a letter to BP CEO Tony Hayward, the lawmakers said taking action to "move money off of the company's books" will make it more difficult for BP to pay the U.S. government, fishermen and others affected by the environmental disaster.But, does Tony Hayward listen to AC/DC? I think he's doing a fair bit of headbanging right about now. And definitely, he's got the (litigious) Yanks covered in oil. Send John Edwards to New Orleans, ASAP.
BP PLC has paid an estimated $1 billion to clean up the oil leak and expects to spend billions more. BP spokesman Toby Odone called the distribution of dividends "a company matter" that will be decided by company leaders. BP paid $10.4 billion in dividends last year and $10.3 billion in 2008.
I must say, I'm pretty proud of the county where I grew up: Montgomery County, Maryland. It just passed the first county-level carbon tax in America. It also increased the energy consumption levy on homeowners and businesses by 85 percent. This comes as only mildly surprising for an area that has long been a fairly progressive suburb of Washington, D.C.
The previous post on African oil being sought after by powers from the world over jogged my memory of seeing this other fine feature on EU gas markets by our friends over at the European Centre for International Political Economy (ECIPE). This publication is of particular interest to me since it was prepared by none other than an old cyber-buddy of mine, Iana Dreyer, formerly blogging at Global Conditions and now at the fine ECIPE group blog Trade Matters. Lest you worry that the IPE Zone is turning into the Emmanuel's Energy-Researching Cronies Blog, let me offer an excerpt of the blurb from this publication that should entice you to read further if the subject matter is in your line of interest. While the ECIPE is well to the right of me--working at the LSE, I like to think of myself as a post-Fabian, whatever that is--you can rest assured that they typically make fine arguments in favour of markets that are worth pondering.
As before, there are security issues involved as Western Europe contemplates the consequences of being more or less dependent on a Russia that has qualms about subjecting natural gas supplies to political exigencies. Rule of law? The solution, they say, lies in improving competition in EU gas markets to ensure a stable, diversified supply of natural gas:
More, not less, competition in the EU’s gas markets is required to achieve a Single Market and to therefore reduce Europe’s vulnerability to gas supply cuts originating in Russia. In particular, the East-West divide within the EU in terms of competition policy revealed in this paper must be overcome.
The authors investigate the relationship between the level of competition in the gas markets of the EU member states and their vulnerability to supply cuts from Russia’s monopoly company Gazprom, which is behind most of the recent gas supply disruptions in the EU. Most markets in Central and Eastern Europe are locked into a tight one-way relationship with Gazprom, not only as sole supplier of gas, but also as investor in the domestic markets, and through long term supply contracts. All incentives in the local gas markets are skewed in such a way as to favour Gazprom. Based on these insights, the paper launches a new “Index of Vulnerability to Gazprom Supply Cuts”. The scores of the individual EU member states in this index show that the more the national gas market structure it monopolised, the greater a country is likely to suffer from gas supply disruptions.
The paper further takes a close look at the legislative measures and antitrust actions undertaken by the EU to foster such competition. It examines Brussels legislation moves to liberalise the EU’s gas markets since the 1990s. The failure of these policies to foster sufficient competition in the markets led to the ambitious Third Energy Package. The Energy Package, adopted in 2009, attempts to introduce “full ownership unbundling” – a complete break-up of the existing vertically integrated gas majors – because increasing evidence shows that this is the only effective means to foster competition and thus improve customer service, reduce consumer prices and provide a more liquid and flexible market able to respond to crises. The paper also has a closer look at current antitrust cases launched by the European Commission against some of the EU’s biggest vertically integrated gas companies in Western Europe. The cases concern “concerted practices” (cartels) and in particular the “abuse of market dominant” position. The company actions under scrutiny had as aim and/or effect to foreclose national markets. This foreclosure leads to insufficient investment in gas infrastructure such as pipelines and interconnectors.
An analysis of how the Commission’s regulations and antitrust actions have played out on the ground reveals that the Third Energy Package provides for exemptions to the ownership unbundling rules. It also includes the Third Option, a watered down unbundling requirement, which will not fundamentally change incentives for gas companies. These exemptions and the Third Option will mostly apply to Central and Eastern Europe, thus perpetuating the uncompetitive status quo. Furthermore, the recent antitrust cases have focused on those markets that are least vulnerable to supply cuts from Gazprom, although Gazprom has been behind most recent gas disruptions. The EC’s antitrust policy in energy has neglected the Achilles heel of Europe’s supply security, its Eastern rim, and in particular the new EU member states. This must change.
The paper concludes that the Commission’s priority on increasing competition in gas markets should be shifted to the East. In the short term, new legislation on full ownership unbundling of vertically integrated companies is not likely to be passed – political resistance is too strong. It is thus to Brussels’ antitrust action, and especially abuse of market dominance, that the greatest attention should be shifted. Particular emphasis should be given to countries that need it most, namely Bulgaria, the Baltic States, and Slovakia.
Here is more in-house stuff that should pique your interest, especially if you're interested in African political economy. After featuring so many posts on Chinese energy interests in Africa, regular readers should be forgiven if they think China is the only player scouring the continent for energy. Well, today, I'm here to tell you that China is far from the only country staking claims on its energy demands against African supplies. A few days ago, I made an apparently well-received post featuring a contribution I made to our IDEAS newsletter and, sometime before that, one from our Southeast Asia programme which I am part of. Recently, IDEAS launched our sister unit covering Africa. Hopefully, you will receive it as nicely as you've taken to our output on Southeast Asia which is geared towards a general audience.
