Thursday, March 31, 2011

The Arab Awakening and Shifting Oil Sands: Obama's Georgetown Speech; "Ethical Oil"; Canada's Bible Belt

From Le Monde Diplomatique English Edition, in larger format here.

US President Barack Obama's Wednesday March 30, 2011 speech at Georgetown University on US energy policy, particularly regarding oil, has stimulated a number of commentaries and articles, all the more so in Canada, one of the potential beneficiaries. It is particularly newsworthy since Canada has just begun its federal election campaigning and will elect its new government and Prime Minister on May 2, 2011. The current minority government, Prime Minister Stephen Harper's Conservative Party, stands to benefit most from promises of more Canadian oil exports to the US. Most of Canada's oil production is in the Province of Alberta, from whence the Prime Minister and his most trusted advisers and Cabinet Ministers hail.

Alberta is arguably the country's most conservative province. It is socially, economically, and politically conservative. The province has the "freest economy" in Canada, and the second freest of all the states and provinces of the US and Canada, in other words the least regulation, the most free market principles applied. It has a new and growing Wildrose Alliance Party, created by conservatives who wanted a more right-wing and populist alternative to the provincial Conservative Party. Highly libertarian and socially conservative it has been compared to the American Tea Party.

At one level, this need for a more conservative Conservative party is hard to imagine as the province was long governed by the extremely conservative Premier Ralph Klein of the right-wing of the Progressive Conservative Party--sort of a Canadian Newt Gingrich. who out-Newted the Newt in the 90's. On the other hand, the Wildrose Alliance Party grew from a perceived shift toward a more moderate conservatism both federally and provincially--both perceived instances of moderation required by minority governments at the provincial and federal levels.

Alberta is also the buckle of Canada's Bible Belt which stretches along the southern border of Manitoba, Saskatchewan, Alberta, and into some areas of British Columbia. Southern Alberta is perhaps the largest and best known stronghold of a Christian conservatism that dates to settlement by Hutterites and Mennonites, among others, seeking the freedom to pursue a more conservative religion than easily tolerated elsewhere. It is home to the Social Credit Party which was based in Christian conservatism, as was the Reform Party which dissolved into the current Conservative Party of Canada. Our current Prime Minister, Stephen Harper, was on the right wing of the Reform Party before the merger.

The University of Calgary in the province's largest city, at the southern pole of the Calgary-Edmonton urban corridor, has an extremely conservative social sciences faculty, including its departments of economics, and of political sciences, whence Stephen Harper received his MA in Economics, and made the relationships which staff his advisory panels and his Cabinet. After George W Bush left office, the only place in Canada that he and his political allies (Condoleeza Rice, Donald Rumsfeld) were invited to speak was the University of Calgary.

The Athabasca Oil Sands in Alberta, Canada, are a very large source of bitumen,
which can be upgraded to synthetic crude oil.

Edmonton, in the north, is the hub of oil energy production in the province and the country, as it sits on the traditional oil field region, but Calgary is the seat of political power and economic power as the provinces largest city. Canada's "oil sands" are also located in the north, so the balance of economic power may also eventually further shift to Edmonton, which is the provincial capital.

I readily admit I know next to nothing about oil and its extraction, commodification, distribution, etc, except that it is important in the world economy, and hence geo-politics; and, that Canada has major reserves, some of them in the form of "tar sands", "oil sands"; or, for connoisseurs, "bituminous sands".

Recently, I have heard or read headlines about "ethical oil" and the cleanliness of the "tar sands" (the name I first learned, and prefer for its imagery) without paying much attention. It did seem to be a response to criticism that the process of extraction of oil from its sands was causing massive pollution and killing of wildlife.

Only very recently did every expert's and pundit's suddenly spouting "ethical oil" (pun intended) make greater sense. No longer a seeming contrivance, even an oxymoron, or at least a personification of oil and its morality, "ethical oil" now makes sense as a propaganda tool for the government--one handed to them by a pundit as far right and Albertan as they are. Indeed, being a journalist, and "conservative activist", Ezra Levant boldly goes where no elected politician would dare--at least not overtly.

