Q Recession, retrenchment, revolution? Impact of low crude prices on oil powers http://www.theguardian.com/business/2015/dec/30/oil-iran-saudi-arabia-russia-venezuela-nigeria-libya In an unprecedented year for the oil business, each of the major producers has its own problems. How will they react? An oil pump jack 2015 saw the dawn of a new era in the oil markets. Photograph: Mike Stone/Reuters Shaun Walker in Moscow Dominic Rushe in New York Chris Stein in Lagos Chris Stephen in Tunis Sibylla Brodzinsky in Caracas Hugh Miles in Cairo Saeed Kamali Dehghan and Larry Elliott Economics editor Wednesday 30 December 2015 17.00 AEDT Last modified on Wednesday 30 December 2015 21.34 AEDT A glut of oil, the demise of Opec and weakening global demand combined to make 2015 the year of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may have further to go. There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979, 1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should be positive for the world economy, with lower fuel costs for consumers and businesses in those countries that import crude outweighing the losses to producing nations. But the evidence since oil prices started falling from their peak of $115 a barrel in August 2014 has not supported that thesis – or not yet. Oil producers have certainly felt the impact of the lower prices on their growth rates, their trade figures and their public finances butthere has been no surge in consumer spending or business investment elsewhere. Economist still reckon there will be a boost from a lower oil price particularly if it looks as if the lower cost of crude will be sustained. Dhaval Joshi, an economist at BCA, a London-based research company, said: “A commodity bubble has deflated three times in the past 100 years: the first was after world war one; the second was after the 1980s oil shock; the third is happening right now.” For the big producer countries, this is a major headache, the ramifications of which are only starting to be felt. Oil powers base their spending plans on an assumed crude price. The graphic below shows just how far below water their budgets are. Oiled again Joshi says crude prices may fall by a further 35% to reach its long-term trend. That would mean an oil price closer to $25 a barrel - and fiscal crises in some of the world’s most pivotal economies. Saudi Arabia The Ras Tanura oil production plant in Saudi Arabia’s eastern province. Facebook Twitter Pinterest The Ras Tanura oil production plant in Saudi Arabia’s eastern province. Photograph: Bilal Qabalan/AFP/Getty Images Low oil prices are not just squeezing Saudi Arabia’s domestic budget, imposing austerity on a kingdom not used to it: it is taking its toll on Saudi support for foreign projects too. The kingdom this week announced swingeing budget cuts for 2016 to address an alarming deficit of 15% of GDP run up this year. Subsidies for water, electricity and petroleum products are likely to be cut, and government projects reined in. But overseas beneficiaries will face some austerity too. For years, Saudi Arabia has used its oil wealth to support friends and allies around the world, including media organisations, thinktanks, academic institutions, religious schools and charities. Countries that have traditionally benefited from Saudi largesse include Jordan, Lebanon, Bahrain, Palestine and Egypt. But now the IMF has raised the prospect that Saudi Arabia could go bankrupt in five years without changes to its economic policy, cuts in support to foreign allies seem inevitable. Egypt’s black-hole economy is potentially the kingdom’s most expensive foreign policy commitment. In recent years, Saudi Arabia has donated billions in cash and oil products but, despite this, the Egyptian economy, battered by war, terrorism and political instability, is facing an acute foreign currency shortage. Saudi Arabia's $640bn question Speculation is mounting that Saudi financial support to Egypt is starting to dry up – something the Egyptian authorities have denied – and that this is damaging the bilateral relationship. There have been some signs of tension. In July, Egypt’s oil minister said he had no objections to importing crude oil from Iran, a move sure to ruffle the Saudis. In September, the Saudi journalist Jamal Khashoggi – known for his closeness to the Saudi state – raised eyebrows when he said the new Egyptian culture minister, Hilmi al-Namnam, who is well known for his secularism and dislike of Wahhabi Islam, should never have been appointed. So far, the Saudi authorities have given few clear signs about how they are planning to respond to the oil price crisis, let alone lay out a long-term plan for a post-oil Saudi Arabia. Options under consideration are thought to include cutting construction projects, energy subsidies and public sector wages, introducing new taxes and privatisations, and issuing debt. Another possibility foreign observers have posited is that the Saudis will be forced to unpeg the riyal from the dollar, although given the potential this would have for uncontrollable knock-on effects on the rest of the economy, this seems likely to be a last resort. Cuts impacting on ordinary Saudis are something the government will be keen to avoid to maintain political stability, so industry, the public sector and foreign allies are likely to bear the brunt of the economic burden. Nigeria Nigeria’s president, Muhammadu Buhari, swears in his cabinet in November. Facebook Twitter Pinterest Nigeria’s president, Muhammadu Buhari, swears in his cabinet in November. Photograph: Afolabi Sotunde/Reuters The oil price slump has not prevented Nigeria’s new government from unveiling big spending plans – but analysts warn that the generosity is misplaced at a time when oil prices languish below $40 a barrel. Nigeria is Africa’s top oil producer and the World Bank estimates crude sales fund about 75% of the country’s budget. In its £19.8bn budget proposal, the government plans to increase spending by about one quarter over last year’s budget, and to pay for it by improving tax collection and cutting the cost of government. The budget includes £1.65bn for cash transfers to poor Nigerians. The programme was a campaign promise of the president, Muhammadu Buhari, who was elected in March on a platform of cutting corruption and weaning Nigeria’s economy off its dependence on oil revenue. But some analysts think the proposed budget is unrealistic during times of $40 oil. “This brings a dose of reality to a people who have extremely high expectations,” said Bismarck Rewane, the chief executive of Financial Derivatives Co. He predicted the government would have to back down on some of its promises. Nigeria is Africa’s largest economy, but most of the money is concentrated in the hands of a wealthy elite and about two-thirds of Nigerians live in poverty, according to the United Nations development programme. Nigeria overtakes South Africa to become Africa's largest economy Unemployment has climbed this year, hitting 9.9% in the third quarter, according to the National Bureau of Statistics. Chuba Ezekwesili, research analyst at Nigerian Economic Summit Group, says despite the falling price of crude, the country has been able to avoid a jump in inflation by imposing limits on the