Six Years of Afghan War, But No Lasting Victory

The stated goal of George W. Bush was the capture of Osama, his supporters and the overthrow of the Taliban regime. It is evident that after six years, these goals have not been accomplished.

The actually physical damage and casualties to the US in the World Trade center destruction was fairly insignificant in comparison to the number of people killed in auto accidents in the US each year (42,000) or the carnage in Afghanistan between 1979 and 2001 (1.5 million). However, it had great symbolic value to Al-Qaida by portraying the US as vulnerable despite their great power. When Uncle Sam gets a bloody nose in a sucker punch, it strikes back.

Zbigniew Brzezinki, Jimmy Carter’s national security adviser got his wish for the Soviet’s “Vietnam” in Afghanistan. The contracting out of a cold war battle on Afghan lands to Islamic fundamentalists had the ironic result of training Osama bin Laden who has turned on his former allies by bombing in New York and resistance in Iraq and Afghanistan.

One can speculate that if Osama bin Laden did not exist, would there be a war in Afghanistan today? The answer is probably not. Human rights or mistreatment of citizens alone in any country around the world have not caused the US to intervene. The driver for intervention is always commercial concerns, whether it is oil, or bananas or nationalization of US interests. The US supported the Taliban on their road to power and it could have removed them by supporting the opposition. Likely, they could have convinced the Taliban to accept a pipeline.

The media machine went into overtime after 9/11 to ensure that the case for intervention in the Middle East was built. In fact, since the Bush administration came to power, there was significant interest in deposing Saddam Hussein. Orders were given to the intelligence community – find a Saddam Hussein / Al Qaeda link. A new Homeland security department was created. Threats of anthrax were discovered. Speculation about dirty bombs abounded and the atmosphere of fear allowed freedom of political movement.
The removal of the Taliban sounded like a simple plan for the most powerful nation in the world. The US government ordered Pakistan to stop shipments of arms and other supplies to the Taliban after the destruction of the Twin towers. The northern alliance, now called the United Front, became the “boots on the ground” for the US plan. They didn’t want to repeat the Soviet mistake.

The Taliban, under bombing attack, retreated to the Kandahar region and the leadership eventually took to the hills of Pakistan for safety. The American general Tommy Franks refused to commit American troops to cut off their retreat and as is traditionally done, they bought their way through the warlord’s lines. On January 30, 2002, the US announced the defeat of the Taliban. Mullah Omar and Osama, from their cave in the hills or elsewhere, perhaps didn’t hear the news and have kept on fighting.

In this poor land, there are several realities. Money can recruit an army from the large numbers of desperate young men. Money can buy your way out of prison, or stop the destruction of your poppy crop. Money can allow your opium to cross the border without inspection. Most of the money in Afghanistan comes from narcotics exports, from foreign aid and from countries wishing to mold the government of the day to their will – United States, Pakistan, Saudi Arabia, Iran, Russia, and India. The alliances between ethnic groups are constantly changing as the flow of money or power changes. A former Taliban commander now becomes a Karzai supporter. In an impoverished land, the only constant is the search for survival.

The US soon lost interest in the Afghan war when the Taliban melted away. The real prize was Iraq with its potential for oil production increases. Dick Cheney’s task force on energy predicted shortfalls in world oil supply in coming years. The privatization of that oil and US control would ensure that future US energy problems are reduced. The transfer of human resources to the Iraq project allowed the stated goals of destroying Al-Qaeda to slip away. NATO was strong-armed into playing a role in the security of Afghanistan when the US had visions of Iraq dancing around their head. Canada had played its independence card once in refusing to support the US invasion of Iraq. You don’t refuse “the Don” (Uncle Sam) twice and expect to trade with them.

Hamid Karzai, named the interim president, and elected president in 2004, had worked closely with the US government in the past. He is a member of the majority Pashtun tribe. His excellent command of the English language and good public relations skills have been valuable in obtaining support in the West. His family had been in government circles in the past and he formed part of the Taliban government for a short time. His father was assassinated in 1999, likely by the Taliban. In 2006, Karzai told the UN General Assembly “You have to look beyond Afghanistan to the sources of terrorism and destroy terrorist sanctuaries beyond” referring to Pakistan frontier areas. His government has been described as “cautious” and “seeking to build consensus”. He has survived several assassination attempts.

The Taliban gradually regrouped and have been fighting a guerrilla and terror war using bases in Pakistan hill country in winter, with spring offensives. Some of the tactics are -assassinations of people cooperating with foreigners, IED’s, suicide bombers, and direct attacks where they are superior in force. With the security situation poor, reconstruction efforts have been less than required to build hope for the future.

Now six years later, Prime Minister Stephen Harper wants NATO countries to increase their contribution of troops willing to do the “heavy lifting” and presumably some dying. Do we properly understand the problems causing this lack of progress?

The next article reviews the impediments to peace.

Where God goes to cry

A football quarterback punts when he gets into trouble.  In politics, you ask for a report by an “independent” panel to ensure that nothing sticks to you.  The Manley Report on the future of our mission to Afghanistan is a political sidestep by the Prime Minister around the land mine that awaits him.  Public support for the mission has been less than overwhelming and not likely to improve as deaths of soldiers are announced on a continuing basis.

First, the PM indicated that he would abide by the will of parliament on the question, providing an appearance of respect for the will of the people.  Secondly, the composition of the committee was selected from those who would be sympathetic to his ultimate aim.  The chair chosen was John Manley, a prominent liberal.  This gave him the best of all worlds, the likelihood that a “non-partisan” report would provide favourable justification for his choice and the ability to paint opposing views as being out of step with the majority.