While I was aware of much of Levant's ideology and actions, reviewing the entry on Wikipedia makes him stand out as something of a caricature. No wonder he has been featured on Glenn Beck's program. What continues to be salient from my perspective is his Islamophobia, and his antipathy to all social programs and to Human Rights.

I learned of him first as the only Canadian editor to publish the Danish Cartoons (with the exception of one university newspaper which was blocked from distribution by the university administration). The day he was called to testify at the provincial Human Rights Commission after complaints by Muslim groups, he published them again.

Levant has also been found guilty of libel against a Human Rights Commissioner for writings on his blog, and ordered to retract the posts and pay a fine of $25,000 CDN. He has a number of libel suits pending against him, many from other conservative bloggers, and George Soros forced an apology from Sun Media because of Levant's libelous writings about him in their news papers.

Sun Media is starting a news channel in Canada, dubbed by critics "Faux News North", and Levant will host a nightly talk show when it starts up.

Despite government and company reassurances and failures to disclose, along with supposed clean ups, environmentalists and the media have documented large numbers of birds killing in "tailings ponds", ponds of water heavily contaminated with oil, that form after the extraction process used to drawn synthetic crude from bitumenous sands.

Perhaps Obama has been convinced by the eco-ethics of Canada's bituminous sands. It would make his case better for those on the left of his party. On the other hand, they and Obama are probably well aware of all the "unfortunate incidents" and dying wildlife which prompt one to favour "tar sands" as an appellation.

Most significantly, in my opinion, is where Obama gave this speech, when, and the topic of "Energy and Security". Georgetown University, home to the Kennedy Center of Government, is a liberal bastion and think tank as well as a highly respected academic centre. Obama's speech followed on the initiatives to help oust Gaddafi and the implications of that for the region and for oil prices. Oil energy in the US is heavily tied both to the economy and foreign policy. There is no doubt that Western, and particularly US, support for dictatorial regimes in the Middle East are predicated on the ability of these dictators to keep the oil flowing at a reasonable cost. When they won't or don't they are vilified, and subjected to regime change.

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The Arab Awakening with its attendant risks of democratically elected Arab governments wanting to re-adjust oil relationships and prices, is viewed with apprehension for that reason. Better the dictator you know than the democracy you can't so easily control. Or, as the off quoted saying goes, "He may be a son of a bitch, but he's our son of a bitch"--attributed to various members of the Franklin Delano Roosevelt administration including the President, regarding Latin American dictators, banana republics, and Nicaraguan President Anastasio Somoza García specifically.

"Remember Nasser with his nationalization!", might well be a rallying cry for Western governments, as evidenced by the longlasting support for Mubarak--until it was not only an embarrassment but a failed position. One cites the Egyptian Revolution not only because of its currency, but also because the US would prefer to forget Mossadegh, and how replacing him with the Shah eventually led to Khomeini. The impact on the rest of the region, including major oil producer Saudi Arabia, as a result of the Irani Islamist Revolution in 1979 has been far reaching and pervasive of the social structures across the region and international geo-politics towards it.

The following 2 articles address the implications of Obama's speech for Canada and internationally. The 3rd is an interesting review of how regime change in the Middle East whether endogenous or imposed from without is not good for oil--at least not from a Western perspective.

President Barack Obama speaks March 30, 2011, about America's energy at Georgetown University in Washington. | NYT

Obama says Canada a partner in U.S. plans to make itself less dependent on oil
WASHINGTON— The Associated Press
Published Wednesday, Mar. 30, 2011 3:50PM EDT
Last updated Wednesday, Mar. 30, 2011 5:39PM EDT

U.S. President Barack Obama called Wednesday for a one-third reduction in American oil imports by 2025, describing Canada as one of his country’s energy partners as he tackled an issue that has dogged the United States since the 1970s.

