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Week 8 - February 25th - 2002 |
David
Seaton's Energy Links® Commentary
If you read lots of articles about energy you keep hitting up against the
same things over and over again. Here is one piece of information you'll
see often: "the United States uses 25 percent of the world's oil production
even though it has only 4 percent of the world's population and 3 percent
of its reserves." More or less the same is true of electricity or food
or whatever. In Europe people live very well, on aggregate it has a bigger
GNP than the USA and a larger population... "The trains run on time", services
like public health and education are tops, the food is great, but for some
reason all this can be done without putting such a drain on the planet.
The European Union can commit itself to the Kyoto treaty, but America can't.
Why is this? What is driving the American thirst for energy? The feeling
I get is increasingly that of hypertrophy -abnormal or excessive and unhealthy
growth- similar to pituitary disorders when people's jaws or hands and
feet grow grotesquely. The amount of natural, financial, social and cultural
disasters brought on by this gigantism will certainly be one of the prime
topics of future historians as they write their chronicles... by candle
light! David Seaton
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| The
Energy Industry Gauges the Enron Damage (New York Times)
The leaders of the world's largest energy companies and those who aspire to replace them come to the annual Cambridge Energy Research Associates conference to think big thoughts. This year's four-day conference was devoted to "The New Face of Risk: Energy Strategies for the Changed World" - a theme chosen months before Enron's spectacular failure changed the energy world more than anyone could have imagined. But it was the small thoughts, the niggling doubts, that cast a pall over the conference that ended on Friday, and they centered on Enron. Publicly stoic, the investment bankers, accountants and energy executives said they would weather the larger issues that buffet any commodity-based industry, like the sluggish economy and low prices for oil, natural gas and electricity. But in hotel hallways, over dimly lighted dinners and with their fists wrapped around cocktail glasses, they faced their lurking fear: that the fallout from Enron's collapse might taint the industry and change it in dire ways. "There's a sense that we're so close to the collapse of Enron, it's hard to know how it may affect the future," said Lawrence J. Makovich, head of North American Energy and Global Power at Cambridge Energy Research and a ubiquitous host. "Enron is something that people talk about all the time. At receptions, they talk about who they knew at Enron and what they said. It's an icebreaker now." Click here to read more Contents |
| Ken
Lay: A Prisoner of His Own Success (Los Angeles Times)
Pundits from every corner of academe are weighing in on this question. But the countless analysts who claim that the former Enron Corp. chairman lied out of greed are wrong. After 25 years of studying and counseling self-destructive executives whose behavior was at least as abnormal as Lay's, I can guarantee that what drove him--or, more accurately, caused him to freeze in his tracks as Enron's financial house of cards was collapsing--was far more complex. Consider what is arguably Lay's greatest offense: In late October 2001, despite receiving several warnings about Enron's accounting practices, Lay promised that Enron would again be wildly profitable. Many Enron insiders who had heard the same warnings found Lay's statements and inaction bizarre. Yet one of the best-kept secrets of executive psychology is that, once you achieve success, you become a prisoner to the business model that brought you acclaim. Before its collapse, Enron was the Microsoft of energy, primarily because of Lay's brilliance. He took a garden-variety company--a union of two pipeline companies--and propelled it to Fortune 100 status. Rather than merely delivering gas to customers, Lay exploited the recent deregulation of pipelines, realigning Enron so that it could trade, at a huge profit, the product that others had to drill wells to extract. The success of this paradigm shift set the stage for Lay's undoing. Rather than sticking to gas, Enron branched into trading whatever seemed tradable--water, coal, fiber-optic capacity and so on. Inevitably, Lay stretched this model too far. Before he could realize the damage he had done, success had warped his thinking. Rather than remaining true to the swashbuckling soul that enabled him to seize an opportunity, he grew hyperconservative and became blindly adherent to the business model responsible for his success. Click here to read more Contents |
| Enron
Kept After U.S. Regulators (Washington Post)
Federal energy regulators met or exchanged phone calls with Enron Corp. executives and lobbyists 25 times during 11 months when Californians endured soaring energy prices and rolling blackouts, according to records released yesterday by Sen. Barbara Boxer (D-Calif.). The records cover Enron contacts with a dozen Federal Energy Regulatory Commission officials in August 2000 through June 2001, including lunches in Houston and dinners with lobbyists. They do not include references to contacts with FERC by other energy companies during the same period.The FERC officials "were wined and dined by Enron . . . as an obvious effort to win friends and allies as part of its campaign to control all aspects of America's energy policy," Boxer said in a prepared statement. "It is disturbing that during the period of time that California consumers were begging for relief from the price-gouging electricity crisis, Enron was engaging in an active campaign to get close to the top FERC decision-makers -- the only people who could bring relief to my state." FERC Chairman Pat Wood III, who arrived at the commission last June after being appointed by President Bush, said FERC contacts with Enron were neither improper nor especially numerous and never unduly influenced regulators. "I don't think that is really the report card I would look for from a very aggressive advocate," Wood said in an interview. "I see consumer advocates show up on my calendar more than Enron or their ilk do." Boxer asked FERC to document all of its contacts with Enron during California's energy-supply crisis, when federal regulators were asked to set price limits and force energy companies to refund billion of dollars they were said to have overcharged. Boxer spokesman David Sandretti said that in some cases the records don't detail what regulators discussed with Enron executives and lobbyists. Thus, he said, is it difficult to determine whether the regulators improperly discussed pending issues with one side of a dispute, which is prohibited. Wood said: "We are making policy in the sunshine. We have meetings in accordance with the law and we stick to the highest standards of public service." Among the contacts was a December 2000 meeting in Houston during which eight FERC employees had lunch with Enron executives -- including Jeffrey K. Skilling, who was company president at the time -- and were given a tour of Enron's trading room. The records don't say where the lunch was or who paid for it. Click here to read more Contents |