availability of foreign currency. While other major oil producing economies have let their currencies lose value along with oil prices, Nigeria has spent its reserves to prop up the value of the naira. But Ezekwesili says they can only do that for so long. “They’re sort of delaying the inevitable,” he said. “I feel like eventually it has to give way, and by the time it does I feel the economy is going to be hurt because a lot of businesses can’t work under those conditions.” Ezekwesili was also sceptical of the government’s ability to generate the revenue necessary to pay for programmes such as cash transfers to the poor. He doubts the government can accomplish its goals of streamlining its costs and generating more revenue by next year. “One thing I’ve learned about policies in Nigeria is we tend to be very optimistic but it never really works out exactly as we want it to,” Ezekwesili said. Russia Oil extraction at a Gazprom field in Khanty-Mansiysk, Russia. Facebook Twitter Pinterest Oil extraction at a Gazprom field in Khanty-Mansiysk, Russia. Photograph: TASS/Barcroft Media Vladimir Putin goes into 2016 with record approval ratings but the shakiest economic outlook since he took charge. In the 15 years he has been at the helm, 2015 was the first year that real wages registered a decline, something that did not happen even during the 2008-09 financial crisis. Oil and gas exports make up about half of the Russian budget, and the rouble rate has been strongly linked to the price of oil. Sanctions against Russia, particularly the ban on Russian banks seeking western credit, combined with falling oil prices in late 2014 to create a perfect storm that demolished the rouble, with the currency losing half of its value against the dollar, reviving memories of previous crashes. The currency regained some of its value by spring, but falling oil prices in autumn have caused it to fall back to lows similar to those it experienced in late 2014. Rouble in freefall despite rate hike Falling oil prices were one of the principal reasons for the collapse in the Soviet economy, and some economists are warning of history repeating itself. Riding on a wave of high oil prices for most of his presidency, the Russian president did not expect such a sharp downturn. Last October, Putin said that if the price of oil fell below $80 a barrel, the world economy would crash. A range of other top Russian officials made similar statements, in effect ruling out the possibility that oil could fall below $70. Some analysts say the rouble is still overvalued, and the current oil price should theoretically push the rouble down further. This is necessary to balance the budget: the fewer dollars Russia receives for the oil it sells, the higher the exchange rate needs to be for the budget to receive the requisite amount of roubles. For the budget to balance at 65 roubles, not far off the current rate, the price of oil should be $70, a recent Bank of America Merrill Lynch report found. For ordinary Russians, it could be a tough year ahead. Those who were used to travelling abroad have already had to scale back as the rouble made the cost of visiting foreign cities prohibitive; and rising food prices have made it harder to balance the books for many families. The 2016 budget, fixed in October, requires oil to be at $50 in order to run a 3% deficit within “acceptable” rouble rate limits, meaning if the price does not rise soon, cuts will need to be made or reserves spent. The war in Syria is an extra cost, and the announced increases in military spending are not likely to be reversed. US Belridge, California, one of the oldest and largest oilfields in the US. Facebook Twitter Pinterest Belridge, California, is one of the oldest and largest oilfields in the US containing tens of thousands of wells, many of which are being fracked. Photograph: Les Stone/Corbis Filling up at the gas station hasn’t been this cheap in the US since the recession. The nationwide average price of a gallon of regular is now $2.02 (£1.36), down 58 cents from this time last year, according to auto club AAA, and expected to fall further. Scared that North America’s oil boom threatens its grip, Opec, the oil cartel, stepped up production and forced a price war that has driven oil prices down to below $35 a barrel. US consumers have benefited from lower petrol prices to the tune of about $700 a year, according to the US government, and that money is fuelling consumer spending. According to a recent report from JP Morgan, 80% of that saving is being spent on goods and services. But the collapsing price of oil has also cast a shadow over the US energy industry – formerly one of the country’s fastest growing employers. Fracking – the controversial process of extracting oil and gas from shale rock – has become less attractive to investors as the oil price has fallen, and tens of thousands of jobs have been lost as a result. This year, the International Energy Agency said low oil prices would “slam the brakes” on the US shale industry and the impact is already being felt across the country’s oil producing areas. The US energy sector has cut more than 90,000 jobs this year, according to outplacement company Challenger, Gray & Christmas. And while the overall US unemployment rate has continued to fall, in Texas unemployment has risen since August, according to the Bureau of Labour Statistics. In North Dakota, home of the Bakken shale oil field, more than 17% of the mining jobs – which include oil and natural gas – have disappeared in the past year. More jobs look certain to be lost in the coming months. North of the border in Canada, things are even worse. In Alberta, “the Texas of the north”, job layoffs and the downturn of the economy have been blamed for a 30% rise in suicides between January and June, compared with 2014. In Saskatchewan, another energy-dependent region, there have been 19% more suicides this year. Daniel Pavilonis, senior commodity broker with RJO Futures, said the situation was only likely to get worse for those employed in the US energy sector. “There are oil tankers just sitting off the coast because we don’t need more supply. We have too much,” he said. “There’s oversupply and a lack of anybody trying to tighten production because they don’t want to lose market share.” As a result he predicts oil prices will go lower, taking more jobs with it. But for most consumers, it’s a win. Unlike other global economic trends, the oil price fall actually benefits average Americans, said Pavilonis. “This is our money,” he said. “For most people, it’s a good thing.” Venezuela A mural depicts President Nicolás Maduro. Facebook Twitter Pinterest A mural depicts President Nicolás Maduro, who, having lost the Venezuelan National Assembly, has a battle to keep economy and his leadership afloat. Photograph: Luis Robayo/AFP/Getty Images In most of the world, falling oil prices have caused significant reductions in petrol prices. But in the country with the world’s largest oil reserves, the oil glut could force a price rise. “It’s probably the only place in the world where with oil prices so low, they may raise gasoline prices,” says Pedro Méndez, an informal taxi driver in Caracas, the Venezuelan capital, who fills the tank of his Ford Laser for less