Opinion

The Great Debate

from Breakingviews:

Ecuador economic “miracle” meets maturity

By Rob Cox

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Turn on state television here, and within an hour or so a public service message will appear extolling the “Ecuadorean miracle” of President Rafael Correa. The advertisements highlight big new infrastructure projects and endorsements by experts, even an American or two.

Coming on one of the many formerly private channels that Correa tucked under government control during his seven years in office, it’s easy to dismiss this as propaganda. Yet here’s the thing: nearly every ordinary Ecuadorean I met during a recent stay was able to answer the Reaganesque question, “Are you better off now?” in the resounding affirmative.

To the amazement of Correa’s critics, Ecuador has undergone a relatively sustained period of economic progress since he took office in 2007. Annual growth in gross domestic product has averaged 4 percent. Unemployment is below 5 percent. Wages are up. Inflation is a tame 3.1 percent thanks to the dollarization of the economy before his accession. The percentage of Ecuador’s 16 million people living below the poverty line has dropped to 25 percent from some 45 percent before Correa became president.

The infrastructure improvements are evident everywhere, from the shiny new Quito airport and the highway that leads to the capital, to the 95 new bridges spanning the jungle chasms of the Amazon region. Regional hospitals are being built, and universal education has been made more accessible to everyone, its quality improving. Infant mortality rates shrink every year.

Why the shift to alternate energies continues, despite shale boom

Thousands of solar panels are pictured generating electricity used at Nellis Air Force Base in Las Vegas

Oil prices are rising as uncertainty grows over the fate of major producers like Russia and Iraq. Everything from transportation to manufacturing to a petroleum-intensive agricultural system is a puppet flailing on the strings of this volatile commodity.

Meanwhile, increased production of alternative power is finally making prices more competitive, particularly for solar energy, as former Vice President Al Gore recently pointed out in Rolling Stone. Costs have declined dramatically — 20 percent a year since 2010. This is not yet reflected in energy prices, however, largely because of the major tax breaks still extended to the dirty technology of the past.

Yet this shift to alternative energies is inexorable. The recent boom in natural gas from shale, which has glutted the market with cheap fuel, has delayed it. But as oil costs rise, the transition to alternative energy is again poised to accelerate.

from Breakingviews:

Iraq troubles are unlikely to bring new oil crisis

By Fiona Maharg-Bravo

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The continued violence in Iraq looks like a harbinger of a sharp cutback from the world’s seventh-largest oil producer. But the bulk of Iraq’s production is still secure. Even though the Middle East has clearly become less stable, it will still take a cascade of problems to create a big oil price shock.

The oilfields which account for around 90 percent of Iraq’s production are in the still peaceful south of the country, far from the conflict zones. Oilfield security is tight and has recently been increased. The evacuation of non-essential staff by BP and other foreign operators is not an immediate threat to output, since these large fields are predominantly staffed by locals. Oil exports were near record rates in June, according to industry sources cited by Reuters.

from Breakingviews:

Russia puts gas-hungry China in a bear hug

By Ethan Bilby
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Russia has signed a long-awaited gas pipeline deal with China, and it leaves the People’s Republic in a bear hug. Russia gets a new market outside the increasingly frosty European Union. Oil major PetroChina gets to balance out some losses from low regulated prices at home. But the optics of the deal shred Beijing’s pretensions to political neutrality.

Russia could use a friend. EU countries have been planning to diversify supply away from dependence on Russia, which provides a third of their energy needs – especially after a dispute in 2009 saw gas cut off. Annexing Ukraine’s southern Crimea region has raised the temperature further. New pipelines from places like Azerbaijan are designed to limit Moscow’s leverage.

Assad’s terror farce at the Geneva talks

Just days before the most recent Syrian peace talks in Geneva began, a report detailing “industrial-scale” killing in President Bashar al-Assad’s prisons revealed the nature of his government. Despite this setback, the regime continues to claim that it is only fighting terrorists.

While their rhetoric is convenient, the reality is that only one side of the Syrian negotiations is actively fighting al Qaeda – the opposition. Though Assad has the capacity to attack extremists, from the spring of 2011 until today he has chosen to target civilians instead.

