More Re-Alignments

Charles A. Kohlhaas | July 5, 2023
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After thoroughly antagonizing the Saudis, a longtime ally, President Joe Biden is now trying to renew negotiations with Iran, a long-term Saudi enemy. Biden is willing to release billions of frozen funds to Iran, in order to make some strange deal in which Iran will agree to not quite develop nuclear weapons. This with a long-term, vicious, terrorist enemy. And, for what? Of course, this deal is meaningful, because the ayatollahs are notoriously untrustworthy.

The only conclusion one can reach for such a dangerous policy is that it provides an excuse, however unreasonable, to remove sanctions on Iran. That will give them more freedom of action to work against us with the money released to them. It will also bring more oil supply to market, further aggravating the Saudis by suppressing oil prices.

The Saudis obviously noticed US inflation before the Federal Reserve did. They figured out that the Fed would eventually wake up to the effects of Biden’s massive spending and raise interest rates, causing recession and a decline in demand for oil.

They have been closely watching the US economy for three-quarters of a century. Sadly, they understand it better than either our nation’s Fed chairman or Treasury secretary. The Saudis reduced production rates twice, in order to maintain oil prices in anticipation of reduced demand.  But, the Biden Administration is to working against them, by cozying up to Iran and continuing to draw down the US Strategic Petroleum Reserve.

The harm of these policies has spread beyond the US, first to Europe (which is now in recession), and then worldwide. The world watches and notes that the US uses the international financial system it established for sanctions and as a weapon against people the Administration decides not to like. These policies, combined with feckless use of the military (abandoning Afghanistan), extensive US government corruption, and a breakdown of US social structure, are all being monitored worldwide with fear and alarm.

With US world leadership deteriorating, a large group of countries, representing more than half the world’s GDP, have decided to make other arrangements. Led by the original BRICS nations, they are forming an alternative trade and finance system and seeking other leadership. 

Meanwhile, China is actively making oil and gas deals and establishing alliances worldwide, while moving aggressively to displace the US for world dominance. During the past month, the Chinese strengthened their ties with additional agreements with Saudi Arabia, the UAE, and other Arab countries, as well as with Brazil and other BRICS members.

China has contracted for $2 billion worth of seismic exploration work in Saudi Arabia, started production from the world’s largest deep water, sub-salt oil field in Brazil, and expanded into LNG supply source projects.  China is no longer limited to financing, observing, and passive investing in the oil and gas business; it is now a major oil and gas operator.

India, long a country which minded its own business, is stepping onto the world stage by aggressively negotiating new alliances and trade agreements. As the US retreats from the Middle East, India and China are each making long-term agreements with oil and gas producer countries for supply. The producer-countries are writing contracts for extended seismic exploration for new fields, offshore development, and expanded export facilities.

Outside the Middle East, extensive new oil and gas resources are being discovered, developed, and put on production. New, large, long-lived fields in Norway, Namibia, and Guyana will come on-stream in the next few years, contrary to what, until recently, was established policy to combat climate change by eliminating fossil fuel use.  The US drills enough wells to maintain its production rate at around 12 million barrels a day.

The Great Energy Transition is being re-thought. Such a transition would be the largest engineering project in history and should be well-planned, coordinated, systematic, apolitical, and carefully executed.

Instead, it is obviously an emotional, unplanned, haphazard, disorganized, childish party doomed to fail. Costs for necessary materials are increasing, availability is decreasing, and new mines are not environmentally or politically acceptable.

Siemens, a major windmill manufacturer and one of the world’s premier engineering companies, revealed problems with their turbines and blades last week. Those are all the moving parts of a functioning windmill. Other manufacturers then revealed similar problems. Transformer shortages, caused by materials shortages, delay electric grid expansions.

Holland, a country with a picturesque and practical relationship with windmills for several centuries, announced they will build some new nuclear plants to provide emission-free sustainable base-load energy. Holland had let climate fanatics drive Royal Dutch Shell out of the country, but evidently came to its senses. The manager for the energy transition of Shell, now based in London, just resigned after two years.

On the other hand, more and more people panic less and less about climate change. Many countries, signatories to the Kyoto and Paris Accords, still let farmers burn their fields at certain times of the year - including our neighbor to the south, where visibility in the spring will be down to about three or four miles in some areas. The claim that 97% of scientists believe that humans are causing global warming and climate change has been debunked. Climate Activist Greta Thunberg does not rant to the UN and Davos anymore; she got herself arrested for ranting in a street. 

Hanoi Jane re-invented herself as Climate Jane and demonstrates at the US Capitol, claiming climate change is racist. In interviews, she explains how she reached this conclusion. Her reasoning is a bit difficult to follow, but seems to go like this: The advance of civilization over the last 2,500 years was led by white men in what we now call the West. Other people did not advance as much. White-man-led Western Civilization eventually reached the point of using fossil fuels to heat homes and move around. Because the rest of the world did not advance so much, climate change was a white racist plot since Pericles. According to her, the cure is democratic socialism, so governments can clamp down on all human activity and stop all civilizational progress. 

So, with all the various re-alignments of trade, finance, and alliances, a critical overriding implication of the re-alignment is that, if India, China, Africa, and South America do not participate in the Great Energy Transition, all the cost and disruption endured in North America and Europe will be a meaningless waste. And, they cannot participate.

The current limited Energy Transition attempt is not working, is too expensive, requires too many unavailable resources, is unachievable as now conceived, and obviously cannot be expanded six-fold to the entire world.

This rethinking of energy sources and available resources will affect all other re-alignments.