Reports normally use a chain of logic to justify the position that is taken and the Manley Report is no different.  Where we start from determines our world view.   A simple example illustrates – Today, Israel takes the view that rocket attacks on its land are unjustified and retaliates.  The Palestinians view Israel as occupiers of their lands, and that Israeli helicopter gunships attacks are unjustified and retaliate.  Looking back 60 years, the entire area belonged to Palestine and Israel didn’t exist.  But looking back over 2000 years, a Jewish state did exist.  Choosing different starting points for a report can lead to vastly different opinions and approaches to the problem.

The Manley report begins its story with September 11, 2001, but the history of Afghanistan, the Taliban and Al Qaeda didn’t start there.  The story is more complex and there are questions to be answered.  Is this fight a continuation of Afghanistan’s colonial past? If it is indeed a worthwhile venture, how might it be “won” or at least brought to a reasonable conclusion.    If we are to commit money beyond the $6 billion and 78 lives already expended, perhaps we should look beyond the simplistic tale of John Manley to the history of Afghanistan.

Afghanistan is a land of war and assassination punctuated by peace and mismanagement.  Some 31 million people of multiple ethnic groups and many languages live in an area slightly larger than Alberta.  The modern country was formed in 1747 but experienced internal conflict for a large number of years in the late 1700’s and the 1800’s.  There were also great conflicts with outside forces – Russia, England and Persia (Iran).  Afghanistan loses territory to all three, but a bright note occurs in 1842 when the British are defeated with the massacre of over 16,000 soldiers.  One survivor makes it back.  In 1859, it becomes land locked when the British take Baluchistan and attach it to British India and eventually Pakistan.

A third Anglo-Afghan war in 1921 ends with the withdrawal of English troops.  The early part of the 20th century is rife with changes of leaders and assassinations.  The country remains neutral in WWII.  In the 1950’s historical conflicts with Pakistan over borders cause problems with exporting for the landlocked country.  This leads to an alternate trade route and foreign aid from the Soviet Union.  A coup in 1973 ends the monarchy and a republic is formed.  In the late 70’s, the CIA started funding of Islamic militants here as a way of countering Soviet influence and encouraging a Soviet invasion that is intended to become their “Vietnam”.  The financing of Islamic fundamentalism has been part of American cold war strategy since the 1950’s, such as countering Nasser’s nationalism in Egypt. This occurs throughout the Middle East.

Another coup d’etat occurred in 1978. Mass assassinations of teachers and insurrections by Islamists lead to instability of the new communist government. The Soviets believing that the loss of their client state was imminent, invaded in 1979 killing President Amin in the presidential palace, and installed Babrak Karmal as their puppet.

The new government was no more successful in gaining popular support.  Multi billion dollars of weapons and training were supplied to the resistance from the US and Saudi Arabia making the cost of the war to the Soviets higher than they deemed acceptable.  Pakistan’s secret service (ISI) was the conduit for billions of dollars of arms sent to Afghanistan. The radical Islamists received most of the money and training support, with Bin Laden being one of the leaders to gain useful experience in organizing war and mayhem.  A peace treaty was signed in 1988 and the inter-tribal civil war for control began.

As the Soviets withdraw, the funding from the US spirals downward and the country descends into civil war.  In an interview given in 1998, Z. Brzezinski, National Security Advisor to Jimmy Carter, was asked whether he regretted arming and training future terrorists, “What was more important in world history? The Taliban, or the fall of the Soviet empire? A few over-excited Islamists, or the liberation of Eastern Europe?”

In 1994, one of the mujahadeen factions called the Taliban (meaning “student”), led by Mullah Mohammed Omar became popular with its call for peace and unity to a war weary population.  With the help of outside powers, they become the new “stability” everyone desires.  The harsh nature of the new regime soon becomes evident. Poor Afghanistan, after almost 20 years of war and deprivation, is now rewarded with life in a prison.

Next article: The US and the Taliban do the tango.

Jevons Paradox and the value of conservation

William Stanley Jevons made an observation about the usage of coal in England in 1865, when the increased efficiency of the Watts steam engine actually caused the use of coal to increase rather than decrease, as he would have expected.  The use of the improved steam engine in a wide spectrum of industries increased coal usage as a direct result of the cost-effectiveness of coal.

Today, a number of people use the paradox to argue that increases of energy efficiency only leads to more use of energy and that attempts at conservation are doomed to fail. For example, “if cars double their gas mileage, then people will drive more.”  They’re mainly wrong for the following reasons.  First, when fuel costs are rising rapidly, such as hitting a resource production ceiling in the past several years, any increase in the efficiency of passenger cars and trucks will reduce the litres burnt, not the actual cost of a tank of fuel.  Airline fares have been increasing even though the efficiency of jet engines increase with newer technology.   Reason: fuel prices are rising faster than airlines can upgrade their fleets.  Westjet is an example of a company that invested heavily in newer efficient planes and it shows in their profits.

On the home front, adding extra insulation will reduce the amount of oil, natural gas, wood, or electricity used to heat your house.  You are unlikely to change the setting on your thermostat far from its normal level.  In a rapidly rising cost of energy environment, all categories of conservation will produce good results.

Secondly, some categories of usage, like transportation of goods are relatively fixed.  For example, the amount of produce transported from California to Canada each week is unlikely to change greatly based on a decrease in the cost of transportation.  We can only eat so much lettuce.

