1NC
Uniqueness – oil prices will stay high
Mozee, MarketWatch Reporter, 5/21/2014
[Carla, MarketWatch.com, “Citi raises brent-oil forecasts for 2014, 2015,”
http://www.marketwatch.com/story/citi-raises-brent-oil-forecasts-for-2014-2015-2014-05-21,
Accessed: 7/5/14, JO]
LONDON (MarketWatch) -- Citigroup on Wednesday raised its estimates on oil prices, and said
"earnings headwinds for the [oil] sector look considerably less than they have for some time." Citi
raised its Brent forecast to $109 a barrel from $103 a barrel for 2014, and to $105 a barrel from $95 a
barrel in 2015. The upgrades primarily reflect continuing tight supply through 2014 "exacerbated by a
heightened sense of supply fragility due to escalating violence in Nigeria and Iraq as well as ongoing
disruption in Libya." The ongoing Russia/Ukraine crisis has introduced a "large, completely
unexpected source of geopolitical risk" to a market that was stuck in neutral to bearish territory, Citi
added. Per-share earnings estimates for integrated oil firms were raised by an average of 4% this year,
and 9% in 2015.
[insert link]
Oil exports are key to Russia’s economy – lower prices stagnate the economy
Rapoza, Forbes Contributor, 12
[Kenneth, 4-03-12, Forbes, “Oil A Problem For Russian Economy, Official Says”,
http://www.forbes.com/sites/kenrapoza/2012/04/03/oil-a-problem-for-russian-economy-official-says/,
accessed 7-12-14, AAZ]
Russia, awash in oil and natural gas. It’s the reason why the economy has a budget surplus , and for
some it is the reason why Vladimir Putin and United Russia are still in power. Follow the rising price of
oil over the last seven years and you will see the rising GDP of the Russian economy right along with
it. It’s national icon, Gazprom, is a multi-billion dollar, football sponsoring natural gas behemoth. The
biggest in the world. And companies like it, from Rosneft to the privately held Lukoil oil are bad news for
the Russians in the not-so-distant future. Combined they and others in the oil and gas biz account for
75% of Russia’s exports.
“Economic growth will promptly fall to two or three percent a year in case of further dominance of the
raw materials and fuel sector in the economy as it is now,” Russian Development Minister Elvira
Nabiullina told a forum in Moscow on Tuesday.
The country’s economic development may get stuck at the level of Japan she warned, something no
decent developing nation would wish on their worst enemy. Japan is lucky if it grows 1% a year on
average over the course of a five year stretch. Russia’s economy grew 4.3% last year, and is forecast by
the government to grow at 3.7% if Urals oil price averages are $100 per barrel.
She warned that a fall in GDP growth rates by 0.7-1.7% will cause “a rapid loss of (Russia’s) share of the
global market and, what is most important, will reduce opportunities for increasing incomes and living
standards.”
As an investment story, Russia is known as an oil and gas play. Like the country or not, where oil goes,
Russia’s economy will go right along with it . That’s great when Brent crude and its accompanying
cheaper oil, Urals, is well over $80 a barrel. High oil prices is helping finance the new skyline of
Moscow. Across from the Moscow River, near where Stalin built his great architectural works in honor of
the Russian peoples’ success in World War II, are shiny silver and gold skyscrapers with Sberbank and
VTB Capital logos on them. Moscow wants to be a mini-Frankfurt. Better yet, bigger than Frankfurt. It
wants to be one of the biggest financial markets in the emerging world. Brazil and China have it beat.
Russia’s one trick pony economy is why.
Russia economic decline goes nuclear
Filger, Huffington Post, 09
[Sheldon, 5-10-09, Huffington post, “Russian Economy Faces Disastrous Free Fall
Contraction”,http://www.globaleconomiccrisis.com/blog/archives/356, accessed 7-9-14, AAZ]
In Russia historically, economic health and political stability are intertwined to a degree that is rarely
encountered in other major industrialized economies. It was the economic stagnation of the former
Soviet Union that led to its political downfall. Similarly, Medvedev and Putin, both intimately
acquainted with their nation’s history, are unquestionably alarmed at the prospect that Russia’s
economic crisis will endanger the nation’s political stability, achieved at great cost after years of chaos
following the demise of the Soviet Union. Already, strikes and protests are occurring among rank and file
workers facing unemployment or non-payment of their salaries. Recent polling demonstrates that the
once supreme popularity ratings of Putin and Medvedev are eroding rapidly. Beyond the political elites
are the financial oligarchs, who have been forced to deleverage, even unloading their yachts and
executive jets in a desperate attempt to raise cash.
Should the Russian economy deteriorate to the point where economic collapse is not out of the
question, the impact will go far beyond the obvious accelerant such an outcome would be for the
Global Economic Crisis . There is a geopolitical dimension that is even more relevant then the
economic context. Despite its economic vulnerabilities and perceived decline from superpower status,
Russia remains one of only two nations on earth with a nuclear arsenal of sufficient scope and
capability to destroy the world as we know it. For that reason, it is not only President Medvedev and
Prime Minister Putin who will be lying awake at nights over the prospect that a national economic
crisis can transform itself into a virulent and destabilizing social and political upheaval. It just may be
possible that U.S. President Barack Obama’s national security team has already briefed him about the
consequences of a major economic meltdown in Russia for the peace of the world. After all, the most
recent national intelligence estimates put out by the U.S. intelligence community have already
concluded that the Global Economic Crisis represents the greatest national security threat to the
United States, due to its facilitating political instability in the world.
During the years Boris Yeltsin ruled Russia, security forces responsible for guarding the nation’s
nuclear arsenal went without pay for months at a time, leading to fears that desperate personnel
would illicitly sell nuclear weapons to terrorist organizations . If the current economic crisis in Russia
were to deteriorate much further, how secure would the Russian nuclear arsenal remain? It may be
that the financial impact of the Global Economic Crisis is its least dangerous consequence.
***Uniqueness***
Prices High
2nc high oil prices inev
EPA regs will lead to long term oil prices increase
Beschloss, Desert Sun economist, 7/4/2014
[Morrsi, The Desert Sun, “Will EPA's Increased Politicization Scuttle Long-Term U.S. Energy Boom,”
http://www.desertsun.com/story/money/industries/morrisbeschlosseconomics/2014/07/04/will-epasincreased-politicization-scuttle-long-term-u-s-energy-boom/12221501/, Accessed: 7/5/14, JO]
That cudgel has been expanded enthusiastically by President Barrack Obama, who has put
"climatological purity" at the top of initiatives to push through in the two and a half years of his
presidency remaining.
While the George W. Bush second term initially supported the concept of U.S. leadership in the war
against global warming through renewables, the Obama reign has now made "climatological purity
energy restraints" their leading initiative, which Barrack Obama hopes to list along with Obamacare as
his two-term presidential legacy.
Having failed with former Vice President Al Gore's "cap and trade" boondoggle, the Obama
Administration's chosen EPA Agency's extremist leader, Gina McCarthy, has started off with even
greater zeal that her predecessor Lisa Jackson. While the U.S. Supreme Court by a 5 to 4 vote rendered
long-term CO² restraints unconstitutional, this will have no bearing on the restrictions already imposed
on expansion projects festering on the utilities' drawing boards extending far into future years.
It seems especially bizarre that the White House is further restraining the U.S. energy’s highly
successful oil, natural gas, and coal availability opportunity, at a time when the OPEC Oil dependency is
coming increasingly under the severe pressure of the mounting instability of the Sunni/Islamic
confrontation, already impacting Iraq, one of the world's leading oil reserves.
This Mideast-wide confrontation could eventually involve Saudi Arabia, OPEC's leading oil producer, and
others already affected by civil and religious strife.
Ironically, it may come down to the combined energy expansion capability, of the U.S./Canada/Mexico,
which, for now, is being hampered by the indefinite delay of the Trans-Canada XL oil pipelines, the
"war on coal;" and the increasing hurdles put in the path of additional hydraulic fracturing (fracking)
production sites.
It's doubtful whether the seriousness of this evolving energy tragedy, and the high prices and oil
shortages forthcoming will make much impact on the Administration's priorities. They are either out
of touch or deliberately opposed to the energy future availability of the United States and its dependent
allies.
Marginal barrel costs ensure high prices
OPEC, 2013
[OPEC, “2013 World Oil Outlook,”
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO_2013.pdf,
Accessed: 7/7/14, JO]
The rising cost of supplying the marginal barrel has been, and remains, one of the major factors in
making assumptions for oil prices over the medium- and long-term. Upstream capital costs more than
doubled over the 2004-2008 period. Downward cost pressures stemming from the global recession
were only temporary and since the beginning of 2010 upstream capital costs have been rising again,
albeit at a slow pace. The oil price assumption of the WOO 2013 Reference Case reflects these cost
developments and is similar to the previous year's assumption. The nominal OPEC Reference Basket
(ORB) price remains at an average of $110/b over the period to 2020 and then rises, reaching a
nominal value of $160/b by 2035. In real terms, the ORB is $100/b by that year. This represents a slight
upward revision from the WOO 2012.
a/t: shale boom
Shale oil won’t drive down prices—It’s only profitable as long as prices remain high
Helman, Forbes, 2013
[Christopher Helman, 6/13, Forbes, “Why America's Shale Oil Boom Could End Sooner Than You Think ,”
http://www.forbes.com/sites/christopherhelman/2013/06/13/why-americas-shale-oil-boom-could-endsooner-than-you-think/2/, Accessed:7/6/14, JO]
It’s bad enough to be spending more and more to generate ever less growth. It’s worse when that
growth doesn’t even translate into profits. Oil and gas companies have spent hundreds of billions
acquiring acreage, drilling wells, booking reserves, boosting supplies, but in 2012 they proved too
good at their job, found too much gas and cratered the gas price. That made vast shale fields
uneconomic to drill at all. In 2012 those 50 biggest companies recorded $26 billion in asset impairment
charges. That basically means that natural gas reserves that were worth $26 billion the previous year
became worthless because it cost too much to drill them. This led to a 58% decline in after-tax profits
in 2012 over 2011.
And you’d better believe the same thing could happen to oil reserves.
It’s all a function of price. West Texas Intermediate crude has been bopping around between $88 and
$98 a barrel this year and the front month futures price is at $96 this week. Its high of the last two
years was $109 and its low $77. As I wrote here recently, there are plenty of reasons why oil prices
should be heading up, not down.
But it’s worth thinking about what could happen to the American Oil Boom if oil prices slipped just 1015% from where they are now. Oil drilling is generating hundreds of billions of dollars of value to the
United States right now, in terms of jobs and equipment, and especially the benefit to the national
balance of payments of not having to spend $200 billion a year buying foreign oil. But it must be said
that when you take into account all the costs incurred in acquiring and developing unconventional oil
fields today, many plays are already balanced on the knife-edge of profitability , and any down draft
in oil pricing could dry up activity real quick.
Shale is a short term phenomenon and perceived that way—Rapid declines in
production are coming within 10 years
Smith, Bloomberg Reporter, 2013
[Grant, 11-12-13, Bloomberg, “U.S. to Be Top Oil Producer by 2015 on Shale, IEA Says,”
http://www.bloomberg.com/news/2013-11-12/u-s-nears-energy-independence-by-2035-on-shaleboom-iea-says.html, Accessed: 7/7/14, JO]
While North American shale, coupled with rising production in Brazil and global supplies of natural gas
liquids, will dominate output growth over the next 10 years, OPEC, and its Middle Eastern members
in particular, will regain importance after that as supplies from outside the organization falter,
according to the report. OPEC pumps about 40 percent of global oil supplies.
Not Stirred
“The U.S. moves steadily towards meeting all of its energy needs from domestic resources by 2035,” the
IEA said. “But this does not mean that the world is on the cusp of a new era of oil abundance. Light,
tight oil shakes the next 10 years, but leaves the longer term unstirred . The Middle East , the only
large source of low-cost oil, remains at the center of the longer-term outlook .”
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the
United Arab Emirates and Venezuela. It will next meet to review production targets on Dec. 4 in Vienna.
More than half of the 790 billion barrels the world will need to produce by 2035 is needed to
compensate for declining output from mature deposits, the agency said. Output declines at a rate of 6
percent a year at conventional oil fields once they reach peak production, according to the report.
AT- Decreasing demand
Oil demand will continue to increase—Global economic growth
Smith, Bloomberg Reporter, 3/14/2014
[Grant, Bloomberg, “IEA Raises 2014 Oil Demand Estimate as World Economy Recovers,”
http://www.bloomberg.com/news/2014-03-14/iea-raises-2014-oil-demand-estimate-as-worldeconomy-recovers.html, Accessed: 7/8/14, JO]
Oil demand will be higher in 2014 than previously estimated as global economic growth recovers,
the International Energy Agency said. Pressure on supplies will ease in coming months as seasonal
consumption dips.
World consumption will increase by 1.4 million barrels a day, or 1.5 percent, this year to a record 92.7
million a day, or about 95,000 a day more than forecast last month, according to the IEA, a Paris-based
adviser to oil-consuming nations. While freezing U.S. weather has eroded oil inventories to their lowest
level in more than a decade, fading demand for winter fuels coupled with a 35-year peak in supplies
from Iraq will help replenish stockpiles, the agency said.
“Growth momentum is expected to benefit from a more robust global economic backdrop,” the IEA
said in its monthly market report. Still, a seasonal lull in demand means “pressure on oil markets,
ceteris paribus, seems set to ease.”
West Texas Intermediate crude futures are little changed this year, trading at about $98 a barrel today,
as signs of economic recovery in the U.S., the world’s largest oil user, counter slowing growth in
emerging nations. Manufacturing and jobs growth in the world’s biggest economy surpassed forecasts in
February, government data showed earlier this month.
OPEC Production
The increase in global consumption will require a higher average level of crude this year from the
Organization of Petroleum Exporting Countries than previously expected, according to the report.
OPEC, responsible for about 40 percent of world oil supplies, will need to provide 29.7 million barrels of
crude a day in 2014, or about 100,000 a day more than anticipated in a month ago. Still, that’s about
800,000 a day less than the group’s production in February.
OPEC’s 12 members boosted output by 500,000 barrels a day to 30.49 million in February as a surge
in Iraq’s exports pushed the organization’s production above its 30-million barrel ceiling for the first
time in five months, according to the IEA. Iraq’s production climbed by 530,000 barrels a day to 3.62
million a day, the most since 1979, while that of Saudi Arabia, the group’s biggest member, rose 90,000
to 9.85 million.
OPEC’s own monthly report, published on March 12, estimated the group’s output at 30.1 million
barrels a day in February and Iraq’s supplies at the highest since 1980.
U.S. Strengthening
While all of the expansion in demand next year will be accounted for by developing nations, the pace
of growth in China and other emerging nations is slowing, the IEA said. U.S. demand “continues to show
signs of strengthening,” it said. Tensions between the West and Russia over Ukraine “has increased
downside risk to the forecast” for global consumption, the agency said.
Yes U.S. Dependence
Consumption > Production
U.S. oil dependence will remain high—domestic drilling can’t meet massive demand
Rapier, OilPrice reporter, 7/5/14
[Robert, OilPrice.com, “Where The US Got Its Oil in 2013 ,” http://oilprice.com/Energy/CrudeOil/Where-The-US-Got-Its-Oil-in-2013.html, Accessed: 7/5/14, JO]
As events in Iraq continue to unfold, we have been getting quite a few queries on just how much oil the
US imports from Iraq. In my previous post – The Top 10 Oil Producers in 2013 — I showed that even
though the US is a major oil producer, we are an even greater oil consumer . So we import millions of
barrels a day of oil from over 40 countries — one of which is in fact Iraq.
The Energy Information Administration (EIA) tracks US oil imports and finished product exports, and I
have tabulated our Top 10 sources of crude oil imports from 2013. Overall, the US imported 7.7 million
barrels per day (bpd) of crude oil in 2013, a 2 million bpd decline since 2008. We imported another 2.1
million bpd of finished products like diesel, gasoline, and jet fuel, but we also exported 3.6 million
bpd of petroleum and petroleum products (mostly as finished products).
Where Does Our Imported Oil Come From?
Of the 7.7 million bpd of crude oil imports, 3.5 million bpd (45 percent of the total) came from OPEC
countries. Saudi Arabia was our largest OPEC supplier at 1.3 million bpd (17 percent of the crude
import total). But our biggest supplier of crude continues to be Canada. The 2.6 million bpd of crude we
got from Canada in 2013 represents a 66 percent increase in the past 10 years and made up a third of US
crude oil imports in 2013.
Shale supply exaggerated
The shale boom is over exaggerated—Industry supply estimates were more than twice
as high as reality
Martenson, Duke neurotoxicology PhD, 5/22/2014
[Chris, founder of PeakProsperity.com, and energy predictions website, Market Watch,
“Dream of U.S. energy independence was just revised away,”
http://www.marketwatch.com/story/dream-of-us-energy-independence-was-just-revised-away-201405-22, Accessed: 7/7/14, JO]
The U.S. shale oil “miracle” took a major hit Wednesday, when the federal government announced a
hefty downward revision of its estimate of the amount of recoverable oil in the No. 1 shale reserve in
the U.S.: the Monterey formation in California.
A recently as this week, the much-publicized Monterey formation accounted for nearly two-thirds of
all technically recoverable U.S. shale oil resources, standing at a world-class 13.7 billion barrels . But
on Wednesday, that estimate was downgraded to a mere 600 million barrels , or 96% lower than the
day before.
You read that right: 96% lower. This takes the Monterey from one of the world’s largest potential
fields to a play that, if all 600 million barrels thought to be there were brought to the surface all at
once, would supply the U.S.’s oil needs for a mere 33 days.
Yep. 33 days.
And along with that oil come tremendous water demands, environmental, and infrastructure damages.
The reasons for the downgrade are easy enough to understand. The initial estimates were mere
guesses that relied on company statements and not actual results . Now with enough wells in play the
Energy Information Agency can calculate the potential of the Monterey play and it’s obviously a lot
less than originally thought.
With that, California’s dreams of 2.8 million new jobs from the Monterey shrank to 112,000 and the
hoped for $24.6 billion in tax revenues withered to $984 million.
More importantly, the U.S. shale “miracle” turned into a pumpkin overnight with overall U.S. reserves
shrinking from approximately 24 billion barrels to approximately 11 billion barrels.
This is not surprising at all to anybody following the shale story with a critical eye. We always knew that
the best plays were being prosecuted first for obvious reasons; it’s human nature to go after the easy
stuff first. And this is especially true for the folks in the oil patch.
The best plays were tapped first, not by some accident of technology or lucky holes plunged into the
ground, but because they were cheapest to prosecute. The remaining shale deposits are less rich, more
costly to explore, and the profitable pockets much harder to find.
Your main take-away is this: the U.S. has a lot less shale reserves on the books today than it did
yesterday. Look for future downward revisions as the other remnant shale plays are poked and
prodded and found to be wanting.
Shale not cheap enough
Shale oil won’t led to independence—We can’t produce enough and even if we could,
it wouldn’t be economical
Licata, Blue Phoenix chief energy strategist, 6/26/14
(Blue Phoenix Inc. is an independent energy research group)
[John, The Motely Fool, “Can the US Really Be Energy Independent?,”
http://www.fool.com/investing/general/2014/06/26/can-the-us-really-be-energy-independent.aspx,
Accessed: 7/5/14, JO]
US energy independence: You probably have heard the phrase thrown around countless times,
especially during political campaigns or election seasons. The problem with the term, which refers to
being completely self-sufficient when it comes to meeting energy demand, is really based on flawed
logic considering we are really decades away, if ever, from truly meeting all of our power needs with
domestic energy production. Also, economics will always trump the goal of being energy independent
if access to cheaper power is on the table. Just ask Germany, a nation dedicated to renewable energy
yet now a significant importer of US coal to offset rising electricity prices, some of the highest in the
European Union without their focus on nuclear power post Fukushima.
So the question beckons, can the US really be energy independent? I recently spoke with former US
Energy Secretary Spencer Abraham who told me, "We have huge demands for petroleum and we are
probably never going to ever produce enough petroleum domestically to handle our needs every
single day." If a former US Energy Secretary believes we can't be 100% energy independent, why the
heck are we hearing so much talk about exporting crude oil and natural gas?
Shale oil isn’t a silver bullet—Rising costs and rapidly falling well output
Loder, Bloomberg Reporter, 2014
[Asjylyn, 2/26/14, Bloomberg, “Dream of U.S. Oil Independence Slams Against Shale Costs,”
http://www.bloomberg.com/news/2014-02-27/dream-of-u-s-oil-independence-slams-against-shalecosts.html, Accessed: 7/714, JO]
The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder
than it seems.
Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar
they get back . Shale output drops faster than production from conventional methods. It will take
2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale,
according to the Paris-based International Energy Agency. Iraq could do the same with 60.
Consider Sanchez Energy Corp. The Houston-based company plans to spend as much as $600 million
this year, almost double its estimated 2013 revenue, on the Eagle Ford shale formation in south Texas,
which along with North Dakota is one of the hotbeds of a drilling frenzy that’s pushed U.S. crude
output to the highest in almost 26 years. Its Sante North 1H oil well pumped five times more water
than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shares sank 7 percent.
Offshore Drilling UQ + Link
Oil dependence now, but opening offshore drilling leads to independence
Johnson, Congressman, Ohio 6th District, 7/3/2014
[Bill, The Daily Caller, “This Independence Day, Remember Energy Independence Matters Too,”
http://dailycaller.com/2014/07/03/this-independence-day-remember-energy-independence-matterstoo/, Accessed: 7/5/14, JO]
In 2014, America is dependent on other nations to meet our energy needs. But we need not be. For
too long we’ve had to rely on OPEC, and the whims of third world dictators, to put gas in our cars and to
keep the engines of our economy running smoothly. We watch Vladimir Putin’s Russia, one of our top
rivals, use its energy as a strategic weapon in Ukraine, and we’ve seen him use it as an economic
weapon before in Eastern Europe, on our allies who must resort to buying Russian natural gas to heat
their homes in the winter. And thus far, America has been unable to offer our allies an alternative.
But now we have a choice. The U.S. is now a global superpower in terms of oil and natural gas
production – we’re competitive with Saudi Arabia and Russia. This remarkable shift has happened not
because of government policies, but despite them. Primarily, this dramatic turnaround has occurred
because of innovation advancing technology in getting oil and natural gas out of shale formations that
are plentiful in the U.S., and in large quantities in Eastern and Southeastern Ohio’s Utica and Marcellus
shale plays. As our production has gone up (we pump about 10.3 million barrels of oil a day, compared
to Russia at 10.8 million and Saudi Arabia at 11.7 million), our imports have gone down. We buy 32
percent less natural gas, and 15 percent less oil from other nations than we did five short years ago.
But we can, and should, be doing better. The vast majority of the increase in America’s oil and natural
gas production is happening on private lands . In fact, a study by the non-partisan Congressional
Research Service (CRS) found that under the Obama administration, oil production on federal lands has
actually fallen by six percent, while increasing by 61 percent on state and private lands. This
administration’s hostility toward traditional fuels comes as no surprise. President Obama has gone out
of his way, through regulation, to hurt both the supply and demand sides of the coal industry, living up
to his threat that “if someone wants to build a new coal-fired power plant they can, but it’ll bankrupt
them.” Under our current President, America has no national energy policy, and no pathway to
independence.
In the absence of leadership from the White House and the Senate, the House of Representatives has
taken action. Last week, the House passed three important pieces of legislation, with my support, that
begin putting America on a path toward energy independence:
The Lowering Gasoline Prices to Fuel and America that Works Act: Under President Obama, the average
price of gasoline has increased to $3.68 – double what it was when he first took office. The
legislation would expand production of our energy resources by opening up areas offshore currently
restricted by the Obama Administration.
*** Links***
OTEC
OTEC ends oil dependence for power production and transportation
Magesh, OTEC Engineer, 10
[R.,, 6/30/10, “OTEC Technology-A world of Clean Energy and Water,” Proceedings of the World
Congress on Engineering, Vol II,
http://www.iaeng.org/publication/WCE2010/WCE2010_pp1618-1623.pdf, AC]
Scientists all over the world are making predictions about the ill effects of Global warming and its
consequences on the mankind. Conventional Fuel Fired Electric Power Stations contribute nearly 21.3%
of the Global Green House Gas emission annually. Hence, an alternative for such Power Stations is a
must to prevent global warming. One fine alternative that comes to the rescue is the Ocean thermal
energy conversion (OTEC) Power Plant, the complete Renewable Energy Power Station for obtaining
Cleaner and Greener Power. Even though the concept is simple and old, recently it has gained
momentum due to worldwide search for clean continuous energy sources to replace the fossil fuels. The
design of a 5 Megawatt OTEC Pre-commercial plant is clearly portrayed to brief the OTEC technical
feasibility along with economic consideration studies for installing OTEC across the world. OTEC plant
can be seen as a combined Power Plant and Desalination plant. Practically, for every Megawatt of power
generated by hybrid OTEC plant, nearly 2.28 million litres of desalinated water is obtained every day. Its
value is thus increased because many parts of the globe are facing absolute water scarcity. OTEC could
produce enough drinking water to ease the crisis drought-stricken areas. The water can be used for local
agriculture and industry, any excess water being given or sold to neighboring communities. Index
Terms—Desalinated water, Ocean Temperature Differences, Rankine Cycle, Renewable Energy. I.
INTRODUCTION CEAN thermal energy conversion is a hydro energy conversion system, which uses the
temperature difference that exists between deep and shallow waters in tropical seas to run a heat
engine. The economic evaluation of OTEC plants indicates that their commercial future lies in floating
plants of approximately 100 MW capacity for industrialized nations and smaller plants for small-islanddeveloping-states (SIDS). The operational data is needed to earn the support required from the financial
community and developers. Considering a 100 MW (4-module) system, a 1/5-scaled version of a 25 MW
module is proposed as an appropriate size. A 5 MW precommercial plant is directly applicable in some
SIDS. OTEC works on Rankine cycle, using a low-pressure turbine to generate electric power. There are
two general types of OTEC design: closed-cycle plants utilize the evaporation of a working fluid, such as
ammonia or propylene, to drive the turbinegenerator, and open-cycle plants use steam from
evaporated R. Magesh is with Coastal Energen Pvt. Ltd., Chennai 600 006, Tamilnadu, India (e-mail:
wellingtonmagesh@ gmail.com). sea water to run the turbine. Another commonly known design, hybrid
plants, is a combination of the two. In fact, the plants would cool the ocean by the same amount as the
energy extracted from them. Apart from power generation, an OTEC plant can also be used to pump up
the cold deep sea water for air conditioning and refrigeration, if it is brought back to shore. In addition,
the enclosed sea water surrounding the plant can be used for aquaculture. Hydrogen produced by
subjecting the steam to electrolysis during the OTEC process can fuel hybrid automobiles, provided
hydrogen can be transported economically to sea shore. Another undeveloped opportunity is the
potential to mine ocean water for its 57 elements contained in salts and other forms and dissolved in
solution. The initial capital cost of OTEC power station would look high, but an OTEC plant would not
involve the waste treatment or astronomical decommissioning costs of a nuclear facility. Also, it
would offset its expense through the sale of the desalinated water.
Offshore Wind
Offshore wind ends US dependence on oil
Huelsenbeck, Oceana marine scientist, 13
[Matt, Oceana is the world’s largest ocean advocacy organization, 6/15/13, LiveScience,
“Offshore Wind Energy: The Coming Sea Change?,” http://www.livescience.com/38187-windturbines-rising.html, accessed 7/7/14, AC]
In light of rising gas prices, increased dependence on foreign oil, ocean acidification and global climate
change, it's clear the United States needs to look for alternative and cleaner sources of energy.
Offshore wind energy is one such source that, although in early developmental stages in the United
States, could offer hope for a future of energy independence and a clean energy economy.
Thankfully, there is some good news on the horizon.
The first U.S. offshore wind turbine was recently deployed off the coast of Maine. This pilot project uses
a floating platform with a small wind turbine attached to a tower, marking a small, but significant step
toward the development of an abundant, clean-energy resource in the United States.
One of the reasons offshore wind energy is so effective is that these winds are stronger and steadier
than onshore winds. And offshore winds are strongest during the day as well as in heat waves, when
the demand for energy is highest. In fact, the East Coast of the United States has been dubbed the
"Saudi Arabia" of offshore wind, since there is enough wind energy off this coast to provide the entire
country with electricity — if the industry is fully developed. [For Wind Turbines, Bigger Equals Greener]
Unfortunately, the United States still lags behind Europe in developing offshore wind farms; in Europe,
such infrastructure has been providing jobs and clean energy since 1991. Although the United States
has a lot of catching up to do, the country's floating offshore wind technology is an encouraging step
forward. The development of floating turbines is exciting, because some of the strongest offshore
winds can be found over deep-water locations. Conventional offshore wind turbines, which use a steel
foundation placed into the seabed, cannot access these sites. Floating offshore wind platforms,
however, could be placed in deep-water areas near Maine, California, Oregon, Hawaii and within the
Great Lakes.
Another big milestone for offshore wind happened in June, when the Bureau of Ocean Energy
Management (BOEM) announced that the nation's first competitive lease sales for offshore wind
development would be scheduled for July, in an area of ocean off of Rhode Island and Massachusetts.
The effort could provide one million homes with emissions-free electricity.
The technology is here, and the demand for clean energy is high, but we will need political support to
truly establish an offshore wind industry in the United States. To that end, Oceana has been working to
create a long-term extension to the Investment Tax Credit (ITC) for offshore wind, which would allow
offshore wind to flourish, and help the country transition away from fossil fuels and harmful offshore
drilling. Unlike offshore oil drilling, offshore wind is clean and will never spill. If the United States truly
wants energy independence, the country must get serious about developing the untapped wealth of
clean, renewable wind energy off its shores.
Offshore wind replaces oil
Larsen, Earth Policy Institute research director, 2010
[Janet, 5-12-10, Mother Earth News, “Why Offshore Wind Energy Is a No-Brainer Compared to Offshore
Oil Drilling,” http://www.motherearthnews.com/renewable-energy/why-offshore-wind-energy-is-a-nobrainer-compared-to-offshore-oil-drilling.aspx#axzz3712G4Lp0, Accessed:, JO]
Fortunately there are alternatives. Much of the U.S. oil consumption of nearly 20 million barrels a day
goes to run vehicles, the same vehicles that get city commuters stuck in traffic for a cumulative 4.2
billion hours a year, costing society some $87 billion, according to the Texas Transportation Institute. To
cut dependence on oil, transportation options can be expanded beyond single-passenger vehicles to
bus rapid transit, light rail, high speed rail, and space for bicycles and pedestrians.
Even though the U.S automobile fleet shrank by four million vehicles last year, cars will not disappear
completely anytime soon. However, the fleet can be cleaned up by marrying the electric and plug-in
hybrid electric vehicles now starting to come to market to renewably produced electricity. The U.S.
Pacific Northwest National Laboratory estimates that the current electrical infrastructure could power
over 80 percent of the U.S. car fleet, relying largely on off-peak electricity as cars are charged at night.
Upgrading to a stronger, smarter, and interconnected national grid that taps into the country’s
enormous wind, solar and geothermal resources completes the transition.
Natural Gas
Natural gas displaces oil as a transportation fuel
Reuters 14
[2/4/14, Reuters, “Global transport sector looks to ride natural gas boom ,”
http://www.reuters.com/article/2014/02/04/gas-transport-idUSL5N0L51QV20140204, Accessed:
7/7/14, JO]
LONDON, Feb 4 (Reuters) - Natural gas has started to challenge oil as the dominant transport fuel with
companies building gas-powered ships and installing networks of service stations on water and land.
The expectation of cheaper gas and tighter environmental regulation have created demand for a
cleaner alternative to the oil-based fuels that have so far dominated the transport world.
Although European and Asian liquefied natural gas (LNG) prices are currently high, trading at almost $20
per million British thermal unit (mmBtu) in Asia and around $10 per mmBtu in Europe because of
booming demand, analysts expect prices to drop substantially later this decade when new production
rises.
Germany, Singapore and the Netherlands are among the countries investing in natural gas transport
hubs while companies including Royal Dutch Shell, Gazprom and Total, are also developing LNG fuel
infrastructure.
Germany is making its first move into LNG for transport after Bomin Linde LNG signed a deal in January
to supply ferry firm AG EMS and it is now building two LNG bunker terminals in Hamburg and
Bremerhaven, due to start operations in 2015.
"Supplying their ferries with LNG makes AG EMS a pioneer in Germany and sends a clear signal that this
low-emission propulsion system has arrived here," said Ruben Benders, managing director at Bomin
Linde LNG.
In the Dutch port of Antwerp, Europe's second largest, the harbour authority says that there are "all
kinds of initiatives" through which the use of LNG as fuel for shipping is encouraged.
At Rotterdam, Europe's biggest port, LNG also plays an increasing role in transport as the Gate LNG
import terminal has begun supplying local river vessels and port tugs, as well as sending it on for use in
the Baltic Sea where LNG is also seeing a pick-up in the marine sector.
In Asia, Singapore has invested in LNG bunkering capacity in anticipation of rising demand from large
ships.
Singapore's motivation to enter the gas for transport sector is driven by the expectation of huge
growth in China, currently still a small user of natural gas, but where new regulation is aimed at
shifting the power generation sector from coal to gas and the transport sector from oil towards more
gas use.
Energy consultancy Wood Mackenzie says global gas demand in the transport sector could grow from
under 5 billion cubic metres (bcm) in 2012 to over 160 bcm by 2030, which would be equivalent to two
years worth of current British gas demand or around 3 million barrels of oil.
"Gas has traditionally played a niche role in global transport but it is now garnering greater attention,"
said Noel Tomnay, head of research at Wood Mackenzie.
"Oil and gas price differentials are now making investment in gas re-fuelling infrastructure worthwhile
and... increased environmental restrictions on emissions are encouraging wider global uptake."
Various new regulations on sulphur emissions in the shipping sector will come into place for much of the
North and Baltic Sea as well as the U.S. and Canada in 2015, which has driven interest in alternative fuels
to diesel.
TRUCKS AND TRAINS
In North America, LNG is also gaining traction on land as a shale gas boom has led to a 50 percent drop
in U.S. gas prices since 2008, making it competitive with oil in the transport sector.
Shell and TravelCenters of America are developing a network of LNG truck fuel stations that will allow
U.S. coast-to-coast LNG-fueled road transport within a few years.
"Gas is cleaner and gas is cheaper - at least for now," said Bruce Carlton, president and chief executive
of the U.S. National Industrial Transportation League, a trade association.
"We are seeing a lot of attention being given to conversions to gas/LNG in the USA... Rail is probably a
bit behind, but very interested in it as well," he said.
Tucker Gilliam of U.S. transport and logistics group Crowley Liner Services, whose firm has ordered
two LNG-powered vessels to operate between the U.S. and Puerto Rico, said LNG for transport would
gain further traction.
"As more is invested in infrastructure to produce and deliver the fuel, there will be greater
opportunities for wider scale adoption," he said. He added that for Crowley, the driving force were
"significant environmental benefits".
Natural gas will be used for transportation—Causes oil independence and exports
Kilcarr, Fleet Owner senior editor, 2012
[Sean, 11-13-12, Fleet Owner, “What an awesome global energy forecast! ,”
http://fleetowner.com/blog/what-awesome-global-energy-forecast, Accessed: 7/7/14, JO]
Now, here’s the second part of this equation: even as the prospect of huge domestic oil reserves makes
itself know, efforts continue apace to expand the infrastructure for natural gas transportation in the
U.S. – the most recent being a deal struck between General Electric (GE) and Clean Energy Fuels.
That deal calls for the acquisition and use of GE’s “MicroLNG” production system, which Clean Energy
will use to make 250,000 gallons of liquefied natural gas (LNG) per day, or about 54 million DGEs
(diesel gallon equivalents) per year with the built-in capability for further expansion. GE said this new
technology will help reduce a fleet operator’s fuel costs by more than 25% compared to diesel fuel,
with the volume of LNG produced with the natural gas production technology from one such plant
capable of supporting 28,000 heavy trucks.
Sure, a lot of truckers will say, “heck, if the U.S. is going to be producing so much oil, why switch my
truck to run on LNG?” The best reason is this: if oil prices – and thus diesel prices – stay high, we can sell
that “black gold” overseas for top dollar while operating our transportation network on cheaper (and
domestically produced) natural gas.
Oil and gas price decoupling is only short term—Prefer long term trends over snapshot
evidence
Ramberg, MIT Center for Energy and Environmental Policy Research Researcher, and
Parsons, MIT Sloan School of Management Senior Lecturer, 2012
[David J. and John E., “The Weak Tie Between Natural Gas and Oil Price,” The Energy Journal,
Volume: 33 Number: 2 , page 34, JO]
This analysis can inform the repeated discussions about how the natural gas price has "decoupled"
from the oil price. First, our documentation of the unaccounted for volatility points out that there are
likely to be many occasions when the prices temporarily break away from the usual relationship to
which they will later return. These decouplings can be severe, but they are also not very long
lasting —less than one season typically—and the old relationship is reestablished. Second, our
documentation that the cointegrating relationship has shifted over time, first in one direction and then
in another, points out that prices can decouple from one relationship only to recouple in a new
relationship. Third, there is not yet any evidence that the relationship between the two price series
has been severed completely. Indeed, it is hard to imagine that natural gas and oil prices could
decouple completely and permanently. For example, while conversion of gas to liquids may seem
expensive now, the technological possibility of conversion does place a cap on the degree to which oil
prices can rise relative to natural gas prices. Other technological and economic constraints act
similarly to prevent a complete decoupling. However, the freedom of motion is large.
The aff ends us oil dependence
Ganos, Forbes writer, 12
[Todd, 1/3/12, Forbes, “Breaking U.S. Dependence on Foreign Oil,”
http://www.forbes.com/sites/toddganos/2012/01/03/breaking-u-s-dependence-on-foreignoil/, accessed 7/7/14, AC]
We’ve heard the beating of the drum time and time again: “We must reduce our dependence on
foreign oil.” It forces us into poor economic, political, diplomatic, and military choices. But, what are
we really doing about it?
In this column, I’ve discussed a widely accepted concept called “peak oil”. It is a logistics model that has
been able to predict the point in time at which the maximum rate of extraction occurs for a specific well,
a field, a region, or the world, after which extraction quickly declines. Under this model, it appears that
peak oil for the world might well occur this decade. While the extraction of oil might decline, energy
consumption certainly won’t. So, energy consumers will turn to different sources.
Given a combination of factors – our nation’s infrastructure, domestic resources, technology, and
environmental impact – it might be that natural gas is the natural choice. Of course, we would want to
ultimately move to zero-emission sources of energy, but we’re not there yet . . . at least our
infrastructure and technology are not there yet.
U.S. crude oil consumption is roughly 7 billion barrels per year, of which approximately 4.5 billion
barrels is imported. Based on data from the U.S. Energy Information Administration, about 24 trillion
cubic feet of natural gas per year would be needed to replace the 4.5 billion barrels per year we
import.
The U.S. currently produces just under this amount each year. With an effective doubling of
consumption of natural gas each year, an expansion of infrastructure would be needed. Such an
expansion might take ten years to implement. But, it would be a shift from energy investment that we
are already paying for outside the United States to energy investment inside the United States. This
would likely have the effect of pulling jobs back into the U.S.
Gas Drilling
Gas drilling ends US dependence on foreign oil
Ganos, Forbes writer, 12
[Todd, 1/3/12, Forbes, “Breaking U.S. Dependence on Foreign Oil,”
http://www.forbes.com/sites/toddganos/2012/01/03/breaking-u-s-dependence-on-foreignoil/, accessed 7/7/14, AC]
We’ve heard the beating of the drum time and time again: “We must reduce our dependence on
foreign oil.” It forces us into poor economic, political, diplomatic, and military choices. But, what are
we really doing about it?
In this column, I’ve discussed a widely accepted concept called “peak oil”. It is a logistics model that has
been able to predict the point in time at which the maximum rate of extraction occurs for a specific well,
a field, a region, or the world, after which extraction quickly declines. Under this model, it appears that
peak oil for the world might well occur this decade. While the extraction of oil might decline, energy
consumption certainly won’t. So, energy consumers will turn to different sources.
Given a combination of factors – our nation’s infrastructure, domestic resources, technology, and
environmental impact – it might be that natural gas is the natural choice. Of course, we would want to
ultimately move to zero-emission sources of energy, but we’re not there yet . . . at least our
infrastructure and technology are not there yet.
U.S. crude oil consumption is roughly 7 billion barrels per year, of which approximately 4.5 billion
barrels is imported. Based on data from the U.S. Energy Information Administration, about 24 trillion
cubic feet of natural gas per year would be needed to replace the 4.5 billion barrels per year we
import.
The U.S. currently produces just under this amount each year. With an effective doubling of
consumption of natural gas each year, an expansion of infrastructure would be needed. Such an
expansion might take ten years to implement. But, it would be a shift from energy investment that we
are already paying for outside the United States to energy investment inside the United States. This
would likely have the effect of pulling jobs back into the U.S.
LOST
LOST ratification massively increases US oil production—ends foreign dependence
Irwin, Breaking Energy Writer, 13
[Conway, 6/30/13, Breaking Energy, “US Lagging on Law of the Sea: What It Stands to Lose,”
http://breakingenergy.com/2013/07/30/us-lagging-on-law-of-the-sea-what-it-stands-to-lose/,
accessed 7/7/14, AC]
The US is the only country with an Arctic coastline that has not yet ratified the Law of the Sea Treaty,
which could put it at a disadvantage in laying claim to what could be substantial resources on its outer
continental shelf.
The Law of the Sea Treaty – or more formally, the United Nations Convention on the Law of the Sea –
establishes navigational rights, territorial limits, economic and legal jurisdiction, and various other basic
regulatory structures for delimiting countries’ rights in seas and oceans.
The treaty is “basically the rules of the road for how to do business, not just in the Arctic, but in other
places, and how you prove out your extended continental shelf claims”, Fran Ulmer, Chair of the
US Arctic Research Commission, told attendees of the USAEE/IAEE North American Conference in
Anchorage, Alaska on July 29. Among other provisions, it establishes a 200-mile exclusive economic
zone, using the limits of a country’s territorial waters as a baseline, that recognizes coastal states’
right to “exploit, develop, manage and conserve all resources”, including oil and gas.
More than 160 countries have ratified the treaty, and it has had broad-based and consistent
support, with proponents including the military, the oil and gas industry, several presidential
administrations and the US Chamber of Commerce, said Ulmer. But a select group of Senators objects to
it on the grounds that it forces the US to cede some of its sovereign rights. “As we know, in the US
Senate, if you can’t avoid a filibuster, the issue doesn’t even get to the floor,” she said.