than a dollar. But the lower the price of oil goes, the deeper Venezuela’s economy sinks. It’s near total dependence on crude exports for hard currency has seen the government of president Nicolás Maduro struggling to try keep the economy afloat. The political effect is already being felt. Gripped by spiraling inflation, chronic shortages of basic goods and a quickly depreciating currency, Venezuelan voters this month gave the opposition an overwhelming majority in the new legislature, which takes office in January. Each $1 drop in oil prices results in more than $685m in lost yearly oil income for PDVSA, the state-owned oil company, according to analysts. And every drop in crude prices means less funding for the health, education and housing and other social welfare programmes that won Maduro’s predecessor, Hugo Chávez, widespread support for his self-styled “Bolivarian revolution”. While dwindling oil revenue hurts the social programmes, Antonio Azpurua, a financial consultant with CFS Partners/LA Group, says it could be a blessing in disguise, allowing Venezuela to wean itself of its dependence on crude. “Venezuela needs to take advantage of low oil prices to build its industrial base,” he says. With a super-majority in the National Assembly, the opposition could reverse some of Maduro’s populist measures, which have contributed to the current economic crisis. They could also choose to raise petrol prices. Iran Iranians take to the streets to celebrate the nuclear deal. Facebook Twitter Pinterest Iranians took to the streets to celebrate the nuclear deal which will mean they can more freely trade their oil. Photograph: Abedin Taherkenareh/EPA Iran is rushing to implement the landmark nuclear accord in order to cash in on sanctions relief as early as next month, but the plummeting price of oil is tempering its expectations even though its economy has become less dependent on crude sales. Tehran currently exports 1.1m barrels of oil per a but the Iranian oil minister, Bijan Zanganeh, has announced that the country is aiming to double that amount within six months of sanctions being lifted, hoping it will return to the pre-sanctions level of 2.2m. Although the EU lifted Iranian sanctions in October after the Vienna nuclear agreement, the measures will only come into effect after what has become known as “implementation day”, the unknown date when the UN nuclear watchdog, IAEA, will verify that Iran has taken the necessary steps as outlined under the nuclear deal. Iran is expediting whatever it can to bring this date forward to as early as January. In an effort to woo foreign investment in the post-sanctions era, Iran put a set of new lucrative oil and gas contracts, worth more than $30bn, on the market this month. But all these efforts have come at a time when global oil prices are falling as a result of a crude surplus of 2m barrels a day, a phenomenon Tehran blames on the Saudis. “The drop in oil prices hurts all oil producers, not just Iran,” said Amir Handjani, president of PG International commodities trading services and a member of the board directors of RAK Petroleum. “Saudi Arabia is very aware that Iran will be able to sell its crude unencumbered by sanctions on the international market very soon and will use all means at its disposal to make sure Iran doesn’t recapture the market share it lost over the past four years,” he said. “Basically, Riyadh’s message to Tehran is simple: we can endure low oil prices for a while; can you?” But the experience of years under sanctions has made the Iranian economy “incredibly resilient”, according to Handjani. Iran’s economy faced huge economic problems in recent years due to international sanctions imposed over Tehran’s nuclear programme. Plummeting oil prices only added to economic woes in a country with the world’s fourth-largest oil reserves. “To be sure, low oil prices deny Tehran much needed revenue but unlike the Saudis, Iran’s economy is not solely dependent on oil exports. Oil revenue accounts for about 15% of Iran’s GDP,” Handjani told the Guardian. Sanctions have forced Iran to diversify its economy, he said. It has a large manufacturing base, IT sector, and robust agro-industries, which make its economy on the whole “much more balanced” than Saudi Arabia. “The Iranian economy has absorbed so many shocks over the past 36 years, from war to sanctions, that the pain of low oil prices now, as it breaks from international isolation, pales in comparison.” Without naming Saudi Arabia, Zanganeh said last week that it was clear which country had an excess of supply and that there was “no ambiguity about who they are”. On the occasion of unveiling new oil contracts, the Iranian minister said last month that his country was willing to play a major role in oil supply and was even ready to work with American companies. “The way for the presence of these companies in Iran’s oil industry is open,” he said at the Iran Petroleum Contracts Conference in Tehran. The deputy managing director of the national Iranian oil company (NIOC) told the Guardian in September that the Iranian government was earning more from tax than oil for the first time in almost half a century as the country shifts its traditional reliance on crude to taxation revenues in the face of falling oil prices. Critics say Iran is unlikely to maintain that equation when the lifting of sanctions allows it to export more oil. According to Opec, Iran on average was selling oil at $38.92 a barrel in November, $5.63 less than the average in October, which is the worst drop among the group’s members. Libya A fuel depots on fire in Libya. Facebook Twitter Pinterest Fuel depots and tankers have been targets for years in the struggle for control of Libya and its oil resources. Photograph: EPA Plunging oil prices are threatening disaster in Libya, where civil war has left the population depending on fast-dwindling oil revenues to survive. Libya has Africa’s largest oil reserves and in normal times this provides 95% of the country’s export revenues, keeping the economy afloat. But civil war between rival governments at either end of the country has shattered the economy, leaving the population almost wholly dependent on revenue generated overseas. The crash in oil prices has halved revenues, and shortages of foodstuffs and medicines – even petrol – are starting to be felt. This cash squeeze has triggered a three-way battle for control of what remains of the country’s oil wealth. Much of Libya’s largest group of oil fields, the Sirte Basin, is now held by Islamic State, which has interposed itself between forces of the rival governments. Most of what remains is in eastern Libya, held by the elected parliament based in Tobruk. Tobruk is using its status as the internationally recognised government to battle in foreign courts for the right to income from other producing fields, opposing the state-owned National Oil Corporation, whose headquarters remains in Tripoli, held by a rival parliament. Tobruk has set up a second National Oil Corporation, based in eastern Libya, and last month demanded international oil companies switch payments that currently go to Tripoli. Countering that, Tripoli’s NOC chief, Mustafa Sanallah, convened a conference in London in October calling on oil buyers to stick with him. Two of the world’s largest oil buyers, Glencore and Vitol, have agreed, but the eastern government has vowed legal action. London courts are likely to be the proving ground for this test of wills, with both governments already gearing up for a precedent-setting high court battle, due early next year, for control of the Libya Investment Authority, the country’s £65bn sovereign wealth fund. But whoever wins control of what remains of the oil industry may find it a pyrrhic victory. John Hamilton, director of London’s Cross-border Information, says the glut of oil on world markets and turbulence around the few remaining oil ports means Libyan oil has already been “priced out” by many buyers. UQ
