ENERGY-LATIN AMERICA: US Proposes 'Variable Geometry'

• by Humberto Márquez (caracas)
• Friday, April 24, 2009
• Inter Press Service

This 'a la carte' approach would make it possible to work with Venezuela on the heavy crudes in its Orinoco Belt and with Brazil on ethanol, or with Mexico and Brazil on the reduction of greenhouse gas emissions, because the marriage of energy and climate change means Washington can no longer talk about one without the other, the U.S. expert said at a forum in Caracas.

At the Fifth Summit of the Americas, held Apr. 17 to 19 in Trinidad and Tobago, U.S. President Barack Obama called for 'a new energy and climate partnership' in the hemisphere. According to Martin, this would be based on promoting efficiency, improving infrastructure and reducing greenhouse gas emissions.

Canadian energy consultant Roger Tissot, speaking at the same university forum as Martin, said the United States intends to reduce oil imports from the Middle East and Venezuela, develop hybrid vehicles and cut carbon dioxide emissions – a main culprit in global warming - by 80 percent by 2050.

But these goals have implications for the energy security of the United States, because abundant oil use has been the pillar of its economy and growth.

The experts recalled the words of former U.S. president George W. Bush (2001-2009), 'we are addicted to oil,' and pointed out that during the administration of Richard Nixon (1969-1974) the country imported 30 percent of the oil it consumed, compared to 65 percent today.

Paulo Valadao de Miranda of the Federal University of Rio de Janeiro said, furthermore, that while the world gets an average of 13 percent of the energy it consumes from renewable resources, only two percent of the energy used in the U.S. is from renewable sources.

Martin described what he calls the 'high-low paradigm' in the United States. During the 2008 presidential campaign, he said, when gasoline prices were high, public opinion pushed for domestic oil exploration under the Atlantic or in Alaska, and its mantra seemed to be 'drill, baby, drill.'

However, now that fuel prices have fallen, everyone is 'going green' and cheering for the environment, Martin said.

But he quoted the head of Brazil’s oil giant Petrobras, Sergio Gabrielli, according to whom 'the world will carry on moving about in cars, planes and trucks for many years,' and said he agreed with estimates that 'even in 2030, up to 80 percent of the world's energy will come from fossil fuels.'

Today, world daily consumption is 84 or 85 million barrels, but in 20 years' time demand is forecast to reach 113 to 115 million barrels of oil a day.

In contrast, according to Venezuelan experts like Víctor Poleo, a professor at the Central University of Venezuela and deputy energy minister in the initial three years (1999-2001) of President Hugo Chávez's first term, 'the world is advancing toward a structural change in the energy matrix, from the gasoline-powered engine to different sources, like electricity.'

Poleo said gasoline 'is the worst pollutant in the world' and the greatest contributor to the revenues of large oil corporations.

Eight of the 15 companies with the highest sales in the world, according to Forbes magazine, are oil businesses.

In Tissot's view, sustained demand and rising oil prices in recent years brought about 'exaggerated optimism' among oil companies, so that they would practically leave money on the table when bidding for oilfield concessions.

Today the scenario is different, given the global crisis, according to the Canadian expert, because the recession in the United States is very real. There will not be a rapid recovery, and the economic cycle will be 'not V-shaped or U-shaped, but rather L-shaped,' he said.

Private oil companies that had abandoned research and development programmes some years ago are seeing that their production costs have not fallen at the same rate as oil prices, that demand has collapsed, and that the financial crisis is ongoing, while they also face the political risk of new regulations, Tissot said.

State oil companies, while they control 80 percent of global reserves, do not have the luxury of a single purpose, as private ones do - profits for their shareholders - but answer to several interests, often including pressure from a 'populist' state that wants money but is averse to risk, he said.

These circumstances could be the prelude to another energy crisis, because in order to maintain the balance between supply and demand that is rising every year, it is necessary to invest some 500 billion dollars a year, Tissot said.

It is like those treadmills in gymnasiums which force one to run faster and faster just to stay in the same place, said the Canadian expert.

Uncertainty about investment and production may also explain the different estimates of what the equilibrium price of oil ought to be, he said. Saudi Arabia puts it at between 60 and 70 dollars a barrel, while Venezuela and Iran want it at between 70 and 80 dollars, 'although in the present recession I don't think that's possible,' he said.

Investment banks calculate that the price of a barrel of oil will average between 50 and 60 dollars over the next two years, and in the long term may go back up to between 100 and 110 dollars.

On that basis, the United States will want to expand the market for clean energy, while working with Brazil on ethanol and with several countries on hard-to-extract crudes, such as Brazil's deep-sea Atlantic oil fields, the Orinoco Belt in Venezuela or the Athabasca bituminous sands in Canada, that are already part of the U.S. energy security strategy, Tissot said.

Every country is different. Production in Colombia, for instance, has declined since its peak of 821,000 barrels a day in 1999, but it has made efforts to recover and has risen again to above 500,000 barrels a day, Martin said.

Another example is Trinidad and Tobago, the foremost foreign supplier of natural gas to the United States. It has gas reserves of 31 trillion cubic feet and a programme of tax incentives for investment in exploration that could double the available reserves, Martin said.

With a 10-year deadline for reducing dependence on imported fossil fuels, the Obama administration has taken measures to stimulate the automotive industry to mass-produce hybrid cars (using gasoline and another fuel) from 2011, and vehicles with a maximum fuel consumption of 6.7 litres of gasoline per 100 kilometres, as opposed to the present limit of 8.7 litres per 100 kilometres.

The declaration of the Fifth Summit of the Americas said that the countries of the hemisphere would 'cultivate investment and innovation in the development and diversification of energy sources and of efficient and environmentally friendly technologies, including cleaner technologies for the production of fossil fuels.'

José Ignacio Moreno, energy minister of Venezuela in 1983 and 1984 and head of the Metropolitan University, which hosted Martin and Tissot, called for 'the eco-economy and the values of ecology to be taken into account in the economy, which involves changing the models of the consumer society and persevering in the search for clean energy sources.'

'The problem is not how much these changes will cost, but what price we will have to pay if we do not make them,' Moreno said.

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service