The Weekly Wrap: Nov. 5, 2011

About the impending arrival of U.S. energy independence: We return to the twist in our energy and geopolitical circumstances that we are hearing about — that, contrary to the drumbeat regarding peak oil to which we have become accustomed, there is no problem on the global energy patch. There is abundant oil, report the New York Times, the Washington Post and the Financial Times; not only that, it is located in the nearby, secure Western Hemisphere (pictured above, happy days in Brazil), and not in the violent-and-volatile Middle East; moreover, the United States may be on the verge of achieving what had seemed to be merely fabled — "energy independence." We expressed our doubts about these findings when they emerged a few days ago. And though this is not a peak-oil blog, suffice it to say that our brow has not become less furrowed. One reason is the mathematics behind the theoretical revision. Let’s start with the suggestion that the gravitational center of oil is shifting from the Middle East to the Western Hemisphere, as we read in the Times, the Post, and last month here at Foreign Policy. In order for that to happen, Western Hemispheric oil production should comfortably surpass the Middle East’s 25 million barrels of oil a day. When you add up the numbers, North and South American producers currently pump some 21 million barrels a day. The bright-picture scenario suggests another 7-9 million barrels a day (additional supplies of 3 million barrels a day from Brazil, 1.5-4.5 million barrels a day from Canadian oil sands, and 2.5 million barrels a day from U.S. onshore oil shale). Shaving off a bit for depletion of current fields, and you get roughly the same production for the concentrated Middle East as for the far-flung Western Hemisphere, with no single country bearing the singular heft of a Saudi Arabia. It is a tidy volume, but not quite the forecasted tectonic shakeup.

Go to the Jump for more on U.S. energy independence and the rest of the Wrap

And what of U.S. energy independence? This forecast — suggesting that the U.S. alone or in tandem with friendly Canada might meet its own oil demand by the year 2035 — appears to be based largely on a September report by the industry-dominated National Petroleum Council called "Prudent Development." This report, ordered up by U.S. Energy Secretary Steven Chu, is confusing. In its executive summary, it uses a color-shaded chart to describe a best-case ("unconstrained") scenario in which the U.S. and Canada together produce about 22 million barrels a day of oil in 2035. Only, nowhere else in its hundreds of pages of details do the formation-by-formation breakdowns reach anywhere in proximity to that number, not that I can find anyway. But there is a hint of the wishful thinking behind the report. In its recommendations, the report’s writers suggest opening up the U.S. West and East coasts and Alaska’s National Wildlife Refuge (known as Anwar) to oil drilling, a shift that would be a political challenge even in a Rick Perry presidential administration. As packaged, the study reads like a lobbying platform pasted onto serious documentation. Ultimately, we are back to square one, with the glass half-full and half-empty folks still at loggerheads.

Conversely, consider the latest comparably impartial product from CNA’s Military Advisory Board. CNA is a U.S. military think tank that over the last five years has assembled 13 retired senior U.S. military officers to study the intersection of energy, climate change and national security. In its latest report, the board concludes that increased U.S. domestic production is well and good, but calls U.S. oil consumption a "significant national security threat" that can best be resolved through a 30 percent reduction in U.S. demand. Even if the Strait of Hormuz were shut off, this reduction would leave the U.S. secure, the board asserts.

Here is the thinking: Demand reduction achieves much more than supply enhancement. It reduces U.S. — and global — payments on oil. It lowers the concentrated power of petro-states having conflicted interests as regards the world at large. And it pushes down the emissions of CO2. As regards priorities in U.S. domestic policy, the retired admirals and generals seem to be more sensible than the industry hands.

Great Britain’s Open Fracking Debate: A U.K. energy company called Cuadrilla Resources may never have the chance to extract some of the trillions of cubic feet of shale gas it says underlie northwest England — that would be a consequence of its having triggered some 50 small earthquakes in its initial use of hydraulic fracturing, or fracking for short. But if drilling is permitted to proceed, it will have something to do with the company’s decision to conduct an assertive but transparent campaign for the right to do so. It is a lesson from which Cuadilla’s American industry brethren could learn. We care about shale gas because, if it is produced to its potential, it can positively transform the global energy picture and geopolitics. But back in April and May, earthquakes registering 2.3 and 1.5 on the Richter scale rattled northwest England’s Blackpool area, where Cuadilla is drilling. A public uproar followed, and Cuadilla agreed to fund an expensive independent investigation of what happened. Meanwhile, all drilling ceased. The resulting report, released this week, concluded with "strong evidence" that Cuadilla’s fracking in fact did cause the quakes, writes Alexis Flynn at the Wall Street Journal. How did fracking trigger the earthquakes? According to ARS Technica, fluid released in the fracking process came in contact with a nearby geologic fault. ARS’s John Timmer reports:

