Red, Green & Blue: Will Polar Oil Race Launch a New Cold War?
The Arctic is heating up in more than one way, as we saw last week when Russia planted its flag on the seafloor below in an apparent move to establish a claim to the ample oil and gas reserves buried beneath.
What’s disastrous for polar bears and Inuit subsistence hunters is emerging as a potentially huge — and destabilizing — fossil-fuel rush for the nations bordering the Arctic Ocean as the polar ice melts. How heated could disputes over the North’s buried oil and gas riches become? It’s still early, but I’ve already heard at least one theory that this could even spark conflict between the U.S. and, of all places, Canada. The ocean treaty regarding claims to seabed sovereignty might soon fall apart before the U.S. has even ratified it.
So how concerned should we be? What role should the Earth’s citizens play as the most fuel-hungry nations on the globe start a new race for buried energy? Is this the start of the next Cold War?
Image source: Wikimedia Commons
Tags: Canada, gas reserves, global warming, melting ice caps, North Pole, oil reserves, polar ice caps, Red, Green and Blue, Russia, U.S.
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August 14th, 2007 at 6:19 pm
That was really an interesting stunt by Russia but I think it’s more for the home political audience to give them something to rally around. As I understand the debate over ownership of this area has been in contest for decades and has been going through a very extensive political process. It’ll be interesting to see if it becomes feasible to go and get these natural energy reserves before alternatives kick in and make old fossil sources moot.
August 14th, 2007 at 6:38 pm
Oh, no doubt the whole Russian affair was mostly for internal PR. There’s certainly nothing binding about it. As one Canadian official, I believe, put it, "It’s not the 15th Century anymore. We can’t go planting flags anywhere we want and claiming territory for the homeland." (Not exact words, but that was the gist.)
But Putin’s undoubtedly upping the ante in the fossil-fuel race: between the Gazprom takeover, the withholding of gas supplies to Ukraine and other such antics, Russia is clearly serious about flexing its muscles in the gas/oil sector.
And Canada’s not only cranky about Russia’s moves, but looking with an increasingly suspicious eye at the U.S. Don’t you imagine all these tensions will inflame more and more as existing oil fields dry up? Especially if we encounter another Katrina-like situation that knocks out our refinery capacity, or someone else’s?
August 14th, 2007 at 7:12 pm
There you go with the pessimism again, Shirley.
We’ll nuke our electric grids long before we nuke our neighbors. All that we need to do is develop our own oil fields and resources and we’ll easily make it over the hump to alternatives. As the economics push oil to $100 a barrel it will just make sense to do so.
Then you’ve got to figure in ever-increasing efficiencies.
I think we’ll be OK.
I’m a lot more worried about Peak SSI which hits in 10 years where the Seniors start cashing in all the IOUs the congress has been issuing in the form of T Bills to cash-flow its insatiable pork addiction. Now that’s not something we’re speculating about; it’s something that will happen. In 2017 the congressional cash-flow dries up and the economic mechanics are put into reverse with government having to pay back the money it’s borrowed from the SSI fund. If you want something to really worry about then it should be SSI, medical cost inflation and public defined benefit medical and pension plans.
They’ll hit long before peak oil gets us.
August 15th, 2007 at 1:03 pm
Actually, I’m not as much a pessimist as you might think, Jimmy. After all, you’re the one who mentioned the nuclear option. : )
I’m not channeling Condi and envisioning mushroom clouds so much as increasing global tension and a greater sustained level of conflict and skirmishes. Not just for oil but for resources like dwindling water supplies as well.
I’m with you on the looming financial crisis, though. I’ve been following the GAO chief’s "Fiscal Wakeup Tour" for a while now, and don’t believe it’s getting nearly the attention (nor public concern) it deserves.
August 15th, 2007 at 2:04 pm
I think if we keep taxes down we’ll continue toward surplus budgets again and that maybe paying off the SSI debt we owe to ourselves will turn into a form of disciplined debt repayment plan… who knows. We’ve got to get our hands around health care costs though.
But back to the environment… do you think water is really going to be an issue? I guess for the undeveloped world that could be the case but, again, nuclear power and desalinization can go hand in hand. We’ve got a long way to go before that ever becomes an issue here in the US I think… although this drought we are suffering in Nashville this month is really starting to get old.
August 15th, 2007 at 2:54 pm
Jimmy,
Could you explain something for me? I’ve never understood how you obtain a budget surplus from lower taxes, especially when we are at war on multiple fronts. The result so far has been record deficits, and a ballooning national debt.
August 15th, 2007 at 3:29 pm
Income taxes in this country come from people who can choose to work or not Jason. Our last economic down-turn started in 2000 before the election. Income inflation had pushed typical two earner households into punitive tax brackets where about 1/2 the second income was going to taxes.
