- By Steve LeVine<p> Steve LeVine is a contributing editor at Foreign Policy, a Schwartz Fellow at the New America Foundation, and author of The Oil and the Glory. </p>
The Kremlin Contest: Perusing the first week of entries in our friendly, low-risk wagering contest for who will be Russia’s next president, I’ve discovered that I am not alone: Many conclude that Vladimir Putin will step aside and permit Dmitry Medvedev to remain Russia’s president. But where are the Putin bettors — the multitudes who are sure that Putin will return to the Kremlin in elections next year? Get your bets in: You must name who will be president, who will be prime minister, and the date on which Putin will disclose his choice. You must also name your small, non-cash wager (one contestant has wagered a shot glass; I have wagered a glass of Rioja). Remember that, if you lose, you must mail your wager directly to the winner. You can use the email link in the "About this Blog" box on the right, or my twitter address: @stevelevine. The deadline is Sept. 1.
When oil is next door: On paper, the gasoline-guzzling United States has no oil scarcity problem. To the south, Venezuela has 211 billion barrels of oil reserves, second only to Saudi Arabia. To the north, Canada’s Alberta province possesses a conservative estimate of 175 billion barrels of oil. At home, there are the newly prolific volumes of the Bakken and Eagle Ford oil shales, and new plays in the Gulf of Mexico. So why do Americans fret about the supposed peaking of oil? Because of geopolitical, environmental and self-imposed impediments that keep these enormous volumes at arm’s length.
Alberta is the piece of this picture that’s on my mind today. Chip Cummins and Edward Welsch weigh in with a long, page-one piece in the Wall Street Journal on the province’s long, grueling campaign to persuade its southern neighbor — the United States — to accept a near doubling of current oil exports to 1.1 million barrels a day, and more down the road. The hang-up is that the crude comes from oil sands (pictured above), which get a lot of Americans riled up because of the pollution created during production and refining.
The worries about oil sands have led Alberta and the companies working there to try to make the sands more environmentally acceptable. For instance, unlike shale gas drillers in the United States, who all-but refuse to police themselves and go transparent, Alberta has adopted a pro-active carbon offset program. They say that, all in all, oil sands are now no more polluting than almost any other form of oil drilling.
Over at Time, Tara Thean asks validly whether new doubt is cast on Alberta’s plans to pipe more oil to the United States because of a fresh oil spill from an ExxonMobil pipeline in the Yellowstone River. Alberta will have to respond. But if it does — which one imagines it will — U.S. environmentalists ought to reconsider their opposition to this expanded oil flow. Hydrocarbon developers have little incentive to repent if environmentalists demonstrate no capacity for compromise.
Read on for more of the Wrap
The Soundlessness, the Fury and the iPhone ap: One can recognize the potential for tragedy — a harried young mother crosses the street, child in tow, and is struck and injured by a soundless electric car that she simply did not hear until it was too late. Hence, in the United States, the federal government is considering a mandate that electric carmakers add a sound to their vehicles, Josh Mitchell and Mike Ramsey write at the WSJ. Some carmakers such as Nissan already include such a feature, appreciating that they need to get ahead of this self-evident issue.
Yet, one can also see where this is going — toward yet another boon for Steve Jobs, and especially the ap-makers who are piggy-backing on the hyper-success of his iPhone. These techno-wizards will devise all manner of customized sounds to load into your electric vehicle engine. Many people will go for the conventional and civilized sound of a purring engine. Chest-beaters may prefer a sonorous Vroom Vroom. But teen-agers, eccentrics and the merely creative could take off in other directions — a phone ring? A crow’s squawk? An elephant’s trumpet? Jumpin’ Jack Flash? And what will be the internal combustion engine’s response to that?
The hype on oil prices: Adding insult to injury, influential bankers and analysts have put aside the niceties and forecast that we are headed back to $150-a-barrel oil over the coming year or so. This comes just two weeks after the United States and the rest of the West’s main oil-consuming nations attempted to put a line under high prices by releasing 60 million barrels of crude from their strategic petroleum reserves. After an initial deer-in-the-headlights price plunge, traders have gotten their feet back and roared to the casino tables. Now Barron’s advances a prediction of a $170-a-barrel oil spike by next spring, with $150-a-barrel the norm. Morgan Stanley and Goldman Sachs piled in next with forecasts of $120 a barrel in roughly six months, and $130 a barrel next year. Goldman urged its clients to buy December 2012 futures.
But let’s look under the hood. The investment banks it turns out are getting in front of a moving parade rather than leading it — both of them were referring to the price of European-based Brent crude, which already closed at $118.04 a barrel yesterday. How courageous is it to predict a rise of $2 a barrel — by the end of the year? Barron’s, on the other hand, is talking about West Texas Intermediate, the U.S. benchmark, which closed at $96.94 a barrel.
Are we really on the verge of a 50 percent — or a 70 percent — rise in WTI oil prices? Possibly — John Hofmeister, for one, the former Shell USA president, thinks it will be that and worse. Personally, I don’t see how prices rise so high so fast. Specifically, I believe the Saudis when they say they have 3 million barrels a day of spare capacity, which is the key metric. By the end of next year, global oil demand will rise to 90 million barrels a day, according to a forecast issued last month by the U.S. Energy Information Administration, leaving approximately 2 million barrels a day of spare capacity. That suggests that the crunch — if it happens — occurs in 2013 or later. Steady for now.
Pipelines, pipelines, pipelines: Iran and Pakistan say they are serious about building a 1,000-mile-long natural gas pipeline connecting the two countries. In fact, they say 680 miles of it — within Iran — is already finished and all that’s left is the Pakistan section, which will take until 2014. This isn’t a huge gauge pipeline — it’s advertised at the delivery of 740 million cubic feet of Iranian gas to Pakistan a year, which isn’t much. Still, politics are at work. The United States seriously opposes such hydrocarbon relationships with Iran, which has stymied Tehran from building up its gas industry for 15 years and more. But Pakistan itself is at loggerheads with the U.S. at the moment, and may not much care. In addition, Washington has looked the other way in the construction of similar but isolated pipelines to Iran — when it regards Azerbaijan and Turkmenistan, for example. One wonders where the financing money will come from. But this one is worth watching.