Boys Go to Baghdad. Men Go to Tehran.

The red arrow shows the Strait of Hormuz, one of the most important shipping lanes (and bottlenecks) in the world. It's also within Iran's UN-defined "territorial water" if it wishes to make that claim.

by Thomas Neuburger

"'Anyone can go to Baghdad; real men go to Tehran', an administration official was heard saying shortly after the fall of Baghdad" (source).

This quip was then widely transmuted to the much more macho (and euphonious) "Boys go to Baghdad. Men go to Tehran":

My first encounter with the phrase came late in 2003 when, newly enrolled in graduate school, I gathered in the department lounge with a group of first-year students for an ad hoc session on foreign policy. With the Bush administration still mobilizing consent for America’s second go-around with Iraq, a very conservative, very well connected classmate shared with us what he was hearing from his friends inside the government. Overthrowing Saddam Hussein was but the first step in a larger project, he said in a whisper, as if to make us accomplices in a tragic conspiracy. Iran would be next. “Boys go to Baghdad,” he intoned, “but men go to Tehran.”

The Trump administration is the latest to ride that train. It's now the stated policy of the United States to aggressively reduce all Iranian exports "to zero":

“President Donald J. Trump has decided not to reissue Significant Reduction Exceptions (SREs) when they expire in early May,” the White House said in a statement. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue.”

Strong words indeed.

Yet it's one thing to declare a sanctions regime that tries to prevent all Iranian oil from reaching the market; Iran has dealt with sanctions before and survived. It's another to classify all oil owned by the National Iranian Oil Company (NIOC), an affiliate of the Iranian Revolutionary Guard, as the property of a terrorist organization, as the U.S. has in effect done — and then declare an international sanctions regime against that oil, with no waivers, sanctions that affect China, India, Turkey, Japan and South Korea.

Those sanctions started May 1. If no one backs down, this path leads to war.

From a good analysis by Scott Ritter of the latest U.S. assault on Iran (emphasis added):

What if Iran Retaliates and Shuts Down the Strait of Hormuz?

Some 18 million barrels of oil transit through every day. The economic impact would be catastrophic.

...There is a major difference between 2018 and today, however. The recent decision by the Trump administration to declare the Iranian Revolutionary Guard Command (IRGC) a terrorist organization has complicated the issue of Iran’s oil sales, and America’s reaction in response.

The IRGC has long been subject to U.S. sanctions. In 2012, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC), determined that National Iranian Oil Company (NIOC) was an “agent or affiliate” of the IRGC and therefore is subject to sanctions under the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA). Other Iranian oil companies have likewise been linked to the IRGC, including Kermanshah Petrochemical Industries Co., Pardis Petrochemical Co., Parsian Oil & Gas Development Co., and Shiraz Petrochemical Co.

While in 2012 the United States determined that there was insufficient information to link the National Iranian Tanker Company (NITC) as an affiliate of the IRGC, under the current sanctions regime imposed in 2018 the Islamic Republic of Iran Shipping Lines (IRISL) and the NITC have been blacklisted in their entirety.

By linking the bulk of Iran’s oil exporting capacity to the IRGC, the United States has opened the door to means other than economic sanctions when it comes to enforcing its “zero” ban on Iranian oil sales. Any Iranian oil in transit would be classified as the property of a terrorist organization, as would any Iranian vessel carrying oil.

Likewise, any vessel from any nation that carried Iranian oil would be classified as providing material support to a terrorist organization, and thereby subject to interdiction, confiscation, and/or destruction. This is the distinction the world is missing when assessing Iran’s current threats to close the Strait of Hormuz. It’s one thing to sanction Iranian entities, including the IRGC—Iran has historically found enough work-arounds to defeat such efforts. It is an altogether different situation if the Unite[d] States opts to physically impede Iran’s ability to ship oil. This would be a red line for Iran, and a trigger for it to shut down all shipping through the Strait of Hormuz.

Ritter points out that, so far at least, "U.S. naval and commercial vessels transiting the Strait of Hormuz continue to respond to the queries transmitted by the IRGC naval forces responsible for securing Iran’s portion of the strategic waterway—an awkward reality given that the IRGC has been designated a terrorist organization, which means the U.S. Navy freely communicates and coordinates with terrorists."

But what will happen when the sanctions inevitably fail? As Ritter points out, Iran’s Foreign Minister has bragged that “Iran has a PhD in sanctions busting.” Will the "real men" in the Trump administration — the Pompeos, the Boltons, and Trump himself perhaps — be forced to "do something" or sacrifice their manhoods on the altar of pointless threats? 

If the U.S. attempts to deny or restrict traffic through the Strait, Iran could enforce the 1982 United Nations’ Convention on the Law of the Sea that grants all countries the right to declare its "territorial waters" out to a maximum of 12 miles from the coastline, and then close the Strait to all U.S. shipping. Ritter is certain this is their next step if the U.S. tries to "do something" to enforce its failed sanctions.

What then? Do "real men" back down or respond with force? If the U.S. does respond militarily to Iran closing the Strait to U.S. shipping, the U.S. will be the aggressor under international law, and this time few nations that matter will support us.

Stay tuned. 
 

Transparent Solar Cells: The Future of Energy Production

This is a solar energy cell (source)

by Gaius Publius

The news about solar energy has been getting better and better for a decade or more. As storage schemes improve, so does the potential for completely replacing fossil fuels with renewable energy sources.

The latest information about solar energy cells, however, seems like a game-changer. In a nutshell, it's now possible to harvest and use the energy of the sun, not just as it strikes opaque surfaces, but also as it passes through transparent ones. Considering the number of transparent surfaces in the country — and in fact in the world — the potential for integrating light-harnessing energy cells into our lives and infrastructure, all of it invisibly, has increased by many orders of magnitude.

Consider that every pane of glass in every office building, house and apartment, every "gorilla glass" screen on every smart phone, every windshield of every car. and every other glass surface you can imagine — windows inside office buildings? mirrors? — can now be used to harvest energy from light and send it to be used or stored.

Then consider how much fossil fuel use that can replace. The developers of this technology say, eventually all of it. The story via Newsweek:

A new generation of see-through solar cell technology could soon be used to harvest the massive energy potential of building and car windows, cell phones as well as other objects with a transparent surface.

Scientists at Michigan State University detailed in a paper in the journal Nature Energy how highly transparent solar applications could “nearly meet U.S. electricity demand” and drastically reduce reliance upon fossil fuels.

“We will see commercial products become available over the next few years,” Richard Lunt, an associate professor of Chemical Engineering and Materials Science at MSU, tells Newsweek. “We are just beginning to hit performance metrics that make sense to scale up.” ...

The untapped electricity potential of this energy source, the researchers note, is vast. An estimated 5 billion to 7 billion square meters of glass surface in the United States could be used to meet 40 percent of the country’s energy demand, or “close to 100 percent” if energy storage is improved.

That journal article is here (subscription required).

The trick involves collecting the energy from non-visible wavelengths of the electromagnetic spectrum, of which visible light is just a part. In this case, the energy is collected from ultraviolet and "near infrared" wavelengths. Light from these wavelengths is then "guided to the edge of the surface they are on [and] converted into electricity by thin strips of photovoltaic solar cells."

The work is being done by a team at Michigan State University, which has previously published on this technology.

A few things to keep in mind. First, these cells don't replace glass, but fit over glass surfaces without reducing their transparency. In the announcement published by MSU, these cells are described as see-through "solar materials that can be applied to windows." This means already-installed windows won't have to be replaced in order to benefit from this technology.

Second, efficiency is obviously a factor in the amount of energy the technology provides: 

Compared to traditional solar cells, the transparent technology still has some catching up to do. Rooftop solar panels typically have an efficiency of between 15 and 18 percent, whereas the see-through solar cells record efficiencies of around 5 percent. However, Lunt says he expects to see a three-fold improvement in efficiency of the transparent solar cells.

Finally, the project is financed by the National Science Foundation and the U.S. Department of Education (interestingly, not the Department of Energy). If this story gets wider attention and the potential of this technology becomes more publicly appreciated, will Betsy Devos' DoE pull funding for the project? That aspect is worth paying attention to as this exciting research starts making even more news.

