It’s been his campaign’s policy since October last year, but in case you needed reassurance, here’s what Obama’s July 15 speech on foreign policy had to say about energy security (one of five national security priorities – the others being “ending the war in Iraq responsibly; finishing the fight against al Qaeda and the Taliban; securing all nuclear weapons and materials from terrorists and rogue states; … and rebuilding our alliances to meet the challenges of the 21st century”):
One of the most dangerous weapons in the world today is the price of oil. We ship nearly $700 million a day to unstable or hostile nations for their oil. It pays for terrorist bombs going off from Baghdad to Beirut. It funds petro-diplomacy in Caracas and radical madrasas from Karachi to Khartoum. It takes leverage away from America and shifts it to dictators.
This immediate danger is eclipsed only by the long-term threat from climate change, which will lead to devastating weather patterns, terrible storms, drought, and famine. That means people competing for food and water in the next fifty years in the very places that have known horrific violence in the last fifty: Africa, the Middle East, and South Asia. Most disastrously, that could mean destructive storms on our shores, and the disappearance of our coastline.
This is not just an economic issue or an environmental concern – this is a national security crisis. For the sake of our security – and for every American family that is paying the price at the pump – we must end this dependence on foreign oil. And as President, that’s exactly what I’ll do. Small steps and political gimmickry just won’t do. I’ll invest $150 billion over the next ten years to put America on the path to true energy security. This fund will fast track investments in a new green energy business sector that will end our addiction to oil and create up to 5 million jobs over the next two decades, and help secure the future of our country and our planet. We’ll invest in research and development of every form of alternative energy – solar, wind, and biofuels, as well as technologies that can make coal clean and nuclear power safe. And from the moment I take office, I will let it be known that the United States of America is ready to lead again.
Never again will we sit on the sidelines, or stand in the way of global action to tackle this global challenge. I will reach out to the leaders of the biggest carbon emitting nations and ask them to join a new Global Energy Forum that will lay the foundation for the next generation of climate protocols. We will also build an alliance of oil-importing nations and work together to reduce our demand, and to break the grip of OPEC on the global economy. We’ll set a goal of an 80% reduction in global emissions by 2050. And as we develop new forms of clean energy here at home, we will share our technology and our innovations with all the nations of the world.
It’s a much more progressive target than the G8 was able to come up with: at Hokkaido, the most leaders could manage was “at least 50%”. It’s more in line with the IPCC, too, which says that to limit temperature increase to between 2.0 and 2.4 degrees C, the 2050 reduction needed is between 50 and 85 per cent: so assuming you want 2.0 rather than 2.4, and adding in the rate of sink failure as well, we should certainly be looking at closer to an 85 than a 50 per cent reduction by 2050 (see page 15 of this).
And lest you wonder, yup, he’s talking about 80 per cent below 1990 levels, rather than the 2000 levels (which would be a lot less demanding). Here’s his campaign’s full energy policy brief.
From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies — estimated at $40 billion this year in China alone — are also removing much of the incentive to conserve fuel.
The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels.
In most countries that do not subsidize fuel, high prices have caused oil demand to stagnate or fall, as economic theory says they should. But in countries with subsidies, demand is still rising steeply, threatening to outstrip the growth in global supplies.
The article goes on to report that while Malaysia caused no end of annoyance to its citizens when it hiked petrol prices by 40 per cent at the start of June, it was before this spending 7.5 per cent of economic output on fuel subsidies – more than anywhere else on earth. (Indonesia is next, at 4 per cent.)
Bill Emmott, the former editor of The Economist, has a great – if glibly-titled – piece in The Times today, articulating what I have thought for a while (OK – what I should have thought): that while Fareed Zakaria talks about a post-American order where U.S influence is giving way to the power of the “Rest” (China, India etc.) both Barack Obama and John McCain seem to live in a decidedly Euro-centric world.
Look at Senator Obama’s stops on his recent trip – Europe, the Middle East and, of course, Afghanistan. The itinerary is hardly any different from what Bill Clinton’s would have done in 1992 – that is, go to Europe, the Middle East and to where U.S forces are deployed. But, as Emmot says, the future of the U.S may be determined in Asia, not Europe or even the Middle East:
Three issues in Asia will be, or should be, high on the new president’s briefings when he enters office in January. In order of immediacy they are inflation, climate change and the balance-of-power politics.
So what do Obama and McCain say about a rising China, a resurgent Russia, rivalry between India and Pakistan Asian countries? Very little. Or, at least very little compared to what they say about other issues.
At the Chicago Council on Global Affairs, Obama said:
In Asia, the emergence of an economically vibrant, more politically active China offers new opportunities for prosperity and cooperation, but also poses new challenges.
To deal with these, Obama will “forge a more effective regional framework in Asia that will promote stability, prosperity and help us confront common transnational threats such as tracking down terrorists and responding to global health problems like avian flu.”
Nothing wrong with this, but a profound policy statement it is not. Nor does it deal with many of the gremlins in the U.S-China relationship like the trade balance.
McCain has been more forward on how he would deal with China and Russia. He has meet with the Dalai Lama and urged China to address human rights concerns and free Tibetan prisoners.
His tough-guy stance is even tougher on Russia. The U.S, says McCain, should respond harshly to Russia’s anti-democratic actions, and warns of the “dangers posed by a revanchist Russia”. On the campaign trail, McCain jokes that when he looks in Vladimir Putin’s eyes, he sees three letters: KGB.
But while the Arizona senator’s stance is tough and clear, he can hardly have thought through the implications of such a stance against Moscow, given the price of oil, the views of America’s allies etc.
Bottom-line is that while both candidate have talked about U.S relations with the “Rest”, both lag behind today’s leading foreign policy intellectuals in developing a serious set of U.S. policies towards the new powers and seem more comfortable in a Euro-centric mindset. That may be good for Europe in the short-term, but bad in the long-term. For the way in which the U.S and Europe relate to these new powers will determine how the world looks in the next 10 years.
Next Tuesday the Martin Jetpack will be unveiled. It will be able to operate for up to 30-minutes and a total engine life of 1,000 hours. It’s enough to make Elton John weep on his ivories.
Herewith an attempt to marshal my thoughts about what’s happening on the oil price (which has fallen sharply over the last few weeks), what’s likely to happen next, and what policymakers need to do to move forward. Brief summary as follows:
– The oil price has fallen sharply over the last couple of weeks, from a peak of $147 to a 7 week low of $123 at close yesterday. So is this the start of a long decline, or just a brief pause to draw breath before a resumption of the relentless upward march of recent years?
– In a nutshell, probably more like the latter – but with the potential for a big drop in the near term for as long as the credit crunch lasts, as emerging economies slow down sharply in line with falling US demand for their exports.
– However, once we’re through the crunch, we may be back to a game of cat and mouse between oil supply and economic growth. Demand falls, oil price falls; demand picks up, oil price goes back up too – but never for long enough to give investors a clear signal to pump cash into new oil supply infrastructure.
– What we need is a game changing intervention that breaks us out of this stop-start cycle. Massive investment in new oil supply would provide it, but can’t be squared with what needs to happen on emissions reductions.
– It looks like the only way through is for policymakers to agree a global climate policy framework that’s both global in scope and sufficiently long term to provide investors with an unequivocal signal of where to put their cash: this is the only way of squaring energy security with climate change.
