[Rhodes22-list] Energy, Farming, High School Geopolitics

[TN Rhodey]

Brad,

For the most part I have stayed out of the energy thread. Short term I am 
sure Middle East oil producers could cut us off. The one thing we can all 
agree on is we need to find an alternative to oil.

Wally


>From: "Brad Haslett" <flybrad at gmail.com>
>Reply-To: The Rhodes 22 mail list <rhodes22-list at rhodes22.org>
>To: "The Rhodes 22 mail list" <rhodes22-list at rhodes22.org>
>Subject: [Rhodes22-list] Energy, Farming, High School Geopolitics
>Date: Fri, 7 Jul 2006 10:33:11 -0500
>
>Here is one last stab at energy, farming, and high school geopolitics.
>I'm very busy the rest of the month so everyone can breathe easy.
>First, let's clear the air about some numbers.
>
>
>
>Bill and Dave don't like my Straight of Hormuz numbers and attack the
>whole argument about what a strategic choke point it is based on their
>numbers.  My number was a quick and dirty number from memory based on
>Gulf oil reserves times the shipping rate past Hormuz.  Bill and
>Dave's number are based on the percentage of total world production,
>20% plus.  Allow me to be specific.  Roughly 40% of the worlds traded
>oil flows past Hormuz.  That is a lot.  Using the lowest number tossed
>out, 20% of the total production, would cause a worldwide shortage and
>price spike that would make the previous OPEC created shortages seem
>mild in comparison.  If you look down the road, two-thirds of the
>world's oil reserves are in the Gulf region.
>
>
>
>Dave doesn't think based on his Wikopedia research Hormuz can be
>closed.  Yet, the same articles he sites clearly explains that the
>tanker shipping routes are 1 mile wide with a 2 mile buffer.  What
>happens if you sink a tanker, or a US aircraft carrier, in the middle
>of the shipping channel?  The Iranians have Russian submarines and
>Chinese gunboats.  They also have mines. Wally wonders why they would
>do this when they need to ship oil as well.  Good question.  Why does
>their leader openly state that Israel should be wiped off the map and
>the Holocaust never happened?  They're crazy perhaps?  Another
>question, why do they need a nuclear reactor? Is it because they are
>concerned about damaging the environment by burning oil for
>electricity?
>
>
>
>Now Bill thinks the US and Russia produce more oil than all the Gulf
>countries that ship through Hormuz.  Actually, the Gulf production in
>2004 (DOE data) was 21.76 million barrels per day versus 17.96 for the
>US and Russia.  The US does not export oil, we consume all we produce,
>as does China.  Russia exported 6.67 million barrels a day.  But let's
>look further down the road at reserves.  Russia and the US combined
>have 81.4 billion of reserves (JAN 06 DOE) compared to 711.1 billion
>for the Persian Gulf.  Hardly comforting.  More discomforting, the
>Chinese are cutting deals everywhere.  Everywhere!  Now as to some of
>those other big oil countries, Nigeria, Venezuela, Libya, and Algeria
>are also members of OPEC.  Nigeria and Venezuela are both having their
>internal political problems that have affected oil production.
>
>
>
>Let's talk about tar sands.  If you count Canada's tar sands into
>reserves, Canada has the second largest reserves behind Saudi Arabia.
>Only one small problem, the extraction of oil from tar sands requires
>huge amounts of energy (currently natural gas) and creates enormous
>environmental damage.  If the sands were to be fully developed, Canada
>would be forced to withdraw from Kyoto.  If Al Gore is correct, the
>inconvenient truth is that mining tar sands will accelerate our
>journey to New York City being innundated with the Atlantic Ocean.
>But let's assume Al is full of it and the environmentalists will give
>Canada a bye.  Who is one of the biggest investors in tar sands?
>China!  In fact, the Chinese are exploring building a pipeline to the
>West Coast of Canada for shipment to China. There has been talk of
>building a nuclear reactor in Alberta to replace natural gas as the
>hot water source.  Let's hope so.  If production of tar sands ramps
>up, our largest outside source of natural gas, Canada, will compete
>with the winter heat source for many of us.  Oh yeah, and don't forget
>all those clean burning electric peaking plants encouraged by the
>Clinton administration that burn natural gas.
>
>
>
>Bill is correct when he states that the Saudis are worried about the
>price of oil.  At current prices, biodiesel, Dave's synfuels, and
>Brazilian ethanol start to look attractive.  The Saudis have always
>been the swing producer in the market and for years tried to keep oil