The high-pressure fluids diffused from the drill site for hours afterward, which allowed them to spread to the fault site. The pressure was much lower by the time the fluid got there, but it was still sufficient to lubricate a fault under stress. Once they reached the fault, the pressurized fluids did exactly what they’re meant to do: force open existing fractures.

The U.K. government says it will study the report before determining how to proceed. That is about as fair a shot as Cuadilla could ask for.

Juxtapose the Blackpool experience with that of the U.S. shale gas industry. Faced with a similar hullabaloo over different concerns — whether or not fracking imperils aquifers — U.S. frackers generally have reacted with a combination of defensiveness, shading of the truth, and a PR campaign. For instance, the U.S. Environmental Protection Agency this week announced the outlines of a comprehensive fracking study. The industry’s lead lobbying group, the American Petroleum Institute, responded with the following statement: "The industry has taken the lead in working with state regulators to constantly improve operations, industry practices and guidelines as well as improve communications with local communities." Ummm … no. Besides the communication part, this is precisely what the industry should be doing, but isn’t.

This blog has long urged the fracking industry to mount a full-force transparency campaign, loudly and publicly disclosing the ingredients of the fluids it injects into the Earth, and bullying its bad actors into adopting best fracking practices (versus best PR outreach). Now, the federal regulation that the industry has most opposed is here. It appears to be too late to adopt the Cuadilla approach.

Navigating the rare earths monopoly: Since summer 2010, the world has been on notice regarding the geopolitical aspect of 17 elements known as rare earths, which are used in high-tech, consumer and military products: China produces 97 percent of them, and when a Chinese trawler captain nosed into a Japanese naval ship (twice), Beijing demonstrated its outsized leverage by severing rare-earth shipments to Japan, and later much of the rest of the world. That left Western manufacturers in fear of a supply shortage. Economic history informs us, however, that cartel behavior, like bullying, works only a short time because people figure out how to bypass boors. In this case, writes the Financial Times’ Chris Bryant, we see the inklings of such a reaction in a German company called Continental, which has devised a new electric motor that, unlike most such technology, does not require neodymium-laden permanent magnets (the price of neodymium has risen 10-fold since the trawler incident). Continental’s non-neodymium motor is currently being used by Renault, the French auto-maker. The innovation does not solve the rare earths problem, but suggests that — along with rare-earth mines under discussion and opening in Australia, Canada, the United States, Kazakhstan, Mongolia and elsewhere — the world is moving on.

Will a U.S. military base famous for its fuel be closed? Almazbek Atambayev, winner of Kyrgyzstan’s presidential election, says his first order of business will be to close the U.S. Manas Air Base. That’s the jumping off point for much NATO war supplies into Afghanistan. Atambayev says the base’s presence could make it and the country a target for attacks from unnamed assailants. I asked a State Department official whose opinion I trust for a sense of the chances that Atambayev’s vow will be carried out. "I’d put money on ‘nil,’" this official said. I agree. But why is the base even an issue? Not because of potential attack, but for two other reasons. One is that Russia wants the base out, and has persistently pressured Kyrgyz leaders to accommodate its wish. The other reason is because of how the Pentagon has organized its fuel provisions for much of the last decade: Until a few days ago, an American-run company called Mina Corp. was the blithe recipient of accumulated Manas fuel contracts exceeding $3 billion in collaboration with successive ruling Kyrgyz families. These partnerships were to a large degree responsible for successive popular uprisings that overthrew said ruling families, and Atambayev’s rise to power. Now, Manas’s fuel will be supplied by a partnership of Russia’s Gazprom, a local Kyrgyz company called GAK, and a Miami-based company called World Fuel Services Europe, reports Deirdre Tynan at Eurasianet.org. There is little in the deal’s appearance that seems cleaner than the previous arrangements, but neither is there the apparent stuff of an imminent third uprising.