The Danger of Venezuela

The AP did an article today about Hugo Chavez’s desire to use its oil supply to tie the rest of South America to Venezuela at the expense of the US.

Basically, Chavez is looking to pull other South American countries into a free trade zone centered around Venezuela, and counteract US efforts to create a South American/US version of NAFTA. His enticement: guaranteeing cheap Venezuelan oil to those countries instead of sending it to the US like Venezuela has historically done.

Venezuela’s Chavez Expands Oil Initiative

A bit of historical context:

  • Venezuela is an OPEC nation, historically viewed as a “cheater” in that they rarely stayed within their OPEC production quotas. It is 7th in the world in oil reserves, most of it heavy crude that is more expensive to produce and refine than other types of oil reserves.
  • The Venezuelan heavy oil company, PDVSA (pronounced “ped a vay sa”) used to be recognized as the best run state owned oil company in the world, and provides most of Venezuela’s state revenue.
  • After he was elected as a populist President, Chavez took control of PDVSA in a power struggle with the more patrician management as he wanted to use more of its oil revenues to support populist projects. It’s reputation has since suffered.
  • Chavez does not like the US, and has blamed President Bush for supporting the coup against him a couple of years ago.
  • Venezuela has traditionally been a friendly and major supplier of oil the US, and a number of large multi-national oil companies (including a client of mine, ConocoPhillips) have significant operations there.

However in recent years Chavez has reneged on previous deals with oil companies, trying to carve back significantly larger tax rates than previously agreed.

Chavez has also actively attempted to divert Venezuelan oil supplies away from the US in general, cutting supply deals with European and Asian countries including China, not just South America. He has done this in a stated effort to have more leverage over, and less dependence on, the US as a customer.

There is a real danger if OPEC is not dealt with, that one third world country after another, from Saudi Arabia to Iraq, then Iran, and now Venezuela will continue to have too much influence on our energy security. See my earlier post on the oil policy.

More bio fuel amusement – this time from the French

Two weeks ago I blogged about the German inventor supposedly using dead cats as feedstock in a biodiesel process.

This week the amusing bio fuel story is about French nonsense. Apparently the French government does not exactly permit drivers to use vegetable oil in cars, but a large number of French citizens are doing so anyway.

The driving force, if you’ll pardon the expression, is pure economics. Apparently vegetable oil over there costs around 60% of diesel by volume. I’m not sure how that figures on a BTU content basis (quick question, does anyone know if the French actually measure energy value in British Thermal Units?), or what it does to mileage. A quick websearch did not yield a good answer.

The article also suggested that there were serious technical problems as well if you used a greater than 50% mix of vegetable oil/diesel.

The EU is quite big on vegetable oil as well as ethanol as a fuel substitute, but France is not yet. They have pushed mainly ethanol as a substitute. Check it out.

French drivers illegally use vegoil as fuel

The Australian Solar Race

It’s called the World Solar Challenge, and a Dutch team has won for each of the past 2 races. I know it’s not exactly the near term future of the automotive industry, but I still get a kick out of it. Especially since we do a lot of work with Australian companies.

11 teams drive odd looking solar powered cars race across Australia (not exactly the whole world, but since they’ve been doing it for 20 years and have entrants from around the world, we’ll give them credit). Now, to be fair, it’s a race across Australia from North to South, not the longways. But it’s still 3,000 kilometers, 4 days for a solar powered car according to their website. And they camp in the outback on the way.

They left Sunday according to a Reuters article The Australian Solar Race, and you can track their progress on the WSC site,

I’m rooting for the University of Michigan Team. It’s one of three from the US this year (not counting the Puerto Rican team).

Check it out.

Biofuels: Their Future Is Now?

The title of this post (without the question mark) was the title of September’s monthly American Bar Association renewable energy teleconference. For those who are interested, I recommend listening into these inexpensive monthly sessions to remain current on renewable energy developments.

  • Of particular interest in this past week’s biofuels conference was a presentation by Reid Detchon of the Energy Future Coalition. His presentation was one of the more cogent and coherent cases I’ve seen in promoting the need for an alternative to oil for economic, environmental and geopolitical purposes, and why biomass could/should be a contributor to the solution.

  • I had never heard before of the Energy Future Coalition, so I did a little more digging. In looking at their web site — their mission, their participants — this would appear to be an organization well worth watching…and supporting.

    Can CleanTech Really Help Address Oil Challenges?

