Tag Archives: hydrocarbons

One Hundred Billion to Help America, the Core, and the Gap

Calculated Risk has an interesting post titled “The Oil Cushion.” The article describes how a $1.50/gal drop in the price of gas (say, from $4.00 to $2.50/gal) amounts to a $900 check to every American. This is essentially a large stimulus package, that takes money that would have flowed out to petrostates (Russia, Venezuela, Iran, Saudi Arabia, etc) and puts it in Americans’ politics.

Low prices for hydrocarbons (oil and natural gas) help our country by not exporting wealth to gap states that can’t handle it, help the Gap by warping their governments into resource-extraction corporations, and helps the Core by preventing bad Gap governments (Russia, Venezuela, Iran, Saudi Arabia, etc) from having undo influence.

Progress in this direction can be had by creating a geogreen stimulus package, as Thomas Friedman has recommended. Here are some details of how it might work:

The Democrats, with the blessing of Federal Reserve Board Chairman Ben Bernanke, are suggesting a stimulus package of about $200 billion. We should use at least half of that to move America away from our dependence on petroleum and reduce our carbon footprint on the planet.

Green Jobs for America Campaign, a coalition of environmental and labor groups, is calling for a $100 billion green stimulus program that would include a combination of tax credits, loan guarantees and public investment in environmental technology that it says will create roughly 2 million jobs over two years.

The program, outlined in a report written by the Political Economy Research Institute at the University of Massachusetts-Amherst and the Center for American Progress, calls for investing in new power sources, including wind, solar power and “next-generation biofuels.” It also recommends “expanding mass transit and freight rail,” “retrofitting buildings to improve energy efficiency” and “constructing ‘smart’ electrical grid transmission systems.”

If we are going to get “transformational leadership,” this would be a good place to start:

The public infrastructure portion of the program — upgrades to public buildings, public transportation and the electrical grid — could be enacted quickly, according to the report. But to do so would take a commitment to public works spending that the Congress and the executive branch have not demonstrated in more than a generation.

A geogreen stimulus is all the more important because the financial crisis have weakened the investment infrastructure that alternative energy research firms (focused on ethanol, solar, and wind power) use to grow. From CNET and CBS News:

Now some of the pillars underpinning green technologies are wobbling. Oil prices have plummeted more than 50 percent since the summer, making traditional energy sources look a lot more affordable than they did six months ago for businesses and consumers alike. And the global credit crisis that has sucked the wind out of the economy has done damage to the funding of alternative energy projects as well.

The hardest hit by a freeze or reluctant lending are renewable energies which are already commercial, or on the cusp of getting there. These aren’t cheap little startups we’re talking about: Constructing a biofuels plant costs upwards of a $100 million while connecting a solar power plant, capable of powering tens of thousands of homes, is in the range of $500 million and $800 million, depending on the size. In the current credit market, it’s tough to come up with that money.

But don’t write off clean tech as another casualty of the souring economy quite yet. Today’s clean energy field is a lot more resilient than in the days of the 1970s oil price shock for one simple reason – society’s priorities have changed since then. Climate change and energy security are front-page issues that still command the attention of consumers, businesses, and politicians, regardless of the economy.

This is a place for federal intervention:

More immediately, the world leaders’ reaction to the financial crisis could determine whether and how quickly clean energy technologies will make an impact on the energy business.

Governments may treat the economic crisis as a reason to backpedal on emissions reduction targets. Another school of thought is to make energy and environment an important part of government stimulus spending to upgrade infrastructure.

Many technologies – solar, wind, geothermal, cellulosic ethanol – can be scaled up today. Others, such as storing carbon underground at coal plants, need more active government involvement to make economically feasible, said Fulton of Deutsche Bank.

“We do indeed have many technologies that are in commercialization, or close to it, that can have significant impacts on the whole energy and electricity mix,” Fulton said. “But there are still some looming that need public and private capital to keep pushing them down the cost curve.”

If hope both Barack Obama and John McCain quickly endorse a geogreen stimulus.

That Other Pipeline

Russia’s recent invasion of Georgia included an (unsuccessful) attack on a pipeline that brings Caspian natural gas to Turkey, and then on to Europe. The line allows the Caspian states to avoid Russia, preventing Russia (a gap state) from holding Europe hostage by threatening to cut off access to Caspian hydrocarbons. Before the completion of that pipeline, Caspian hydrocarbons flowed through Russia as a legacy of the old Soviet system.

Europe isn’t the only large power that’s working to chip away at Russian power by supplementing the Soviet hydrocarbon network. The New Core state of China, working with the Seam State of Kazakhstan, is building China’s first direct hydrocarbon importation pipeline, from the Caspian Sea to Chinese Turkestan (the new route is cleverly named the Kazakhstan-China Pipeline).

The New Core must be allowed to grow and become richer, free from intimidation of the Gap and safe from its noxious exports. In East Asia, that means that China’s growth cannot be held hostage to Russia’s decline. The Kazakhstan-China pipeline is an important part of this.

More information on the Kazakhstan-China pipeline is available from SRAS and The Opposite End of China.