GP
 

Junk Bonds Are in Worse Shape than Before Lehman Collapsed

Percentage of S&P junk bonds and leveraged loans considered "distressed" (click to enlarge)

by Gaius Publius

We know that there will be another economic "big one" like the crisis of 2008. All of the pieces are in place — Wall Street greed and literal pathology, the even greater size of too-big-to-fail institutions, a literal get-out-of-jail free card that almost blesses continued financial fraud, and the like. We just don't know when it will occur, or what will trigger it. Last time it was triggered by the collapse of the bubble-sized home mortgage market. The time before that, it was the bubble-sized tech stock valuations. Where's the bubble now, or the inverse bubble, the market hole that may be forming somewhere?

Many people are looking at collapsing oil prices and soaring supplies, which is causing the collapse of over-leveraged carbon companies of all types (coal, oil and methane), as a potential cause of the next crash. Others say that the collapsing price of oil is "contained" — unique and isolated — and is not contaminating other markets.

The following piece by Wolf Richter argues the opposite point — that the collapse in the carbon market is not contained at all, and that collapse is in danger of spreading via the increasing price of junk bonds. Is this a precursor to the next "big one"? See what you think.

Wolf Richter (my emphasis throughout):

Now It’s Even Worse Than it Was When Lehman Collapsed, But It’s “Contained”

“Distress” in Bonds Spirals into Financial Crisis Conditions

The pile of toxic corporate bonds in the US, euphemistically called “distressed” debt, ballooned 15% in the single month of February to $327.8 billion, up 265% from a year ago, according to S&P Capital IQ. The number of S&P rated US companies with distressed debt rose 9% in February to 353, up 128% from a year ago.

The last time the pile of distressed debt had soared to this level was in November 2008, and the last time the number of distressed issuers had shot up to these levels was in October 2008; Lehman had declared bankruptcy in September.

These “distressed” junk bonds sport yields that are at least 10 percentage points above US Treasury yields, according to S&P Capital IQ’s Distressed Debt Monitor. 

Note the definition in the final paragraph above. Bonds are considered "distressed" if they have to offer 10 points or more greater yield than U.S. Treasuries in order to attract buyers. Obviously, any company whose financing depends largely on these bonds is at risk of bankruptcy.

As a chart, the above data looks like this. Take a minute to study it.

The Y-axis is both number of issuers (bar graph) and billions of dollars issued (line graph). Click to enlarge.

Richter adds this about the S&P "distress ratio" for junk bonds and leveraged loans (see chart at the top):

The ratio hit the highest level since July 2009, when it was coming down from the Financial Crisis. But this is the spine-chilling part: Back in September 2008, before the Lehman bankruptcy had fully registered in the ratio, but when the Financial Crisis was already gaining a good amount of momentum, and when stocks were crashing left and right and prudent people were wearing hardhats while out on the sidewalk, the distress ratio was “only” 28.9[.]

Richter quotes the report he cites as saying that a rising ratio is “typically a precursor to more defaults.” If he's right, we could be headed into the same soup we took years getting out of. And this time, it will be a political soup as well, since the country, both left and right, is in zero mood for another massive government bailout.

Not Confined to Oil and Gas

Nor is the damage in these markets confined to the carbon sector. Richter again:

And it’s not just the oil-and-gas and the minerals-and-mining sectors that are getting crushed. Of the 607 distressed bond issues in the ratio, 172, or 28%, are oil-and-gas related and 80 bond issues, or 13%, are minerals-and-mining related. The remaining 59% are spread across other the spectrum.

“Spillover effect,” is what S&P Capital IQ calls this. It has contaminated “the speculative-grade spectrum as a whole.”

The article has more along these lines, including a list of sectors affected, how many billions of dollars in debt are distressed in those sectors, and the main companies affected in each sector. It's quite eye-opening.

Will Commodity Prices Cause the Next Collapse?

I've been personally watching all of this with interest. There is a bubble in commodities — especially those things that the very very wealthy are interested in (for example, Manhattan real estate and high-end art) — but really, in commodities in general. There's also a major crack in the commodities bubble connected to carbon products (coal, oil and methane). I've wondered before if collapsing oil prices would spark a collapse in other commodities (stocks, for example) via the highly leveraged, and therefore highly vulnerable, nature of many fracking companies in the U.S.

It's possible we'll get an answer soon ... or not. Still, this is worth watching. If you're interested, Richter's website, Wolfstreet.com, is worth checking on a regular basis.

GP

Two Industries Poised to Wipe Out Carbon Emissions Savings of Entire Nations

Data: LSE | *Metric tonnes CO2 equivalent (click to enlarge). Note Canada's emissions in 1990, the Kyoto benchmark year, and in 2005, Obama's benchmark year.

by Gaius Publius

The push to get nations to commit to carbon emissions savings is much in the news lately, so I'd like to take a moment to make two points. The first is in the headline to this piece. While the U.N. FCCC (Framework Convention on Climate Change, their treaty-making body) is working to get firm and sufficiently large commitments from nations to reduce their carbon emissions, nations are only part of the problem. The other is industries that operate internationally.

The second point, below, involves the choice of "benchmark year" for carbon reductions agreements — in this pledge, for example, "to reduce our emissions by 26-28% below 2005 levels by 2025," something Obama announced recently as the U.S. contribution to the FCCC national target request.

Why 2005, and not, say, 1990, the benchmark year of the Kyoto agreement? Read on.

Two Emissions-Rich Industries That Individual Nations Can't Reign In

Independent of the pledges of the various nations — which are proving to be entirely inadequate to meeting even the modest goals of the U.N. — pledges by nations aren't the entire solution. In fact, the pledges by a number of nations would be entirely wiped out by the emissions of two international industries. These are international shipping and international air travel.

Cassie Werber writing at Quartz:

These industries are going to cancel out entire countries’ carbon savings

Later this month, representatives from some of the world’s biggest polluting countries will gather in Paris to negotiate a collective agreement to limit global warming to fewer than two degrees celsius below pre-industrial levels.

It’s a massive task, especially since global average temperatures are likely to have risen by one degree from those levels—halfway to the crucial point of no return—by the end of this year.

But as individual countries commit to cuts, the runaway emissions of industries that operate across borders is becoming more apparent. In 1990, the world’s entire maritime industry emitted less than half the carbon of Canada. Aviation emitted even less. But by 2030, both these industries will outstrip Canada and other large economies by millions of tons of carbon every year.

The forecasts by the London School of Economics (pdf) include several scenarios for countries’ emissions in 2020 and 2030. We’ve compared them [in the chart above] with Canada’s national emissions because the country’s commitment to cut its pollution by 30% below 2005 levels by 2030 isn’t subject to as many variables as other countries’ (like India, which bases its commitment on how fast its economy grows).

Ponder that chart again. As Canada's emissions have fallen about 15% below the 1990 benchmark and about 30% below its peak in 2005, on the same scale the emissions of global shipping and global aviation have almost quadrupled. Certainly, even if a solution were found for completely eliminating carbon emissions from a nation's energy use — and there is one here, for example — eliminating emissions from shipping and aviation will be a challenge.

Consider — a nation could conceivable eliminate all emissions from transportation, save those two, fairly easily. Simply convert all power generation, all of it, from anything carbon-related to 100% renewables, then require that only non-carbon-using vehicles, electric cars and buses, for example, be used.

Still, that doesn't solve the "boats and planes" problem? What does solve it? Sadly, not something good, but something that is revealed by examining the benchmark year issue.

Why the "Benchmark Year" Matters & What It Reveals

Briefly, if you're in the business of looking better than you are, or making your performance look as good as possible, what you compare yourself to is critical. Consider Obama's pledge to, again, "reduce our emissions by 26-28% below 2005 levels by 2025." Here's a chart of U.S. carbon emissions from energy generation:

U.S. energy-related CO2 emissions since 1992 (source).

Now consider that if Obama had said in 2012, "I pledge to reduce energy-related emissions in the U.S. by 10% from 2005 levels" — he'd be there on the day he made the statement. When Obama announced at the 2009 Copenhagen climate talks that he would "reduce greenhouse gas emissions about 17% below 2005 levels by 2020," he knew that he had 10% of that reduction already in his pocket and 12 years to find the rest. Not much of a pledge.

