Wednesday, April 26, 2006

Robert McFarlane and breathing room for energy

With all of the talk about steps we need to take toward energy independence--I wanted to share some of former National Security Advisor Bud McFarlane's thoughts on how we can make the transition. The complete essay ("The Challenge of Energy Security") will appear in the Summer 2006 issue of The National Interest.


For the immediate future, therefore, we should be looking at two countries as integral partners in ensuring the energy security of the Western world.

The first is Brazil. In 1975, after the first oil shock, the Brazilian government made the decision to invest heavily in the technology of ethanol production, so as to utilize the country’s vast potential for growing sugar cane. Today, about 20 percent of the auto fuel in use in Brazil is ethanol. Brazil produces about 4.2 billion gallons of ethanol (and has about 50 percent of the global ethanol export market); indeed, Brazil has the capacity to become the Saudi Arabia of ethanol, and an important partner in ensuring America’s energy security if only we would open our market to it. Today, while we do not tax oil imports, we impose what amounts to a 57 cent a gallon tariff on ethanol imports. Other Western Hemispheric countries with a climate suitable for sugar cane cultivation could become ethanol exporters as well. And Latin America ethanol can easily be exported to the United States via tankers.

The second is Russia. Russia possesses some 30 percent of the world’s natural gas reserves; natural gas has the demonstrated capacity to generate electric power and fuel transport. Today there is more than 600 trillion cubic feet of gas in the Yamal peninsula. None of this gas is currently being exported, and it would be enormously expensive to link this region into Russia’s existing pipeline networks. But the peninsula is well-suited to become a major center for the production of liquefied natural gas (LNG). With temperatures at 20 below zero, it is much cheaper to liquefy gas here than in Qatar, Nigeria or Trinidad. It is a 3,800-mile trip from Yamal to terminals in the Canadian maritime provinces (where the gas can be piped into the North American distribution network), one-third of the distance to ship LNG from Qatar to the Western Hemisphere. Finally, it should be noted that there are very few terrorists in Russia’s Arctic Circle—unlike the oil and gas terminals in the Persian Gulf.

The United States cannot depend upon a finite supply of hydrocarbons located in unstable foreign regions. At the same time, we need at least twenty years to really move the United States toward full-scale deployment of alternative sources of energy. Brazilian ethanol and Russian gas could help us to buy the time and security we need.

The United States, quite frankly, can't depend on hydrocarbons period. The obvious environmental impact of burning hydrocarbons aside, "energy independence" in its current conception still requires deals outside the Middle East. It's highly doubtful that Brazil would deny us ethanol, but shouldn't we at least consider that potential contingency?

Hydrogen fuel cells are years off, and even then still pretty theoretical. Hybrid cars are definitely improving but still remain too expensive.

Chemical solar cells are already being manufactured and are quite efficient but require a massive infrastructure shift from fuel based to individual-centered energy production.

But regardless of the possibilities, the thing to take away is that the US has to take a hard look at its energy situation, and that means going beyond Presidential addresses that demand inquiries into high gas prices and wax idealistic about the advent of the Hydrogen Economy.
If the U.S. government and U.S. businesses were interested, they could take the entire bio-fuels project and not only move the country to independence in energy but spark a major revival of our rural economy and of small businesses across the country. But for the lack of vision ...
Cliff Kupchan had the following comments on Iran using oil as a trump card in the LA Times on Sunday:

Tehran's bravado announcement April 11 that it had mastered key nuclear technology drew censure from world capitals. But it also drove oil prices to more than $70 a barrel on fears that increasing tensions or future military strikes might disrupt Iranian exports and damage Western economies. Prices have risen more than $8 a barrel in less than three weeks, primarily because of Iran.

Tehran's oil leverage is formidable, flowing from its role as the world's fourth-largest producer of oil and its strategic location abreast the Strait of Hormuz, through which 20% of the world's production passes. Iran produces 4 million barrels of oil a day, about 5% of world production, and exports 2.5 million barrels. And it has used oil to build a web of relationships that make key countries dependent on its supplies.

Today, Iran supplies China with 4% of its oil, France with 7%, Korea with 9%, Japan with 10%, Italy with 11%, Belgium with 14%, Turkey with 22% and Greece with 24%. Those dependencies will create increasing unease over U.S. attempts to pressure Tehran.
Brian is right that we need to move away from burning hydrocarbons for energy. But the question Nikolas asks is about the relatively short term of the next 20 years. Alaskan oil is sold mostly to Japan, and no Russian natural gas will ever get to North America if China needs it too. But Chinese competition for Canadian supplies might not be as intense if Beijing can get natural gas from Siberia. Siberia is closer to China than Canada and the latter is closer to us.

There was a recent report that cars powered by lithium batteries with a range of 300 miles have been test-driven. For people who drive less than that in a day, the five-hour recharge overnight might be an acceptable solution if the electric power demand can be met. In the short run, however, that may not be possible.

Probably the greatest thing we could do in the short run is to mandate much higher mileage in motor vehicles. It makes no sense that people are encouraged to buy SUVs that get lower mileage than cars built in the 1980s. Gasoline prices could gyrate for a long time and I don't think the fragile U.S. auto industry will make the necessary investments if demand for fuel-efficient vehicles blows hot and cold. Congress really needs to get involved.

Longer-term, I would like to see a solution to the problem of spacelift so that we can economically ship nuclear waste off the planet (could we send it back to the sun?). It is unfortunate that NASA's breakthrough propulsion physics program got cancelled because some of the more exotic ideas (if they could ever be developed) might also solve the energy problem too.
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