“We cannot keep going from shock to trance on the issue of energy security, rushing to propose action when gas prices rise, then hitting the snooze button when they fall again,” Mr. Obama said in a speech delivered as a cascade of uprisings in the Arab world wreak havoc on global energy prices and prices at the gas pumps.

“It is time to do what we can to secure our energy future. … We will keep on being a victim to shifts in the oil market until we finally get serious about a long-term policy for secure, affordable energy.”

The president added he knows the U.S. will still need foreign oil, giving a nod to America’s friends in the Western Hemisphere, including Canada.

“I set this goal knowing that imported oil will remain an important part of our energy portfolio for quite some time,” he said.

“And when it comes to the oil we import from other nations, we can partner with neighbours like Canada, Mexico and Brazil, which recently discovered significant new oil reserves, and with whom we can share American technology and know-how.”

One Canadian oil industry official called that remark encouraging.

“The very specific mention of Canada makes absolutely clear that the president views Canada as part of the solution and not part of the problem,” said Tom Huffaker, the vice-president of policy and the environment for the Canadian Association of Petroleum Producers.

He added: “Even if the U.S. is largely successful in achieving its goals, we still believe there is still going to be a very good market for growing exports of Canadian oil to the United States.”

Alberta Premier Ed Stelmach agreed, saying Mr. Obama’s tip of the hat to Canada “makes me feel good.”

“It’s good news, of course, recognizing that Alberta is a very stable supplier of oil … it has a huge proven oil reserve, and without the kind of investment that the Americans have been putting into countries in the Middle East.”

Canada and Mexico are America’s biggest suppliers of oil, providing almost 75 per cent of the energy source to the U.S. At a White House background briefing earlier this week, a senior official was asked to clarify what Obama’s oil objectives meant to his North American neighbours.

“On the international side … the goal is to secure access to reliable energy sources. And that means oil from a diversified set of countries,” the official said.

Many Democrats concerned about climate change, however – most notably congressman Henry Waxman of California – have expressed serious misgivings about Alberta’s oil sands. They’ve branded it “dirty oil” because mining the oil sands requires more energy than conventional oil operations, resulting in higher greenhouse gas emissions.

Environmental groups have warned that as the planet continues to heat up, it’s foolhardy for the U.S. to continue being reliant on the world’s most carbon-intensive fuel, even if it’s coming from America’s friendly neighbour to the north.

The State Department is currently deciding whether to approve Transcanada’s Keystone XL pipeline, which will transport Alberta oil sands crude through the Midwest to Texas.

A decision on the pipeline isn’t expected until the fall, but environmental groups and some Democrats have been urging Secretary of State Hillary Clinton to put the brakes on the pipeline, arguing vital aquifers in several agriculture-dependent states will be made vulnerable.

In his remarks at Georgetown University, Mr. Obama also emphasized the need for Americans to shift to cleaner fuel sources like natural gas and renewable biofuels.

Of nuclear power, currently at the centre of controversy again as tsunami-stricken Japan deals with an ongoing nuclear crisis, he said: “We can’t simply take it off the table.”

The president wants Americans to be using non-oil energy sources for 80 per cent of their electricity use by the year 2035. He stressed the need to tap “one critical, renewable resource …American ingenuity.”

“Meeting this new goal of cutting our oil dependence depends largely on two things: finding and producing more oil at home, and reducing our dependence on oil with cleaner alternative fuels and greater efficiency,” he said.

Republicans, meantime, are eager to embrace Canadian oil. Mr. Obama’s speech came on the eve of a hearing being held Thursday in the House of Representatives, now controlled by Republicans, entitled: “Rising Oil Prices and Dependence on Hostile Regimes: The Urgent Case for Canadian Oil.”

Republicans have been assailing the Obama administration for months on energy, accusing officials of dawdling in issuing permits for new offshore drilling sites in the aftermath of last summer's devastating Gulf of Mexico oil spill and failing to lift a moratorium on new deep-water development quickly enough.