You see this over and over with him. His much touted EPA plan, for example, "aims for a 30% national reduction of heat-trapping CO² emissions, from 2005 levels, by 2030"— about half of which had already been accomplished. Prior to Obama's pledges, the usual benchmark year was the one used in the Kyoto protocol, 1990. Look again at the two charts above and you'll see why that benchmark level was jettisoned.

Which leads to the question: What is the most effective method of reducing carbon emissions? You may not want to know.

Economic Crisis & Climate Change

The answer comes in a good 2009 piece in the New Yorker by David Owen. Note again that 2009 was the year of the Copenhagen climate conference. My emphasis below:

Economy vs. Environment

Economic crisis and climate change

The week before last, twenty-five hundred delegates, from more than seventy countries, met in Copenhagen to prepare for the United Nations Climate Change Conference, which will take place there in December and will produce a successor to the Kyoto Protocol, which was adopted in 1992 and will expire in 2012. The speakers in Copenhagen were united by a sense of urgency—and for good reason, given the poor record of most participating countries in meeting their Kyoto targets for reducing the emission of greenhouse gases.

So far, the most effective way for a Kyoto signatory to cut its carbon output has been to suffer a well-timed industrial implosion, as Russia did after the collapse of the Soviet Union, in 1991. The Kyoto benchmark year is 1990, when the smokestacks of the Soviet military-industrial complex were still blackening the skies, so when Vladimir Putin ratified the protocol, in 2004, Russia was already certain to meet its goal for 2012. The countries with the best emissions-reduction records—Ukraine, Latvia, Estonia, Lithuania, Bulgaria, Romania, Hungary, Slovakia, Poland, and the Czech Republic—were all parts of the Soviet empire and therefore look good for the same reason.

The United States didn’t ratify the Kyoto Protocol, but Canada did, and its experience is suggestive because its economy and per-capita oil consumption are similar to ours. Its Kyoto target is a six-per-cent reduction from 1990 levels. By 2006, however, despite the expenditure of billions of dollars on climate initiatives, its greenhouse-gas output had increased to a hundred and twenty-two per cent of the goal, and the environment minister described the Kyoto target as “impossible.”

The explanation for Canada’s difficulties isn’t complicated: the world’s principal source of man-made greenhouse gases has always been prosperity. The recession makes that relationship easy to see: shuttered factories don’t spew carbon dioxide; the unemployed drive fewer miles and turn down their furnaces, air-conditioners, and swimming-pool heaters; struggling corporations and families cut back on air travel; even affluent people buy less throwaway junk. Gasoline consumption in the United States fell almost six per cent in 2008. That was the result not of a sudden greening of the American consciousness but of the rapid rise in the price of oil during the first half of the year, followed by the full efflorescence of the current economic mess.

Sad but true. Barring intervention in the economy — this kind of intervention, for example — the only "free market" method of reducing emissions is reverse prosperity — in other words, recession and depression. It's possible to have both zero energy-related emissions and national prosperity, but only if we manage it, World War II-style. If we don't manage it, we'll still get recession and depression, but chaotically and destructively.

The good news is, today at least we can still make choices, and some of them are excellent. Which means that it's not too late to sign this pledge. Nor is it too late to work for the only candidate who truly recognizes the threat that climate change represents, not just to our wealth, but to our lives (you can adjust the split any way you want at the link).

GP

Fossil Fuel Companies Risk Wasting at Least $2 Trillion of Investors' Money

Alan Cumming tells you why you can't have nice things

by Gaius Publius

The reason we won't have nice climate — until we fight for it — is money. Rich people's money. And frankly, the money of mainly old, soon-to-be-dead, rich people, like this one from Exxon, or these two from god knows where. People, in other words, with no future of their own and a pathological reason to sacrifice ours.

Because it turns out, if humans ever wrest control of the climate-fix process and kick the moneyed bottoms out of the decision room, those moneyed bottoms stand to lose a ton — by this news account, trillions. From Damian Carrington in The Guardian:

Fossil fuel companies risk wasting $2tn of investors' money, study says

Paris climate deal could render oil, gas and coal projects worthless with US, Canada, China and Australia most vulnerable to losing billions

Fossil fuel companies risk wasting up to $2tn (£1.3tn) of investors’ money in the next decade on projects left worthless by global action on climate change and the surge in clean energy, according to a new report.

The world’s nations aim to seal a UN deal in Paris in December to keep global warming below the danger limit of 2C. The heavy cuts in carbon emissions needed to achieve this would mean no new coal mines at all are needed and oil demand peaking in 2020, according to the influential thinktank Carbon Tracker. It found $2.2tn of projects at risk of stranding, [i.e.] being left valueless as the market for fossil fuels shrinks.

The report found the US has the greatest risk exposure, with $412bn of projects that could be stranded, followed by Canada ($220bn), China ($179bn) and Australia ($103bn). The UK’s £30bn North Sea oil and gas projects are at risk, the report says, despite government efforts to prop up the sector. Shell, ExxonMobil and Pemex are the companies with the greatest sums potentially at risk, with over $70bn each.

The failure of the fossil fuel industry to address climate change is laid out in a second report on Wednesday, in which senior industry figures state there is “a significant disconnect between the changes needed to reduce greenhouse gas emissions to the [2C] level and efforts currently underway”.

Lord John Browne, former BP boss, Sir Mark Moody-Stuart, former Shell and Anglo American chair and others say there must be “fundamental reassessment of the fossil fuel industry’s business models” and that companies should seize commercial opportunities in low-carbon energy.

Here's why that number — $2.2 trillion in stranded-asset losses — is too low (my emphasis):

The Carbon Tracker report looked at existing and future projects being considered by coal, oil and gas companies up to 2025 and determined which could proceed if carbon emissions are cut to give a 50% chance of keeping climate change under 2C. Many high-cost projects, including Arctic and deepwater drilling, tar sands and shale oil are unneeded and therefore uneconomic in the 2C scenario, the report found, although some are required to replace fields that are already depleting.

“Business history is littered with examples of incumbents – like Kodak and Blockbuster – who fail to see a transition coming,” said Anthony Hobley, chief executive of Carbon Tracker. “Our report offers these companies a warning [about] avoiding significant value destruction.”

You read that right. Those are losses from stranding only part of their assets and agreeing to let them monetize and burn the rest. (The amount "allowed to be burned" under a given scenario is called our "carbon budget.") In other words, what happens if humans agree to burn just enough to give them a 50% chance of keeping global warming under 2°C. In other words, what happens if humans agree to play Climate Russian Roulette with a gun with just two chambers, one of them loaded.

If We Increase the Odds of Success to 90%, There's No "Carbon Budget" at All

But what happens to oil and gas reserves if humans decide to up the odds of success, to, say, 90%? Answer: There's no carbon budget left at all. 100% of carbon reserves must be stranded. If you can't wrap your head around that fact, you're not seeing the problem, and without seeing the problem, you won't recognize the solution.

You can see the relationship between the carbon budget and the odds of success in this chart:

Source: David Spratt at the invaluable Climate Code Red

To read this chart, let's first get oriented:

• The Y-axis represents cumulative carbon emissions since pre-industrial times.
   
• The gray area under the 515+ level represents emissions through 2011 — a part of the “budget” we’ve already spent. Everything above that, as shown by the green, orange and red arrows, is "allowed future emissions" — our remaining "carbon budget" — under a number of scenarios.
  
  Two notes: First, we're burning carbon worldwide at the rate of more than 10 GtC per year, so for cumulative emissions through 2015, add 40 GtC to that 515 number and mentally raise the top of the gray area. Second, about the units on the Y-axis above — 1 petagram (1 Pg) of carbon is the same unit, the same amount, as 1 gigaton (1 Gt) of carbon. This is two ways to say the same thing.
   
• The X-axis shows odds of success from 0% to 100% for the emissions scenarios shown in the Y axis. In other words, for each amount of cumulative emissions (on the Y axis) there's a corresponding "chance of success" (on the X axis).
   