This may, paradoxically, proscribe the US’ ability to represent its own interests in securing rights to
potentially resource-rich areas. A USGS assessment has estimated undiscovered oil and gas resources
north of the Arctic Circle at nearly 90 billion barrels of oil, more than 1,660 trillion cubic feet of natural
gas and over 44 bln bbl of natural gas liquids.
“The United States is undertaking the science associated with being prepared to prove its claims to
the extended continental shelf, but until the Senate ratifies this treaty, we will not be able to claim
those additional lands,” Ulmer said. “Other nations are moving forward and proving up their claims, and
the US is sitting on the sidelines without having ratified that treaty for really no good reason.”
Russia has been vocal – and demonstrative – about claiming ownership of the resources on its
continental shelf. And Canada has made significant progress on the scientific evaluation, mapping,
charting and submission of its claims. If the US does not ratify the treaty, “we won’t have anybody
sitting there on the adjudication panel deciding all these borders for all these other countries”, Ulmer
said.
Most of the oil and gas resources that have been identified by the USGS would be on the continental
shelves and in the near area likely to be extended through Law of the Sea extensions of continental
shelves,” said Ulmer. “As the countries of the Arctic move forward under the Law of the Sea to expand
their territories, that free-for-all area will shrink dramatically.”
Senator Orrin Hatch penned a piece for the Fox News website that raised numerous objections to the
treaty, singling out a provision that would require payments to a centralized authority for exploitation of
oil and gas or mineral continental shelf resources beyond a 200-nautical mile baseline. Payments, which
would begin in the sixth year of production, would amount to 1% of the volume of production initially,
and never exceed 7%.
But Ulmer argued that if the US fails to sign the treaty – and extend its continental shelf – it will end up
with nothing to tax.
“Is 90% of something better than 0% of nothing? I think so,” she said. “That small taxation provision on
the minerals that could be found on the sea bed beyond the 200-mile limit on our extended continental
shelf to me is such a small thing in comparison to our ability to extend an area of multiple-sized of the
state of Texas, have it be ours and have it be internationally recognized.”
Ratification of LOST ends US oil dependence
Sen. Murkowski, R-AK, Senate Energy and Natural Resources Ranking Member, 9
[Lisa, 1/23/9, Washington Times, “MURKOWSKI: America’s Arctic responsibility,”
http://www.washingtontimes.com/news/2009/jan/23/americas-arctic-responsibility/?page=all,
accessed 7/7/14, AC]
A more accessible Arctic Ocean will require enhanced environmental protection, navigational and
marine safety measures. We must find the balance to allow for reasonable development of the vast
natural resources while maintaining strong protections for the environment.
Maritime activities relating to the transportation of goods, oil and gas, tourism and research will surely
increase as marine access to the Arctic Ocean increases. Marine transportation through an icediminished Arctic has the potential to reduce shipping routes by thousands of miles.
The distance through the Northern Sea Route reduces the Hamburg to Yokahama voyage by almost
5,000 miles. Recognizing there will be increased activity in this area represents perhaps the greatest
challenge and need for international cooperation. This is action that needs to be taken now, not after a
major maritime disaster occurs.
The Arctic, however, isn’t just about responsibility - it offers opportunity as well. America’s Arctic may
hold the key to bringing down the cost of energy in this country and reducing our dependence on
unstable foreign sources of energy. Recently, the U.S. Geological Survey estimated the Alaskan Arctic
might contain more than 30 billion barrels of oil and 221 trillion cubic feet of natural gas in its
undiscovered reserves.
While energy production in the Arctic is vital, we also must not forget about the indigenous people of
the Arctic - the Inuit, Inupiat, Athabaskan, Yupik and Saami. The dramatic changes now occurring may
have a profound impact on their environment and traditional way of life. Preserving their culture,
languages and subsistence lifestyle while Western civilization knocks on their door will be extremely
challenging. That is why they must be involved in the political, legal and scientific decisionmaking to
ensure that their voice, as the residents of the Arctic, will be heard.
When Russia planted a flag on the sea floor beneath the North Pole in 2007, thus seeking to claim
almost half of the Arctic, it sent a resounding message to the rest of the world. While the United States
is working to map our own extended Continental Shelf, we cannot lay claim to our rightful area in the
Arctic until we ratify the Convention on the Law of the Sea. Nor can we dispute other claims, such as
Russia’s or Canada’s, that will likely overlap with ours.
This intense interest in claiming Arctic territory is primarily driven by the quest for Arctic resources.
Until recently, the resources of the Arctic were deemed too difficult and expensive to develop, but the
region is now being explored and developed at an unprecedented rate.
Methane Hydrates
Methane hydrates end global dependence on oil and crash the economies of oilproducing states
Mann, National Academy of Sciences Book Award Winner, 13
[Charles C., 4/24/13, The Atlantic, “What If We Never Run Out of Oil?,”
http://www.theatlantic.com/magazine/archive/2013/05/what-if-we-never-run-out-ofoil/309294/, accessed 7/7/14, AC]
In the 1970s, geologists discovered crystalline natural gas—methane hydrate, in the jargon—beneath
the seafloor. Stored mostly in broad, shallow layers on continental margins, methane hydrate exists in
immense quantities; by some estimates, it is twice as abundant as all other fossil fuels combined.
Despite its plenitude, gas hydrate was long subject to petroleum-industry skepticism. These deposits—
water molecules laced into frigid cages that trap “guest molecules” of natural gas—are strikingly unlike
conventional energy reserves. Ice you can set on fire! Who could take it seriously? But as petroleum
prices soared, undersea-drilling technology improved, and geological surveys accumulated, interest
rose around the world. The U.S. Department of Energy has been funding a methane-hydrate research
program since 1982.
Already the petroleum industry has been convulsed by hydraulic fracturing, or “fracking”—a technique
for shooting water mixed with sand and chemicals into rock, splitting it open, and releasing previously
inaccessible oil, referred to as “tight oil.” Still more important, fracking releases natural gas, which,
when yielded from shale, is known as shale gas. (Petroleum is a grab-bag term for all nonsolid
hydrocarbon resources—oil of various types, natural gas, propane, oil precursors, and so on—that
companies draw from beneath the Earth’s surface. The stuff that catches fire around stove burners is
known by a more precise term, natural gas, referring to methane, a colorless, odorless gas that has the
same chemical makeup no matter what the source—ordinary petroleum wells, shale beds, or methane
hydrate.) Fracking has been attacked as an environmental menace to underground water supplies, and
may eventually be greatly restricted. But it has also unleashed so much petroleum in North America
that the International Energy Agency, a Paris-based consortium of energy-consuming nations, predicted
in November that by 2035, the United States will become “all but self-sufficient in net terms.” If
the Chikyu researchers are successful, methane hydrate could have similar effects in Japan. And not
just in Japan: China, India, Korea, Taiwan, and Norway are looking to unlock these crystal cages, as are
Canada and the United States.
Not everyone thinks JOGMEC will succeed. But methane hydrate is being developed in much the same
methodical way that shale gas was developed before it, except by a bigger, more international group
of researchers. Shale gas, too, was subject to skepticism wide and loud. The egg on naysayers’ faces
suggests that it would be foolish to ignore the prospects for methane hydrate—and more foolish still
not to consider the potential consequences.
If methane hydrate allows much of the world to switch from oil to gas, the conversion would
undermine governments that depend on oil revenues, especially petro-autocracies like Russia, Iran,
Venezuela, Iraq, Kuwait, and Saudi Arabia. Unless oil states are exceptionally well run, a gush of
petroleum revenues can actually weaken their economies by crowding out other business. Worse,
most oil nations are so corrupt that social scientists argue over whether there is an inherent bond—a
“resource curse”—between big petroleum deposits and political malfeasance. It seems safe to say that
few Americans would be upset if a plunge in demand eliminated these countries’ hold over the U.S.
economy. But those same people might not relish the global instability—a belt of financial and political
turmoil from Venezuela to Turkmenistan—that their collapse could well unleash.
SMRs
SMRs end US oil dependence
Argonne National Laboratory 13
[9/9/13, Argonne National Laboratory, “10 Myths about Nuclear Energy,”
http://www.anl.gov/articles/10-myths-about-nuclear-energy, accessed 7/7/14, AC]
Myth # 10: Nuclear energy can't reduce our dependence on foreign oil.
Truth: Nuclear-generated electricity powers electric trains and subway cars as well as autos today. It
has also been used in propelling ships for more than 50 years. That use can be increased since it has
been restricted by unofficial policy to military vessels and ice breakers. In the near-term, nuclear power
can provide electricity for expanded mass-transit and plug-in hybrid cars. Small modular reactors can
provide power to islands like Hawaii, Puerto Rico, Nantucket and Guam that currently run their
electrical grids on imported oil. In the longer-term, nuclear power can directly reduce our
dependence on foreign oil by producing hydrogen for use in fuel cells and synthetic liquid fuels.
OSEA
A regulatory framework for exploration leads to massive US oil development and ends
oil dependence
Dennis, University of Illinois News Assistant Director, 10
[Jan, 5/21/10, University of Illinois News, “Oil spill should spark safety measures, not curb drilling, expert
says,” http://news.illinois.edu/news/10/0521oilspill.html, accessed 7/7/14, AC]
CHAMPAIGN, Ill. – A massive oil spill in the Gulf of Mexico should fuel a renewed push for safety, not
less offshore drilling, according to a University of Illinois expert who wrote a six-volume book series
on marine pollution.
Backing away from ocean exploration would heighten U.S. dependence on foreign oil and its lingering
threat to national security, says John Warren Kindt, a professor of business and legal policy.
“We should ‘drill, baby, drill’ – but safely, baby, safely,” said Kindt, the author of “Marine Pollution and
the Law of the Sea,” which examines protecting the world’s oceans while encouraging development of
essential resources.
He says a BP well still gushing untold barrels of crude into the gulf is a wakeup call for oil companies that
put profits over safety and federal regulators that shortchanged damage control – both lulled into a
sense of false security by years of drilling with no major accidents.
As Congress investigates the worst offshore drilling disaster in three decades, Kindt says the aftermath
should bring mandatory backup systems to contain spills quickly and more rigid government safety and
inspection standards.
“Accidents will happen, so we need more than just a backup system,” he said. “We need to have
multiple backup systems because when there is an accident like this one, it can be catastrophic.”
Kindt says history shows environmental disasters can be a springboard for improved safety. Doublehulled ships were mandated to minimize tanker spills after the Exxon Valdez ran aground on an Alaskan
reef in 1989, dumping 250,000 barrels of oil into Price William Sound.
The BP spill has renewed cries from environmentalists to halt offshore drilling, a move that Kindt says
would be counterproductive to the nation’s drive toward energy independence.
Offshore oil reserves offer short-term relief as the U.S. seeks long-range solutions such as electric cars,
biofuels and other alternative energy sources, said Kindt, whose collection on marine pollution was first
published in 1985 and grew to six volumes with its last update in 2007.
“I’m an environmentalist, but I’m also a realist,” he said. “Realistically, this country needs energy. So
we need to utilize all of our energy resources, including offshore wells, but do it safely.”
Kindt also cautions against a proposal spawned by the BP disaster that would increase oil companies’
liability cap to cover damages from spills from $75 million to $10 billion.
“A $10 billion cap wouldn’t just make companies think twice about drilling, it would make them consider
whether they’re going to drill at all,” he said. “And that would be bad for the country as we seek to end
a love affair with foreign oil that threatens our national security.”
Kindt says a renewed push for safety can maintain the delicate balance between environmental
concerns and the need to harvest resources from the world’s oceans.
“If we err, we need to err on the side of safety,” he said. “That will mean steeper upfront costs for oil
companies, but it would work in their favor in the long run because their costs are far higher if there is a
disaster.”
Port Dredging
Port dredging leads to US LNG exports
Eaton, Houston Chronicle Energy Expert, 12
[Collin, 5/29/12, Houston Business Journal, “Economists differ on Panama Canal expansion's impact
” http://www.bizjournals.com/houston/blog/money-makers/2012/05/economists-differ-onpanama-canal.html, accessed 7/7/14, AC]
Economists at a recent forum disagreed about the potential impact of the Panama Canal expansion set
for 2014, arguing in turns that it could greatly boost energy trade or that it needs to improve its depth
and width before it can attract new traffic.
Last week, I covered an economic panel and watched as three economists discussed Houston’s
economic future. The canal expansion was just one piece of the discussion, and it wasn’t the only point
of contention.
Michael Economides, a professor of chemical and biomolecular engineering at the University of
Houston, told an audience of about 100 that the Panama Canal expansion would be a defining moment
for the U.S.’s energy sector, especially in its competition with Russia and China.
“The reason for that is LNG, liquid natural gas,” Economides said. “The Panama Canal expansion will
allow for super tankers to be able to traverse (the canal). We would be exporting energy from the U.S.
Some of it's going to go east to Europe, primarily.”
Patrick Jankowski, regional economist at the Greater Houston Partnership, said the expansion will boost
trade, but it won’t necessarily be a game-changer.
“The Panama Canal expansion is not being built to handle a bottleneck — it’s being built to handle larger
ships,” Jankowski said. “We will see additional traffic, but the Port needs to make some improvements
in deepening and widening. The Port has said it will need up to $3 billion in improvements over the
next 15 years to handle that, some of it just for maintenance dredging.”
Jankowski said the Port needs a sizable investment to see a substantial increase in trade.
That ends us oil dependence
Ganos, Forbes writer, 12
[Todd, 1/3/12, Forbes, “Breaking U.S. Dependence on Foreign Oil,”
http://www.forbes.com/sites/toddganos/2012/01/03/breaking-u-s-dependence-on-foreignoil/, accessed 7/7/14, AC]
We’ve heard the beating of the drum time and time again: “We must reduce our dependence on
foreign oil.” It forces us into poor economic, political, diplomatic, and military choices. But, what are
we really doing about it?
In this column, I’ve discussed a widely accepted concept called “peak oil”. It is a logistics model that has
been able to predict the point in time at which the maximum rate of extraction occurs for a specific well,
a field, a region, or the world, after which extraction quickly declines. Under this model, it appears that
peak oil for the world might well occur this decade. While the extraction of oil might decline, energy
consumption certainly won’t. So, energy consumers will turn to different sources.
Given a combination of factors – our nation’s infrastructure, domestic resources, technology, and
environmental impact – it might be that natural gas is the natural choice. Of course, we would want to
ultimately move to zero-emission sources of energy, but we’re not there yet . . . at least our
infrastructure and technology are not there yet.
U.S. crude oil consumption is roughly 7 billion barrels per year, of which approximately 4.5 billion
barrels is imported. Based on data from the U.S. Energy Information Administration, about 24 trillion
cubic feet of natural gas per year would be needed to replace the 4.5 billion barrels per year we
import.
The U.S. currently produces just under this amount each year. With an effective doubling of
consumption of natural gas each year, an expansion of infrastructure would be needed. Such an
expansion might take ten years to implement. But, it would be a shift from energy investment that we
are already paying for outside the United States to energy investment inside the United States. This
would likely have the effect of pulling jobs back into the U.S.
Algae
Algae energy development ends oil dependence
Haag, Popular Mechanics Writer, 7
[Amanda Leigh, 3/29/7, Popular Mechanics, “Pond-Powered Biofuels: Turning Algae into America's New
Energy,” http://www.popularmechanics.com/science/energy/biofuel/4213775, accessed
7/7/14, AC]
Given the right conditions, algae can double its volume overnight. Unlike other biofuel feedstocks, such
as soy or corn, it can be harvested day after day. Up to 50 percent of an alga’s body weight is comprised
of oil, whereas oil-palm trees—currently the largest producer of oil to make biofuels—yield just about
20 percent of their weight in oil. Across the board, yields are already impressive: Soy produces some 50
gallons of oil per acre per year; canola, 150 gallons; and palm, 650 gallons. But algae is expected to
produce 10,000 gallons per acre per year, and eventually even more.
“If we were to replace all of the diesel that we use in the United States" with an algae derivative, says
Solix CEO Douglas Henston, "we could do it on an area of land that’s about one-half of 1 percent of the
current farm land that we use now."
Solix plans to complete its second prototype by the end of April and to begin building a pilot plant this
fall. That plant will take advantage of CO2 generated from the fermentation and boiler processes of
New Belgium Brewery, also in Fort Collins. The company’s initial target is to be competitive with
biodiesel, which historically sells for about $2 per gallon, wholesale. They believe they can reach this
goal within a few years, and are ultimately aiming to compete with petroleum.
John Sheehan, an energy analyst with the National Renewable Energy Laboratory (NREL) in Golden,
Colo., believes these goals are within reach. “There is no other resource that comes even close in
magnitude to the potential for making oil,” says Sheehan, who worked in the lab’s algae program
before it was shut down by the Department of Energy. One of algae’s great strengths, Sheehan adds, is
its ability to grow well in brackish water. In the desert southwest, where much of the groundwater is
saline and unsuitable for other forms of agriculture, algae can proliferate.
GreenFuel Technologies Corp., based in Cambridge, Mass., is focused on cultivating algae that can
produce high yields of both biodiesel and ethanol. There are more than 100,000 strains of algae, with
differing ratios of three main types of molecule: oils, carbohydrates and protein. Strains of algae high in
carbohydrates as well as oils produce starches that can be separated and fermented into ethanol; the
remaining proteins can be turned into animal grains. GreenFuel hopes its pilot plant will see initial yields
of 8000 gallons of biodiesel and 5000 gallons of ethanol per acre of algae.
The main focus now, says Cary Bullock, GreenFuel’s president and CEO, is figuring out “how to grow
algae fast enough and cheap enough that it makes sense economically. That’s not easy to do.”
With the science well in hand, the degree to which algae-based biofuels can replace petroleum—or
the limited acreage of traditional feedstocks—rests upon that bottom line. Once the technology hits the
ground, will a commercial-scale facility be on par with petroleum? Says Bullock: “You don’t know until
you’ve actually built the thing.”
Nuclear power
Nuclear power drastically reduces oil dependence
Adams, USS Von Steuben former engineer officer, 2013
[Rod, 12-10-13, ANS Nuclear Cafe, “Do oil and gas suppliers worry about nuclear energy development?,”
http://ansnuclearcafe.org/2013/12/10/do-oil-and-gas-suppliers-worry-about-nuclear/, Accessed:
7/9/14, JO]
Carol Browner, who served as the Environmental Protection Agency administrator in a Democratic
administration, insisted that nuclear energy has an important role to play in reducing fossil fuel
dependence and reducing CO2 emissions.
Those examples show that the most receptive audiences for the nuclear energy alternative are people
who buy a lot of fuel without selling any, and people who are deeply concerned about air pollution and
climate change. The former understand that having additional supplies of reliable power will mean more
competition to provide more stable and lower prices. The latter group knows that we cannot continue
to dump CO2 into the atmosphere at an ever-increasing rate without unexpected consequences.
It’s time to get more aggressive in nuclear energy marketing. The uranium industry should teach people
how heat is fungible in order to excite its potential supporters and capture attention from energy
pundits.
Nuclear fission heat has already reduced the world’s dependence on oil; there is plenty of remaining
opportunity. Nuclear energy pushed oil out of the electricity market in most of the developed world.
Fission has replaced oil combustion in larger ships, but most others still burn oil. Nuclear-generated
electricity has replaced oil burned for locomotives, city trolleys, and space heat, but there is room for
substantial growth in these markets. Uranium producers should be influential members in the
coalitions that are working to electrify transportation systems. Fission heat, especially with higher
temperature reactors, can replace oil heat in industrial processes, including those well-proven
processes that can turn coal, natural gas, and biomass into liquid fuels.
Fission can also reduce oil use by pushing gas out of the power generation business, thus freeing up
more natural gas for other uses. As the gas promoters love to point out, methane is a flexible and clean
burning fuel. It is important to remind their customers that fuel burned in power plants is not available
for any other use.
Nuclear Saudi Flood Link Magnifier
OPEC fears nuclear power more than anything else
Adams, USS Von Steuben former engineer officer, 2013
[Rod, 12-10-13, ANS Nuclear Cafe, “Do oil and gas suppliers worry about nuclear energy development?,”
http://ansnuclearcafe.org/2013/12/10/do-oil-and-gas-suppliers-worry-about-nuclear/, Accessed:
7/9/14, JO]
The world oil market is not a free market. Prices are manipulated by a small number of producers that
adjust production rates to achieve desired prices that are high enough to provide maximum profits,
without being high enough to encourage customers to aggressively pursue alternative energy sources.
That is the most important take away for attendees at the OPEC Embargo +40 summit held in
Washington DC on October 16. Unfortunately, the meeting sponsors avoided acknowledging that
nuclear energy is the alternative energy source that most worries established hydrocarbon suppliers .
Nuclear has held that position since the early 1960s, when General Electric first won a head-to-head
competition against coal to sell the Oyster Creek nuclear power plant.
Nuclear energy is reliable, virtually emission-free, and uses a widely distributed, abundant fuel source
that is no longer subject to influence by the same producers that manipulate other fuel prices. Its
cheap, clean heat can help turn coal, natural gas, and plants (vegetation) into liquid fuels that can be
drop-in replacements for petroleum-based fuels.
US key to global
U.S. production shapes global oil prices—Predictive evidence
Beschloss, Desert Sun economist, 6/17/14
[Morris, The Desert Sun, “US Shale Oil Boom Calms Global Oil Prices, Retains Availability ,”
http://www.desertsun.com/story/money/industries/morrisbeschlosseconomics/2014/06/17/us-shaleoil-boom-calms-global-oil-prices-retains-availability/10694881/, Accessed: 7/5/14, JO]
While China continues to represent the pivot point for the up/down direction of oil pricing, as the
world’s largest user, Beijing’s economic direction will magnify the price movements forthcoming in this
year’s second half. U.S. demand, which is hanging in at around 19 million barrels per day has already
closed the import gap to 25% of its total consumption from 60% as late as 2005. Although there are
divergent schools of thought regarding the direction of oil pricing in the next few years, there is
unanimity that the balance of pricing power has shifted from the turbulent Middle East, North Africa
and Russia to how quickly and voluminously the U.S. oil production capability and refining potential
can be brought to market.
With U.S. stockpiles mounting in the intermediate timeframe, a near-term price drop, especially in light
of a Southeast Asian demand cut, could find U.S. central inventories in a temporary overstock mode.
This could even become more severe if Iran and Iraq, containing the second and third largest global oil
reserves resolve the geopolitical pressures that have reduced their exports.
However, a realistic longer term outlook, which envisions a worldwide demand growing from current
90 million barrels per day now, to 120 million BPD within the next decade, would indicate global prices
sharply on the upside, with the U.S. and Canada’s maximum output becoming the global center of
gravity in the oil world.
a/t: U.S. Can’t export
Restrictions on U.S. crude exports are being loosened, and will eventually be removed
Walsh, TIME magazine senior writer, 6/26/14
[Bryan, Time Magazine, “U.S. Oil Could Rescue Iraq,” http://time.com/2927922/iraq-oil-usexports/, Accessed: 7/5/14, JO]
In the years to come, the U.S. could play an even bigger role. As the Wall Street Journal and Reuters
reported earlier this week, the Obama Administration has begun taking steps towards allowing U.S.
crude exports. If that wording sounds confusing, well, it is. What seems to be happening is that the U.S.
Commerce Department will allow a pair of oil companies to begin exporting what is known as ultralight condensate to international markets, with only minimal refining. ( The U.S. has long allowed
exports of refined oil products. ) That doesn’t mean U.S. oil companies can begin exporting all the
crude they want; in fact, both Commerce and the White House, reflecting the political sensitivities
around allowing domestic exports at a time when gasoline costs an average of $3.68 a gallon, have
insisted that there has been “no change in policy on crude oil exports.”
But with domestic oil production approaching the capacity of U.S. refineries —and the oil industry
putting all its considerable pressure on the government—it seems likely that U.S. oil will eventually
be sold abroad. What effect that will have domestically is uncertain. A recent report by Goldman Sachs
found that the ban on exports was a net economic positive for the U.S., at least until domestic
refineries could no longer handle growing production of oil. But it seems clear that lifting or at least
modifying the ban would likely lead to more production, as oil companies wouldn’t have to worry
about their product being landlocked in the U.S. A report by the research firm IHS found that lifting the
ban would lead to more than $700 billion in additional investment in oil extraction between 2016 and
2030, and would increase oil production by an average of 1.2 million barrels a day. And given that global
crude demand is expected to rise by about that much over the next several years, that oil could be very
useful indeed—especially if today’s fighting in Iraq is only the beginning.
***High Oil Prices Good***
2nc Russia economy internal
Drop in oil collapses Russia’s economy – huge dependence
Schuman, TIME writer, 12
[Michael, 6-05-12, TIME, “Why Vladimir Putin Needs Higher Oil Prices”,
http://business.time.com/2012/07/05/why-vladimir-putin-needs-higher-oil-prices/, 7-9-14, AAZ]
But Vladimir Putin is not one of them. The economy that the Russian President has built not only runs
on oil, but runs on oil priced extremely high. Falling oil prices means rising problems for Russia – both
for the strength of its economic performance, and possibly, the strength of Putin himself.
Despite the fact that Russia has been labeled one of the world’s most promising emerging markets,
often mentioned in the same breath as China and India, the Russian economy is actually quite different
from the others. While India gains growth benefits from an expanding population, Russia, like much of
Europe, is aging; while economists fret over China’s excessive dependence on investment, Russia
badly needs more of it. Most of all, Russia is little more than an oil state in disguise. The country is
the largest producer of oil in the world (yes, bigger even than Saudi Arabia), and Russia’s dependence
on crude has been increasing. About a decade ago, oil and gas accounted for less than half of Russia’s
exports; in recent years, that share has risen to two-thirds. Most of all, oil provides more than half of
the federal government’s revenues.
What’s more, the economic model Putin has designed in Russia relies heavily not just on oil, but high
oil prices . Oil lubricates the Russian economy by making possible the increases in government
largesse that have fueled Russian consumption. Budget spending reached 23.6% of GDP in the first
quarter of 2012, up from 15.2% four years earlier. What that means is Putin requires a higher oil price
to meet his spending requirements today than he did just a few years ago.
Research firm Capital Economics figures that the government budget balanced at an oil price of $55 a
barrel in 2008, but that now it balances at close to $120. Oil prices today have fallen far below that, with
Brent near $100 and U.S. crude less than $90. The farther oil prices fall, the more pressure is placed
on Putin’s budge t, and the harder it is for him to keep spreading oil wealth to the greater population
through the government. With a large swath of the populace angered by his re-election to the nation’s
presidency in March, and protests erupting on the streets of Moscow, Putin can ill-afford a significant
blow to the economy, or his ability to use government resources to firm up his popularity.
Russia economy is dictated by oil prices – there’s no stopping collapse if oil prices drop
Inozemtsev, Moscow Times writer, 14
[Vladislav, 6-24-14, Moscow Times, “Why Economic Growth Doesn't Matter in Russia”,
http://www.themoscowtimes.com/opinion/article/why-economic-growth-doesnt-matter-inrussia/502465.html, 7-12-14, AAZ]
Many politicians sincerely believe that Russia's economy has virtually stopped growing, in light of
current tensions between the West and Russia resulting from Russia's annexation of Crimea and the
economic sanctions that followed.
They also believe that Russia's economy may face additional challenges due to new restrictions
imposed — and that this will reduce the government's credibility and so create problems for President
Vladimir Putin.
For better or for worse, nothing like this will happen . Russia today is a unique place where the rate of
economic growth changes neither the behavior of elites nor the loyalty of the population. Upon a
closer look, it is easy to realize why — but to do this one must forget how economies are supposed to
work.
First, Russia is not an industrial, but rather a resource economy. The well-being of its citizens depends
primarily on just one sector of the economy. Export duties on oil and gas, as well as federal mining tax
contribute 49.4 percent of federal budget's revenues — although crude oil and natural gas production
has not increased since the mid-2000s. In 2013 only 8 percent more oil was pumped in Russia than in
2006, and 1 percent less of gas.
Both the political situation's stability and the level of popular support for the government depend not
on growth in the real sector but from the dynamics of personal incomes — and these hang not so much
on development but on oil and gas.
In the crisis years of 2008 and 2009, for instance, real disposable incomes adjusted for inflation fell by
2.7 percent in the U.S. while in Russia, where the drop in GDP was the most significant among Group of
20 nations, they increased by 5.4 percent.
Of course, a fiscal policy driven by oil and gas kills businesses and entrepreneurial spirit, but why should
the government fix this if everyone is happily spending money?
Second, Russian officials at different levels are at the same time businessmen, and if not, then they get a
significant portion of their income from bribes. In a period of economic growth they become richer due
to the expansion of their enterprises or by imposing a "corruption tax"on successful businesses.
But economic crises are even better for corrupt officials. In the event of crisis they are able to pocket
even more while distributing state aid and subsidies; moreover, during such periods they are able to
purchase impaired assets. Up to 45 percent of purchases of expensive real estate in Moscow in 2009
were made by government officials and members of their families.
In addition, even if officials know that mismanagement is rarely a cause for dismissal, they may be sure
that crises allow them to write off even the most egregious "mistakes." Therefore Russian bureaucracy
sees nothing bad in a new crisis.
Third, unemployment, which in the U.S. and Europe is considered almost an integral indicator of a
government's effectiveness, is not recognized as a big issue in Russia, partly because there is no
information available on it. Deputy Prime Minister Olga Golodets recently admitted that the government
did not fully understand where 38.2 million people, or 44 percent of the active labor force, actually
worked. Therefore Western governments of rising unemployment does not disturb anyone in Russia.
Hence, no one cares also about the growth in the real sector of the economy, which could absorb the
excess labor.
Fourth, both the authorities and the public have interpreted every serious crisis in the world's major
economies in the last 30 years as the result of foreign influences, not as a result of domestic policy.
The financial crash in Mexico in 1994, Asia's troubles of 1997, Russia's default of 1998 and Argentina's of
2001, the "dot com" crash in 2000, as well as the financial cataclysm in the U.S. and Europe in 2008 — all
of them were attributed to external causes.
Russian authorities in recent years have been so successful in convincing its citizens that all evil comes
from the outside that they may have become convinced of it themselves. The president has often
explained economic difficulties as U.S. and Europe's fault, in particular the crisis of 1998, which is
depicted as the result of Western advisers' manipulations.
Some even attribute the collapse of the U.S.S.R. to a joint conspiracy by the U.S. and Saudi Arabia to
push down oil prices. In this mind set, a slump in growth confirms not the Russian elites lack of
professionalism but the power of Russia's enemies.
Today's Russia is not a normal country. A significant portion of people who can adequately assess the
situation either left the country or are leaving it right now. Many entrepreneurs sold their businesses to
bureaucrats and pulled money out of the country, realizing the futility of their labors.
But as long as energy resources can be exported and the prices for them are high, the Russian
government does not need to worry about the economy . Special budget reserves exceed $175 billion;
the public debt is less than 2.8 percent of GDP, the budget still runs a small surplus, and even if it dips
into red it may easily be balanced by a soft devaluation of the ruble since the export duties on oil and
gas are denominated in dollars.
High prices are massive chunk of Russia’s revenue
Bremner, Bloomberg News, 13
[Brian, 8-29-13, Business Week, “Why Is Vladimir Putin Acting So Crazy?”,
http://www.businessweek.com/articles/2013-08-29/can-vladimir-putin-survive-americas-energy-boom,
accessed 7-13-14, AAZ]
Russia is still the world’s biggest overall energy exporter: It’s the No. 1 oil producer and No. 2
in gas after the U.S. However, the country’s known oil reserves—primarily between the Ural
Mountains and the Central Siberian Plateau—are enough to sustain current production levels
for just 20 years, according to a study in December by the European Bank for Reconstruction
and Development (EBRD), vs. 70 years for Saudi Arabia and 90 years for the United Arab
Emirates. Untapped oil and gas reserves in eastern Siberia and the Arctic will take massive
investments to explore. ¶ Putin’s aware of the problem. “For many years we have had a
situation when prices for our main export goods rose fast and almost without interruption,
and this made it possible for Russian companies and for the government to cover high
expenses,” he told global executives at the St. Petersburg International Economic Forum on
June 21. “But this situation has changed now. There are no simple solutions and no magic
wand we can wave to change things overnight.Ӧ That may be true, but the country has little
time to waste. Many Russians, and in particular members of the president’s inner circle, have
benefited hugely from the country’s energy-export windfall. Now that foundation is slipping
away. The question is whether Putin’s power will, too.¶ When he took over at the start of the
last decade (he served as president from 2000 to 2008 and premier for four years after that),
the global economy was in the early stages of a commodities supercycle. Accelerating global
demand, led by a China growing at about 10 percent annually, coincided with rising prices for
oil, gas, copper, coal, and other natural resources. Political instability in Venezuela, the start of
the Second Gulf War, and Hurricane Katrina all constrained supply and refining capacity,
sending energy markets into overdrive.¶ Through 2008, Putin oversaw an average of 7 percent
growth in gross domestic product and a huge expansion in Russia’s middle class. At its 2007
annual meeting, Gazprom, the world’s largest gas producer, served red and black caviar.
Management Committee Chairman Alexey Miller said the company, whose market value at the
time was $360 billion, would someday be worth $1 trillion.¶ Russia’s phenomenal run of
prosperity would have been an ideal time to diversify the economy beyond energy, a goal
that harks back to the days of Soviet leader Leonid Brezhnev. Instead, energy’s share of the
economy actually increased; as of late 2012, oil and gas accounted for about 70 percent of
exports, compared with less than 50 percent in the mid-1990s, providing half of the
government’s revenue and roughly 17 percent of GDP, according to the EBRD. Gazprom alone
represents 14 percent of the Russian stock market’s total capitalization. “It has been an issue
since the late 1970s and early 1980s, and it has gotten worse,” says Alexei Kokin, an energy
analyst with UralSib Financial. “I don’t see that changing.”
2nc ultranationalism scenario
Drop in oil prices causes Russian ultranationalism
Matthews and Nemtsova, Newsweek Russia Correspondents, 14
[Owen and Anna, 5/27/14, Newsweek, “Why the Kremlin Aids the Rise of Russia’s Far-Right
Hate Groups,” http://www.newsweek.com/why-kremlin-aids-rise-russias-far-right-hate-groups67127, accessed 7/12/14, AC]
As Norway's tragedy showed, paranoid and violent minds can lurk in the calmest, most prosperous
countries. But the cancer of ultranationalism has found a particularly fertile breeding ground in the
frustrations and resentments of young Russians. Belov claims to have predicted his country's future as
far back as August 1991. Manezh Square, in the shadow of the Kremlin, was thronged with Russians
celebrating the sudden collapse of Soviet communism; to most, the evening marked the birth of
Russian democracy. But Belov, who was there with a friend, distributing pamphlets for the antiSemitic Pamyat organization, says he saw something else. "We knew that these liberals would fail,"
he says. "And that their failure would fuel our rise--the rise of the right."
Twenty years later, at least half of that apocalyptic vision has come true. Russia's liberals have indeed
failed; Russia is now ruled by an authoritarian clique of former KGB men. And Belov may also have
accurately foreseen the triumph of the far right. On the surface, a decade of high oil prices has
brought ordinary Russians rising living standards and a semblance of political stability. But even the
Kremlin's closest allies fear that when oil prices eventually fall and the tide of easy money recedes,
the ugly reality of an angry, fascist Russia could be revealed.
Russian ultranationalism leads to nuclear war
Israelyan, former Soviet Ambassador, 98
[Victor, Winter 1998, “Russia at the crossroads: Don't tease a wounded bear,” Washington Quarterly,
21:1, p.47, EBSCO, AC]
The first and by far most dangerous possibility is what I call the power scenario. Supporters of this
option would, in the name of a "united and undivided Russia," radically change domestic and foreign
policies. Many would seek to revive a dictatorship and take urgent military steps to mobilize the
people against the outside "enemy." Such steps would include Russia's denunciation of the
commitment to no-first-use of nuclear weapons; suspension of the Strategic Arms Reduction Treaty
(START) I and refusal to ratify both START II and the Chemical Weapons Convention; denunciation of the
Biological Weapons Convention; and reinstatement of a full-scale armed force, including the
acquisition of additional intercontinental ballistic missiles with multiple warheads, as well as mediumand short-range missiles such as the SS-20. Some of these measures will demand substantial financing,
whereas others, such as the denunciation and refusal to ratify arms control treaties, would, according to
proponents, save money by alleviating the obligations of those agreements.
In this scenario, Russia's military planners would shift Western countries from the category of
strategic partners to the category of countries representing a threat to national security. This will
revive the strategy of nuclear deterrence--and indeed, realizing its unfavorable odds against the
expanded NATO, Russia will place new emphasis on the first-use of nuclear weapons, a trend that is
underway already.
The power scenario envisages a hard-line policy toward the CIS countries, and in such circumstances
the problem of the Russian diaspora in those countries would be greatly magnified. Moscow would use
all the means at its disposal, including economic sanctions and political ultimatums, to ensure the
rights of ethnic Russians in CIS countries as well as to have an influence on other issues. Of those
means, even the use of direct military force in places like the Baltics cannot be ruled out.
Some will object that this scenario is implausible because no potential dictator exists in Russia who
could carry out this strategy. I am not so sure. Some Duma members--such as Victor Antipov, Sergei
Baburin, Vladimir Zhirinovsky, and Albert Makashov, who are leading politicians in ultranationalistic
parties and fractions in the parliament--are ready to follow this path to save a "united Russia."
Baburin's "Anti-NATO" deputy group boasts a membership of more than 240 Duma members. One
cannot help but remember that when Weimar Germany was isolated, exhausted, and humiliated as a
result of World War I and the Versailles Treaty, Adolf Hitler took it upon himself to "save" his country.
It took the former corporal only a few years to plunge the world into a second world war that cost
humanity more than 50 million lives.
I do not believe that Russia has the economic strength to implement such a scenario successfully, but
then again, Germany's economic situation in the 1920s was hardly that strong either. Thus, I am afraid
that economics will not deter the power scenario's would-be authors from attempting it. Baburin, for
example, warned that any political leader who would "dare to encroach upon Russia" would be
decisively repulsed by the Russian Federation "by all measures on heaven and earth up to the use of
nuclear weapons."(n10) In autumn 1996 Oleg Grynevsky, Russian ambassador to Sweden and former
Soviet arms control negotiator, while saying that NATO expansion increases the risk of nuclear war,
reminded his Western listeners that Russia has enough missiles to destroy both the United States and
Europe.(n11) Former Russian minister of defense Igor Rodionov warned several times that Russia's
vast nuclear arsenal could become uncontrollable. In this context, one should keep in mind that,
despite dramatically reduced nuclear arsenals--and tensions--Russia and the United States remain
poised to launch their missiles in minutes. I cannot but agree with Anatol Lieven, who wrote, "It may
be, therefore, that with all the new Russian order's many problems and weaknesses, it will for a long
time be able to stumble on, until we all fall down together."(n12)
Exts – low prices cause ultranationalism
Drop in oil prices leads to expansion of violent Russian ultranationalism
Seddon, Associated Press, 12
[Max, 4/4/12, Associated Press, “Russian nationalists protest Putin in Moscow march,”
http://www.washingtontimes.com/news/2012/nov/4/thousands-nationalists-marchmoscow/?page=all, accessed 7/12/14, AC]
Nonetheless, Russian nationalism’s future may lie with its crude rank and file rather than leaders who
pepper their conversations with literary quotations and historical references, Sova’s Natalia Yudina said.
“They’re not good at speaking to the young, shaven-headed activists,” she said. “If you try to ban Nazi
salutes and racist chants, you’re never going to be popular with this crowd.”
Although Sunday’s organizers said most participants in the march were ordinary people, skinheads with
covered faces and neo-Nazis were highly visible. When a regional nationalist activist gave several
fascist salutes, Mr. Belov rushed onstage and awkwardly hugged her to stop her from raising her right
arm.
Though no violence was reported at the Moscow march, at least 100 people were involved in a brawl in
a subway station between nationalist and anti-fascist activists shortly after it ended, the Interfax news
agency reported. Police also detained 25 men wearing overcoats emblazoned with swastikas.
About 200 people were arrested for participating in unsanctioned Russian Marches in St. Petersburg,
Nizhny Novgorod, Yekaterinburg and Kazan.
The rise in nationalist sentiment since the 2008 financial crisis should gather pace if economic
conditions worsen in Russia, which relies heavily on oil and gas revenue, said Nikolai Petrov, an
analyst at the Carnegie Endowment for International Peace.
“This is the tip of the iceberg,” he added. “The Kremlin is worried that nationalist sentiment will
become uncontrollable.”
2nc expansionism scenario
Oil revenue declines cause Russian expansionism
Molfetas, Global Policy Journal Associate, 14
[Martha, 4/19/14, Global Policy Journal, “Eye on the Prize - Russian Expansionism and Energy
Dependency,” http://www.globalpolicyjournal.com/blog/19/03/2014/eye-prize-russian-
expansionism-and-energy-dependency, accessed 7/12/14, AC]
In the decades since Gorbachev, Russia has become increasingly dependent on energy revenues and
increasingly authoritarian. Suppressing the rights of political groups, journalists, and minority groups.
An increased level of authoritarianism is closely aligned to resource dependency and poor social
investment. This phenomenon is known as the resource curse. Resource curse drives imperialistic
ambitions for more resource wealth while inciting conflicts and increasing draconian governance.
Considering this Russian reality that is pivotal to state survival, Crimea represents a huge windfall for
resource security.
In the last year, 16% of gas consumed by Europe passed through Ukraine. Thirty per cent of all gas
transported through Ukraine originated in Russia. In 2009, Russia cut off gas to Ukraine in an effort to
push political agendas. These cut offs impacted energy stability throughout Europe and prompted
efforts to diversify European energy. In light of recent events, German energy firms are devising
strategies for energy re-routing to Kiev to support Ukraine’s energy needs in the event of future gas shut
offs. Russia currently supplies Ukraine with 50% of their energy demand, and Germany with 35% of their
energy. There is no debate about the importance of Russian gas for Europe. While there have been
advancements in renewable energy systems like solar and wind, natural gas still plays a large role
for European energy consumers.
The Crimea issue may be of more importance today than if the same events occurred 50 years ago.
The world is in a post-peak reality where harder to harness hydrocarbon reserves are being tapped into
at growing rates, and sweeter or conventional hydrocarbon wells are running dry. Crimea offers Russia
an opportunity to increase potential reserves of oil and gas while protecting vital pipelines into
Europe. Unrest in Ukraine and a Russo-ethnic majority in Crimea offered an opportunity for expansion
and to increase potential energy reserves. Without energy, Russia will cease to exist as a state. And
with energy, Russia will continue to lack a diversified economy, continue on it’s authoritarian track, and
will continue to be a wild-card in global and regional politics and security. With the potential that
Crimea may fall into Russia’s hands, the international community needs to reflect on how we should
cope with states affected by resource curse in a world currently running on empty
Russian expansionism causes nuclear war
Blank, US Army War College Strategic Studies Institute Senior Fellow, 9
[Stephen J., March 2009, “Russia And Arms Control: Are There Opportunities For The Obama
Administration?” http://www.strategicstudiesinstitute.army.mil/pdffiles/pub908.pdf, accessed June 30,
2014, AC]
Proliferators or nuclear states like China and Russia can then deter regional or intercontinental
attacks either by denial or by threat of retaliation.168 Given a multipolar world structure with little
ideological rivalry among major powers, it is unlikely that they will go to war with each other.