In the infinitely slow path to energy efficiency, our friends south of the border recently passed an energy bill mandating an increase from 25 to 35 mpg, a 40% increase in vehicle fuel standards by 2020.  The increases start in 2011, but there are a number of loopholes related to alternative fuel, trucks and swapping of credits.  The entire bill is 1055 pages and deals with a huge variety of topics from incandescent lamps to biofuel.   Was the legislation partially a pre-emptive strike to ward off more severe legislation on car mileage from California and 12 other states who wanted SUV’s and light trucks treated the same as cars and higher mileage implemented sooner than later?

Around the world, there are countries with higher standards than North America. China has already a 35-mpg standard in place.  Europe and Japan standards are over 40 mpg.
Here in Canada, our energy policies are guided by American legislation. The automotive companies are integrated across North America and have driven the agenda.  Perhaps Stephen Harper will now feel comfortable raising our mileage standards to meet those of his friend George.  Don’t expect to see anything different or better.  The auto industry will have to invest billions of dollars in retooling factories to meet the requirements of lighter, more aerodynamic vehicles.  The aluminum and carbon fibre industries are big winners and steel, being heavy, will be replaced where possible.

Canada’s “new” government has been interested in clean emission technology.  This follows the American lead on misdirecting the public.  Common sense alone makes it clear that burning less fuel reduces emissions of all types, whether CO2 or other varieties, less expensively than technology alone.    The auto industry has wanted to keep its high profit margin SUV and trucks at all costs, even at the risk of its long-term demise.

It is unfortunate that politics is an averaging process where you give a little bit in each direction and end up often in the same location with the same problem.  The American legislation is too little, too late and we will soon see the California’s of this world forcing deeper changes.

What most people don’t realise is that we are starting on the second half of our oil reserves.  This is the tough expensive oil to recover, and the worst part of it will be the gradual decline of world production.   $100 oil will seem cheap in the near future and the resulting economic catastrophe will be unprecedented.

Jevons was concerned that the supply of coal would run out in his time.  He couldn’t foresee that coal use would be partially displaced by the rise of oil for 150 years and that other reserves would be found.  Likewise today, we are concerned that oil is starting a decline very soon.  There is a small chance that we will find technological solutions to our energy needs in time.  There is also a small chance that we will find additional reserves of significant size.

However, there is a much larger chance that we will not solve the problem and we will suffer greatly.  In 1865, there were 1.2 billion people on this planet in a mostly agricultural lifestyle using little energy.  Today, we are 6.6 billion people who use a great deal of energy.

What should be our resolutions for 2008?  Certainly, we should plan for higher efficiency in all of the products that we purchase.

How far does your tank take you?

Recently my gas mileage doubled when I replaced my mechanically challenged car with a well worn but newer diesel-powered car. Do I feel greener? Perhaps a little, but deep down you know that mileage has to get much better before we can say that a car qualifies as being green. We just don’t have the same choice in public transport that Toronto, New York or London does, so a car is a requirement for many people.

It does make a real difference in finances when you fill up every two weeks rather than on a weekly basis. If the price goes up a little, well it isn’t a panic. More of my money stays in Canada rather than going to Norway or Venezuela or Saudi Arabia. Not that there’s anything wrong with international trade but our outflows on fuel have almost doubled in the past year.

But is doubling mileage ratings good enough to save people a lot of financial pain? A typical person may drive 20,000 km per year or 384 km per week. At 25 mpg (11.32L / 100 km), it is 43 liters a week (a tank), 50 mpg = 22 liters (1/2 tank) and at a fictional 100 mpg, it is 11 liters. When the price of fuel rises to $3 per litre, the average car would use $129 of fuel per week or $516 per month. The double mileage car costs $66 / week and the non-existent supercar would use only $33 / week.

Canada annual gas and diesel sales at the retail pumps are roughly 55 billion litres. In comparison New Brunswick uses about 1.5 billion litres each year. Cutting fuel use in half would save NB drivers roughly $750 million dollars a year at $1 per liter pump prices. Road transportation is roughly 35% of Canadian total oil use and 23% here in New Brunswick as there is large use of heavy oil for power generation.

There is some hope on the horizon. Heard about the X prize for Space? The X PRIZE was inspired by the $25,000 Orteig Prize, offered in 1919 by wealthy hotelier Raymond Orteig, to the first pilot who could fly non-stop between New York and Paris. The winner was Charles Lindbergh and an era of air transportation began.

This year an automotive X prize was announced for the development of a realistic 4-person vehicle that will achieve 100 miles per gallon equivalent. This means that electric or diesel can also apply. A multi-million prize will be awarded to the group who designs a vehicle that can win a long distance race and meet the various standard demand such as emissions, features, and cost of vehicle. 100 mpg is roughly four times higher than the present “CAFE” fuel standards for the auto industry.

Why pick a target of 100 miles per US gallon, you might ask? The foundation estimates that at 20 miles per gallon today, it takes five gallons to go 100 miles. At 100 mpg, it just takes one gallon. Therefore, 4 gallons are saved. Above 100 mpg the law of diminishing returns kicks in harder. If 200 mpg had been chosen, then only ½ gallon more would have been saved but it becomes much more difficult to build an attractive, marketable vehicle.

There are 43 groups that have signed a letter of intent to compete and 300 who have inquired about the contest. One of the entrants is a BC company called Fuel Vapour Technologies who had been developing a three-wheel sportster called the “Alé”.

Vehicle mileage is related to the weight of the car, to its wind resistance profile, the engine technology and the speed at which it is driven. It is likely that the vehicles in this contest will be much lighter than the 2727-kg GMC Yukon or the 1135-kg Toyota Corolla. As we have seen in the aircraft industry, there is a tendency to move to lighter material such as carbon fiber due to the strength to weight ratio. Costs of this material are decreasing.