    It’s becoming increasingly clear that the biggest energy challenges now facing both industry and society at large relate to oil. About once a week, it seems that some event — Hurricane Katrina, the Iraq conflict, rattling sabers from Hugo Chavez in Venezuela, OPEC meetings — sends the oil markets into a frenzy, with oil prices bouncing around above $60/bbl for several months now. For really the first extended period since the late 1970’s, energy issues actually hold something more than a trivial sliver of the collective mindshare of the U.S. Funny how spending $50 to fill up an SUV gets people to worrying about oil.
    The CleanTech community has been quick to seize upon this increased consciousness about energy to advance their messages. In many ways, this is a good thing: more Americans need to become more knowledgeable and cognizant of their energy decisions and alternatives. However, as an advocate and follower of the CleanTech industries, I am concerned about the long-term negative impact from statements that are much more hyperbole than factual. People get downright mad when they find they have been misled. So, I wrote an article expressing my concerns.

    Basically, my point is that reducing reliance on imported oil can be accomplished by energy efficiency technologies (e.g., hybrids) and behaviors (e.g., using public transport) and by direct substitution away from conventional oil to transportation fuels that are derived from abundant resources in the U.S. (e.g., biofuels, coal, shale). CleanTech technologies and ventures that serve this function can and will help address our oil challenges. However, no matter how much the ardent supporters of renewable energy may wish to the contrary, unless and until there is a direct linkage between the electricity markets and the transportation sector, increased adoption of solar and wind energy won’t make any meaningful dent in our oil import requirements. To the extent that solar and wind advocates keep hammering their misinformed and misleading message, their credibility will be lastingly tarnished. And that will be a bad thing for the CleanTech community at large.

    Power Company Execs Thinking Business as Usual

    In this new survey report, it is striking how many of the utility execs are wishfully thinking that the world won’t pull the rug out from under them, where other industry participants see that dramatically different futures need to be considered, even if they may be somewhat lower on the probability scale.

    Note particularly the doubts expressed about IGCC. Gee, it costs a bit more, and “no-one’s built one yet”. Yikes.


    Conventional Wisdom May Steer Power and Utility Companies Toward the Wrong Future

    Significant New Challenges Could Be in Store According to a New Deloitte Research Report

    WASHINGTON, Sept. 14 /PRNewswire/ — Most of America’s leading power and utility CEOs and CFOs think business will not change much over the next five years. However, a study released today by Deloitte Research — including interviews with regulatory, financial, and policy experts — shows significant new challenges could be in store between now and 2010.

    These are the highlights of the Deloitte Research report: Which Way to Value? The U.S. Power and Utility Sector, 2005-2010.

    In the report Deloitte Research groups the contrasting views on what the next five years may hold into three broad scenarios: “Continuity,” “Tough Times,” and “Rising Expectations.” The “Continuity” scenario is based on the majority view among industry executives.

    “We believe that while minority views may represent less-likely scenarios, they should not be ignored,” says Greg Aliff, vice chairman and national managing partner, energy and resources, Deloitte & Touche USA LLP. “The report notes that when companies base their strategies on the conventional wisdom, they may leave themselves vulnerable if the contrarians turn out to be correct.”

    The study documents support for certain views that go against the industry’s prevailing assumptions.,1015,sid%253D2000%2526cid%253D89087,00.html

    “Which Way to Value? The U.S. Power and Utility Sector 2005 – 2010” (620 KB)September 2005; 56 Pages; A Deloitte Research Energy Study.

    What to do about the Oil Problem

    The Tirade: We need to achieve low oil prices, and ensure that no one country is able to control our fuel supply. We have just passed a new Energy Bill. It does not do so. What we do need to do: Drop the ANWR fight and instead break the back of OPEC, slash consumption, and work closely with China.

    The Links:

    Since the early 1970s the US has sucked up more oil than we produce, and a large share of everything the world produces. I figure that’s okay, as we also produce more goods than anyone else in the world.But now China is sucking up oil without adding a lot to the world production, and driving up prices. And worse, all the big oil reserves left in the world are in places (read Iraq, Iran, Russia), that are not exactly, ahhh, “politically friendly”. This is not tenable. It’s a politico-security problem wrapped up with an economic problem.

    Here’s the crux of the situation. OPEC currently controls enough oil output to be the swing producer and manage prices like a monopoly. OPEC is controlled by countries whose population doesn’t like us. American and Asian consumers are the main drivers of oil demand, factors we can influence. (Usually sharp changes in oil prices are caused by faster or slower economic growth in Asia or the US than was expected, not OPEC). OPEC’s main goal is to keep prices stable, and relatively high. As long as OPEC is the swing vote in world oil supply, and a handful of the Arab nations control OPEC, and we need lots of oil from OPEC, we have a problem. Because prices will not come down, and we’ll always have an oil embargo hanging over our heads. Again, we need to achieve low oil prices, and ensure that no one country is able to control our fuel supply.
    Unfortunately our energy policy for the last 30 years has been built on two premises:
    • Friendship with key OPEC members like Saudi Arabia and Kuwait, whom we have courted to keep OPEC somewhat in line and keep the oil flowing (kind of like putting the fox in charge of the hen house);
    • And a policy of supporting the domestic oil industry to increase drilling with only limited commitment to reduced consumption.