the world needs more energy, we have more than enough now because things are going good. When things go bad their simply won't be enough affordable energy and things will go bad when we need more energy
Recession, retrenchment, revolution? I think there will be a revolution like the followings pretty soon! My guess is the oil countries may have already realised this potential upcoming trend for some years. https://www.climatecouncil.org.au/batterystoragereport2015?gclid=CJLB_9eBhMoCFcwTaAodSV0Mng http://www.cnet.com/au/news/tesla-powerwall-home-battery-coming-to-australia-by-late-2015/ http://www.popsci.com.au/space/us-senate-votes-to-legalize-space-mining,411747 https://en.wikipedia.org/wiki/Asteroid_mining http://www.space.com/30213-asteroid-mining-planetary-resources-2025.html
Q http://www.huffingtonpost.com/rober...891888.html?utm_hp_ref=australia&ir=Australia Robert Redford Actor, director and environmental activist Paris Agreement Marks Epic Movement Away From Fossil Fuels Posted: 30/12/2015 09:33 AEST Updated: 30/12/2015 09:59 AEST CALIFORNIA WIND TURBINES As a son of southern California in the 1950s, I grew up surrounded by reminders of the oil industry that fueled generations of economic growth in our country. Dad was an accountant for an oil company. I rode my bike past the giant derricks that pumped day and night. I even did a stint myself as a roustabout on the rigs. In recent decades, though, it's become increasingly clear that our reliance on oil, gas and coal has come at a grave and unsustainable cost to our health and the future of the planet. We just can't tolerate blowouts polluting our oceans, oil trains exploding in our communities, pipeline ruptures across our ranches and farms or the carbon pollution that's driving climate change. We have to shift away from fossil fuels and all the damage and danger they bring, and move toward cleaner, smarter ways to power our future. That's the heart and soul of the historic climate agreement reached this month in Paris, where the United States and 186 other countries put plans on the table for real action to fight climate change by moving toward a low-carbon global economy. We won't get there overnight. The fossil fuels that have been shaped the wealth of nations since the dawn of the Industrial Revolution still account for about 80 percent of global energy use. The Paris agreement, though, consolidated an epic movement away from those fuels. It advanced that shift. And it sent a clear message to the markets: we're not stuck with fossil fuels - and neither are our children. I've been pushing for this kind of breakthrough for four decades. I went to Paris to add my voice to those calling for real progress and change. It starts by doing what's right for our people at home, cutting our own carbon footprint in our own backyards. And it depends on all of us doing our part. That's why it was so heartening to sit in the grand Hotel de Ville - the city hall of Paris - alongside 400 mayors and other local leaders from around the world who are already taking action to make buildings more efficient, create sustainable transportation options and shift to wind and solar generation to power their cities. There's a global contest already underway over which country, or countries, will be best positioned to reap the benefits from the historic transition away from the dirty fossil fuels of the past and toward the cleaner energy options of the future. Now, much as California was near the center of the oil age, the state is leading the way to the clean energy era remaking the world. With four decades of progressive policies to promote clean air, energy efficiency, renewable power, carbon reduction targets and other sustainability goals, California has stolen a march on the competition in the greatest economic play of our lifetime. At the Paris climate talks, delegates clamored for a chance to ask Los Angeles Mayor Eric Garcetti about his plan to cut carbon pollution and other greenhouse gas emissions 80 percent by 2050. International governments from China to Israel got in line to hold bilateral meetings with Gov. Jerry Brown and his state legislative delegation. When Brown and Silicon Valley clean-tech investor Tom Steyer hosted a dialogue at the opulent Petit Palais, several hundred climate delegates came to hear their advice on how to stoke a clean energy revolution. "You need to get the right ideas, you need to be able to present them, and you have to build a coalition," said Brown. It's all about creating conditions where private industry, public policy-makers, visionaries and voters all play their respective roles. "This is an art," said Brown, "and a science." How's it working out? Last year California's economy grew 2.8 percent; national growth was 2.2 percent. California is getting more clean-tech investment than the rest of the country combined. And California creates nearly twice as much economic value, per unit of energy used, than the country overall. That's saving real money for our families and businesses. It's given California a leg up on its competition, across our country and around the world. And it's created a virtuous cycle as technological advances make clean-tech investments more attractive. Fighting climate change is a moral imperative. And yet, just as protecting our children from the widening dangers of climate chaos is a challenge, it's also an opportunity. It's the economic play of our lifetime. By doing what's right for our people at home, California has positioned itself for leadership abroad. Our people, and those of the world, are the better for it. UQ
Q http://www.news.com.au/finance/econ...t/news-story/ca6989d32ebe88158258f250e41a5690 The dive in oil prices is largely due to Saudi Arabia’s own policies and those of other OPEC nations, who are refusing to cut oil production as they seek to drive less-competitive players, including US shale producers, out of the market. With oil prices expected to remain low, Saudi authorities also projected a shortfall of $119 billion in the 2016 budget. Revenues in 2015 dropped to $222 billion, the lowest since the global financial crisis in 2009, due to a massive $168 billion fall in oil revenues. The contribution of oil income to revenues dropped to just 73 per cent in 2015, from an average of 90 per cent in the past decade. UQ
At least the Birth/Death model still hasn't lost its sense of humor, Mining sector has been positive the past 2 years. Hopefully some remember this goofy measure from 2008, particularly how positive the Financial Activities were that year!