In his speech, Mr. Obama said his administration is expediting drilling permits for companies that meet safety standards and has recently given the green light to seven deep-water projects.

“Any claim that my administration is responsible for gas prices because we’ve ‘shut down’ oil production might make for a useful political sound bite, but it doesn’t track with reality,” he said.

Republicans were particularly irked, however, by Mr. Obama’s remarks in Latin America last week that he wanted the U.S. to be a “major customer” for the mammoth new oil reserves Brazil recently discovered off its coast.

“The problem isn’t that we need to look elsewhere for our energy,” Mitch McConnell, Senate minority leader, said Wednesday.

“The problem is that Democrats don’t want us to use the energy we have. It’s enough to make you wonder whether anybody in the White House has driven by a gas station lately.”

As has been the case since former president Richard Nixon grappled with the “energy crisis” that hogged headlines in the 1970s, OPEC – the Organization of the Petroleum Exporting Countries, comprised mostly of Arab and North African nations – is being largely blamed for the latest surge in gas prices.

The Financial Times reported earlier this week that OPEC stands to make a record-breaking $1- trillion (U.S.) in export revenues this year if crude oil prices remain above $100 a barrel amid the unrest in the Arab world.

The Canadian Press


Obama targets cuts in U.S. oil imports
OTTAWA— From Thursday's Globe and Mail
Published Wednesday, Mar. 30, 2011 3:10PM EDT
Last updated Thursday, Mar. 31, 2011 7:12AM EDT

President Barack Obama wants to slash U.S. oil imports by a third in the next decade, a commitment that would shrink Canada’s only existing market for crude exports.

But Western Canadian oil producers can take some comfort in the fact that Mr. Obama has singled out his northern neighbour as a secure and reliable source of crude. By doing so, the President signalled that even as the United States tries to reduce its appetite for oil from the Middle East or Venezuela, it will rely on growing production from Canada’s oil sands.

Canadian oil producers are confident they can increase exports to the United States, even if demand continues to drop, by taking a larger slice of a smaller pie. They expect declining production from Mexico and Venezuela, and a shift among Middle East producers to supply the growing Asian market.

In a speech at Georgetown University on Wednesday, Mr. Obama also promised to work with Congress to provide new incentives to increase natural gas consumption in both the transportation and power sectors. That is good news for North American gas producers who face depressed prices due to a glut of production from prolific new shale gas plays.

The President said his country remains far too dependent on oil, and on imported crude in particular. He warned global crude prices will likely remain high as demand from emerging economies outstrip new production.

As a result, he set a goal of reducing U.S. crude imports by a third – or more than 3.6 million barrels per day – from 2008 levels by 2025.

“I set this goal knowing that we’re still going to have to import some oil,” he said. “And when it comes to the oil we import from other nations, obviously we've got to look at neighbours like Canada and Mexico that are stable and steady and reliable sources.”

While Mr. Obama said the United States needs to boost its own oil production to reduce the dependency on oil imports, he emphasized the need for greater fuel efficiency, as well as efforts to expand the use of biofuels, natural gas-powered vehicles and electric cars.

Financial markets reacted to Mr. Obama's endorsement of increased natural gas consumption by bidding up shares of companies in the sector. Canada's largest gas producer, Encana Corp., (ECA-T33.750.060.18%) climbed 1 per cent to $33.69 in Toronto, while U.S.-based Chesapeake Energy Corp. (CHK-N33.90-0.43-1.25%) rose 3 per cent to $34.33 (U.S.) on the New York Stock Exchange, where the natural gas index was up 1.23 per cent.

Mr. Obama faces challenges to his energy strategy from Republicans in Congress, who want an all-out effort to boost U.S. oil production but oppose new fuel-efficiency standards and would eliminate spending aimed at commercializing advanced biofuel technology and electric cars.