As people realized this it became a lifestyle choice for the second earner to fire the baby-sitter, clip coupons and eat out less because working 1/2 the day for Uncle Sam when you could be home with the kids and basically play defense with the family budget is a no brainer. Who suffers? The economy.
Following the 2000 down-turn we had the prolonged election uncertainty that dried up the venture capital money; then the Enron/WorldComm fiascoes; then 9/11… the economy was at the breaking point. The solution was two fold… Kennedy-esqu tax cuts and Keynesian-esqu deficit spending by the government. This acted as shock paddles to get the economy back on track and we are now seeing deficits far smaller than anyone projected even in the face of the protracted war on terror and several devastating natural disasters.
The thing to remember in all of this though is that the people actually paying the majority of taxes in this country work at high stress high responsibility jobs because they choose to. The top 10% of earners pay over 50% of the federal income tax and the top 50% of earners pay over 90%.
Now that the economy is in recovery (save the housing bubble) it’s time to trim back on spending. Income inflation will continue to be a de facto tax increase so the rates should be left alone until the next economic dip when they should be adjusted down again either by rate or bracket range change to help stimulate the economy.
If you want to raise a tax then a tax on oil is appropriate. It will discourage consumption and better index the cost to it’s real environmental and geopolitical cost. Further taxing the producers will do nothing but discourage production.
August 15th, 2007 at 6:19 pm
Back to the environment, Jimmy: yes, I do believe water scarcity will become an increasing concern in the U.S. as well as in other developed countries like Australia (already a serious problem there that’s causing Australians to turn to desalination, which is expensive, energy-intensive and potentially damaging to marine environments and life).
There are no shortage of studies indicating that the changing climate will provoke more frequent and more severe droughts in parts of the U.S. Plus, our reliance on large aquifers like the Ogallala is already raising serious questions about how sustainable our water use (and irrigation-based agriculture) is. The U.S.G.S has found that some wells tapping into the Ogallala have seen groundwater levels drop by as much as 30 meters since intensive irrigation began in the ’50s.)
August 15th, 2007 at 6:39 pm
Sadly Shirley I suspect in 20 years history will prove again that the worries of the day were for naught. You’ll be saying ‘whew… that was close’ as if we’d just dodged a bullet; and then you will move on to the next hysterical catastrophic concern of the day… and I’ll still be preaching optimism against Malthusianism.
History’s on my side. We live in an ever-improving world where our only fear should be the sliding benchmark that defines imminent catastrophe to the next generation of worriers.
In the words of one of my favorite presidents (and yours too I suspect) …
“The only thing we have to fear is fear itself”.
August 15th, 2007 at 6:55 pm
I’m sorry, Jimmy, but I can’t help but feel that you haven’t answered my question. I’m an engineer, so numbers mean a lot to me. Do you have any that might help to substantiate some of these claims? For instance, I understand the idea that many mothers went home to be housewives, due to an oppressive tax bracket, but do you have any idea how many, or how much tax revenue was lost due to this change?
It seems to me that your supply-side solution would work great if the purpose is to reduce the government, but I can’t tell without some numbers, whether this would really dig us out of this massive national debt that we’ve increased the ceiling on several times. You say that we had a two-fold solution to the economic woes of the turn of the millenium: tax cuts and spending cuts. These are what I’d like to see numbers for.
Let’s take spending first. What would you cut? What would be the savings? What would be the potential consequences of the cuts? As I understand it, the cuts have resulted in a total of about $250 billion per year in revenue loss, so I’d want to see that the proposed cuts in spending would offset these losses.
Now, to the cuts themselves. I’m going to go through a very simple example, just to help illustrate my view of this, and then you can tell me where I’ve gone wrong. Let’s say that a person is taxed $0.50 for every $1.00 that he makes. Then, his taxes are reduces such that he will only be taxed $0.25 for every dollar. Now, just to break even to the amount of tax revenue that was being collected before, it seems to me that he would have to double his income. Then, he’d make $2.00, and consequently, pay $0.50 in taxes. Now, we’re back to even, but we still need to dig out of our hole that we’re in. Are tax cuts going to result in a tripling or quadrupling of incomes? If his income stays approximately the same, we’ve given him $0.25 back. He could then go spend it, at which point that would be taxed, but that wouldn’t come near to paying back the initial cut.
This is why I doubt these supply-side claims of tax cuts resulting in an increase in tax revenue. It seems like an impossible contradiction to me. Please show me with figures and calculations how this is supposed to dig us out of the hole that the war and the tax cuts have caused.
I understand that "the top 10% of earners pay over 50% of the federal income tax and the top 50% of earners pay over 90%". However, by 2010, the top 1% of earners will get about 53% of the tax cuts, so that doesn’t do much for me.