Rather, like Russia, they will strive for exclusive hegemony in their own “sphere of influence” and
use nuclear instruments towards that end. However, wars may well break out between major
powers and weaker “peripheral” states or between peripheral and semiperipheral states given their
lack of domestic legitimacy, the absence of the means of crisis prevention, the visible absence of
crisis management mechanisms, and their strategic calculation that asymmetric wars might give
them the victory or respite they need.169
Simultaneously, The states of periphery and semiperiphery have far more opportunities for political
maneuvering. Since war remains a political option, these states may find it convenient to exercise
their military power as a means for achieving political objectives. Thus international crises may
increase in number. This has two important implications for the use of WMD. First, they may be
used deliberately to offer a decisive victory (or in Russia’s case, to achieve “intra-war escalation
control”—author170) to the striker, or for defensive purposes when imbalances in military
capabilities are significant; and second, crises increase the possibilities of inadvertent or accidental
wars involving WMD.171
Obviously nuclear proliferators or states that are expanding their nuclear arsenals like Russia can
exercise a great influence upon world politics if they chose to defy the prevailing consensus and use
their weapons not as defensive weapons, as has been commonly thought, but as offensive weapons
to threaten other states and deter nuclear powers. Their decision to go either for cooperative
security and strengthened international military-political norms of action, or for individual national
“egotism” will critically affect world politics.
For, as Roberts observes, But if they drift away from those efforts [to bring about more cooperative
security], the consequences could be profound. At the very least, the effective functioning of
inherited mechanisms of world order, such as the special responsibility of the “great powers” in the
management of the interstate system, especially problems of armed aggression, under the aegis of
collective security, could be significantly impaired. Armed with the ability to defeat an intervention,
or impose substantial costs in blood or money on an intervening force or the populaces of the
nations marshaling that force, the newly empowered tier could bring an end to collective security
operations, undermine the credibility of alliance commitments by the great powers, [undermine
guarantees of extended deterrence by them to threatened nations and states] extend alliances of
their own, and perhaps make wars of aggression on their neighbors or their own people.172
Putin cred impact
Russia depends on high oil prices
Schuman, TIME Asia correspondent, 12
[Michael, 7-5-12, TIME, “Why Vladimir Putin Needs Higher Oil Prices,”
http://business.time.com/2012/07/05/why-vladimir-putin-needs-higher-oil-prices/, Accessed: 7-11-14,
KMM]
Falling oil prices make just about everyone happy. For strapped consumers in struggling developed
nations, lower oil prices mean a smaller payout at the pump, freeing up room in strained wallets to
spend on other things and boosting economic growth. In the developing world, lower oil prices mean
reduced inflationary pressures, which will give central bankers more room to stimulate sagging growth.
With the global economy still climbing out of the 2008 financial crisis, policymakers around the world
can welcome lower oil prices as a rare piece of helpful news.
But Vladimir Putin is not one of them. The economy that the Russian President has built not only runs
on oil, but runs on oil priced extremely high. Falling oil prices means rising problems for Russia – both
for the strength of its economic performance, and possibly , the strength of Putin himself.
Despite the fact that Russia has been labeled one of the world’s most promising emerging markets,
often mentioned in the same breath as China and India, the Russian economy is actually quite different
from the others. While India gains growth benefits from an expanding population, Russia, like much of
Europe, is aging; while economists fret over China’s excessive dependence on investment, Russia badly
needs more of it. Most of all, Russia is little more than an oil state in disguise. The country is the largest
producer of oil in the world (yes, bigger even than Saudi Arabia), and Russia’s dependence on crude has
been increasing. About a decade ago, oil and gas accounted for less than half of Russia’s exports; in
recent years, that share has risen to two-thirds. Most of all, oil provides more than half of the federal
government’s revenues.
What’s more, the economic model Putin has designed in Russia relies heavily not just on oil, but high
oil prices . Oil lubricates the Russian economy by making possible the increases in government largesse
that have fueled Russian consumption. Budget spending reached 23.6% of GDP in the first quarter of
2012, up from 15.2% four years earlier. What that means is Putin requires a higher oil price to meet his
spending requirements today than he did just a few years ago.
Research firm Capital Economics figures that the government budget balanced at an oil price of $55 a
barrel in 2008, but that now it balances at close to $120. Oil prices today have fallen far below that, with
Brent near $100 and U.S. crude less than $90. The farther oil prices fall, the more pressure is placed on
Putin’s budget, and the harder it is for him to keep spreading oil wealth to the greater population
through the government. With a large swath of the populace angered by his re-election to the nation’s
presidency in March, and protests erupting on the streets of Moscow, Putin can ill-afford a significant
blow to the economy, or his ability to use government resources to firm up his popularity.
That’s why Putin hasn’t been scaling back even as oil prices fall. His government is earmarking $40
billion to support the economy, if necessary, over the next two years. He does have financial wiggle
room, even with oil prices falling. Moscow has wisely stashed away petrodollars into a rainy day fund it
can tap to fill its budget needs. But Putin doesn’t have the flexibility he used to have. The fund has
shrunk, from almost 8% of GDP in 2008 to a touch more than 3% today. The package, says Capital
Economics, simply highlights the weaknesses of Russia’s economy:
This cuts to the heart of a problem we have highlighted before – namely that Russia is now much
more dependent on high and rising oil prices than in the past… The fact that the share of ‘permanent’
spending (e.g. on salaries and pensions) has increased…creates additional problems should oil prices
drop back (and is also a concern from the perspective of medium-term growth)…The present growth
model looks unsustainable unless oil prices remain at or above $120pb.
Putin’s leadership secures nuclear modernization.
Bugriy, Ukrainian weekly correspondent, 13
[Maksym, 3-31-13, Ukrainian Weekly, “Russia is Arming Itself, but Against Whom?”,
http://ukrainianweek.com/World/76030, 7-12-14, AAZ]
The intensification of military reforms was an ideological cornerstone of Putin’s 2012 presidential
campaign. In a programmatic article, he wrote about a new global trend: increasingly frequent attempts
to resolve economic issues and obtain access to resources through force. Thus, his claim is that Russia
should not “lead anyone into temptation by being weak”. As he was preparing his return to the
presidency, Putin announced “unprecedented programmes to develop the Armed Forces and
modernize the defence industrial complex”, declaring that some 23 trillion roubles (US $750 bn) would
be allocated to this end in the next decade.
Tellingly, the key programmatic theses in the article begin with stressing the need to reform strategic
analysis for national defence. The goal is to have foresight, an ability to estimate threats 30-50 years in
advance. As far as a security strategy is concerned, the Kremlin has embraced the classical theory of
nuclear containment as its main mechanism. At the same time, Russia will be following a
contemporary worldwide trend of producing high-precision long-range conventional weapons that can
also later be used for strategic containment purposes.
READ ALSO: Do the Russians Want War?
Moscow’s emphasis on nuclear containment forces it to follow the classical geopolitical conceptions of
“air force” and “naval force”. Hence, strategic bombers, joined by drones and fifth-generation fighter
aircraft, will form the core of its Air Force. The Navy will be modernized with an emphasis on long-range
submarines and securing an “oceanic fleet” with a strategic presence in regions of interest. In March
2012, Vice-Admiral Viktor Churikov, Russia’s Air Force Commander, confirmed the decision to have a
permanent operational unit of five to six ships from Russia’s Black Sea fleet stationed in the
Mediterranean and said that similar units may be formed to navigate the Pacific and Indian Oceans.
According to other sources, Russia was in negotiations with Vietnam this winner about opening military
bases there.
Putin is critical of modernization in the form of “spot purchases” of Western equipment (such as the
acquisition of French Mistral aircraft carriers) and supports the modernization of Russia’s own military
industrial sector. High-priority weaponry and combat equipment for Russia’s Armed Forces include
modern nuclear arms (many of the existing missiles have been in service for over 20 years and must be
upgraded) and air and space defence systems, complete with new anti-aircraft armaments; high-tech
communications, reconnaissance and control systems; unmanned drones; personal combat protection
systems; high-precision weapons and the means to counteract them. Russia’s Armed Forces are to
focus on nuclear containment and conventional high-precision weapons, developing oceanic naval
forces, the Air Force and space defence. The goal is to create a common national system of air and
space defence. Together with nuclear containment forces, it will counter the antiaircraft systems of,
above all, the USA and NATO. Geographically , Russia will be “a guarantor of stability” in Eurasia : an
collective security system for the “Eurasian space” based on the Collective Security Treaty Organization
is in the works, and the North (primarily the resource-rich Arctic) and the Asian-Pacific region will be
high-priority regions for the Kremlin.
Russian miscalculation one of the only likely scenarios for nuclear war
Mosher, RAND policy analyst, Schwartz, RAND associate policy analyst, 03
[David E., Lowell H., Fall 2003, RAND, “Why Russian and U.S. Nuclear Postures Perpetuate Cold War
Risks”, http://www.rand.org/pubs/periodicals/rand-review/issues/fall2003/force.html, 7-12-14, AAZ]
Russian strategic nuclear forces remain the only current threat to the national existence of the
United States. Although the risk of deliberate attack from Russia has sharply fallen since the end of
the Cold War, the risk of an accidental or unauthorized use of Russian nuclear forces has arguably
risen . For example, Russia’s early-warning system has severely deteriorated, as has the country’s
ability to keep its mobile (and thus survivable) nuclear forces deployed. There are additional concerns
about the state of Russia’s command-and-control system and the rise of separatist violence.
None of the nuclear arms control treaties after the Cold War have dealt with the issue of accidental
or unauthorized use of nuclear weapons . Instead, these treaties have concentrated on reducing the
total number of nuclear warheads each side wields. While these reductions are extremely important
for improving the overall U.S.-Russian relationship, they do little to ease the risks of an accidental or
unauthorized nuclear launch. This is because those risks stem from the nuclear postures and underlying
nuclear doctrines of each nation, which remain firmly rooted in the hostile relationship forged during
the Cold War.
Exts – prices key to Putin crediblity
Collapse in oil collapses Putin’s leadership
Evans-Pritchard, The Telegraph International Business editor, 14
[Ambrose, 1-22-14, The Telegraph, “$60 oil will finish Russia's Putin regime, says Hermitage's Browder”,
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026424/60-oil-will-finish-russiasputin-regime-says-hermitages-browder/, 7-12-14, AAZ]
There is nothing behind the facade of Vladimir Putin's regime in Russia, says William Browder from
Hermitage Capital Management.
"All it will take is a fall in the price of oil to $60 a barrel and Putin will be gone within a year . You'd be
surprised how brittle the system really is, " he told me at the World Economic Forum in Davos.
The "fiscal break-even price" of oil needed to balance the Russian budget is now $117 a barrel . A
protracted slump in crude would force the government to dig deep into its reserve funds, and that in
turn would set off further capital flight.
The hedge fund manager – who describes himself as Putin's "enemy number one" – says Russia's
$499bn foreign reserves would not prove much a defence in the end. "We saw this in 2008 when
everything fell apart in a few months even though Russia had the world's third biggest reserves. It
wasn't supposed to happen but it did."
A drop in Brent crude to $60 is not impossible. Both Deutsche Bank and Bank of America have warned of
a potential glut in oil this year as sanctions against Iran are phased out and Libya's exports revive. The
US is expected to add more than 1m barrels per day (b/d) this year. The Saudis may choose not to
stabilise the market by cutting output, deliberately letting crude slide below the marginal cost of
production of shale.
Mr Browder says Russia is already primed for Ukraine-style street protests. The catalyst could be oil, or
the secondary effects of Fed tapering as it exposes structural rot across the Brics universe
High oil prices maintain Putin’s stability
Judah, European Stability Initiative, 13
[Ben, March 2013, “Five Traps for Putin”, http://www.li.com/docs/default-source/publications/fivetraps-for-putin---ben-judah-march-2013-(legatum-institute).pdf, p.9, 7-12-14, AAZ]
More recently, Putin has abandoned carefully balanced budgets, largely for political reasons.
Although currency reserves remain high—Russia has the third largest reserves in the world—
and government borrowing is still relatively low, state spending has been rising steadily since
the 2009 crisis, and now accounts for 41 percent of GDP.41 Between 2007 and 2010, funding
for the Russian provinces increased by $58 billion, rising from 5.7 percent to 9.2 percent of
GDP.42 Again in 2010, pensions were hiked 50 percent. The following year pensions were
raised by 10 percent again with a 6.5 percent across the board increase in public sector
wages.43 The Kremlin has also announced a ten-year, $613 billion spending programme for the
military, a policy largely designed to maintain employment in Russia’s many single-industry
military production towns.44 During the 2012 campaign, Putin doubled military and police
salaries and promised $160 billion worth of giveaways.45 As a result, the Kremlin now must rely
on a much higher oil price in order to balance its budget. In 2007, $40 a barrel would have
sufficed.46 By 2012, more than $110 was required.47 Should the price of oil now fall for any
substantial length of time, Russia could be forced to return to large scale borrowing, even cut
benefits or implement some form of austerity, thus undermining support for the regime in the
provinces and among low-wage earners. It is ironic, but Putin’s support now depends upon the
one thing he cannot control: the price of oil. This economic populism looks particularly reckless
in the light of Russia’s unreformed pension system, its slowing growth and its shrinking trade
surplus. If no alterations are made, government expenditure on pensions alone will rise from 9
percent of GDP to 14 percent of GDP by 2030.48 Adding further uncertainty is the fact that
Russia is slowly running out of cheap oil. Its current reserves are of declining quality and its
huge potential fields lie in extremely difficult terrain in Eastern Siberia or under the Arctic
Ocean. Similar problems are looming in the gas sector as LNG and shale gas pose long-term
problems for Gazprom’s business model. Russia is set to stay an energy superpower, but the
best years of the “double boom”—high oil production and high oil prices—are over. At the a
VTB bank investor conference in 2012 there was much talk about Russian growth slowing,
perhaps as low as an annual 2 percent. As a result of these changes, economic policy, once a
source of stability and consensus, has increasingly divided the Russian political and business
elite. Not since the arrest of Mikhail Khodorkovsky in 2003 have there been such vocal
disagreements. Alexey Kudrin, the former finance minister, has publicly warned that unless the
Kremlin reigns in spending it will be exposed to dangerous economic shocks. Igor Sechin, chief
executive of the state energy giant Rosneft, has also gone out of his way to obstruct
Medvedev’s ambitious privatization agenda. Other leading officials have been openly at odds
with one another as well. These bitter disputes are corroding Putin’s once unchallenged role as
arbiter in chief. Not only is the Russian economy vulnerable to an economic crisis thanks to
state spending, in other words, but the Russian president is vulnerable too.
$100 key
$100 a barrel is the sustainable point – anything lower has severe economic
consequences
Whitmore, Radio Free Europe Senior Russia Correspondent, 13
[Brian, 1-2-13, RFERL, “After The Storm: Trends To Watch In Russia In 2013”,
http://www.rferl.org/content/after-the-storm-trends-to-watch-in-russia-in-2013/24813957.html, 7-914, AAZ]
It began with a roar and it ended with a whimper.
As 2012 wound down in Russia, the soaring expectations for change that accompanied the civic
awakening and mass protests at the year’s dawn had clearly faded. But the social, economic, and
political forces that spawned them will continue to shape the landscape well into the new year.
A fledgling middle class remains hungry for political change, splits still plague the ruling elite over the
way forward, and a fractious opposition movement continues to struggle to find its voice.
With the Kremlin unable to decisively squelch the mounting dissent and the opposition unable to topple
President Vladimir Putin, Russia has entered an uneasy holding pattern that has the feel of an
interlude between two epochs.
"I don't think we are at the end of the Putin era, but we are at the beginning of the end," says longtime
Russia-watcher Edward Lucas, international editor of the British weekly "The Economist" and author of
the recently published book "Deception."
With economic headwinds on the horizon, generational conflict brewing, and new political forces
developing, Russian society is changing -- and changing rapidly. But the political system remains ossified.
So what can we expect in 2013? Below are several trends and issues to keep an eye on in the coming
year.
The Oil Curse: Energy Prices And The Creaking Welfare State
If 2012 was all about politics, 2013 will also be about economics.
The Russian economy, the cliche goes, rests on two pillars -- oil and gas . And both will come under
increasing pressure as the year unfolds.
World oil prices, currently hovering between $90 and $100 per barrel, are expected to be volatile for
the foreseeable future. And any sharp drop could prove catastrophic for the Russian economy .
Energy experts and economists say Russia's budget will only stay balanced if oil prices remain
between $100 and $110 per barrel. Five years ago, the figure needed for a balanced budget was $50 to
$55.
1nc warming impact
Lower oil prices kill renewable investment—causes global warming.
Haug, Harvard Graduate, 11
[Marianne, Former Director at the International Energy Agency, chairs Advisory Group
on Energy of the EC, and is Senior Research Advisor at the Oxford Institute of Energy
Studies, 2011, Oxford Journals, “Clean energy and international oil,”
http://oxrep.oxfordjournals.org/content/27/1/92.full, accessed 7/10/13, MC]
Developing and commercializing clean energy is one of the basic strategies to combat climate change.
It involves the near total decarbonization of the power sector, the use of renewables and low-carbon
fuels for heating and cooling, and last, but not least, the increasing substitution of oil in the transport
sector. Hybrid, battery electric, and fuel-cell cars fuelled by clean power or hydrogen, together with
sustainable biofuels and natural gas/CNG, are considered the most likely technologies that will reduce
oil demand.
Such fundamental transformation of the energy sector evolves over time through co-evolution of
technologies, markets, institutions, and societal values. Despite the absence of a global price or tax for
carbon, governments of the major economies worldwide are putting in place the building blocks for a
transition to a low-carbon economy. The present emphasis is on support for RD&D and market diffusion
for a wide range of technologies in different stages of technological maturity and provision of associated
infrastructure. Policies, institutional support, industrial capacities, and renewable resource base vary
widely among countries. We know that 10–20 years are needed to introduce the diversity of
technologies and policy approaches that should be helpful during this formative stage of the transition
to address different public concerns in different countries and search for best solutions in both a
country-specific and a global context.
Which energy mix of clean energy will evolve is highly uncertain. However, the broad based RD&D and
infrastructure investments and commercial scaling up of clean technologies should narrow choices and
reduce costs of substitutes for oil within the next 10–15 years and choices for new low-carbon vehicles
in 20 years. In this evolving process of technology selections and industrial and policy engagement, the
role of emerging economies as major investors in clean technology and cost-competitive producers
will become crucial.
What are the chances that the transformative dynamic towards clean energy is derailed again? A span of
10–20 years is a long time to introduce competitive choices for clean electricity, sustainable biofuels,
clean hydrogen, alternative power trains, and the necessary infrastructure. Unforeseen and
unforeseeable events will happen over such an extensive time span. Chernobyl changed the growth of
nuclear power, decisively, Fukushima is jolting the nuclear renaissance, and a meteorite hit may
invalidate the climate change threat for a century or more. However, the probability that a clean energy
transition will unfold is very high. First, RD&D and niche market support has unleashed a wave of
scientific interest and technological creativity to explore clean-fuel and end-use alternatives in all
scientifically advanced countries. The assumption that competitive backstop technologies for oil will be
ready to be scaled up within the 10–20-year period is not only plausible but very likely. Second, the
institutional and policy support in favour of clean energy, while highly fragmented and imperfect, is
creating vibrant industries with increasing competitive pressure for all technologies, and sustainability as
an overarching core value. In brief, the trend to slowing oil demand growth appears irreversible in the
absence of a ‘black swan event’.
Can international oil influence the trend through price or quantity strategies, now, before the decline is
imminent? Experience shows that, indeed, consistently cheap oil will slow both substitution and the
development of alternatives. Theoretically, the world's low-cost oil producers have the capacity to
increase output and flood the market for an extended period of time at low prices, as Sinn with his
Green Paradox postulates. Such a major oil price drop could be passed on to the consumers. But
governments and societies committed to clean energy could also take such an opportunity to internalize
the cost of carbon and energy security, keep consumer petroleum product prices relatively stable, and
incentivize the clean energy transition without large fiscal outlays. Low-cost producers would gain
market share, but would not slow the substitution process. As a corollary, a quantitative strategy to limit
crude oil output is likely to increase the expectation of scarcity and oil prices. Renewed oil price hikes
would strengthen the commitment of governments to develop alternatives to oil and consumers’
willingness to pay for alternatives and help accelerate market readiness and market opportunities of
backstop technologies for oil.
Warming human caused & leads to extinction—prefer qualified science.
Deibel, Professor of IR at National War College, 7
[Terry L., Foreign Affairs Strategy, 2007, “Conclusion: American Foreign Affairs Strategy
Today Anthropogenic – caused by CO2”]
Finally, there is one major existential threat to American security (as well as prosperity) of a nonviolent
nature, which, though far in the future, demands urgent action. It is the threat of global warming to
the stability of the climate upon which all earthly life depends. Scientists worldwide have been
observing the gathering of this threat for three decades now, and what was once a mere possibility has
passed through probability to near certainty. Indeed not one of more than 900 articles on climate
change published in refereed scientific journals from 1993 to 2003 doubted that anthropogenic warming
is occurring. “In legitimate scientific circles,” writes Elizabeth Kolbert, “it is virtually impossible to find
evidence of disagreement over the fundamentals of global warming.” Evidence from a vast
international scientific monitoring effort accumulates almost weekly, as this sample of newspaper
reports shows: an international panel predicts “brutal droughts, floods and violent storms across the
planet over the next century”; climate change could “literally alter ocean currents, wipe away huge
portions of Alpine Snowcaps and aid the spread of cholera and malaria”; “glaciers in the Antarctic and
in Greenland are melting much faster than expected, and…worldwide, plants are blooming several days
earlier than a decade ago”; “rising sea temperatures have been accompanied by a significant global
increase in the most destructive hurricanes”; “NASA scientists have concluded from direct temperature
measurements that 2005 was the hottest year on record, with 1998 a close second”; “Earth’s warming
climate is estimated to contribute to more than 150,000 deaths and 5 million illnesses each year” as
disease spreads; “widespread bleaching from Texas to Trinidad…killed broad swaths of corals” due to a
2-degree rise in sea temperatures. “The world is slowly disintegrating,” concluded Inuit hunter Noah
Metuq, who lives 30 miles from the Arctic Circle. “They call it climate change…but we just call it breaking
up.” From the founding of the first cities some 6,000 years ago until the beginning of the industrial
revolution, carbon dioxide levels in the atmosphere remained relatively constant at about 280 parts per
million (ppm). At present they are accelerating toward 400 ppm, and by 2050 they will reach 500 ppm,
about double pre-industrial levels. Unfortunately, atmospheric CO2 lasts about a century, so there is no
way immediately to reduce levels, only to slow their increase, we are thus in for significant global
warming; the only debate is how much and how serious the effects will be. As the newspaper stories
quoted above show, we are already experiencing the effects of 1-2 degree warming in more violent
storms, spread of disease, mass die offs of plants and animals, species extinction, and threatened
inundation of low-lying countries like the Pacific nation of Kiribati and the Netherlands at a warming of 5
degrees or less the Greenland and West Antarctic ice sheets could disintegrate, leading to a sea level of
rise of 20 feet that would cover North Carolina’s outer banks, swamp the southern third of Florida, and
inundate Manhattan up to the middle of Greenwich Village. Another catastrophic effect would be the
collapse of the Atlantic thermohaline circulation that keeps the winter weather in Europe far warmer
than its latitude would otherwise allow. Economist William Cline once estimated the damage to the
United States alone from moderate levels of warming at 1-6 percent of GDP annually; severe warming
could cost 13-26 percent of GDP. But the most frightening scenario is runaway greenhouse warming,
based on positive feedback from the buildup of water vapor in the atmosphere that is both caused by
and causes hotter surface temperatures. Past ice age transitions, associated with only 5-10 degree
changes in average global temperatures, took place in just decades, even though no one was then
pouring ever-increasing amounts of carbon into the atmosphere. Faced with this specter, the best one
can conclude is that “humankind’s continuing enhancement of the natural greenhouse effect is akin to
playing Russian roulette with the earth’s climate and humanity’s life support system. At worst, says
physics professor Marty Hoffert of New York University, “we’re just going to burn everything up; we’re
going to het the atmosphere to the temperature it was in the Cretaceous when there were crocodiles at
the poles, and then everything will collapse.” During the Cold War, astronomer Carl Sagan popularized a
theory of nuclear winter to describe how a thermonuclear war between the Untied States and the
Soviet Union would not only destroy both countries but possible end life on this planet. Global warming
is the post-Cold War era’s equivalent of nuclear winter at least as serious and considerably better
supported scientifically. Over the long run it puts dangers form terrorism and traditional military
challenges to shame. It is a threat not only to the security and prosperity to the United States, but
potentially to the continued existence of life on this planet.
2nc – impact run
Global warming leads to insecurity & threatens long-term peace – outweighs the aff
Graves, Politics Reporter, 13
[Lucia, 3/11/13, Huffington Post, “Top U.S. Admiral: Climate Change Biggest Threat,”
http://www.huffingtonpost.com/2013/03/11/climate-change_n_2855007.html,
accessed 7/10/13, MC]
Despite renewed threats from nuclear North Korea, missile stockpiling in China and a standoff
between China and Japan over a small string of islands, the head of the U.S. Navy’s Pacific fleet has
declared the greatest threat to long-term peace in the region is climate change.
Fallout from the shifting global temperature "is probably the most likely thing that is going to happen ...
that will cripple the security environment, probably more likely than the other scenarios we all often
talk about," Navy Admiral Samuel J. Locklear III told the Boston Globe's Bryan Bender on Friday.
This not from some liberal tree hugger, but from the man who ran the maritime part of NATO’s war
against Libyan dictator Muammar Gaddafi in 2011 and has since been tasked with responding to the
frequent destructive weather events in East Asia and the Pacific Ocean.
"You have the real potential here in the not-too-distant future of nations displaced by rising sea level,"
Locklear said. "Certainly weather patterns are more severe than they have been in the past. We are on
super typhoon 27 or 28 this year in the Western Pacific. The average is about 17."
Locklear's comments come after the Department of Defense released a Quadrennial Defense Review in
which it described the shifting global climate as a national security threat and "accelerant of instability
and conflict," placing the burden of response on militaries around the world.
Nuclear war does not cause extinction—global warming is the existential risk.
Seitz, Harvard & MIT Graduate, 6
[Russell, former Presidential science advisor and keynote speaker at international
science conferences, holds multiple patents, 12/20/06, “The ‘Nuclear Winter’
Meltdown,” http://adamant.typepad.com/seitz/2006/12/preherein_honor.html,
accessed 7/10/13, MC]
"Apocalyptic predictions require, to be taken seriously,higher standards of evidence than do assertions
on other matters where the stakes are not as great." wrote Sagan in Foreign Affairs , Winter 1983 -84.
But that "evidence" was never forthcoming.'Nuclear Winter' never existed outside of a computer
except as air-brushed animation commissioned by the a PR firm - Porter Novelli Inc. Yet Sagan predicted
"the extinction of the human species " as temperatures plummeted 35 degrees C and the world froze in
the aftermath of a nuclear holocaust. Last year, Sagan's cohort tried to reanimate the ghost in a
machine anti-nuclear activists invoked in the depths of the Cold War, by re-running equally arbitrary
scenarios on a modern interactive Global Circulation Model. But the Cold War is history in more ways
than one. It is a credit to post-modern computer climate simulations that they do not reproduce the
apocalyptic results of what Sagan oxymoronically termed "a sophisticated one dimensional model."
The subzero 'baseline case' has melted down into a tepid 1.3 degrees of average cooling- grey skies do
not a Ragnarok make . What remains is just not the stuff that End of the World myths are made of.
Emissions cause ocean acidification—result is extinction.
Parry, Senior Writer for LiveScience, 12
[Wynne, 3/2/2012, Live Science, “Oceans Turning Acidic Faster than Past 300 Million
Years,” http://www.livescience.com/18786-ocean-acidification-extinction.html,
accessed 7/10/13, MC]
The oceans are becoming more acidic faster than they have in the past 300 million years, a period that
includes four mass extinctions, researchers have found.
Then, as is happening now, increases in carbon dioxide in the atmosphere warmed the planet and
made the oceans more acidic. These changes are associated with major shifts in climate and mass
extinctions.
But while past increases in the atmosphere's carbon dioxide levels resulted from volcanoes and other
natural causes, today that spike is due to human activities, the scientists note. "What we're doing today
really stands out," lead researcher Bärbel Hönisch, a paleoceanographer at Columbia University's
Lamont-Doherty Earth Observatory, said in a news release. "We know that life during past ocean
acidification events was not wiped out — new species evolved to replace those that died off. But if
industrial carbon emissions continue at the current pace, we may lose organisms we care about —
coral reefs, oysters, salmon." [Humans Causing 6th Mass Extinction]
As the level of carbon dioxide in the atmosphere increases, oceans absorb that carbon dioxide, which
turns into a carbon acid. As a result the pH — a measure of acidity — drops, meaning the water has
become more acidic. This dissolves the carbonates needed by some organisms, like corals, oysters or
the tiny snails salmon eat.
In their review, published Thursday (March 1) in the journal Science, Hönisch and colleagues found the
closest modern parallel about 56 millions ago in what is called the Paleocene-Eocene Thermal
Maximum, when atmospheric carbon concentrations doubled, pushing up global temperatures.
Extinctions in the deep sea accompanied this shift. (The PETM occurred about 9 million years after the
dinosaurs went extinct.)
But, now, the ocean is acidifying at least 10 times faster than it did 56 million years ago, according to
Hönisch.
Ocean acidification may also have occurred when volcanoes pumped massive amounts of carbon
dioxide into the air 252 million years ago, at the end of the Permian period, and 201 million years ago, at
the end of the Triassic period, they found. Both are associated with mass extinctions.
"The current rate of (mainly fossil fuel) carbon dioxide release stands out as capable of driving a
combination and magnitude of ocean geochemical changes potentially unparalleled in at least the last
300 million years of Earth history, raising the possibility that we are entering an unknown territory of
marine ecosystem change," the researchers conclude in their paper.
2nc – green military impact
High oil prices spur renewable investment—Key to green DoD.
Neader, National Policy Director of Roosevelt Institute, & GOLDFARB, Program
Director at Americans for Energy Leadership, 12
[Reese & Daniel, Program Director at Americans for Energy Leadership Policy Fellow at
Americans for Energy Leadership Research Assistant at Democratic Institutions Research
Team, 5/7/12, “Big Idea: A Green Energy Offensive From the Department of Defense,”
http://www.good.is/post/big-idea-a-green-energy-offensive-from-the-department-ofdefense/, accessed 7/10/13, MC]
How much does it cost the U.S. government to protect our oil supplies? In fiscal terms, between 1976
and 2007 it cost our military $7.3 trillion to patrol the Persian Gulf with aircraft carriers. Between 2001
and 2006, while thousands of troops lost their lives in Afghanistan and Iraq, the military—much like
average Americans—saw its budget squeezed as oil prices climbed to record highs. The U.S. economy’s
growth has frequently been thwarted by shocks stemming from rising oil prices.
Those rising prices aren’t going away. The global economy of the 21st century is being defined by the
"Rise of the Rest." Developing countries like China and India are industrializing rapidly and bringing
millions of people out of poverty. The members of this new, global middle class demanding access to
energy are already driving up the cost of fuel. This process makes our dependence on fossil fuels too
expensive.
The Department of Defense has reacted to this challenge by investing in renewable energy innovation.
In the face of growing costs in terms of lives and fuel, our military has developed a new approach to
energy innovation that fundamentally changes the way we think about energy security. In order to
compete economically and preserve our military dominance in the 21st century, the U.S. military is
developing technologies that promote energy ownership: energy supplies that can be controlled by the
user from production to consumption.
The DoD is investing in technologies that can supply self-sustaining units in combat theaters, from
Navy aircraft carriers to forward deployed Marine bases. A focus on distributed generation, renewable
energy, and American-made technologies is becoming increasingly ingrained in our military’s decisionmaking, and needs to take a larger role.
While the military’s foremost concern is operational effectiveness, a natural alignment of national
security and economic interests is helping drive commercial innovation with the potential to spur the
creation of American jobs and reduce the federal deficit through a variety of avenues that should be
widened as the DoD doubles down on green energy.
Key to hegemony—laundry list of reasons.
Sussman, president of strategic counseling firm, 12
[Michael, graduate of Interdisciplinary Center, Herzliya, served in the office of the Critic
of International Cooperation in the Canadian House of Commons He is currently the
president of the strategic consulting firm Samuel Sussman Strategic Consulting Group,
2/9/12, Jpost, “American military spending and oil dependency”,
http://www.jpost.com/Opinion/Op-Ed-Contributors/American-military-spending-andoil-dependency, accessed 7/10/13, MC]
***Gender modified***
One of the most crucial problems facing the United States is whether it will be able to maintain its
strategic interests in the Middle East. It is expected that US defense expenditures will drastically
decrease in the coming six years – official estimates are as high as eight percent, roughly $477 billion, a
significant sum when it comes to defense. It is also projected that the US will not have the financial
means at its disposal to bolster its allies, marginalizing the potential for Marshall-Plan type subsidies
(which totaled $13 billion at the time).
Since the Second World War, military might and financially aiding its allies in the Middle East have been
two of the major methods used by the US to protect its interests. The reality dictated by the today’s
situation is ingenuity: the US will have to be resourceful in projecting (at least the perception of) its
power, and find new ways of supporting its allies. But even that will not be enough. To mitigate the
problem to a manageable level the US must reduce its dependence on oil.
It is important to clarify what the expected reduction in US military spending means for US military
capabilities.
The US is currently the strongest military in the world; its capabilities are exponentially greater than
those of any other military in the world. That reality is unlikely to change in the near future, even with
the proposed spending cuts.
US military spending accounts for over 43% of global military expenditures. The magnitude of that sum
becomes realizable when compared to China, which ranks second with 7.3%, and Russia, which ranks
third with 3.6%. US military superiority is also evident in the amount of military equipment at its
disposal. The US currently possesses 11 aircraft carriers, whereas the rest of the world only has eight
(China is building one, but it is not expected to be completed until 2015).
What the spending cuts will do, however, is limit the ability of the US to achieve its objectives in the
Middle East; the [power] manpower and machinery to conduct such operations will no longer be
available. For instance, even if the US maintains the largest air force in the world, it will not have the
[power] manpower to conduct the number of operations that it did in the past.
In recent years, the US has implemented defense policies aimed at countering the problem, including
greater focus on intelligence, special forces units and network-centric warfare. These options are less
costly than all-out war; however, they are not able to fully substitute for conventional standing forces.
An additional factor is that while aircraft carriers and a well-trained army require time, expertise and
capital to develop, and spy rings and anti-missile technology are less costly, it is therefore easier for the
US’s adversaries to counter these measures with their own spy rings and anti-missile defense
technology.
It is well known that the reason the Middle East is of particular importance to the US is oil. The US
consumes about 25% of all of the crude oil produced in the world, while producing less than 9%. A
large percentage of US imports comes from Middle Eastern countries, not to mention the fact that 60%
of the world’s known oil resources are in the Middle East. Oil may be only a commodity, but it is the
commodity that fuels US society, from transporting foods and manufactured goods across the country
to powering industries to transporting civilians to work.
At the recent Herzliya Conference former CIA director James Woolsey advocated decreased
dependency on oil. That can be achieved by the use of alternative fuels, including natural gas. For
example, today in Brazil, cars are fueled by ethanol fuel produced from sugarcane. The view that the US
should decrease its reliance on foreign oil is not a new one but given the economic downturn it is of
even more importance.
America’s policies in the Middle East in the last half century have often been skewed by the fact that it
is beholden to the oil producing regimes. Through incremental decreases in foreign aid and defense
spending, coupled with investment in alternative energy technology the US can reach a point where it
need no longer rely on some of these local regimes and where it can pursue its true self interest and
policies.
The money saved on US defense expenditures in the region could be put toward placing its military in
other regions. For instances, the US plans to expand its operations in Asia. This will be very difficult to
achieve given the defense cuts and its many commitments around the world.
It would also deliver a blow to the oil producing regimes that supply the US, and which are also among
the greatest violators of human rights and sponsors of terrorism. Without money coming from oil
producing countries, Islamist terrorists will suffer a major setback.
As an additional benefit, some of the money saved can go towards strengthening manufacturing and
US industry. With government support, as well as a large domestic market, the alternative energy
industry can become a booming industry in the US – helping to strengthen its economy. By decreasing
dependency on the oil producing regimes in the Middle East the US will be freer to focus on other core
strategic issues, such as increased Iranian influence, democratization and maintaining security and
stability in the region.
The US faces a problem of defense cuts and maintaining its interests. Alternative fuels are ready to be
utilized. The defense spending problem can be eliminated.
Americans should ask themselves why these solutions are not being implemented.
2nc – turns offshore drilling
Warming causes extreme storms—destroys their offshore drilling infrastructure
NWF, conservation organization, 11
(National Wildlife Federation, largest member-supported conservation organization.
“Most Extreme Weather and U.S. Energy Infrastructure”
http://www.nwf.org/~/media/PDFs/Global-Warming/ExtremeWeather/Final_NWF_EnergyInfrastructureReport_4-8-11.ashx, accessed 7/8/13, MC)
The destructive potential of tropical storms in the North Atlantic has increased by about 50 percent
since the 1970s. 10 This increase, which primarily reflects longer storm lifetimes and greater storm
intensities, is correlated with an increase of 0.9 to 1.3°F in sea-surface temperatures in the main
development area for tropical storms in the North Atlantic. 11 If carbon pollution continues unabated
over the next century, tropical sea surface temperatures could increase another 3°F —– three times
the warming to date. 12 If this happens, tropical storms are likely to have wind speeds that are 2 to 13
percent greater —– enough to bump a hurricane up to the next more severe category —– and to have
10 to 31 percent more precipitation.
Rising sea level will further compound the risk to coastal communities from hurricanes. If the world
follows higher emissions scenarios, sea level is expected to rise by 3 to 4 feet by 2100. 14 To put this in
perspective, a two-foot rise in sea level would mean regular inundation for 2,200 miles of major roads
and 900 miles of railroads in Maryland, Virginia, North Carolina and the District of Columbia. 15 When a
tropical storm hits, higher sea-level translates into bigger storm surges that can cause flooding further
inland. In addition, the heights of big waves —– those higher than about 10 feet that are likely to be
present during strong storms —– have already increased by 20 percent along the eastern United States
during hurricane season since the late 1970s, 16 a trend that is likely to continue and pose challenges
for offshore infrastructure.
2nc – high prices key
Low oil prices kill investment in renewable energy; empirics prove.
Bullis, MIT Technology Review senior editor, 12
(Kevin Bullis, senior editor of MIT Technology Review for 7 years, awarded a Jefferson
Fellowship, articles widely cited by Wall Street Journal and NPR, 6/26/12, MIT
Technology Review, “Could New Oil Production Cause Oil Prices—And Energy
Innovation—To Collapse?” http://m.technologyreview.com/blog/energy/27966/,
accessed 6/19/13, MC)
A new report out of Harvard suggests that a boom in oil exploration and production—driven by a surge
of investment starting in 2003—might lead to a sharp drop in oil prices. If that happens, could that kill
development of alternatives to oil, as happened when oil prices hit bottom in the 1990s? Will solar
panels, electric cars, and advanced biofuels fade from view?
Three decades ago, high oil prices spurred investment in alternatives. But by the time oil prices had
bottomed-out in the 1990s, much of that research had been abandoned, and promising technologies
didn’t come to market or weren’t made cheap enough to catch on widely. With the surge in oil prices in
recent years, much of that research has been taken up again, and the trends look good. Solar power is
approaching the cost of conventional fossil-fuel power, and advanced biofuels seem on the cusp of
becoming commercial reality. As new energy startups proliferated, many alternative energy researchers
and companies waved away suggestions that oil might plummet again, causing these technologies to be
abandoned once again. The conventional wisdom has been that high demand from fast-growing
economies will keep oil prices high enough to drive innovation. And concern about climate change will
lead to a price on carbon that will drive new technologies even if oil prices drop.
But interest in climate change seems to have waned, and efforts to put a price on carbon dioxide
emissions have failed in the U.S. and most of the rest of the world. If oil prices also drop due to
overproduction, as the report suggests, what could that mean for technologies such as electric cars,
advanced internal combustion engines, and renewable electricity sources, such as solar power?
Taking solar power first, things are a bit different now than in the 1970s, at least in the United States.
The oil crisis spurred investment in solar power in part because oil was used to generate a substantial
amount of electricity in the United States. Now the U.S. hardly uses oil at all for generating electricity,
and installing solar panels doesn’t do anything to decrease oil consumption. Some people don’t know
that, and support solar as a way of reducing oil consumption—their support could fade with high oil
prices. Such public support is critical for the solar industry now, since it relies heavily on subsidies. More
importantly, while the U.S. doesn’t use oil for electricity, much of the rest of the world does. At current
oil prices, solar power is cheaper than electricity from diesel generators, and that’s creating a new
markets for solar panels. A drop in oil prices could hurt the solar industry.
But solar panel prices have been dropping quickly, and some solar companies, such as First Solar, are
staking their business on the prospect that they can soon be competitive in unsubsidized markets.
There’s a race on. If the oil price drops within the next couple of years, that could be a bad sign for the
solar industry. If it drops later, the solar industry may be able to survive on its own by then, even if it’s
hurt some by lower prices.
A drop in oil prices could really hurt advanced biofuels companies, which are struggling to get prices
low enough to compete with even today’s relatively pricey oil. Low oil prices could further deteriorate
already strained support for advanced biofuels.
And low oil prices could also hurt attempts to sell electric cars, and cars with costly efficiency
improvements.
2nc – renewables solve warming
Renewables can solve for global warming with proper investment
UCS, 11
(Union of Concerned Scientists, group of scientists and citizens working to find
environmental solutions to the world’s problems, 5/9/11, Union of Concerned Scientists
of the United States, “Renewable Energy Likely to Become Dominant Climate Change
Solution by 2050, U.N. Study Concludes”,
http://www.ucsusa.org/news/press_release/renewable-energy-likely-climate-solution0539.html, accessed 7/8/13, MC)
"This IPCC report makes it clear that renewable energy has tremendous potential to meet our energy
needs and confront the challenge of climate change. But we must do much more to scale up clean
energy sources," said Rachel Cleetus, UCS climate economist. "Many renewables are already
economically competitive with fossil fuels and nuclear energy, especially when you take into account
all the hidden costs of conventional energy—such as public health risks, air and water pollution, global
warming emissions, and security risks."
