We're excited to welcome Professor Michael J. Economides - University of Houston

 

Come join us as Dr. Economides presents a discussion on "Energy Geopolitics".

The past few years have been eventful in the world of energy.

Oil prices climbed to almost $150 per barrel and then completely unexpectedly suddenly dropped to around $40, prompted by the “credit crisis” and then compounded by economic recession. As should be clearly expected prices have been climbing recently. While the calculated by us world break-even price of oil should hover around $65, geopolitical headlines rule the price and the world is constantly one headline away from far larger oil prices. There is a great probability that oil will top $100 before the end of 2010.

There is a substantial imbalance in the location of energy producers and consumers, an imbalance that has precipitated world conflicts and one that will likely cause future upheavals. Prominent among these areas is the Middle East where five of the six countries with 75 billion barrels of reserves are located. The Straits of Hormuz through which one third of all trans-national oil trade passes is a geopolitical choke point.

Energy militant nations such as Iran, Venezuela and, over the last few years, Russia hold a considerable sway over the energy trade. Iran’s nuclear enrichment program has had a measurable impact on oil prices. In Venezuela Hugo Chávez has led a Latin American populist insurgency, has totally re-nationalized his country’s oil industry and has taken a very militant and hard-line position towards the biggest consumer of them all, the United States. Russia’s energy ascendancy over the past decade has been an important counterbalance to the power of OPEC. However, recent re-centralization of Russia’s energy industry, amounting to what we have called re-Sovietization, has given rise to what can easily be described as energy imperialism.  See www.soviettoputin.com

One obvious bright spot for the future is that energy consumption in the generation of wealth and the forms of primary energy sources have not been constant throughout the last two centuries. Of considerable significance is the change of fuels from wood to coal to oil and now to natural gas and, eventually, hydrogen will play a role. Wide use of electricity in transportation is the only obvious long-term, decades away, future.

Distorting the economically sane path to the future is the confusion deriving from the current lack of overlap between primary energy sources such as oil and natural gas and improbable ideas for alternative energy sources such as the practically energy-negative bio-fuels, headed by ethanol or, even more impractical alternatives such as solar electricity.

Compounding the issue even further is the entire rhetoric of global climate change, its presumed anthropogenic component, and the proposed solutions, bound to add to energy costs and energy availability.

 

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