Category Archives: Energy

NeoCons back to the future

I have to admit I am really confused by the new US neocon strategy to say that they had nothing to do with the failure of the neocon strategy.

Another top neocon, Ken Adelman, had assured the administration in February 2002 that “liberating” Iraq would be a “cakewalk,” but today disavows all responsibility with how the venture has turned out.

There is nothing more annoying than having someone say that a plan is low or even no-risk, and then blame the operator(s) if the plan fails. Reminds me of some big software deals where the salesmen constantly say that everything will just “plug-and-play”, when those who know better understand that they really mean “plug-and-pray”.

Speaking of prayer…

Joshua Muravchik, a leading conservative scholar with the American Enterprise Institute, agreed that the neocon role has been overstated.

“In reality, of course, we don’t wield any of the power that contemporary legend attributes to us. Most of us don’t rise at the crack of dawn to report to powerful jobs in government,” he said in an article in Foreign Policy magazine.

“But it is true that our ideas have influenced the policies of President George W. Bush, as they did those of President Ronald Reagan. That does feel good. Our intellectual contributions helped to defeat Communism in the last century and, God willing, they will help to defeat jihadism in this one.”

In other words, don’t blame us when things fall apart, but we’d sure like to take credit for anything good that happens. Sounds like the sort of consultants you are better off never hiring.

The sad irony to Muravchik’s point is that the Soviet Union unilaterally stood down from the arms race because Gorbachev brought a reasoned and rational focus to his role and called upon Reagan to follow his lead. He started a process whereby the USSR could finally recognize that it had been run so poorly that it was over-committed to the war in Afghanistan, overspending on defense initiatives, and unable to keep up with the economic growth and expansion of the US. He argued for a more diplomatic, less militant, foreign policy, just like he did when he warned that Bush and Blair would regret their decision to invade Iraq.

Frankly, I guess I am truly disappointed by the neocons for mistaking the diplomatic compliance of Reagan and his cooperation with Gorbachev as some kind of clarion call for future half-baked unilateral military intervention into the Middle East. Instead, I thought they would recognize that China’s economic strength and influence in developing markets poses the same challenge to the US that the US once posed to the USSR. I thought they would try to avoid past mistakes (as Gorbachev suggested) rather than become the image of the enemy they thought they destroyed. Perhaps most notably, I do not see how they could have thought that pride and greed are a sound foundation for foreign policy. Harpers provides some insight into how the neocon strategy was a disaster waiting to happen:

The problem is that governments, even neoconservative governments, rarely get the chance to prove their sacred theory right: despite their enormous ideological advances, even George Bush’s Republicans are, in their own minds, perennially sabotaged by meddling Democrats, intractable unions, and alarmist environmentalists.

Iraq was going to change all that. In one place on Earth, the theory would finally be put into practice in its most perfect and uncompromising form. A country of 25 million would not be rebuilt as it was before the war; it would be erased, disappeared. In its place would spring forth a gleaming showroom for laissez-faire economics, a utopia such as the world had never seen. Every policy that liberates multinational corporations to pursue their quest for profit would be put into place: a shrunken state, a flexible workforce, open borders, minimal taxes, no tariffs, no ownership restrictions.

Of course, if you flatten the playing field and erase the rules, you might not like it when someone shows up that you simply can’t beat, or the tide turns from cooperative to contentious hard work and your hope for return on investment was based entirely on implied rules of engagement. This of course raises the question of whether the neocons were just sitting in the back row making suggestions to the Bush administration, or whether they were actively driving the Iraq bus while Bush gamely rode along?

Slate had an interesting opinion piece in 2004 describing the neocon foreign policy role in the Bush administration:

In December 2002, Wolfowitz, Feith, Wurmser and Vice President Cheney’s national security advisor, I. Lewis “Scooter” Libby, acting together, maneuvered Condoleezza Rice into appointing Elliott Abrams to the position of special assistant to the president and senior director for the Middle East at the National Security Council. This appointment gave the neocons everything they wanted — the NSC, Executive Office of the President, Office of the Vice President, the Pentagon, a cornered director in George Tenet at CIA, and Wurmser at State.

The neocons had control of the information reaching the president and a channel for their pseudo-intelligence product from Wolfowitz and Feith’s secret Pentagon Office of Special Plans. The only wild card was Colin Powell and State’s elite and independent Bureau of Intelligence and Research (INR).

[…]

INR kept telling Powell the truth about Saddam’s nonexistent WMD. State’s Future of Iraq project, led by a career Foreign Service officer, who was cold-shouldered by Rumsfeld and Wolfowitz, laid out what might happen if we took over control of Iraq. Unfortunately, even the sober minds of INR could not stop Powell from lending his credibility to the “unfortunate error” show at the U.N. Security Council.