Strangely absent from the X prize list are the major automotive companies, although GM actually produced a concept car in 1992 called the Ultralite, with a carbon fiber frame – total vehicle weight of 636-kg, top speed of 135 mph and 88 miles per US gallon. Volkswagen has the L1, which uses 1 liter of diesel per 100 km or 270 mpg. GM’s subsidiary Opel developed the Eco-Speedster, whose top speed is 155 mph and gives 108 mpg. In North America, perhaps the largest impediment to production of these cars is the high profitability of big vehicles, the low return on small efficient cars and the lack of understanding of how precarious our energy position is.

 

 A private foundation is trying to stimulate the production of good mileage vehicles in North America. We know that it is possible to do so. We see the beginning of an unprecedented energy problem. We know that GM doesn’t want to raise the “CAFE” requirements. It clear that Canada’s “New” government will not set independent higher fuel standards from the US. The federal government did introduce a vehicle subsidy program that was politically skewed, but a small start. Here in NB, Shawn Graham cut the 3.8-cent gas tax to get elected, which was exactly the worst thing he could have done.

There are a number of things that could be done to get us ready for high prices and the eventual rationing of gas. Yes, rationing of gas is coming. High mileage diesels are available in Europe but few are on sale here. Does GM determine our energy policy? Should we institute a carbon tax on fuel to help fund subsidies on the purchase of good mileage vehicles? Maybe we could lower the speed limits on highways. Perhaps the annual vehicle registration fee could have an aggressive carrot and stick approach. There are so many ways we can adjust to extreme prices that are inevitable, but we haven’t seen much interest from the very people we elected only a short time ago.

Diplomacy is a crude story

The first chapter of “Diplomacy for dummies” would explain how the world really works.  “Energy resources create excellent opportunities to make fortunes for big business.  Big business makes big money and will make substantial bribes to governments and politicians to grease the wheels of commerce.  Governments support these efforts with low royalties.  US governments go the extra mile and will send soldiers if required in case of pesky foreign governments.  As usual, the poor will always be shafted.”

One of the most intriguing exceptions to this rule is Venezuela (a pesky foreign government), where Hugo Chavez, as an extraverted socialist, has turned the standard dynamic on its head in recent years.

His primary goal appears to be increasing the standard of living for the people of his country. To do this has meant changing the status quo for the establishment of his country and the international oil companies (IOC’s). Not a very popular idea in many circles. Increasing control and nationalization of energy resources is not a new idea. Over the years, we have seen a similar process in Mexico (1938), Iraq (1960-72), Saudi Arabia (1950-80), Iran (failed attempt 1953, success in 1973), Libya (1970), Algeria (1971), Russia (re-nationalization 2003-05), Ecuador (2006), and Bolivia (2006) as part of the list.

This continuing desire of countries wanting to control their oil resources is based on:

• Retaining a larger share of the profits from the resource to allow financial autonomy and to increase social benefits for their citizens.
• The realization, that in most cases, the financial and technological requirements for oil development can be obtained without giving away the ship. The model of the multi-national oil major being able to dictate terms is less common today.
• The knowledge that their resources are limited and that control over production levels to increase or decrease production according to national objectives is crucial.

The history of colonial powers such as France, England and the United States in matters of oil gives us many rather sad instances where the military or economic weakness of oil rich states have been exploited. The example of Iran in 1951 failing to negotiate better royalty rates with the predecessor of British Petroleum is typical. When Iran nationalized the industry, Britain blockaded the export of Iranian crude with British intelligence and the CIA responsible for a coup that toppled the government in an early example of “regime change”. The Shah of Iran was re-instated and did the bidding of both British and American interests through repressive government. The fall of the Shah in 1979 led to the hostage taking at the American embassy. Subsequent behaviour by the US during the Iran-Iraq war provided further fuel to the fire. Present day relations between the US and Iran is related to “blowback” from the covert activity of the early 50’s.

Back in Venezuela, a 2002 coup attempt temporarily removed Chavez and to supporters of Chavez appears to have some links to the US. It may be some years before the allegations can be confirmed. Based on a few of the known interventions by the US in the governance of Guatemala (1950’s..), Dominican Republic (1960’s), Congo (1960’s), Cuba (1960’s), Chile (1973), Haiti (1980’s), El Salvador (1980’s), Nicaragua (1980’s), Grenada (1984), Panama (1989), it appears to be a plausible scenario. Since 2002, the rocky relations between the US and Venezuela have become even more strained. Chavez is seen as a “socialist with deep pockets” and a serious risk to US control of Central and South America countries. Support from Chavez provides those countries with some choice in their economic and political policy decisions.

The balance of power in the oil industry is changing as well. At this moment, the percentage of oil under the ownership of national oil companies (NOC’s) is roughly 85%. IOC’s such as Exxon Mobil, BP, Total, Chevron, Repsol produce only 12 million barrels a day compared to the 85 million total world output. Big oil (IOC’s) claim that they are kept out of many areas where their expertise and money would mean higher production. This is true in some cases. However, the only place where it may change is Iraq, where the invasion has had as a principle goal the privatization of oil, and the entrance of American and British oil companies. Given the $1.3 trillion cost of the war to date and the failure of the Iraqi government to pass the oil laws demanded by the US, it is not a cost-effective way to stimulate privatization.

In the future, the amount of oil that will be available to the open market may decrease in addition to geological depletion. National oil companies (China) are making contracts with oil nations, offering them billions in loans, and development technology in exchange for long-term supply contracts. In the short term, that volume may be sold on the open market. However, when shortages appear, these volumes could revert to the home country. Given this case, those buying on the open market will be the hardest hit – an area like Eastern Canada for example.

