America’s path to alternative energy runs through Brazil
Mitt Romney alone can no longer be saddled with the label of most obvious flip-flopper among this year’s presidential candidates. That honor instead belongs to Barack Obama, whose 180 on the Keystone XL pipeline construction last week was sufficient to induce whiplash among oil industry executives and green advocates alike.
In an effort to actually make good on his “all of the above” energy policy, promoting both fossil fuel and renewable energy, President Obama had no choice but to pull off a neck-twisting reversal. Five months ago he postponed a decision on whether to build a controversial $7 billion pipeline to bring Canadian oil sands fuel down to Texas refineries. But it turns out that was only a temporary sop to the activists who see the structure as both an environmental threat as well as the embodiment of reckless Big Oil greed.
Now, with his opponents falsely equating current high oil prices with Obama’s perceived inaction on domestic energy development, Obama is acting differently. He’s scrambling to counter them by not only reconsidering the earlier postponement but actually accelerating the pipeline’s build as a national priority.
As recently as Mar. 8, Senate Democrats echoed Obama’s early wariness on the pipeline by defeating a Republican bill to fast-track Keystone’s construction. The bill fell short by four votes, no doubt due to Obama’s personal outreach to several senators for their “no” vote, prompting Senate Minority Leader Mitch McConnell to remark: “At a moment when millions are out of work, gas prices are sky-rocketing and the Middle East is in turmoil, we’ve got a president who’s up making phone calls trying to block a pipeline here at home. It’s unbelievable.” After two weeks of damaging poll results, Obama hurried to a photo-op in Cushing, Oklahoma to announce his embrace of the pipeline project.
It would be easy to dismiss such quick U-turns as election year politics-as-usual, but perhaps the truth is that Obama and his advisers finally saw the light on the game-changing potential of North America’s energy opportunities. Within the oil and gas sector, the talk of America becoming energy independent has reached fever pitch since Obama nixed his earlier decision on Keystone. Last week’s Wall Street Journal op-ed by renowned Citigroup energy analyst Ed Morse, “Move Over OPEC – Here We Come,” painted a dramatic picture of a Western hemisphere hydrocarbon revolution based on the current glut of Canadian oil sands crude, American shale gas and Mexican offshore drilling, rendering the Americas as “the new Middle East.”
Statements like that reassure defense observers who see the dangers of foreign oil dependency and encourage multinational fuel corporations. But it’s also the renewable energy companies that stand to benefit. Solar, hydropower, wind and green fuel cell need time to become economically viable and plug into a revised and as-yet-undeveloped smart power grid. A domestic fossil fuel awakening can buy that time.
Brazil’s attack on Chevron is a dangerous error
A truly bizarre international incident has gone largely unnoticed, even though it is one of the most shameless shakedowns of an American company by another country in recent memory. What is happening now in Brazil could easily scare off U.S. companies that may be looking to do business overseas.
What happened was that a small amount of oil seeped from cracks in the ocean floor near an oil well that was operated by Chevron off Brazil’s coast. This oil seep occurred some 200 miles offshore, was successfully stopped in four days, has been fully contained, and caused no harm to the environment, wildlife or human health. The amount of oil that leaked from the cracks in the ocean floor was less than 0.1 percent the size of the BP spill in the Gulf of Mexico.
Instead of sitting down with Chevron in candid talks to find preventive measures against future incidents, discuss reasonable reparations and additional cleanup, Brazil’s prosecutors went after Chevron like a rabid hound lunging after a hotdog.
After oil bubbled up from the ocean floor, Brazil’s prosecutors issued indictments seeking criminal charges, actual jail time for several company executives and fines large enough to fuel the economies of most Central American nations. Even more egregious is the fact that in 2010 Brazil’s own state-run oil company, Petrobras, spilled almost double the amount Chevron did in this incident and no one from Brazil’s oil company is facing charges or jail time.
When President Obama visited Brazil late last year, he promoted the partnership between America and the South American nation, saying: “We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.”
Brazil is an emerging South American economy. The country will assuredly receive international attention as it readies to host both the Olympics and the World Cup. Even more confusing is the fact that Chevron has been a trusted business partner of Brazil for decades. Why would Brazil’s leaders embarrass themselves by mistreating an established business partner and jeopardize their nation’s own economic prosperity?
Perhaps an overzealous prosecutor sees potential political fame or greedy government bureaucrats see an opportunity to cash in against a multibillion-dollar energy company. Whatever the reason, it’s clear that Brazilian officials have made a large and embarrassing miscalculation. What could have been a resolvable, relatively minor environmental incident has progressed into unfavorable media attention and criticism that could chill investment from companies seeking to do business overseas.
