Monday, November 07, 2011

Will Putin Panic, Punked by Shale Oil & Gas?

Vladimir Putin is a man on a mission, aiming to return Russia to its glory days as a superpower. Mr. Putin plans to achieve this goal using Russia's vast oil & gas reserves. During the buildup in energy prices prior to August 2008, Putin was riding high -- going so far as to invade and partially ethnically cleanse the neighboring nation of Georgia.

But something annoying is getting in the way of Mr. Putin's grand plans of becoming Russia's first superpower tsar. The energy chokehold which Putin held over most of Europe is beginning to slip away. Abundant unconventional energy resources are beginning to pop up where least expected -- taking advantage of high global energy prices. And the unconventionals are just getting started:
The cost of developing these unconventional resources, meanwhile, continues to drop. In the case of Israel, which has developed an unusually clean and efficient drilling technology, oil is expected to flow at a cost of US$35 to US$40 per barrel, or less than half today’s world oil price of US$90 a barrel.

The diversified democracies of the world — the U.S. and European countries among others — will profit big time from the world’s endowment of unconventional oil and gas, partly because many of them will become energy exporters instead of importers and mainly because low energy prices will spur their advanced economies. Not so for today’s undiversified, energy-export dependent countries.

Russia, a largely undeveloped country that relies on energy exports to meet half of its federal government budget, would be dealt a crippling blow. In 2009, with falling energy prices following the 2008 financial crisis, Russia’s GDP fell by 8% as its energy export earnings dropped by 60%. As oil prices recovered following the crisis, so did Russia, but in a new world energy order of sustained low prices, Russia’s predicament would be dire.

Because Russia depends on its energy exports to the EU to meet its needs for manufactured goods, for food and for the capital required to maintain its energy infrastructure, its standard of living would plummet, along with its aspirations for status as a global or even regional superpower. As one example, Russia will have lost its ability to cow Europe, as it has on previous occasions by threatening to withhold, or actually withholding, gas deliveries. According to a study funded by the U.S. Department of Energy, the market share of Russian gas exports to Western Europe could be cut in half in the coming decades.

Iran’s government, perhaps the greatest threat to world peace today, would likewise be crippled, perhaps fatally. With millions of Iranians living on $2 or less per day, with high unemployment, high inflation and an economy even more energy dependent than Russia’s, the Iranian government could be unable to keep calls for its overthrow at bay, let alone continue in its role as the world’s premier financier of terrorism. Other mischief-making Middle Eastern governments, and Hugo Chavez’s Venezuela, too, would find their sails trimmed in a world of plentiful energy. _GWPF Lawrence Solomon
It would not be the first time that western environmental organisations, and other anti-energy activist groups, had their strings pulled by foreign interests. Various entities both foreign and domestic would like to bring energy starvation to the west, for reasons of profit, power, and influence.

Much of the propaganda and protest with regard to unconventional energies such as oil sands, shale oil & gas, oil shale kerogens, etc. is influenced by persons with less than pristine motives. But that is the way of the world. Idealistic and gullible individuals are often lured into acting as cats paws and cannon fodder for the sake of other interests with more ambitious plans in mind.

How far would Putin go, when faced with the possibility of a Russian economic collapse in the face of abundant foreign unconventional energy and fuels?

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