Peak Oil And The Third World  

Chris Nelder at "Energy And Capital" has a look at the impact of peak oil on the third world.

Here in the first world, we still have the luxury of armchair theorizing about peak oil, and paying a bit more for gasoline, but the third world is actually feeling the pain of peak oil today. Rising oil prices are acting as a regressive worldwide tax, pricing poorer countries right out of the market.

Since their experience must to some extent herald ours as peak sets in, let's see how peak oil feels to those who are undergoing it firsthand.
Asia and Middle East

Nepal: Gasoline and diesel shortages are crippling the country. In July, the Kathmandu valley was hit with its worst energy crisis in history as the state-owned petroleum importer and distributor stopped supplies to gas stations entirely. Fuming taxi drivers subsequently parked their cars before the heart of the Nepalese government center to protest the shortfall. The Nepal Oil Company (NOC) has been facing cuts from its sole supplier, the Indian Oil Corporation (IOC), because of mounting debts owing to Nepal's subsidies, which force NOC to sell fuel below cost.

Pakistan: Chronic power shortages have led to riots in the streets in Karachi. At one point this summer, the gap between supply and demand reached a peak of 3,000 megawatts (MW). Due to chronic underinvestment in energy infrastructure, the country's Planning Commission estimates that its shortfall in oil supply will grow to 3.2 million tons of oil equivalent (TOE) in 2010, and 21.5 TOE in 2020.

Iraq: Iraq has suffered from an acute shortage of oil products since the U.S.-led invasion in 2003. This week brought a report that Iraq's electricity grid could collapse any day now, due to sabotage, rising demand, fuel shortages, and provincial officials who are disconnecting their local power stations from the national grid (presumably in the interest of self-preservation). Constant attacks on pipelines have made it impossible for Iraq to meet its internal need for gasoline, forcing it to rely on imports to the tune of 1.3 million gallons per day. At the same time, it is being forced to reduce subsidies on gasoline in order to meet IMF debt-reduction requirements, even as it struggles with 60% unemployment and rampant poverty as well as chronic grid blackouts. Oil smuggling and a robust black market have sprung up to take advantage of an estimated 10x spread between the official subsidized prices and black market rates.

Iran: Chronic gasoline shortages have forced the government to impose rationing. Motorists can buy only 100 liters a month at the subsidized price of 1,000 riyals (about 11 cents) a liter (the cheapest gasoline in the world). Iran's program of oil subsidies--combined with sanctions from the West over its nuclear intentions--has proved disastrous, putting the government in an intense budgetary squeeze. Angry protesters torched 19 gas stations in response to the rationing in late June. Tehran currently imports about half of its gasoline, and absorbs a loss of nearly $2 per gallon on it, creating an intense drain on the national coffers. As in Iraq, rationing is expected to lead to a brisk black market.

Bangladesh: The shortage of electricity is acute, to the tune of about 2,000 MW a day, which is resulting in regular blackouts. Bangladesh's attempts to import electricity from India, Nepal and Bhutan have been fruitless, so in June the country obtained permission from the International Atomic Energy Agency (IAEA) to begin building nuclear power plants.

Sri Lanka: Severe shortages of fuel have led the UN to warn the government that it may not be able to continue providing humanitarian aid or preserve its supply of vaccines and essential medicines. The UN agencies have been forced to curtail the usage of generators and vehicles. Construction activity in the Jaffna and Wanni regions has all but ceased due to the lack of fuel.

Philippines: A deadly tropical storm hit the country this week, bringing an end to a three-month drought that had severely reduced the country's electricity output. Extremely low water levels were recorded at five major hydroelectric power dams, one of which was forced to shut down entirely. The shortage caused sporadic electricity outages in the country's capital of Manila, which turned to coal and oil-fired power plants to make up the difference.

China: A red-hot economy with rapidly growing industrial sectors has put China in a constant state of electricity shortages, with brownouts a common occurrence. Shortages of coal, power and oil have been reported. Top refiner Sinopec has stopped selling refined products to other companies and private filling stations in order to maintain supply to its own outlets, and some oil dealers are suspected of hoarding supplies. Now the world's second largest energy consumer (behind the U.S.), China's total energy consumption has risen by an average of more than 11% each year for the last five years, 70% to 80% of which is supplied by coal. Meanwhile, all of that coal is casting a shadow of soot around the world, dropping it in places like the west coast of the U.S., and causing acid rain that poisons lakes, rivers, forests and crops. It has been estimated that fully 77% of the black carbon emitted into North America's lower atmosphere comes from Asia.

