3 Massive World Events That Will Change Your Life
Continued from previous page
In a front-page story entitled “Facing Up to the End of ‘Easy Oil,’” the Wall Street Journal noted that any hope of meeting future world oil requirements rests on a Saudi willingness to sink hundreds of billions of dollars into their remaining heavy-oil deposits. But right now, faced with a ballooning population and the prospects of an Egyptian-style youth revolt, the Saudi leadership seems intent on using its staggering wealth on employment-generating public-works programs and vast arrays of weaponry, not new tough-oil facilities; the same is largely true of the other monarchical oil states of the Persian Gulf.
Whether such efforts will prove effective is unknown. If a youthful Saudi population faced with promises of jobs and money, as well as the fierce repression of dissidence, has seemed less confrontational than their Tunisian, Egyptian, and Syrian counterparts, that doesn’t mean that the status quo will remain forever. “Saudi Arabia is a time bomb,” commented Jaafar Al Taie, managing director of Manaar Energy Consulting (which advises foreign oil firms operating in the region). “I don’t think that what the King is doing now is sufficient to prevent an uprising,” he added, even though the Saudi royals had just announced a $36-billion plan to raise the minimum wage, increase unemployment benefits, and build affordable housing.
At present, the world can accommodate a prolonged loss of Libyan oil. Saudi Arabia and a few other producers possess sufficient excess capacity to make up the difference. Should Saudi Arabia ever explode, however, all bets are off. “If something happens in Saudi Arabia, [oil] will go to $200 to $300 [per barrel],” saidSheikh Zaki Yamani, the kingdom’s former oil minister, on April 5th. “I don’t expect this for the time being, but who would have expected Tunisia?”
Nuclear Power on the Downward Slope
In terms of the energy markets, the second major development of 2011 occurred on March 11th when an unexpectedly powerful earthquake and tsunami struck Japan. As a start, nature’s two-fisted attack damaged or destroyed a significant proportion of northern Japan’s energy infrastructure, including refineries, port facilities, pipelines, power plants, and transmission lines. In addition, of course, it devastated four nuclear plants at Fukushima, resulting, according to the U.S. Department of Energy, in the permanent loss of 6,800 megawatts of electric generating capacity.
This, in turn, has forced Japan to increase its imports of oil, coal, and natural gas, adding to the pressure on global supplies. With Fukushima and other nuclear plants off line, industry analysts calculate that Japanese oil imports could rise by as much as 238,000 barrels per day, and imports of natural gas by 1.2 billion cubic feet per day (mostly in the form of liquefied natural gas, or LNG).
This is one major short-term effect of the tsunami. What about the longer-term effects? The Japanese government now claims it is scrapping plans to build as many as 14 new nuclear reactors over the next two decades. On May 10th, Prime Minister Naoto Kan announced that the government would have to “start from scratch” in devising a new energy policy for the country. Though he speaks of replacing the cancelled reactors with renewable energy systems like wind and solar, the sad reality is that a significant part of any future energy expansion will inevitably come from more imported oil, coal, and LNG.
The disaster at Fukushima -- and ensuing revelations of design flaws and maintenance failures at the plant -- has had a domino effect, causing energy officials in other countries to cancel plans to build new nuclear plants or extend the life of existing ones. The first to do so was Germany: on March 14th, Chancellor Angela Merkel closed two older plants and suspended plans to extend the life of 15 others. On May 30th, her government made the suspension permanent. In the wake of mass antinuclear rallies and an election setback, she promised to shut all existing nuclear plants by 2022, which, experts believe, will result in an increase in fossil-fuel use.