Secondly, the growth of NOC’s may continue to increase at the expense of the international oil companies. The IOC’s have not yet adjusted to the change in roles and the best use of their technology in cooperation with the NOC’s is not in place.

As the price of oil rises, exporting countries may be satisfied with lower export volumes to conserve reserves and revenues for the long term, worsening the supply problem. What will be Canada’s national strategy to declining world production? It is not clear to those of us who are the most at risk (Eastern Canada). Perhaps we could all just act surprised when the going get rough?

A bargain at twice the price

Steve Wilcox, one of the readers of this column, suggested I write about the good value that electricity provides for our lives. He is a smart engineer and that isn’t an oxymoron in his case. (Oxymoron examples – clean coal, government organization, tax return and you soon get the drift).

When an elevator takes you up to the 15^th floor of a building, few of us give it a second thought, unless the elevator is broken and we have to walk up. We tend to take things for granted. Electricity is ubiquitous, inexpensive and not at all respected for what it can do. (Ubiquitous = being everywhere, omnipresent) I just hate it when a word slips into general usage and I didn’t get the memo on it.

A kilowatt-hour costs roughly 10 cents and provides you with 1000 watts of electrical energy for an hour. By comparison, a human can only provide a peak work output of 500 watts for several seconds. A level of 200 watts output from a trained athlete can be sustained for several hours and was enough for the amazing man-powered flight across the English Channel back a number of years ago. One can quickly see that the human body could not sustain a lifestyle of lighting, heating or appliances. And who would want to be tied to a bicycle generator for 8 hours a day working for a measly 10 cents a shift.

We have been seduced by the plentiful, low cost supply of electrical and oil based energy sources to fulfill our desires. Our houses have become filled with appliances, grown much larger and we have bought large cars and trucks. Our cities sprawl over large distances without efficient public transport. A litre of gas costs roughly $1 with taxes and refining costs. It contains 35,000 Btu’s and when burnt for transportation purposes will last 25 kilometers in a car with excellent mileage (4L /100 km) but only 6 km in a vehicle with a poor rating of 16L / 100 km. At its best, that is 4 cents per kilometer.

The use of electricity for refrigeration is a remarkable value as well. Before electrification, ice blocks were cut in winter, stored, and transported to homes for use in iceboxes. We are now able to keep our food fresh and safe for a very small cost of electrical energy. Efficiency NB tells us that an efficient fridge uses 405 kWh per year or a little over 1 kWh per day (11 cent/day). An inefficient unit from 1984 uses 1457 kWh (40 cents / day). The annual difference is $105 per year – enough savings to justify a changeout.

The biggest use of electricity in our homes or apartments is for water or space heating. Oil and wood heat remains to some extent. Natural gas is prominent in many provinces across Canada. Central heating controlled by thermostat is extremely convenient for our society and has become the norm due to the low cost of energy. If the average salary in Canada is $38,000 per year, then a total home energy bill of $2500 per year is 6.5% of gross salary. Your percentage may vary based on salary, heating / electrical bill and size of home.

Most people would not be willing to cut their own wood in the forest or go back to one woodstove as the only heat source in their house. We may complain but we realize how great a value energy really is.

If the world had infinite sources of energy, no changes in our lifestyle would be required. However, with 6.6 billion people on this planet demanding resources, something has got to give. A recent sign is the rising price of oil, which indicates some real difficulties in world supply. Given that the supply will eventually start a downward trend, what would be our appropriate energy strategy?

David Hay of NB Power recently indicated that the price of electricity is too low to encourage conservation. Very true. Unfortunately just raising the cost of electricity is not politically feasible at this moment. However, raising the price of a kWh while simultaneously lowering the provincial income and corporate tax rate by an equivalent amount is a neutral step that gives money back to the people and makes saving energy into an interesting proposition for us. Taxing the carbon-based production facilities of NB Power does the transfer of the money. The government should also agree on an accelerated time frame for power rate reform from declining to inclining block, again on a neutral basis.

The reduction of the gas tax by Shawn Graham after the last election was a retrogressive step. Re-installing the tax with compensating subsidies for vehicle efficiencies and public transport would be tax neutral and encourage conservation.

Sweden has a plan. “Our dependency on oil should be broken by 2020,” said Mona Sahlin, minister of sustainable development, in an interview with The Guardian newspaper. How do they plan to do it?

What is our plan for New Brunswick? When the price of a barrel goes above $100, will we see a plan? Perhaps, when the price of oil hits $150. So far, the rising Canadian dollar has taken the sting out of recent increases.

Electricity and gas are worthwhile at twice the price of today and the sooner we get there the better off we’ll be in the long term. Shawn Graham seeks transformational change in this province. Unfortunately, he doesn’t recognize the real problem.

Do you feel lucky?

It’s a notable event when oil hits over $90 per barrel. Taking a moment to reflect on the occasion could be of some value.  Only a year ago, we saw a price of $55 dollars.  Simple logic of supply and demand would indicate that supply is very tight at this moment.

Back in 2005, surplus capacity had declined to roughly a million barrels a day, a very thin margin when dealing with daily production of 85 million barrels. Today, Saudi Arabia claims to have spare capacity of over 2 million barrels / day but has effectively cut production by 1 million barrels over the past two years, perhaps to support prices. OPEC has not yet used that capacity to push oil fluctuations downward but promises some production increases starting in November.

Saudi Arabia might be able to lower prices on a short-term basis. But, are higher prices a bad thing? The answer is mostly no. Naturally high prices affect people and business temporarily, but they also drive conservation, energy efficiency and ultimately greater independence that is greatly needed to reduce consumption. What are the prospects for our long-term supply of oil?