%%%%%%%%%%%%%%%% Good points,+ not likely S Arabia gets hurt to much, they planned that production; TX still has lower unemployment than most of US[source IBD, NOV or DEC-investors business daily]NOT all oil trends are down, not a stock tip, but bear market ETFs on oil- theyre up-trending past year- good......................................................................
Q http://www.quantumrun.com/prediction/our-future-energy-abundant-world-future-energy-p6 Prediction | Our Future in an Energy Abundant World: Future of Energy P6 By David Tal, Publisher, Futurist @DavidTalWrites Jun 18, 2015, 3:48 AM If you’ve come this far, then you’ve read about the fall of dirty energy and the end of cheap oil. You’ve also read about the post-carbon world we’re entering, led by the rise of electric cars, solar, and all the other renewables of the rainbow. But what we’ve been teasing at, and what you’ve been waiting for, that’s the topic of this final part of our Future of Energy series: What will our future world, filled with nearly free, limitless, and clean renewable energy, really look like? This is a future that’s inevitable, but also one that humanity has never experienced. So let’s take a look at the transition before us, the bad, and then the good of this new energy world order. A not so smooth transition to the post-carbon era The energy sector drives the wealth and power of select billionaires, corporations, and even entire nations across the world. This sector generates trillions of dollars annually and drives the creation of many more trillions in economic activity. With all this money at play, it’s fair to assume there are a lot of vested interests who aren’t much interested in rocking the boat. Presently, the boat these vested interests are protecting involves energy derived from fossil fuels: coal, oil, and natural gas. You can understand why if you think about it: We’re expecting these vested interests to throw out their investment of time, money, and tradition in favour of a simpler and safer distributed renewable energy grid—or more to the point, in favour of an energy system that produces free and limitless energy after installation, instead of the current system that generates continuous profits by selling a limited natural resource on the open markets. Given this option, you can probably see why a CEO of a publicly traded oil/coal/natural gas company would think, "Fuck renewables." We’ve already reviewed how established, old school utility companies are trying to slow the expansion of renewables. Here, let’s explore why select countries might be in favour of those same backward, anti-renewable polities. The geopolitics of a de-carbonizing world Middle East. The OPEC states—especially those situated in the Middle East—are the global players most likely to fund opposition to renewables as they have the most to lose. Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iran, and Iraq collectively have the world’s largest concentration of easily (cheaply) extractable oil. Since the 1940s, this region’s wealth has exploded due to its near monopoly on this resource, building sovereign wealth funds in many of these countries in excess of a trillion dollars. But as fortunate as this region has been, the resource curse of oil has turned many of these nations into one trick ponies. Instead of using this wealth to build developed and dynamic economies based on diverse industries, most have allowed their economies to depend entirely on oil revenue, importing the goods and services they need from other nations. This works fine when the demand and price of oil remains high—which it has been for decades, the last decade especially so—but as the demand and price of oil begins to decline over the coming decades, so too will those economies that depend on this resource. While these Middle East nations aren’t the only ones who struggle from this resource curse—Venezuela and Nigeria are two obvious examples—they do also struggle from a unique grouping of challenges that will be difficult to overcome. To name a few, we see a Middle East faced with the following: A ballooning population with a chronically high unemployment rate; Limited personal freedoms; Disenfranchised female population due to religious and cultural norms; Poor performing or uncompetitive domestic industries; An agricultural sector that cannot meet its domestic needs (a factor that will steadily worsen due to climate change); Rampant extremist and terrorist non-state actors that work to destabilize the region; A centuries long feud between two dominant denominations of Islam, currently embodied by a Sunni bloc of states (Saudi Arabia, Egypt, Jordan, United Arab Emirates, Kuwait, Qatar) and a Shiite bloc (Iran, Iraq, Syria, Lebanon) And the very real potential for nuclear proliferation between these two blocs of states. Well, that was a mouthful. As you can imagine, these aren’t challenges that can be fixed anytime soon. Add declining oil revenues to any one of these factors and you have the makings of domestic instability. In this region, domestic instability generally leads to one of three scenarios: a military coup, a deflection of domestic public anger to an outside country (e.g. reasons for war), or a total collapse into a failed state. We’re seeing these scenarios play out on a small scale now in Iraq, Syria, Yemen, and Libya. It will only get worse should Mideast countries fail to successfully modernize their economies over the next two decades. Russia. Much like the Middle East states we just spoke about, Russia also suffers from the resource curse. However, in this case, Russia’s economy is dependant on revenues from natural gas exports to Europe, more so than exports of its oil. Over the past two decades, revenues from its natural gas and oil exports have been the bedrock of Russia’s economic and geopolitical revival. It represents over 50 per cent of government revenue and 70 per cent of exports. Unfortunately, Russia has yet to translate this revenue into a dynamic economy, one that’s resistant to swings in the price of oil. For now, domestic instability is controlled by a sophisticated propaganda apparatus and a vicious secret police. The politburo promotes a form of hypernationalism that thus far has insulated the nation from dangerous levels of domestic criticism. But the Soviet Union had these same tools of control long before current day Russia did, and they weren’t enough to save it from collapsing under its own weight. Should Russia fail to modernize within the next decade, they may enter a dangerous tailspin as demand and prices for oil begin their permanent decline. However, the real problem with this scenario is that unlike the Middle East, Russia also has the world’s