In a 2009 analysis titled “Climate 2030: A National Blueprint for a Clean Energy Economy,” UCS
concluded that by adopting a comprehensive package of climate and clean energy policies in the U.S.,
renewable sources could provide 25 percent of the nation’s energy supply and 50 percent of electricity
generation by 2030. When combined with investments in energy efficiency, renewable energy,
according to the UCS analysis, could help reduce heat-trapping emissions in 2030 by 56 percent from
2005 levels and save consumers money in every region of the country.
“To reach a low-carbon global economy by 2050 requires making smart policy choices and investments
today,” said Steve Clemmer, UCS Director of Energy Research and Analysis. “Here in the U.S. we can
make serious progress by building on what the states have already done and adopt strong national
renewable electricity and energy efficiency standards, and a price on carbon. That’s a sure way to
transition to a clean energy economy while driving down costs and significantly reducing emissions.”
Renewables key to solve warming
Kutscher, National Renewable Energy Lab Scientist, 07
[Charles F., January 2007, American Solar Energy Society, “Tackling Climate Change in the U.S.”,
http://kansas.sierraclub.org/Wind/Climate_Change.pdf, accessed 7/8/13, PS]
The studies focused on the use of renewable energy in the electricity and transportation sectors, as
these together are responsible for nearly three-quarters of U.S. carbon emissions from fossil fuels.
Goals for renewables are often stated in terms of a percentage of national energy. Figure 2. Potential
carbon reductions in 2030 from energy efficiency and renewable technologies and paths to achieve
reductions of 60% and 80% below today’s emissions value by 2050. The results of these studies show
that renewable energy has the potential to provide approximately 40% of the U.S. electric energy need
projected for 2030 by the Energy Information Administration (EIA). After we reduce the EIA electricity
projection by taking advantage of energy efficiency measures, renewables could provide about 50% of
the remaining 2030 U.S. electric need. There are uncertainties associated with the values estimated in
the papers, and, because these were primarily individual technology studies, there is uncertainty
associated with combining them. The results strongly suggest, however, that energy efficiency and
renewable energy technologies have the potential to provide most, if not all, of the U.S. carbon
emissions reductions that will be needed to help limit the atmospheric concentration of carbon
dioxide to 450 to 500 ppm.
2nc – clean energy now
Investment in clean tech is increasingly strong now—reports prove
Content, Milwaukee Journal Sentinel Journalist, 11
[Thomas, 7/12/11, Milwaukee Journal Sentinel, "Report finds Wisconsin 13th in cleantechnology jobs," http://www.jsonline.com/business/125463128.html, accessed 7/7/13,
MC]
Batteries, biofuels and water technology helped rank Wisconsin 13th among the 50 states in clean-tech
jobs nationally last year, according to a new Brookings Institution-Battelle report. The report says about
2.7 million people nationally were employed by the "clean economy" last year, including nearly 77,000
in Wisconsin. "The clean economy is more than a myth," said one of the report's authors, Jonathan
Rothwell, senior research analyst at Brookings. "And it's a significant and growing area of the U.S.
economy, especially in the newer technologies such as solar, wind and biofuels, but also energyefficiency related segments like the smart grid, electric vehicle technologies and fuel cells." The first
report to look at the clean-tech economy in 100 cities across the country notes that Milwaukee has seen
slower-than-average growth in clean technology in recent years, but it also highlights the region's efforts
to expand in two clean-tech markets: water-efficiency technologies and batteries. The Milwaukee 7
regional economic development group has established a Water Council and advanced freshwater science
research at the University of Wisconsin-Milwaukee. A similar initiative has been launched in energy
storage, through the Wisconsin Energy Research Consortium and the announcement last week of a
multimillion-dollar partnership between Johnson Controls Inc. and the state's two largest public
universities. "We find that clustering is associated with faster growth in the clean economy from 2003 to
2010, so clusters in the Milwaukee area are apt to boost growth for the relevant companies and attract
more companies that are doing similar work," Rothwell said. "Where innovation matters - and that's most
industries, and not just the clean economy - clustering should matter." Madison, meanwhile, has seen
above-average growth in clean-tech sectors, with particular strength in biofuels and energy-efficiency
products and technologies, according to the report, prepared for a division of Brookings that focuses on
the economies of the nation's metropolitan areas. Drivers of its green economy include companies such as
renewable fuels developer Virent Energy Systems and the Great Lakes Bioenergy Research Center at
UW-Madison. Researchers at Brookings used a database compiled by Battelle - the nonprofit organization
that runs national energy research laboratories for the federal Department of Energy - to develop the
report. It measures employment in a variety of fields, tallying up jobs linked to everything from
renewable energy and pollution prevention devices to organic foods and green consumer products. The
report recommends a variety of policy initiatives to help foster growth of clean-technology businesses
but also says the private sector has moved swiftly to shepherd clean-tech's ascension. From 1995 to
2010, the value of venture capital flowing into clean-tech sectors rose from $1 billion to $4 billion.
Clean-tech accounted for 17% of all venture capital dollars invested last year, Rothwell said.
1nc Saudi flood
Saudi Arabia will flood the market to crash oil prices and assert its leadership of OPEC.
Fang, Rice political science professor, et al 12
[Songying & Amy Myers Jaffe, Wallace S. Wilson Fellow in Energy Studies, James A.
Baker III Institute for Public Policy at Rice University & Ted Temzelides, PH.D. Rice
Scholar, James A. Baker III Institute for Public Policy Professor of Economics, Rice
University, January 2012, James A. Baker III Institute for Public Policy at Rice University,
“NEW ALIGNMENTS? THE GEOPOLITICS OF GAS AND OIL CARTELS AND THE CHANGING
MIDDLE EAST,” p. 18-19, http://www.bakerinstitute.org/publications/EF-pubGasOilCartels-012312.pdf, accessed 7/8/13, MC]
However, it would be premature to draw the conclusion that Saudi Arabia will no longer be willing to
wage a price war. Its interest in carrying the spare capacity to wage a credible price war goes beyond its
security relationship with the United States. Saudi Arabia gains international clout from its ability to
guard the global economy by raising oil output and lowering oil prices. Moreover, Riyadh’s ability to
threaten other oil producers that it could flood the oil market is a critical aspect buttressing its
leadership role inside OPEC and gives the country regional clout as well. Indeed, among the best levers
Saudi Arabia has to influence regional politics is its ability to dramatically lower the price of oil. Saudi
Arabia has flooded the oil market for geopolitical reasons in the past, and could arguably do so again.
For example, Saudi Arabia has made it clear that it aims to draw the line against Iranian expansionism.27
Iran is dependent on oil revenues for more than 65 percent of its government revenue. In contrast, the
Kingdom is in a position to withstand a period of low oil prices. Thus, Saudi Arabia’s ability to wage a
price war is a major tool it can use to diminish Iranian power in the region and weaken Iran’s position as
a regional military and political rival to the Kingdom. The ability to wage an oil price war also helps the
Kingdom to guard against other producers with large oil reserves, such as Iraq, from taking over its oil
market share. In fact, Iraq has expressed the ambition to reach 10 to 12 million b/d of production by
2017. This level is commensurate with Saudi Arabia’s capacity. Rising Iraqi output could alter the balance
of political power within OPEC and challenge Saudi Arabia’s current leadership. Iraqi oil reserves are
considered very low-cost to develop and are competitive with those of Saudi Arabia. In summary, while
the costs of maintaining enough spare capacity to wage a price war have risen for Saudi Arabia, there
are still many geopolitical incentives for the Kingdom to maintain this capability. This includes
contributing to its security by weakening Iran and by remaining important to the United States, which
would then be more apt to provide security guarantees in exchange for the free flow of oil.28
Exts – Saudi floods
Plan triggers a flood – even if they don’t displace explicitly – drops prices below $100 a
barrel
Schelmetic, TMCnet Contributor, 11
[Tracey E., 6-1-11, TMCnet, “Saudi Prince Frets that High Oil Prices will Spur Drive to
Alternative Energy”, http://green.tmcnet.com/channels/renewableenergy/articles/181084-saudi-prince-frets-that-high-oil-prices-will.htm, 7-6-14, AAZ]
What do you do when you're a theocratic ruler of an oil-rich nation and you see the insidious creep of
alternative energy technologies coming to end your party? You worry, apparently.
Saudi Arabian prince Alwaleed bin Talal recently told CNN that his country wants to see oil prices
come down to between $70 and $80 a barrel. The reason? The Saudi rulers are apprehensive that high
oil prices are spurring Western countries to seek replacement energy sources. The prince is concerned
that if oil prices remain at high current levels, countries that use a lot of petroleum products – like the
U.S. and Western European nations – will be encouraged to invest in alternative energy sources such as
solar, wind power, geothermal heat, hydropower and other technologies – all of which would be
detrimental to the oil-rich nation.
Saudi already pressured by US markets now – further independence exceeds their
limits.
Hawkins, Breitbart News, 13
[AWT, 5-29-13, Breitbart News, “SAUDI ARABIA FEELING PRESSURE AS U.S. OIL
PRODUCTION BOOMS”, http://www.breitbart.com/Big-Peace/2013/05/29/SaudiArabia-Feeling-Pressure-As-U-S-Oil-Production-Booms, 7-6-14, AAZ]
Long accustomed to dominating world energy, Saudi Arabia is scrambling for ways to maintain a strong
role in energy for decades to come. With U.S. oil production booming and the International Energy
Agency predicting the U.S. will actually be the world's top energy producer by 2020, Saudi Arabia is
starting to feel the squeeze.
According to Foreign Policy, this new pressure has put the Saudis in somewhat of a quandary, as "40
percent of [their] 28 million citizens [are] under the age of 15"; the males above this age are mostly
employed in the nation's "bloated public sector." Add to this the "post-Arab Spring era of elevated percapita government spending" and it's easy to see why Saudi Arabia feels pressure.
Yet their plan for dealing with this problem has been unclear.
On April 25, Prince Turki al-Faisal "announced that Saudi Arabia is set to increase its total production
capacity from 12.5 million barrels per day (mbd) today to 15 million mbd by 2020." Such an increase
would guarantee that Saudi Arabia remains the world's top oil producer. However, just five days after
this announcement was made, the Saudi Arabian Minister of Petroleum and Mineral Resources, Ali alNaimi, said 15 million mbd couldn't be produced by 2040, much less 2020.
There is a theory that Naimi's rejection of Faisal's predictions isn't based on a lack of confidence in Saudi
Arabia's technological or oilfield capabilities, but on the knowledge that the Saudis may already be
producing at a level which they will not be able to maintain for long.
Displacing OPEC creates massive oil flood from Saudi – controls all scenarios for price
drop
McCarthy, The Globe and Mall, energy reporter, Jones, the Globe and Mall, business
reporter, 13
[Shawn, Jeffery, 6-8-13, The Globe and Mall, “OPEC’s slipping grasp on the world’s oil market”,
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/opecsslipping-grasp-on-the-worlds-oil-market/article12431746/?page=1, 7-7-14, AAZ]
More than 50 years after it was created to wrest economic power from the major oil companies, the
OPEC oil cartel finds itself at risk of losing its dominant role in the global oil market. The group is
increasingly competing with new oil sources that are starting to chip away at its share in previously
secure markets, while a shaky global economy keeps demand for oil at bay. Also troubling for OPEC as it
looks to protect oil prices: One key member, long-suffering Iraq, is aiming to dramatically increase
production and flex its muscles again as a major exporter.
It adds up to a nightmare scenario for the group. China, Russia and other countries are taking early
steps to emulate the North American unconventional oil boom of recent years, which has the U.S. on
track to overtake Saudi Arabia as the world’s largest oil producer. Some key OPEC members,
meanwhile , are eager to pump as much as possible to bring in badly needed revenue , rather than
restrain output as part of any concerted effort to add upward pressure to prices.
The risk is that such a scenario leads to cutthroat competition and a flood of oil in global markets ,
triggering a plunge in prices that could threaten the economic and political stability of its member
nations.
“There’s a storm brewing on the horizon,” said Greg Priddy, an analyst with Eurasia Group, a
Washington-based political risk firm, “You are looking a year or two out before it becomes acute. But
that is the direction we are headed.”
How Saudi Arabia and the rest of the fractious group cope with its external and internal threats will
have ripple effects around the globe , from consumers ever sensitive to pump prices, to China’s fastgrowing industries, to Alberta’s high-cost oil sands producers that need rich enough prices to justify new
investment in their own vast reserves.
Increased energy independence removes current structures – floods the market and
drops prices
Congregalli, Freelance journalist, 13
[Matteo, 2-15-13, Urban Times, “Without Oil. Without Allies: USA and the New American Dream of
Independent Energy”, http://urbantimes.co/2013/02/usa-oil-saudi-arabia-independent-domesticenergy-supply/, 7-7-14, AAZ]
At the end of the day, the United States of America is overcoming Saudi Arabia for a simple reason. The
cuts on Saudi production are part of a well-planned economic strategy. The more oil you pump, the
more oil you have on the market. The more oil on the market, the lower the price of the oil. The Saudi
government knows that injecting the market with more than the necessary amount of oil would reduce
revenues. To top it all, American oil production is expected to overcome the Saudi’s 2020. However,
Saudi Arabia will regain its position by 2027.
US is living the dream, for now. The perspective of giving up the dependence on Saudi oil is appealing.
The Keystone pipeline will open job positions for thousands of American workers which is good news as
7.9% of the working population remain unemployed. But the achievement of energy independence
sounds like a fluffy fairy tale without the “living happily ever after”.
Saudi oil production is determined by Saudi government policy. Saudis could potentially produce more
oil than they do now, but for whatever reasons they choose not to do so.
“I believe we need an all-of-the-above strategy. That means producing more biofuels. More fuelefficient cars. More solar power. More wind power,” Barack Obama stated, in Cushing, last year.
The question we should ask is whether an energy independent country – whose economy is based on
domestic fossil fuels – is actually motivated to move towards a green economy model?
So far, small countryside town such as Hardisty and Cushing are getting bigger, richer and prouder,
among crop fields. The Keystone is the symbol of this new era. But, if the forecasts are correct, this
new American dream won’t last long . If green energy merely remains an electoral pledge and Saudi
re-opens the taps while the US is unable to remain energy independent, the backlash could be far
worse than any price fluctuation or discounted stock of F-15. Without green energy, without oil,
without allies.
The plan surges the production of alternative energy – causes collapse of oil
investment
Johnson, Wall Street Journal Correspondent, 09
[Keith, 2-11-09, Wall Street Journal, “Crude Awakening: Saudi Oil Minister Warns Against Renewable
Exuberance”, http://blogs.wsj.com/environmentalcapital/2009/02/11/crude-awakening-saudi-oilminister-warns-against-renewable-exuberance/, 7-7-14, AAZ]
Oil executives will talk about how the world needs more renewables and more oil. But there is tension
between crude oil purveyors and renewable energy adherents.
Saudi Arabia Oil Minister Ali Naimi lobbed a verbal salvo in the crude vs. renewables scuffle. In a speech
to oil executives in Houston, he warned that promoting the growth of renewable fuels too quickly
could create a “nightmare scenario” – too little investment in oil, while renewables aren’t yet ready to
pick up the slack.
His remarks seemed aimed at officials in Washington D.C. and particularly members of President Barack
Obama’s administration. His speech comes at a time when the new Obama administration embarks on
an ambitious path to steer the country’s energy policy away from fossil fuels. President Obama was to
instate a national renewable electricity mandate and a carbon cap-and-trade system this year.
“We must be mindful that efforts to rapidly promote alternatives could have a ‘chilling effect’ on
investment in the oil sector,” he said at the Cambridge Energy Research Associates oil conference,
according to his prepared remarks. “ A nightmare scenario would be created if alternative energy
supplies fail to meet overly optimistic expectations, while traditional energy suppliers scale back
investment.”
That echoes an argument made last summer by a Dutch think tank–basically, that oil-producing nations
are just as concerned about “security of demand” as consumer countries are about “security of supply.”
Mr. Naimi’s warning against ramping up investments and expectations in renewable energy comes at a
time when OPEC members are feeling the financial pain of low crude oil prices.
Mr. Naimi, the longtime oil minister for Saudi Arabia, is one of the most influential voices in the oil
world. But he speaks as the Organization of Petroleum Exporting Countries has slashed output in an
effort to cut supplies and keep prices from falling.
Still, Mr. Naimi acknowledged that the world was likely headed towards a transition away from fossil
fuels. But he said it wasn’t clear which fuels or technologies would be able to gain the scale and
economics needed to replace crude oil.
The cost of replacing the current “highly efficient and economical” energy infrastructure with
alternatives would be “prohibitive” in the short term. “A prudent approach demands we recognize that
the massive scale of the global energy system makes rapid change costly and impractical,” he said.
He also that he believed current prices were “unsustainable” and unsupported by market fundamentals.
He blamed oil speculators for pushing up oil prices too high last year, but said they also should shoulder
blame for “exaggerated price weakness.” He said financial markets were guilty of “group-think,”
forgetting that the oil business is cyclical.
Members of OPEC and oil analysts have warned repeatedly in recent months that the low price of
crude oil could lead to an underinvestment and crimp future oil supplies. An economic recovery and
growth in oil demand could send prices shooting back up, warn analysts.
Exts – yes capacity
Saudi Arabia has largest spare capacity, empirically used to influence market.
Dow Jones 13
[The Dow Jones, 5/1/13, Gulf News, “Rift emerges over Saudi oil policy”,
http://m.gulfnews.com/business/oil-gas/rift-emerges-over-saudi-oil-policy-1.1177886,
accessed 7/12/13, ALT]
Saudi Arabia currently produces around 9 million barrels a day of oil, leaving 3.5 million barrels a day
as spare capacity.
The level of Saudi Arabia’s spare capacity is closely watched by oil markets. Two of the strongest
periods of oil price increases-from 2003 to 2005 and 2007 to 2008-coincided with Opec spare
production capacity, most of which is in Saudi Arabia, falling to historic lows.
“Saudi Arabia’s national production management scheme is set to increase total
capacity to 15 million barrels per day and have an export potential of 10 [million] barrels
per day by 2020,” Prince Faisal, a former Saudi ambassador to the US and UK said in a
speech at the Belfer Centre for Science and International Affairs of Harvard University.
The speech was delivered last week and posted on the centre’s website late Monday.
The prince clarified his position in an email on Tuesday. “Saudi consumption may reach
five million barrels of oil by then [2020], hence the production capacity of fifteen million
barrels,” is required to maintain country’s export potential, he said.
Saudi Arabia would be lucky to go past production of 9 million barrels a day by 2020
and, “we don’t see anything like 15 million barrels a day before 2030, 2040,” said Naimi
in an appearance at the Centre for Strategic and International Studies in Washington DC
Tuesday.
Any decision to increase capacity would be taken by Saudi Arabia’s oil ministry, which
directs Aramco, or the kingdom’s Supreme Petroleum Council, which is chaired by the
king.
Prince Faisal’s comments also run counter to the official position of the state-controlled
Saudi Arabian Oil Co., also known as Aramco. Aramco declined to comment Tuesday,
but its top executive has previously ruled out increasing capacity to 15 million barrels a
day despite acknowledging that domestic use of crude would rise and thus limit exports.
Aramco’s Chief Executive Khalid Al Falih ruled out increasing Saudi production capacity
to 15 million barrels a day in 2011, despite acknowledging that domestic use of crude
would rise and thus limit exports, because he said expansion plans in other producing
countries such as Iraq and Brazil should be enough to satisfy world markets.
Before 2011 Saudi Arabia had planned to increase oil production capacity to 15 million
barrels a day.
Some economists predict that if Saudi Arabia’s current energy-consumption growth rate
of 7 per cent a year continues unabated, within 20 years the kingdom will burn more
than eight million barrels a day domestically, or around two-thirds of its current
production capacity of 12.5 million barrels a day.
Saudi Arabia last year consumed around 3 million barrels per day of oil, according to the
US Energy Information Administration, almost double its 2000 level and putting it on
track to use more than 5 million barrels a day if a 7 per cent annual growth rate were to
continue.
Aramco’s Al Falih acknowledged in 2011 that, if left unchecked, domestic energy
consumption would rise to 8.2 million barrels of oil a day by 2030.
If Saudi Arabia were to raise its oil production capacity to 15 million barrels a day, it would have
enough of a supply buffer to instantly replace all of the production of Iraq, the second-largest member
of the Organization of the Petroleum Exporting Countries, Prince Faisal said.
Iraq’s oil exports should rise to 3.4 million barrels a day in 2014, said the country’s oil
minister Abdul Kareem Luaiby on Tuesday.
Investment of over $100 billion in oil infrastructure will enable to kingdom to remain for
many more decades the major supplier of energy to the world, Prince Faisal said.
Saudi Arabia, which is currently producing about 9 million barrels a day of oil, is the only exporter in
the world that can offset major supply disruptions at short notice. It did so in 2011 after the civil war
in Libya took more than 1.5 million barrels a day of oil off the market, and in 1990 after the
suspension of Kuwaiti output during the Iraqi invasion.
Saudi Arabia can flood market- 80’s practices prove.
Ergo Task Force 12
[The Ergo Task Force Includes: Manager of Production Engineering and Future Oilfield
Development for Saudi Aramco, former Exxon Mobile Treasurer, petrochemist, R & D
Director for Leading Middle East NGO, Executive Director of Leading Gulf Affairs Think
Tank, Energy Advisor to the Saudi Ministry of Commerce, Former OPEC Employee,
February 2012, “The Waning Era of Saudi Oil Dominance”,
http://www.ergo.net/ErgoSpecialReport_Saudi_Oil_Feb2012.pdf, accessed 7/12/13, ALT]
Saudi Arabia’s importance to global oil markets is due not solely to its immense reserves and
production, but also its spare production capacity, which far surpasses that of any other country. Oil
producers with spare capacity can ¶ ramp up production to calm turbulent markets and prices in
response to a crisis—Saudi Arabia did so during the high market uncertainty in the period immediately
after the September 11, 2001 terrorist attacks in the US, and again during the 2011 Libyan unrest.
However, spare capacity can also be wielded as a tool to undermine other market participants.
Between 1979 and 1980, Saudi Arabia warned other OPEC members that high oil prices would
eventually curb demand. It enforced its view in 1981 by flooding the market, bringing down prices and
slowing upstream expansion programs in countries that had sought high oil prices.
At present OPEC spare capacity is approximately 3 mbpd. Saudi Arabia represents approximately
98% of this amount, making it the only country that can effectively and strategically make use of
spare capacity. Spare capacity also provides a proxy for price movements in oil. Recent history reveals a
close correlation between spare capacity and the price of oil: when spare capacity dwindles, the risk of a
supply disruption grows and prices rise. Two of the sharpest periods of oil price inflation—2003 to 2005
and 2007 to 2008—coincided with OPEC’s spare capacity falling to historic lows. Armed with immense
reserves and production capability, Saudi Arabia has historically played the role of the world’s swing
producer, helping to mitigate shocks to the oil market.
Saudia Arabia can flood the market to decrease prices— capacity and political
support.
Taqui AlBab Center for Strategic Studies Director 11
[Dr. Jassim, 7/4/11, The Pakistan Observer, “Saudi Arabia leads the move to bring down
oil prices”, http://pakobserver.net/detailnews.asp?id=101173, accessed 7/12/13, ALT]
Saudi Arabia has emerged as an international player and a savior by insisting on increasing the oil
production to bring down the oil prices. It is supported by the State of Kuwait, United Arab Emirates
and the State of Qatar.
Prince Turki Al-Faisal has stated that Saudi Arabia can flood the international market with oil to bring
down the prices. Saudi Arabia has the capacity to achieve this feat. It has a spare production capacity
of 4 million barrel per day. It is the world leading oil producer and can achieve what it promises. It has
also the financial resources to further expand oil production at a fairly quick time.
Saudi Arabia has ability to control the oil market— can export up to 10 million barrels
a day.
Peixe Oil Price 13
[Joao, 5/2/13, “Saudi Arabia Aim to Increase Oil Production to 15 Million Barrels a Day by 2020”,
http://oilprice.com/Latest-Energy-News/World-News/Saudi-Arabia-Aim-to-Increase-Oil-Production-to15-Million-Barrels-a-Day-by-2020.html, accessed 7/12/13, ALT]
One of Saudi Arabia’s main strengths, which has allowed it to invest heavily in
infrastructure and develop its economy, is the fact that it boasts a huge spare capacity with
which it can stabilise the global oil market, and influence prices, by either increasing or decreasing
production volumes. By increasing total production to 15 million barrels a day, Saudi Arabia
will be able to increase exports to 10million barrels a day.
Link Magnifier
Even small fluctuations in prices causes shocks – multiple warrants
Nerurkar, Congressional Research Service energy policy specialist, 11
[Neelesh, 4-1-2011, Congressional Research Service, “U.S. Oil Imports: Context and Considerations”,
http://fas.org/sgp/crs/misc/R41765.pdf, 7-7-14, AAZ]
Domestic supply disruptions can also shift trade flows. After hurricanes Katrina and Rita shut in oil
production in the U.S. Gulf of Mexico, U.S. imports increased by around 0.7 Mb/d between July and
October 2005. The increase was in refined products; hurricanes shut down more refining capacity than
crude oil production. Crude imports fell.
Supply disruption in countries that are not traditionally major sources of U.S. imports may still have
significant implications for the United States because they raise the price of oil worldwide. The oil
market is globally integrated , refiners can shift the crude they use, and refined products are
interchangeable commodities; so a disruption anywhere can affect oil prices everywhere . For
instance, the United States imported only around 0.1 Mb/d of oil from Libya in 2010. (For context, the
U.S. consumed about 19.2 Mb/d in 2010.) Most of Libya’s crude supply went to Europe. But when
unrest shut down Libya’s exports in February 2011, global prices rose , including prices for oil
imported into the United States from elsewhere and oil produced domestically. Global supply was
reduced and European refiners had to look to other oil sources, bidding up those oil prices to secure
substitute supplies.10 The price of oil may rise until it makes up for the amount of supply no longer
available due to the disruption. This can occur by price rising enough that some consumers no longer
demand oil and/or suppliers bring additional production to market.11 Many oil producers and
consumers are inelastic to price changes when considering how much to supply or consume, especially
in the short run, so seemingly small disruptions can lead to more significant percent changes in the
price of oil .
a/t: economy turn
High oil prices improve global growth—exporting countries re-invest their revenues in
global manufacturing and service sectors
McKillop, Energy economist and consultant, 2004
[Andrew, 4-19-04, Oil and Gas Journal, “A counterintuitive notion: economic growth bolstered by high
oil prices, strong oil demand,” p. 1, Lexis, KMM]
The real impact of higher oil prices, certainly up to the range of about $ 60/bbl, is to increase
economic growth at the composite worldwide level. This is the main reason why demographic oil
demand during 1975, with oil prices at $ 40-65/bbl in 2003 dollars, was significantly higher than it is
today. It should be clearly understood that if the demographic demand rate in 2003 was the same as
in 1979, then world oil demand in 2003 would have been 95.4 million b/d. Relative to real total world
oil demand at this time (about 78 million b/d), the additional capacity needed would be close to two
times Saudi exports, more than three times Russia's export offer, or well above five times
Venezuela's current export capacity. There is no certainty at all that world oil supply would or could
have been able to meet this demand. Higher oil prices operate to stimulate first the world
economy, outside the member countries of the O rganization for E conomic C ooperation and
D evelopment, and then lead to increased growth inside the OECD. This is through the income, or
revenue, effect on oil exporter countries, and then on metals, minerals, and agrocommodity
exporter countries, most of them low income (per capita gross national product below $ 400/year).
Almost all such countries have very high marginal propensity to consume. That is to say that any
increase in revenues, due to prices of their export products increasing in line with the oil price, is
very rapidly spent on purchasing manufactured goods and services of all kinds. During 1973-81, in
which oil price rises before inflation were 405%, the New Industrial Countries (NICs) of that period -notably the so-called "Asian Tigers" Taiwan, South Korea, and Singapore -- experienced very large
and rapid increases in solvent demand for their export goods. In easily described macroeconomic
terms, the revenue effect of higher oil prices "greasing economic growth" was and is much
stronger than the price effect on industrial producers. NICs as a group or bloc of economies rapidly
expanded their oil imports and increased their oil consumption as prices increased in 1974-81,
because demand for their export goods had increased, due to the global economic impacts of higher
oil and "real resource" prices. This has very strong implications for oil demand of today's emerging
and giant NICs with large populations and immense internal markets: China, India, Brazil, Pakistan,
and Iran. For the much smaller NICs of 1975-85, their oil import trends during 1974-81 show
dramatic growth only slightly impacted by the major price rises of the period. In general terms, the
NICs Taiwan, South Korea, and Singapore increased their oil demand by about 60-80% in volume
terms in this period of a 405% increase in nominal prices (Table 2).
High oil prices don’t hurt the global economy anymore—Structural changes and
reforms
Decressin, IMF Researcher, 2012
[Jorg, 5-25-12, International Monetary Fund, “Global Economy Learns to Absorb Oil Price Hikes,”
http://www.imf.org/external/pubs/ft/survey/so/2012/num052512a.htm, Accessed: 7/12/14, JO]
Despite a fourfold increase in oil prices over the past decade, the world has absorbed the price hikes
with relatively little disruption due to fundamental changes in the workings of the global economy,
and the use of macroeconomic policy to mitigate the effects of rises.
During the current economic downturn, the price of oil hit over $100 a barrel, and prices rose close to
levels only seen in the 1970s. But the increases have not triggered global recessions as they did in the
1970s and 80s.
In new research, IMF economists attribute this resilience to five underlying factors:
1. Stronger demand
The reason for the current price hikes differs from the past. Increases in the 1970s and 1980s were
caused largely by sharp disruptions to world supply. In contrast, a prime reason for the increases since
2000 has been stronger-than-expected demand from emerging market economies.
The strong growth of emerging markets has benefited both them and the global economy: raising living
standards and increasing their demand for products made abroad.
A side-effect of this may have been an increase in oil prices, but this has not derailed the benefits of
increased growth.
2. Central bank policies
Central banks and economies have become more adept at dealing with price shocks. In the 1970s and
1980s, oil price rises triggered fears of inflation, and workers would try to protect themselves by
demanding higher nominal wage increases. This had the effect of setting off wage-price spirals.
Now, greater awareness of the impact of high wage increases—including lost employment and reforms
to labor markets—have led to more job-friendly wage setting. Central banks have become more adept
at convincing workers that oil price increases will not feed through into inflation.
Today, headline inflation temporarily increases after an oil price increase, but nominal wages hardly
respond. Workers have grown to expect this rise in headline inflation, and anticipate that it will be
temporary.
Given the experience of the past, more recently many oil-importing economies with strong central
banks have experienced little impact on core inflation and wage increases, despite oil price rises.
This has allowed central banks to be more supportive of promoting recovery in the economy after an
oil price increase, rather than having to raise interest rates to dampen inflationary expectations.
3. Recycling the benefits of oil profits
The revenues from oil exports are flowing back to oil-importing economies. This helps bring down
interest rates for households and firms, and so supports investment and growth in these economies.
4. Greater efficiency
Oil price shocks do not have the same impact as in the past because economies have become more
efficient in the use of energy. The amount of energy it takes to produce a dollar of income has been
steadily declining for 40 years. This decline in energy intensity is expected to continue.
Major emerging markets are also becoming more efficient in the use of energy, and they are expected
to continue to make efficiency gains. By 2030, the major regions of the world—the United States,
China, and India—are projected to have the same energy intensity.
a/t: airlines turn
U.S. Airline industry growing now
Maxon, Dallas News, 4-21-14
[Terry, 4-21-14, Dallas News, “Profits expected to climb among most U.S. airlines ,”
http://www.dallasnews.com/business/airline-industry/20140421-profits-expected-to-climb-amongmost-u.s.-airlines.ece, Accessed: 7/13/14 , JO]
No question about it, this past winter really socked the first-quarter earnings of U.S. airlines, to the tune
of many millions of dollars.
So why are airline executives smiling?
Despite the disruptions caused by the severe and repeated storms, most carriers will report higher
earnings in the three months that ended March 31 than in the same period of 2013.
The first quarter, traditionally a money loser, will be a moneymaker in 2014.
Among the country’s four largest carriers, No. 3 Delta Air Lines Inc. kicks off the air earnings season
Wednesday, followed by Nos. 1, 2 and 4 — American Airlines Group Inc., United Continental Holdings
Inc. and Southwest Airlines Co. — on Thursday.
Of those, only United Continental is expected to report a year-over-year decline or a loss. Analysts
expect the parent of United Airlines Inc. to post a loss of $1.35 a share or just under $500 million. That
compares with a $325 million loss in first quarter 2013.
Offsetting that, though, are nice profits expected at American, Delta and Southwest. Analysts are
looking for American to report a profit of 48 cents a share, or more than $350 million. At Delta, the
estimate is for profit of 29 cents a share, or just under $250 million. Southwest is expected to report a
profit of 17 cents a share, or about $122 million.
In an April 10 report, Deutsche Bank analyst Michael Linenberg projected that the industry will earn
$397 million in the “seasonally challenged” quarter, compared with a net loss of $65 million in first
quarter 2013.
“Not only is it rare for the US airline industry to report a net profit for the Mar Q — last one was
observed in 2007 — but this year’s result is especially satisfying given the disruptive weather (+80,000
cancellations) and absence of Easter,” Linenberg wrote.
‘Worst winter’
Analyst Helane Becker of Cowen and Co. called this past winter “the worst winter we’ve had for flight
cancellations. Despite the impact from the storms, we believe the demand environment has remained
strong, helping pricing improve.”
Airline resurgence coming now—Predictive evidence
The Economist, 2013
[12-27-13, The Economist, “Good times for the airline industry,”
http://www.economist.com/blogs/gulliver/2013/12/airline-profits, Accessed: 7/13/14, JO]
The much-maligned airline industry is in the middle of a resurgence—according to the airline industry
itself. The International Air Transport Association (IATA), the trade group for the world's biggest airlines,
said this month that it expects industry profits to hit a record $19.7 billion in 2014, an increase of more
than 50% on the $12.9 billion estimate made for 2013.
Driving the trend, IATA says, are "improvements to the industry’s structure" (read: big airline mergers)
and lower jet-fuel prices. Jet fuel is the single largest expense for airlines, so if its price falls, their profits
generally rise. Still, airlines' industry-wide net profit margins are not big: 1.8% of revenues in 2013, with
2.6% of revenues expected for next year. And getting fuel out of the ground and then refining and
selling it remains a far more profitable business than flying planes: a single oil company, Exxon Mobil,
makes more money than the entire global airline industry combined.
U.S. aerospace is high and set to rise
Seattle Times, 6-5-14
[6-5-14, Seattle Times, “Editorial: A federal nod for Washington’s aerospace industry ,” Editorial: A
federal nod for Washington’s aerospace industry , Accessed: 7/13/14, JO]
Washington State knows aircraft manufacturing is one of its crown jewels, and it is nice to see the other
Washington knows it, too. The U.S. Economic Development Administration last week designated the state’s
aerospace industry as one of a dozen “manufacturing communities” nationally that will be eligible for
a torrent of federal economic development money. Boeing sets the pace for Washington’s thriving industry,
and the jetmaker’s supply chain runs deep — a total of 1,350 companies in this state with 132,000
workers. It is the biggest aerospace cluster in the world , boasts the Puget Sound Regional Council, which applied
for the special designation. The federal program was designed to promote manufacturing clusters like these — shipbuilding on
the Alabama gulf coast, metals machining in the Chicago area and so forth. Washington and the 11 other manufacturing
communities nationwide will be first in line for some $1.3 billion in federal economic development funds and other assistance
over the next two years. The regional council has some big plans, like training programs that emphasize
composite technology, the big new thing in aircraft construction. It will seek funds for an effort to map out the
supply chain to see where gaps might exist locally, for biofuels research at the state’s research universities, and for
improvement to regional airports and rail spurs. The federal initiative is a good start, and the focus on
Washington aerospace is understandable because it is a highly concentrated, easily definable group of
companies. But Dave Gering of the Manufacturing Industrial Council of Seattle points out that manufacturing is more than
just aerospace. Manufacturing is responsible for 17 to 18 percent of the state’s jobs and a third of the state’s economic output.
Non-aerospace manufacturing is equally deserving of recognition and encouragement. Where Washington manufacturing is
concerned, airplanes are just the beginning.
High oil prices are key to the airline industry—Drives out small competitiors
Mayerowitz, Associated Press Airline reporter, 2014
[Scott, 4-19-14, Poughkeepsie Journal, “High oil prices help airlines ,”
http://www.poughkeepsiejournal.com/story/money/2014/04/19/high-oil-prices-helpairlines/7887771/, Accessed: 7/13/14, JO]
Airline executives frequently complain about fuel costs. But the truth is higher prices actually have been
good for business.
In the past six years, airlines overhauled how they operate to adjust to this new reality. They exercised
more discipline by offering fewer seats, which ensures airfares are high enough to cover costs.
Unprofitable routes were eliminated. Every expense was scrutinized.
These changes, along with high oil prices, created an insurmountable roadblock to startup airlines that
hope to undercut established carriers.
“Traditionally, it was too easy to start an airline and too difficult to kill one off,” said Jamie Baker, an
airline analyst with JPMorgan Chase.
No more.
A decade ago, airlines were paying just $1.42 a gallon for fuel, when adjusted for inflation. Last year,
they paid an average of $3.03 a gallon, the Bureau of Transportation Statistics said. Fuel now accounts
for more than one-third of airlines’ expenses, overtaking salaries, wages and benefits as the biggest line
item.
High oil prices forced the major airlines to do business differently. They grounded older, gas-guzzling
jets. Then they charged extra for checking baggage and raised other fees. More passengers were
packed into planes, and mergers helped push airfares higher.
The average cost of a roundtrip domestic ticket — including baggage and reservation change fees —
grew to $378.62 from $351.48 in the last five years, when adjusted for inflation.
All of that has airlines on pace for a fifth consecutive year of profits.
A big reason for the streak: The majors aren’t facing the myriad fly-by-night start-ups that disrupted
their business in the past. Low-cost carriers like PeopleExpress and ValueJet used to be able to enter
markets, charge a lot less to fly and push established carriers out.
Since fuel is now such a great expense, that doesn’t happen anymore, Scott Kirby, president of
American Airlines, said at a recent aviation symposium in Phoenix. “It’s an equalizer,” he said.
Jeff Knittel, president of transportation and international finance at CIT, which leases planes to airlines,
said high fuel costs created financial discipline among carriers that made them look closely at every
expense — in the air and on the ground.
As part of their quest to reduce fuel consumption, airlines have replaced drink carts with new, lighter
ones. Planes now taxi with only one engine running. And wingtips have been redesigned to reduce drag.
“It has forced efficiency throughout the entire organization,” Knittel said.
High oil prices also have caused lenders to look closer at business models. In the past, they just
considered the collateral — the airplane — that they were lending against.
“It makes the merits of the airlines matter more than they have in the past,” said Hunter Keay, an airline
analyst with Wolfe Research.
Airlines are expanding only to cities where they know they can make money, limiting competition and
keeping everybody’s flights profitable. Instead of fighting to become the largest airline in a city, airlines
now make rational decisions based on profitability.
“The only universal disciplinarian across the entire global airline industry is high oil prices,” Keay said.
a/t: resource curse
No inevitable resource curse – governance policies
Craig, Video Journalist for CNN, 2013
[Jill, 5-16-13, Voice of America News, “South Sudan 'Failing' at Resource Management,”
http://www.voanews.com/content/south-sudan-failing-at-resource-governance/1662417.html,
Accessed: 7-13-14, KMM]
WASHINGTON - A new report says one billion people could have their lives transformed with better
governance and management of their countries' natural resources.
The study by Revenue Watch, which was released Wednesday in Washington, D.C., says that less than
20 percent of the 58 countries studied "embraced openness and accountability." These 58 countries
produce 85 percent of the world's petroleum, 90 percent of the world's diamonds, and 80 percent of the
world's copper, according to Revenue Watch.
Revenue Watch is a New York based non-profit that, according to its website, works to reduce
corruption and improve governance in resource rich countries.
The 58 countries in the study were evaluated on four factors - institutional and legal setting, reporting
practices, safeguards and quality controls, and general governance environment.
Revenue Watch says that most of the worst performers depend almost exclusively upon revenues from
natural resources as their main source of income. South Sudan, the most oil dependent country in the
world, received a failing grade, ranking 50th out of the 58 countries.
Revenue Watch analyst Marie Lintzer, an analyst with Research Watch, worked on the project.
"They don't have an open and transparent oil sector," she said. "By that, we mean that they do not
publish a lot of information about the oil revenues that they get, and their checks and balances are
weak."
"And actually the only part where South Sudan scores really high on our index is regarding the
institutional arrangements," she continued. "They have laws in place and since 2011, they have issued
some laws regarding transparency in the oil sector. And South Sudan has a very high score in that
respect."
But, Lintzer added that while South Sudan may have laws on the books, such as the 2012 Petroleum Act,
implementation of the laws is a problem.
"For now, none of the government agencies have been publishing information, so you can't really find
anything," she said. "Whether it's reports that have been published by ministries, or online, that was the
main difficulty. Because you don't have any information on the sector."
South Sudan's dependence on its oil sector makes better governance a priority, according to Lintzer.
"Their entire economy is based on oil. And therefore, managing well your oil sector and having an
accountable and transparent oil sector is important for the economic development of that country and
for the sustainability of the economic growth that would go with that."
Revenue Watch President Daniel Kaufmann agreed, saying the issue is not only important for South
Sudan, but also for other countries ranking poorly on the index.
"But in terms of a development challenge of this decade, for these countries, it is the management, the
better governance, anti-corruption in natural resources," he said. "Because that is basically where
their domestic resources lie."
However, the Revenue Watch report states that being wealthy is not a precondition for good
governance of resources. The report said six of the top 11 performers on the index are middle-income
countries, including Mexico, Colombia, and Peru.
"The silver lining is that some are performing satisfactorily, and that shows that it can be done, that
there's no such thing as a deterministic resource curse," Kaufmann explained. Those countries that
are doing satisfactorily are not all rich industrialized countries. And that's very interesting news from
this data report."
Revenue Watch said the future of sub-Saharan African countries will depend on how well they manage
their oil, gas, and mineral resources.