The editor of the UK Petroleum Review, Chris Skrebowski sees it as a problem of “oil flow.” If you can’t get enough product out of the ground or through the refinery to the market, then reserves mean nothing. With his megaprojects database, he has been tracking increased supply (oil flow), subtracting expected depletion rates of fields (roughly 4 million barrels / day) and comparing the result with projected demand since 2003. Since the time line from discovery of oil to commercial production averages 6 years, a prediction of new production till 2012 can be made. The result of his analysis shows a peak for oil production in 2011. “Peak oil” is considered to be when flows are inadequate to meet demand after which supply will start its natural decline. “It’s real, it’s imminent and it’s going to be unpleasant” he indicates.

An optimistic view has been usually provided by the International Energy Agency (IEA). The IEA, in a recent report expects world spare oil production capacity will shrink after 2010, and a “supply crunch” is likely. Fatih Birol, the chief economist, indicated in an interview in Le Monde that ” if the production in Iraq doesn’t increase exponentially from now to 2015 we have a very large problem, even if Saudi Arabia fulfills its promises.. of 3 Mb/d. The numbers are simple..… it will not be sufficient to meet the Chinese demand.” Queried on the growth of demand – “Unfortunately, there are lots of words but few actions. I hope that the consuming nations understand the gravity of the situation and put in place very strong and radical policies to slow the growth of oil demand.” The IEA has been predicting an increase of 2 million barrels a day in 2008 and an output level of 120 million barrels a day by 2030.

This month saw the release of an interesting report by the research organization Energy Watch Group (EWG) on the world supply of oil. A member of the German Legislature Hans-Josef Fell founded EWG. The report was based on the production records of oilfields around the world. A number of the key findings were that:

• Peak oil is now. It is expected that world production will initially decline by several percent a year and by 2030 will be 39 million barrels per day – half of today’s figures.
• Global proven reserves are smaller than believed by others – 854 Gb as opposed to the IHS Energy database figure of 1255 Gb. The area of difference being the numbers related to the Middle East.
• The major international oil companies, in aggregate, have not been able to increase their production in the last ten years.
• A growing supply gap has been caused by the decline of the North Sea fields and the Canterell Fields in Mexico. Additionally, Saudi production has been reduced by a million barrels a day – either a choice of the kingdom or as a result of declining production.

What are we to believe? IEA, an official energy-monitoring agency that has been predicting no problems to 2030 now shows doubts on capacity. Will they soon disavow the optimistic reserve pronouncements of the US Geological Survey? The size of discoveries has been shrinking since the 1960’s and we now use more than is being discovered. And we expect to increase the flow by 50% when the cheap and easy to find oil is gone?

A number of independent scientists and geologists have been forecasting declines based on the data that they see and the fear that the promises of Saudi Arabia are hollow. They see severe economic storms that threaten the very nature of our society in coming years.

George W. Bush, the geopolitical genius of our time, went to war in Iraq to conserve US control over Middle East oil and probably to have the “majors” develop the higher potential of the Iraqi oil fields, something not possible with Saddam Hussein in place. Alan Greenspan, the former chairman of the Federal Reserve said in his memoirs “the Iraq war is largely about oil.” Former US General John Abizaid also recently confirmed this. Based on recent posturing, it appears that a second oil war is possible with Iran. The official charge of “wanting to manufacture nuclear weapons” seems a bit thin given that Pakistan next door is a notoriously unstable state, possessing multiple atomic bombs. At the moment, Pakistan is a useful and pliable ally of the US and doesn’t have any oil. Iran is guilty of the crime of “having an independent foreign policy” in the same way that Cuba does. Should the US decide to bomb Iran we should expect the removal of 4 million barrels from world markets with huge increases in the price of oil. When Iran then retaliates on Saudi facilities or blocks the Strait, the damage to the world economy would be irreparable.

We now have George W playing Dirty Harry with his 44 magnum confronting the next bad guy – Iran and asking him “Do you feel lucky?”

Are we lucky to have governments without adequate energy policies determining our future? The Canadian Defence and Foreign Affairs Institute just released a report by Annette Hester entitled “Canada as an emerging superpower – Testing the case”. She notes we are only a small exporter of oil despite Harper’s spin and make some interesting points. “The relevant question is not whether Canada is an energy superpower, but how Canadian energy resources can be used to turn the country into a powerful modern nation, an example of capitalism done right.”

The cost of a deficient energy policy for Canada is high prices, lost opportunities, and eventually an unstable supply. If there is lots of oil, why are China and the US, the two major users, each going after control of supplies in a panic mode? Put on your seat belts. This could be a rough ride.

The five stages of oil grief

In the book “On death and dying”, Elisabeth Kubler-Ross talks about the five stages of grief and tragedy: Denial, Anger, Bargaining, Depression, Acceptance.   Categorizing our reactions to traumatic events is a way to understand how the human mind copes and eventually gets beyond the situation.

In the similar way, the reaction of our minds to the decline of the oil era is quite predictable.  Living in North America in the midst of the oil era has given us greater power than an Egyptian pharaoh.  It’s no surprise that we don’t want to give it up. The decline of world oil resources is off the radar of our political leaders. As one of my former bosses used to say: “The general doesn’t tell the soldiers that they are out of bullets.”

What politician in his right mind wants to tell you: “OK, we screwed up, we’ve sent too much of our oil and natural gas south of the border. We’ve allowed poor gas consumption ratings because larger cars are more profitable for car manufacturers. We’re sorry that you can’t afford to heat your home because your job at the factory has closed due to high energy costs that could have been avoided.”

