Self-Driving Electric Cars Coming Soon

By Paolo von Schirach –

WASHINGTON – Imagine this: affordable, driverless electric cars, EVs. This would be the true game changer for urban transportation and urban living. I say “would be” because this revolution, prophesized and announced many times, has not quite arrived. We know that there has been significant technological progress in these areas in the last few years; but not enough to make this vision into a reality. Still, I am hopeful that some day we shall see it.

When the revolution comes

If and when these affordable, autonomous EVs will hit the road, the impact of this radical technological revolution will be immense. I am not just talking about the environmental gains deriving from zero emissions electric engines, and therefore the overall reduction of greenhouse gases and significant air quality improvements in all large urban areas.

The real game changer will be that most people will no longer want to own a car, because hiring one will be very easy, and very cheap. Hence a true revolution in the way most of us will deal with all personal mobility needs, especially in large urban areas.

Changes in the way we think of mobility and cars

Even today, relying only on established, gasoline powered cars driven by humans who need to be paid for their driving, the availability of app-connected transportation services like Uber and Lyft convinced many city dwellers that calling a vehicle via smart phone whenever needed is easier and probably cheaper than owning and driving your own car.

How so? Uber of course is not free. However, for many users who rely on Uber or equivalent services any app-connected car service is more cost-effective than going through the trouble of buying and keeping a car.

It is true that you have to pay for each Uber ride, while you pay only a little (the cost of gasoline) each time you drive your own car. Still, you have to consider all the costs connected with owning a vehicle. You have to factor the substantial cost of the initial purchase, plus the cost of registration, insurance, parking, fuel, ordinary (oil changes) and extraordinary maintenance, (new tires, new brakes, new transmissions). Then add odds and ends like the cost of parking tickets, (some people collect many of those), the cost and aggravation caused by possible car accidents, and then the aggravation of the daily stress of driving on congested roads, and all of a sudden the Uber option, while it has a price, seems more cost-effective, at least for some.

Driverless, electric Uber

Well, if relying on smart phone connected car services as opposed to owning a car is the emerging trend today, imagine the appeal of this car hire option in a not so distant future in which your Uber or equivalent vehicle will have an electric engine and no driver. These radical innovations obviously will mean very low operating costs for the service provider, hence much lower fees charged to users, and guaranteed, fast 24 hour service.

The rides will be cheaper because there will be no payments to a human doing the driving. Besides, the driverless car will stay on the road day and night. It does not get sick and it does not need to take a break. And the cost of the electric charges will be much lower than gasoline.

The future of personal mobility

So, here is tomorrow’s scenario. Think of driverless EVs that will be on the road almost 24/7, (taking a break only for the time necessary to recharge the car’s battery). Since these vehicles will cost much less to operate, the companies providing the service will be able to pass on to the consumers significant savings.

And this will mean that almost anybody will be able to afford rides, probably several rides a day. At the same the service providers will be able to guarantee that there will be plenty of vehicles constantly on the road available to quickly meet demand for rides. And this means almost no wait time for your ride.

No more need for private cars

In this new scenario, for the vast majority of urban dwellers, owning a private vehicle will become unnecessary, because all mobility needs will be easily and inexpensively met by driverless EVs. If this is so, let’s think about the significant ripple effects of this radical reorientation of consumers’ preferences.

Fewer cars

As a result of all this, there will be a complete restructuring of the automobile industry. Only EVs will be manufactured, of course; but fewer of them, because it will no longer be one vehicle per individual driver. One vehicle on the road 24/7 will serve many customers during the day. This will mean far fewer cars on the road. And probably improved road safety, because driverless vehicles will not get distracted, they will not cause accidents. They will not be under the influence of alcohol. They will not be tired and sleepy.

Empty parking garages

Furthermore, far fewer cars constantly in circulation will mean plenty of redundant parking spaces. In most large cities enormous parking garages have been built for commuters. They are filled every day by tens of thousands of cars parked there by commuters. In the future commuters will be able to rely on services provided by driverless cars, therefore all these parking lots and garages will sit empty. This will create an opportunity for re-purposing a great deal of valuable urban real estate.