India: Soaring temperatures as high as 122° F have caused hundreds of deaths and raised grid demand to a record 4,000 MW in the capital of New Delhi, where rolling blackouts and equipment failures have caused power outages lasting up to 15 hours a day. Chronic power shortages in urban and rural India are crippling industrial and agricultural productivity and discouraging foreign investment. The country is currently looking to nuclear energy to provide some relief.

Vietnam: Another red-hot Asian economy with electricity consumption growing at the rate of 15% to 20% annually, Vietnam is facing a 1,000 megawatt shortfall in peak power production. The capitol has ordered local governments to keep the thermostats set no lower than 77° F and to turn off air conditioners a half-hour before the end of the day--with a $1,250 fine for non-compliance.
Africa

Some 25 of the 44 sub-Saharan nations are facing "unprecedented" and crippling electricity shortages with common power outages, even in South Africa. In Nigeria, Kenya, Tanzania, Uganda, Ghana and other parts of West Africa, drought has slashed the generating capacity of hydroelectric dams, which is in turn crippling production of gold, aluminum, and other basic metals.

Uganda: Electricity shortages are frequent as the grid is strained beyond capacity, largely because drought has lowered the water level of the Nile River, reducing hydroelectric generation. Parts of the capital are blacked out for as much as a day at a time. The country has leased two 50-megawatt diesel-burning generators to compensate, reportedly costing the nation about as much as it would have cost to build two new hydroelectric dams. And in a horribly ironic twist, grid power shortages are shutting down a pipeline from Kenya, adding to the diesel shortages.

Zimbabwe: Critical gasoline and diesel shortages are ruining the economy, pushing the price of a liter of petrol to a staggering 120,000 Zimbabwe dollars. Fuel stations went completely dry in June, and there have been long queues at the few which had any to sell.

Ghana: Electricity shortages are causing load shedding blackouts, costing the economy on the order of US $5 million a day. Ghana, among others, has compensated by leasing huge gas generators to produce emergency power--at exorbitant rates.

Nigeria: An acute shortage of fuel occurred in June due to strikes by unionized oil labor over wages, a hike in fuel prices, and the sale of two refineries. Nigeria Labour Congress (NLC) has vowed to cripple the government of Oyo State if it makes good on its threat to eliminate some of the state work force. Abductions, killings and robberies have plunged the oil-producing parts of the country into chaos. Only 19 of 79 power plants even work, and blackouts are costing the economy $1 billion a year. In Nigeria, Angola and other nations, most businesses and many residents run private generators because the grid is so unreliable, adding to their economic and air pollution woes. Imagine: "I've been on the 20th floor of an apartment building in Luanda, and there would be generators on all the verandas, with the racket, the fumes."

Senegal: State power company Senelec has been unable to pay for supplies of fuel for its oil-fired power stations, leading to cuts in electricity supply. China has come to its rescue with a 370 million yuan loan to fund a new distribution network, in addition to its commitment to build a 250 megawatt coal-fired power station there.

Kenya: Gasoline and diesel shortages in Nairobi are grounding industrial and personal transport alike, and price hikes appear likely.

Gambia: Shortages of gasoline and diesel are taking an economic toll across the country, with many empty petrol stations and long lines at stations that have fuel to sell--but only to customers holding coupons from Shell.
Americas

Argentina: The country is facing its worst energy shortage in nearly 20 years. An increase in heating demand caused by an unseasonably early cold snap, combined with the failure of a power plant, caused the collapse of both the power grid and the fuel supply system. Electricity supplies have been severely curtailed, plunging entire districts into darkness and causing the layoff of industrial workers. Shortages of compressed natural gas, which powers many Argentine cars and 90% of the capital's taxis, are common. Argentina now has less than ten years' worth of gas reserves, and can no longer meet peak electricity demand.

Nicaragua: Electricity shortages have led to widespread blackouts, prompting the recently re-elected president Daniel Ortega to promise an end to the "energy bankruptcy" that has afflicted the country. The nation's energy deficit is running between 20% and 30%, forcing the power-distribution company Unión Fenosa to shut down whole cities for six to ten hours at a time. Ortega announced that nations such as Iran would help to build new energy plants to address the issue.

Chile: Reduced supplies of natural gas and lower-than-average rainfall have pushed electricity spot prices to record highs, prompting concerns of inflation and reduced valuations of the country's energy companies. The market took Chile's third-biggest power generator, Colbun SA (COLBUN CC), to the woodshed in early July.

Costa Rica: Beginning in April, Costa Rica began experiencing nationwide electricity blackouts, forcing emergency rationing. The country's hydroelectric capacity is strained to the max, due to a dry summer cutting power output by 25%, damaged turbines at oil-burning thermal plants, and Panama's decision to stop exporting electricity to Costa Rica. Blackouts are now routinely scheduled.

