Should We Pay to Keep Oil in the Ground Or Share It?
|August 21, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Should We Pay to Keep Oil in the Ground Or Share It?
US Senate Entertains a Bill to Set Up an Iraqi Dividend
Sharing “rent” works for all valuable natural resources, even surface land. We trim, blend, and append four articles from: (1) The Guardian, Aug 7, on Ecuador by Kevin P. Gallagher; (2) Associated Press, Aug 11, on Africa by Katharine Houreld; (3) Gulf News, June 14, on a dividend by Saadallah Fathi, former head of OPECs Energy Studies Department in Vienna; and (4) BBC, Aug 15, on Bolivia by Peter Day.
by K. P. Gallagher, by K. Houreld, by S. Fathi, and by P. Day
- Paying to keep oil in the ground
Extracting oil from the western Amazon would yield Ecuador $5.7bn in present value terms, or 10% of its GDP.
However, cutting down the forest to extract oil could cost the country in terms of the other uses of the land that generated income, such as tourism, as well as in losses of biodiversity. Given that the park is one of the most diverse places in the world, there is a chance it could house the key to some future wonder drug and bring in even higher receipts than the oil.
The park is home to the Waorini, an estimated 20,000 indigenous peoples who have a livelihood and culture that cannot be priced.
Finally, extracting and burning the oil would emit carbon dioxide. The cost to the world to abate these emissions would be between $2.6bn and $3.7bn.
President Rafael Correa proposes that Ecuador sell the world bonds for the value of the carbon dioxide emissions avoided by preserving the forest.
JJS: Sounds like a not-half-bad idea, yet would oil be so tempting if other energy sources could compete on a level playing field? And if we used power efficiently, cutting demand? Both of those measures — ending corporate welfare for oil and plugging the leaks in engines and buildings — would save us money and the planet. Meanwhile, oil continues to be as much curse as blessing.
- Oil is no gift for Africa’s poor
Nigeria and Angola are Africa’s top two oil producers, yet most of their people live in wretched poverty, often in shanties dwarfed by fire-belching derricks.
Thousands have been killed over the years in Nigeria’s oil-rich Delta, where the military battles criminal gangs by firing into slums from helicopter gunships and militant groups bomb pipelines and kidnap foreigners.
Nigeria has a history of coups and the last elections here were marred by voting irregularities and police firing tear gas at lines of voters.
Angola was in civil war from the 1970s to 2002. It has not held presidential elections since the war ended. In its last parliamentary election, money, alcohol, and even cars were dished out and many polling stations didn’t open for lack of materials.
Corruption has long kept oil revenues from making life better for ordinary people in the two countries.
Global Witness, a London-based watchdog group, reported that several shareholders of a private firm authorized by Angola’s state oil company to bid for lucrative contracts have the same names as top current and former Angolan officials.
Petrodollars allow their leaders to ignore foreign critics, unlike other states that rely on foreign tourism, aid, or peacekeepers. The US could help is by requiring oil, gas, and mining companies to publicly disclose their payments to the governments of countries whose riches they extract.
JJS: A more fundamental way the West could help is by setting a better example. Acknowledge the value of nature is part of the commons. Recover that value and share it, a la Alaskas oil dividend, instead of taxing our exertions and subsidizing the influential.
- Iraq oil trust plan is futile
A bill in the US Senate titled Support for Iraq Oil Trust Act 2009. It advocates that every Iraqi will get a direct benefit or “share” from Iraq’s oil revenue. The direct stake would give Iraqis a “responsible and transparent management of resources and use of revenues”, diffuse concentration of power to reduce corruption, alleviate incentives for smuggling and sabotage, reduce reliance on local and central government, and serve as a model to other resource rich countries in the Middle East.
At $50 per barrel, 2 million barrels per day exports and 10 per cent disbursement, I calculate that every Iraqi will get $10 a month.
JJS: That’s puny and apparently futile, but at todays $75 per barrel with 80% disbursement to only adult Iraqi, that means $480 a month for a couple in a nation where the cost of living is much lower than the West. While oil matters much, so do other resources.
- Prosperity promise of Bolivia’s salt flats
International carmakers scramble to find a suitable alternative to petrol vehicles. If the world takes to the electric car powered by batteries, lithium could provide the energy source. For years lithium has been used for specialist purposes such as ceramics, and pills for depression. But being very light, in batteries lithium is much quicker to charge and discharge than heavy conventional batteries. So if plug-in cars catch on, then Bolivia, with its great Uyuni salt flats, would become a major player.
JJS: Whether cursed or blessed by the resource depends on how the return is apportioned.
Jeffery J. Smith runs the Forum on Geonomics.
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