Transparency solves – empirically proven
Naim, Senior Associate in the International Economics Program at the Carnegie
Endowment for International Peace, 2009
[Moises, Dr. Naím was ranked among the top 100 influential global thought leaders by Gottlieb
Duttweiler Institute, 8-31-09, Foreign Policy, “The Devil’s Excrement,”
http://www.foreignpolicy.com/articles/2009/08/17/the_devil_s_excrement, Accessed: 7-13-14, KMM]
One promising new idea is to force multinational corporations to be more transparent about their
contracts, investments, tax payments, and revenues in poor countries. The premise is that more
transparent information will curtail the ability of unaccountable politicians to use national resources
as if they were their own. Not all multinationals are accountable and willing to play by these rules,
however, and it takes more than the threat of posting a report on the Internet to stop a deeply
entrenched kleptocracy from stealing.
So, is all hope lost for poor countries with rich natural resources? Not quite. Chile and Botswana stand
out as success stories on continents where the resource curse has otherwise wreaked havoc. Their
experiences confirm what we know is needed to inoculate a country from the oil curse. But why they
were able to do so is still a mystery. Answers such as œgood leadership, œstrong governance, and
œreliable institutions only serve to mask our ignorance. Unlocking the secret of what enabled these
two poor countries to successfully lift the resource curse can spare millions from the devils excrement.
But nobody has done it yet.
Brazil proves Dutch disease is avoidable
Carrington, Head of Environment at the Guardian, 2010
[Damian, 8-5-10, The Guardian, “Can Brazil become the world's first environmental superpower?,”
http://www.guardian.co.uk/environment/2010/aug/05/brazil-environmental-superpower, Accessed: 713-14, KMM]
Câmara has adopted the slogan: "Brazil – the natural knowledge economy". He describes this as
applying knowledge and technology to commodities to boost their value, and reels off examples:
biofuels, in which Brazil leads world research thanks to its sugar cane ethanol and growing biodiesel
production; renewable energy – 47% of the country's energy is already green, a world record; and
climate change – Brazil's Amazon is vital to the planet's health. Of course, it also has plenty of timber,
beef, iron and aluminium, though he doesn't boast about those.
"Brazil's natural knowledge economy offers more opportunities for internal [national] research than
our manufacturing industry," he says. "There is no opportunity in, say cars, as VW designs those in
Germany." Câmara also suggests the approach will allow Brazil to avoid the "resources curse", reeling
off Venezuela, Angola, Saudi Arabia and Sierra Leone as examples. Brazil wouldn't be the first nation
to get rich on its resources, but it aims to be the first to do without destroying its own economy or
environment.
The effects of Dutch disease are easily manageable
Osava, IPS Correspondent, 2008
[Mario, 11-4-8, Inter Press Service, “ECONOMY-BRAZIL: Crisis Delays Threat of ‘Venezuelan Disease’,”
http://www.ipsnews.net/2008/11/economy-brazil-crisis-delays-threat-of-venezuelan-disease/,
Accessed: 7-13-14, KMM]
The consequent overvaluation of the real, the national currency, may be “deindustrialising” Brazil, by
reducing the competitiveness of the industrial sector, forcing it increasingly to import components and
transforming it into a “maquiladora” – a term for companies in duty free zones that import components
on preferential terms and assemble products for export, using cheap labour, without adding value or
technology.
This was the apparent trend, but a serious situation of “Dutch disease” will only come about towards
the end of this decade if the exchange rate is maintained at the level it stood at three months ago, at
just over 1.50 reals to the dollar, Julio Gomes de Almeida, a professor at the University of Campinas and
a consultant for the Institute of Industrial Development Studies (IEDI, founded by industrialists in 1989),
told IPS.
From 2006 until the first half of this year, “the expanding internal market reduced the impact of the
appreciated exchange rate” on the manufacturing sector, he said.
Appreciation of the national currency is “the mechanism through which the disease is transmitted,”
but strong growth in domestic consumption “to a large extent compensated” for the overvalued real,
he said.
The real stood at around three to the dollar in 2003, but the exchange rate fell to 1.56 reals per dollar in
early August this year. If this exchange rate continues, it will cause “severe damage” to industry,
according to the economist.
But capital flight, triggered by the international financial crisis that originated in the United States, has
led to a sharp depreciation of the real since September. Two weeks ago the real stood at 2.30 to the
dollar in Brazil, reaching a value of 2.52 on Oct. 23.
The Central Bank intervened, selling dollars after being authorised to use up to 50 billion dollars of the
country’s foreign reserves, which totalled 207 billion dollars in early October.
This had the effect of strengthening the real to nearly 2.10 to the dollar, thanks also to the anti-crisis
measures taken in the United States and Europe.
Brazil has had one of the most volatile exchange rates in the world in the past three months, if not the
most volatile, with sharp rises and falls in the value of the real within the space of a single day.
These are “devastating blows” that damage business and cause losses at a moment’s notice, since “all
the big companies have debts in dollars,” and the benefits of the devaluation of the real for exporters
“will only be felt in the long term,” Almeida said.
Many Brazilian companies have speculated on future exchange rates, wagering on a continued
overvaluation of the real. This could cause huge losses and aggravate the impact of the crisis in Brazil.
In any event, Almeida said the crisis brought about a “correction” in monetary policy, which seemed
“to actually be wishing for Dutch disease” by allowing speculative capital to enter and exit the country
freely, something that is not permitted in other emerging economies. When the present turmoil has
been overcome, some restrictions, however temporary, will have to be imposed, he said.
Now “a new international and national economy has been born,” and the excessive overvaluation of the
real has been left behind, although it remains to be seen what the exchange rate will be when the crisis
is over, the economist said.
His concern now, he added, is that at some future time, which the financial crisis has possibly delayed
for several more years, Brazil might become a major oil power, exporting the large reserves that were
discovered this year thousands of metres below the surface of the Atlantic ocean, under a salt layer,
some 250 kilometres off its southeastern coast.
The creation of a fund similar to Norway’s is being discussed, to convert oil riches into benefits for the
entire population, especially future generations, by investing in education and so avoiding “the curse
of oil” and “Dutch disease”.
***Aff***
Prices Low:
2ac
Prices low – Increased production will cause prices to drop
Epstein, Barron’s Economist, 3/29/2014
[Gene, Barron’s, “Here Comes $75 Oil,”
http://online.barrons.com/news/articles/SB50001424053111903536004579459323209921860,
Accessed:7/5/14, JO]
The long-term outlook for global oil prices is lower, perhaps much lower, giving a strong boost to the
U.S. economy while potentially crippling the economy of Vladimir Putin's Russia. Vast new discoveries of oil and
natural gas in the U.S. and around the globe could drive the oil price to as low as $75 a barrel over the
next five years from a current $100.
The demand side, too, will put pressure on the supremacy of petroleum. For the first time in its 150-year
history, the internal combustion engine can be run efficiently on alternative fuels from a number of
sources, including natural gas. As these alternatives are increasingly introduced, global consumption of oil will slow its
growth and flatten out.
Citigroup's head of global commodity research, Edward Morse, believes the combination of flattening consumption
and rising production should mean that "the $90-a-barrel floor on the world oil price over the past
few years will become a $90 ceiling." Within a new trading range with a $90 ceiling, Morse sees an
average of $75 as plausible.
That's a far cry from the old paradigm, promoted in the past 40 years, which posited ever-greater demand for petroleum as
developing economies grew, and a slowdown on the supply side -- the looming prospect of "peak oil," whereby global
production maxes out and falls into decline. To the contrary, unconventional sources of crude oil totaling more
than a trillion barrels -- the equivalent of more than 30 years of extra supply -- have been discovered
in the past five years. The majority is recoverable at $75 or less, and much is now being tapped.
Exts – prices low
Oil prices will fall to $87 in 2015—Increased supplies, decreased demand, and
Norwegian government predictions
Reuters, International News Agency, 2013
**1 crown= $0.164, 535 crowns= $87.74
[8-23-13, Reuters, “Norway Cuts Oil Price Forecasts for 2014, 201,”
http://www.rigzone.com/news/oil_gas/a/128622/Norway_Cuts_Oil_Price_Forecasts_for_2014_2015,
Accessed: 7/7/14, JO]
OSLO, Aug 23 (Reuters) – Norway's government is cutting its projections for oil prices by 4 percent for
next year and 11 percent for 2015, reflecting higher supply and lower demand from the world's two
biggest economies, its prime minister said late on Thursday.
The Nordic country is the world's seventh-largest oil exporter. It can use up to 4 percent of its oil and
gas revenues in its national budget, so it runs oil price projections to establish how much money it can
count on.
The government now expects the average per barrel price for oil to fall to 600 crowns ($98.4) in 2014
from its earlier view of 625 crowns. It expects prices to drop further to 535 crowns in 2015 .
"There is growing uncertainty about oil prices. There is great uncertainty because the United States
produce more (oil) ... In addition, China is buying less than before," Prime Minister Jens Stoltenberg
told public broadcaster NRK.
"We must be prepared for more falls (in oil prices)," he said during a break in negotiations for the 2014
budget.
Oil prices will decrease to $80 by 2020—location and extraction costs are falling, and
supply is rising
Fin, OilPrice reporter, 2012
[Al, 9-2-12, OilPrice.com, “Where Will Oil Prices be in 2020?,” http://oilprice.com/Energy/OilPrices/Where-Will-Oil-Prices-be-in-2020.html, Accessed: 7/8/14, JO]
Citi is projecting that (PDF) oil costs will stabilize at $80 to $90 a barrel by the year 2020. And a recent
report from Harvard's Belfer Center warns that oil prices may fall precipitously over the next several
years, due to a coming global oversupply of oil & gas.
How can these analysts be certain that their predictions will be accurate?
Several factors go into setting the price of oil. Supply and demand are both crucial.
In terms of supply, costs of finding and producing a barrel of oil help determine whether it is worth
producing that particular oil reservoir:
Production or lifting costs are the expenses associated with bringing oil and gas from the reservoir to
the surface, separating the oil from any associated gas, and treating the produced oil and gas to
remove impurities such as water and hydrogen sulfide. Worldwide lifting costs have been increasing
since 2001 and U.S. costs have been higher than foreign cost since 2004. In 2007, U.S. production costs
were $11.25/barrel of oil equivalent (BOE) and foreign costs averaged $8.88/BOE. These figures include
production taxes of $2.90/BOE in the United States and $2.41/BOE internationally.__Petrostrategies
Although costs for finding and producing oil increased in the first part of the decade beginning in
2000, such costs decreased in the latter years of that decade:
Finding and lifting costs both declined.
Average worldwide finding costs for the FRS companies decreased to $18.31 per barrel of oil
equivalent (boe) of reserves added in the 2007-2009 period compared with the 2006-2008 period, a
decline of $5.79 per boe from 2008. Finding costs declined in all FRS regions except the Former Soviet
Union, Africa, and the Middle East. The U.S. Offshore, which had the highest finding costs among the
FRS regions in 2006-2008, had the largest fall in 2007-2009. Europe's costs also fell substantially in 20072009. Europe had the highest finding costs among the foreign regions in 2006-2008. Canada displayed a
large decline in part likely because of the inclusion of oil sands in 2009.
Reversing an almost decade-long trend, worldwide total lifting costs for the FRS companies fell $2.66
per boe, to $10.04 per boe, in 2009. Total lifting costs also fell in each of the FRS regions except
Canada, where they rose $2.49, probably reflecting the inclusion of oil sands in 2009. _USEIA
The fall in lifting costs in the latter part of the 2000s reflects the drop in cost of oil and subsequent
reduction in taxation, which is generally tied to market prices.
Oil prices are declining—ISIS is receding and Libya export terminals
Associated Press, 7/3/14
[CBS News, “Crude oil prices dip as Iraq fears ebb,” http://www.cbsnews.com/news/crude-oil-pricesdip-as-iraq-fears-ebb/, Accessed: 7/5/14, JO]
The price of oil dropped below $104 a barrel Thursday as the risk of supply disruptions in Iraq
continued to recede and two key export terminals in Libya were expected to reopen soon.
By early afternoon in Europe, benchmark U.S. crude for August delivery was down 68 cents to $103.80
a barrel in electronic trading on the New York Mercantile Exchange, its sixth day of declines. On
Wednesday, the contract fell 86 cents to $104.48.
Brent crude, a benchmark for international oils, was down 61 cents to $110.63 a barrel on the ICE
Futures exchange in London.
Oil prices in recent weeks have largely been driven by concerns that violence in Iraq, OPEC's secondlargest producer, would disrupt supplies. Oil reached a 10-month closing high of $107.26 on June 20.
The al-Qaida-inspired Islamic State of Iraq and the Levant rampaged across Iraq in recent weeks,
feeding off the chaos of neighboring Syria's civil war to seize control of a large chunk of territory in
Iraq and effectively erasing the border between the two countries.
Despite the chaos, Iraqi oil production continued and prices began to stabilize when the militants
advance appeared to have slowed after encountering stiff resistance in Shiite-majority regions of Iraq.
Additionally, an agreement in Libya between the central government and a regional militia was
expected to lead to the reopening of two eastern oil terminals which would boost the country's crude
exports by about 500,000 barrels a day.
Olivier Jakob of Petromatrix in Switzerland said that since the start of the crisis in Iraq, "the crude oil
market has seen no interruption of supply from the south of Iraq, an increase of supply from the north
of Iraq (Kurdistan) and the re-opening of ports in Libya."
The fall in oil prices came even as a report Wednesday from the U.S. Department of Energy showed
stockpiles of crude fell a larger-than-expected 3.2 million barrels last week due to increased refinery
activity.
Geopolitical problems no longer have much effect on oil prices—U.S. supply drives the
market
Warnes, Morningstar's equities research head, 6/20/2014
[Peter, Morningstar, “Geopolitical issues have muted impact on global oil prices,”
http://www.morningstar.in/posts/25792/geopolitical-issues-have-muted-impact-on-global-oilprices.aspx, Accessed: 7/7/14, JO]
In the past, the dangerous situation in Iraq would have sent oil prices soaring as supplies from OPEC's
(the Organisation of the Petroleum Exporting Countries) second-largest producer were threatened. But
a mere pebble has been thrown into the global oil pond with a ripple effect. A decade ago it would
have been a very large boulder instigating rogue waves.
The modest rise in oil prices in reaction to the combined Ukraine/Russian impasse and Iraqi situation
clearly demonstrates the significant change in the global oil/energy supply chain since the U.S. shale
oil revolution. The muted impact reflects the U.S. climbing the global oil/energy supply ladder and the
lessening of OPEC's stranglehold over global supply. Rising oil prices are an immediate additional tax on
global economic growth.
The discovery and the exploitation of the Marcellus Shale is a major game changer in the U.S. energy
equation. In just a few years, Marcellus Shale has transitioned from an upstart into the undisputed
champion of U.S. gas production. The speed of the transition is breathtaking -- growing from 2% of
domestic supply in 2007 to just below 20% in 2013. Production rates continue to climb despite a sharp
pullback in exploration and infill drilling activity.
Marcellus gas production, and by extension that of the U.S. as a whole, is unlikely to reverse any time
soon. At current production rates, the resource potential of the Marcellus is between 30 and 75 years.
But not all of the gas is cost-effective to extract.
That geopolitical issues are having a muted impact on global oil prices is a positive for global financial
markets. Reduced volatility in economically sensitive commodities such as oil has a knock-on effect on
volatility in global financial markets.
a/t: Predictive evidence
Don’t give their price predictions any weight—too many unknowns and everyone has
entrenched interests
Natural Resources Canada, 2010
[October, Natural Resources Canada, “Long Term Outlook: Crude Oil Prices to 2030,”
http://www.nrcan.gc.ca/energy/publications/markets/6511, Accessed: 7/7/14, JO]
There is a very large, unknown amount of crude oil in the earth's crust. As geological knowledge and
extraction technologies improve, more and more of this oil will become recoverable. Technological
improvement also constantly reduces the real cost of extraction of crude oil of any particular quality,
depth, and reservoir type. On the other hand, as the best oil pools are depleted, there is a need to move
from high quality, shallow, very permeable crude oil reservoirs to lower quality, deeper, and lower
permeability reservoirs. This "depletion effect" tends to cause higher extraction costs.
It then becomes a question of which effect predominates. At times, and for some resource types,
technological improvements may overwhelm any resource depletion effect, with a net result of lower
production costs over time. The price of most metals, in real terms, has declined since the 1950s.
A qualitative schematic of how future crude oil prices could evolve, based solely on the two main
theoretical considerations - resource depletion effects and technological improvement effects - is given
in figure 8.
Crude oil has many other complicating factors, of course, not least of which is the presence of a cartel
organization (OPEC), and a heavy concentration of global crude oil resources controlled by NOCs.
These factors mean that the above theoretical model is for some of the time, simply not relevant.
It is impossible to predict with complete accuracy whether any particular event that could have an
impact on the price of crude oil will occur, or their timing. This means that to a certain extent, future
crude oil prices and price fluctuations are not predictable . This could explain the significant variability
in the reference forecasts shown in table 5.
Reference forecasts project crude oil prices out into the future based on current market conditions. As
seen in table 5, to deal with uncertainty, several organizations including the U.S. Energy Information
Administration and the National Energy Board have high and low price forecasts, in addition to their
reference cases. These forecasts take in account a wide range of factors which could affect their oil price
forecasts. For these groups, the reference case is an average of their high and low price forecasts and
represents their best estimate of where crude oil prices could be in the future.
Scenarios project crude oil prices based on specific factors which could occur in the future. For
example, the IEA's so called "450 Scenario", shows the possible impact of greenhouse gas emissions
regulations on oil prices. By 2030, under the IEA's "450 Scenario", stringent greenhouse gas emissions
regulations result in crude oil prices which are $25 per barrel or 22 percent lower than its Reference
forecast.
Bank, Consultant, & Government Oil Price Forecasts
As seen in table 5, oil price forecasts vary dramatically. Forecasts which show a long-term trend
towards falling prices place more emphasis on technological advances or on the view that oil demand
will be weaker than expected by others (improvements in energy efficiency are cited as playing a strong
role in reducing the demand for oil).
Other forecasts, which see higher oil prices, place more emphasis on factors such as a continued rise
in Asian oil demand, the large volume of institutional investment in the crude oil market, the falling
value of the U.S. dollar, the fact that most global oil resources are controlled by NOCs, rising marginal
costs of oil production, and the established pattern of slow non-OPEC supply growth.
No U.S. Dependence:
IEA Report
U.S. oil independence by 2020—IEA Report
Kilcarr, Fleet Owner senior editor , 2012
[Sean, 11-13-12, Fleet Owner, “What an awesome global energy forecast! ,”
http://fleetowner.com/blog/what-awesome-global-energy-forecast, Accessed: 7/7/14, JO]
The International Energy Agency recently noted upon publication of the 2012 edition of its
annual World Energy Outlook (WEO) that “the global energy map is changing in dramatic fashion.”
Boy is it EVER! And what a shot in the arm it potentially offers for the U.S. – if we’re bold enough and
wise enough to seize it!
In the New Policies Scenario within the WEO, the IEA predicts that the U.S. will become a net exporter
of natural gas by 2020 and almost self-sufficient energy-wise, in net terms, by 2035. Also, North
America emerges as a net oil exporter by 2020, according to IEA’s analysis, accelerating the switch in
direction of international oil trade with almost 90% of Middle Eastern oil exports being sent to Asia by
2035.
“North America is at the forefront of a sweeping transformation in oil and gas production that will
affect all regions of the world,” noted IEA Executive Director Maria van der Hoeven. What she calls this
“extraordinary growth in oil and natural gas output in the U.S.” will in turn engender a “sea-change” in
global energy flows.
Here’s the big trend: what the IEA dubs the “recent rebound” in U.S. oil and gas production – driven
not only by upstream technologies that are unlocking light tight oil and shale gas resources but done
so on private lands in the face of resistance by the federal government – is spurring American
economic activity with less expensive gas and electricity prices, giving North American industry a
competitive global edge.
By around 2020, the IEA projects that the U.S. will become the largest global oil producer – overtaking
Saudi Arabia until the mid-2020s – with U.S. oil imports falling. By 2030, North America as a whole is
predicted to become a net oil exporter around 2030, thus switching the direction of international oil
trade towards Asia and putting a focus on the security of the strategic routes that bring Middle East oil
to Asian markets.
End result: The U.S., which currently imports around 20% of its total energy needs, becomes all but
self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy importing
countries.
Predictive
The U.S. will become energy independent—Predictive evidence
Cama, The Hill Energy Reporter, 6/9/14
[Timothy, The Hill, “U.S. Reaches Highest Energy Independence in Decades,”
http://thehill.com/policy/energy-environment/208635-us-reaches-highest-energyindependence-in-decades, Accessed: 7/5/14, JO]
The United States produced enough energy last year to satisfy 84 percent of its demand, the highest
share since 1987, the Energy Information Administration (EIA) said.
Energy production reached 81.7 quadrillion British thermal units (BTU), an 18 percent increase from
2005, when the ratio of energy produced to energy consumed hit an all-time low, the Houston
Chronicle reported.
The country consumed 97.5 quadrillion BTU, a 2.7 percent decrease from 2005, the Chronicle said,
citing EIA data.
The increase in the energy security ratio from 2005’s 69 percent correlated with the recent oil and gas
production boom, though coal output dropped during that time.
The last time the United States produced more energy than it used was in the 1950s.
The International Energy Agency projected in April that the United States would again become energy
independent around 2035.
Experts
U.S. energy independence within the next 15 years—Global energy executives agree
Davis, Natural Gas Intelligence Journalist, 6/24/2014
[Carolyn, Natural Gas Intelligence, “U.S. Energy Independence Within 15 Years Probable, Say Top E&P
Executives ,” http://www.naturalgasintel.com/articles/98811-us-energy-independence-within-15-yearsprobable-say-top-ep-executives, Accessed: 7/7/14, JO]
The United States will achieve energy independence within the next 15 years and possibly as soon as
2020, senior global energy executives said in a new survey by KPMG Global Energy Institute.
The 12th annual industry outlook by KPMG found that close to three-quarters (73%) of 100-plus
executives questioned believe the United States will attain energy independence by 2030 or sooner,
up 10% from last year's outlook. Of the 73%, 17% said they believed the United States could meet
current energy demand with only domestic-based resources as soon as 2020.
"Technology continues to offer the promise of a greener, safer, cheaper and more reliable energy
future. Exciting new breakthroughs are leading to a whole new generation of domestic oil and gas
production, particularly from deepwater, oil sands, and shale assets," said John Kunasek, national
sector leader for energy and natural resources for KPMG LLP. "These developments are contributing to
a significant transformation of the energy industry, adding to the increased optimism among energy
executives on the potential for U.S. energy independence and the overall future of the energy
industry."
Natural gas is the biggest driver, according to executives.
"Natural gas production in the U.S., and its reputation as a low-cost alternative to other energy sources
is shifting the future of the energy industry," said KPMG's Regina Mayor, advisory industry leader for
energy and natural resources. "Additionally, shale is quickly shifting from 'the next big thing' to an
essential part of the global energy sector, and while the U.S. is still ahead in terms of commercializing
this valuable asset, a series of discoveries and technological advances is opening up the playing field to
new markets around the globe."
Statistics
U.S. oil independence is rising and inevitable—Statistical evidence
Beschloss, Desert Sun economist, 6/17/14
[Morris, The Desert Sun, “US Shale Oil Boom Calms Global Oil Prices, Retains Availability ,”
http://www.desertsun.com/story/money/industries/morrisbeschlosseconomics/2014/06/17/us-shaleoil-boom-calms-global-oil-prices-retains-availability/10694881/, Accessed: 7/5/14, JO]
While China continues to represent the pivot point for the up/down direction of oil pricing, as the
world’s largest user, Beijing’s economic direction will magnify the price movements forthcoming in this
year’s second half. U.S. demand, which is hanging in at around 19 million barrels per day has already
closed the import gap to 25% of its total consumption from 60% as late as 2005. Although there are
divergent schools of thought regarding the direction of oil pricing in the next few years, there is
unanimity that the balance of pricing power has shifted from the turbulent Middle East, North Africa
and Russia to how quickly and voluminously the U.S. oil production capability and refining potential
can be brought to market.
With U.S. stockpiles mounting in the intermediate timeframe, a near-term price drop, especially in light
of a Southeast Asian demand cut, could find U.S. central inventories in a temporary overstock mode.
This could even become more severe if Iran and Iraq, containing the second and third largest global oil
reserves resolve the geopolitical pressures that have reduced their exports.
However, a realistic longer term outlook, which envisions a worldwide demand growing from current
90 million barrels per day now, to 120 million BPD within the next decade, would indicate global prices
sharply on the upside, with the U.S. and Canada’s maximum output becoming the global center of
gravity in the oil world.
a/t: EPA Regs
EPA regulations aren’t enough to stop independence
Kilcarr, Senior Editor of Fleet Owner, a trucking news source, 6/25/2014
[Sean, Fleet Owner, “Is U.S. energy independence still possible?,” http://fleetowner.com/blog/usenergy-independence-still-possible, Accessed: 7/7/14, JO]
With Iraq increasingly being consumed by violence – and the global economy starting to stutter as a
result – many might rightly begin to wonder whether the U.S. can possibly achieve energy
independence; a goal many believe is within reach, as I’ve noted in this space before. There are other
factors, too, that may affect America’s chance at energy independence: intensification of efforts
aimed at limiting and even stopping fracking, which is increasingly how the lion’s share of our natural
gas reserves are being developed; efforts by the Environmental Protection Agency (EPA) to tighten
power plant emissions, which impacts the ability to use coal to generate electricity (though the
Supreme Court recently put limits on that regulatory push); plus concerns that natural gas, often seen
as a low-cost alternative to diesel fuel, may undergo a major price spike later this year.
It doesn’t help, either, that another ripple effect form the growing unrest in Iraq is higher fuel
prices here in the U.S., though it is worthy of note that the Obama administration recently lifted a fourdecade ban on the exports of unrefined American crude oil.
Despite all of that, however, more and more energy executives still think the U.S. can attain energy
independence within the next 15 years, eliminating the U.S. dependency for foreign energy sources.
That’s according to findings from the 12th annual Energy Industry Outlook Survey conducted by
the KPMG Global Energy Institute.
[On top of that, the firm’s own analysis – contained within its Outlook 2014 paper – believes U.S.
independence is “ on the horizon” by 2020 at the earliest.]
2ac high prices inev
Global oil prices will not plunge — 7 distinct reasons
Helman, Forbes Writer, 2013
[Christopher, 4-29-13, Forbes, “7 Reasons Why Oil Prices Won't Plunge”,
http://www.forbes.com/sites/christopherhelman/2013/04/29/7-reasons-why-oil-prices-wont-plunge/,
Accessed: 7-13-14, KMM]
The United States is in the midst of a miraculous supply boom that has seen domestic oil output soar by
more than 1 million barrels per day in the past year to the highest levels in decades. U.S. oil output is
now at 6.5 million bbl per day, in third place after Saudi Arabia and Russia (both at roughly 9.8 million
bpd). And the growth shows no sign of slowing down.
Add to that the slow and steady recovery of the Iraqi oil industry, plus the likelihood that the shalecracking techniques perfected in the U.S. will be exported to the likes of China and Russia, and it looks
like the world’s oil demand will be easily met for years to come.
So it’s little wonder that oil prices have been falling in recent months, with WTI at $93 and Brent crude
down to $103 from a peak of $116 in February. Which way from here?
Well, analysts Oswald Clint and Rob West at Sanford Bernstein, though not wildly bullish on oil prices,
believe there are seven good reasons why we will not see a sustained plunge in crude (but they call
them “seven sources of hidden oil market elasticity”).
1. Decline rates at mature fields
It’s conventional wisdom that the output of mature oil fields declines at a rate of 5% to 10% a year,
slowly fading away over time but never giving up the ghost entirely. The Bernstein analysts earlier this
year conducted a study of 3,100 oil fields that debunked that myth. They found that some fields
decline much faster. The decline rate in the Gulf of Mexico, for instance, is 23%, with the North Sea is
about 10%. Russian fields fare a little better, at a 3.5% decline rate. Even if the average decline rate
worldwide is just 5%, that means the industry needs to develop a new Saudi Arabia every two years,
just to stay even.
2. Motorists are sensitive to gasoline prices
Data from the Dept. of Energy and the Federal Highway Administration shows that the number of miles
that American motorists drive is inversely correlated with gasoline price increases. As gas prices rose
25% in early 2008, the number of miles driven dropped by roughly 3.5%. When gas prices fell 35% into
the 2009 recession, miles driven jumped up 2%, year over year. There’s not enough new Priuses or
Teslas on the road to change this yet: if gas prices fall, demand for gas will increase.
3. European imports
Despite weak markets, European refiners can be expected to buy more when prices fall. This is what
they did when prices dipped last year — buying an additional 1.2 million bpd. Europe’s crude oil
inventories are also about 10 million barrels below 5-year averages, so importers there would likely be
buyers on a price dip.
4. China inventories
The Bernstein analysts note that in 2012 China increased the rate at which it built up its oil inventories,
adding 240 million barrels in 2012 after 140 million in 2011. When oil peaked in February China cut
back its oil imports to the lowest level in five months, indicating that if prices fall they’ll pick up the
pace.
5. Rising marginal costs
Despite the enormous growth in the U.S., the costs of getting that oil out are growing at
unprecedented rates. Bernstein figures that the cost of producing the last barrel rose from $89 in 2011
to $114 in 2012. About 95% of U.S. production was done at a marginal cost of $71 a barrel. Part of the
marginal cost calculation involves non-cash expenses like depreciation, but over the longer term a
corporation will not survive if its marginal production costs are higher than the going price of crude.
6. U.S. stripper wells
The first to go will be stripper wells. These are marginal wells that produce less than 15 barrels per day.
But there’s a lot of them, enough to produce 1 million bpd when the price is high. Production costs are
often high on stripper wells because they often bring up a lot of water along with the oil, and water can
be expensive to treat and get rid of, especially when you don’t have economies of scale. Most of these
wells become uneconomic at oil prices less than $90.
7. OPEC
The cartel has a stated production cap of 30 million barrels per day. But member states are producing
more like 30.4 million today. But the OPEC nations need prices of $90 to $100 to balance their budgets
and keep their people happy with government spending. They will adhere to quotas in order to get
prices back up. The Saudis have proven that they can be very disciplined when it comes to cutting
output. In 2009 when oil prices crashed they scaled back by 1.5 million barrels per day. They also tend to
export less when prices are low, and keep the oil in the kingdom.
Exts – marginal costs
Even if OPEC fails, marginal costs ensure high prices
Mackenzie, Financial Times Editor, 2012
[Kate, 5-2-12, FT Alphaville, “Marginal oil production costs are heading towards $100/barrel,”
http://ftalphaville.ft.com/blog/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards100barrel/, Accessed: 7-13-14, KMM]
Bernstein’s energy analysts have looked at the upstream costs for the 50 biggest listed oil producers
and found that — surprise, surprise — “the era of cheap oil is over”:
Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that
cash, production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last
year production costs increased 26% y-o-y, while the unit cost of production increased by 21% y-o-y to
US$35.88/bbl. This is significantly higher than the longer term cost growth rates, highlighting continued
cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive
to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in
2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another
double digit increase this year, marginal costs for the 50 largest oil and gas producers could reach close
to US$100/bbl.
While we see near term downside to oil prices on weaker demand growth, the longer term outlook
for higher oil prices continues to be supported by the rising costs of production.
This is important because, as Bernstein analyst Neil Beveridge and colleagues note, the cost of
producing marginal barrels of oil plays a big role in determining oil prices.
We’d add that the expectations of said costs also play a big role, but that’s another story… and anyway,
the Bernstein team argue their point pretty strongly with this chart:
Also, this research obviously only covers non-Opec producers, and it mostly excludes Russia too. Given
Saudi Arabia’s role as the “swing producer”, how are the ex-Opec, ex-Former Soviet Union marginal oil
production costs so correlated to Brent prices?
Bernstein argues that it’s because they are, basically, more costly:
While OPEC plays a key role in influencing price through production quotas, in the long run we believe
that it is the marginal cost of non-OPEC production which sets the oil price. As global demand has
surged over the past decade the marginal cost of production and oil prices have increased, as the
industry has venture to increasingly higher cost (smaller, deeper fields) and more marginal regions (deep
water, high arctic) to produce the incremental barrel of oil.
High oil prices inevitable – marginal cost of production
Sreekumar, Motley Fool Writer, 2013
[Arjun, 1-29-13, Motley Fool, “Why Oil Prices Are Likely to remain high,”
http://www.fool.com/investing/general/2013/01/29/why-oil-prices-are-likely-to-remain-high.aspx,
Accessed: 7-13-14, KMM]
Last year was a good year for oil. The price of Brent crude, the global benchmark for oil, remained
above $100 per barrel for most of the year. But now, as a new year kicks off, people want to know
whether oil prices are headed higher or lower.
It's certainly an important question. Not just for oil companies, but for consumers and other businesses
as well. While it's true that commodity prices are virtually impossible to predict with a high degree of
accuracy, there is compelling evidence that oil prices should remain high.
Or, to look at it a different way, there is good reason to believe that they are at least unlikely to fall
below a certain threshold level. Let's take a closer look at why.
Determinants of the price of crude oil
The price of Brent crude reached a three-month high last week, bolstered by a string of optimistic global
economic data and geopolitical concerns about North African oil supply in the wake of a terrorist attack
in Algeria. ICE March Brent crude rose to nearly $114 a barrel on Friday and started off this week at
levels above $113 a barrel.
Brent prices have risen nearly 2% since the start of the year, as recently released economic data from
the U.S., China, and the eurozone have instilled a renewed sense of optimism about the global economy.
Concerns about North African supply, as well as reduced production from Saudi Arabia, have also
contributed to the slight increase in prices.
While there are a host of factors that impact crude oil prices, such as global supply and demand
fundamentals, geopolitical risk, speculation, and monetary policy, marginal production costs have
proven to be a remarkably accurate indicator of the price of oil. In fact, according to a note by
Bernstein Research, the marginal cost of production is "the most important factor driving oil prices
over the long run."
The relationship between the price of oil and the marginal cost of oil production, which refers to the
expenses associated with producing the last barrel, is well documented. For instance, between 2001
and 2010, the average annual price of Brent increased 228%, while marginal production costs among
the world's 50 biggest public oil companies rose 229%, according to calculations by Bernstein Research.
It boils down to the incentives facing oil companies. If the cost of producing that last barrel of oil
exceeds the price they can get for it, they have no financial motivation to produce it. Herein lies the
first major clue as to the future direction of oil prices – production costs have risen sharply in recent
years, which, some argue, has effectively placed a floor below the price of oil.
Spike in production costs
The Bernstein Research note analyzed production costs for the 50 biggest publicly traded oil producers
and found that cash, production, and unit costs in 2011 increased at a rate much higher than the 10year average.
Specifically, they found that production costs in 2011 rose 26% year over year, while the unit costs of
production rose by 21% year over year, coming in at $35.88 per barrel. Among the 50 oil producers
surveyed, the marginal cost of production rose 11% year over year, coming in at a whopping $92 per
barrel in 2011.
Energy companies are well aware of this development and have been doing everything they can to
protect themselves, including major initiatives to lower costs. For instance, Halcon Resources (NYSE: HK
) is planning dramatic cost reductions in 2013 to help offset the relatively high operating costs of its
mature producing assets.
Meanwhile, Kodiak Oil & Gas (NYSE: KOG ) has already seen a dramatic reduction in operational
expenses through improved fracking techniques, which has led to a sharp decline in the number of days
taken to drill a well. And LINN Energy (NASDAQ: LINE ) , through water-management initiatives, has
benefited from major expense reductions in its Granite Wash and Permian Basin operations.
Why productions costs have risen
The reason production costs have increased so sharply has to do with changes in the marginal source of
supply. A few decades ago, U.S. oil producers could easily extract oil for under $20 a barrel, but those
days are long gone. As fields of so-called "easy oil" have quickly been depleted, energy companies have
been forced to venture out of their comfort zone and into new and harsh terrain in the pursuit of black
gold.
For instance, Royal Dutch Shell is hoping to drill for oil off the coast of Alaska – a plan that has received
intense scrutiny and opposition by environmental groups, as well as the CEO of Total. Similarly,
ExxonMobil (NYSE: XOM ) and Statoil (NYSE: STO ) are planning to explore for oil in the harsh Arctic
waters near Russia.
These examples are illustrative of a major shift in global oil supply and suggest that the world is
becoming increasingly reliant on unconventional sources of oil, such as shale and deepwater. While
these unconventional sources hold vast promise in terms of the quantity of potentially recoverable
hydrocarbon resources, they are accompanied by exorbitantly high costs due to the need for more
technologically sophisticated equipment.
Final thoughts
Because oil prices are determined at the margin, the net impact of this shift toward unconventional
sources has been upward pressure on crude prices. Despite media coverage suggesting that oil
companies are raking in more cash than they know what to do with, the evidence suggests that high
marginal production costs are taking their toll on even the most expertly managed operators.
All evidence flows aff
Herron, Wall Street Journal reporter, 2012
[James, 5-22-12, Wall Street Journal, “Oil Price Likely to Stay Buoyed by Marginal Costs”,
http://online.wsj.com/article/SB10001424052702303610504577418081105218276.html, Accessed: 713-14, KMM]
However, many industry observers say the price of oil is unlikely to fall far below current levels for
long, because the cost of producing every last barrel of oil needed to meet demand has risen so high.
"Costs are still at a very high level because of the complexity of marginal fields," said Pierre Sigonney,
chief economist at French oil company Total SA. "We don't expect oil prices to go much below $100 a
barrel."
The marginal cost of oil production, defined as the cost of pumping the last and most expensive barrel
required to satisfy demand, is fundamentally linked to long-term oil prices. If the oil price falls below
the marginal cost, there is no incentive to produce that last barrel of oil, so demand will remain
unsatisfied until consumers are willing to pay more.
The close relationship between the two was demonstrated from 2001 to 2010, when the average
annual price of international oil benchmark Brent crude rose 228%, while analysts at Bernstein Research
estimate the marginal production cost of the world's 50 largest listed oil companies increased 229%.
In 2011, the marginal cost of oil production was $92.26 a barrel for the 50 largest listed oil and gas
companies and will reach $100 a barrel next year if it continues to follow the long-term trend, said
Bernstein in a research note.
Costs are rising because much of the extra oil added to world supply has come from more technically
challenging areas such as deep water or the Arctic, Bernstein said. This has led to "a combination of
higher material costs and reduced productivity per well," it said.
a/t: Russia
No Russian econ impact—They can survive $25 oil prices
Kommersant, Russian Daily Newspaper, 2006
[9-15-06, Kommersant, “Low Oil Prices May Push Up Russia’s Economy,”
http://www.kommersant.com/p705040/r_500/Low_Oil_Prices_May_Push_Up_Russia%E2%80%99s_Ec
onomy/, Accessed: 7/12/14, JO]
Experts note that a new drop is the start of a long-term trend of a decline in oil prices. Russian
authorities have already given their predictions of how Russia’s economy will be affected by lower oil
prices. The Central Bank’s head Sergey Ignatyev said that Russia would not suffer even if oil falls below
$25-30 per barrel. Independent experts are of a different opinion, though. With a Urals barrel at $80 a
Russian oil company has after-tax net profit of $36.3 billion annually. If Urals decline to $30, the net
profit will plummet to $7.8 billion.
Yet, a fall in natural resources prices may give a positive impulse to the Russian economy. “Certainly, if
the natural resources industry slows down, other sectors may speed up as the Central Bank will no
longer have to strengthen the ruble to trend down inflation,” Evgeny Nadoshin at the Trast bank said.
“This is what Russian business has long been asking for.”
A sharp drop in oil prices may force the Russian government to reinvigorate reforms and diversify
economy, which will boost Russia’s economy. Even if authorities prefer a passive stance and keep on
increasing budget expenses ahead of presidential election, Russia’s gold reserves and stabilization fund
will help the economy to slow down as smoothly as possible.
Putin wants low oil prices – key to economic transition
RT Business, 2012
[6-23-12, RT Business, “Lower oil price 'good for Russia',” http://rt.com/business/oil-price-russiaeconomy-497/, 7-13-14, KMM]
Russia will benefit from lower oil prices says Jim O’Neill, Chairman for Goldman Sachs Asset
Management. This follows news that Russia is to adopt new policies to make its economy less
dependent on the price of crude.
"I think it will be good for Russia if oil prices go down”, Jim O’Neill told RT at the St. Petersburg
International Economic Forum.
Russia’s economy has long been heavily dependent on oil exports. Half of the budget revenues come
from oil and gas.
”Russia certainly needs to be not so dependent on the drug of rising oil prices. It has to adopt and
change to a quarter balance."
And Russia seems to be heading in the right direction. President Vladimir Putin told the St. Petersburg
Forum it was not enough to rely on an oil price of 115 dollars per barrel to achieve a deficit-free
budget.
“We need to diversify our economy away from total reliance on oil revenues, and turn to private
capital as a source of growth,” he said. “Russia not only needs a deficit-free budget but a budget with
a reserve of resilience.”
Putin also said that “budget rules will be adopted soon under which "neither state liabilities, nor
budgetary expenditure, nor long-term investment programs will depend on oil prices, and excess
profits will go to replenish funds.”
Analysts say Russia, one of the four BRIC countries, has become a particular surprise this year, Russia
seems to be more sheltered from the current global economic crisis than it was during the 2008 and
2009 downturn. Its prospects are brighter than those of many other economies
The country’s economy is expected to grow between 4-5 percent this year -much higher than any
developed country.
“If it carries on growing at these rates it will contribute more to the world this decade than he whole of
Europe,” said Jim O’Neill.
Together with the other BRIC nations Russia is ready to tackle the global economic crisis.
“Emerging countries, including BRICS should play a bigger role in the world economy,” Russian President
Vladimir Putin told the Petersburg International Economic Forum.
Brazil, Russia, India, China and South Africa have recently offered their help, pledging to inject $75
billion into the IMF.
Turn - High oil prices increases likelihood of Russian economic crash
Englund, Washington Post Staff Writer, 2011
[Will, 3-21-11, Washington Post, “Increase in oil revenue amid unrest in Arab world gives Russia some
breathing room”, http://www.washingtonpost.com/wpdyn/content/article/2011/03/10/AR2011031001553.html, Accessed 7-12-14, KMM]
But with increased oil revenue also comes the danger of complacency. Bureaucrats, defense
contractors, pensioners and workers in construction and finance all stand to gain from the money
coming in, along with the oil companies. But the cash also feeds corruption, encourages increased
financial opacity and discourages attempts to shake up the system - all of which could spell trouble for
Russia down the road.
"All of the dominant groups in Russia get a share of the increased oil revenue," said Alexander Auzan, an
economist and adviser to Medvedev. "Yet it contradicts their long-term interests."
Largest oil producer
It's a powerful prop for the status quo - which Auzan and others say is unsustainable.