Obviously Ken Blackwell is like so many Americans who still look down on developing nations unless some profitable relationship can be ensured. They are always so self-righteous and ready to condemn, critize and then bully any country, like Brazil, who dares to exercize its sovereignty. Who are you, Mr. Blacwell, to judge the size and damage extense of the oil spill? Are you a scientist? How misleading of you to equate this oil spill as only 0.1% of the one in the Gulf of Mexico? ANY oil spill amount is detrimental to the environment. This was no small oil spill: 3,000 barrels of oil. It is sad to see how this is presented on the international media, making Chevron (the bully) as a victim of greedy bureaucrats. Chevron wants to do business in Brazil; it plays by Brazilian rules. Chevron does not like it the way it is, then it can go exploit some other dumb country…
from MacroScope:
India’s central bank battles alone in inflation struggle
What more does India's central bank have to do? Last week data showed March inflation rising to almost 9 percent on an annual basis. More importantly, core inflation is above 7 percent for the first time in 3 years meaning demand-side pressures are rising fast. And that's despite the Reserve Bank of India raising interest rates eight times since last March.
The inflation data comes just after a quarterly HSBC report based on purchasing managers indexes showed that inflation in India seemed impervious to monetary policy tightening.
The truth, is the inflation-fighting central bank has little backup from the government which remains stubbornly in spending mode. Its foot-dragging on reform and foreign investment contributes towards keeping food price inflation high. This year's fiscal deficit target is 4.8 percent of GDP and even this is seen as optimistic.
"What India really needs is to have domestic demand slowing down quite rapidly but the government is not prepared to risk that,"says Claire Dissaux, investment strategist at Millenium Global in London.
The RBI has repeatedly said it shouldn't have to do all the heavy lifting. But lack of support from the government means the central bank will have to put up rates another 100 bps this year, analysts reckon.
Of course India is not alone in this bind though it is the most extreme example of lax fiscal policy being counterbalanced by tight monetary policy. Brazilian interest rates are among the highest in the developing world at 11.75 percent and that is down to loose fiscal policy, a lot of it "quasi-fiscal spending" via the state development bank BNDES, research house Capital Economics says.
Brazil's central bank suggested recently that fiscal tightening of one percent of GDP would have the same impact as 125 bps of interest rate hikes.
Shifting wealth: does the developing world hold the key to building a stronger economy?
The following is a guest post by Angel Gurría, Secretary-General of the Organisation for Economic Co-operation Development. The opinions expressed are his own.
The world’s economic center of gravity is changing. Global GDP growth over the last decade owes more to the developing world than to high-income economies. If these trends continue, by 2030 developing countries will account for nearly 60% of world GDP on a purchasing-power parity basis, according to OECD calculations.
While high-income countries have been languishing in the worst recession since the 1930s, China and India have continued to power ahead. This is not a single stand-alone event, but a sign of an important structural transformation in the global economy, a process we call “shifting wealth.”
The tangible signs of shifting wealth are widespread. In 2009 China became the leading trading partner of Brazil, India and South Africa. The Indian multinational Tata is now the second most active investor in sub-Saharan Africa. Over 40% of the world’s researchers are now based in Asia. And by 2009, developing countries were holding USD 5.4 trillion in foreign currency reserves, nearly twice as much the amount held by rich countries.
Some commentators talk about these new trends with trepidation. But the “rise of the rest” is not a “threat to the west:” overall, the newfound prosperity in the developing world represents an enormous opportunity for citizens in the developing and developed world alike. Improvements in the range and quality of their exports, greater technological dynamism, better prospects for doing business, a larger consumption base – all these factors can create substantial welfare benefits for the world.
Moreover, imagine the consequences if the Asian Giants had followed the industrialised countries into recession? These large developing countries have helped soften the impact of the most serious global recession since the 1930s. Through their trade and investment links they have also mitigated the impact of the crisis on the rest of the developing world. Africa, for instance, is forecast to post growth of 4.5 percent this year – a figure below its pre-crisis level, but far in excess of that of the OECD average.
As world leaders work on the recovery and strengthening of the global economy and financial system, more attention deserves to be paid to South-South linkages, which promise to be one of the main engines of growth over the coming decade. Take trade, for example. Between 1990 and 2008, South-South trade multiplied more than twenty times over, while world trade expanded only four-fold. Yet trade barriers between developing countries are still high.
If the 19th and 20th century models for building an industrial society are followed by the developing world, their success will be even more short lived than that of Europe and the U.S..
China and the world economy
Dr. Gerard Lyons is chief economist and group head of global research, Standard Chartered Bank. The views expressed are his own.