• The blue line plots those points that connect Y-axis emissions to X-axis odds of success. The result shows that, as cumulative emissions (and the "carbon budget") become smaller, the odds of “success” increase.

Note that at the 90% success point, the blue line crosses below 515 GtC. In other words, if we want to improve our chance of failure to 1-in-10 — to play Climate Russian Roulette with a ten-chambered gun — we must stop emitting carbon, completely, now.

Do you see why people like me are sounding urgent, and why climate scientists, when you get them alone, are freaking out? (Be careful, by the way, when listening to news out of Paris and their expressed "carbon budget" number. The IPCC is using a 60% chance of success — Russian Roulette with a three-chambered gun — to derive their recommended carbon budget. Even Clint Eastwood offers a six-chamber chance.)

Again, this isn't over, but we've got just five years maybe, and at most ten, by my estimation, to stop, something that's entirely possible if the mass of people want to. Will they want to? They're starting to wake up. Let's see what the next Hurricane Haiyan brings, say, if it appears in the Atlantic this time.

What You Can Do

As I wrote recently, you can help in two ways. These are things you can do now. First, contribute to Bernie Sanders campaign, and optionally, to the campaigns of all candidates who have endorsed him. (Adjust the split any way you like at the link.)

Second, understand that moving quickly means just that — a World War II-style national mobilization. Consider adding your name, voice and effort to this group and signing the pledge to mobilize. We've done this before, and when enough people want to — something that's well within imagination — we'll do it again.

Beautiful Miami Beach. If the "big one" hits here next and developers flee like rats from the wreckage of their property values, will "let's mobilize" be the cry of the day? It's not unthinkable.

Even the right wing will beg for "daddy" to save them, because, well, that's what they do. And we'll be glad to have them on board.

GP

Goldman Eyes $20 Oil; Glut Overwhelms Storage Sites

The price of two oil benchmarks, Brent Crude and West Texas Intermediate (WTI), in danger of collapse? (source)

by Gaius Publius

Ever since the "Exxon Knew" story broke, and especially since NY AG Eric Schneiderman announced his Martin Act investigation of Exxon and other carbon companies for fraud, I've been watching to see how this disrupts the oil and gas markets.

To be clear — I consider a disrupted carbon fuel market to be good, since the supply of fossil fuel does have to be interrupted, and forcefully. Consider that if they dig it, we will burn it. So we have to prevent them digging it, and again, with force. The law, when applied with penalties, counts as force. A collapsing commodity price market also counts as force, as does a collapsing stock market price for companies like Exxon.

The alternative, if the market for extracted carbon starts to collapse or become wildly chaotic, is for government to prop it up with even more subsidies and "bailouts" — the opposite of what any climate-aware citizen should want. We need to get off of oil, as a nation, quickly, and we need all the help we can get doing it. I don't want to see government standing in the way of the destruction of the oil and gas industry. (Do you?)

So, is the carbon market headed for chaos? I don't know, but the possibility of oil at $20/barrel is frightening many analysts, including those at Goldman Sachs. From the Telegraph (my emphasis):

Goldman eyes $20 oil as glut overwhelms storage sites

“The world is floating in oil. The numbers we are facing now are dreadful," said David Hufton from PVM Group

The world is running out of storage facilities for surging supplies of oil and may soon exhaust tanker space offshore, raising the chances of a violent plunge in crude prices over coming weeks, experts have warned.

Goldman Sachs told clients that the increasing glut of oil on the global market has combined with mild weather from a freak El Nino this winter. The twin-effect could send prices plummeting to $20 a barrel, the so-called ‘cash cost’ that forces drillers to abandon production. “Risks of a sharp leg lower remain elevated,” it said.

Oil has fallen from $110 a barrel early last year and is hovering near $40 for US crude, and $44 for Brent in Europe.

The US investment bank said the overall glut in the commodity markets may take another twelve months to clear. It cited ‘red flag’ signals on the Shanghai Future Exchange over recent days. Copper contracts point to “imminent weakening” in China’s ‘old economy’ of heavy industry and construction, it said.

The chart at the top shows that benchmark prices have dropped to about $36/barrel, risen but not to new near-term highs, then dropped again. A technical analyst would say, watch that $35 price point. A drop below that could be trouble.

Now for the fundamentals. Note in the quote above: "$20 a barrel [is] the so-called 'cash cost'." At present, people are keeping their oil off the market, not selling their inventory in hopes of a better price ...

It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28m barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30m barrels offshore ready to sell as soon as sanctions are lifted.

“The world is floating in oil, and commercial stocks on land are at a record high,” said David Hufton, head of oil brokers PVM Group. “The numbers we are facing now are dreadful. Stocks have been building continuously for two years. This is unprecedented.”

... yet even so, prices are falling, despite current buying by the Chinese for their strategic reserve (see the article for those details). We're in new territory at present — low prices, high inventory, high production — and could be headed for even newer territory.

The Story Is Complicated; the Outcomes Are Many

This is not a simple story, as the article makes clear. No one in position to comment expects a permanent collapse, yet the items in play are both many and varied. To name just a few, they include conflict among the OPEC nations about how much to produce, the length of time the bear market in oil will stay depressed, the ability of marginally-financed producers — the U.S. shale oil producers qualify here — to stay afloat in a "below cost of production" sales environment, the worldwide growing awareness that climate change and carbon emissions are linked, and so on.

At some point, if these conditions prevail (the last will certainly grow stronger), carbon production will drastically slow and companies will simply go bankrupt. At that point, absent government intervention, if you're an investor do you buy or sell the stock of these companies?

Now add in AG Schneiderman's fraud lawsuit, and then, way down the road, the potential for a Sarbanes-Oxley prosecution to yield criminal charges and jail time for oil and gas execs — assuming some AG (that's you, Ms. Lynch; that's you, whomever President Sanders appoints) is bold enough to pursue that course. That will certainly stir the pot even further, and not in a good way. Just the announced intent to pursue Sarbanes-Oxley prosecution could further roil this market — the roilage of which is your friend, since an uncertain energy market drives an increased move to "safer" renewables.

At this point, it's all up in the air. Oil prices may recover and the market re-stabilize. That would be a bad thing, assuming you have grandchildren and care about them. But the good news is ... right now, it really is all up in the air. That good thing that could turn into a very good thing with just a few more breaks our way.

GP

Blowback, Money & the Washington War Party

U.S. prisoner at Abu Ghraib in Iraq

by Gaius Publius

In a provocative piece called, "Blowback -- the Washington War Party's Folly Comes Home to Roost," David Stockman asks, in effect — "Does America have the wars it seeks and deserves?"

Whatever your answer might be, or mine, I think Stockman's answer is Yes, and he details that answer in an excellent looking-back and looking-forward essay about the U.S. and its Middle East "involvement." I have excerpted several sections below, but the whole is worth a full top-to-bottom read.

Before we turn to Stockman's points, though, I just want to highlight two semi-hidden ideas in his essay. One is about money. What Stockman calls the "War Party" in Washington is really the bipartisan Money Party, since the largest-by-far pile of cash looted from the federal budget (in other words, from taxpayers) goes to fund our military and its suppliers and enablers. Which means that most of it is stolen and diverted in some way. Which means that those who do the stealing have a lot of "skin in the game" — the game that keeps the money flowing in the first place.

Recall that what's now called the Money Party was what Gore Vidal called the "Property Party":

“There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat.”

Which means the Washington War Party is a bipartisan gig. Thus our bipartisan wars, which for Stockman answers the first part of the imputed question above. Yes, America does have the wars it seeks.

But that's just the first part — what about wars it "deserves"? Do Americans really want these wars? Does the D.C.-based "war party" have popular backing? You've probably guessed the answer just reading the news, but for the most recent, post-Paris evidence, consider this:

Exclusive: After Paris, Americans want U.S. to do more to attack Islamic State - poll

A majority of Americans want the United States to intensify its assault on the Islamic State following the Paris attacks, but most remain opposed to sending troops to Iraq or Syria, where the militant group is based, a Reuters/Ipsos poll found.

The poll makes clear that Americans don't want to send in troops (yet), at least most don't. But that just means we're happy with more bombs, drones and missiles fired into streets and villages filled with potential "collateral damage" — also knows as victims,  also known as "future U.S.-hating terrorists."