During two weeks I just spent interviewing Syrians in the southern border towns of Turkey, I found nearly universal opposition to the Islamic State of Iraq and the Levant (ISIS), the army of foreign jihadists backed by al Qaeda that has now taken over many liberated areas across Northern Syria.

Mexico’s reversal of fortune

In Latin America, this looks to be the year of Brazil — thanks to the impending World Cup and presidential elections. But with another lackluster year looming in emerging markets, fans of transformation, growth and investment potential should instead look to Mexico.

Brazil’s president, Dilma Rousseff, is expected to win a second term this year, and its soccer team stands a good shot at victory. But growth has slowed considerably. In the world’s seventh largest economy, reforms are stagnating and the country faces a possible ratings downgrade.

Mexico, by contrast, is in the throes of serious reforms. It will likely lead Latin America with at least 4 percent growth this year and an improving investment outlook. Standard & Poor’s recently boosted Mexico’s credit ratings because of energy reforms that the rating company trumpeted last month as a “watershed moment” for the country. It is becoming a story of inverted fortunes, as Michael Shifter and Cameron Combs of the Inter-American Dialogue recently wrote.

The Case Against Natural Gas Exports

President Barack Obama has made middle-class jobs and natural gas two of his top second-term policy objectives. Both could be undermined if his Department of Energy (DOE) continues to approve gas industry applications for exporting American gas.

There is already a move in Congress to remove DOE’s authority, so approvals can move even faster, and the oil and gas industry has thrown all its lobbying muscle behind this effort to steamroll through the permission process.

Natural gas, the cleanest of the hydrocarbon-based fuels, has long been a primary choice for heating and power generation, as well as an essential raw material, or “feedstock,” for a vast range of chemistry-based products, including every kind of plastic, synthetic cloth and high-tech composite materials. When gas supplies came under pressure in the late 1990s, the chemical industry — and most other energy-dependent U.S. heavy manufacturers — were hard hit.

The oil boom’s foreign policy dividend

The domestic benefits of the U.S. oil production boom are well documented — everything from the creation of high-paying jobs to sending less money to foreign oil producers.

Less well appreciated are the geopolitical benefits. U.S. oil production has already paid foreign policy dividends in at least one vital area: It has paved the way for stronger sanctions on Iran by helping to keep the global oil market well-supplied and minimizing oil price volatility.

This development is timely and instructive.

By the first half of 2014, according to credible estimates, Iran is likely to be able to covertly produce enough highly enriched uranium for one nuclear device in as little as seven to 10 days — before it could be detected by the international community. While it remains unclear how close Iran is to nuclear weapons capability, the consensus is that the window for preventing it from happening is closing.

The darkness behind fracking’s silver lining

A natural gas pipeline under construction near East Smithfield in Bradford County, Pennsylvania, Jan. 7, 2012. REUTERS/Les Stone

Climate change may have reached the point of no return last month.

CO2 levels in the atmosphere topped 400 parts per million on May 19, for the first time since the Pleistocene era, over 2.5 million years ago. President Barack Obama’s historic speech on climate change today highlights his growing focus on this issue for his second term.

Climate scientists have long regarded that 400 number as the symbolic threshold. One step beyond, and it would be virtually impossible to put the brake on human-generated climate change. The bad news escalated last week when the International Energy Agency reported that global emissions of carbon dioxide rose 1.4 percent in 2012, the largest annual increase on record.

The inter-state job search migration

The Internal Revenue Service created a bit of a kerfuffle last week when it announced that it would no longer publish data on interstate taxpayer migration and the income they take with them. This would be a huge disservice not just to economists and policy analysts but to all Americans.

This IRS migration data provides the best evidence that low-tax, limited-government states attract employers, families and individuals, while states pursuing the same policies as the White House – higher taxes, bigger government and more onerous regulations – drive businesses and taxpayers away. It’s not hard to fathom why the Obama administration, despite its promise to be the most transparent in history, would want the IRS to stop publishing this damning evidence.

California, Illinois and Maryland, which have some of the highest tax burdens and biggest state governments in the country, may have finally realized the deleterious economic effects that come with following President Barack Obama’s approach to governance.

  •