That pretty-much says to me that the whole debacle is, in fact, more proof of the disaster of neocon strategy. If nothing else, the neocons had successfully gained so much control of the administration that there was virtually only one source of information allowed — that which suited the neocon strategy. Such amazing power coupled with blinkered pride, arguably fueled by Halliburtonesque greed, is hardly the sort of thing you can overlook when wondering where things went wrong. I mean they might have been able to make their plan workable in a utopian country endowed with a strong, secure infrastructure and a friendly yet competitive population (in the real world, the only thing close to that is usually a result of years of friendly and progressive economic/public policy balance — not exactly Iraq under Saddam), but to completely tear down all the rules and regulations of a country, fail to establish a secure foundation, and then just expect a “honeypot” approach to attract more good flies than bad…that totally defies the fundamentals of security, as well as common sense.

China sweetens relations with developing states

I have written about this trend before, but the latest news clearly shows how China is moving into natural resource markets in a way the US used to pride itself. In other words, while the US is bogged down in a rediculously self-created quagmire for control of Iraq, China is extending its reach and relations around the world:

China, with nearly $1 trillion in reserves and a voracious appetite for natural resources, has decided to spend some of its billions of dollars in savings to secure access to the oil, gas, copper, coal and other mineral riches that lie beneath the soil of many African countries.

On the anniversary of the 1956 Suez Crisis the leaders of the US would be wise to think long and hard about the mistakes made by the US, Britain and France as they worked against each other while trying to impose their will abroad.

Clinton on Prop 87

Interesting comments from Clinton on the economics and risk issues behind Prop 87

Now, I know the oil companies have trotted out some economists in their ads. But let me ask you something: If they really thought you were going to pay for this, would they be spending all that money trying to convince you to vote against it? You need to know that California is the only state in America without any kind of extraction fee on its natural resources on oil.

I like that. Well said.

I come from a state, Arkansas, where we had an oil and gas severance tax. It never makes any difference in the price. It’s set in the market. There are plenty of states with very, very high severance taxes, much higher than Prop 87 would impose here, that have less expensive gasoline. Believe me, this — all this campaign is a ruse. This is designed to slow down America’s transformation to a clean, independent, energy economy.

And I want you to think about it, all of you students, not just from the point of view of climate change, but also our national security. Aren’t you tired of financing both ends of the war on terror? And think about — think about it from the point of view of our economic security. We are now in a period for the first time ever when we’ve had five years of economic growth, a 40-year high in corporate profits, five years of increasing worker productivity. So the people who are working for us are doing a better job every year, and yet wages are stagnant, poverty is going up among the working poor, and the people without health insurance that are working and their children are increasing.

Now, why is that? That is because we have not found this generation’s new jobs.

True enough. The economy is being stifled by giant fat companies who fear innovation and threats to their strangle-hold on margins. But even more pointedly:

And I cannot tell you how strongly I feel about this. The argument that this is going to raise your gas prices is just bogus. It’s not so. All my public career before I become president — and I’ll say it again — was spent in a state that used to have a lot of oil, still has a lot of natural gas. Nobody in the whole wide world ever thought that measly little extraction tax we had had anything to do with the price people paid for their natural gas or their gasoline. No one. The only way they can even put these ads up and make this argument is that you never had it, so you don’t know. Take it from me. I’ve been there. I lived in a place that had it. It will not make a difference to the price, but it will make all the difference in your future. All the difference in your future.

Tough words from a guy who lied under oath. Despite his past personal issues, it is easy to see that he is 100% right about the economics and risk of Prop 87.

Oh, and I also read an article about Gore’s speech on this topic, but more interesting to me is the anti-Prop 87 statement in that same article:

“When you look at what’s in there, it’s clear to see what harm it would do and it’s totally unclear there would be a benefit,” DeLuca said. “There’s no guarantee that at the end of all this … we’d see anything for the $4 billion.”

Clear harm? I’m afraid I do not follow. What “harm” is there from taxing companies who are extracting natural resources? A decrease in production? That is about as likely as finding WMDs in Iraq. There is no clear “harm” to the taxes. In fact, the second part of DeLuca’s argument gives this away when he reveals his weak grasp of risk management. Do the oil companies only drill when oil discovery is guaranteed? No, they blow hundreds of millions of dollars on prospecting and research. Now, imagine if they made the same/similar investment in another potential source of energy…they might not find the biggest discovery in history, but even a few minor successes would go a long way towards the goal of reduced emissions, new jobs, and independence from petroleum.

Algeria establishes oil windfall tax

While California debates Proposition 87, and whether oil companies should be taxed at all, Algeria has decided to place a tax on excessive profits:

From early 2007, profits accrued by firms when prices are above $30 a barrel will be taxed at between 5% and 50% depending on total output.

The tax will apply to existing production agreements between the state oil firm and private operators as well as those signed in the future.

In addition, it will be mandatory for Sonatrach to be involved in all future energy development projects and it will be entitled to a 51% stake in production and refining contracts with foreign firms.

“This will have a positive effect on future generation,” Chakib Khelil, Algeria’s energy minister, said of the measures.

“It is a gain for the public good as that will reinforce the state’s role in monitoring the sector.”

The article does not say whether any of the money from the taxes will be used to counter-act the harmful effects of petroleum waste and pollution.