Jason Barton

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Archive for the ‘Petroleum’ tag

Obama and the New Brazil

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After a first visit to Brazil earlier in the 20th Century, a foreign diplomat boldly stated that “Brazil is the country of the future!” Self-deprecating Brazilians quickly added, “And it always will be.”

Based on my four years of living in Brazil and many return visits in the four years since, I don’t think Brazilians are saying this any longer, nor are the popular media or President Obama.

It has been fascinating to watch the changes in Brazil since my first arrival shortly before Lula’s election in 2002. I feel very fortunate to have earned the job that first brought me there, and to have stayed in close contact with the amazing colleagues and friends with whom I worked and laughed during the past decade.

Mr. Obama, Meet the New Brazil

By JULIA SWEIG and MATIAS SPEKTOR
Published: March 18, 2011

When Barack Obama lands in Brazil this weekend, he will find a country transformed. In little more than a decade, some 30 million people have been lifted out of poverty and the country has risen to seventh place in the world economy.

Change at home has revolutionized policies abroad. Brazil has woken up to the 10 states along its borders, becoming the eminent power and driver of regional integration in South America. It has set out to develop closer ties simultaneously with Israel, Syria and Iran.

[…]

With most of the Amazon within its borders, the world’s 10th largest oil stores, and nearly a fifth of the world’s fresh water, Brazil is an environmental power, an energy power, and guarantor of global food security.

Read the entire article here.

Not Panic, but a Response is Needed to Oil Prices

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Of course panic would be counterproductive, but rising petroleum prices are yet another motivation for us to continue innovating towards cleaner, renewable, domestic energy resources.

Oil Ministers, CEOs: Don’t Panic About Oil Prices

Oil ministers, CEOs say don’t panic about oil prices but US drivers, economists are worried

The Associated Press
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By JONATHAN FAHEY AP Energy Writer
HOUSTON March 9, 2011 (AP)

Energy leaders from around the world meeting in Houston this week have a consistent message about high oil prices: Don’t panic.

AP

The energy leaders from around the world meeting in Houston in March, 2011, and have a consistent message about recent high oil prices: Don’t panic. (AP Photo/Mark Lennihan, file) Collapse

Oil markets may have heard the message — prices fell Wednesday for a second straight day to near $104 per barrel. U.S. drivers, however, may not be so easily reassured.

Oil rose 24 percent in the past three weeks. In that same time, the average price of regular gasoline in the U.S. increased 40 cents per gallon to $3.52, the highest since September 2008. This is straining the wallets of drivers and raising fears among economists that high energy prices will stall the nation’s economic recovery, lead to inflation, or both.

Read the entire article here.

Written by Jason

March 10th, 2011 at 9:40 pm

Obama Pursues a Moderate, Pragmatic Approach During Energy Woes

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Of course times are tough. I tend to drive my car until the gas light comes on so I have to fill up less often, but then kick myself for driving so much as I watch the cost climb past $40 a tank. These are minor pains compared to the ones some folks are feeling, but even this light irritation is enough to make me want a fast change to whatever it is we’re doing, or not doing, in terms of making energy more affordable.

Patience is key. Jumping in to more drilling without taking the time to make sure it’s safe and efficient could cause as many problems, and increase total costs, as much as launching scads of new and often inefficient wind or solar projects.

Energy is expensive. Our government has helped it to be artificially cheap since early in the last century. This has lead to great advantages in our country, such as the great access most people in the U.S. have to everyday conveniences such as lights, heat, cars, buses, and airplanes. In most countries these aren’t nearly as accessible to people on, say, the bottom half of the socio-economic strata.

As Obama weathers the criticism from the right that we need to expand our use of fossil fuels, and from the left that more needs to be done to move us to alternative forms of energy, I hope that he and Secretary Chu continue their pragmatic approach, leaving the door open to more fossil fuels so long as they are safe, while also encouraging innovation and investment in alternatives.