A better future

So, here the picture. No more private automobiles on the roads, or at least far, far fewer of them. And this means that the substantial capital devoted by millions of individuals to purchasing a vehicles will be used for other goals. Besides, given far fewer cars on the road, there will be no more road congestion, and no more street noise caused by the internal combustion engines and related air pollution. And, finally, no more stressed out drivers/workers who have to fight the traffic twice a day, every day, commuting to and from their work places. All in all, with the driverless EV doing the driving, this will translate into a much more enjoyable, more relaxing urban life experience for millions of people across the globe.

Paolo von Schirach is the Editor of the Schirach Report He is also the President of the Global Policy Institute, a Washington DC think tank, and Chair of Political Science and International Relations at Bay Atlantic University, also in Washington, DC




Raising The Temperature In The Middle East

By Paolo von Schirach –

WASHINGTON – After the unexpected airstrike that killed IRGC General Qassem Soleimani, right outside the Baghdad airport, analysts began speculating what Trump’s end game may be. In other words, is this just an ill-conceived, spur of the moment decision? Or is this targeted assassination of the master mind of all the Iran-led irregular forces operating with impunity in the Middle East part of a carefully orchestrated US “plan”?

Recalculations about America’s will are in order

I have no idea. However, I would say that this brazen attack that eliminated the most significant and most revered leader of Iran’s international mischief will probably cause some rethinking on the part of those who have come to believe that America is a hesitant giant, essentially impotent when targeted by non state actors.

Well, not so impotent, it turns out. I would speculate that Soleimani was killed in some measure because he got used to traveling from Iranian fiefdom to Iranian fiefdom, (Lebanon, Syria, Iraq, Yemen), without too much concern about his own safety. In other words, being at the head of a victorious and unchallenged unconventional military force, made Soleimani arrogant. It made him believe that he was invincible, that he could safely move around almost anywhere in the region.

Here is the thing. Going forward, the accepted narrative of a rather passive and impotent America, incapable of reacting to stealthy attacks that do not leave clear footprints, no longer applies. Not just Iran, but all America’s enemies should take all this into account.

Making things worse in the Middle East?

Sure enough, this sensational killing caused all sorts of speculations regarding possible reverberations on the volatile Middle East, already torn by conflicts and insurrections. Trump has been accused by Joe Biden, would be Democratic nominee for the presidency, of having thrown a stick of dynamite into a powder keg, or something like that.

Sure, this American action raises the temperature in the region. But the most feared consequence of a major Middle East crisis, sky rocketing oil prices, will not happen. As Holman W. Jenkins noted in a recent piece in The Wall Street Journal, the unrelated American fracking revolution, by substantially increasing US oil production, completely transformed global oil markets.

There is plenty of oil

In other words, today the world should not be overly concerned with any disruption of the flow of oil passing through the Strait of Hormuz. The difference between 10 0r 15 years ago and today is that America –until not long ago a major oil importer– is now the largest oil producer in the world. Yes, the US produces more oil than Saudi Arabia or Russia. While America still imports oil, it buys most of it from Canada, not from the Persian Gulf.

This fantastic increase of America’s oil production has had and will have significant geopolitical consequences. A very big one is to have down graded the strategic importance of the Middle East as an oil producing region, and therefore the possible negative impact of Iranian actions targeting Middle Eastern oil facilities on the world economy.

Nothing happened after Iran attack Saudi oil facilities

If you recall, a few months ago, the Iranians launched a surprise attack against major Saudi oil installations, knocking down with one shot about 50% of Saudi Arabia’s oil output. Well, what happened? Not much. Yes, oil prices went up, for a few days. But then, when the analysts were reassured that there was plenty of extra supply in global energy markets, oil prices went down again.