But as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to
involve a cost for someone, so why take the risk if the money is flowing in?
Russia is currently the world's largest oil producer. When the price last spiked, in 2007, Moscow was
flooded with money and people close to Putin were suggesting that Russia was genuinely selfsufficient and had no need to engage more deeply with the West. The economic crisis the following
year brought that talk to an abrupt end, and Medvedev began pushing for a Western-oriented
program of modernization and diversification away from dependence on energy exports.
The Kremlin moved to stimulate the economy in 2008 by increasing government salaries and hiking
pensions by 35 percent. Now it is stuck with those increases. With oil revenue providing 40 percent of
the Russian budget, the Gaidar Institute for Economic Policy here has calculated that at any price less
than $105 a barrel the government will be in the red.
That tempers any inclination toward hubris, said Daniel Treisman, a political scientist at UCLA who
follows Russian developments. The Kremlin was looking at a difficult financial crunch, with
parliamentary elections coming late this year and a presidential election next March, so the timing of
this rise in revenue is more a relief than a goad to aggressive behavior. "We don't need high prices," said
Leonid Grigoriev, an economist and former World Bank adviser. "We need good relations, a long-term
market and reasonable prices," which he put in the $70-to-$90 range.
Russia will not turn its back on the West, by any means, he said. But, especially in an election year, its
leaders may be more vocal in pointing up differences with the West. In 2010, Russia had enough
problems at home that it was actively trying to avoid them abroad; now, with money to address
domestic issues, that caution may not be so evident.
Treisman, like many others, did not think much would ever come of Medvedev's modernization plans it's not the sort of change, he said, that can be ordered from the top down. But the oil bulge makes the
Westernization of the Russian economy less likely. It helps big companies - which, Grigoriev said,
already dominate the economy to a much greater extent than in other developed countries - and it
hurts small ones, where jobs and creativity tend to be nurtured.
Information technology firms, with high labor costs, will suffer, Guriev said, and they are central to
Medvedev's vision for the future of Russia.
Lower oil prices are net good for Russia’s economy—They promote diversification and
build long term stability
RT News, Russian News Source, 2012
[6-23-12, Russia Today, “Lower oil price 'good for Russia' ,” http://rt.com/business/oil-price-russiaeconomy-497/, Accessed: 7/12/14, JO]
Russia will benefit from lower oil prices says Jim O’Neill, Chairman for Goldman Sachs Asset
Management. This follows news that Russia is to adopt new policies to make its economy less
dependent on the price of crude.
"I think it will be good for Russia if oil prices go down”, Jim O’Neill told RT at the St. Petersburg
International Economic Forum.
Russia’s economy has long been heavily dependent on oil exports. Half of the budget revenues come
from oil and gas.
”Russia certainly needs to be not so dependent on the drug of rising oil prices. It has to adopt and
change to a quarter balance."
And Russia seems to be heading in the right direction. President Vladimir Putin told the St. Petersburg
Forum it was not enough to rely on an oil price of 115 dollars per barrel to achieve a deficit-free
budget.
“We need to diversify our economy away from total reliance on oil revenues, and turn to private
capital as a source of growth,” he said. “Russia not only needs a deficit-free budget but a budget with a
reserve of resilience.”
Putin also said that “budget rules will be adopted soon under which "neither state liabilities, nor
budgetary expenditure, nor long-term investment programs will depend on oil prices, and excess profits
will go to replenish funds.”
Analysts say Russia, one of the four BRIC countries, has become a particular surprise this year, Russia
seems to be more sheltered from the current global economic crisis than it was during the 2008 and
2009 downturn. Its prospects are brighter than those of many other economies
The country’s economy is expected to grow between 4-5 percent this year -much higher than any
developed country.
“If it carries on growing at these rates it will contribute more to the world this decade than he whole
of Europe,” said Jim O’Neill.
Together with the other BRIC nations Russia is ready to tackle the global economic crisis.
“Emerging countries, including BRICS should play a bigger role in the world economy,” Russian
President Vladimir Putin told the Petersburg International Economic Forum.
Brazil, Russia, India, China and South Africa have recently offered their help, pledging to inject $75
billion into the IMF.
Currency devaluation checks the Russian impact
Oprita, CNBC Web Producer, 2012
[Antonia, 6-21-12, CNBC, “Are Oil Exports Russia's Curse as Well as Its Blessing? ,”
http://www.cnbc.com/id/47870418, Accessed: 7/12/14, JO]
"I think currently Russia is in a very good situation," Anton Struchenevsky, senior economist at Troika
Dialog in Moscow, told CNBC.com. "The exchange rate policy is more flexible than in 2008/2009, and
it helps Russia to absorb external shocks ."
The ruble fell 12 percent against the dollar in May, the biggest drop since January 2009, but in June it
recouped most of the losses and is nearly flat year-to-date.
"Having lurched given the crisis in the euro zone, [the ruble] has pretty much recovered all its losses,"
Liam Halligan, chief economist at Prosperity Capital RF in Moscow, told CNBC.com.
"The Russian state has a very strong balance sheet," Halligan added, pointing out that Russia "hasn't
printed any money."
Half of the revenues to Russia's budget come from the oil and gas sector, and taxation in that area
depends heavily on the oil price on international markets. When prices decline, the Russian budget
gets less revenue in dollar terms. But the budget is denominated in rubles, so a decline in the
national currency helps to offset falls in oil prices to a certain degree.
Oil prices fell to around $83 a barrel from around $110 in February because of worries that the global
economy would slow down as the euro zone debt crisis spread.
"Due to the devaluation of the ruble, the fall in oil prices was somewhat compensated," Struchenevsky
said.
No Russian budget impact— Spending cuts are sufficient to solve
Russian Information Agency 2011
[9-26-11, Russian Information Agency, “Russian economy can survive low oil prices - Kudrin ,”
http://en.ria.ru/business/20110926/167139562.html, Accessed: 7/12/14, JO]
The Russian economy will be able to function normally for a year, if global oil prices fall to $60 per
barrel, Finance Minister Alexei Kudrin said on Monday in an interview with Russia Today international
news TV channel.
"We expect this fall will certainly cause a decrease in our economic growth down to nearly zero or
below zero, but in terms of the budget policy we'll be able to cope with this for up to a year," Kudrin
said.
Russia's finance minister said on Saturday he expected world oil prices to fall to $60 per barrel in the
next one and a half to two years and stay at this level for about six months.
After this, "we'll have to adjust policy and reduce expenditure. As a whole, however, we are ready to
provide stability for a year or two and fulfil all our commitments," Kudrin said.
Russia's federal budget for the next three years is based on a forecast of Urals average yearly oil price at
$100 per barrel in 2012, $97 per barrel in 2013 and $101 per barrel in 2014.
Russian Deputy Finance Minister Tatiana Nesterenko said last week that a fall in global oil prices to $60
per barrel could force the Russian government to cut the 2012 budget spending but added that this
scenario was unlikely.
The average price of Urals blend, Russia's key export commodity, stood at $109.2 per barrel in JanuaryAugust 2011.
a/t: warming
High prices don’t lead to alternative transition
Khavari, University of Bremen economics Ph.D., 12
[Farid A, April 11, 2012, “THE FINAL CRASH – THE END OF U.S. DOMINANCE IN 2013 – Part Three –
Substitution of Crude Oil – The Overlooked Links” http://investmentwatchblog.com/the-final-crash-theend-of-u-s-dominance-in-2013-part-three-substitution-of-crude-oil-the-overlookedlinks/#iGWQPBPlT0JIK0Kq.99 7/10/13 EYS]
But a closer analysis shows that a series of steps and considerations must be taken to initiate efficient
substitution of crude oil with alternative energy sources; rising price is just one of many factors even
if, in some cases, it turns out to be an important one. Here are a few scenarios related to the first
assumption:
• Let’s say the Organization of the Petroleum Exporting Countries (OPEC) abruptly set the price of crude
oil at $1,000 or even $2,000 per barrel. The substitution theory assumes that substituting crude oil
with other energy sources could be done easily and immediately or, at least, over a relatively short
period of time. Unfortunately, this is not true because sufficient amounts of immediate alternatives
are lacking. Not only would substitution not take place; even worse, the world economy (which
depends heavily on oil) would collapse overnight if a serious oil shortage occurred or if oil was
withdrawn for political or economical reasons. The result would be an economic disaster of
unimaginable magnitude. If crude oil stopped flowing because of high prices, few people would be able
to afford it, as with the 2008 oil price increase. Unless oil was substituted with an alternative energy
source, the world economy would collapse. On the other hand, rising oil prices would not trigger an
automatic substitution process as most people assume. In other words, we must initiate the
substitution process regardless of whether we are to become oil independent. It does not matter if the
efforts toward oil independence come from domestic or foreign sources. Rising oil prices will not start
the market mechanism for substitution of crude oil unless we implement an aggressive energy policy.
• Suppose crude oil prices rose gradually and permanently. Even so, effective substitution would not
occur unless the country implemented a rigorous energy policy to substitute crude oil with alternative
energy sources and technologies. The belief that rising oil prices would accelerate substitution is not
realistic even in a fully functioning market economy, which serves as a basic assumption. If oil prices
rise, the demand for crude oil decreases as long as the possibility of substitution exists. Decreasing
prices influence the substitution process; at the same time, energy consumption rises so that oil prices,
in the end, fluctuate cyclically with an upward tendency. In other words, rising oil prices would have a
limited effect, at best, on crude oil substitution from a microeconomic standpoint if companies or
private households (because of cost comparisons) prefer one energy source over another. However,
from a macroeconomic perspective, rising oil prices would not initiate an effective substitution process.
When oil prices keep rising, the demand for oil drops; as a result, the price of oil drops. This process
will continue indefinitely unless oil substitution occurs: the market price mechanism (in which oil prices
increase when the demand exceeds supply and decrease when the supply exceeds demand) does not
apply to oil. Therefore, we must implement oil substitution without any expectation from the market
price mechanism. During 2008, oil prices rose from about $25 per barrel to $160 and then dropped
down to $60. Similarly, gasoline prices went up $1 per gallon to $4.80 and then fell back to $2.50.
Warming won’t cause extinction
Barrett, Columbia natural resource economics professor, 7
[Scott, 2007, “Why Cooperate? The Incentive to Supply Global Public Goods” p. 5 7/10/13 EYS]
First, climate change does not threaten the survival of the human species.5 If unchecked, it will cause
other species to become extinction (though biodiversity is being depleted now due to other reasons). It
will alter critical ecosystems (though this is also happening now, and for reasons unrelated to climate
change). It will reduce land area as the seas rise, and in the process displace human populations.
“Catastrophic” climate change is possible, but not certain. Moreover, and unlike an asteroid collision,
large changes (such as sea level rise of, say, ten meters) will likely take centuries to unfold, giving
societies time to adjust. “Abrupt” climate change is also possible, and will occur more rapidly, perhaps
over a decade or two. However, abrupt climate change (such as a weakening in the North Atlantic
circulation), though potentially very serious, is unlikely to be ruinous. Human-induced climate change is
an experiment of planetary proportions, and we cannot be sur of its consequences. Even in a worse
case scenario, however, global climate change is not the equivalent of the Earth being hit by megaasteroid. Indeed, if it were as damaging as this, and if we were sure that it would be this harmful, then
our incentive to address this threat would be overwhelming. The challenge would still be more difficult
than asteroid defense, but we would have done much more about it by now
6 degree warming inevitable
AP 9
[Sept . 24, 2009, Associated Press, “Six Degree Temperature Rise by 2100 is Inevitable: UNEP”
http://www.speedy-fit.co.uk/index2.php?option=com_content&do_pdf=1&id=168 7/10/13 EYS]
WASHINGTON - Earth's temperature is likely to jump six degrees between now and the end of the
century even if every country cuts greenhouse gas emissions as proposed, according to a United
Nations update.
Scientists looked at emission plans from 192 nations and calculated what would happen to global
warming. The projections take into account 80 percent emission cuts from the U.S. and Europe by
2050, which are not sure things.
The U.S. figure is based on a bill that passed the House of Representatives but is running into resistance
in the Senate, where debate has been delayed by health care reform efforts.
Carbon dioxide, mostly from the burning of fossil fuels such as coal and oil, is the main cause of global
warming, trapping the sun's energy in the atmosphere. The world's average temperature has already
risen 1.4 degrees since the 19th century.
Much of projected rise in temperature is because of developing nations, which aren't talking much
about cutting their emissions, scientists said at a United Nations press conference Thursday. China
alone adds nearly 2 degrees to the projections.
"We are headed toward very serious changes in our planet," said Achim Steiner, head of the U.N.'s
environment program, which issued the update on Thursday. The review looked at some 400 peerreviewed papers on climate over the last three years.
Even if the developed world cuts its emissions by 80 percent and the developing world cuts theirs in
half by 2050, as some experts propose, the world is still facing a 3-degree increase by the end of the
century, said Robert Corell, a prominent U.S. climate scientist who helped oversee the update.
Corell said the most likely agreement out of the international climate negotiations in Copenhagen in
December still translates into a nearly 5-degree increase in world temperature by the end of the
century. European leaders and the Obama White House have set a goal to limit warming to just a couple
degrees.
The U.N.'s environment program unveiled the update on peer-reviewed climate change science to tell
diplomats how hot the planet is getting. The last big report from the Nobel Prize-winning
Intergovernmental Panel on Climate Change came out more than two years ago and is based on science
that is at least three to four years old, Steiner said.
Global warming is speeding up, especially in the Arctic, and that means that some top-level science
projections from 2007 are already out of date and overly optimistic. Corell, who headed an assessment
of warming in the Arctic, said global warming "is accelerating in ways that we are not anticipating."
Because Greenland and West Antarctic ice sheets are melting far faster than thought, it looks like the
seas will rise twice as fast as projected just three years ago, Corell said. He said seas should rise about
a foot every 20 to 25 years.
Exts – no impact
No impact to warming—takes forever and adaptions solves
Mendelsohn, Yale environmental studies professor, 9
[Robert O, 2009, “Climate Change and Economic Growth”
http://siteresources.worldbank.org/EXTPREMNET/Resources/4899601338997241035/Growth_Commission_Vol4_Globalization_Growth_Ch12_Climate_Change_Economic_G
rowth.pdf 7/10/13 p. 286 EYS]
These statements are largely alarmist and misleading. Although climate change is a serious problem
that deserves attention, society’s immediate behavior has an extremely low probability of leading to
catastrophic consequences. The science and economics of climate change is quite clear that emissions
over the next few decades will lead to only mild consequences. The severe impacts predicted by
alarmists require a century (or two in the case of Stern 2006) of no mitigation. Many of the predicted
impacts assume there will be no or little adaptation. The net economic impacts from climate change
over the next 50 years will be small regardless. Most of the more severe impacts will take more than a
century or even a millennium to unfold and many of these “potential” impacts will never occur
because people will adapt. It is not at all apparent that immediate and dramatic policies need to be
developed to thwart long‐range climate risks. What is needed are long‐run balanced responses.
Experts agree
Hsu, Live Science writer, 10 [Jeremy, July 19, 2010 “Can Humans Survive?”
http://www.livescience.com/culture/can-humans-survive-extinction-doomsday-100719.html 7/10/13
EYS]
His views deviate sharply from those of most experts, who don't view climate change as the end for
humans. Even the worst-case scenarios discussed by the Intergovernmental Panel on Climate Change
don't foresee human extinction.
"The scenarios that the mainstream climate community are advancing are not end-of-humanity,
catastrophic scenarios," said Roger Pielke Jr., a climate policy analyst at the University of Colorado at
Boulder.
Humans have the technological tools to begin tackling climate change, if not quite enough yet to solve
the problem, Pielke said. He added that doom-mongering did little to encourage people to take action.
"My view of politics is that the long-term, high-risk scenarios are really difficult to use to motivate shortterm, incremental action," Pielke explained. "The rhetoric of fear and alarm that some people tend
toward is counterproductive."
Searching for solutions
One technological solution to climate change already exists through carbon capture and storage,
according to Wallace Broecker, a geochemist and renowned climate scientist at Columbia University's
Lamont-Doherty Earth Observatory in New York City.
But Broecker remained skeptical that governments or industry would commit the resources needed to
slow the rise of carbon dioxide (CO2) levels, and predicted that more drastic geoengineering might
become necessary to stabilize the planet.
"The rise in CO2 isn't going to kill many people, and it's not going to kill humanity," Broecker said. "But
it's going to change the entire wild ecology of the planet, melt a lot of ice, acidify the ocean, change the
availability of water and change crop yields, so we're essentially doing an experiment whose result
remains uncertain."
Exts – warming inevitable
Warming’s irreversible
Solomon, NOAA atmospheric chemist, et al. 10
[Susan, John S. Daniel, NOAA research scientist, Todd J. Sanford, Union of Concerned Scientist climate
scientist, Daniel M. Murphy, NOAA chemical research scientist, Gian-Kasper Plattner, IPCC scientist, Reto
Knutti, climate physics professor, and Pierre Friedlingstein, climate professor, August 31, 2010,
“Persistence of climate changes due to a range of greenhouse gases”
http://www.pnas.org/content/107/43/18354.abstract Vol: 107, no: 43, 7/10/13 EYS]
Carbon dioxide, methane, nitrous oxide, and other greenhouse gases increased over the course of the
20th century due to human activities. The human-caused increases in these gases are the primary
forcing that accounts for much of the global warming of the past fifty years, with carbon dioxide being
the most important single radiative forcing agent (1). Recent studies have shown that the humancaused warming linked to carbon dioxide is nearly irreversible for more than 1,000 y, even if emissions
of the gas were to cease entirely (2–5). The importance of the ocean in taking up heat and slowing the
response of the climate system to radiative forcing changes has been noted in many studies (e.g., refs. 6
and 7). The key role of the ocean’s thermal lag has also been highlighted by recent approaches to
proposed metrics for comparing the warming of different greenhouse gases (8, 9). Among the
observations attesting to the importance of these effects are those showing that climate changes caused
by transient volcanic aerosol loading persist for more than 5 y (7, 10), and a portion can be expected to
last more than a century in the ocean (11–13); clearly these signals persist far longer than the radiative
forcing decay timescale of about 12–18 mo for the volcanic aerosol (14, 15). Thus the observed climate
response to volcanic events suggests that some persistence of climate change should be expected even
for quite short-lived radiative forcing perturbations. It follows that the climate changes induced by
short-lived anthropogenic greenhouse gases such as methane or hydrofluorocarbons (HFCs) may not
decrease in concert with decreases in concentration if the anthropogenic emissions of those gases
were to be eliminated. In this paper, our primary goal is to show how different processes and timescales
contribute to determining how long the climate changes due to various greenhouse gases could be
expected to remain if anthropogenic emissions were to cease.
Advances in modeling have led to improved Atmosphere-Ocean General Circulation Models (AOGCMs)
as well as to Earth Models of Intermediate Complexity (EMICs). Although a detailed representation of
the climate system changes on regional scales can only be provided by AOGCMs, the simpler EMICs have
been shown to be useful, particularly to examine phenomena on a global average basis. In this work, we
use the Bern 2.5CC EMIC (see Materials and Methods and SI Text), which has been extensively
intercompared to other EMICs and to complex AOGCMs (3, 4). It should be noted that, although the
Bern 2.5CC EMIC includes a representation of the surface and deep ocean, it does not include processes
such as ice sheet losses or changes in the Earth’s albedo linked to evolution of vegetation. However, it is
noteworthy that this EMIC, although parameterized and simplified, includes 14 levels in the ocean;
further, its global ocean heat uptake and climate sensitivity are near the mean of available complex
models, and its computed timescales for uptake of tracers into the ocean have been shown to compare
well to observations (16). A recent study (17) explored the response of one AOGCM to a sudden stop of
all forcing, and the Bern 2.5CC EMIC shows broad similarities in computed warming to that study (see
Fig. S1), although there are also differences in detail. The climate sensitivity (which characterizes the
long-term absolute warming response to a doubling of atmospheric carbon dioxide concentrations) is
3 °C for the model used here. Our results should be considered illustrative and exploratory rather than
fully quantitative given the limitations of the EMIC and the uncertainties in climate sensitivity.
One Illustrative Scenario to 2050. In the absence of mitigation policy, concentrations of the three major
greenhouse gases, carbon dioxide, methane, and nitrous oxide can be expected to increase in this
century. If emissions were to cease, anthropogenic CO2 would be removed from the atmosphere by a
series of processes operating at different timescales (18). Over timescales of decades, both the land and
upper ocean are important sinks. Over centuries to millennia, deep oceanic processes become dominant
and are controlled by relatively well-understood physics and chemistry that provide broad consistency
across models (see, for example, Fig. S2 showing how the removal of a pulse of carbon compares across
a range of models). About 20% of the emitted anthropogenic carbon remains in the atmosphere for
many thousands of years (with a range across models including the Bern 2.5CC model being about 19 ±
4% at year 1000 after a pulse emission; see ref. 19), until much slower weathering processes affect the
carbonate balance in the ocean (e.g., ref. 18). Models with stronger carbon/climate feedbacks than the
one considered here could display larger and more persistent warmings due to both CO2 and non-CO2
greenhouse gases, through reduced land and ocean uptake of carbon in a warmer world. Here our focus
is not on the strength of carbon/climate feedbacks that can lead to differences in the carbon
concentration decay, but rather on the factors that control the climate response to a given decay. The
removal processes of other anthropogenic gases including methane and nitrous oxide are much more
simply described by exponential decay constants of about 10 and 114 y, respectively (1), due mainly to
known chemical reactions in the atmosphere. In this illustrative study, we do not include the feedback of
changes in methane upon its own lifetime (20). We also do not account for potential interactions
between CO2 and other gases, such as the production of carbon dioxide from methane oxidation (21),
or changes to the carbon cycle through, e.g., methane/ozone chemistry (22).
Fig. 1 shows the computed future global warming contributions for carbon dioxide, methane, and
nitrous oxide for a midrange scenario (23) of projected future anthropogenic emissions of these gases to
2050. Radiative forcings for all three of these gases, and their spectral overlaps, are represented in this
work using the expressions assessed in ref. 24. In 2050, the anthropogenic emissions are stopped
entirely for illustration purposes. The figure shows nearly irreversible warming for at least 1,000 y due to
the imposed carbon dioxide increases, as in previous work. All published studies to date, which use
multiple EMICs and one AOGCM, show largely irreversible warming due to future carbon dioxide
increases (to within about ± 0.5 °C) on a timescale of at least 1,000 y (3–5, 25, 26).
Fig. 1 shows that the calculated future warmings due to anthropogenic CH4 and N2O also persist notably
longer than the lifetimes of these gases. The figure illustrates that emissions of key non-CO2 greenhouse
gases such as CH4 or N2O could lead to warming that both temporarily exceeds a given stabilization
target (e.g., 2 °C as proposed by the G8 group of nations and in the Copenhagen goals) and remains
present longer than the gas lifetimes even if emissions were to cease. A number of recent studies have
underscored the important point that reductions of non-CO2 greenhouse gas emissions are an approach
that can indeed reverse some past climate changes (e.g., ref. 27). Understanding how quickly such
reversal could happen and why is an important policy and science question. Fig. 1 implies that the use of
policy measures to reduce emissions of short-lived gases will be less effective as a rapid climate
mitigation strategy than would be thought if based only upon the gas lifetime.
Fig. 2 illustrates the factors influencing the warming contributions of each gas for the test case in Fig. 1
in more detail, by showing normalized values (relative to one at their peaks) of the warming along with
the radiative forcings and concentrations of CO2, N2O, and CH4. For example, about two-thirds of the
calculated warming due to N2O is still present 114 y (one atmospheric lifetime) after emissions are
halted, despite the fact that its excess concentration and associated radiative forcing at that time has
dropped to about one-third of the peak value. Two factors contribute to the differences between
decreases in concentrations of greenhouse gases and persistence of the resulting warming, discussed
further below: (i) Radiative forcing may not simply follow concentration because of optical depth effects
(for CO2 and CH4), and (ii) warming may not match decreases in radiative forcing because of climate
inertia, particularly due to the ocean.
Triggers their impacts
ANI 10 [March 20, 2010, Asian News International citing Charles H. Greene, Cornell Earth and
atmospheric science professor, “IPCC has underestimated climate-change impacts, say scientists”
http://news.oneindia.in/2010/03/20/ipcchas-underestimated-climate-change-impacts-sayscientis.html
7/10/13 EYS]
According to Charles H. Greene, Cornell professor of Earth and atmospheric science, "Even if all manmade greenhouse gas emissions were stopped tomorrow and carbon-dioxide levels stabilized at
today's concentration, by the end of this century, the global average temperature would increase by
about 4.3 degrees Fahrenheit, or about 2.4 degrees centigrade above pre-industrial levels, which is
significantly above the level which scientists and policy makers agree is a threshold for dangerous
climate change."
"Of course, greenhouse gas emissions will not stop tomorrow, so the actual temperature increase will
likely be significantly larger, resulting in potentially catastrophic impacts to society unless other steps
are taken to reduce the Earth's temperature," he added.
"Furthermore, while the oceans have slowed the amount of warming we would otherwise have seen for
the level of greenhouse gases in the atmosphere, the ocean's thermal inertia will also slow the cooling
we experience once we finally reduce our greenhouse gas emissions," he said.
This means that the temperature rise we see this century will be largely irreversible for the next
thousand years.
"Reducing greenhouse gas emissions alone is unlikely to mitigate the risks of dangerous climate
change," said Green.
a/t: Backstopping
US controls prices more than Saudi Arabia- fracking.
Smith, Former UNC Economics and Government Assistant Professor, 2013
[Karl, 7-1-13, Forbes, “Yes Virginia, US Oil Production Can Influence Global Prices,”
http://www.forbes.com/sites/modeledbehavior/2013/07/01/yes-virginia-us-oil-production-caninfluence-global-prices/, Accessed: 7-13-14, KMM]
There are a couple of ways to tackle this. One is to note that the US produces roughly the same amount
of Petroleum Liquids (a bigger category than crude oil) as Saudi Arabia. Yet, conventional wisdom had
been that Saudi Arabia more or less controlled the global price of oil and gasoline by altering how
much it supplied to the markets. If the Saudis cut production oil prices, went up. If the ramped up
production then oil prices went down. How can this be if they control roughly the same market share
as the US?
The answer is that the price of oil is determined not by the overall amount of oil produced and
consumed but by whether slightly more oil is being produced than consumers want to buy or slightly
less. If slightly more is being produced then stockpiles will rise larger and larger over time. Stockpiles
can’t keep growing forever and as they build larger and larger, vendors become eager to sell and cut
the price. Similarly, as stockpiles shrink closer to zero, vendors become nervous that they will run out
and raise the prices.
Folks can tack as much or as little cynicism about price gouging and manipulation, as there wont
determines. Anyway you slice it, however, the fundamental limit here is that when the tanks are full you
cannot accept deliveries and when the tanks are dry you cannot sell to consumers. Price has to change
to keep those boundaries from being hit.
So, the US doesn’t have to produce so much oil that it radically expands global production. It just has
to produce enough to tilt the tanks towards filling up, rather than emptying out.
If we go to the charts, it looks like that is exactly what is happening. Below is the daily price of oil
produced in the Central US, West Texas Intermediate (WTI) in blue and the oil used by East Coast
refineries, Brent Crude.
The two follow each other closely until about 2011. The US fracking boom had started well before then.
However, that’s when oil started to pile up at Cushing, OK. The price of oil is pushed around by many
factors but its fair enough to say that the price of WTI (blue line) continued to sink throughout most of
2011 as the storage depots in Cushing, Oklahoma became increasingly close to full capacity.
In late 2011 Enbridge announced plans to reverse one its pipelines that moved oil from the Texas coast
to Cushing. Reversing the flow direction of a pipeline is no small matter, and the announcement helped
ease concern that Cushing would hit capacity. As a result the blue line rose close to the red line again.
However, US production kept going and the Enbridge reversal was not enough. Over time the gap
between WTI and Brent opened up again. Only recently, have it begun to close. Yet, this time its
closing the other way. Brent is coming towards WTI. The result is that consumers are seeing a reduction
in prices, related to the US supply boom.
Lets add gas prices to our chart and zoom in. The green line is the price of gasoline (minus 49 cents for
the average US tax.) With a bit of a delay and some diversions due to refinery outages, the green line
follows the red line. The price of gasoline is determined by the price of Brent. And, since the beginning
of this year the price of gasoline has slowly been coming down, even though the price of WTI has
barely changed. In the coming weeks the price of gasoline is likely to fall even more. There are currently
some refinery outages in California and gasoline moves with a delay. This will save consumers money at
the pump, and its happening as the price of Brent converges on to the price of WTI.
What that implies is that US production is beginning to set the world price and the price that
consumers pay. The US is in economists terms – the marginal producer. This state of affairs may not
last long. The Saudis may attempt reassert their role. Demand in Asia could pick up beyond what US
production can meet, etc.
However, its not clear that this will happen. Asian growth is weakening. Iranian oil production is
limited by sanctions. Both factors complicate the Saudis attempts to control prices. The landscape
could continue to shift in this direction. As it does, price will increasingly be set by the marginal
producer and the marginal producer righ,t now, is US fracking operations.
No capacity for backstopping
Saxena, Puru Saxena Wealth Management founder, 2011
[Puru, 6-18-11, Market Oracle, “An Epic Energy Crunch, Global Crude Oil Demand Exceeds Production,”
http://www.marketoracle.co.uk/Article29323.html, Accessed: 7-13-14, KMM]
The majority of the world’s developed economies are growing at a sluggish pace, yet the price of
NYMEX crude is trading around US$100 per barrel. Interestingly, the price of Brent Crude (the price
most nations pay) is even higher!
You may recall that during the last oil spike in 2008, world governments blamed those wily speculators.
Therefore, in order to diminish speculation, the authorities banned leveraged ‘long’ oil exchange
traded funds.
It is notable that a few months ago, the price of NYMEX crude (once again) spiked to US$115 per barrel
and this caused the politicians to panic. This time around, the governments could not blame the
speculators so, a few days ago, they decided to dump 60 million barrels of crude on the market from
their strategic petroleum reserves. This ‘oil pour’ created a lot of sensational headlines in the media
and caused the price of crude to drop sharply. However, this decline proved to be short-lived and the
oil price bounced right back up again.
Political manipulation notwithstanding, the truth is that the fundamentals for petroleum are wildly
bullish and all the governments put together will not succeed in suppressing the price of oil. According
to the International Energy Agency, the world is likely to consume 89.3 million barrels of liquid fuels
per day in 2011 (Figure 1) and in May, global production came in at 87.68 million barrels per day.
Thus, you can see that output is failing to keep up with rising worldwide consumption and the 60 million
barrels ‘oil pour’ represents less than a single day’s usage!
Bearing in mind the fact that global usage of liquid fuels will only increase in the future, one does not
need to be a rocket scientist to figure out that the world will need to raise its production. So, in this
editorial, we will evaluate whether the oil producing nations will be able to rise to the challenge.
When reviewing crude’s supply picture, it is important to realise that several oil producing regions are
already past their peak flow rates and have entered an irreversible decline. For instance, it is no secret
that the North Sea, Mexico, Indonesia and a host of other areas are past their prime. In terms of future
production growth, all eyes are now fixated on OPEC which claims to have almost 5 million barrels per
day of spare capacity. Nobody really knows whether OPEC is capable of increasing production by such a
large amount but Saudi Arabia keeps insisting that it can ramp up daily output by approximately 3.5
million barrels (Figure 2).
Now, given the fact that the vast majority of Saudi Arabia’s super-giant oil fields are extremely old, one
has to wonder whether the nation is capable of boosting production. According to some reports, Saudi
Arabia is struggling to maintain its current flow rates and in a desperate attempt to maintain reservoir
pressure, it is pumping huge amounts of water into its ageing oil fields.
More importantly, we are of the view that Saudi Arabia has grossly overstated its oil reserves and it is
extremely unlikely that the nation has 270 billion barrels of petroleum. After all, the Saudi reserves
have never been audited and a recent report by WikiLeaks suggests that the Saudis have inflated their
oil bounty by 40%!
The proof of the pudding is in the eating and when one reviews Saudi oil production data, it becomes
clear that despite all the rhetoric, its flow rate is in decline! Figure 3 shows that Saudi oil production
reached a high in 2004 and ever since, it has been heading south.
If Saudi Arabia is indeed sitting on humungous oil reserves and it has the ability to raise output, why has
production failed to climb above the level recorded seven years ago?
Now some may argue that the Saudis are deliberately keeping a lid on production, but we have a
different view. Call us sceptics, but we believe that Saudi Arabia is already stretched to the limit and
will find it hard to increase production.
Unfortunately, if Saudi Arabian oil production is close to its peak, then the world simply cannot
produce more crude. Furthermore, when you take into account the ongoing depletion in the world’s
existing oil fields, it becomes clear that the world is heading into an epic energy crunch.
Under these circumstances, we believe that the price of oil will appreciate considerably and the
impending surge will cause the next worldwide recession. However, as long as the global economy is
expanding, the oil bull will charge ahead and it is likely that the all-time high recorded in 2008 will be left
in the dust. Accordingly, we are maintaining our overweight investment position in upstream energy
companies, oil services firms and nuclear energy plays.
Although we are aware that nuclear energy is currently out of favour and many are unsure about its
future, we are convinced that there is no Plan B. With the finite supply of liquid fuels, the world will
need to generate more electricity and nuclear energy is the only viable option. Sceptics may want to
note that if France can generate over 75% of its power from nuclear energy and do so without any
accidents, then the rest of the world can surely do the same. It is notable that with the exception of
Germany, most other nations are going ahead with their nuclear programs and this is good news for the
sector. In summary, we view the panic fueled sell off in the nuclear sector as a great opportunity for the
patient investor
Alt cause—Iran prolif
Energy Digital, 2011
[6-28-11, OilPrice.com, “Saudi Arabia Using Oil as an Economic Weapon Against Iran,”
http://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Using-Oil-as-an-Economic-Weapon-AgainstIran.html, Accessed: 7-13-14, KMM]
Saudi Arabia and Iran have been in a bitter dispute over the last several weeks. Iran successfully blocked
an effort by OPEC nations to release excess oil reserves into the market to ease high prices and stabilize
the world economy. In response, Saudi Arabia decided to act against OPEC and release its own
reserves. In no uncertain terms, a bitter feud is brewing between the two oil-rich nations, and Saudi
Prince Turki Al-Faisal has stated that the country is in such fear of what may happen if Iran succeeds in
attaining nuclear weapons capabilities, that it is considering flooding the market with oil to bankrupt
Iran’s government and halt nuclear ambitions.
In a meeting with U.S. and British servicemen at a U.K. airbase, the prince claimed that Saudi Arabia
does not want Tehran to attain nuclear weapons, to the extent that the Saudis are willing to
completely open their oil reserves to bankrupt Iran. “We could almost instantly replace all of Iran’s oil
production,” stated the prince. This would equate to roughly 4 million barrels per day.
However, if such an action were to occur, there would of course need to be a naval blockade of Iran’s
fleet of oil tankers, which Iran would inevitably view as an act of war. However, this seems like an
unlikely and rather dangerous scenario. What is more likely to occur is a continued increase in supply
coming from Saudi Arabia despite OPEC’s disapproval. The effect will be a prolonged cut into Tehran’s
oil profits.
Saudi can’t backstop
Real Clean Energy, 2012
[5-29-12, Real Clean Energy, “OPEC's Spare Capacity Is at Lowest Since 2008,”
http://www.realclearenergy.org/charticles/2012/05/29/opec_spare_capacity_lowest_since_2008_1065
72.html, Accessed: 7-13-14, KMM]
OPEC's spare crude oil production capacity is at the lowest level since 2008, according to figures from
the Energy Information Administration. Excess capacity has been declining steadily since the last
quarter of 2009 but is still nowhere near as low as it was from 2003 to the end of 2008.
The blue bars on the graph indicate OPEC spare capacity, with the scale in millions of barrels on the left.
Capacity is now 2.4 million barrels, down from 4.5 million in the last quarter of 2009 but well above the
low point of less than 1 million barrels in 2004. The red line indicates the WTI crude oil price with the
scale on the right, running from zero to $140 a barrel in 2010 prices. The price is now near $100 a barrel,
the highest since 2009 but well below the peak of $123 in 2008.
Low spare capacity is usually associated with high prices and vice versa, although there is no clear
cause and effect. What low capacity does mean is that prices become inelastic as countries are unable
to respond to supply squeezes, increased demand or unanticipated world events by ramping up
production. Nearly all the world's spare capacity is in OPEC countries and most of that is in Saudi Arabia.
EIA defines spare crude oil production capacity as potential oil production that could be brought online
within 30 days and sustained for at least 90 days, consistent with sound business practices. This does
not include oil production increases that could not be sustained without degrading the future
production capacity of a field.
What the current moderately low spare capacity indicates is that the world is on a tightrope with the
uncertainty over the Iranian boycott. Prices are now high and there is not too much spare capacity
available to bring them down. But the situation is not as bad as it was in 2008, when tight supplies sent
oil over $120 a barrel.
Reserves overstated
Vidal, Guardian Environment Editor, 2011
[John, 2-8-11, The Guardian, “WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on
prices,” http://www.guardian.co.uk/business/2011/feb/08/saudi-oil-reserves-overstated-wikileaks,
Accessed: 7-13-14, KMM]
The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to
prevent oil prices escalating, confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi
government oil executive that the kingdom's crude oil reserves may have been overstated by as much
as 300bn barrels – nearly 40%.
The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global
demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel
partners would pump more oil if rising prices threatened to choke off demand.
However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly
Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco's
12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.
According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an
output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil
production would have hit its highest point. This crunch point is known as "peak oil".
Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because
the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He
argued that Aramco had badly underestimated the time needed to bring new oil on tap.
One cable said: "According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi
reserves are not as bountiful as sometimes described, and the timeline for their production not as
unrestrained as Aramco and energy optimists would like to portray."
It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration,
reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20
years Aramco will have 900bn barrels of reserves.
"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as
300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in
decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a
plateau in total output that will last approximately 15 years followed by decreasing output."
The US consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco
company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his
predictions be thoughtfully considered."
Seven months later, the US embassy in Riyadh went further in two more cables. "Our mission now
questions how much the Saudis can now substantively influence the crude markets over the long term.
Clearly they can drive prices up, but we question whether they any longer have the power to drive
prices down for a prolonged period."
A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may
further constrain Saudi oil exports. "Demand [for electricity] is expected to grow 10% a year over the
next decade as a result of population and economic growth. As a result it will need to double its
generation capacity to 68,000MW in 2018," it said.
It also reported major project delays and accidents as "evidence that the Saudi Aramco is having to
run harder to stay in place – to replace the decline in existing production." While fears of premature
"peak oil" and Saudi production problems had been expressed before, no US official has come close to
saying this in public.
***a/t: links***
Renewables + Nuclear:
No OPEC Perception
OPEC doesn’t perceive a tradeoff between renewables and oil
OPEC, 2013
[OPEC, “2013 World Oil Outlook,”
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO_2013.pdf,
Accessed: 7/7/14, JO]
Beyond volume patterns, oil demand in the road transportation sector is determined by the efficiency
of the vehicle fleet using internal combustion engines (ICE), and the pace of development and
penetration of vehicle technologies, including hybrids and non-petroleum-based engines. The
efficiency of ICE vehicles will be determined by policies, technological developments and consumer
preferences, as well as scrap-page rates, the choice between gasoline and diesel for passenger cars, and
possible changes in the scope for efficiency improvements in commercial vehicles. Possibilities for
alternative technologies in the transportation sector include hybrids (seen as the most likely to
emerge over the projection period to 2035 ), Plug-in hybrid electric vehicles (with their high price
remaining a key challenge ), battery electric vehicles (though they also have a high price, as well as
significantly shorter vehicle range and long charging time ) and natural gas vehicles (which are limited
by the availability of refuelling infrastructure, despite growth in some markets). The average global
decline in oil use per vehicle is around 2% p.a., similar to that of the WOO 2012.
Electricity =/= Liquid Fuel
The aff doesn’t change oil prices—Electricity is distinct from liquid fuel
Styles, Managing Director of GSW Strategy Group, LLC, an energy and environmental
strategy consulting firm, 2012
[Geoffrey, February 24th, Blogspot, “How Helpless Are We in the Face of Rising Oil Prices?,”
http://energyoutlook.blogspot.com/2012/02/how-helpless-are-we-in-face-of-rising.html, Accessed:
7/6/14, JO]
To see why requires a sense of how the oil market works, as well as the uses to which we put oil today,
rather than a generation ago. For starters, although the President has worked hard to improve
conditions for renewable energy sources like wind and solar power --sources that certainly have an
important role to play in our long-term energy mix--these technologies, along with nuclear power , are
out of place in a conversation about oil prices in 2012. That's because they produce electricity rather
than liquid fuels , and less than 1% of US electricity is generated from oil today, compared to more
than 10% in 1980. Electricity from renewable and nuclear power doesn't compete with imported oil or
any other kind of oil; it competes with domestic energy sources like coal and natural gas, most of
which now comes from conventional and unconventional gas fields, rather than as a byproduct of
producing oil. So by all means lets have a conversation about renewables in the context of reducing
greenhouse gas emissions today and displacing oil from transportation when there are tens of millions
of electric vehicles on the road in the future, but in terms of oil prices now and in the near future,
they are a rhetorical diversion.
Correlation down
No link—The correlation between renewables and oil prices collapsed
David, Scribe-editor @CNBC, 3/30/2014
[Javier E., CNBC, “Solar's spike tied to oil prices? Don't bet on it,”
http://www.cnbc.com/id/101534083#., Accessed: 7/6/14, JO]
In recent years, analysts have debated whether alternative energy stocks are directly correlated to the
price of crude oil. The thinking goes that pricier oil pushes renewable energy companies higher, as
investors and consumers search for cheaper alternatives to fossil fuels.
But for a host of reasons, the link between solar and crude prices has begun to break down
completely . The uncoupling highlights how, after years of false starts, renewables may finally be
coming into their own as an investment class.
"The correlations in the past [between crude and alternative energy] have been very high, but in the
last year they have dropped significantly," said Leo Kelly, partner and managing partner at HighTower's
Kelly Wealth Management.
With a coefficient of "1" meaning direct correlation, Kelly said solar stocks traded as high as 0.7 to the
price of oil just a few years ago, but in the last year that correlation has collapsed to virtually nil . At
its peak, the renewable/crude link was nearly as high as the relationship between oil and big oil
companies like ExxonMobil and ConocoPhillips, whose correlation to crude ran as high as 0.9 percent
late last year.
Yet exactly how tight the link is between the two asset classes is disputed. The tenuous relationship has
grown weaker now that the U.S. is on a path to energy independence.