    This has been true of every administration, whether Republican or Democrat. And the Energy Bill is no exception.

    My Prescription: Supply solutions need to go hand in hand with reduced consumption. If we want to solve the Oil Problem, we have to attack both the roots of the supply and demand.

    The Details:
    Attack the Supply Problem
    • Drop that whole drilling in the Alaskan National Wildlife Refuge thing. It is not the cure-all that the Bush Administration considers it to be, and it sets off the environmental lobbies like no tomorrow so we can’t move on to real oil policies. The potential production from that field is a lot, but not big enough to make a long-term difference in our oil needs. Besides, if I had the choice I’d rather save our oil for later and burn Saudi Arabia’s.
    • Break the back of OPEC. OPEC is a monopoly cartel. If you break it, oil production goes up, oil prices fall (though they do become more volatile), and no longer can one or two Arab nations hold us over the barrel on oil. They become just one of many countries, not the swing producer.
    • This would drive oil prices down and reduce our reliance on the Middle East.
    • How do we do that? Make friends with major swing producers like Venezuela, Russia, West Africa, Mexico, Norway, Indonesia. Encourage OPEC cheating. Split them off from the herd one by one, so that it no longer speaks with one voice. Use our economic and political power to fight the Oil Cartel just like we fight the drug cartel.
    • Encourage additional domestic drilling and new technology, but be cognizant that domestic drilling is only a small part of the solution.
    • At the same time, crack down hard on countries that nationalize oil reserves and renege on contracts with the major oil companies. The major oil companies are our oil companies. We want them getting a hold of Nigerian and foreign oil. Encourage the opening of foreign drilling in new markets

    Attack the Demand Issue in Parallel

    • Reduce our oil consumption. Most of our oil goes to cars and plastics. We badly need to drive the adoption of fuel-efficient hybrid and fuel cell cars by implementing significantly higher fuel efficiency standards and consumption taxes. In practice this means eliminating the fuel economy exemptions for pickup trucks and SUVs. And this from a Texan with two F-150s and a 1970 Mustang in my family!
      As a consumer, this means buy smaller cars, or stop complaining about oil prices.
    • Encourage reduced consumption in China and India. We can sell them the technology to do this. I would love to see an “Oil Consuming Nations” cartel with China, Japan, and India to balance OPEC.
    • Increase the strategic petroleum reserve. Our reserve is only a few days of supply. Give our government some additional leverage with a mandate to fight OPEC on oil prices.
    • And of course, recycle, recycle, recycle. Any time you throw away plastics, you increase demand for oil.

    In Requiem: We have an Oil Problem, both economic and political. OPEC is our enemy, not the oil companies. OPEC must be destroyed. Consumption must be reduced, but at the same time as increased production so that the price shocks don’t hurt our economy.

    And within a few years we will find that while still an oil economy, we will be richer, we will not have an Oil Problem with Arab countries hanging over our heads, and we will be one step closer to transitioning a sustainable energy future.

    For Research:

    Is Toyota THE Clean Tech Automotive Company?

    According to a Bloomberg article picked up by Fuel Cell Today, Toyota has announced its goal of an “all-hybrid” fleet. I think Toyota is rapidly becoming THE powerhouse in clean vehicles.

    Toyota Hybrid Article

    • Toyota is the world’s second largest auto maker.
    • It is largest producer of hybrid vehicles, and doesn’t seem like it intends to relinquish the title anytime soon.
    • It actually developed the technology that is powering Ford’s hybrid program, and sold it to Ford.
    • It’s the only major automotive company that makes a concerted effort to grow its clean vehicle business at the expense of its other business units.

    I read an article not too long ago explaining why Toyota as winning the hybrid race over Honda. The gist of it was design over technology. This guy suggested that Toyota designed it’s Prius hybrids just different enough to be easily recognizable as a hybrid (unlike the Honda Civic hybrid), but not so far out there in design that consumers were turned off like the Honda Insight.

    Then, with great technology, good marketing, and plain good auto design, Toyota had built its lead.

    Who says a $100 billion mainstream company can’t lead the way in cleantech.

    Anybody have a thought on other cleantech leaders?