I am not suggesting that the Middle East has become irrelevant, far from it. What I am suggesting is that Iranian threats and possible attacks against oil are not as dangerous as they used to be in an era of tight supplies and enormous needs for imported oil on the part of the United States.

Iran is not the winning champion

Yes, after the stinging loss of Soleimani, its revered military leader, we should be prepared for something really nasty coming out of Iran. But let us not forget that Iran is not Stalin’s Soviet Union, or Nazi Germany at the height of its power.

Iran is an impoverished police state, stricken by US economic sanctions. It is a country in which an increasingly recalcitarting population, notwithstanding the obvious threats of imprisonment, torture or death, still engage in spontaneous protests against the high cost of food and other basic necessities. While we should not underestimate its resourcefulness, today’s Iran is not exactly an unbeatable champion.

Paolo von Schirach is the Editor of the Schirach Report He is also the President of the Global Policy Institute, a Washington DC think tank and Chair of Political Science and International Relations at Bay Atlantic University, also in Washington, DC




When The Coal Mine Closed Down

By Paolo von Schirach

WASHINGTON – Not long ago, I read a vivid account of a small town in West Virginia facing the demise of a coal mine, the major employer in the area. It is a real tragedy. Many people in the small town worked there. Their families depended on their salaries; while the entire local economy thrived because of the money coming directly or indirectly from the mining operation. No mine, no nothing. Only semi-desperate unemployed miners, empty stores, empty restaurants. You get the idea.

Gas is cheaper and cleaner

And why did the mine close down? Mostly because of the competition created by cheaper, super abundant, (and much cleaner), natural gas as the new fuel of choice for electric power generation plants. Considering lower prices and lower emissions, utilities across America have been switching to natural gas.

Hence the slow demise of coal. Quite frankly, from a most elementary economic stand point, this switch from coal to natural gas makes perfect sense. Having a choice, utilities go for the fuel that costs less and pollutes less.

Indeed, as a nation, we should be extremely grateful to the entrepreneurs who a couple of decades ago unleashed this incredible “fracking revolution” and created this almost unthinkable natural gas bonanza. Once gas poor, America has now so much natural gas that it is exporting it, with obvious advantages for our balance of trade.

No reason to be happy

However, if you grew up and live now in that West Virginia community, you have no reason to be happy. The coal mine was all they had; and now it is gone. How are the people going to create, out of nothing, a new local economy that will provide income and a decent standard of living for all? The reality is that this is almost impossible.

Creative destruction

Capitalism is a process of “creative destruction”. Unfortunately the “creation” and thedestruction” components are not nicely harmonized. There is no “system” that will guarantee that when jobs are lost because a new technology has made the old one obsolete, (or as in this case a better fuel becomes available this way replacing the old one), enough new, well-paying jobs will be created, just when they are needed.

In the end, if one looks at the big picture, if an innovative economy works, eventually the entire society will be better off. New technologies mean new and better products or services. New investments mean higher productivity and higher salaries. Yes, this is true…eventually.

What about the victims?

In the meantime, what will be the fate of this West Virginia rural community now that their main source of income has disappeared, victim of the “destruction” component of “creative destruction”? Unfortunately, as a society we have not managed to create the necessary shock absorbers, the transition tools that could eliminate or at least alleviate the frictions caused by painful economic change affecting people with no defenses.

Sure enough, in America we have retraining programs, vocational schools, Community Colleges, and more. But these resources are scattered. They are not well organized. Most tragically, usually they are not available when and where they are needed the most.

A future smart society will provide tools

A future smart society should have this reassuring message for all workers: “Do not worry. If you lose your current job, and this is quite possible given the rapid pace of change in this hyper competitive global economy, we have many resources for you. You will quickly learn new skills. You will become employable in new sectors where there is a strong demand for qualified workers. You will be OK. Your family will be OK.”

Sadly, we do not have anything like this in place today in America. Yes, there is unemployment compensation, food stamps, Medicaid, and other state or federal subsidies. But these are just bandaids. These are no long term solutions.

May God help those poor people in that West Virginia small community. Without the coal mine they are lost.