If the American war-making machine, both the in-government part and the out-of-government part, wants these wars ... and if the American people want our war machine to prosecute them ... well, these do seem to be wars that America both seeks and, sadly, deserves — because frankly, it doesn't fall to me to say my fellow Americans shouldn't have what they seek.

To be clear — I believe my fellow Americans should not have what they seek when they seek their own suffering and pain. I have that great a sense of compassion. But I would not say that, any more than I would say to my drunken uncle, "Time to stop." He's not going to stop, so why spend time asking him? It won't hurt less to watch, whether you ask or not. 

But you and I, we can talk about the truth. And the truth is, all of our Middle East involvement is a deadly exercise, deadly to us — and it will end in tears, our own. Now Stockman to say why.

Blowback & the Washington War Party's Folly

I called Stockman's essay a look back as well as a look forward. The look back produces this (Stockman's emphasis):

Exactly 26 years ago last week, peace was breaking out in a manner that the world had not experienced since June 1914. ...

As it turned out, however, there was a virulent threat to peace still lurking on the Potomac. The great general and president, Dwight Eisenhower, had called it the “military-industrial complex” in his farewell address, but that memorable phrase had been abbreviated by his speechwriters, who deleted the word “congressional” in a gesture of comity to the legislative branch.

So restore Ike’s deleted reference to the pork barrels and Sunday afternoon warriors of Capitol Hill and toss in the legions of beltway busybodies that constituted the civilian branches of the cold war armada (CIA, State, AID etc.) and the circle would have been complete. It constituted the most awesome machine of warfare and imperial hegemony since the Roman legions bestrode most of the civilized world.

In a word, the real threat to peace circa 1990 was that Pax Americana would not go away quietly in the night.

Yes, there was a day, in the lives of many of us in fact, when peace threatened to break out. But that didn't last long:

Needless to say, the sudden end to 20th century history posed an existential threat to Imperial Washington. A trillion dollar complex of weapons suppliers, warfare state bureaucracies, intelligence and security contractors, arms exporters, foreign aid vendors, military bases, grand poobahs and porkers of the Congressional defense committ[e]es, think tanks, research grants and much more——were all suddenly without an enemy and raison d’etre.

As it has happened, Imperial Washington did find its necessary enemy in the rise of so-called “global terrorism”.

But the everlasting truth is that the relative handful of suicidal jihadi who have perpetrated murderous episodes of terror like 9/11 and this weekend’s carnage in Paris did not exist in November 1989; and they would not be marauding the West today save for the unrelenting arrogance, stupidity, duplicity and mendacity of Imperial Washington.

Not to put too fine a point on it, Stockman says plainly:

That the middle east and the Arab/Islamic world in particular is now a burned out zone of failed states and an incubator of barbaric religious and sectarian fanaticism is because Imperial Washington made it that way.

It did so under the banner of two stunningly false predicates. ...

Those "false predicates" are as illuminating to consider as they are surprising.

Is the U.S. Military the Cure for High Oil Prices?

The first false predicate is one that goes back to Henry Kissinger, that the Fifth Fleet, guarding the Persian Gulf, is necessary to free the world from high oil prices.

One of these was the long-standing Washington error that America’s security and economic well-being depends upon keeping an armada in the Persian Gulf in order to protect the surrounding oilfields and the flow of tankers through the straits of Hormuz.

That doctrine has been wrong from the day it was officially enunciated by one of America’s great economic ignoramuses, Henry Kissinger, at the time of the original oil crisis in 1973. The 42 years since then have proven in spades that its doesn’t matter who controls the oilfields, and that the only effective cure for high oil prices is the free market, not the Fifth Fleet.

Every tin pot dictatorship from Libya’s Muammar Gaddafi to Hugo Chavez in Venezuela to Saddam Hussein, to the bloody-minded chieftains of Nigeria, to the purportedly medieval Mullahs and fanatical Republican Guards of Iran has produced oil—-and all they could because they desperately needed the revenue.

For crying out loud, even the barbaric thugs of ISIS milk every possible drop of petroleum from the tiny, wheezing oilfields scattered around their backwater domain. So there is no economic case whatsoever for Imperial Washington’s massive military presence in the middle east, and most especially for its long-time alliance with the despicable regime of Saudi Arabia [emphasis Stockman's].

There's much more about this, going back to our 1953 CIA coup against Iran's democratically elected leader Mosaddegh, which "installed the monstrous Mohammad Reza Pahlavi on the Peacock Throne and thereby inaugurated 25 years of plunder and Savak terror." Stockman then ably traces the history through the First Gulf War to today.

If you read this section, note that the justification for the First Gulf War, and indeed for the existence of the "state" of Kuwait itself, makes no sense. A taste: "Kuwait wasn’t even a country; it was a bank account sitting on a swath of oilfields surrounding an ancient trading city that had been abandoned by Ibn Saud in the early 20th century."

The bottom line about "high oil prices" is this — because every greedy SOB sitting on an oil field wants to monetized it, the market will float on a sea of oil and never be starved of it. For a climatologist, that's a disaster, but for oil prices, not so bad. It's why oil — not gasoline, but oil — is so cheap today. The Saudis won't, or can't, stop selling it, nor can anyone else (like ISIS).

Is Regime Change in America's Best Interest?

The second predicate Stockman fingers as a perp in our constant addiction to Middle East adventurism is the (hubristic, in my view) belief that regime change is in our best interest:

Right then and there came the second erroneous predicate. To wit, that “regime change” among the assorted tyrannies of the middle east was in America’s national interest, and that the Gulf War proved it could be achieved through a sweeping interventionist menu of coalition diplomacy, security assistance, arms shipments, covert action and open military attack and occupation.

What the neocon doctrine of regime change actually did, of course, was to foster the Frankenstein that became ISIS. In fact, the only real terrorists in the world which threaten normal civilian life in the West are the rogue offspring of Imperial Washington’s post-1990 machinations in the middle east.

While that may seem obvious, Stockman includes a stunning particular, the fact that the remnants of the out-of-work Saddam-era Iraqi officer class, and countless others, were being actively radicalized by the U.S. itself:

[E]ven as Washington was crowing about the demise of Zarqawi, the remnants of the Baathist regime and the hundreds of thousands of demobilized Republican Guards were coalescing into al-Qaeda in Iraq, and their future leaders were being incubated in a monstrous nearby detention center called Camp Bucca that contained more than 26,000 prisoners.

Here's part of a quote from a U.S. military officer who visited Camp Bucca (emphasis mine):

"You never see hatred like you saw on the faces of these detainees," [former US Army officer, Mitchell] Gray remembers of his 2008 tour. "When I say they hated us, I mean they looked like they would have killed us in a heartbeat if given the chance. I turned to the warrant officer I was with and I said, 'If they could, they would rip our heads off and drink our blood.'"

What Gray didn't know -- but might have expected -- was that he was not merely looking at the United States' former enemies, but its future ones as well. According to intelligence experts and Department of Defense records, the vast majority of the leadership of what is today known as ISIS, including its leader, Abu Bakr al-Baghdadi, did time at Camp Bucca. ...

Camp Bucca was an American terrorist factory. America has a number of terrorist factories around the world.

A U.S. terrorist factory in Cuba (source)

Note that this isn't an indirect connection to current ISIS leadership, but a direct one. These men aren't connected with current ISIS leadership. They are current ISIS leadership. Stockman discusses how L. Paul Bremmer, Bush's "proconsul" in Iraq, threw them out of work when he disbanded the Iraqi army (almost on day one), guaranteeing an era of Shiite revenge-taking against Saddam's former Sunni-led secular regime. These men were the victims of both U.S. punishment and Shiite vengeance. They were, and are, also well trained military leaders. Not the best combination, if you're interested in a peaceful outcome.

Why Are We Fighting in Syria?

Which leads to the last piece of this puzzle. ISIS — for now, but not forever — occupies the terrorized towns of Sunni Iraq, kept there because we keep them supported and in power with our relentless hate-inducing attacks. But why are we in Syria? The answer has to do with, yes, our addiction to "regime change," but also our "friends" in Qatar and Saudi Arabia. It turns out that what we want isn't what they want. Are they helping us, or are we helping them?

