Thursday, April 13, 2006

Oil Shock

When the Secretary of State speaks in such an alarming manner, we should ask ourselves what is behind these words. Should we be expecting $100 oil by midsummer? Fortune says it might be worse. Has there been an agreement between Iran and Venezuela? Which are the states she is talking about?

... We do have to do something about the energy problem. I can tell you that nothing has really taken me aback more as secretary of State than the way that the politics of energy is -- I will use the word warping -- diplomacy around the world. It has given extraordinary power to some states that are using that power in not very good ways for the international system, states that would otherwise have very little power. It is sending some states that are growing very rapidly in an all-out search for energy -- states like China, states like India -- that is really sending them into parts of the world where they've not been seen before, and challenging, I think, for our diplomacy. It is, of course, an energy supply that is still heavily dependent on hydrocarbons, which makes more difficult our desire to have growth, environmental protection and reliable energy supply all in a package.

... on the energy side, we have simply got to do something about the warping now of diplomatic effort by the all-out rush for energy supply.

I am completely behind the India nuclear development initiative. Safe reactors in India, built in numbers and built cheaply with US/UN oversight, will cut down on world-wide pollution, divert some of the oil grab mentality, reduce the chance for resource wars, give India an energy parachute, provide a democratic model and a military balance for China. Rice says that India is producing 1% of their electric power with nuclear, as opposed to 20% for the US and 78% for France. So the marginal benefit should be huge for India.

I am, however, a little unsettled by the Secretary's directness.

We apparently can't build nukes here, so it will be almost as good to build them in India. It might even be better in some ways. The nimbys can take comfort in the distance and still reap the economic benefits. Australia is apparently reading from the same playbook and is presently negotiating with China on a uranium contract. Oz nimbys are equally problematic.

My suggestion to you is to buy that Prius now and also a couple shares of oil stock. I'm hoping Rice was just trying to wake up the sleeping Senators and forgot that people might be listening.

4/13/2006 11:51 AM

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At Friday, April 14, 2006 10:14:00 AM, Blogger mal said...

the only good thing about the oil situation is when we go back to a modest production overhang we will prices collapse again as the "states" who are trying to make a "statement" scramble to sell their oil. It was the last crash in 86 that directly led to todays crunch. The next few years will be unsettled, just as the period from 79-86 was.

As an FYI, this months crunch appears to be speculation/rumour driven. Inventories are at very high levels for this time of year

I saw a burp in US News this week where the Democrats may resurrect Nuclear energy as a campaign issue. Quite a turn around from the 80's

At Tuesday, April 18, 2006 6:51:00 PM, Blogger jj mollo said...

Unfortunately the Democrats will be split on the issue. The Nader temptation will again bring them down. It's hard for the Aquarians to get a rational fact into their heads. Much as I would like it, SUVs are not going to disappear. Furthermore, we are not going to voluntarily return to the Paleolithic. The only way to protect the economy is nuclear. The only way to protect the environment is nuclear. The only way to preserve the power of the US is by reversing our oil dependency, and the only way to do that is nuclear. Wind and solar are very nice, but they're not going to be enough.

I don't think it's just panic and rumor. The crunch is already beginning, IMO, and we need to get some nukes on line while we can still afford it. We can actually use the oil price as a weapon in the Chavez/Ahmadinejad wars. They are getting fat and happy off of the high prices, giving them too much leverage, but if we were to tax fuel heavily enough, the barrel prices would collapse, just as you suggest. Prices may collapse anyway, but the tax strategy hastens it. It encourages our consumers to save, and transfers a lot of the money into our own coffers, where we can use it to facilitate the transition.

At Tuesday, April 18, 2006 7:05:00 PM, Blogger mal said...

you are preaching to the choir here *L* ties in nicely with my latest entry

At Wednesday, April 19, 2006 2:16:00 PM, Blogger jj mollo said...

I just found this article in the Age demonstrating the impact that a price increase might have on consumption. It appears to be a lot more price sensitive than I imagined, at least in Australia. Dollar amounts are Australian dollars per litre.


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