The world is witnessing a shift in the balance of power, from the West to the East. This shift will take place over decades, and the winners will be: - Those economies that have financial clout, such as China - Those economies that have natural resources, whether it be energy, commodities or water, and will include countries, some in the Middle East, some across Africa, Brazil, Australia, Canada and others in temperate climates across, for instance, northern Europe - And the third set of winners will be countries that have the ability to adapt and change. Even though we are cautious about growth prospects in the U.S. and UK in the coming years, both of these have the ability to adapt and change.
China is at the center of this shift.
The scale and pace of change in China is breathtaking. Against this backdrop of dramatic change, let me look at China’s impact on the global economy, especially in the aftermath of the financial crisis.
It is now clear that the financial crisis was a result of three key factors: an imbalanced global economy; a systematic failure of the financial system in the West; and a failure to heed the many warning signs.
The world needs to move towards a more balanced economy. But that will take years. The imbalanced nature of the world economy led some to point the finger of blame at the savers, such as China. The 1944 Bretton Woods agreement placed no obligation on savers, countries with current account surpluses. The obligation to change was put on those countries with the deficits. This has to change.
Whilst China and other savers may not be the main source of the recent problem, they are part of the solution.
West needs to look at its base first, i think the fundamentals are shifting, boy now you learn!
I don’t see Chinese taking any interest in leading the world or trying to accomplish ! The eastern men are survivalist my partner! they can consume all the bull, yet we have some hope they learn! But I have my doubts if Yuan will be in my pockets!
Financial crisis is greatest threat to international security
Paul Rogers is Professor of Peace Studies at Bradford University and Global Security Consultant to Oxford Research Group. Any views expressed are his own.
Unless global responses are made to the current economic crisis, the biggest threat to international security will be the impoverishment of hundreds of millions of people, leading to radical and violent social movements that will be met with force, resulting in still greater conflict.
Oxford Research Group’s 2008 International Security Report, The Tipping Point?, published on 13 November, points to some improvements in security in Iraq in the past year as well as the potential for major changes in US policy in South West Asia with an incoming Obama administration. It also finds that the recent deterioration in East West relations after the Russian intervention in Georgia in August can be reversed, but its main conclusion is that it is the global financial crisis that is now the most dangerous threat to international security.
With the G20 meeting due in Washington on 15 November, all the indications are that the response to the crisis of the most powerful states will be to focus narrowly on immediate issues, with calls for improvements in international financial cooperation involving:
• An effective early warning system.
• A more effective framework for transnational responses.
I think it would be very beneficial if we had leadership which could promote a mindset whereby we didn’t think of it as us versus them. When underdeveloped nations begin sharing in the wealth to a larger degree we all win. I think that we should concentrate more on showing the voters in wealthy nations how much they can benefit by supporting development in the poorest nations of the world.
The world’s expanding top table
– Paul Taylor is a Reuters columnist, the views expressed are his own –
LONDON (Reuters) – Move over America! Make space Europe! The world’s top leadership table is expanding to bring in emerging powers from Asia, Africa and Latin America to help rescue the global economy.
This week’s Washington summit of 20 nations, called to discuss reforming the international financial system and avert a further worsening of the credit crisis that began in the United States, sets a precedent for a new international order.
Emerging economies such as China, India, Brazil, South Africa and Mexico are invited to share responsibility for the economic fate of the planet with the established Group of Eight industrialized nations — the United States, Japan, Germany, Britain, France, Italy, Canada and Russia.
Saudi Arabia is urged to disgorge its petrodollars and China to tap its $1.9 trillion reserves to underwrite rescue packages and buttress a Western-dominated financial system the collapse of which would wreak even worse devastation around the world.
No longer mere appendages invited for lunch at the end of the annual G8 summit, the rising powers are in demand because they have either mountains of cash, vital natural resources, fast-growing economies or regional security responsibilities.
Will they cooperate, and what do they want in exchange?
India constitutes around 17% of the world population whereas the whole of Europe contitutes only around 5% of the world population. Europe have 3 permanent UN security council members with veto power, which India does not have. What kind of democratic world is this ?. What kind of world order is this ?. Current world order represets post world war 2 times and it needs to be changed. Europe, You still live in past legacy, Please come into terms with the current realities.
Brasilia is the power it is today because of Lula’s enlightened leadership. Before Lula its currency regularly crashed, and there was zero safety net for the poor. Today, while far from perfect, there is great hope, the poor are getting some help, and the country is in the best financial condition it has ever seen. We need to understand how intervening to help the general populace, while also practicing financial rectitude can transform a country in a few short years, as it did, magnificently, in Brasil. Instead, we seem to try and follow the neo-con models of Chile and Singapore, where you get either quasi-dictatorship or outright repression. The future is Sweden, Germany and Norway–and Brasil, if it continues on the path of social democracy, looks like it will get there, too. They are the countries whose model works and whose people have the best chance at a healthy, dynamic life–and, neo-con propaganda to the contrary, the best chance for a stable financial future.