More fence sitting, I know, but I believe this middle path is the best one.*

Obama Faces Bipartisan Criticism on Energy Policies

By Jim Angle

Published March 05, 2011

Sen. Mary Landrieu, D-La. and Senate Republican leader Mitch McConnell are questioning the Obama administration's energy policies and arguing more should be done to develop domestic sources of energy. (AP)

Sen. Mary Landrieu, D-La. and Senate Republican leader Mitch McConnell are questioning the Obama administration’s energy policies and arguing more should be done to develop domestic sources of energy. (AP)

With energy prices rising in part because of turmoil in the Middle East, lawmakers from both parties are questioning the Obama administration’s energy policies and arguing more should be done to develop domestic sources of energy.

“I don’t think the president’s position on oil and gas is as strong as it should be,” said Democratic Sen. Mary Landrieu of Louisiana, where the oil industry plays a large role in the local economy. “Oil and gas is an important industry in the United States today and it will be in the next decades.”

Many in the administration emphasize alternative forms of energy and some, including the president, have openly talked of the need for higher prices on oil and coal to make alternatives such as wind and solar more price-competitive.

Read the entire article here.

* I hope my post is fair and balanced. Not like the Fox version, but truly fair and truly balanced.

Petroleum’s Centrality, Volatility, Damage World Economies

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Processes such as innovation and competition are vital to enhancing world economies, but both of these are stifled in the world of petroleum. Either a place has oil, or it doesn’t, so there’s little place for either one.

True, there can be innovation in terms of the technology used to extract oil from hard to reach places such as the tar sands of Alberta or the floor of the Gulf of Mexico. But this is nothing like the innovation that is taking place in the competition to produce technologies that provide domestic, renewable, cost effective energy.

The article below highlights the pitfalls of our economies’ current dependence on an energy resource that is so subject to the swings we saw in 2008, when oil went from over $140 per barrel in August to only $40 in December. Petroleum’s centrality, its concentration in few places, such as North Africa and the Middle East, are further problems that should continue motivating us to find ways to reduce this reliance on a non-renewable resource.

Oil and the economy

The 2011 oil shock

More of a threat to the world economy than investors seem to think

Mar 3rd 2011 | From The Economist print edition

THE price of oil has had an unnerving ability to blow up the world economy, and the Middle East has often provided the spark. The Arab oil embargo of 1973, the Iranian revolution in 1978-79 and Saddam Hussein’s invasion of Kuwait in 1990 are all painful reminders of how the region’s combustible mix of geopolitics and geology can wreak havoc. With protests cascading across Arabia, is the world in for another oil shock?

[…]

Even without a disruption to supply, prices are under pressure from a second source: the gradual dwindling of spare capacity. With the world economy growing strongly, oil demand is far outpacing increases in readily available supply. So any jitters from the Middle East will accelerate and exaggerate a price rise that was already on the way.

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By contrast, the biggest risk in the emerging world is inaction. Dearer oil will stoke inflation, especially through higher food prices—and food still accounts for a large part of people’s spending in countries like China, Brazil and India. True, central banks have been raising interest rates, but they have tended to be tardy. Monetary conditions are still too loose, and inflation expectations have risen.

Read the entire article here.

Supporting Despotic Regimes for their Resources Is Not New

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It has been called “The Resource Curse” by economists. When a region has stores of petroleum, metals, arable land, or even spices in earlier days, it behooves the powerful to keep those regions stable, and open to extraction of these valuable resources. This often comes at the expense of the people whose wages are kept low and the lands whose protection is sacrificed to ensure cheap prices.

Eduardo Galeano wrote poetically, heart-breakingly, of this phenomenon and the price paid by people for centuries in his book, Open Veins of Latin America. John Perkins wrote about it more recently in Confessions of an Economic Hit Man. The article below continues this discussion in terms of oil and Libya’s Muammar Qaddafi.

These discussions should bring home to all of us the often unseen costs–economic, human, and ecological–of our consumption on distant people and places. If this isn’t shocking enough, you can read more about it here. This is the kind of depressing information with which I used to spend far too much time.

I’m much happier focusing on the positive and the possible solutions, rather than on the problems themselves, but it’s important to be reminded from time to time how pressing are the reasons why we need to change, and the costs if we continue irresponsible use of precious resources.

