What ails global energy? Everything

Japan’s possibly cataclysmic situation started with an earthquake, went on to a tsunami, and now is essentially an energy event — a potential catastrophe stemming from long-ago decisions on how to power the world’s third-largest economy and among the most affluent lifestyles on the planet. After a wait-and-see period, traders today expressed their anxiety with a panicky sell-off — they sent oil prices well below $100 a barrel in the United States (Japan’s Nikkei stock index unsurprisingly fell by 11 percent, and the New York Stock Exchange has followed suit by dropping more than 250 points at this point, or 2.4 percent). The market is turning brutal against anything related to the nuclear industry — investors sent down shares of many uranium miners, for example, by double-digit percentages, and of nuclear power plant operators like Exelon and Entergy in the single digits.

What’s going on is economic fear, but also a global energy system under severe stress. Over the last several months, we’ve learned the hard way in incredibly coincidental events that we are in firm control of almost none of our major sources of power: Deep-water oil drilling can be perilous if the company carrying it out cuts corners. Because of chronically bad governance by petrostates, we can’t necessarily rely on OPEC supplies either. Shale gas drilling may result in radioactive contamination of water, though who knows since many of the companies involved seem prepared to risk possible ignominy and lawsuits later rather than proactively straighten out their own bad actors. As for much-promoted nuclear power, we know now that big, perfect-storm, black-swan natural disasters can come in twos.

The global trouble is not over yet. In Bahrain today, the king declared martial law for three months amid conflicting reports of the possible killing of a Saudi soldier, among more than 1,000 troops who have intervened to help quell an ongoing uprising there. Saudi Arabia is worried because Bahrain neighbors its own Shiite-majority, oil-rich Eastern Province. In Libya, forces of Col. Muammar al-Qaddafi pushed to the edge of the rebel stronghold of Benghazi, setting up the most direct confrontation yet between the sides, one that could prove decisive in the uprising there.

Yet, again one is surprised that the markets are not even more spooked. We understand why oil isn’t more volatile — there is so much supply sloshing around the world that traders cannot get too bold in their bets. But cool heads are also helping to tamp down some edgy conjecture.

At the Financial Times, a couple of U.K.-based experts played down the risk of another Chernobyl-style radioactive blowout from Japan. And in this Bloomberg video, Robert Kelley, a nuclear engineer in the U.S., says that whatever happens, Fukushima won’t be like Chernobyl, which had a graphite core made of 100 tons of the equivalent of charcoal that caught fire, and spewed its contents straight into the atmosphere because it had no containment vessel.

China suggests that, while it is observing the events in Japan, it is proceeding with the largest expansion of nuclear power anywhere in the world (at the New Yorker, Evan Osnos blogs on China’s nuclear power binge). In general, a lot of experts think the developing world will likely push ahead with its nuclear plants.

As for the United States and Europe, what I’m hearing now is that we are in for a long watch-and-wait period in which the public and regulators demand a lot of layers of redundant safety equipment on nuclear plants. That would included several backup power systems that could kick in and operate a plant even in a remotely possible emergency, since we now know from Japan that having even a diesel-powered generator and batteries on hand is insufficient. Germany has already shut down all its pre-1980 plants provisionally, and even Indian Prime Minister Manmohan Singh is having to reassess his $175 billion nuclear power buildup.