second largest stockpile of nuclear weapons. Should Russia fall again, the risk of these weapons falling into the wrong hands is a very real threat to global security. United States. When looking at the United States, you’ll find a modern empire with: The world’s largest and most dynamic economy (it represents 17 per cent of global GDP); The world’s most insular economy (its population buys most of what it makes, meaning its wealth isn’t excessively dependant on external markets); No one industry or resource represents the majority of its revenue; Low levels of unemployment relative to the world average. These are just a few of the US economy’s many strengths. A big but however is that it also has one of the biggest spending problems of any nation on Earth. Frankly, it’s a shopaholic. Why is the US able to spend beyond its means for so long without much, if any, repercussions? Well, there are a number of reasons—the biggest of which stems from a deal made over 40 years ago at Camp David. Then President Nixon was planning to move off the gold standard and transition the US economy towards a floating currency. One of the things he needed to pull this off was something to guarantee demand for the dollar for decades to come. Cue the House of Saud who made a deal with Washington to price Saudi oil sales exclusively in US dollars, while buying up US treasuries with their surplus petrodollars. From then on, all international oil sales were transacted in US dollars. (It should be clear now why the US has always been so cosy with Saudi Arabia, even with the huge gulf in cultural values each nation promotes.) This deal allowed the US to keep its position as the world’s reserve currency, and in so doing, allowed it to spend beyond its means for decades, while letting the rest of the world pick up the tab. It’s a great deal. However, it’s one that’s dependant on continued demand for oil. So long as demand for oil remains strong, so too will the demand for US dollars to buy said oil. A dip in the price and demand for oil will, over time, limit US spending power, and ultimately place its standing as the world’s reserve currency on shaky ground. Should the US economy falter as a result, so too will the world (e.g. see 2008-09). These examples are just a few of the obstacles between us and a future of limitless, clean energy—so how about we switch gears and explore a future worth fighting for. Breaking the death curve of climate change One of the obvious benefits of a world run by renewables is breaking the dangerous hockey stick curve of carbon emissions we’re pumping into the atmosphere. We’ve already spoken about the dangers of climate change (see our epic series: Future of Climate Change), so I’m not going to drag us into a lengthy discussion about it here. The main points we need to remember are that the majority of emissions polluting our atmosphere come from burning fossil fuels and from methane released by the melting arctic permafrost and warming oceans. By transitioning the world’s power generation to solar and our transportation fleet to electric, we’ll move our world into zero carbon emission state—an economy that meets its energy needs without polluting our skies. The carbon we’ve already pumped into the atmosphere (400 parts per million as of 2015, 50 shy of the UN’s red line) will stay in our atmosphere for decades, maybe centuries, until future technologies suck that carbon out of our skies. What this means is that the coming energy revolution won’t necessary heal our environment, but it will at least stop the bleeding and allow the Earth to begin healing itself. End of hunger If you read our series on the Future of Food, then you’ll remember that by 2040, we’ll enter a future that has less and less arable land due to water shortages and rising temperatures (caused by climate change). At the same time, we have a world population that will balloon to nine billion people. The majority of that population growth will come from the developing world—a developing world whose wealth will skyrocket over the coming two decades. Those larger disposable incomes are predicted to lead to an increased demand for meat. An increased demand for meat will consume our supply of grains, thereby leading to food shortages and price spikes that could destabilize governments the world over. Well, that was a mouthful. Luckily, our future world of free, limitless, and clean renewable energy might avoid this scenario in a number of ways. First, a large chunk of the price of food comes from fertilizers, herbicides and pesticides made from petrochemicals; by reducing our demand for oil (e.g. transitioning to electric vehicles), the price of oil will collapse, making these chemicals dirt-cheap. Cheaper fertilizers and pesticides ultimately reduce the price of grains used to feed animals, thereby reducing the costs of all manner of meats. Water is another big factor in the production of meat. For example, it takes 2,500 gallons of water to produce a single pound of beef. Climate change will deep six much of our water supply, but through the use of solar and other renewables, we can build and power huge desalination plants to turn seawater into drinking water cheaply. This will let us water farmland that no longer receives rainfall or no longer has access to useable aquifers. Meanwhile, a transportation fleet powered by electricity will cut the cost of transporting food from point A to point B in half. Finally, if countries (especially those in arid regions) decide to invest in vertical farms to grow their food, solar energy can power these buildings entirely, cutting the cost of food even further. All these benefits of limitless renewable energy may not protect us entirely from a future of food scarcity, but they will buy us time until scientists innovate the next Green Revolution. Everything becomes cheaper In reality, it’s not just food that will become cheaper in a post-carbon energy era—everything will. Think about it, what are the major costs involved in making and selling a product or service? We’ve got the costs of materials, labour, office/factory utilities, transportation, administration, and then the consumer-facing costs of marketing and sales. With cheap-to-free energy, we’ll see huge savings in many of these costs. Mining raw materials will become cheaper through the use of renewables. The energy costs of running robot/machine labour will fall even lower. The cost savings from running an office or factory on renewables are pretty obvious. And then the cost savings from transporting goods via electrically powered vans, trucks, trains, and planes will cut costs that much more. Does this mean everything in the future will be free? Of course not! The costs of raw