| Oil
Drips With Money for Alaska (Los Angeles Times)
Who wants to drill for oil in the far north of Alaska? Alaskans do. And do they ever. More than the oil companies themselves, more than labor unions, more even than George W. Bush, Alaskans are desperate to get some fresh crude flowing out of the wilderness here. That's because there is a threat on the horizon. Doom is settling in like ice fog. The bears are restless in their dens. Without new oil, goodness, Alaskans might be asked to pay taxes. For a generation now, Alaskans have been living high off public lands and the royalties from free-flowing petroleum. Instead of having to pay state taxes, Alaskans get a juicy cash kickback every year from their government. But the big North Slope oil fields are slowly drying up. So, Alaska has dipped into its shrinking state treasury for money to mount the mother of all lobbying campaigns: nearly $5 million to try to convince other Americans and Congress that it's in the nation's best interests to open the Arctic National Wildlife Refuge to oil drilling so that Alaskans won't have to shoulder the yoke and actually pay for their schools and hospitals themselves. For pure self-interest, Alaska beats even Enron in trying to shape government policy. In the last year, the state spent $3.85 million in its Arctic refuge drilling campaign and appropriated another $1 million last week. By comparison, Enron spent $2.1 million lobbying in 2000 and $1.9 million the year before, according to the Center for Responsive Politics. I have been kicking around, writing about, playing and working in Alaska on and off for a dozen years now. I love this state and its people, truly. I also love to pull the fig leaf off their silly myths once in awhile, even though they roar like angry sow bears every time. For instance, you'll hear plenty about national energy independence in the debate over the Arctic refuge. But the real fight is Alaska's fight for money. National energy independence? The last time we heard that argument was when federal lands in Prudhoe Bay, west of the refuge, were opened for drilling. Back then, Americans were promised that North Slope crude would lead the country to self-sufficiency. Funny, but for the benefit of Alaskans who wanted a better price for their oil, Congress later said never mind and allowed this oil to be sold to Asia. Today the U.S. imports a larger share of its oil than ever before. Funny, too, but if you look close, you don't see much in the way of oil company lobbying to drill in the disputed coastal section of the Arctic National Wildlife Refuge. To the disappointment of many Alaskans, the giant oil companies are preoccupied elsewhere--in Russia, in Africa, in Latin America, in the Gulf of Mexico and in Central Asia. Click here to read more Contents |
| The
Battle for Energy Dominance (Foreign Affairs)
The American campaign against terrorism may be grabbing the headlines, but another battle is being waged with perhaps equally significant long-term implications: the contest for energy dominance between the world's two largest oil exporters, Saudi Arabia and Russia. This battle will have fundamental consequences for the world's economy, U.S. energy security, Russia's global role, the future relevance of Saudi Arabia, and the clout of the Organization of Petroleum Exporting Countries (OPEC). The contest emerged suddenly and unexpectedly. For each of the past two years, Russia has quietly but persistently increased its annual oil output at a rate of nearly half a million barrels a day (mbd) -- the largest single increment of increased output of any country in the world. With the world economy and world oil demand stagnating, Saudi Arabia and its OPEC partners therefore opted to reduce their output by 3.5 mbd. Then, on January 1, 2002, OPEC cut output by another 1.5 mbd to stave off a price collapse. Even though Moscow made a symbolic cut in output as well, OPEC has not welcomed Russia's gain at the cartel's expense. Russia and the Soviet successor states can easily continue to increase oil output at this rate for years to come. The victims of that increase, in all likelihood, will be Saudi Arabia, Kuwait, and other oil producers with state monopoly companies that disallow foreign investment. The only oil not threatened by Russia's rise is the petroleum developed by international companies outside of the key OPEC countries of the Middle East. Click here to read more Contents |
| Ending
the Oil Addiction (Editorial - New York Times)
President Bush's grand design for reducing America's vulnerability to terrorism lacks one obvious and critical piece - a realistic strategy for reducing America's crippling reliance on imported oil, especially petroleum from the Persian Gulf. Reducing our dependence on gulf oil would increase our flexibility in the war on terrorism and in other areas of foreign policy as well. If the Bush administration took the most practical approach and explored new methods of energy conservation, the effort could also yield important technological gains and reduce America's unconscionably large contribution to global warming. Right now, the United States uses 25 percent of the world's oil production even though it has only 4 percent of the world's population and 3 percent of its reserves. Two-thirds of world reserves, more than 600 billion barrels, belong to the nations of the Persian Gulf. No matter how many holes are punched on American soil, we simply cannot drill our way to energy independence. The route lies elsewhere. Buying oil from many different nations would help, up to a point. Compared with its allies, the United States already has an advantage in this regard. The gulf supplies only one-quarter of total imports, or 14 percent of the total consumption of seven billion barrels a year. Hemispheric neighbors like Canada and Mexico supply well over 40 percent, and they could be asked for more. Africa remains an important source, while other potential suppliers are ramping up production. Together, Russia, Azerbaijan and Kazakhstan have more than 6 percent of the world's proven oil reserves, more than the United States and Canada combined, and exploration in the former Soviet Union is continuing. Diversification, though, has its limits. Not only is most of the planet's oil located in the Persian Gulf, but that is where America's allies - which do not have substantial reserves of their own - must turn to find the bulk of their imports. That won't change, even if the United States finds alternative sources for itself. Click here to read more Contents |
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