No, the smart politician operates on rules that guarantee we make the wrong choices.

Rule #1 – Never accept blame or admit an error. If an error exists, it must be the previous administration that caused it. Blame them.

Rule #2 – Get new jobs announcements at any cost. Growth is absolutely necessary. Environment concerns are expendable.

Rule # 3 – Think short term. If the problem is more than six months away, it can wait. If it is more than 4 years away, it doesn’t exist and the next government will take the heat.

Our denial of reality takes many forms, such as the technology fix: the urban legend of a carburetor that gives 140 miles a gallon but the oil companies or Ford bought up the patent and it’s in a vault somewhere.  They don’t explain why George Bush wouldn’t love to reduce oil dependence of the US or perhaps they believe he is a tool of the oil industry and on it goes.  There are others who think hydrogen, ethanol, or use of electricity in cars will be the silver bullet.  But we don’t look closely at the mathematics of the proposed solution and the politicians don’t mind spending our money on useless subsidies for fuel and technology that aren’t going to work.

Or the conspiracy theorist, “the oil companies just want you to believe that there is a shortage so that they can benefit from oil prices. There is plenty of oil”.

Fairly soon, perhaps within five years, the second stage of oil grief will hit you.  When oil prices skyrocket, you’ll get a sickening feeling in your stomach and anger that this can’t be happening to you – Every time you fill up your vehicle and it costs $250 or more. Perhaps you’ve just bought a gas-guzzler, a half ton or SUV and it is now virtually worthless. You are locked into car payments that you can’t afford to drive, a house you can’t afford to heat, you live too far from the grocery store to walk, your job is miles away and there is no public transport from your subdivision.

The widespread anger of the public will drive politicians out of office and lead to some forms of anarchy.  Hard on the heels of anger is the “bargaining” phase when truck drivers will shut down the highways in general strikes as they go broke from fuel costs. There will be demands that the cost of fuel be subsidized but the government won’t have the money to comply, as job losses will drive down tax revenue. The government won’t be able to subsidize home heating, the levels of employment insurance benefits along with companies’ demands for help.

Unfortunately, it will be too late to help most people through the hard times that are coming.  The depression stage will hit many people who are stressed beyond their capacity to cope financially and emotionally with the changing reality.

Somewhere between six months and one year after “the event” we can expect that a large number of people will have moved towards the acceptance phase and make the difficult but necessary changes in their lives.  Approximately 3% of the population are presently involved in farming to support everyone else. Back in 1900, the figure was close to 40%.  The question we might want to ask ourselves, given the gradual elimination of fuel from agriculture in the next fifty years, is:

How quickly will this country revert to a higher percentage of farmers and do I like farming as a career choice to provide food for my family?  Secondly, if not, what other valuable contribution can I bring to a totally different sustainable society that will be forced on us by necessity in the coming years.

Some in denial will insist that this can’t be true. According to George Bush, “the American way of life is non-negotiable.”  Here in Canada, the lack of a coherent energy policy, courtesy of Stephen Harper and his predecessors, makes the possibility of a soft transition to a post oil economy less likely than a real tragedy.

Our oil intoxication is about to end but hopefully the withdrawal symptoms won’t be as painful as I fear.  But we may all have to start that garden plot sooner than later. Hey, what about a solar powered electric tiller or one recharged by wind energy?  I just hate using a shovel to turn sod.

Get your free car

After you’ve made your car mechanic a rich man and terminal rust is devouring the metal frame of your car, it may be time to re-evaluate your “investment” in your car. Statscan figures there are 1.6 million commercial and passenger vehicles sold annually in Canada. There are roughly 20 million on-road vehicles registered in Canada, which means that the average vehicle life is 12.5 years.

Collectively we burn 55 billion liters of gas and diesel.   At $1 a liter, we spend $55 billion per year to keep our tanks with fuel.

A rough value of Canada’s vehicle fleet is $560 billion if we assume an average value of $28,000. Remember that trucks are included in this total.   Each year we spend $45 billion on new vehicles.

My ailing vehicle is 12 years old and has six months to live. The tedious process of finding a replacement speaks volumes about the state of my finances. The rich write a cheque for the new car of their choice. The “financially challenged” agonize over mileage ratings, the sound of an engine, the slip of a transmission or the colour of exhaust. Options are weighed as salesmen spin their stories and our heads.

But there is a glimmer of hope in the distance. Perhaps you’ve read about the new low cost cars being built in Romania, China, Brazil, India and elsewhere. Some of these cars may cost as little as $3000. On the higher end is the Renault Logan, which costs roughly $8600 and has sold over 300,000 units. It has mileage ratings of 40 mpg (6.8 L/100 km) with a gas engine.

 

Where this car becomes very interesting is combining the low initial cost with annual fuel savings by replacing gas-guzzlers in Canada. With an average 20,000 km annually, the fuel used would be 1360 liters or $1360 dollars. Large numbers of Canadian vehicles are getting less than half the mileage rating of this car (20 mpg or less) and would use $1360 more. Over a 12-year life, the present value of gas savings for those people changing to efficient vehicles would be $10,802 (based on 7% interest).

This means that a new low cost car would be totally paid for in less than 12 years with the money that is saved on gas, with benefits of reduced CO² emissions and reducing national oil consumption. The annual benefit of taking a gas-guzzler off the road and replacing it with something like this is 3600 tonnes per year. If ten million vehicles were replaced and efficiency doubled, then we have reduced CO² by 36 Mt per year and that is 20% of the required Kyoto reduction. And it doesn’t have to cost the government any money to accomplish this.