materials, human labour, and business operations will still cost something, but by taking the cost of energy out of the equation, everything in the future will become much cheaper than what we see today. And that’s great news considering the unemployment rate we’ll experience in the future thanks to the rise of robots stealing blue collar jobs and super intelligent algorithms stealing white collar jobs (we’ll cover this in our Future of Work series). Energy Independence It’s a phrase politicians around the world trumpet whenever an energy crisis emerges or when trade disputes pop up between energy exporters (i.e. oil rich states) and energy importers: energy independence. The goal of energy independence is to wean a country off of a perceived or real dependence on another country for its energy needs. The reasons why this is such a big deal are obvious: Depending on another country to provide you with the resources you need to function is a threat to your country’s economy, security, and stability. Such a dependence forces energy-poor countries to spend excessive amounts of money importing energy instead of funding worthwhile domestic programs. This dependence also forces energy-poor countries to deal with and support energy exporting countries that may not have best reputations in terms of humans rights and freedoms (ahem, Saudi Arabia and Russia). In reality, every country around the world has enough renewable resources—collected through solar, wind or tidal—to power its energy needs entirely. With the private and public money we’ll see invested in renewables over the next two decades, countries around the world will one day experience a scenario where they no longer have to bleed money to energy-exporting countries. Instead, they will be able to spend the money saved from once importing energy on much needed public spending programs. Developing world joins the developed world as equals There’s this assumption that in order for those living in the developed world to continue leading their modern consumerist lifestyles, the developing world cannot be allowed to reach our standard of living. There’s just not enough resources. It would take the resources of four Earths to meet the needs of the nine billion people expected to share our planet by 2040. But that kind of thinking is so 2015. In the energy rich future we’re heading into, those resource constraints, those laws of nature, those rules are thrown out the window. By fully tapping into the power of the sun and other renewables, we’ll be able to meet the needs of everyone born in the coming decades. In fact, the developing world will reach the developed world’s standard of living much faster than most experts might think. Think about it this way, with the advent of mobile phones, the developing world was able to leapfrog over the need to invest billions into a massive landline network. The same will be true with energy—instead of investing trillions into a centralized energy grid, the developing world can invest much less into a more advanced decentralized renewable energy grid. In fact, it’s already happening. In Asia, China and Japan are beginning to invest more in renewables than traditional energy sources like coal and nuclear. And in the developing world, reports have shown a 143 per cent growth in renewables. Developing countries have installed 142 gigawatts of energy between 2008-2013—a far larger and faster adoption than wealthier countries. The cost savings generated from a move towards a renewable energy grid will open up funds for developing nations to leapfrog in many other areas as well, like agriculture, health, transportation, etc. The last employed generation There will always be jobs, but by mid-century, there’s a good chance most of the jobs we know today will become optional or cease to exist. The reasons behind this—rise of robots, automation, big data powered AI, substantial decreases inthe cost of living, and more—will be covered in our Future of Work series, to be released in a few months time. However, renewables could represent the last huge bumper crop of employment for the next few decades. The majority of our roads, bridges, public buildings, the infrastructure we rely on everyday was built decades ago, particularly the 1950s to 1970s. While regular maintenance has kept this shared resource functioning, the reality is that much of our infrastructure will need to be rebuilt completely over the next two decades. It’s an initiative that will cost trillions and will be felt by all developed countries the world over. One big part of this infrastructure renewal is our energy grid. As we mentioned in part four of this series, by 2050, the world will have to entirely replace its aging energy grid and power plants anyway, so replacing this infrastructure with cheaper, cleaner, and energy maximizing renewables just makes financial sense. Even if replacing the infrastructure with renewables cost the same as replacing it with traditional power sources, renewables still win—they avoid national security threats from terrorist attacks, use of dirty fuels, high financial costs, adverse climate and health effects, and a vulnerability to wide scale blackouts. The next two decades will see one of the biggest job booms in recent history, much of it in the construction and renewables space. These are jobs that can’t be outsourcedand that will be desperately needed during a period when mass employment will be at its peak. The good news is these jobs will lay the groundwork for a more sustainable future, one of abundance for all members of society. A more peaceful world Looking back through history, much of the world’s conflict between nations arose due to campaigns of conquests led by emperors and tyrants, disputes over territory and borders, and, of course, battles for control of natural resources. In the modern world, we still have empires and we still have tyrants, but their ability to invade other countries and conquer half the world is over. Meanwhile, the borders between nations have largely been set, and aside from a few internal secessionist movements and squabbles over small provinces and islands, all-out war over land from an outside power is no longer in favour among the public, nor profitable economically. But wars over resources, they are still very much in vogue. In recent history, no resource has been as valuable, nor indirectly brought about as many wars, as oil. We’ve all seen the news. We’ve all seen behind the headlines and government doublespeak. Shifting our economy and our vehicles away from oil dependence won’t necessary end all wars. There are still a variety of resources and rare earth minerals the world can fight over. But when nations find themselves in a