US Kicks Gazprom In The Shin

By Paolo von Schirach –

WASHINGTON – It looks like a clever Washington move. The US Government just put on notice any company involved in laying pipes underwater that they should immediately stop work on the Gazprom Nord Stream 2 pipeline designed to deliver Russian gas to Northern Germany, and beyond via the Baltic Sea. If they do not stop, they will face US sanctions. Allseas, the Dutch-Swiss company directly involved in the Nord Stream 2 pipe-laying operations, immediately signaled that it would comply, in order to avoid US sanctions. Hence the halting of the pipeline project, just as it was close to completion.

Last minute effort to stop Nord Stream 2

Well, what’s this all about? This is about the American determination to prevent the completion of this Russian pipeline, even though Germany and many other EU countries openly want it, because Washington fears that Russian dominance of the European energy markets will give Moscow a dangerous degree of influence in European affairs.

Besides, for years Washington has been pointing out that this Nord Stream 2 pipeline has the clear geopolitical goal to divert to this new pipeline Russian gas now flowing to Eastern Europe via pipelines transiting through Ukraine. Upon completion of Nord Stream 2, the same Russian gas destined to European markets will no longer go to Eastern Europe via Ukraine. It will be shipped to Europe via Nord Stream 2. This way, with implicit European complicity, Russia will isolate Ukraine, while selling the same gas to its willing European customers.

The Europeans know what’s going on

Let me stress here that the Europeans (ostensibly our Allies) know very well that this is exactly what is going on. Russia wants to hit Ukraine and figured out a clever way to prevent it from collecting the transit fees for the Russian gas passing through it on its way to Eastern Europe and beyond.

But now America, with the threat of sanctions, stopped the whole thing. The Nord Stream 2 pipeline will not be completed; and the wily Russians got a bloody nose. Well, not really.

Nord Stream 2 will be done

Sure enough, this is a major inconvenience for Gazprom and Moscow that most likely will cause a significant delay and cost overruns for the mega-project now almost completed. But there is no doubt that in the end Nord Stream 2 will be done. Notwithstanding the aggravation and the additional costs, Russia seems to have the vessels that can step in and lay the pipes, so that the project will be finished, at some point.

Only a gesture

So, what is this fracas about sanctions all about? Quite frankly, at best, this is a gesture on the part of the US. I do not see much substance here. Frankly, it is odd for Washington to try to stop our fully consenting NATO allies, who really want this energy project with roguish Russia, (up to no good in Ukraine and elsewhere), simply because we say that it is bad for them.

The reality is that via these targeted sanctions the US can certainly delay this Nord Stream 2 project; but it cannot not stop it altogether. In the meantime, Europe sees us as bullies trying to impose our own views on them, while the EU and NATO countries engaged in this venture with Russia apparently see nothing wrong in doing business with Russia, while abetting its clear design to hurt Ukraine.

No unified view on energy policies within NATO

Sadly, the problem here is not about this ill-advised pipeline aimed primarily at hurting Ukraine. The problem is that the very existence of this project, with full European participation, (the Germans in the lead), illustrates the inability to have a cohesive, unified view of what constitutes a threat to European security, and more broadly to NATO.

An empty gesture that will drive the US and Europe further apart

This clever US move to stop the work on the pipeline looks to me like an empty gesture that at best will delay completion of this energy project. However, we can rest assured that this American blatant interference in a deal freely struck between our NATO Allies and Russia will only engender more anti-American animosities in Europe, and not the necessary reappraisal of what we, as NATO Alliance, consider to be a serious threat to our security when it comes to energy, or other critical areas.




US Will Soon Be The Number One LNG Exporter

Paolo von Schirach –

WASHINGTON – Energyindepth, www.energyindepth.org recently stated that the world is witnessing a major energy supply revolution. The United States, until a few years ago destined to become a major natural gas importer, is now slated to become the world’s number one exporter of Liquefied Natural Gas, LNG.