Qaddafi and his ilk

Blood and oil

The West has to deal with tyrants, but it should do so on its own terms

Feb 24th 2011 | from the print edition

LESS than two years ago, at the G8 summit in L’Aquila in Italy, prime ministers and presidents sat down to talk about world trade and food security with Muammar Qaddafi. Today Libya’s tyrant is paying mercenaries to shoot his people in the streets like “rats” and “cockroaches”.

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…but sometimes cynicism can be deeply naive

This is not an argument for callousness. The lesson from the Arab awakening is an uplifting one. Hard-headed students of realpolitik like to think that only they see the world as it truly is, and that those who pursue human rights and democracy have their heads in the clouds. In their world, the Middle East was not ready for democracy, Arabs not interested in human rights, and the strongmen the only bulwark between the region and Islamic revolution. Yet after the wave of secular uprisings, it is the cynics who seem out of touch, and the idealists have turned out to be the realists.

Read the entire article here.

Patience, Efficiency Are Key to Safe, Profitable Use of Brazil’s Oil

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There are a lot of people with a lot to gain from drilling this “presal” oil off Brazil’s coast as quickly as possible. I have worked with some of them and understand their desire to move forward with the extraction now, not later. I also understand their many good intentions as well as their confidence that the oil can be extracted safely using existing technology, even if I don’t agree.

I can also attest, from personal experience, to the truth of the article’s contention that government bureaucracy will be as inefficient at getting the job done as it will be at distributing any public funds to Brazilians and much needed government services. The barrier however, is not the Brazilian government, but existing technology.

And yes, prices at the pump are rising with no sign of abating, but it’s hard to see how speeding this oil drilling ahead in the next few years will do much to ease those prices in anything but the longest term. Plus, oil is a great example for supply creating its own demand. Increase the supply of oil and the lowered prices will drive us to use enough gasoline, diesel, and jet fuel to keep demand and prices high.

The first paragraph in the article below describes a process that is every bit as difficult, and as dangerous, as the one employed for the Deepwater Horizon platform formerly situated in the Gulf of Mexico. These processes and others like them can be and have been done safely, though recent experience tells us that not only is this safety far from ensured, but also that if something goes wrong, the consequences remind us exactly what the word “disaster” means.

The pressure to drill now is exacerbated by the high current demand for oil in the face of growing constraints. Some are reluctant to continue drilling off U.S. shores while the people and economies of Louisiana and other Gulf states are still reeling from last summer’s spill. Regardless of your political stripe, Middle East politics make us all a bit uneasy, especially when we think of how much of our oil comes from despotic and unstable regimes there.

Slowing our demand for oil, first by increasing efficiency and reducing use of transportation fuels, and then by continuing to develop viable alternatives to petroleum, will decrease the drive to rush drilling in places like the oil fields over 7000m beneath the ocean’s surface, through 3000m of rock and another 2000m of salt.

Given time, companies such as Petrobras will certainly improve technologies so that this oil can be reached more safely, with more effective failsafes in the event something does go wrong, and likely it will all be doable at lower costs, to the companies doing the drilling and to the consumer.

The additional time will also allow Brazil to continue eliminating corruption and streamlining its bureaucracy so that the permitting process is more efficient, as are the avenues through which the government spends its revenues and improves infrastructure.

These factors combine to create win-win-win situations for people, profit, and ecological health. Patience and efficiency are key.

Brazil’s offshore oil

In deep waters

Extracting the black gold buried beneath the South Atlantic will be hard. Spending the profits wisely will be harder

Feb 3rd 2011 | CIDADE DE ANGRA DOS REIS | From The Economist print edition

THE coast of Rio de Janeiro is 290km and 70 minutes away as the helicopter flies. High overhead, gas is flaring; underfoot, enough oil to fill 330,000 barrels is waiting to be offloaded. The ocean floor is 2,150 metres beneath. Drill past 3,000 metres of rock and you will hit a layer of salt 2,140m thick. Only after boring through that fossilised ocean will you strike oil—6.5 billion barrels’ worth in the “Lula” field alone. (Supposedly, it is named for the Portuguese word for squid, not the former president called Lula for his curly hair.)

