COP27: Contradictions Foretold

The other day I was looking back at the C@W "predictions 2022" compo.  En passant, it seems that back in January, none of us could believe Putin would actually invade ...

Anyhow, I offered "it's not a prediction, it's a cert; 2022 will be a year when the contradictions in energy policy will truly make themselves felt" - and now, as then, I claim no credit because it was already obvious for all to see.  You could argue - certainly in the case of Germany - it had been obvious for years.

Anyhow, fast-forward to COP27, and much blathering about the wicked oil and gas producers limbering up to produce ... more gas!  And - shock, horror - 

The push is coming from the host Egypt and its gas-producing allies amid a global energy crisis compounded by Russia’s invasion of Ukraine.

Well yes.   And of course benighted Germany is well to the fore in stimulating the producers' revived development activity.  As the Grauniad callously puts it: 

Panic over keeping people warm in winters to come, and keeping the lights on from gas-fired power generation, has led governments in Europe that previously relied on gas from Russia to push for new supplies from a range of other sources.

Well, errr, yes again!  'Panic', of course, is a loaded term in progressive circles, generally coupled as "moral panic", which is always a thing to be derided.  That really is a nasty little insinuation.

Yup, gas it is.  Nature's most all-round effective off-the-shelf fuel offering, certainly in the context of today's technology - while we patiently await practicable nuclear fusion, and/or serious electricity storage capability.  What wailing and gnashing of teeth there will be if Egypt engineers a COP27 resolution which labels gas as "sustainable" ...

ND

The price of oil is breaking the Middle East; What will OPEC do?

This may sound somewhat counter-intuitive. The Middle East holds the largest known reserves of oil on Earth. Thanks to this we have buildings like that pictured and indoor ski domes in the Desert. Oil has made what was once one of the worst places to live on Earth into a paradise fuelled by pertro-dollars.

Of course, the way that this wealth has remained tightly controlled is an issue for the people in these Countries, but that has not made them riot and protest in the past.

What is different today and since 2008 is the swift rise in the price of Oil. This matters not because it makes the wealth gap worse, but because oil is intrinsically linked to the price of food. When oil goes up so do food prices. There was a tough spike in 2008 which blew off because of the Global Financial Crisis. Now though we are back with oil over $100 and many predict it is not going to go lower again. This, along with crop failures, has pushed up the price of wheat in 2010/11.

Arab Countries are deserts as a rule, so they have to import most of their food from abroad. This makes them especially susceptible to global price changes in soft commodities and they have become acutely aware of the problem. One solution for the Arab leaders may be to increase their food subsidies and lower the fuel subsidies they give their populations.

Another solution which no one is yet discussing is for OPEC to increase oil production to lower the price of oil. To date all comment has been about worries of supply disruption, but sooner or later it should dawn on them what the solution is.