Stockman:

The newly proclaimed Islamic State also filled the power vacuum in Syria created by its so-called civil war. But in truth that was another exercise in Washington inspired and financed regime change undertaken in connivance with Qatar and Saudi Arabia.

The latter were surely not interested in expelling the tyranny next door; they are the living embodiment of it. Instead, the rebellion was about removing Iran’s Alawite/Shiite ally from power in Damascus and laying gas pipelines to Europe across the upper Euphrates Valley.

I'm afraid this will not end until the major players stop financing and prosecuting it — meaning us.

How Will This End?

It's easy to see that this ends in either of two ways. It will end when we stop sending money and arms into the region — i.e., when we impoverish our wealth-drunk arms industry and starve the fighting — or it will not end.

Which means, it will lead to continuous tears, American ones. And when, again, you factor in the continuing spiral toward chaos guaranteed by continuing global warming, we may look back and say, "Paris was our generation's Sarajevo." It's hard to stop a war when only a nation's people don't want it. It's almost impossible to stop a war when the people unite with the wealthy to promote it.

Which brings me to Bernie Sanders, Hillary Clinton, war, and speeches each gave recently. But that's for later.

(Blue America has endorsed Bernie Sanders for President. If you'd like to help him, click here. This page also lists every progressive incumbent and candidate who has endorsed him. You can adjust the split in any way you wish.)

GP

How Oil Fuels ISIS

ISIS acts like a state that owns an oil company. Notice, at the bottom right, that the non-ISIS market for ISIS oil is local, meaning civilians, and also includes anti-ISIS rebels in Syria and Iraq (click to enlarge; source).

by Gaius Publius

ISIS is a complex entity, in part a state and in part a jihadist insurgency. To the extent that they're a state, they hold territory and govern (including, ironically, offering free government-provided health care). Here's a look at ISIS-held territory, including the location of oil fields and refineries within that territory.

ISIS-held and -supported territory in red; anti-ISIS territory in blue. Note that even the rebels are customers of ISIS oil (click to enlarge; source).

The U.S. and its allies are in a bind. ISIS finances its operations from its oil revenue. Most of its oil isn't sold on the international market, but the local one. That is, millions of people in the region depend on ISIS oil for their energy needs, even the anti-ISIS rebels in Syria. If those oil fields and refineries were bombed or otherwise put out of commission, the disruption to civilians in the region would be enormous. This likely accounts for the fact that of the more than 10,000 air strikes against ISIS by the U.S.-led coalition, fewer than 200 have targeted its oil infrastructure.

The story comes from the Financial Times. Only part is below, but it's all fascinating:

Isis Inc: how oil fuels the jihadi terrorists

Erika Solomon in Beirut, Guy Chazan and Sam Jones in London

Jihadis’ oil operation forces even their enemies to trade with them

On the outskirts of al-Omar oilfield in eastern Syria, with warplanes flying overhead, a line of trucks stretches for 6km. Some drivers wait for a month to fill up with crude.

Falafel stalls and tea shops have sprung up to cater to the drivers, such is the demand for oil. Traders sometimes leave their trucks unguarded for weeks, waiting for their turn.

This is the land of Isis, the jihadi organisation in control of swaths of Syrian and Iraqi territory. The trade in oil has been declared a prime target by the international military coalition fighting the group. And yet it goes on, undisturbed.

Oil is the black gold that funds Isis’ black flag — it fuels its war machine, provides electricity and gives the fanatical jihadis critical leverage against their neighbours.

But more than a year after US President Barack Obama launched an international coalition to fight Isis, the bustling trade at al-Omar and at least eight other fields has come to symbolise the dilemma the campaign faces: how to bring down the “caliphate” without destabilising the life of the estimated 10m civilians in areas under Isis control, and punishing the west’s allies?

The resilience of Isis, and the weakness of the US-led campaign, have given Russia a pretext to launch its own, bold intervention in Syria.

Despite all these efforts, dozens of interviews with Syrian traders and oil engineers as well as western intelligence officials and oil experts reveal a sprawling operation almost akin to a state oil company that has grown in size and expertise despite international attempts to destroy it. ...

Estimates by local traders and engineers put crude production in Isis-held territory at about 34,000-40,000 bpd. The oil is sold at the wellhead for between $20 and $45 a barrel, earning the militants an average of $1.5m a day.

About selling to their enemies in Syria:

“It’s a situation that makes you laugh and cry,” said one Syrian rebel commander in Aleppo, who buys diesel from Isis areas even as his forces fight the group on the front lines. “But we have no other choice, and we are a poor man’s revolution. Is anyone else offering to give us fuel?”

It's both a complicated situation and a lucrative one (my emphasis):

When [ISIS] pushed through northern Iraq and took over Mosul, Isis also seized the Ajil and Allas fields in north-eastern Iraq’s Kirkuk province. The very day of its takeover, locals say, militants secured the fields and engineers were sent in to begin operations and ship the oil to market.

“They were ready, they had people there in charge of the financial side, they had technicians that adjusted the filling and storage process,” said a local sheikh from the town of Hawija, near Kirkuk. “They brought hundreds of trucks in from Kirkuk and Mosul and they started to extract the oil and export it.” An average of 150 trucks, he added, were filled daily, with each containing about $10,000-worth of oil. Isis lost the fields to the Iraqi army in April but made an estimated $450m from them in the 10 months it controlled the area.

While al-Qaeda, the global terrorist network, depended on donations from wealthy foreign sponsors, Isis has derived its financial strength from its status as monopoly producer of an essential commodity consumed in vast quantities throughout the area it controls. Even without being able to export, it can thrive because it has a huge captive market in Syria and Iraq.

Indeed, diesel and petrol produced in Isis areas are not only consumed in territory the group controls but in areas that are technically at war with it, such as Syria’s rebel-held north: the region is dependent on the jihadis’ fuel for its survival. Hospitals, shops, tractors and machinery used to pull victims out of rubble run on generators that are powered by Isis oil.

“At any moment, the diesel can be cut. No diesel — Isis knows our life is completely dead,” says one oil trader who comes from rebel-held Aleppo each week to buy fuel and spoke to the Financial Times by telephone.

The article details well the way the oil industry is managed. ISIS, unlike a number of other jihadist groups, has a professional core and it shows. ISIS, after all, is led by a ex-Iraqi army officers, the people L. Paul Bremer fired almost as soon as he took office as Bush's "proconsul" in Iraq:

As the top civilian administrator of the former Coalition Provisional Authority, Bremer was permitted to rule by decree. Among his first and most notable decrees were Coalition Provisional Authority Order Number 1, which banned the Ba'ath party in all forms[14] and Coalition Provisional Authority Order Number 2 dismantled the Iraqi Army.[15]

In a very real sense, ISIS is Bush's and Bremer's direct creation.

How will this end? The authors aren't sure:

Isis’ luck with oil may not last. Coalition bombs, the Russian intervention and low oil prices could put pressure on revenues. The biggest threat to Isis’ production so far, however, has been the depletion of Syria’s ageing oilfields. It does not have the technology of major foreign companies to counteract what locals describe as a slow drop in production. Isis’ need for fuel for its military operations means there is also less oil to sell in the market.

For now, though, in Isis-controlled territory, the jihadis control the supply and there is no shortage of demand. “Everyone here needs diesel: for water, for farming, for hospitals, for offices. If diesel is cut off, there is no life here,” says a businessman who works near Aleppo. “Isis knows this [oil] is a winning card.”

The situation in Iraq and Syria isn't stable, but it isn't unstable either. Dismantling ISIS is going to be a tough nut to crack. Radicalizing a great many more of the region's residents is a distinct possibility if Western and Russian attacks increase.

A Nation Free of Oil

One final thought. Have you ever wondered what the nation and our foreign policy would be like today if Jimmy Carter had won in 1980, the solar panels had stayed on the roof of the White House, renewable energy production had thrived, and the nation, by determined effort, were freed of all dependence on fossil fuel?

That world, with the possibility of leisurely conversion from carbon, is gone. But for a time in the 1970s the door was wide open. If a certain Presidential candidate hadn't cut a deal with a certain hostage-holding government, we might even have walked through it. How much better would our lives be today, if we were a nation free of oil?