New geopolitics of energy

The website made this point also quoting the Executive Director of the International Energy Agency, a Paris-based group of major energy consumers: “The growth of U.S. natural gas production – led by increased shale production – has been transformative, not only domestically but globally. And it’s only the beginning. As IEA Executive Director Fatih Birol recently said:

“The second wave of the U.S. shale revolution is coming. It will see the United States account for 70 percent of the rise in global oil production and some 75 percent of the expansion in LNG trade over the next five years.  This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”

US as LNG exports leader

While the US is now the world leading oil producer, let us focus here on the vastly increased American LNG export capacity. New US LNG terminals have been completed, and additional ones will come on line very soon. As a result the US, already the world number three LNG exporter, (behind Qatar and Australia), in a few years will become number one.

While this is good for business, it is obvious that this new role of America as key energy supplier will have important geopolitical implications, as this surge in LNG exports is not just a temporary phenomenon. Indeed, the undeniable fact is that the world will rely on large amounts of natural gas for decades to come.

The world will continue to rely on gas

Realistically, it is clear that notwithstanding pledges to cut down the use of fossil fuels in order to combat global warming there is no way to achieve a rapid shift to non-carbon energy sources within the foreseeable future. It is just technically impossible. And it is also clear that affordable natural gas, used largely as electric power generation feed stock, is and will be the fuel of choice for many energy poor countries. Besides, it pollutes a lot less than coal. Therefore, from an environmental protection perspective, it is the least damaging among the fossil fuels.

Taking all this into account, the world will continue to rely on natural gas as feed stock for electric power generation, heating, and much more for decades.

Vast geopolitical implications

Of course, this sustained demand for gas is about new or expanding markets for the US energy business. However, it is obvious that there are and there will also be significant geopolitical implications. Indeed, US growing LNG exports will be a factor in reshaping commercial and political relations with many Asian countries and Europe.

New markets in Asia

For example, India desperately needs additional energy supplies for its energy starved population, now exceeding 1.3 billion. When it comes to electric power generation, India still largely relies on dirty coal, with horrible environmental repercussions in terms of staggering air pollution levels in most large urban areas. Switching over to natural gas is a necessity for India. The availability of increasing amounts of US LNG will make this transition away from coal a bit easier; while a new, robust energy trade will strengthen overall ties. Likewise, Japan and South Korea, traditional US allies and always net energy importers, also need gas. The opportunity to buy additional quantities of US LNG will strengthen the bonds with these two key Asian countries.

Of course, energy poor China could also be a major buyer of US LNG. But the political relationship between the US and China is bad, and not destined to improve any time soon. Therefore do not expect China to be a major buyer of US LNG. (China is focusing now on a significant increase of imported Russian gas, via new pipelines).

More LNG to Europe will counter Russian dominance

Another important market for US LNG will be Europe. All projections indicate that natural gas consumption in Europe will stay flat. However, European sources of natural gas (originating from Norway and The Netherlands), are dwindling, while much of Europe relies heavily on imported Russian natural gas supplied via a variety of pipelines, old (via Ukraine) and new (via the Baltic Sea). Some European countries see no problem in this significant energy dependence on Russia, while others feel uneasy, given the history of Russian meddling in Eastern Europe and beyond.

Given these geopolitical concerns, some European countries, most notably Poland and the Baltic States, look very favorably at the opportunity to diversify their natural gas imports by increasing US LNG purchases. For the time being, US LNG exports to Europe are modest, and so they do not shift the overall pattern of large purchases from Russia.

New flexibility

However, the very fact that several European buyers of Russian gas now have a new purchasing option –US LNG– that simply did not exist until a few years ago, gave flexibility and better bargaining power to the Europeans. As a result, Russia in many instances was forced to lower its prices, as a way to fend off US LNG competition. Going forward, as US LNG export capacity increases and the price differential between LNG and Russian piped gas shrinks, expect additional European purchases of US LNG.

