by Alex Evans | Jul 28, 2008 | Climate and resource scarcity, Global system
A key fact here from BP, via the New York Times:
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.)
by Daniel Korski | Jul 27, 2008 | East Asia and Pacific, North America, South Asia
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.
by Alex Evans | Jul 26, 2008 | Climate and resource scarcity, East Asia and Pacific, Economics and development, Global system
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.
Full version after the jump.
(more…)
by Alex Evans | Jul 24, 2008 | Climate and resource scarcity, Conflict and security, Cooperation and coherence
As a general rule of thumb, my starting assumption is that we need new multilateral agencies like we need a hole in the head. But if there’s an exception to that rule, then energy has a pretty good claim to be it. As I argue in Multilateralism for an Age of Scarcity, there is no multilateral agency with a mandate to look at all aspects of the issue:
The International Energy Agency is supposed to represent major consumer countries, but its 27 members are all OECD countries – hence leaving out key emerging economies including China and India. Although the Organisation of the Petroleum Exporting Countries (OPEC) is generally thought of as the major body representing producer states, in fact well over half of the world’s oil is produced by non-OPEC countries. Yet the most fundamental incoherence on energy is the obvious one: that with consumer and producer states represented by two different institutions in two different cities, it is wholly unclear where any discussions about a comprehensive approach encompassing both producer and consumer interests would take place.
Now, IAEA head Mohamed ElBaradei has written a piece in the FT which starts from the same analysis, and goes on to argue that a new global energy organisation is indeed needed. What would it do?
“complement, not replace, bodies already active in the energy field … bring a vital inter-governmental perspective to bear on issues that cannot be left to market forces alone, such as the development of new energy technology, the role of nuclear power and renewables, and innovative solutions for reducing pollution and greenhouse gas emissions”;
“provide authoritative assessments of global energy demand and supply and bring under one roof energy data that are now dispersed and incomplete … speed the transfer of appropriate energy technology to poor countries and give them objective advice on an optimal energy mix that is safe, secure and environmentally sound”;
“develop a global mechanism to ensure energy supplies in crises and emergencies, and help countries run their energy services and even do it for them temporarily after a war or natural disaster … co-ordinate and fund research and development, especially for energy-poor countries whose needs are often overlooked by commercial R&D.”
He concludes, “the need for joint action to develop long-term solutions to the looming energy crisis is now undeniable. It is difficult to see how this can be done without an expert multinational body, underpinned perhaps by a global energy convention, with the authority to develop policies and practices to benefit rich and poor countries alike, equitably and fairly”.
So what to make of this call? A few thoughts.
First, I can’t see much in the first two paragraphs that isn’t already done by the IEA – with the possible exception of advising poor countries on their energy mix, which agencies including UNDP and the Bank already cover. True, most publicly available data on oil reserves is pretty suspect; but this new agency wouldn’t obviate that problem (which stems from internal machinations within OPEC).
The interesting element here is the idea of a global mechanism to ensure energy supplies in crises and emergencies (what could the head of the IAEA be thinking of?). When I was drafting Multilateralism for an Age of Scarcity, this seemed to me one of the real gaps in current multilateral capacities – both for dealing with short term spikes (attack on Iran leads to $200 oil) and long term stresses (peak oil). In those conditions, a regime for sharing access to what supplies there are will be essential for reducing the risk of competition and friction, and for providing (at least a degree of) predictability, to reduce wild market swings as much as can be.
What I think is missing from ElBaradei’s proposal is a proper account of where food fits in. There are plenty of major reasons why food prices and energy prices are ever more closely in synch: biofuels, input costs (especially fertiliser), and the fuel used to cultivate land, harvest crops, process, refrigerate, ship and distribute them. If energy costs keep going up over the long term (as looks likely, recent sharp falls notwithstanding), then food prices will do the same – making it more important than ever to effect a far more integrated international approach.
by Richard Gowan | Jul 18, 2008 | Africa, Conflict and security, Cooperation and coherence, Influence and networks
I’ve spent much of the last month poking fun (with serious intent) at Irish EU peacekeepers in Chad praised by rebels for staying neutral during a shoot-out at a refugee camp. Yesterday, I spoke to some researchers just back from Chad who reported that the Irish had done the best job they could under the circumstances. Their failure was on the PR front, not the battlefield.
After all, operating alongside rebels is tricky. My colleague Ben Tortolani, an indefatigable hunter after peacekeeping trivia, draws my attention to this story from the Congo – if true, it’s definitely one for the “oops” file:
The scandal-hit U.N. mission in Democratic Republic of Congo is investigating an Indian peacekeeping officer accused of showing support for eastern Tutsi rebels, a U.N. spokesman said on Thursday. The allegations stem from recordings of a bush ceremony in which an Indian U.N. commander hailed the rebels as “brothers” and presented their leader General Laurent Nkunda with his regimental crest.
Nkunda’s rebels have continued to clash with Congo’s weak government despite a peace deal this year that followed 2006 elections intended to pacify the vast mineral-rich former Belgian colony.
The world’s largest U.N. peacekeeping mission in Congo often finds itself stuck in the middle — fighting rebels and militias but also at times accused by the government of not doing enough.
“We have launched an investigation,” mission spokesman Kemal Saiki told Reuters in response to the allegations against the Indian officer. Saiki refused to name the officer but the transcript seen by Reuters identified him as Colonel Chand Saroha, the former commander at Sake, a strategic town in the eastern province of North Kivu.
“We are like brothers,” Saroha told Nkunda and his fighters at the ceremony in April marking his departure from the zone. “Officially we are not allowed to meet you. But your good conduct, your good discipline … made us feel we were associated with proud people,” he added. Amid chants from his soldiers, according to the transcript, Nkunda thanked Saroha, saying: “You have helped us a great deal.”
What I find most remarkable about this story is that someone was recording all this. I suggest that Indian officer training courses should make biographies of Richard Nixon required reading if this sort of leak is to be avoided in future…