GP

America Has Built the Equivalent of 10 Keystone Pipelines Since 2010

The blue lines show expansion since 2005. Note the expansions to Port Arthur and Corpus Christi, Texas.

by Gaius Publius

As you may know, TransCanada Corporation, the owner and builder of the Keystone (KXL) Pipeline, has recently withdrawn its application for approval, hoping, most analysts say, for a more carbon-favorable next president. Obama didn't take the bait, didn't interrupt the approval process, and rejected the proposal anyway: "He announced on Friday that he would not approve the Keystone application, saying the project did not serve the nation’s interests."

That great victory obscures a sobering fact. A virtual Keystone pipeline is being built anyway. Yadullah Hussain at Financial Post:

America has built the equivalent of 10 Keystone pipelines since 2010 — and nobody said anything

While TransCanada Corp. has been cooling its heels on its Keystone XL proposal for the past six years, the oil pipeline business has been booming in the United States.

Crude oil pipeline mileage rose 9.1 per cent last year alone to reach 66,649 miles, according to data from the Washington, D.C.-based Association of Oil Pipe Lines (AOPL) set to be released soon.

Between 2009 and 2013, more than 8,000 miles of oil transmission pipelines have been built in the past five years in the U.S., AOPL spokesperson John Stoody said, compared to the 875 miles TransCanada wants to lay in the states of Montana, South Dakota and Nebraska for its 830,000-bpd project. By last year, the U.S. had built 12,000 miles of pipe since 2010.

“That’s the point we make,” Stoody said. “While people have been debating Keystone in the U.S. we have actually built the equivalent of 10 Keystones. And no one’s complained or said anything.”

What does "10 Keystones" look like? Read this and refer to the map at the top:

The 487-mile southern leg of the project, dubbed the Gulf Coast project, between Cushing, Okla. and Texas refineries came on stream in 2014.

While the northern leg of Keystone XL remains under review, the Lower 48s have seen new oil pipes crisscrossing the country.

“If you look at 2010 versus now we have seen historic realignment that has transformed the infrastructure situation,” said Afolabi Ogunnaike, analyst at Wood Mackenzie. “There has been tremendous investment in pipelines and more investments are coming on.”

The U.S. midstream infrastructure is responding to a near-doubling of U.S. production over the past six years. The U.S. saw an 11.6 per cent increase in crude oil transport via pipelines in 2014, according to AOPL data.

As I said in this Virtually Speaking Sundays episode (second half of the show), the way to eliminate carbon emissions is to strangle ("disrupt") supply and/or strangle ("disrupt") demand. I favor disrupting supply, since demand for energy coupled with diminished carbon-based supply will accelerate the creation of alternative energy sources. As the article makes clear (there's more in it than I quoted), increased delivery capacity enables as much supply as producers are willing to create. It's hard to disrupt supply when (1) they're digging as much as they can profit from, and (2) there are no barriers to transporting to refineries and users, including foreign ones.

Bottom line — the victory against the pipeline named Keystone is real and important. That said, it's just the first touchdown in the first quarter of a much longer game. It's not over. (Sorry for the sports metaphor; 'tis the season.)

GP

Merkley & Sanders Introduce Bill to End New and Non-Producing Oil and Gas Leases on Public Lands

Source: Bureau of Land Management. Does not show area available for offshore drilling

by Gaius Publius

The idea of ending the hypocritical role of the federal government in aiding and betting the warming of our planet is not a hard idea to hold, especially if you're a climate-aware citizen, or climate-aware president. Yet, for some reason, the federal government, the guardian of land owned by the public, is still in the coal, oil and gas business.

Bernie Sanders and Jeff Merkley want to end that, with a bill called the "Keep It In The Ground" Act. Meteor Blades at Daily Kos (my emphasis):

Merkley and Sanders introduce bill to end new and non-producing oil and gas leases on public lands

Flanked by Sierra Club president Aaron Mair, tribal rights attorney Tara Zhaabowekwe Houska‎, and 350.org founder Bill McKibben, Sen. Jeff Merkley and Sen. Bernie Sanders introduced legislation Wednesday to stop issuing leases to extract fossil fuels from on- and off-shore federal lands. Titled the Keep It in the Ground Act, the bill would also terminate all existing federal leases that are not producing. Co-sponsors of the legislation are Democratic Sens. Barbara Boxer, Ben Cardin, Kirsten Gillibrand, Patrick Leahy, and Elizabeth Warren.

Behind the legislation is a simple message: When the common good depends on our adapting to and ameliorating the impacts of climate change, it makes no sense for public land meant for that common good to continue as a source of the fuels that are driving global warming.

Standing with a crowd of supporters near the Capitol in Washington, Sanders and Merkley praised the aggressive grassroots environmental movement that has been at the forefront of climate change activism, including opposition to the proposed Keystone XL pipeline that looks closer than ever to extinction.

The two senators and Mair also spoke about ensuring that workers in the fossil fuel industry are not left behind. Merkely said their legislation, in particular, and fighting climate change, in general, by ending the extraction and burning of fossil fuels should not be an exercise in green vs. blue. Ours, he said, "must be a green and blue movement" with eco-activists working side by side with workers in the transition to renewable energy sources now underway.

Sanders said we have a "moral responsibility" not to bequeath a planet to our kids and grandkids "that is unhealthy and in some cases uninhabitable." You can't just "talk the talk" and then support extracting huge amounts of oil and gas from federal lands, he declared.

There's quite a bit more at the link, including this, about how to protect workers during the transition.

Mair, who has been president of the Sierra Club since May, said what is needed is a "green TARP" for fossil fuel workers, referencing the 2008 bail-out of financial institutions. Activists need to push a fully funded clean-green energy transition that protects workers, he added. He recommended "retooling" America just as was done to defeat the Axis powers during World War II. Houska, a member of the Couchiching First Nation, spoke in favor of the legislation, noting that indigenous people have been in the forefront of the climate change fight because they are among the most affected by those changes and by the extraction of fossil fuels.

Note the reference to World War II and its "retooling" of America. If I remember my history, that wasn't a "free market" effort — as in, General Motors didn't get to "free market decide" how many tanks and jeeps to build. The word for that kind of effort is "emergency mobilization." Stay tuned for more; this actually represents a way out of the worst of the mess we're headed for.

The article also notes that "Current extraction of fossil fuel from federal lands and waters accounts for nearly one-fourth of all emissions in the United States" (my emphasis) so this is not nothing. On the other hand, it will take quite a bit to get this passed.

How You Can Help

What this bill does:

1. It lays down a marker, a stake in the ground. "Keep it in the ground" is a moral obligation and a doable one. It's also easy to understand and an easy phrase to remember.

You can help — by asking, as the writer says, "every candidate for public office, Democrat or Republican—from city councils to state legislatures to Congress—whether they agree climate change has created what Sanders calls a 'major, major, major' crisis and if so, what they propose to do to meet the challenges that crisis presents." As the writer correctly notes, "Anybody who blows off such questions or treats them as a side issue is worthy of progressives' disdain, not our support."

2. It tells you what a President Sanders would strive to do if he achieves the Oval Office. That's big. Will any other announced candidate back this bill, and by implication, support the ending of climate-killing carbon leases on public land?

You can help — by supporting Bernie Sanders in his bid for that office. Adjust the split any way you wish at the link. You can also help by asking Mr. O'Malley and Ms. Clinton the same question. They deserve the right to answer.

GP

Not the Onion, I Swear

Correction: We're not eating money. We're feeding it to the wealthy in exchange for nothing at all. Time to stop? (source)

by Gaius Publius

It's not over yet — in the largest sense — but thinking like this sure moves the climate car closer to the no-return part of the cliff. The governor of Alaska wants to drill more oil to pay for ... wait for it ... the damage caused by climate change.

The BBC (h/t John Irving):

Alaska mulls extra oil drilling to cope with climate change

Expanding the search for oil is necessary to pay for the damage caused by climate change, the Governor of Alaska has told the BBC.

The state is suffering significant climate impacts from rising seas forcing the relocation of remote villages.