Increased US influence around the world

All in all, the fact that the United States already is today –and will be even more so in the years to come– the leading, dependable exporter of liquefied natural gas, a vital, relatively clean, energy source, will increase American influence around the world, and will help strengthen political ties with key countries in Asia and in Europe.

Yankee Ingenuity

Not so bad overall, considering that this US natural gas (and oil) revolution originated out of the dogged persistence of a small band of American “frackers” who believed that oil and gas could be profitably extracted from shale formations, when all the energy experts and the big energy companies stated that it was absolutely impossible.

Three Cheers for Yankee Ingenuity!




The Fake Aramco IPO

By Paolo von Schirach

WASHINGTON – There were great expectations about the Aramco IPO. It was announced long ago by Saudi authorities, and then postponed several times. Well, now we know why it took so long, and why in the end the IPO did not take place in New York or London. Indeed, the Saudi government, the sole owner of this energy giant, could not be sure about the response of savvy international investors. Would they really buy shares at a price that implies an overall $ 2 trillion valuation for Aramco? May be not. And so the Saudis decided to play it safe. They would do this at home, in an environment and with investors they could control. And so they used the Riyadh Tadawul stock exchange (where less than 200 stocks are traded) as the venue for this “historic” IPO.

Home made IPO

And, sure enough, the compliant, super wealthy Saudi elites bought the Aramco shares at the set price and bid up the stock so that Aramco would reach the $ 2 trillion valuation This choice of venue and how all this was arranged tells us that this is is no genuine IPO.

This is a (forced?) purchase, at a preset, dubious valuation of a very small number of Aramco shares by a few wealthy Saudis and some Saudi companies. Prince Mohammad Bin Sultan, MBS, the de facto ruler of Saudi Arabia, wanted the valuation of Aramco –no doubt the world’s largest energy conglomerate– to be at or close to $ 2 trillion. And so the shares had to be priced accordingly, and the compliant buyers –all of them Saudis– had to pay and sustain that price.

Not the real thing

Anyway, because of all this maneuvering, it is clear that this is not a genuine IPO in which the market eventually sets the value of the newly offered company based on available, scrutinized financial data and on their interpretation of market trends.

This IPO is a Saudi government gimmick aimed at getting essentially free cash in exchange for a tiny sliver of Aramco for which several compliant Saudi buyers paid a preset political (and therefore most likely inflated) price.

The risks involved in a real IPO

If Saudi Arabia had wanted to attract serious international buyers, it would have had to disclose a lot more, and then let the market decide what the value of Aramco really is. But this orthodox approach carried the risk of a lower overall valuation for Aramco after the IPO, had investors decided that the company, however enormous and certainly very valuable, is not worth $ 2 trillion. And this would have hurt the prestige of the Saudi Kingdom. For Saudi Arabia, Aramco is “it”. There is not much else in the Kingdom beyond oil and oil products.

Cognizant of these risks, MBS opted for a safe IPO. The offering took place at home, in Saudi Arabia, using the tiny Saudi stock exchange. The Saudi elites were persuaded (forced?) to buy the Aramco shares, so that the government could prove to the world that Aramco is the most valuable company on earth. In other words, this is about propaganda, and therefore the IPO is not serious.

What is Aramco’s true market value?

There is no doubt that Aramco is an energy giant. In fact, “the” energy giant. But, based on all we know about the company and most importantly about the future of global oil demand and oil prices in this new era of electric vehicles and carbon taxes, what is a fair valuation for Aramco? Is it close to to $ 2 trillion as the “local buyers only” IPO would suggest? Or is it less, perhaps half of that, as many analysts indicated? We did not know for sure before this IPO, and we still do not know today.

Clearly, executing a proper IPO in an internationally recognized exchange would have exposed the Saudi government to the scrutiny of international investors, and therefore a possible embarrassment, had investors decided that the shares were too expensive and consequently the touted $ 2 trillion pre IPO valuation excessive. In order to guarantee a “success” MBS engineered this “friends and family only” IPO.