Dominican Republic: Electricity blackouts have become commonplace, apparently due to a lack of fuel and regular maintenance of power plants. Programmed blackouts have now spread from the barrio neighborhoods to the exclusive residential districts.

The picture is clear: the poor and undeveloped countries of the world are the first to fall before the remorseless price inflation brought by peak oil.

Claude Mandil, the head of the International Energy Agency, warned recently of a "catastrophe" for the world's poorest countries as they are forced into the suicidal practice of subsidizing oil just to keep their economies running.

Since we know that there is little point in trying to radically increase anyone's supply of oil, gas or coal at this point, there are only two paths left to choose: powering down or going renewable.

You know what our preference is. Who can turn his back on industries that are growing at the rate of 25%+ a year? While aging oil companies struggle to suck "the last days of ancient sunlight" from the ground, warily eyeing their incipient declines, there are young, agile companies eyeing the abundant and untapped solar, wind, geothermal and wave potential in most of the above countries--with the eager support of the World Bank and the IMF.

Andrew Leonard at Salon has a look at the rapidly growing US corn harvest (at least partly due to increased planting caused by the ethanol boom) - "Biggest. Corn harvest. Ever".

The largest corn harvest in U.S. history is ripening in fields across America as summer rolls along. The latest figures from the USDA predict a total harvest of 13.1 million bushels, a huge 24 percent jump over last year's harvest. The big numbers are in part a natural result of farmers planting more acres of corn than in any year since 1944, but are also due to increased yields per acre. ...

More, supposedly, is to come. Last October, at a presentation at the Renewable Energy Conference, Secretary of Agriculture Mike Johanns promised that new, drought-tolerant varieties of corn were in development that would boost yields in dry areas another 40 percent "not in the next lifetime but in the next few years." At the same conference Monsanto chief technological officer Robert Fraley predicted average U.S. corn yields were set to double within a generation.

That last tidbit of information comes from "Food and fuel for all: realistic or foolish?" an article by University of Nebraska agronomists Kenneth G. Cassman and Adam J. Liska in the debut issue of a new academic journal, Biofuels, Bioproducts, and Biorefining. ...

Cassman and Liska do not present themselves as opposed to biofuel production. They note that even just a "10 percent petroleum replacement of today's motor fuel usage [by biofuels] would represent an important component of a broader strategy that includes development of other renewable energy sources, such as wind and solar energy, and aggressive conservation measures to improve vehicle fuel efficiency." This is a crucial point -- replacing all of modern civilization's transportation fuel needs with biofuels is a foolhardy goal. But if a significant fraction could be replaced, as part of a larger portfolio approach to addressing our energy needs, biofuels could be very useful indeed.

But only if such fuels are produced sustainably. And somehow, that goal doesn't seem to be quite as high a priority for the USDA and Monsanto as some others.

The critical challenge is not only to produce enough food to meet increased demand from population increase and expansion of biofuel production, but to do so in an environmentally sound manner. Achieving these dual objectives in a relatively short time period will require a substantial increase in research and extension with an explicit focus on increasing the rate of gain in crop yields while protecting soil and water quality and reducing greenhouse gas emissions. It is sobering to note that agronomists have never been asked to develop innovative management systems that both accelerate yield gains and protect natural resources.

Links :

* Energy Bulletin (Dave Cohen) - Upstream economics and the future oil supply
* Times Of India - Iran, Iraq sign oil pipeline deal
* Houston Chronicle - Potential storm helps oil price rebound
* The Age - Oil headed for $100 a barrel: Chavez
* Daily Times - UAE may carve up, offer oil and gas territory
* Ventura County Star - Developers trying to harness Earth's energy in new way: The WindWing
* ABC News - Fred Chaney: Intervention bill 'tramples' Indigenous rights
* The Guardian - A climate of change: Heathrow airport demo
* Environmental Graffti - Fancy your own Hobbit Home?
* New York Times - In China, a High-Tech Plan to Track People. Trying to catch up with Britain.
* Village Voice - Rudy Giuliani's Five Big Lies About 9/11
* Salon - Now Romancer. Interview with William Gibson about "Spook Country". Phrase of the day "when you invite the zeitgeist in for tea...". Mentioned in the interview - Node Magazine - which appears to be an online shrine to Gibson.
* Cryptogon - “One Month from The Anniversary, I’m Thinking Another 9/11 Would Help America.”. I can't believe how many American neoconservatives say this sort of thing, and how many news outlets publicise them.