Governor Bill Walker says that coping with these changes is hugely expensive.

He wants to "urgently" drill in the protected lands of the Arctic National Wilderness Refuge to fund them.

Alaska has been severely hit by the dramatic drop in the price of oil over the past two years.

The state is the only one in the US that doesn't have an income or sales tax, getting 90% of its day-to-day expenditure from levies on the production of oil and gas.

But the halving in the price of crude over the past year has seen Alaska's financial health deteriorate.

The recent decision by Shell to pull out of drilling in the Chukchi sea off the state's north coast has compounded the problem.

If Shell had found oil, it would have been a major boost for the the huge Trans Alaskan Pipeline that transports oil from the northern production fields to the tanker terminal in Valdez some 1,300km to the south.

Built to carry 2 million barrels a day, it's running at about 25% of its capacity as existing oil field production declines.

While Alaska's income from the oil continues to fall, expenditure on climate related activities is likely to go up. Coastal erosion is threatening a number of native communities in remote areas such as Kivalina....

Does he know he's making no sense? Do the rugged individualist, "stand on your own two feet" voters of Alaska? Did the Onion write this piece?

Thinking like this would have stripped Easter Island of trees years ahead of schedule.

GP

Behind Oil Prices

This week, writing for the energy news site Oilprce.com, Dan Doyle tried to shed some light on the dozen media misconceptions about oil prices that have the public the most confused. Doyle penned his article for the sake of investors. But I wonder how many policy-makers have bought into these misconceptions as well.

Misperception #1: Goldman Sachs knows what is going on. This is incorrect. Goldman Sachs should not be quoted extensively. They are notoriously wrong when forecasting tops and bottoms. What they are good at is jumping on the band wagon and stoking fires. Their forecasting always seems to be done through a rear view mirror and their calls for peaks and troughs are always overdone. Back in July 2014 when WTI was peaking, they were calling for more, even as the dollar was showing signs of strength (and we know what happened there) and as oil inventories were beginning to wash up over our ankles. And then when we are forming a bottom in January and retesting it in March, they were calling for a deeper bottom. And then there was 2008. Remember the calls for $150 and $200 oil from Goldman and Morgan Stanley? That was right before we went to $40 and then some. (To be fair, Ed Morse from Citi called the top but he overshot the bottom. We’re not going into the 20s).

Misperception #2: The “non-productive rigs” are the first to go. This statement is a little baffling because all drilling rigs are productive, some are just more efficient. H&P’s Flex 4 and Flex 5 rigs are state of the art. But these rigs are stacking up just as fast as the less efficient rigs that require more man hours but are not as expensive to contract. Have a drive past H&P’s Odessa yard. It’s stocked full of these Flex 4s. Rigs are enormous which makes them costly to move around. You’re not going to bring in a dozen or so tractor trailers and a few cranes for a rig move back to Texas or Oklahoma, and hire the same sized fleet to bring in the newest generation rig. The closer truth is that the ones that are running in particular areas-- that have not been let go-- will continue running in those areas. And what the oil companies are going to do is put pricing pressure on their driller for not having supplied the cat’s ass in the first place.

Misperception #3: Supply keeps coming on because of innovations in fracking. Yes, fracking has gotten much better in shale formations but the real advances are already baked in. What has been occurring over the last 24 months or so is that more sand is being run per stage and stage intervals are more densely packed. Other than some new chemistry and a few software updates, that is the bulk of it. There really is no smoking gun between well completions in July 2014 when oil was at $100 and now-- 9 months later-- when oil has been cut in half.

Misperception #4: Fracking has not gotten exponentially more efficient resulting in outsized cost reductions. Yes and no, but more “no” than “yes.” The 600 lb gorilla in the room is competition. Fracking has gotten competitive, damned competitive. Five years ago fleet sizes were smaller and there were nowhere near as many players. But then came the boom and service companies did what they do best. They overbuilt. They were also cheered on by cheap and plentiful money because everyone, especially bankers and private equity, wanted in on this one. To get an idea of just how competitive the shale landscape has become, a stage in a 2012 Marcellus well fetched almost twice the same stage today. There have been multiple improvements in both design and implementation, but the heavy lifting on cheaper frack pricing has been competition.

Misperception #5: The Baker Hughes rig count has become irrelevant. Incorrect. The Baker Hughes rig count is always relevant. Remember, this was the weekly number that allowed us to hold a bottom at $43 in March. But because supply didn’t immediately go lockstep with the falling count, analysts lost patience. They are now theorizing that rigs are so “productive” that the count no longer carries the weight that it once did. That’s a tough position to take. We were at 1,600 rigs drilling for oil in October and we’re now at 800. There is some truth that E&Ps are now favoring sweet spots but that won’t make up for the 50% collapse in the count. Shale extraction resembles an industrial process more than it does wildcatting. There aren’t many dry holes with shale. Microseismic advances have put an end to that as have data rooms stuffed full of old well logs that chart the potential of shales. Thus, most shale wells drilled today have a much better chance of being economic than step out and exploratory wells of the past. There is no legitimate model for 800 rigs growing US production past 8.9 mm BOPD in the Lower 48. And because its shale, and because shale is “tight”, drilling must continue at a breakneck pace to grow production. Analysts looking for a more ‘spot on’ number should start following the activity of fuel distributors who run nonstop between depots and frack jobs. Watch their sales for a more immediate indication of future production.

Misperception #6: We are running out of storage space for crude. We’re not. We’re going to be OK. Volumes have increased, especially at the oft mentioned Cushing, but Cushing accounts for only about 10% of US storage. Other storage areas are up but nowhere near as much. The reason is that physical traders like to park their inventory close to market and Cushing gives them that proximity. Also, Cushing is not a dead end. There are large pipelines that connect it to the Gulf Coast where storage is more plentiful and not nearly as full. Additionally, large inventory draws will be coming shortly with the advent of warmer weather.

Misperception #7: Shale wells have a productive life of only a few years. The truth on this one is slowly being sorted out and commentators are finally getting it right. Shale lacks permeability. Which means it’s very “tight.” It requires a frack job to free up the oil and gas trapped in its pore space. Fracking creates and sustains permeability and permeability is the pathway to the wellbore. Like any tight formation, oil and gas production is front loaded, meaning that most production will come right after stimulation. This results in excellent up front results but production tails off quickly, maybe even falling as much as 75% in year one and settling into something less for the next 10 or 20 years. This is called the tail and the tail is profitable, but only if the flush pays for most of the well.

Misperception #8: You can turn shale on and off. That’s wrong. Shale takes time like any other industrial activity. Slowing down its progress is a bit like stopping a supertanker. You can do it, but you need a lot of room. Most drillers require contracts and breaking them can be painful. Sand can pile up at rail sidings and result in demurrages. Layoffs can take time. Regulatory penalties may force an operator into activity whether he wants activity or not. All this takes time to work out. And then there’s always the stronger balance sheets that will drill regardless of price or that will drill and create a “fracklog” which is a newly minted MBA speak for a backlog of wells to frack. There is no switch you can flip.

Misperception #9: Oil is inversely related to the dollar. It is. This was a head fake. It’s not a misperception. Match the DXY to Brent and WTI over the last 12 months. It’s a perfect divergence. You want to bet on oil, then bet on the Euro.

Misperception #10: OPEC is done. Maybe, but the Gulf Cooperation Council is not. Collectively, the 4 GCC members pump more than half of all OPEC production. They also have very low lifting costs and enormous cash reserves. Additionally, they have stamina and are going to maintain OPECs position of no cuts. There’s a long history of Russia or Venezuela filling reduced quotas. This time around the GCC is not going to let that happen. If Russia concedes there may be a cut in June. But it is looking unlikely even if they do. Look for Saudi Arabia to pick up market share.

Misperception #11: American shale producers are the new swing producers. No, their banks are.

Misperception #12: A deal with Iran will lower prices. Sort of. It will take Iran a year or two to add anything meaningful to our 93 MMBOPD global market but the fear of a nuclear Iran will create enough tension to offset the supply addition. Worries over a nuclear Iran, whether real or perceived, will create enough fear in the markets to more than counter balance the additional million barrels a day of supply that may come on.