Kelly attributed the decoupling between alternative energy and crude to the U.S. shale boom, which has
seen the world's largest economy churn out nearly 10 percent of the world's oil, according to Energy
Information Agency data. Last year, overall U.S. crude production rose to nearly 8 million barrels a day,
and natural gas stockpiles also grew year over year.
"People are looking at the abundance in nat gas and wondering if alternative energy will kick into gear,
because natural gas is so cheap," he said.
However, alternative energy stocks certainly have kicked into gear—and then some. For the first time
in recent memory, renewable stocks are far outpacing their oil and gas counterparts, becoming an
investment class in their own right.
Over the last year, solar bellwethers like First Solar and SolarCity have skyrocketed 156 percent and
221 percent, respectively. Those gains eclipse those of Big Oil and the spot prices of crude over the
same period: Exxon is up a meager 6 percent year over year, while Conoco has risen 15 percent.
Pavel Molchanov, an energy analyst at Raymond James, counts himself among the skeptics of the link
between alternative energy and oil. "Solar does not compete with oil. You do not put it in a gas tank ,"
he said in an interview.
Using the CleanTech Index as a proxy for renewables, Molchanov said the index surged by nearly 60
percent in 2013. Simultaneously, crude prices saw modest gains: Brent is up 4 percent over the last year,
while West Texas Intermediate has risen 9 percent.
'Industry-specific' factors
"Solar does in an indirect sense compete with natural gas because both are ways of generating electric
power," Molchanov said. Yet at a basic level renewable power "is not a petroleum substitute ." Rather
than crude, gains in the sector are driven much more "industry-specific" factors like technology
innovation, input prices and capital spending, he said.
a/t: Oil used for electricity
Only 1 percent of oil is used for electricity
U.S. Energy Information Administration, 2014
[June 13th, U.S. Energy Information Administration, “What is U.S. electricity generation by energy
source?,” http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3, Accessed: 7/6/14, JO]
In 2013, the United States generated about 4,058 billion kilowatthours of electricity. About 67% of the
electricity generated was from fossil fuel (coal, natural gas, and petroleum), with 39% attributed from
coal.
In 2013, energy sources and percent share of total electricity generation were
Coal 39%
Natural Gas 27%
Nuclear 19%
Hydropower 7%
Other Renewable 6%
Biomass 1.48%
Geothermal 0.41%
Solar 0.23%
Wind 4.13%
Petroleum 1%
Other Gases < 1%
a/t: Electric Cars
Electric cars are decades away from substantial market penetration, even assuming
the most optimistic estimates
Mouawad, New York Times Energy Reporter, 2009
[Jad, 12-14, New York Times, “Report: Meaningful Numbers of Plug-In Hybrids Are Decades Away ,”
http://green.blogs.nytimes.com/2009/12/14/report-meaningful-numbers-of-plug-in-hybrids-stilldecades-away/?_php=true&_type=blogs&_r=0, Accessed: 7/6/14, JO]
The mass-introduction of the plug-in hybrid electric car is still a few decades away, according to new
analysis by the National Research Council.
The study, released on Monday, also found that the next generation of plug-in hybrids could require
hundreds of billions of dollars in government subsidies to take off.
Even then, plug-in hybrids would not have a significant impact on the nation's oil consumption or
carbon emissions before 2030. Savings in oil imports would also be modest, according to the report,
which was financed with the help of the Energy Department.
Dozens of carmakers, including Toyota, General Motors and Nissan, are developing new plug-in hybrid,
which will begin showing up in showrooms next year. (Toyota just announced today that "several tens of
thousands" of plug-in Priuses would go on sale in 2012 2011) These types of cars have both an electric
and a gasoline- powered engine. They are built to run primarily on the electric battery, but if extra
power is needed for a long drive, the gas engine eventually lacks in. Users are supposed to be able to
recharge their cars by hooking them directly into electric power outlets at home or at work.
The report found that plug-in electric cars could number 40 million by 2030 — provided that rapid
progress is made in battery technology and that the government provided hundreds of billions of
dollars in subsidies and incentives. However, the study suggested that a "more realistic" scenario is
closer to 13 million cars. That would represent 4 percent of the estimated 300 million cars that would
be on the road by then.
The main reason behind this slow rollout relates to the cost of the batteries. Building a plug-in hybrid
that can run for 40 miles on electricity costs $18,000 more than a similar conventional car, the report
stated. While a mile driven on electricity costs less than one driven on gasoline, "it is likely to be
several decades before lifetime fuel savings start to balance the higher first cost of the vehicles," the
report said.
"Lithium-ion-battery technology has been developing rapidly, especially at the cell level, but costs are
still high, and the potential for dramatic reductions appears limited," the report stated.
Natural Gas:
No OPEC Perception
OPEC doesn’t perceive a tradeoff between natural gas and oil
OPEC, 2013
[OPEC, “2013 World Oil Outlook,”
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO_2013.pdf,
Accessed: 7/7/14, JO]
The increased attention paid to natural gas worldwide is closely linked to the emergence of shale gas as
a growing source of supply in the US and Canada. The fact that gas prices are relatively low means that
gas is increasingly being used in the US for power generation. Attention is also increasingly turning to
the use of gas in the transport sector. Despite the rapid rise of supply from shale gas and its evidently
large resource base, there are many potential barriers to the continued rise in supply , in both the
medium- and long-term. These include concerns about potential adverse environmental impacts, the
disposal of waste water and excessive water use. However, these concerns seem to be receding.
Another question relates to the behaviour of gas prices in the future. Prices in the US are well below
those in Europe and Asia, and it is possible that increased inter-regional gas flows (particularly if
expected US LNG exports materialize) will establish more linkages among these markets. However, this
does not necessarily mean uniformity in pricing mechanisms nor a sharp convergence in prices, given
the varied market structures, high LNG transport costs and steps to mitigate risks (particularly demand
risks) that are needed to be able to develop an upfront capital-intensive gas liquefaction infrastructure.
Another significant uncertainty revolves around how fast infrastructure development and the
refitting of commercial trucks, requirements to make natural gas an important fuel in the
transportation sector, can be undertaken.
No infrastructure
Natural gas won’t affect oil—Long timeframe and high cost for the infrastructure
Licata, Founder & Chief Energy Strategist of Blue Phoenix Inc, 6/26/14
(Blue Phoenix Inc. is an independent energy research group)
[John, The Motely Fool, “Can the US Really Be Energy Independent?,”
http://www.fool.com/investing/general/2014/06/26/can-the-us-really-be-energy-independent.aspx,
Accessed: 7/5/14, JO]
Thanks to the natural gas boom here at home, we should be looking at new ways to tap domestic
natural gas as a transportation fuel versus simply using the resource solely for power production. This
is an idea Secretary Abraham also strongly supports. However, creating the necessary infrastructure to
establish nationwide natural gas fueling stations would realistically take years to build and a ton of
cash to complete. Therefore, if the U.S. exports light sweet crude oil prematurely, we could be blindly
opening the door for higher gasoline prices here at home since thanks to our continued reliance on
foreign oil. How's that being energy independent? Additionally, domestic refiners like Valero
Energy (NYSE: VLO ) and Phillips 66 (NYSE: PSX ) were hit hard on the oil export news as investors
wonder if refiners margins will get squeezed if relaxing or tweaking the 40-year ban on crude oil exports
opens the door to an even bigger move to send more oil overseas.
Decoupled
Natural gas and oil prices are decoupled—Statistical evidence
Rottmann, Direct Energy Market Intelligence Senior Manager, 2013
[Hans, August 14th, Direct Energy Business, “Are Natural Gas And Oil Prices Correlated?,”
http://www.business.directenergy.com/blog/natural-gas-oil-prices-correlation, Accessed: 7/6/14 , JO]
Many financial and economic articles I’ve read report on energy prices as well as commodities in
general. But even if you follow the trends in retail gas and retail power prices, which are strongly
correlated, it seems that wholesale natural gas and crude oil prices are not moving together much of
the time when they should trend together.
There are many reasons why natural gas and oil prices should trend together. Oil and gas demand are
both driven by trends in energy usage for the same purposes including space heating, power generation,
manufacturing, etc. When energy demand increases or decreases, it generally changes for all fuels.
And participants in the energy market are trading both types of energy, sometimes for the same
strategic purposes, including, but not limited to: hedging by consumers and suppliers, market
speculation, inflation or foreign currency plays related to commodity price trends and more. In fact, you
and I can personally invest in commodity mutual funds that may have a “bucket” of commodity that are
purchased or sold together, thereby increasing the strength of any correlation.
Until about five years ago, there was a strong correlation between gas and oil. In fact, some businesses
have historically been able to switch fuels based on economics and take advantage of brief market
anomalies. From early 2007 to mid-2008, oil and gas prices have more than doubled, and a year later,
were both lower than they had started as part of the global commodity bubble and subsequent
collapse.
Enter shale gas . While oil prices recovered along with the world economy and global commodity
prices, natural gas prices stayed low as U.S. domestic gas production boomed. While oil imports are
falling, they still represent 40% of U.S. consumption (the lowest figure since 1991) while natural gas
imports represent only 5% of U.S. consumption. Unlike oil prices, natural gas prices are not subject to
the volatility of the world market, the whims of OPEC and the geopolitics of the Middle East. Oil prices
have recovered to roughly two-thirds of the 2008 peak while natural gas is less than one-third of its
peak. And before shale, the U.S. was constructing LNG import terminals to bring in more supply. Due to
international natural gas prices exceeding $10 and U.S. prices near $4 per MMBtu, the U.S. is now
constructing export facilities. Natural gas is helping to make the U.S. more energy independent,
although there is a lively debate regarding shale gas drilling.
For electricity consumers, the correlation between power and gas has strengthened while the link to
oil has weakened. In the 1970’s, both natural gas and oil were used to generate approximately 20-25%
of domestic electricity. Since then, natural gas share has increased to over 40%, while oil’s share has
plummeted to less than 5%.
***Low Oil Prices Good***
2ac Saudi Prolif Turn
Perception of a US alliance is key to prevent Saudi prolif
Guzansky, Institute for National Security Studies Fellow, 13
[Yoel, Spring 2013, “Questioning Riyadh's Nuclear Rationale,” Middle East Quarterly, 20:2, 59-64,
http://www.meforum.org/3512/saudi-arabia-pakistan-nuclear-weapon, AC]
Continued Iranian progress toward a nuclear weapon, Iraq's increasing alignment with Tehran, and an
expedited U.S. exit from Afghanistan are all changing the Saudi strategic landscape. The Obama
administration's "lead from behind" approach in Libya and its hesitation to get involved in the Syrian
civil war all contribute to a reassessment of U.S. commitments. With the U.S. "pivot to Asia"—taking the
form of a series of military, economic, commercial, and diplomatic initiatives aimed at contending with
the rising power of China—and a changing global energy map due to expansion of oil and natural gas
production in the United States, Riyadh and others are beginning to prepare for a post-U.S. Middle
East.
According to recent reports, Washington is considering expanding its nuclear cooperation with Riyadh
on the basis of a 2008 memorandum of understanding: In exchange for foregoing the operation of
nuclear fuel cycles on its soil, Saudi Arabia was to receive nuclear assistance.[33] Such a move, should it
come to pass, may be meant to persuade Riyadh to abandon its strategic goals, prevent other players
from gaining a foothold in the attractive Saudi market, and challenge Tehran's nuclear policy. The United
States is still Saudi Arabia's most effective security support, but if Washington distances itself from
regional matters, the gradual entrance of new players into the Gulf is inevitable.
The question of Saudi acquisition of a nuclear deterrent is more relevant than ever when both enemies
and friends of the United States are looking at a possible regional drawdown on Washington's part as
well as a lack of support for the pro-Western regimes that remain in place. If the U.S. government
provides Riyadh with formal security guarantees, it would be natural for it to demand that the kingdom
forego its strategic goals. But Riyadh's inclusion under a U.S. defense umbrella is not a given and
depends both on the quality of relations between the two countries and other Saudi considerations.
Riyadh remains skeptical over Washington's willingness to come to its aid and may thus seek to
purchase a nuclear deterrent, which would provide it with more freedom vis-à-vis its stronger ally.
Under present circumstances, it is not unreasonable for Riyadh to rely on other states for its defense in
addition to Washington for the simple reason that it has done so in the past. Likewise, it is more than
likely that the Saudis will not act transparently because they have acted in secret previously.
After Iran, Saudi Arabia is the number one candidate for further nuclear proliferation in the Middle
East. Open source evidence remains circumstantial, but perhaps more than any other regional player,
Riyadh has the requisite ideological and strategic motives as well as the financial wherewithal to act
on the option.
The kingdom may conclude that its security constraints as well as the attendant prestige and influence
generated by having a bomb outweigh the political and economic costs it will pay. The difficulty in
stopping Tehran's dogged quest for a nuclear capability coupled with Riyadh's doubts about the
reliability of Washington is liable to encourage Riyadh to shorten timetables for developing an
independent nuclear infrastructure, as well as to opt to purchase a turnkey nuclear system, an off-theshelf product, or to enter into a security compact of one sort with another power. Sunni-majority
Pakistan has emerged as the natural candidate for such an arrangement.
Heavy U.S. pressure is likely to be brought to bear on the Saudis not to acquire nuclear capabilities.
Indeed, it seems that, at present, the price Riyadh is likely to pay should it acquire military nuclear
capabilities might outweigh the advantages of such a move. But strategic interest, motivated by
considerations of survival, could have the upper hand. Should it seem that the kingdom's vital security
interests are threatened, it may prefer to take a series of steps, including obtaining a nonconventional
arsenal, to reduce risks and ensure the continuity of the House of Saud.
Oil independence destroys the US-Saudi alliance
Tanter, former National Security Council member, 12
[Raymond, Georgetown government professor, Summer 2012, International Economy
Magazine, “The Geopolitics of US Energy Independence,” http://www.internationaleconomy.com/TIE_Su12_GeopoliticsEnergySymp.pdf, accessed 7/9/14, AC]
respect to Iran, energy was a factor in the cooperation of American and British intelligence to overthrow
the Mosaddeq government in 1953, but proliferation concerns trump energy a half century later.
Concerning Saudi Arabia, energy is at the heart of the relationship. So rising oil prices and production
costs, declining reserves, and increasingly available alternative fuels as well as nonconventional
sources of oil are bound to make Riyadh of less consequence to Washington than it is today.
Saudi Arabia’s comparative advantage in oil production and the world economy’s thirst for oil converged
to make the Kingdom a strategic ally in the past. But the odds that the Kingdom will survive the
spreading Arab revolts are not high, and the American commitment to the royal family is mainly
against external, not internal, threats. Hence, coming to the defense of the Kingdom is likely to be
perceived in Washington as too costly when the threat is from within.
With European countries becoming more dependent on Russia for energy supplies, and Russia as well
as Germany becoming closer economic partners, the likelihood of out-of-area involvement by NATO in
such places as Afghanistan is not high. And as the saying goes, “Out of area or out of business!” Verleger
suggests that American energy independence could make this era the “New American Century” by
creating an economic environment where the United States enjoys access to energy supplies at much
lower cost than other parts of the world and giving the U.S. economy an edge over other nations,
particularly northern Europe. In the context of enhanced American energy independence, the Obama
Administration’s pivot to Asia is likely to be of more import for Europe than the Middle East. Finally, U.S.
energy independence is likely to reinforce isolationist foreign policy tendencies already in force in the
United States. A game changing event like an Iranian nuclear weapon could wipe out the tide toward
isolationism.
Saudi prolif causes nuclear war
Edelman, former undersecretary of Defense, et al., 11
[Eric S., ANDREW F. KREPINEVICH is President of the Center for Strategic and Budgetary Assessments.
EVAN BRADEN MONTGOMERY is a Research Fellow at the Center for Strategic and Budgetary
Assessments, Jan/Feb 2011, “The Dangers of a Nuclear Iran.,” Foreign Affairs, 90:1, 66-81,
http://www.foreignaffairs.com/articles/67162/eric-s-edelman-andrew-f-krepinevich-jr-and-evanbraden-montgomer/the-dangers-of-a-nuclear-iran, AC]
There are still rumors that Riyadh and Islamabad have had discussions involving nuclear weapons,
nuclear technology, or security guarantees. This “Islamabad option” could develop in one of several
different ways. Pakistan could sell operational nuclear weapons and delivery systems to Saudi Arabia,
or it could provide the Saudis with the infrastructure, material, and technical support they need to
produce nuclear weapons themselves within a matter of years, as opposed to a decade or longer. Not
only has Pakistan provided such support in the past, but it is currently building two more heavy-water
reactors for plutonium production and a second chemical reprocessing facility to extract plutonium from
spent nuclear fuel. In other words, it might accumulate more fissile material than it needs to maintain
even a substantially expanded arsenal of its own.
Alternatively, Pakistan might offer an extended deterrent guarantee to Saudi Arabia and deploy
nuclear weapons, delivery systems, and troops on Saudi territory, a practice that the United States has
employed for decades with its allies. This arrangement could be particularly appealing to both Saudi
Arabia and Pakistan. It would allow the Saudis to argue that they are not violating the NPT since they
would not be acquiring their own nuclear weapons. And an extended deterrent from Pakistan might be
preferable to one from the United States because stationing foreign Muslim forces on Saudi territory
would not trigger the kind of popular opposition that would accompany the deployment of U.S.
troops. Pakistan, for its part, would gain financial benefits and international clout by deploying nuclear
weapons in Saudi Arabia, as well as strategic depth against its chief rival, India.
The Islamabad option raises a host of difficult issues, perhaps the most worrisome being how India
would respond. Would it target Pakistan’s weapons in Saudi Arabia with its own conventional or
nuclear weapons? How would this expanded nuclear competition influence stability during a crisis in
either the Middle East or South Asia? Regardless of India’s reaction, any decision by the Saudi
government to seek out nuclear weapons, by whatever means, would be highly destabilizing. It would
increase the incentives of other nations in the Middle East to pursue nuclear weapons of their own.
And it could increase their ability to do so by eroding the remaining barriers to nuclear proliferation:
each additional state that acquires nuclear weapons weakens the nonproliferation regime, even if its
particular method of acquisition only circumvents, rather than violates, the NPT.
Were Saudi Arabia to acquire nuclear weapons, the Middle East would count three nuclear-armed
states, and perhaps more before long. It is unclear how such an n-player competition would unfold
because most analyses of nuclear deterrence are based on the U.S.- Soviet rivalry during the Cold War. It
seems likely, however, that the interaction among three or more nuclear-armed powers would be
more prone to miscalculation and escalation than a bipolar competition. During the Cold War, the
United States and the Soviet Union only needed to concern themselves with an attack from the other.
Multi- polar systems are generally considered to be less stable than bipolar systems because
coalitions can shift quickly, upsetting the balance of power and creating incentives for an attack.
More important, emerging nuclear powers in the Middle East might not take the costly steps
necessary to preserve regional stability and avoid a nuclear exchange. For nuclear-armed states, the
bedrock of deterrence is the knowledge that each side has a secure second-strike capability, so that no
state can launch an attack with the expectation that it can wipe out its opponents’ forces and avoid a
devastating retaliation. However, emerging nuclear powers might not invest in expensive but
survivable capabilities such as hardened missile silos or submarine- based nuclear forces. Given this
likely vulnerability, the close proximity of states in the Middle East, and the very short flight times of
ballistic missiles in the region, any new nuclear powers might be compelled to “launch on warning” of
an attack or even, during a crisis, to use their nuclear forces preemptively. Their governments might also
delegate launch authority to lower-level commanders, heightening the possibility of miscalculation and
escalation. Moreover, if early warning systems were not integrated into robust command-and-control
systems, the risk of an unauthorized or accidental launch would increase further still. And without
sophisticated early warning systems, a nuclear attack might be unattributable or attributed incorrectly.
That is, assuming that the leadership of a targeted state survived a first strike, it might not be able to
accurately determine which nation was responsible. And this uncertainty, when combined with the
pressure to respond quickly, would create a significant risk that it would retaliate against the wrong
party, potentially triggering a regional nuclear war.
Most existing nuclear powers have taken steps to protect their nuclear weapons from unauthorized use:
from closely screening key personnel to developing technical safety measures, such as permissive action
links, which require special codes before the weapons can be armed. Yet there is no guarantee that
emerging nuclear powers would be willing or able to implement these measures, creating a significant
risk that their governments might lose control over the weapons or nuclear material and that
nonstate actors could gain access to these items. Some states might seek to mitigate threats to their
nuclear arsenals; for instance, they might hide their weapons. In that case, however, a single intelligence
compromise could leave their weapons vulnerable to attack or theft.
Meanwhile, states outside the Middle East could also be a source of instability. Throughout the Cold
War, the United States and the Soviet Union were engaged in a nuclear arms race that other nations
were essentially powerless to influence. In a multipolar nuclear Middle East, other nuclear powers and
states with advanced military technology could influence—for good or ill—the military competition
within the region by selling or transferring technologies that most local actors lack today: solid-fuel
rocket motors, enhanced missile-guidance systems, war- head miniaturization technology, early warning
systems, air and missile defenses. Such transfers could stabilize a fragile nuclear balance if the emerging
nuclear powers acquired more survivable arsenals as a result. But they could also be highly destabilizing.
If, for example, an outside power sought to curry favor with a potential client state or gain influence
with a prospective ally, it might share with that state the technology it needed to enhance the
accuracy of its missiles and thereby increase its ability to launch a disarming first strike against any
adversary. The ability of existing nuclear powers and other technically advanced military states to
shape the emerging nuclear competition in the Middle East could lead to a new Great Game, with
unpredictable consequences.
Exts – oil ties key to alliance
Reducing Saudi Arabian oil ties leads to Saudi perception of US abandonment
Rogers, Center for a New American Security Fellow, 13
[Will, 4/20/13, Center for a New American Security, “America Committed to Gulf Security Despite
Changing Relationship with Region's Oil, says Gen. Dempsey,” http://www.cnas.org/blog/america-
committed-to-gulf-security-despite-changing-relationship-with-region-s-oil-says-gen-dempsey7468#.U74LZfldV8E, accessed 7/9/14, AC]
America’s relationship with the Middle East’s energy resources is changing as U.S. domestic oil
production continues to grow. A combination of hydraulic fracturing, horizontal drilling and advanced
seismic technologies have contributed to the largest annual growth in U.S. crude oil production since
Colonel Edwin Drake first drilled for oil in Titusville, Pennsylvania in 1859. Most of the crude oil is coming
from shale formations in North Dakota and Texas – what we call “light tight oil.” Since 2010, the United
States has, on average, increased monthly crude oil production by 50,000 barrels a day.
Not all of this U.S. light tight oil is displacing Middle East crude, of course. A number of factors matter,
most importantly the crude oil grade. The United States is producing light tight oil, that is, low-density
crude oil, whereas the United States imports heavier crudes from the Persian Gulf, including from
Saudi Arabia. Moreover, U.S. refineries have been increasingly geared to absorb heavier crudes, from
the Persian Gulf, but more so from Canada, Mexico and Venezuela.
Nevertheless, the glut in U.S. crude oil production and declining demand for oil (a consequence of slow
economic growth and more fuel efficient vehicles) have contributed to a powerful notion that the
United States is relying less and less on oil from the Persian Gulf and could conceivably help wean
America off crude oil imports from the Middle East entirely (a debatable point).
Whether or not one believes that the United States can break the tether to Middle East oil, U.S. allies
and partners in the Persian Gulf are increasingly nervous about America’s long-term security
commitment to the region. After all, if the United States no longer relies on energy from the region,
why should American foot the bill for protecting the sea lanes – that backbone of the crude oil trade
in the region – or so the narrative goes.
The United States has a number of stakes in stability of the Persian Gulf oil trade even if it does rely less
on oil from the region. Supply shocks will contribute to higher global oil prices, which will be felt at
home. Moreover, supply shocks are damaging to our allies, particularly those in East Asia that have
grown more dependent on oil and gas from the Middle East and North Africa. But there are other
legitimate security concerns as well, which were not far from General Martin Dempsey’s mind when he
responded to a question on Monday about how the American energy revolution will impact U.S.
interests and presence in the Persian Gulf. Here’s what the Chairman of the Joint Chiefs of Staff said:If
by 2017 the United States can achieve some level of energy independence, why in the world would we
continue to be concerned about the energy that flows out of – out of the Gulf? Well, look, my answer to
that is I didn’t go to the Gulf in 1991 and stay there for about the next 20 years because of oil. That’s not
why I went. It’s not why my children went. It’s –and we went there because we thought that a region of
the world where we had – where we had not, except for a few bilateral relationships – where we hadn’t
invested much of our, let’s call it, bandwidth, intellectual energy, commitment – now, we went there in
’91 because of the – of the aggression of Saddam Hussein, but we stayed there because I think we came
to the realization that the future of the region was tied to our future, and not through this thing called
oil but rather through the – as I said earlier, the shared interest in a common future where people would
be able to build a better life and where threats could be managed collaboratively, not by the United
States uniquely but by the relationships we would build on the basis of common interests. So when I
hear about in 2017, you know, oil won’t be as big a factor for us – and that’s great. I hope we do achieve
energy independence. But I can assure you that at least from a military perspective – and I can only
speak, as I dress, from the military perspective – that the continued development of capabilities –
military capabilities, notably, in my world, but also partnerships and trust that we build by working
together, by exchanging officers and noncommissioned officers in our professional military schools, that
on that basis, you will find –you will find that the future will be a period of greater commitment.
Now, you know, if you measure our commitment in terms of numbers of boots on the ground and
numbers of aircraft and number of aircraft carriers, I think you’ll probably –you know, there’ll always be
this debate about inclining or declining commitment. But that’s not what the commitment’s all about,
really, in my view. As I said, I went to – I went to the Gulf in ’91, spent almost the next 20 years there on
and off and didn’t do it for oil.
So we have two powerful strategic cross-currents that the Obama administration will have to confront in
the near term
This week marks the anniversary of the U.S. invasion of Iraq, a solemn reminder for some that the
United States should be less engaged in the Middle East, not more. Add this to the notion that the
United States could break the tether to Middle East oil, and the domestic narrative speaks for itself. At
the same time, though, a credible U.S. security commitment to our partners in the Persian Gulf may be
the only way to allay concerns about security challenges in the region. Take for example, Iran. My
colleagues Colin Kahl, Melissa Dalton and Matt Irvine recently published a report assessing the
possibility that an Iranian bomb could lead to Saudi Arabia developing the bomb – Atomic Kingdom: If
Iran Builds the Bomb, Will Saudi Arabia be Next? Kahl, Dalton and Irvine argue quite persuasively that a
number of factors will keep Saudi Arabia from developing the bomb. But one of the big caveats tdo
this is a credible U.S. security commitment to Saudi Arabia. Does the Royal Family in Riyadh feel
comfortable about this commitment given the competing narrative that America may have an
opportunity to walk away from the Persian Gulf if it doesn’t need access to the region’s oil? The public
perception on these issues - at home and abroad - will have to be managed carefully. What a
tightrope to walk.
New oil markets makes Saudis perceive decline in US-Saudi ties.
Hoge, International Peace Instutite Vice President, and House, RAND Corporation
Chairwoman, 14
[Warren (interviewer), Karen Elliott (interviewee), 2014, Carnegie Council for Ethics in International
Affairs, “On Saudi Arabia: Its People, Past, Religion, Fault Lines--and Future,”
https://www.carnegiecouncil.org/studio/multimedia/20121129/index.html/:pf_printable,
accessed 7/9/14, AC]
QUESTION: Warren Hoge[28], International Peace Institute
Karen, there's a lot of talk in American politics about the desire to become energy independent, no
longer dependent upon countries like Saudi Arabia, and there's a real possibility that could happen. The
numbers are there, fracking and offshore oil, that sort of thing. Suppose that does happen. How would
that affect our relationship with Saudi Arabia, and is this something the Saudis themselves worry
about?
KAREN ELLIOTT HOUSE: I don't think they like it when we talk about energy independence. They do
take that as a personal insult. I think it would loosen somewhat our sense of dependence. But the
global economy is still going to be not we so much; I mean we're not a major importer of Saudi oil now
but the global economy is a major importer of Saudi oil and will continue to be.
2ac airlines turn
High oil prices decimate the airline industry
Brancatelli, Business Journal Travel Columnist, ‘12
[Joe, 2-22-12, The Business Journal, “Surging Oil Prices Slap Airlines (and Travelers) ,”
http://www.bizjournals.com/bizjournals/blog/seat2B/2012/02/surging-oil-prices-to-cause-price-pain-atairports.html?page=all, Accessed: 7/13/14, JO]
Here's something you probably need to be reminded about: Surging oil prices will cause you real pain at
the airport too, because airlines are disproportionately affected by energy prices. They'll raise fares on
business travelers, and you'll stop flying because prices have gotten too high. Then they'll drop routes
that are no longer profitable and mount counterintuitive fare sales in a desperate bid to lure
discretionary travelers back onto the planes. Some airlines will die.
And here's something I'll tell you now because you'll probably remember it yourself before the end of
this column: It's déjà vu all over again. We've lived what we're about to live before. It was called 2008. It
wasn't fun. And it'll probably be worse this time.
Let's start at the metaphoric top line and the real-world gas pump, shall we? With crude oil prices
nearing nine-month highs, selling for about $105 a barrel on New York markets on Tuesday morning,
gasoline has surged to what the AAA says is a national average of $3.57, up from $3.17 a year ago.
We've already hit the $4 plateau in some parts of the nation. Given the tensions with Iran, the "experts"
that predict $5-a-gallon gas by summer don't look all that wild-eyed.
The airlines, which spend at least 35 percent of their operating budgets on energy costs, actually have
it worse. They paid an average of $3 a gallon for jet fuel in 2011, the highest average annual price in
history and a 30 percent year-over-year increase. Jet-fuel prices in 2012 are already averaging $3.12 a
gallon. Last Friday, it sold for $3.20 a gallon, according to a spokesman for Airlines for America, the
industry trade group.
Spiking fuel costs have already contracted the size of the U.S. aviation system . The Department of
Transportation says airlines operated just 6.08 million domestic departures in 2011, the lowest
number in a decade . In fact, departures have fallen every year since 2008, when crude-oil prices
spiked at $147 a barrel in the spring and the economy melted down in the fall. Want an even longer
view? Back in 1990, the Federal Aviation Administration predicted that the airlines would board nearly
815 million passengers by 2001. We've never come close to that number, and last year the passenger
count was below 800 million.
Want still more? Two airlines, Spanair of Spain and Malev of Hungary, have already folded this year
after their government backers decided to stop throwing good money after high oil prices. And Air
Australia collapsed last Friday, grounded its flights, and abandoned about 4,000 travelers around the
Pacific. According to the administrators called in to salvage the remains, Air Australia stopped
operating because it couldn't afford to buy the fuel needed to fly its planes and passengers back to
Australia.
Want the hit-me-in-the-pocketbook reality? After about a dozen fare increases last year, U.S. carriers
have already imposed two more across-the-board price hikes this year. Most ominously, last week's
$10 roundtrip fare bump initiated by Southwest Airlines, which has recorded a profit for 39
consecutive years. Southwest generally operates as a governor on fares and usually opposes price
hikes initiated by its legacy-carrier competitors such as United and Delta. When Southwest is leading
the fare charge, however, you know that we're in for higher prices.
So right about now you should be getting that déjà vu all over again feeling. And you're right. This is
exactly what happened in 2008.
As crude-oil prices jumped, airlines frantically raised fares to keep pace. (Airline pricing behavior this
year "eerily resembles Q1 2008," observes FareCompare.com chief executive Rick Seaney.) But high
energy prices nationwide suppressed the economy at large, which depressed the demand for business
travel. And many business flyers who weren't put off by the deteriorating economy chose to defer
travel anyway because they thought fares were too high.
Faced with falling demand and higher jet-fuel prices, airlines ended up doing three things more in
2008: They went out of business (four in one week in early spring). They cut their least profitable (or
biggest loss-making) routes. Then, faced with planes that remained empty, they started cutting fares
for leisure flyers in a desperate attempt to get some revenue coming into the system.
Some of the so-called experts insist that the airlines are better prepared for this year's crisis than they
were in 2008. They note that, save for American Airlines, which declared Chapter 11 bankruptcy last
fall, the airline industry at large is modestly profitable. They add that there are fewer competitors left
to divide the diminishing pie. And they are convinced that the industry has cut its other costs so far
and reduced its route maps so dramatically that the carriers are as lean and mean as possible.
But that's what they said in 2008 , when the oil-price surge wiped out the nascent all-business-class
airline segment, grounded discount airline startups, and even washed away some well-regarded
regional players like Hawaii's beloved Aloha Airlines. What always confounds the experts is how quickly
both business and leisure flyers will stop flying when the economy softens, fares appear unreasonable,
and surging gasoline prices sour everyone's mood and empties our pocketbooks.
All that's left now is to watch fuel prices rise, airline raise fares, cut routes, begin to fold, and then
start discounting like crazy again. Oh, and plan for the worst by exploring tips and strategies for keeping
sane in a world gone mad over oil prices.
[insert impact]
Exts – kills airline industry
High oil prices devastate the airline industry
Milmo, Guardian Transport Correspondent, 2011
[Dan, 6/6/11, The Guardian, “Oil prices pose threat to airlines' profits and survival, IATA warns ,”
http://www.theguardian.com/business/2011/jun/06/airline-industry-profit-slump-oil, Accessed:
7/13/14, JO]
Airlines have slashed their global profit forecast in half after warning that high oil prices, the Japanese
tsunami and the Arab spring will remove $4bn (£2.43bn) from the industry's bottom line this year.
Willie Walsh, chief executive of British Airways and Iberia parentInternational Airlines Group, warned
that European carriers will bear the brunt of the impact from high fuel costs, with some operators
going out of business.
The International Air Transport Association (IATA) said carriers will make a worldwide profit of $4bn
this year, down from a previous estimate of $8.6bn. After recording a net profit of $18bn last year, the
industry is slipping perilously close to its loss-making years of 2008 and 2009, with a profit margin of just
0.7% expected in 2011.
Asked if some carriers will go under, as happened to dozens of airlines in the wake of the 2008 oil
spike when prices hit $147 a barrel, Walsh said: "I fully expect that to happen." Referring to the
current price for Brent crude of $115 a barrel, he added: "I think the high oil price is something that
poses a real challenge to the industry. There are lots of airlines that will struggle in a high oil price
environment." Fuel will account for nearly a third of industry costs this year.
Impact – Aerospace
Commercial airline demand is critical to U.S. aerospace—Exports are keeping the
industry alive
Blakey, Aerospace Industries Association President, ‘14
[Marion C., 3-13-14, Aerospace Industries Association, “The U.S. Aviation Industry and Jobs: Keeping
American Manufacturing Competitive,” http://www.aiaaerospace.org/sectors/civil_aviation/news/the_u.s._aviation_industry_and_jobs_keeping_american_ma
nufacturing_competit, Accessed: 7/13/14, JO]
The Aerospace Industries Association (AIA) appreciates the opportunity to present our views on the
competitiveness of the U.S. aviation industry. Today, there is no sector of our economy that contributes
more to U.S. net exports than commercial aviation manufacturing . This situation could change in the
future if we are not careful.
I am Marion Blakey, President and Chief Executive Officer of AIA, the nation’s largest trade association
representing aerospace and defense manufacturers. Our 380 members represent an industry directly
employing one million workers, and supporting another 2.5 million jobs either indirectly or as suppliers.
First, let me discuss the state of commercial aircraft manufacturing today.
U. S. COMPETITIVENESS IN AIRCRAFT MANUFACTURING
U. S. aircraft manufacturers continue to hold strong positions in the world market due to
the dedication and hard work of American workers, the wisdom of executives leading those companies,
and the pursuit of technological advances that drive world markets. In fact, the aerospace industry
continues to be the United States' leading exporter of manufactured goods. By value, our industry
exported $72.1 billion more than we imported last year. This figure was up 10% over the previous year,
even as the overall U. S. economy improved in fits and starts.
Without a doubt, the success in net exports is related to our dominance in commercial
aircraft manufacturing . U. S. exports of civil aircraft, engines, avionics, and related
components represent 88 percent of all aerospace exports and almost all of the increase we
experienced last year. This is a sign of growth in the developing world. But it is also a testament to
an industry which has invested billions of dollars in research and development to remain competitive
through the use of increasingly sophisticated technologies. We have raised the fuel efficiency of jet
engines by 125% since 1960 and by 20% in the past ten years. And while increasing efficiency, our
manufacturers have also increased safety. In fact, aircraft safety margins have doubled since 1990.
Because of these advancements, the competitiveness of our industry remains strong.
Several of AIA’s member companies analyze global market trends, and they reach similar conclusions.
Aircraft manufacturing will continue to experience growth that outpaces the growth in global GDP.
About 60 percent of these new aircraft will be needed to accommodate global market growth.
However, the high price of aviation fuel has been accelerating the replacement of older aircraft with
more modern, fuel-efficient aircraft. A disproportionate share of this growth involves smaller, singleaisle aircraft in emerging markets led by the Asia-Pacific region and China in particular.
We are pleased that the business aviation and rotorcraft sectors are poised to recover from
the economic downturn that began a few years ago. General aviation aircraft shipments were
up about 6% last year and the forecast for this year is in that range (8.5%). Business jet deliveries have
also recovered, with shipments up 6.3% last year. For the next five years at least, the majority of orders
are expected to come from North America, and therefore will be largely dependent on the state of the
U. S. economy. However, over the long term, our success in the business aviation market will become
increasingly dependent on our market share in the developing world, particularly Asia and Latin
America. Likewise, sales of civil helicopters are increasing, and we expect this trend will continue over
the next few years with modest growth. These markets include oil and gas exploration and production,
public safety, and emergency medical services.
I should add that the downturn in U. S. military investment puts a drag on this positive message from
our commercial industry. The U. S. military aircraft sector continues to shrink, falling 6.3 percent last
year and almost 10 percent over the past three years. Many do not realize that several of our key
military aircraft production lines are sustained today largely by exports . This situation contributes to
a declining supplier base that can affect the commercial sector in its overall competitiveness.
U.S. Aerospace dominance solves war in multiple hotspots worldwide—Aerospace
collapse breaks down nuclear deterrence capabilities and causes global war
Pfaltzgraff, Institute for Foreign Policy Analysis President, and Davis, the Fletcher
School International Security Studies Professor, ‘10
[Robert L. and Shelby, 1-20-10, The Institute for Foreign Policy Analysis, “Air, Space, & Cyberspace Power
in the 21st-Century http://www.ifpa.org/pdf/USAFreportweb.pdf, Accessed: 7/13/14, JO]
In stark contrast to the bipolar Cold War nuclear setting, today's security environment includes
multiple, independent nuclear actors. Some of these independent nuclear weapons states are potential
adversaries, some are rivals, and some are friends, but the initial decision for action by any one of them
may lie beyond U.S. control. The United States may need to influence, signal, and restrain enemies,
and it may need to continue to provide security guarantees to non-nuclear friends and allies. America
may also face catalytic warfare, where, for example, a US. ally such as Israel or a third party such as
China could initiate action that might escalate to a nuclear exchange. Although the United States
would not be a party to the nuclear escalation decision process, it could be drawn into the conflict.
Compared to a bipolar world, very little is known about strategic nuclear interaction and escalation in a
multipolar world. The U.S. nuclear deterrent must restrain a wider variety of actors today than during
the Cold War. This requires a range of capabilities and the capacity to address specific challenges. The
deterrent must provide security guarantees and assurance sufficient to prevent the initiation of catalytic
warfare by an ally, while deterring an adversary from resorting to nuclear escalation. America may also
need simultaneously to deter more than one other nuclear state.
Deterrence requirements include four critical elements : early warning, C2, delivery systems, and
weapons. The Air Force plays an indispensable role in furnishing the U.S. early warning system in its
entirety through satellites and radar networks. In command and control, infrastructure is provided by
the Air Force, including Milstar satellites and, in the future, advanced extremely high frequency (AEHF)
satellites. In the area of delivery systems and weapons, two-thirds of the strategic triadintercontinental ballistic missiles (ICBMs) and bombers - is furnished by the Air Force and its Global
Strike Command.
The increased availability of anti-access/area-denial assets coupled with growing threats to the sea,
air, space, and cyberspace commons are challenging the power projection capabilities of the United
States. These threats, in the form of aircraft and long- range missiles carrying conventional or nuclear
munitions, present problems for our overseas bases. States such as North Korea, China, and Iran
jeopardize the notion that forward-deployed U.S. forces and bases will be safe from enemy attack.
Consequently, the United States must create a more flexible basing structure encompassing a passive
and active defense posture that includes these features: dispersal, hardening, increased warning time
of attack, and air defenses. Simultaneously, the United States must continue to develop long-range,
offensive systems such as low-observable manned and remotely piloted strike aircraft, precision
missiles, and intelligence, surveillance, and reconnaissance (ISR) plat- forms to penetrate heavily
defended A2/AD environments. This approach will increase the survivability of U.S. forward-deployed
assets and power projection capabilities and thus bolster deterrence and US guarantees to America's
allies and friends.
The increasing number of actors gaining access to advanced and dual-use technologies augments the
potential for asymmetric attacks against the United States and its allies by those who are unable to
match U.S. military capabilities. Those actors pose increasing challenges to the ability of the United
States to project power through the global commons. Such attacks could target specific U.S.
vulnerabilities, ranging from space assets to the financial, transportation, communications, and/or
energy infrastructures, and to the food and water supply, to mention only the most obvious.
Asymmetric attacks denying access to critical networks and capabilities may be the most cost-effective
approach to circumventing traditional U.S. force advantages. The USAF and DoD must develop systems
and technologies that can offset and defend against asymmetric capabilities. This will require a robust
R&D program and enhanced USAF cooperation with its sister services and international partners and
allies.
Space is increasingly a contested domain where U.S. dominance is no longer assured given the
growing number of actors in space and the potential for kinetic and non-kinetic attacks, including
ASAT weapons, EMP, and jamming. As a result, the United States must protect vital space-based
platforms and networks by reducing their vulnerability to attack or disruption and increasing the
country's resilience if an attack does occur. Required steps include hardening and incorporating stealth
into next generation space systems and developing rapid replenishment capacity (including microsatellite technologies and systems and new launch capabilities). At the same time, America must reduce
its dependence on space capabilities with air-based substitutes such as high altitude, long endurance,
and penetrating ISR platforms. Increased cooperation among the services and with U.S. allies to
develop such capabilities will also be paramount.