>in the $22 to $28 basket range.  Oil has moved to a new whole range
>and the world economy hasn't tanked.  We'll probably never see oil
>less than $30 again, ever.  The Saudis would love to keep oil at just
>under the level where alternatives look attractive.  I assume Dave's
>synfuel includes coal to oil.  Only one small problem there as well,
>coal demand is at an all time high.  We produce over 50% of our
>electricity (you can look up the exact number) and no new nuclear
>reactors have been built in over 30 years.  Let's say nukes are bad
>and coal is good.  We can sacrifice West Virginia and some other
>places and press on with our happy selves.
>
>
>
>Now what the hell does any of this have to do with farming?  Well, for
>one thing, farming takes a lot of fuel, not only for tractors and
>combines but for fertilizer as well.  If biofuels becomes a
>significant part of the mix, those crops will compete with food crops.
>We couldn't replace our current crude consumption if we planted every
>square inch of farm ground in the US.  But, we could make a dent.  The
>problem is, the USDA has focussed on a handful of cerial grains and
>cotton to the exclusion of other crops.  Small family farmers have
>been forced to suck on whatever teat the USDA was offering in any
>given year rather than choose what the next best crop in rotation
>would be.  Not good for the land and not in the long term best
>interest of the farmer.  The program is set up to reward the biggest
>and most aggressive. What do we do with all this excess grain?  We
>export it at prices that harm small farmers in third world countries.
>Farmland prices are inflated according to what subsidy is available.
>This prevents new farmers from entering the market and existing small
>farmers from expanding.  The rich get richer.  What started as a
>safety net for family farms has become a perverse redistribution of
>wealth.  This is bad social policy and bad economic policy.  Where it
>really gets perverse is when you combine agricultural policy with
>energy policy.  Brazil makes ethanol from sugar beets rather than
>corn, a much more efficient process.  We consumers pay well above
>world market prices for sugar to protect US growers of sugar crops and
>there is an import restriction on Brazil ethanol imports.  We like
>corn; we subsidize it, export it, and convert it into fuel even though
>the net energy gain is only about 1.1 to 1.  If we put less emphasis
>on corn and grew rapeseed, we could get about 3.3 to 1 energy
>efficiency out of biodiesel.  We currently make biodiesel out of
>soybeans, another subsidized crop.  If you are a farmer choosing what
>to grow next year, what will you choose?  Subsidized corn, soybeans,
>cotton, or an energy crop?
>
>It is impossible to discuss energy independence from bio fuels without
>discussing farm policy.
>
>
>
>So where are we now?  Let's just assume that alternatives are
>available that are competitive at current prices.  We make ourselves
>energy independent and let China have the rest of the world's oil.
>Oil prices would drop, we would have to compete with China in the
>world market with say, $75 a barrel equivilent cost to whatever new
>lower crude price per barrel.  Not a very sunny prospect.  So here is
>my high school geopolitical analysis.  Two thirds of the world's oil
>is located in a region that hates us no matter how nice we play.  That
>oil has to flow through choke points.  China doesn't give a hoot about
>policing the world as long as oil flows to China.  Countries like Iran
>have influence well beyond what they would otherwise because they
>convert their oil into weapons.  I don't have the solution, and
>Congress is more than happy to pander to their constituents and tell
>them what they think they want to hear rather than look for viable
>solutions.  You figure it out.
>
>
>
>As John Lennon said, Imagine!  Imagine if instead of one sane and
>rational democracy in the Middle East, Israel, we had two, Israel and
>Iraq.  What if the other countries in the area envied their standard
>of living and freedoms and called for revolution?  Someone got a
>better idea?  Anyone?  If not, we'd better get busy farming and
>mining, building nuclear reactors, drilling ANWAR and the coastlines.
>Based on my knowledge of China, they don't give a shit about
>environmental problems or who shoots at whom, as long as the oil keeps
>flowing.
>
>
>
>BTW, I haven't tried Wally's baloney sandwich yet but I have eaten a
>great deal of crow in my lifetime.  If you prepare it just right it
>tastes just like chicken.
>
>
>
>Brad
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