So, could we turn this idea into a practical program without costing much government money? The key is to use the existing financial institutions as the administrators and source of funds. A minimum program would see loans of $10,000 at commercial rates to every person who wishes to replace their vehicle with a new vehicle that gives double the gas mileage. It is necessary that the previous vehicle be certified as scrapped / recycled off the road to derive the maximum benefit for the environment. The loan is repaid from cash available from fuel cost reduction. When fuel prices rise, the business case just gets better.

Not all people would want a Renault Logan or similar low-end vehicle.  Some individuals would purchase vehicles of greater cost and absorb the repayment costs above fuel savings via income, as is the case today.

We should expect that as world oil production tends toward a decline, the status quo will become unacceptable.  I got a chuckle hearing that GM is building a Yukon / Tahoe hybrid in 2008 that will take it’s average fuel rating from 18 to 22 mpg.  Minor tinkering with fuel consumption is unlikely to save the SUV models and won’t stop GM from bankruptcy in the near future.

Automakers can’t immediately change course without large retooling costs but is there a really a choice if Ontario wishes to retain an auto industry?  Witness the rise of the Japanese, Korean, and soon the Chinese automakers.  What future exists for a Canadian industry that is anchored in the past and doesn’t provide vehicles that we will need in a post oil society?

The annual purchase of $45 billion worth of vehicles has an enormous impact on Canada. Our choices are influenced by auto industry spin (advertisements).  It would be interesting to see an effective long-term liquid fuels strategy by the federal government. At what point will Stephen Harper inform Canadians that we urgently need vehicles with superior mileage ratings? His mantra that control of CO² emissions is either impossible or requires enormous tax dollars wears thin.

Capitalism and the Environment

If you saw the Live Earth concerts recently, you may have an opinion on the value of the effort to save the planet. Certainly, there is skepticism whether progress was actually made by this approach which differed from the documentary film “An inconvenient truth”. Although I am not a Metallica fan, some of the artists were great (according to my taste) but perhaps the ultimate benefit of the concerts will be greater than most people understand. Political change happens when ideas percolate throughout society and become commonly accepted as the only way to proceed. This was a major event where leaders of the entertainment industry reached out to millions of fans, who otherwise might not been receptive to an environmental sermon.

No, we will not see any substantial changes this week or the next. The value of this event is more symbolic, hopefully being the date when capitalism got an invitation to the chiropractor for a major adjustment. In the past we have had to send capitalism out to the woodshed to stop child labour abuses, legislate safety regulations to prevent worker deaths, and begin the first waves of environmental regulations to slow down the abuse of this planet where we live and breathe.

Capitalism is celebrated around the world as being effective in producing goods for the masses at affordable prices. It’s tremendous force is related to the way that it marches over all obstacles, whether human or environmental, to achieve its prime objective – profit. Classical economics use supply and demand as its primary tools of analysis. Environmental damage is just part of externalized costs that are pushed off onto society in general to look after. Think about the individuals who are affected by severe air pollution. The degradation of the air and the health costs are borne by individuals and healthcare programs but not by the company who has avoided the cost of proper pollution abatement equipment.

A number of ecological economists have observed that the typical models proposed have not properly described human economic activity. In the view of Robert Costanza who set the annual net worth of nature at $33 trillion, the costs related to the destruction of “natural capital” or the value of nature are an intrinsic part of the economic equation to be considered by government decision-makers.

Today’s serious environmental issues of climate change, global over-population and the resultant decline in world resources such as oil and natural gas are still actively opposed by a majority of the business community and their linebackers, the politicians. What Al Gore has done with his film “An inconvenient Truth” and Live Earth is to throw millions of footballs over the heads of this defensive line and ask the entire world to catch the pass and run with it into the end zone. He has asked millions of people to play on his team in order to win quickly and decisively. Not your typical representative politics.

In the near future, the business community and the existing political chameleons will have to make a decision whether they want to participate in the decision to restrain the rapacious assault on our environment or to watch from the sidelines when a new government does it.

Although there are some technological advances and product efficiencies (like compact fluorescents) that can help the situation, it appears likely that industrial type solutions requiring restraint will be required. One example implemented in Europe is carbon trading, where emitters of CO² are given limits beyond which they must buy credits from those who have not used their quota. Those companies who build energy efficiency into their operation will profit. Limits will decrease annually to meet target for CO² reduction. But carbon trading has its down side and other options are possible.

A second option, suggested by David Fleming, is called the Tradable Energy Quota (TEQ). This is a debit card where industry and individuals are given energy credits for the year. When they purchase energy, they must show their card and it is electronically subtracted. If they exceed, they must purchase other credits. If this sounds like a modern day rationing system, it is. The alternative to reducing demand for oil when the production of oil declines is continual high prices which is just rationing by economic wealth. Like or not, our future is bleak unless we act.

Capitalism harnesses the greed of humans and transforms that force into a self-adjusting production system that has no equal. The question is whether capitalism can adapt to the new reality of diminished natural resources, less growth, and the requirement to reduce the CO² levels. Can planet Earth really afford capitalism as it is presently operating? On the political level, can we afford the do-nothing policies of Stephen Harper? Here in New Brunswick, we have the façade of an energy and environmental policy. Can the Graham government provide us with a rational “road map” to survival or will it always be useless expenditures on more new roads?

Personally, I don’t have a ticket on the space shuttle to another planet so I would prefer that we save this one from the myopic management presently at the helm. How about taking a serious look at our leaders and giving the boot to those who aren’t “getting it on the environment” and real sustainability at the next election?