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More hopeful is the prospect that technological progress, led by Petrobras, can diversify Brazil’s economy. The company employs more than 1,600 people in research and development, says Carlos Fraga, who leads these efforts. It also works with 85 Brazilian universities and research institutes, and for every one of its own researchers, another ten outside the company are working on its projects full-time. A technology cluster is springing up around Petrobras’s research labs in Rio, with university facilities alongside new $50m laboratories built by the likes of General Electric and Schlumberger.

From this perspective, the technical obstacles of sub-salt drilling look like an opportunity. Exploiting offshore oil, says Mr Fraga, could spur Brazilian innovation just as the space race did in the United States. “Just extracting the oil is not enough to move Brazil on in technological development,” says Segen Estefan of the Federal University of Rio de Janeiro. “These are finite resources. Brazil must seize the moment to lead in technology, not just in extracting and exporting raw materials.”

Read the entire article here.

Rural Economic Development and Environmental Health: Growing Hand in Hand

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Ahh…, the sweet sounds of economic development and environmental health, each growing hand in hand, as it should be.

Technology and other forms of innovation are making the conjunction of these essential benefits easier and easier to achieve.

This development is not shutting out the most common energy resources, “While renewable energy industries are generating lots of buzz, the traditional sectors of oil and gas are especially booming in Weld,” but is still working on the kinds of renewable energy that will be, hopefully, much more common in coming decades.

As the article below points out, not only is renewable energy creating jobs, it is creating high-paying jobs that will increase prosperity today and encourage greater education for tomorrow, all while improving the US balance of trade and making it easier for us to meet our current energy demands without compromising, but improving the prospects for future generations of Americans to do the same.

Thank you, Weld County, Colorado, for providing the example.

Greeley Tribune

Weld’s economy gets energized

Expanding renewable energy industries join the entrenched oil and gas, which is experiencing a boom of its own

By Chris Casey

Saturday, January 15, 2011

Wind turbines from the Cedar Creek Wind Farm near Grover in north Weld County and an oil/gas pump are some of the vast energy sources that are produced locally. Weld County has become one of Colorado’s leaders in energy production.

From the growing exurbs of Frederick and Dacono to the wind-swept prairie along the Wyoming border, Weld County has established itself as an energy hotbed.
The oil and gas industry has been a big player here for decades, accounting for 40 percent or more of Weld’s assessed valuation for at least 17 years, said Barbara Kirkmeyer, a Weld County commissioner. The industry accounts for about 4,000 jobs in Weld and supplies the county just shy of $50 million in property tax revenue annually.
But just as wells go through layer after layer of earth to reach the sweet spot, other energy industries are now stacking up in northeast Colorado: the renewable sectors of solar, wind and biomass.

Wind turbines from the Cedar Creek Wind Farm near Grover in north Weld County and an oil/gas pump are some of the vast energy sources that are produced locally. Weld County has become one of Colorado’s leaders in energy production.

Read the entire article here.

BP Oil Spill Demonstrates Need for (Limited) Government Intervention

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Is it possible for the gov’t to establish who–whether BP, Halliburton, Transocean, Anadarko, or others– is responsible for what portion of the damages in an efficient manner?

As has been written many times before on this site, this is the job of government: internalize the costs of these external damages so that the firms and other parties responsible are paying the bills.

The report said the explosion that triggered the worst offshore oil spill in U.S. history resulted from management failures by BP and its contractors as well as “failures of government to provide effective regulatory oversight of offshore drilling.” It said the root causes of the disaster were “systemic” and “might well recur” without significant changes to industry practices and government policies.”

The regulation described here is usually highly inefficient, inhibiting firms from the innovation that makes them both safe and profitable. When firms are held responsible for the costs of their actions, rather than strangled by regulation, they can perform the risk analysis necessary to see whether or not the technology and infrastructure they have available will make a potential drilling location, yes, both safe and profitable.

Already, the report has its detractors. Rex Tillerson, chief executive of Exxon Mobil Corp., told reporters Thursday he did “not agree that this is an industrywide problem,” adding that the report’s conclusions shouldn’t be extended to the entire sector. Exxon was one of a number of oil companies that claimed last summer that the Gulf of Mexico blowout was a one-time event caused by unusual and risky decisions by BP.

Holding responsible those specific firms that were involved with the tragedy* also means avoiding placing blame on those firms that are more careful with their choices of where and how to drill, mine, etc.