In their first newsletter, I am particularly interested by the contribution of Alex Vines OBE, director of regional and security studies at Chatham House, in their maiden issue. For those of you unfamiliar with it, Chatham House is the British equivalent of the American Council on Foreign Relations. In his write-up, he explores the once-again active race to tap comparatively healthy oil reserves in Africa. Back for another round are the usual suspects--Europe and the United States--but they're now joined by the likes of China, India, and even South Korea. Here are some excerpts:
Africa currently supplies about 12 percent of the world’s oil, boasts significant untapped reserves and has surpassed the Middle East as the largest regional supplier of crude oil to the United States. Individually, Nigeria is America’s fourth largest oil supplier, Angola is the sixth and Algeria is the seventh. Recently the National Intelligence Council estimated that the US imported 18 percent from sub-Saharan Africa, almost the same amount as Saudi Arabia. This amount is expected to increase to 25 percent in the next ten years. Africa offers diversification away from Middle East oil for both the US and Europe and also access to new gas reserves.The Prize never stops being such, it seems. At any rate, the other features are well worth a read if their topics interest you. Certainly, they help me improve my understanding of what is happening in Africa given our in-house expertise:
It is not just the US and Europe that are vying for access to African oil. China’s continued economic growth, a key factor in the country’s stability and the Communist Party’s legitimacy, requires the import of substantial supplies of energy, minerals and other materials. China’s leaders have concluded that it is too risky to just compete on the open market after the UNOCAL debacle in 2005, in which the US blocked the sale of the Union Oil Company of California to the Chinese National Offshore Oil Corporation(CNOOC) before approving a merger with the American multinational Chevron. Diversifying energy sources is also seen as important for spreading risk. China’s 2003 National Energy Strategy and Policy remarked that ‘oil is the key factor in the creation of public wealth, and also one kind of most important commodity infuencing (sic) the global political pattern, economic order and military operations.’
Having first become a net importer of oil in 1993, in 2003 China became the world’s second largest consumer of petroleum products behind the United States, and the third largest importer. Although some 55 percent of African oil and gas went to Europe and the US in recent years and only 16 percent went to China this is changing. China is projected to surpass the US in 2015. China currently receives around 33 percent of its imported crude oil from Africa. In March 2008, one senior Chinese official said Beijing aimed to increase this figure to 40 percent over the next five to ten years.
Nine out of ten of China’s top trading partners in Africa in 2008 were oil producing states, the exception being South Africa. The continent’s value of Chinese oil-company investment in Africa amounts to 8 percent of international oil company (IOC) investment and only 3 percent total oil company investment there. Chinese companies currently only produce in Sudan (225,000 barrels a day) but Sinopec’s purchase of Addax for $7.6 billion in 2009 has bought China access to current Nigerian oil production. Angola was in 2009 the second largest supplier of crude to China after Saudi Arabia.
Sarah Hughes [of Sky News]: Foreign Office Minister, Chris Bryant, joins us now live, good afternoon to you Mr Bryant. Firstly can I ask you your reaction to that statement from the Venezuelan President?The concern overseeing plans to drill the Falklands, Desire Petroleum plc, has much technical information about the Falklands apparently welcome prospects if you're so inclined. As Roger Waters once sang, "Ooh...Maggie, what have you done?"
Chris Bryant: We have absolutely no doubt about our sovereignty over the Falkland Islands and I’m slightly surprised that Hugo Chavez, with whom we work quite closely on some issues like counter narcotics because they have a big problem in Venezuela and we work with them on that, why he should now be arguing this case given that the, he often argues about self determination for the people of Latin America. We believe, wholeheartedly, in the self determination of the people in, people of the Falklands and I know what Falkland Islanders believe and I think they’re quite right that they have every legal right, to be able to drill for oil in the Falklands.
SH: None the less Argentina is rallying support particularly in Latin America, the Argentinean Foreign Minister is meeting Ban Ki-moon tomorrow to state their claim for sovereignty. How concerned are you about that?
CB: Well, obviously, we monitor the situation closely but this is nothing new. There have been discussions like this in previous years, there have been motions carried by different groups over different years in Latin America and, and I suppose it’s not to be unexpected that some Latin American colleagues would adopt this kind of position. But that doesn’t undermine that work that we can do with our friends in Brazil or in Uruguay or in Chile or in any of the other countries of Latin America. And nor for that matter does it undermine that work that we can do with Argentina with whom, you know, we forged a very close, close alliance last year working in the G20 to make sure that there was a proper response to the world wide economic crisis.
SH: Lord West described it this morning as sabre rattling said there was no threat to oil drilling there, is that your position?
CB: As I say we monitor the situation very closely but, and we have no doubts about our sovereignty. We, we, I mean it’s to be expected in a sense that the, the Argentinean Government would make these noises but I do note that they’re saying very clearly that they’re not talking about any kind of abandonment of the, of the peaceful discussions that they’ve been engaged in and I, I think that that’s the right way to go.
We have no interest in escalating the, the kind of rhetoric that some people have been engaged in, we’re just very certain that the Falklands are British, the Falkland Islanders want to be part of the United Kingdom and we welcome that and we stand by them.
SH: No interest you say in escalating that rhetoric, what’s Britain doing to try and calm these waters then?
CB: Well we’ve just been, we, we’ve made very clear, we’ve talked to, sometime before, to both our Argentinean counterparts and to the other Governments across Latin America to make sure that they understood what was going to happen when the rig arrived off the Falklands, make, to make sure that everybody understood the legal position. And we, we’re not going to chase every headline that, that some politicians may want to engage in we’re just very resolute, very calmly determined about our position in the Falklands; standing by the Falklanders, standing by their right to exploit the hydrocarbons if there are any there, we don’t yet know whether there will be a commercially viable operation there. And making sure that everybody understands our legal right both across the, in the United Nations and across Latin America.
SH: Foreign Office Minister Chris Bryant thanks very much for your time.
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