Cyber operations are vital to conducting USAF and joint land, sea, air, and space missions. Given the
significance of the cyber threat (private, public, and DoD cyber and information networks are routinely
under attack), the United States is attempting to construct a layered and robust capability to detect and
mitigate cyber intrusions and attacks. The USAF"s cyber operations must be capable of operating in a
contested cyber domain to support vital land, sea, air, and space missions. USAF cyberspace priorities
include developing capabilities to protect essential military cyber systems and to speed their recovery
if an attack does occur; enhancing the Air Force's capacity to provide USAF personnel with the
resolution of technical questions; and training/recruitment of personnel with cyber skills. In addition,
the USAF and DoD need to develop technologies that quickly and precisely attribute attacks in
cyberspace. Cyber attacks can spread quickly among networks, making it extremely difficult to attribute
their perpetrator, and therefore to develop a deterrence strategy based on retaliation. In addition, some
cyber issues are in the legal arena, including questions about civil liberties. It is likely that the trend of
increased military support to civil authorities (for example, in disaster relief operations) will develop in
the cyber arena as well. These efforts will entail greater service, interagency, international, and privatesector collaboration.
To address growing national security challenges and increasing fiscal constraints, and to become more
effective, the joint force needs to adapt its organizations and processes to the exigencies of the
information age and the security setting of the second decade of the twenty-first century. This entails
developing a strategy that places increased emphasis on joint operations in which each service acts in
greater concert with the others, leverages capacities across the services (two land services, three naval
services, and five air services) without duplicating efforts, and encourages interoperability. This would
provide combatant commanders (CCDRs) with a greater range of capabilities, allowing heightened
flexibility to use force. A good example of this approach is the Air-Sea Battle concept being developed
jointly by the Air Force and Navy, which envisions heightened cooperation between the two services and
potentially with allies and coalition partners.
There is an increasing demand for ISR capabilities able to access and persist in contested airspace in
order to track a range of high- value mobile and hard-to-find targets, such as missile launchers and
underground bunkers. This increases the need for stealthy, survivable systems and the development
of next-generation unmanned platforms. The USAF must continue to emphasize precision targeting,
both for strike and close-air-support missions. High-fidelity target identification and discrimination
enabled by advanced radars and directed-energy systems, including the ability to find, track, and target
individuals within a crowd, will pro- vide battlefield commanders with improved options and new
opportunities for leveraging joint assets.
Allies and coalition partners bring important capabilities from which the USAF and other services have
long benefited. For example, allies and coalition partners can provide enhanced situational awareness
and early warning of impending crises as well as assist in understanding the interests, motivations,
traditions, and cultures of potential adversaries and prospective coalition partners. Moreover, foreign
partner engagement and outreach are an avenue to influence partner and adversary perspectives, thus
shaping the environment in ways favorable to U.S. national security interests. Engagement also may be a
key to realizing another Air Force and joint priority: to sustain or gain access to forward operating bases
and logistical infrastructure. This is particularly important given the growing availability of A2/AD assets
and their ability to impede U.S. power projection capabilities.
The USAF needs to field capabilities to support current operations and pressing missions while at the
same time pursuing promising technologies to build the force of the future. Affordability,
effectiveness, time urgency, and industrial base issues inevitably shape procurement choices and
reform. The Air Force must maintain today's critical assets while also allocating resources to meet future
needs. Given the long lifespan anticipated for many weapon systems, planners need to make the most
reliable cost estimates and identify problems at the outset of a weapons system's development phase so
that they can be corrected as early and cost-effectively as possible.
As evidenced in the aftermath of the 2010 earthquakes in Haiti and Chile (the Chile earthquake hit after
this conference), the USAF has a vital role to play in the US. response to international relief operations
and support to civil authorities. In Haiti, the USAF reopened the airport and deployed contingency
response elements, while also providing ISR support for the joint forces in the theater. In Chile, USAF
satellite communication capabilities were critical to the recovery and relief efforts. USAF civil support
roles are likely to grow to include greater use of the Reserve Components. Consequently, USAF planners
should reassess the active and reserve component mix of forces and capabilities to identify potential
mobilization and requirement shortfalls.
A recurring conference theme was the need for the USAF to continue to examine specific issues of
opportunity and vulnerability more closely. For example, a future initiative could include focused
working groups that would examine such questions and issues as:
How can air, space, and cyberspace capabilities best support deterrence, preserve U.S. freedom of
action, and support national objectives?
How should the USAF leadership reconceptualize its vision, institutional identity, and force posture to
align as closely as possible with the future national security setting?
What is the appropriate balance between high-end and low- end air and space capabilities that will
maximize military options for national decision makers, given emerging threats and fiscal constraints?
What are the opportunities, options, and tradeoffs for investment and divestment in science and
technology, infrastructure, and programmed capabilities?
What are additional interdependent concepts, similar to Air- Sea Batde, that leverage cross-service
investments to identify and foster the development of new joint capabilities?
What are alternative approaches to officer accessions and development to support shifting and
emerging Air Force missions, operations, and force structure, including cyber warfare?
How can the USAF best interact with Congress to help pre- serve or refocus the defense-industrial base
as well as to minimize mandates and restrictions that weigh on future Air Force investments?
Finally, the USAF must continue to be an organization that views debate, as the Chief of Staff of the Air
Force put it in his opening conference address, "...as the whetstone upon which we sharp- en our
strategic thinking." This debate must also be used in pursuit of political support and to ensure that the
USAF maintains and develops critical capabilities to support U.S. national security priorities. The 38lh
IFPA-Fletcher Conference on National Security Strategy and Policy was conceived as a contribution to
that debate.
Almost a century has passed since the advent of airpower and Billy Mitchell's demonstration of its
operational potential with the sinking of the Ostfriesland on July 21,1921. For most of that time, the
United States has benefitted from the rapid development of air and space power projection
capabilities, and, as a result, it has prevailed in successive conflicts, contributed to war deterrence and
crisis management, and provided essential humanitarian relief to allies and friends around the world.
As we move into the second decade of the twenty-first century, the U.S. Air Force (USAF), like its service
counterparts, is re-assessing strategies, operational concepts, and force structure. Across the conflict
spectrum, security challenges are evolving, and potential adversaries-state and non-state actors-are
developing anti-access and other asymmetric capabilities, and irregular warfare challenges are
becoming more prevalent. The potential exists for "hybrid" warfare in which state adversaries and/or
non-state actors use a mix of conventional and unconventional capabilities against the United States, a
possibility made more feasible by the diffusion of such capabilities to a larger number of actors.
Furthermore, twenty-first-century security challenges and threats may emanate from highly adaptive
adversaries who ignore the Geneva Conventions of war and use military and/ or civilian technologies to
offset our military superiority.
As it develops strategy and force structure in this global setting, the Air Force confronts constraints that
will have important implications for budget and procurement programs, basic research and
development (R&D), and the maintenance of critical skills, as well as recruitment, education, training,
and retention. Given the dynamic nature of the security setting and looming defense bud- get
constraints, questions of where to assume risk will demand bold, innovative, and decisive leadership.
The imperative for joint operations and U.S. military-civilian partnerships is clear, under- scoring the
need for a whole-of-government and whole-of-society approach that encompasses international and
non-governmental organizations (NGOs).
In his address opening the conference, General Norton A. Schwartz, Chief of Staff of the Air Force
(CSAF), pointed out how, with its inherent characteristics of speed, range, and flexibility, air- power has
forever changed warfare. Its advent rendered land and maritime forces vulnerable from the air, thus
adding an important new dimension to warfare. Control of the air has become indispensable to
national security because it allows the United States and friendly forces to maneuver and operate free
from enemy air attack. With control of the air the United States can leverage the advantages of air
and space as well as cyberspace. In these interdependent domains the Air Force possesses unique
capabilities for ensuring global mobility, long-range strike, and intelligence, surveillance, and
reconnaissance (ISR). The benefits of airpower extend beyond the air domain, and operations among
the air, land, maritime, space, and cyber domains are increasingly interdependent.
General Schwartz stated that the Air Force's challenge is to succeed in a protracted struggle against
elements of violent extremism and irreconcilable actors while confronting peer and near- peer rivals.
The Air Force must be able to operate with great precision and lethality across a broad spectrum of
conflict that has high and low ends but that defies an orderly taxonomy. Warfare in the twenty-first
century takes on a hybrid complexity, with regular and irregular elements using myriad tools and tactics.
Technology can be an enabler but can also create weaknesses: adversaries with increased access to
space and cyberspace can use emerging technologies against the United States and/or its allies. In
addition, the United States faces the prospect of the proliferation of precision weapons, including
ballistic and cruise missiles as well as increasingly accurate mortars, rockets, and artillery, which will put
U.S. and allied/coalition forces at risk. In response to mounting irregular warfare challenges American
leaders have to adopt innovative and creative strategies. For its part, the USAF must develop airmen
who have the creativity to anticipate and plan for this challenging environment. Leadership, intellectual
creativity, capacity, and ingenuity, together with innovative technology, will be crucial to addressing
these challenges in a constrained fiscal environment.
In meeting the broad range of contingencies - high, low, regular, irregular, and hybrid - the Air Force
must maintain and develop systems that are versatile, both functionally (including strike or ISR) and in
terms of various employment modes, such as manned versus remotely piloted, and penetrating versus
stand-off systems. General Schwartz emphasized the need to be able to operate in conflict settings
where there will be demands for persistent ISR systems able to gain access to, and then loiter in,
contested or denied airspace. The targets to be identified and tracked may be mobile or deeply buried,
of high value, and difficult to locate without penetrating systems. General Schwartz also called
attention to the need for what he described as a "family of systems" that could be deployed in multiple
ways with maximum versatility depending on requirements. Few systems will remain inherently single
purpose. Indeed, he emphasized that the Air Force must purposefully design versatility into its new
systems, with the majority of future systems being able to operate in various threat environments. As
part of this effort further joint integration and inter-service cooperation to achieve greater air-land and
air-sea interoperability will continue to be a strategic necessity.
Space access, control, and situational awareness remain essential to U.S. national security. As potential
rivals develop their own space programs, the United States faces challenges to its unrestricted access to
space. Ensuring continuing access to the four global commons - maritime, air, space, and cyberspace will be a major challenge in which the USAF has a key role. The Air Force has long recognized the
importance of space and is endeavoring to make certain that U.S. requirements in and for space are
met and anticipated. Space situational awareness is vital to America's ability to help evaluate and
attribute attacks. Attribution, of course, is essential to deterrence. The USAF is exploring options to
reduce U.S. dependence on the Global Positioning System (GPS), which could become vulnerable to
jamming. Promising new technologies, such as "cold atoms," pseudolites, and imaging inertial navigation
systems that use laser radar are being investigated as means to reduce our vulnerability.
The USAF continues to develop cyber capabilities to address opportunities and challenges. Cyber threats
present challenges to homeland security and other national security interests. Key civilian and military
networks are vulnerable to cyber attacks. Preparing for cyber warfare and refining critical infrastructure
protection and consequence management will require new capabilities, focused training, and greater
interagency, international, and private sector collaboration.
General Schwartz set forth a series of challenges for the Air Force, which he urged conference
participants to address. They included:
How can the Air Force better address the growing demand for real-time ISR from remotely piloted
systems, which are providing unprecedented and unmatched situational aware- ness?
How can the USAF better guarantee the credibility and viability of the nation's nuclear forces for the
complex and un- certain security environment of this century?
What is the way ahead for the next generation of long-range strike and ISR platforms? What trade-offs,
especially be- tween manned and unmanned platforms, should the USAF consider? How can the USAF
improve acquisition of such systems? How can the USAF better exploit the advantage of lowobservables?
How can the Air Force better prepare itself to operate in an opposed network environment in which
communications and data links will be challenged, including how to assure command and control (C2) in
bandwidth-constrained environments?
In counter-land operations, how can the USAF achieve improved target discrimination in high collateral
damage situations?
How should the USAF posture its overseas forces to ensure access? What basing structure, logistical
considerations, and protection measures are required to mitigate emerging anti- access threats?
How can the Air Force reduce its reliance on GPS to ensure operations in a GPS-denied environment?
How can the USAF lessen its vulnerability to petroleum shortages, rising energy prices, and resulting
logistical and operational challenges?
How can the Air Force enhance partnerships with its sister services and the interagency community?
How can it better collaborate with allies and coalition partners to improve support of national security
interests?
These issues were addressed in subsequent conference sessions.
The opening session focused on the multidimensional and dynamic security setting in which the Air
Force will operate in the years ahead. The session included a discussion of the need to prioritize
necessary capabilities and to gauge "acceptable risks." Previous Quadrennial Defense Reviews (QDRs)
rested on the basic assumption that the United States would be able to support operations
simultaneously or nearly simultaneously in two major regional contingencies, with the additional
capacity to respond to smaller disaster-relief and/or stability operations missions. However, while the
2010 QDR1 maintains the need for U.S. forces to operate in two nearly simultaneous major wars, it
places far greater emphasis on the need to address irregular warfare challenges. Its focus is maintaining
and rebalancing U.S. force structure to fight the wars in which the United States is engaged today while
looking ahead to the emerging security setting. The QDR further seeks to develop flexible and tailored
capabilities to confront an array of smaller-scale contingencies, including natural disasters, perhaps
simultaneously, as was the case with the war in Afghanistan, stability operations in Iraq, and the Haiti
relief effort.
The 2010 QDR highlights important trends in the global security environment, especially unconventional
threats and asymmetric challenges. It suggests that a conflict with a near-peer competitor such as
China, or a conflict with Iran, would involve a mix, or hybrid, of capabilities that would test U.S. forces
in very different ways. Although predicting the future security setting is a very difficult if not an
impossible exercise, the 2010 QDR outlines major challenges for the United States and its allies,
including technology proliferation and diffusion; anti-access threats and the shrinking global basing
infrastructure; the possibility of weapons of mass destruction (WMD) use against the US. homeland
and/or against U.S. forces abroad; critical infrastructure protection and the massed effects of a cyber or
space attack; unconventional warfare and irregular challenges; and the emergence of new issue areas
such as Arctic security, U.S. energy dependence, demographic shifts and urbanization, the potential for
resource wars (particularly over access to water), and the erosion or collapse of governance in weak or
failing states.
Technology proliferation is accelerating. Compounding the problem is the reality that existing
multilateral and/or international export regimes and controls have not kept pace with technology, and
efforts to constrain access are complicated by dual-use technologies and chemical/biological agents. The
battlefields of the future are likely to be more lethal as combatants take advantage of commercially
based navigation aids for precision guidance and advanced weapons systems and as global and theater
boundaries disappear with longer-range missile systems becoming more common in enemy arsenals.
Non-state entities such as Hezbollah have already used more advanced missile systems to target state
adversaries. The proliferation of precision technologies and longer-range delivery platforms puts the
United States and its partners increasingly at risk. This proliferation also is likely to affect U.S. operations
from forward operating locations, placing additional constraints on American force deployments within
the territories of allies. Moreover, as longer-range ballistic and cruise missiles become more widespread,
U.S. forces will find it increasingly difficult to operate in conflicts ranging from irregular warfare to highintensity combat. As highlighted throughout the conference, this will require that the United States
develop and field new-generation low-observable penetration assets and related capabilities to
operate in non-permissive environments.
The twenty-first-century security setting features several proliferation trends that were discussed in the
opening session. These trends, six of which were outlined by Dr. Robert L. Pfaltzgraff, Jr., President of
the Institute for Foreign Policy Analysis, and Shelby Cullom Davis Professor of International Security
Studies, The Fletcher School, Tufts University, framed subsequent discussions.
First, the number of actors- states and armed non-state groups-is growing, together with strategies and
capabilities based on more widely available technologies, including WMD and conventional weapons.
This is leading to a blurring of categories of warfare that may include state and non-state actors and
encompass intra-state, trans-state, and inter- state armed conflict as well as hybrid threats.
Second, some of these actors subscribe to ideologies and goals that welcome martyrdom. This raises
many questions about dissuasion and deterrence and the need to think of twenty-first-century
deterrence based on offensive and defensive strategies and capabilities.
Third, given the sheer numbers of actors capable of challenging the United States and their
unprecedented capabilities, the opportunity for asymmetric operations against the United States and
its allies will grow. The United States will need to work to reduce key areas of vulnerability, including its
financial systems, transportation, communications, and energy infrastructures, its food and water
supply, and its space assets.
Fourth, the twenty-first-century world contains flashpoints for state-to-state conflict. This includes
North Korea, which possesses nuclear weapons, and Iran, which is developing them. In addition, China
is developing an impressive array of weaponry which, as the Commander of U.S. Pacific Command
stated in congressional testimony, appears "designed to challenge U.S. freedom of action in the region
and, if necessary, enforce China's influence over its neighbors - including our regional allies and
partners' weaponry."2 These threats include ballistic missiles, aircraft, naval forces, cyber capabilities,
anti-satellite (ASAT) weapons, and other power-projection capabilities. The global paradigm of the
twenty-first century is further complicated by state actors who may supply advanced arms to non-state
actors and terrorist organizations.
Fifth, the potential for irregular warfare is rising dramatically with the growth of armed non-state
actors. The proliferation of more lethal capabilities, including WMD, to armed non-state actors is a
logical projection of present trends. Substantial numbers of fractured, unstable, and ungoverned stales
serve as breeding grounds of armed non-state actors who will resort to various forms of violence and
coercion based on irregular tactics and formations and who will increasingly have the capabilities to do
so.
Sixth, the twenty-first-century security setting contains yet another obvious dimension: the permeability
of the frontiers of the nation state, rendering domestic populations highly vulnerable to destruction not
only by states that can launch missiles but also by terrorists and other transnational groups. As we have
seen in re- cent years, these entities can attack U.S. information systems, creating the possibility of a
digital Pearl Harbor.
Taken together, these trends show an unprecedented proliferation of actors and advanced capabilities
confronting the United States; the resulting need to prepare for high-end and low-end conflict; and
the requirement to think of a seamless web of threats and other security challenges extending from
overseas to domestic locales.
Another way to think about the twenty-first-century security setting, Dr. Pfaltzgraff pointed out, is to
develop scenarios such as the following, which are more illustrative than comprehensive:
A nuclear Iran that engages in or supports terrorist operations in a more assertive foreign policy
An unstable Pakistan that loses control of its nuclear weapons, which fall into the hands of extremists
A Taiwan Straits crisis that escalates to war
A nuclear North Korea that escalates tensions on the Korean peninsula
What all of these have in common is the indispensable role that airpower would play in U.S. strategy
and crisis management.
Exts – airlines key to aerospace
Airline industry decline undercuts U.S. Aerospace
Gomez et al., Harvard Economics undergraduate, ‘10
[Ben Hur Gomez, John Simon, and Alan Ibrahim, Wikiinvest, “Precision Castparts Corp.,”
http://www.wikinvest.com/stock/Precision_Castparts, Accessed: 7/13/14, JO]
PCP’s commercial sales depend substantially on the production rates of both Boeing Company (BA) and
Airbus , which in turn depend upon deliveries of new aircraft. The ultimate drivers of orders and
deliveries of aircraft are underlying air travel demand , financial health of airlines, growth prospects
for airline capacity, and overall economic growth. The current increase in aerospace demand is
dependent on increased spending by foreign carriers and domestic airlines who must upgrade aging
fleets. PCP stands to benefit from expected aircraft deliveries by Boeing and Airbus, and from the
replacement cycle of aging turbines and aircraft that will be upgraded or overhauled. Any factor that
adversely affects the aerospace industry (similar to the tragic events of 9/11 or the SARS travel scare)
would likely pressure PCP’s operations and profitability. Bankruptcy of another airline, continued
high oil prices , or the possibility of a major terrorist attack threaten to change the course of the
recovery in the aerospace cycle and likely impact PCP.
Exts – Aerospace key to Heg
U.S. Aerospace is key to hegemony
Gouré, Lexington Institute Vice President, Ph.D in International Relations, ‘13
[Dan, 1-24-13, Lexington Institute, “America Is A Superpower Because It Is An Air Power,”
http://www.lexingtoninstitute.org/america-is-a-superpower-because-it-is-an-air-power/, Accessed:
7/13/14, JO]
There is no question that the United States has the best military in the world. The United States is
unique in its ability to project military power to multiple regions of the world simultaneously, conduct
multiple major combined and joint operations at a time and both defend the homeland and provide
ongoing support to civil agencies. Europe, which spends about sixty percent of the U.S. defense budget
and actually has more men and women in uniform, was unable without significant U.S. support to
conduct a single, modest campaign in Libya. The U.S. military continues to set the world standard with
respect to most major military systems: nuclear-powered aircraft carriers, large deck amphibious
warfare ships, nuclear attack submarines, strategic bombers, fifth-generation fighters, air and missile
defenses, tanks and armored fighting vehicles and space and airborne ISR. Even though we don’t talk
much about it the military’s cyber warfare capabilities are truly impressive.
While the U.S. has the best ground, naval and amphibious forces in the world, one thing makes it a
21st Century superpower: its dominance as an air power . The United States alone is capable of
deploying its aerial assets anywhere in the world. U.S. air power can hold at risk any target set in any
country and can do so from multiple directions. The U.S. Air Force is the only one capable of delivering
specially-designed conventional bombs large enough to destroy deeply buried and hardened structures.
Over the past two decades, the U.S. military has repeatedly demonstrated that it can destroy an
adversary’s air force and air defenses in a matter of weeks. After that, hostile ground units were toast.
The ability to rapidly seize control of the air means that no soldier has died in an air attack since 1953.
Over a decade of wars, American air power from the land and sea provided continual responsive fire
support for tactical units on the ground.
Other nations have fighters and bombers, although America’s are the best. The U.S. also has the largest
and most capable fleets of air transports, refueling aircraft and airborne ISR assets in the world. During
Operation Iraqi Freedom, the Air Force flew soldiers and heavy armor deep into Iraq to seize a critical
target, the Haditha Dam. Since 2001, the Air Force has maintained a continuous air bridge to
Afghanistan, more than 8,000 miles from CONUS. U.S. C-17 transports are today flying French troops
and equipment into Mali. The U.S. Navy has a fleet of fixed wing transports, the C-2 Greyhounds,
specifically for the purpose of moving parts and people to and from its aircraft carriers. The United
States has crafted an ISR and strategic warning capability based on a sophisticated array of satellites,
manned platforms and unmanned aerial systems.
Dominant air power is about much more than just platforms and weapons. It requires also the trained
people and processes to plan and manage air operations, process, exploit and disseminate intelligence,
identify targets and plan attacks, move supplies and route transports and repair and maintain complex
systems. The U.S. had to send hundreds of targeteers to NATO to support the Libyan operation. Over
decades, the U.S. military has developed an unequalled training establishment and set of ranges that
ensure the highest quality pilots and other personnel.
Finally, the U.S. is the dominant air power in the world because of its aerospace industrial base .
Whether it is designing and producing fifth-generation fighters such as the F-22 and F-35, providing an
advanced tanker like the new KC-46 or inventing high-flying unmanned aerial systems like the Global
Hawk, the U.S. aerospace industry continues to set the bar. In addition, the private and public parts
of the aerospace industrial base, often working together based on collaborative arrangements such as
performance-based logistics contracts, is able to move aircraft, weapons and systems through the
nationwide system of depots, Air Logistics Centers and other facilities at a rate unmatched by any other
nation. The ability to rapidly repair or overhaul aircraft is itself a force multiplier, providing more aircraft
on the flight line to support the warfighters.
The U.S. military can go where it is ordered, respond rapidly to the crisis of the moment, move men,
equipment and supplies around the world and dominate any place on the face of the earth as long as
it desires because it is dominant in the air. As the Pentagon, Congress and the White House struggle
with budget issues that could well require deep cuts to the military, they would be well advised to
remember that it is air dominance that enables this country to remain a superpower.
Impact – economy
U.S. aviation is key to the economy
National Business Aviation Association, ‘09
[3-30-09, National Business Aviation Association, “GENERAL AVIATION INDUSTRY HURTING DURING
ECONOMIC DOWNTURN ,” http://www.nbaa.org/advocacy/issues/economic-downturn/recession.php,
Accessed: 7/13/14, JO]
The U.S. aviation system is critical to the success, strength and growth of the economy . The system is
made up of three segments:
Scheduled operations, including passenger airlines; Military, and; General Aviation.
General aviation (GA) includes diverse operations, with business uses that range from agriculture, to
law enforcement, to fire and rescue services, to varied government, educational, nonprofit and
business organizations. 85% of the businesses using a general aviation aircraft for a business purpose
are small and mid-sized businesses located across the country. Servicing and supporting these
organizations are FBO's, maintenance technicians, suppliers and service providers.
General aviation is an essential economic generator directly or indirectly employing over 1.26 million
people nationwide according a 2006 economic study by Merge Global. These jobs generate $150
billion in economic activity across the United States, including states like California ($18B), Texas
($11B), Georgia ($9B), and Kansas ($7B). Our industry is continuing to build a strong American
manufacturing and employment base that contributes positively to our national balance of trade.
Congress recognized just how fundamental general aviation is to our nation's transportation system,
rural economies, manufacturing capability, and balance of trade when it passed the General Aviation
Revitalization Act a little more than a decade ago.
There's no question that in communities across the country, general aviation means millions of jobs:
jobs in aircraft manufacture (the U.S. industry leads the world), jobs for people in small towns (where
companies use airplanes to reach new markets), and jobs in flight support (including schedulers,
dispatchers, maintenance technicians, pilots, training professionals, and airport employees to name just
a few examples).
Unfortunately, the people and businesses in general aviation are weathering one of the worst economic
storms anyone has ever seen. The impact of the flagging economy on the companies and communities
that rely on general aviation is visible in all parts of the country. Following are some examples:
GA Manufacturing has been hit hard by the economy
The general aviation industry supports highly skilled, well-paying jobs for engineers and manufacturing
line workers who design and build aircraft in places like Savannah, Wichita, and Little Rock and for
hundreds of component manufacturers such as GE, Honeywell, and Pratt and Whitney that supply them
with parts including many small businesses. GA is an important national industry that contributes
greatly to the economy and to local tax bases. These suppliers also contribute extensively to aircraft
produced by foreign companies like Dassault, Embraer, and Bombardier. The collective direct earnings
of general aviation exceed $53 billion.
Layoffs
The industry started feeling the effects of the downturn last fall and since then US members of the
General Aviation Manufacturers Association (employing 144,000 people in the U.S.) have laid off over
12,155 people to adjust to the economy with thousands more among suppliers and additional layoffs
pending. In addition, some general aviation manufacturers, including Adam Aircraft and Eclipse
Aviation, have declared bankruptcy and ceased production.
Backlog and Loss of Orders
Our industry held a record backlog of $83 billion at the end of the third quarter 2008, but it is rapidly
shrinking. Customers are not placing orders which results in the backlog shrinking by $6-7 billion each
quarter. Customers are also cancelling or delaying orders as they manage their own finances and
schedule for capital purchases.
At the same time, the used aircraft market is saturated with inventory levels for business jets reaching
over 17%. Criticism of business aviation risks further flooding the used aircraft market and depressing
prices.
Exports
Our industry is a strong contributor to U.S. exports with a total of 1,161 airplanes exported in
2008. The export billings reached $5.86 billion. The aggregate aviation industry, including GA has a
positive impact on the US trade balance. Our exports accounted for 43.9 percent of the total value of
U.S. manufactured general aviation airplanes in 2008.
Exts – key to economy
Aviation is key to the global economy— 8% of GDP, 35% of global trade, 32 million
jobs
Lamichhane, Kathmandu Post, ‘11
[Buddhi Sagar, 10-29-11, Kathmandu Post, “Air economics ,” http://www.ekantipur.com/thekathmandu-post/2011/10/29/oped/air-economics/227643.html, Accessed: 7/13/14, JO]
The air transport industry has experienced rapid expansion along with the growth of the world
economy, and the demand for air transport services is primarily driven by economic development. In
turn, civil aviation acts as an economic catalyst for local/regional and national economies around the
globe. The level of economic activity of the air transport industry is closely linked to the level of
economic activity in markets and economies that the industry serves. Higher levels of economic
activity go hand in hand with a growing demand for air transport, benefiting not only from expanding
industries and trade but also from generally higher income and consumer spending.
Aviation is the glue that keeps the global economy together . Without widely accessible and wellpriced air travel , the global economy will quickly become less global. Every day, each day, the world’s
fleet of 19,000 aircraft, criss-crosses the world, carrying cargo, and connecting people, countries and
economies. Today, the millions of passenger and cargo flights that criss-cross our skies have become
the lifeline of economies on all continents. They provide businesses with access to the global
marketplace, especially vital for land-locked or small-island States like Nepal or Maldives, and they are
an integral component of the world’s largest industry—travel and tourism.
In this regard, one of the reports dedicated to the impact of the aviation industry in the global economy
found that:
The air transport industry generates 32 million jobs globally
The value of all goods transported by air represents 35 percent of all international trade
Aviation’s global economic impact is valued at more than $ 3.5 trillion , or 7.5 percent of the world’s
total GDP
Aviation transports more than 2.2 billion passengers a year.
The above data shows that the gravity of the aviation industry in this globalised world. Even at this time,
it is difficult to find domestic data in as much detail as above. But, it can be assumed that the impact of
air transport on our national economy is more prominent than it is on the global economy.
The aviation industry’s most important economic contribution is “through its impact on the
performance of other industries and as a facilitator of their growth.” For example, helping countries
expand their access to international markets, enhancing tourism, and improving productivity by
attracting investment and encouraging innovation in locations that have good air transport links. In
short it is said that civil aviation is not an end, but it is a means to achieve the desired end of other
sectors. If we talk about the modern economy, aviation industry always leads other sectors of the
economy as a medium of change and progress.
Air travel is key to the global economy
Perovic, International Air Transport Association economist, 2013
[Julie, 2013, Publication/Who runs the website, “The Economic Benefits of Aviation and Performance in
the Travel & Tourism Competitiveness Index,”
http://www3.weforum.org/docs/TTCR/2013/TTCR_Chapter1.4_2013.pdf, Accessed: 7/13/14, JO]
The aviation industry supports tourism and international business by providing the world’s only rapid
worldwide transportation network. Airlines transported 2.8 billion passengers and 47.6 million metric
tonnes of air cargo in 2011, connecting the world’s cities with 36,000 routes.1 By providing these
services, the aviation industry plays an important role in enabling economic growth and providing
various economic and social benefits.
The International Air Transport Association (IATA) commissioned Oxford Economics to estimate the
economic and social benefits of aviation in over 80 countries worldwide over the last three years. The
analysis includes the traditional economic footprint of the industry, measured by aviation’s contribution
to gross domestic product (GDP), jobs, and the tax revenues generated by the sector and its supply
chain. However, the economic value created by the industry goes beyond the value captured by these
measures. Therefore the study also investigates the positive impacts of the connectivity provided by air
transport services. The connections made between cities and markets produce an important
infrastructure asset that facilitates activities that enhance a nation’s productivity. More specifically, air
transport enables foreign direct investment (FDI), business cluster development, specialization, and
other spillover effects. The analysis produced by Oxford Economics is one of the first attempts to
estimate these benefits of connectivity.
The objective of this chapter is twofold. First, the following sections will present some of the results of
the Oxford Economics studies on the benefits of aviation, primarily in regard to aviation’s economic
footprint and connectivity benefits. Second, the chapter will explore whether there are any relationships
between the performance of particular components of the Travel & Tourism Competitiveness Index
(TTCI) and the outputs of the benefits of aviation studies.
THE ECONOMIC FOOTPRINT OF AVIATION
The aviation industry directly generates employment and economic activity across several areas,
including the operation of airlines and ground-based infrastructure. The aviation sector’s direct impact
on jobs and GDP in any given nation is reflected by the domestic resources used to deliver all such
services.
The resources deployed by the aviation sector are measured by their gross value added (GVA). Oxford
Economics estimated GVA either by considering the output created by the sector less the cost of
purchased inputs (a net output measure), or by the sum of profits and wages (before tax) generated
from the sector’s economic activity (an income measure). This gives the sector’s direct contribution to
GDP.2 Worldwide, in 2010 the aviation sectors directly contributed 8.4 million jobs and US$539 billion
to global GDP—a contribution that is about the same economic magnitude as that of Switzerland or
Poland.3
The sector’s economic footprint is calculated by adding to this direct contribution the output and
number of jobs from industries indirectly connected to aviation, as well as the output and jobs
supported by the spending of those employed in aviation’s direct and indirect workforce. In addition,
wider catalytic benefits induced by the aviation sector through tourism are also included in the total
economic footprint of the industry. These benefits will be detailed in the next section.
Indirect industries are simply defined as the aviation supply chain, which includes businesses such as
fuel suppliers, construction companies, and a host of professional service providers. The aviation
industry supply chain supported 9.3 million jobs worldwide in 2010, and contributed US$618 billion to
global GDP in the same year.4 Other flow-on impacts of the aviation industry result from the spending
and consumption of those directly and indirectly employed in the sector. The economic activity of
those individuals supports jobs in other industries, such as retail outlets and a variety of consumer goods
and services providers.5 Globally, the aviation industry has induced 4.4 million jobs through the
spending and consumption of air transport’s direct and indirect employees. The induced contribution
to GDP was estimated to be US$288 billion globally in 2010.6
Together, these three channels provide the aviation sector’s total impact in terms of jobs and
contribution to GDP—over 22 million jobs and US$1.4 trillion in GDP .7
2ac economy turn
Continued high oil prices will collapse the economy—Empirical and statistical evidence
Gordon, McClatchy Newspaper Investigative Reporter, 2012
[Greg, 8-12-12, McClatchy Newspaper, “Will high oil costs permanently ruin world’s economy?,”
http://www.mcclatchydc.com/2012/08/12/160935/will-high-oil-costs-permanently.html, Accessed:
7/12/14, JO]
But to some experts, spikes in oil prices over the last several years have signaled an ominous turn that
could make it nigh on impossible for any president to expand the economy as it has in the past.
Unlike previous oil price jumps stemming from turmoil affecting Middle East oil producers, prices surged
over the last eight years because tightening supplies couldn’t keep pace with Third World demand,
researchers have concluded.
“The question is how much can we keep growing without a growing supply of energy?” said James
Hamilton, a University of California-San Diego economics professor who has been on the leading edge of
research into the impact of high energy costs.
“We’ve had temporary experiments with (oil supply) disruptions in the Middle East,” he said in an
interview. “We don’t really have experience, if worldwide, we produce less oil year after year and have
to deal with that on a longer-term basis. Certainly, the transition to dealing with that could be very
disruptive.”
Many experts now believe that, absent the discoveries of numerous new giant oilfields or
breakthroughs in development of alternative fuels, oil demand will persistently push global prices to
unaffordable levels, shackling economic growth indefinitely .
Even if discoveries somehow keep pace with demand, extracting oil from increasingly harsh conditions,
such as beneath the Arctic Ocean or other deep ocean waters, will put upward pressure on prices.
Despite the potentially huge economic consequences, no full-scale, multinational energy conservation
effort has been launched to buy time for development of alternatives, such as electric cars, that would
ease pressure on oil supplies and prices.
When oil prices eclipsed $100 a barrel in 2011 and early this year, they were edging toward the
“breaking point” – the threshold where economies can no longer expand , said Charles Hall, a
professor in the School of Environmental Sciences and Forestry of the State University of New York. Hall,
a co-author of the book “Energy and the Wealth of Nations: Understanding the Biophysical Economy,”
said that the economy has stalled in the past when U.S. energy costs have approached 13 percent of
the gross domestic product.
Annual global expenditures on raw energy have climbed to an estimated $8 trillion to $9 trillion,
exceeding 10 percent of the $70 trillion world gross domestic product. Those figures, however, omit the
succession of price up-charges along the manufacturing, marketing and delivery chain for energy-related
components of goods and services.
“I don’t think the economy is ever going to grow again . . . not on a sustained basis,” Hall said in an
interview.
Since last spring, oil prices have retreated below $100 a barrel, and global supplies are flush, even
despite trade sanctions that have curbed petroleum exports from Iran, the world’s second largest
producer.
But Christine LaGarde, chief of the International Monetary Fund, said recently that high oil prices
remain “a major threat” that could tip the global economy into recession , especially if Iran triggers a
“price shock” by retaliating with further export cuts. Researchers at her agency have predicted that oil
prices will permanently double to about $200 a barrel over the next decade.
The soaring prices, up from less than $24 a barrel a decade ago, are expected to cost European nations
$500 billion this year, nearly triple the average they paid for imported oil from 2000 to 2010, partly
because of the sunken value of the euro, Maria Van der Hoeven, executive director of the Paris-based
International Energy Agency, said recently.
Energy costs also can share blame for crimping American workers’ standard of living. Adjusted for
inflation, median weekly earnings over the last quarter-century rose less than $10, while crude oil
prices nearly tripled and net U.S. gasoline prices doubled.
In a paper published in 2009, Hamilton reported that the price of crude oil has jumped sharply in
advance of 10 of the 11 U.S. recessions since World War II.
His bigger discovery was that the sharp rise in prices before the economic collapse of 2008 didn’t stem
from an Arab oil embargo, military conflict or other Middle East supply disruption, as occurred before
five other major economic downturns. Instead, it was largely “booming demand and stagnant
production” that briefly sent the price to a record $145 a barrel in July 2008, probably accelerating
the crisis that sank the world economy , he found.
Sure enough, after oil prices pulled back in 2009 and 2010, consumption shot up by more than 5
percent last year, and prices spurted above $100 a barrel again. The world economy soon slumped
into its current doldrums.
Now scientists and economists are fretting about the implications if oil becomes so unaffordable that
it leads to a chain-reaction surge in the costs of other fuels.
What if oil prices get so high that it’s economically attractive to convert natural gas and coal supplies to
liquid fuels? Will prices for those resources rocket into the stratosphere, too? Is there no way out of
energy’s grip?
Exts – high prices kill economy
High oil prices are contributing to global economic stagnation—lowering prices spurs
global growth
Warner, Telegraph Assistant Editor, 2013
[Jeremy, 11-21-13, Telegraph, “Oil is both the lifeblood and the poison of the global economy ,”
http://www.telegraph.co.uk/finance/oilprices/10465340/Oil-is-both-the-lifeblood-and-the-poison-ofthe-global-economy.html, Accessed: 7/12/14, JO]
Ever since the price shocks of the Seventies, oil has had an unerring ability to play havoc with the world
economy. This shouldn’t entirely surprise, for oil is the basic feedstock, or energy source, for much of
today’s economic prosperity and wealth. Without it, we would still be manually drawing water from well
and stream, or riding to market in a horse and cart. For all the well-intentioned talk of decarbonisation,
oil remains the lifeblood of most gainful economic activity. There is no chance of that changing in the
foreseeable future.
Yet in performing this service, hydro-carbons have also become a key driver of the economic cycle
itself. A rising oil price is both deflationary and inflationary at the same time – a poisonous economic
mix if ever there was one. If the price goes too high, it will depress the economy while simultaneously
adding to inflation. More money spent on oil means less for spending on everything else. Fortunately,
there is also a benign reverse effect. Eventually, weakened demand will cause the price to start falling,
at which point oil becomes a powerfully reflationary force.
At least, that’s how it used to work. Over the past decade, this pattern has changed. Fast growth in
emerging markets has undermined the old rules, so that, despite economic stagnation in high income
nations, we still have what are by historic standards very high oil prices. Opec has also got better at
manipulating supply to sustain the price.
The reflationary effect that Western nations used to enjoy from a falling oil price no longer occurs. No
one would suggest that this is the whole or even primary explanation for the permanent stagnation
that seems to have settled like a pall on many advanced economies, but it is undoubtedly part of the
story. Energy prices are simply too high to allow for the resumption of more normal levels of growth.
Indeed, the real surprise is that the damage hasn’t been greater still. Even 10 years ago, the
persistence of $100 a barrel oil would have had a devastating effect on high-income economies. Today,
we’ve had to learn to live with it.
Low oil prices spur the U.S. economy—increased consumer spending comparatively
outweighs their turns
Unger, CSM Staff Writer, 2013
[David J., 10-25-13, Christian Science Monitor, “Oil prices fall below $100. Still good for US economy?,”
http://www.csmonitor.com/Environment/Energy-Voices/2013/1025/Oil-prices-fall-below-100.-Stillgood-for-US-economy, Accessed:, JO]
Robust oil inventories are driving prices down, along with hopes that easing relations with Iran could
bring additional oil onto the global market. Falling oil prices typically boost US economic growth as
cheaper energy helps consumers and industry's bottom lines. And, despite the hit that the booming
US oil industry will take, it's still true that cheaper oil is a net positive for US growth.
It would take a much bigger price plunge to derail the boom. That isn't likely to happen anytime soon,
most analysts suggest.
"The oil market remains well-supplied as production in the US has increased to just shy of 7.9 million
barrels per day, the highest level since 1989," Andrew Lipow, president of Lipow Oil Associates in
Houston, says in a telephone interview. Mr. Lipow also cited "record production out of Saudi Arabia and
the market anticipating that some progress might be made between Iran and United Nations on their
nuclear program."
Prices dipped below $100 Monday for the first time since July, hitting a low of $95.95 Thursday. They
have since rebounded a bit, rising 37 cents Friday to $97.48 in midday trading.
Average US gas prices dropped a cent to $3.32 per gallon Friday, according to AAA, the national motor
club based in Heathrow, Fla. That's down four cents from a week ago.
The drops came as US crude oil stocks jumped a larger-than-expected 5.23 million barrels for the week
ending Oct. 18, according to the US Energy Information Administration (EIA). That puts inventories at 10
percent above the five-year average, according to an analysis by Platts.
A tepid September jobs report released this week curbed optimism about US economic growth, putting
added downward pressure on oil prices on projections of lower demand. The US economy added
148,000 jobs in September, according to government data, less than the 180,000 many economists
expected.
Iran's Tuesday announcement that it has halted uranium enrichment to bomb-grade levels improved the
outlook for US-Iran relations. Sanctions have crippled Iran's oil industry, and investors hope an easing of
tensions could open up Iran's vast oil reserves to the West. The country has the world's fourthlargest proven oil reserves and the world's second-largest natural gas reserves, according to EIA.
Oil prices remain historically high, but the recent drop is a boost for consumers and companies who
have been waiting for prices to reflect increased production in North Dakota, Texas, and other shale
formations across the US. Those sites are at risk if prices drop too low, however.
"Fracked oil is high cost oil," Morgan Downey, a commodities trader based in New York, writes in an email. "There is a cost curve, with some able to produce under $50 and some only if oil prices are above
$75 per barrel. That's what many forget: the boom in US tight oil supply exists only because oil prices
are high. If prices drop to $50 or less for an extended period, we could see US oil production contract
and the boom would be over."
Oil could dip to $93 a barrel by the end of the year, Lipow projects, with retail gasoline hitting $3.20.
Even then, prices would remain well above the break-even point, in a sweet spot that helps
consumers while keeping domestic oil production profitable.
"Low oil prices are still a good thing for the US economy," Jamie Webster, an energy analyst with IHS
PFC Energy, a global consulting firm, writes in an e-mail. "While unconventional oil is relatively
expensive oil to produce, we are still not in the range where investment slows measurably, so you still
have strong support for oilfield jobs."