Under this kind of scenario, the costs associated with the 2010 Gulf spill would be, for the most part, passed along to the customers of these firms, but this is a much more efficient means of paying them than having them paid by taxpayers who use the products and services provided by BP from the Deepwater Horizon rig.

This brings us back to the original question: To what extent it is possible that government establish responsibility?

The goal is to ensure that those benefitting from the the consequences, both intended and unintended, of the drilling, are also held responsible for the direct as well as indirect costs. Taxpayers benefit in different proportions that the government is not able to establish.

The companies, once faced with the fines and other clean up costs, will pass those costs along to their users, meaning We The People (private consumers, not taxpayers) are able to decide how much these benefits are really worth.

  • JANUARY 7, 2011

BP Gets Lift From Oil-Spill Report

By GUY CHAZAN

The U.S. presidential commission’s report on last year’s Gulf of Mexico oil spill reduces the likelihood that BP PLC will be found guilty of gross negligence, legal experts and industry analysts said Thursday, potentially lowering the ultimate cost of the disaster to the U.K.-based oil giant.

A 48-page chapter from the report, released Thursday, shone a harsh spotlight on BP’s actions in the run-up to the blast at its gulf well, but also piled criticism on two of the company’s contractors, Transocean Ltd. and Halliburton Corp.

Read the entire article here.

Written by Jason

January 11th, 2011 at 9:24 pm

UK Forcing Oil Companies to Internalize their Externalities

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It looks like the UK will force energy companies wishing to drill for oil off its coasts to be responsible for potential indirect costs of their operations. Such a strategy, which economists would call internalizing their external costs, is what I and many others consider the most efficient way to preserve both economic and environmental health.

I think this is great news.

  • JANUARY 6, 2011, 5:33 A.M. ET

UPDATE: UK Lawmakers Question Deep Water Drilling Safety

   By James Herron
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)–U.K. lawmakers Thursday raised serious doubts about whether the oil industry is prepared to tackle an oil spill similar to the Deepwater Horizon blowout should it occur in the North Sea, but they stopped short of recommending a moratorium on drilling similar to that imposed in the U.S.

Instead, the U.K. Parliament’s Energy and Climate Change Committee called on the government and regulators to compel companies to improve their spill response plans, install extra failsafe equipment on rigs, and increase financial provisions for spill costs.

Major changes to drilling regulations could have a significant impact on the U.K. because its main deep water area, west of the Shetland Islands, is thought to be home to the bulk of the country’s undeveloped oil and gas resources. For this reason, “a moratorium on deep water drilling off the west coast of Shetland would undermine the U.K.’s energy security and isn’t necessary,” said Tim Yeo, the Conservative member of Parliament who is chair of the committee.

Read the entire article here.

Real People Show the Need to Internalize the Externalities

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If the devastation of the Gulf oil spill is too abstract, as it is for many of us, this story places faces and immediacy on the tragedy. The women discussed here have already lost their husbands and are now in danger of further losing their ability to make ends meet, as soon as the end of this month, this of all months. Yet executives and policy makers bicker over who’s responsible.

If BP and the other companies that operated the well were not fully prepared to pay the costs, then they should not have ventured after the benefits.

To put it unemotionally, the pain these women are experiencing is an externality. The job of government is not to distort the market, letting these firms profit at the expense of third parties, but to ensure that these companies are free to pursue their profits while ensuring that they must pay the costs, internal and external, direct and indirect, associated with their business.

Ah, it’s so simple, no?

  • DECEMBER 16, 2010, 12:08 P.M. ET

Widows Push Congress to Act on Gulf-Spill Measure

By DIONNE SEARCEY

Two widows of men killed in the Gulf of Mexico explosion that led to the largest offshore oil spill in U.S. history say they fear Congress is losing interest in passing a measure soon that would allow them to seek damages in court for the tragedy.

Under current law, families of anyone killed at sea—rather than on land—are banned from receiving damages for loss of care and comfort. Congress is considering a measure that would change the law for families of workers who died in the BP PLC explosion.

Read the entire article here.

Written by Jason

December 16th, 2010 at 11:54 pm