Friday, July 06, 2007

Peak Oil Is Seeping In Around the Edges

We are into our third year of an oil production plateau, while consumption has continued to climb. To date, this has not resulted in any major crisis, but lately there have been a growing number of stories about countries suffering energy shortages, indicating that tight oil supplies may be squeezing the edges of the world's economy--countries that can't compete with richer nations for the supplies available.

In some countries, such as Iran, the shortages are aggravated by government policies. Iran has heavily subsidized gasoline prices causing demand to soar. With Iran's refineries unable to keep up with demand, resulting in imports approaching $5 billion a year. In an attempt to dampen demand, the government imposed rationing, setting off some violent protests. Iran is also experiencing a growing natural gas shortage forcing it to look to neighboring countries to fill its needs.

Energy price controls in Argentina helped fuel an economic boom for the last five years. But now, the country faces rationing and cutbacks in electricity and gas, threatening to bring the economy to a screeching halt.

In Pakistan, population growth combined with economic expansion has pushed demand for energy up, while IMF influenced privatization of power companies has hampered energy production. Efforts to build alternate and renewable sources of energy have been bogged down in bureaucratic delay. As a result, Pakistan's power shortages are reaching critical proportions.

On the other side of the subcontinent, Kathmandu is experiencing serious gasoline shortages. As in other Asian countries, the number of cars and trucks has grown dramatically. Lately they have been unable to import enough gas from India to keep up with demand, resulting in long lines of cars at gas stations, and strains on the economy.

Uganda's ongoing electricity shortages have been worsening recently, again due in part to World Bank privatization policies combined with heavy government subsidization of electricity. The government has considered developing thermal power, but it is expensive, and the government is burdened by the cost of maintaining diesel power.

Gas shortages have even returned to the U.S. for the first time since the 1970s as North Dakota dealers have had to scramble to find supplies. Minnesota and South Dakota have also begun to feel the shortages. The shortages, blamed on refinery slowdowns, have forced the governor to wave regulations on truckers in an attempt to bring in more supplies from other states. The recent flooding of an oil refinery in Kansas will only worsen the situation. Market demand in nearby Chicago has left the smaller states to compete for dwindling supplies. "South Dakota has only 750,000 people, compared to millions in Chicago," according the Dawna Leitzke, head of South Dakota's petroleum marketing association, "They get gasoline before we do."

Straws in the wind, each with its own local conditions contributing to the problem, but all taking place in the context of an ever tighter world market for oil and gas. Poorer and badly managed states are the first to feel the squeeze, but they will be followed by others.


Post a Comment

<< Home