In fact, the United States has reduced its reliance on imported oil from 60 per cent of its fuel consumption in 2005 to just under half of total demand last year. That reduction was the result of lower overall oil demand, increased domestic crude production and the growing market share for ethanol and other biofuels.

Mr. Obama did not mention specific plans to boost Canadian exports to the United States, including TransCanada Corp.’s Keystone XL pipeline that would deliver oil sands crude to the U.S. Gulf Coast. The U.S. State Department is scheduled to release a new environmental impact statement next month, and then conclude the approvals process toward the end of this year.

Industry officials were encouraged that he acknowledged the role of Canada in meeting U.S. oil demand, and hope that indicates administration support for new pipelines like the Keystone XL.

“The President, by singling out Canada and a couple of others as countries that provide reliable supply, made pretty clear that Washington and the President view Canada as part of the solution rather than part of the problem,” said Tom Huffaker, vice-president for policy and environment at the Canadian Association of Petroleum Producers in Calgary.

But environmental groups say TransCanada’s project is not needed because there is plenty of spare capacity in the existing pipeline network. And they believe the President is determined to reduce reliance on oil, no matter what the source.

“He set the goal of cutting oil imports from all foreign sources by a third – that includes Canada,” said Elizabeth Shope, an advocate at Natural Resources Defense Council, an environmental action group.

“Canada is our leading source of oil imports and while that’s not likely to change any time soon, this speech shouldn’t be misconstrued as an endorsement of any specific project or product.”


Jeff Rubin
Regime change not bullish for oil production in Middle East
Special to Globe and Mail Update
Posted on Wednesday, March 30, 2011 6:01AM EDT

If the Western military intervention in Libya is really being driven by oil, maybe it’s time to think again. History says regime change is never bullish for oil production in the Middle East and even less so for oil exports.

Iran and Iraq, two of the larger producers in the region, are cases in point.

While no one misses the Shah’s regime, Iran and the rest of the world still miss the oil production and the oil exports his regime once produced. At the height of the Shah’s power, Iran was pumping out six million barrels a day. Today, 32 years after the Iranian revolution sent Shah Mohammad Reza Pahlavi and his cronies packing, Iran barely produces four million barrels a day.

Exports have fallen even more than production. During the Shah’s reign, Iran consumed less than a million barrels a day, leaving over five million barrels for daily export. Today, thanks to decades of massive fuel price subsidies, domestic oil consumption has almost doubled, leaving only two million barrels a day for export- or 40% of the export volumes prior to the Iranian revolution.

Iraq’s experience should give Western allies no more confidence in their Libyan mission than the Iranian one. Prior to the invasion of Kuwait and the trade sanctions it triggered, Saddam Hussein’s Iraq produced around three million barrels a day in the late-1980s. Since then, oil production has never been close to that level.

When the Americans invaded Iraq in 2003, the U.S. Department of Energy confidently predicted the country would be throwing its arms open to foreign investment and the oil sector would be producing over four million barrels per day by 2010. Instead, the Sunni insurgency broke out and a whole lot of pipelines (and people) started getting blown up. Oil production plunged, and it has taken almost a decade to get production back to pre-invasion two and a half million pace.

What will happen in Libya is still anyone’s guess. Will a defeated Muammar Gadhafi try to blow up the oil fields like Saddam Hussein did on his forced retreat from Kuwait? Will oil production and oil installations simply collapse as collateral damage in a protracted civil war that partitions the country? Or will a new regime take over and prove to be as dysfunctional as its predecessor or less inclined to develop the country’s oil reserves? Whatever happens, both the Iranian and Iraqi experience suggest a post –Gadhafi Libya will produce less, not more, oil.

Of course, maybe the missing 1.3 million barrels of oil exports from the country have nothing to do with why we are in Libya. Maybe it is just a humanitarian mission after all. But if protecting defenseless populations from Middle Eastern dictators is what this is all about, why aren’t we intervening in Bahrain, Yemen and Syria as well?


Your comments, thoughts, impressions, experiences?

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