[HOME] [NEXT]
POLS 410 LECTURE 12
"ENERGY AND WORLD POLITICS"
I. Description of energy sources
79% fossil fuels; 21% renewable (15% = biomass, mostly fuelwood;
rest is mostly hydropower).
What are fossil fuels? Oil, coal, gas
How were they made? (Pirages: dead plants & animals preserved;
coal = trees in ancient swamps;
oil & nat gas = dead organisms deposited on lake & ocean bottoms.
Rank of dirtiness: coal far worst, then oil, then nat. gas far best.
Oil = dominant form, esp. on global mkts.
Why? easiest to transport
Oil reserves: Saudi = 1/4 world's reserves;
OPEC = 2/3
Most dependent countries = W. Europe & Japan
Largest oil producer = SU (now Russia),by far.
2nd largest " " = U.S. (nearly twice Saudi productn)
U.S. originally had as much as Saudi, used up in indus'tn.
Uneven dist. of energy consumption:
Per capita energy consumption in indus. mkt. econs. = 80 times
greater than in sub-Saharan Africa.
II. Global economics
Oil = primary commodity; until last 2 decades, did not confer any
special advantage on producer countries.
Why not?
-- legacy of colonialism; Britain & U.S. carved up Ottoman
Empire after WWI & divided oil among 7 sisters:
Exxon, Mobil, Chevron (All originally Standard,
divide w/ anti-trust laws), Texaco, Gulf, BP, &
Royal Dutch
(Red Line Agreement)
Achnacarry Agreement (same year, 1928) -- how did U.S.
dominance in oil indus. shape the agreement?
-- "Gulf Plus" formula pegged price to Texas price plus
freight from Gulf of Mexico
-- Lasted until 1960's, when new competitive forces
weakened regime. New competition:
Soviet exports, smaller companies, ntl. oil companies
-- Lower prices bad for oil exporters >> cartel.
OPEC, formed in 1960, initiated by Venezuela
Initially not powerful
Like all LDC's dependent upon primary commodities.
3 factors leading to OPEC price revolution
(4-fold increase in 1973):
1) High inflation in West w/ low oil prices decreased
purchasing power of oil exporters
2) Arab nationalism
3) Arab-Israeli conflict (= #1 cause)
How does OPEC present a classic public goods problem?
Each member tries to capture a larger share of mkt, either
by setting prices optimally or raising production.
Factions in OPEC:
1) Banker countries
2) Poor countries: hit hardest by price fluctuations
3) Radicals: Libya, Iran & Iraq
How does OPEC help intl banking community?
stabilizes prices >> predictability
How does OPEC price mechanism still reflect U.S. dominance in oil mkt?
-- Oil priced in dollars
Strong $ slows growth elsewhere by keeping prices high
& demand down.
2 oil shocks >> price increases >> less demand >> lower prices
(very destabilizing for global econ.)
>> Price stability is in everyone's int.
So why doesn't it happen?
-- U.S. wants mkt. forces to control prices (U.S. firms control
mkt.)
-- OPEC wants higher prices
Social psychology of energy prob: shortages >> short-term
conservation measures & govt attn to energy programs; as soon as
crisis is over, consumption habits resume.
III. Security issues
Over 50% of world's oil reserves in Mideast: huge arms transfers &
nuclear proliferation.
Arab states 1st saw Western vulnerability during closing of Suez Canal
(1967).
Were either of the 2 major oil shocks a result of actual shortages?
NO, pol & mil.:
1973 = embargo of Israel's supporters by Arab countries
-- exacerbated by oil company hording to keep prices high
1979 = Fall of Shah -- minor shortages, but prices tripled
-- 2nd shock deeper & longer than 1st, which suggests that the world
econ. had become less resilient.
-- Carter: Rapid Deployment Force.
How did Third World respond to ARab oil embargo & price increases?
Very supportive: symbolic politics;
-- higher prices hurt them worst
This, combined w/ petrodollar surplus in banks led to massive
borrowing, wh. led. to debt crisis.
Russian oil & gas -- perceived by some as security threat to U.S. bec.
of potential for tighter links to Europe.
Russia needs capital & W. Europe needs energy, esp. source besides
Mideast.
-- Withdrawal from Eastern bloc states + break-up of
SU >> end of subsidized shipmts of Russian oil & nat. gas; econ.
hardship
-- Russian production drastically decreased in last 3 years: poor
mgmt, depleted fields, outdated tech.
U.S. response to 1st oil crisis: shifted dependence to Latin American
exporters; expanded domestic exploration; Carter's Synfuels program;
did not seek energy self-sufficiency or renewable energy sources.
Why is U.S. gasoline about 1/2 the cost in W. Europe?
-- small gas tax
-- W. European gas taxes for conservation, to reduce dependency on
foreign producers.
IV. Pollution from fossil fuels
A. Oil Pollution at sea
Late 60's & early 70's: series of spills & accidents
-- Torrey Canyon, Santa Barbara
These were dramatic disasters, but 90% of oil spilled at sea is done
on purpose during routine processes.
IMO = IO dominated by shipping indus.; technical experts
Accidents >> Pressure for new regime >> MARPOL (1976)
B. Urban air pollution
Ozone, CO, nitrous oxides, particulates.
C. Acid Rain (long range)
Partly a result of tall smokestacks
SO2, NOx
D. Global Warming
V. IEA
VI. Wood fuels
A. 70% of ppl in LDCs use wood, avg. of 700 kg/person/year.
B. Rural vs. urban
Rural ppl rarely chop down trees; instead, take branches
Urban ppl buy wood & charcoal; deforestation linked more to this
than rural consumption.
Charcoal production wastes lg. amounts of wood
When fuelwood is scarce, rural villagers forced to burn cow dung,
crop stems & husks -- things normally used to fertilize the soil
>> robs soil of nutrients
C. Short-term sol. is to treat fuelwood like food & grow it as a
subsistence crop.
-- Prob. is that rural ppl are generally outside the money econ. &
so cannot purchase wood.
-- Also a prob. of land distribution: in many places, there are plenty
of trees, but they are owned by only a few people.
D. Pollution
Local air pollution
Climate change.
VII. Flavin: Bridge to Sustainable Energy
Oil mostly covered above (in Pirages)
Coal: dirtiest for all forms of air pollution
China most alarming: trying to fuel rapid devt almost completely by
coal; largest reserves in world
-- Sustainable energy = hydrogen (discussed later by ?)
Bridge = efficiency + transitional fuel (nat. gas)
Why? Cheap, abundant, clean
Can be used in power plants & motor vehicles, w/ some tech. changes.
Prob: methane = greenhouse gas, highly flammable
Why haven't large oil companies w/ capital & technical capabilities
gone into nat. gas exploration?
-- not easily sold for hard currency (dom. use)
Me: Current negs. on climate change convention have mentioned carbon
tax. What would it do? Is it a good idea?