position where they can completely and cheaply satisfy their own energy needs, allowing them to invest the savings into public works programs, the need for conflict with other nations will diminish. On a national level and on an individual level, anything that moves us away from scarcity to abundance minimizes the need for conflict. Moving from an era of energy scarcity to one of energy abundance will do just that. FUTURE OF ENERGY SERIES LINKS The slow death of the carbon energy era: Future of Energy P1 Oil! The trigger for the renewable era: Future of Energy P2 Rise of the electric car: Future of Energy P3 Solar energy and the rise of the energy internet: Future of Energy P4 Renewables vs the Thorium and Fusion energy wildcards: Future of Energy P5 Learn More The following popular and institutional links will give you a deeper insight about this prediction: Fortune She's an inventor. She's 25. And she wants to make true wireless charging a reality Bloomberg Seven reasons cheap oil can't stop renewables now Nanyang Technological University NTU develops ultra-fast charging batteries that last 20 years Nature High-power lithium ion microbatteries from interdigitated three-dimensional bicontinuous nanoporous electrodes Engadget Fast-charging batteries will power your gadgets for 20 years Bloomberg (2) Get ready for life without oil Quartz The man who brought us the lithium-ion battery at the age of 57 has an idea for a new one at 92 Off Grid Quest Tesla motors announces a new home battery; living off the grid will soon be status quo Quartz (2) Two industrial titans are duking it out over a technology that could make electric cars mainstream YouTube Elon musk debuts the tesla powerwall Washington Post Why Tesla’s announcement is such a big deal: The coming revolution in energy storage The New York TImes Tesla ventures into solar power storage for home and business Stratfor UQ
Q http://www.bloombergview.com/articles/2015-01-16/get-ready-for-life-without-oil Get Ready For Life Without Oil Jan 16, 2015 12:11 PM EST By Noah Smith Saudi Arabia isn't the nicest ally to have. The desert kingdom just handed out a sentence of 1,000 lashes to a blogger for running a website devoted to freedom of speech. Not exactly the kind of regime we want to have in our circle of friends, especially once you figure in their financial support for Islamic State and other radical Islamist groups. But you go to war with the allies you have, not the allies you wish you had. And in the global oil price war against Russia and Iran, Saudi Arabia is the U.S.’s indispensable ally. By continuing to pump the black stuff at an undiminished rate, the Saudis are repeating the trick they pulled in the mid-'80s, allowing oil prices to plunge in response to Western supply increases, thus depriving their rival (Iran) and ours (Russia) of revenue -- and, in the process, temporarily tanking the U.S. shale industry. It would be nice if we could escape this cycle -- to say nothing of limiting global carbon emissions. But oil remains the indispensable commodity, without which industrial civilization will be thrown back to the coal age -- or worse. So we’re stuck with the Saudis, stuck with Russia and Iran, and stuck with our dependence on a single nonrenewable pollution-generating resource. But what if we had a real-life Iron Man, to build us magical “arc reactors” and solve our energy needs forever. Well, we do have the man who inspired the movie version of Tony Stark --Tesla founder Elon Musk. Musk and Tesla haven’t invented the arc reactor, but they are making rapid incremental improvements to a more down-to-earth technology -- the lithium-ion battery. Tesla’s planned “gigafactories” in Nevada and (possibly) New York will harness economies of scale to an unprecedented degree, building on improvements that have slashed battery-based energy storage costs during the past two decades. Just to give you an idea of how fast battery costs have declined, here is a chart (via futurist Ramez Naam) showing how the amount of energy that can be stored in lithium-ion batteries per $100 rose from 1991 to 2005: battery chart That data is from a 2009 study by Duke University. Nor did storage efficiency stop after 2005; according to Naam, the cost of electric-car batteries declined by 40 percent from 2010 to 2013. The Tesla gigafactories are projected to drive costs down at an even faster rate. These declines, unlike the recent 50 percent drop in oil prices, are not temporary. They are driven by increasing demand, which spurs technological progress -- not by reduced demand, which lowers the oil price. In the case of oil, new technologies such as fracking allow us to get more oil, but always at a higher cost than before -- in the case of batteries, technology just keeps getting better and better. A 2011 McKinsey & Co. analysis reported that battery prices would have to drop by about three-quarters to make electric cars cost-competitive at gas prices of $2.50 per gallon. But that was four years ago, and battery prices have continued falling. We could see cost-competitive electric cars taking over the road in as little as a decade. That’s how fast the cost trend is moving. Of course, that will require extensive modifications to our transportation-energy infrastructure -- we’ll need to replace gas stations with charging stations. That’s why Iron Man – er, Elon Musk – has decided to allow other companies to use Tesla's patented technology free of charge. When other car companies get in on the electric-car game -- such as General Motors, which just announced a new electric car, the Chevy Bolt -- the incentive increases to build more electric-charging infrastructure. The more charging infrastructure gets built, the more incentive there is for consumers to buy electric cars, and so forth -- a classic case of a network effect. Electric cars won't free humanity from the need for oil. We also use oil for making plastics and other products, and for heating. Heating oil will eventually be supplanted by solar power, of course, for which Musk’s batteries will also come in handy (bye bye, utility industry!). And we use oil for jet fuel, which can’t easily be replaced with batteries. But ground transportation still makes up the bulk of our oil use. So when batteries advance to the point where oil is no longer used for cars and trucks, the Saudis, Russians and Iranians will find themselves selling what is suddenly a niche product. And simultaneously, the U.S., Japan, Europe and other energy importers will find themselves free from the yo-yo of global oil prices. In other words, it’s less than two decades until we are free from the yoke of the petrostates and their nasty, backward regimes. Go Iron Man! …Um, I mean, Elon Musk. UQ