Big questions about the Saudi reform agenda

That said, one thing is clear. If the manner in which this long delayed IPO took place is illustrative of the seriousness of MBS’ ambitious economic reform agenda for Saudi Arabia, I am not impressed; and consequently not very optimistic about the future success of MBS’ plans to diversify and grow the non-oil Saudi economy.




Thanks to Fracking, No Panic in the US After The Attacks on Saudi Oil

by Paolo von Schirach –

WASHINGTON – The most astonishing consequence of the unprecedented, devastating attack on Saudi Arabia which crippled the Kingdom’s oil production and refining facilities is what did not happen, especially in the USA.

There was no panic in the US or worldwide; no skyrocketing, out of control oil prices. Yes, crude prices went up, significantly; but not in a dramatic way, if you consider that the supplies of Saudi Arabia, the leading world exporter, (along with Russia), have just been cut down by 50%! That 50% represents 5% of total world supply. In an environment where strong demand matched tight supply, this sudden shortfall would be a disaster, especially for the US, along with China the leading oil consumer. But right now world oil supplies are not stretched, notwithstanding steady demand, thanks to the US fracking revolution which added millions of barrels of oil a day to global energy markets. More on this in a moment.

Surprise but no shock

Obviously, world markets took this unexpected and sadly successful attack against well defended (we all thought) and vitally important Saudi oil facilities quite seriously. But again, there was no panic; no stock market crazy gyrations. In contrast, you can rest assured that if the very same attack on Saudi Arabia had taken place 10 or 15 years ago, the reaction would have been chaos and mayhem –especially in Washington, DC and on Wall Street. Similar shortfalls caused the oil crises of 1973-74 and 1979.

What happened in the last 15 years?

So, what is the difference between now and then? The difference is the US fracking revolution. The almost unthinkable surge in US oil and gas production made possible by the adoption of fracking technologies by many US energy companies , (a successful combination of hydraulic fracturing and horizontal drilling), which began 10 to 15 years ago has given the United States millions of additional barrels of oil a day; and, as a consequence, also a much higher degree of energy self-sufficiency. Not total self-sufficiency, mind you, but close. Heavy reliance on distant (and it turns out not so reliable) oil suppliers was drastically diminished along with massive increases in domestic oil production. 

The broader impact of the US fracking
revolution

This gigantic increase in domestic oil and gas production made possible by extracting oil and gas from shale formations, coupled with increased oil imports from Canada, a friendly neighbor, have created a new scenario of quasi “Hemispheric Energy Independence”. In simple terms, North America, (Canada, USA and Mexico combined), can soon become energy self-sufficient.

Let’s be clear, we are not there yet. But we are almost there. The US still imports some OPEC oil, as well as crude from other regions of the world, but most of the oil we consume now in America is either domestically produced or imported from reliable neighbors.

Relaxed atmosphere

Hence the relatively relaxed atmosphere both in Washington and on Wall Street, in the aftermath of the attack on Saudi oil facilities, when it comes to confidence in our ability to ensure continuity of energy supplies to industry and consumers.

Notwithstanding the shockingly bad news of the brazen attacks that knocked down half of Saudi Arabia’s oil production and refining facilities, with the ensuing cuts in global supplies, there is no panic in America.

This is an incredibly important achievement. And we owe this to a multitude of small, medium and some large fracking companies that are behind this American energy revolution.

Global benefits

And the fracking revolution obviously benefits the rest of the world as well. Since America’s imports have been cut down by millions of barrels a day, there is more oil in the global market place available to all other importers. Abundant supply means lower energy prices for all, ample reserves, and (almost) guaranteed deliveries to all importers.

So, here is the story. Thanks to fracking and massively increased US oil production, even an unprecedented, catastrophic event like the attack on Saudi oil facilities can be handled without resorting to extraordinary measures such as price controls, rationing, etc.

A private sector effort

Where am I going with all this? Very simple. Fracking was not a US government program. Fracking is all about old fashioned Yankee ingenuity. The US private sector, often small energy entrepreneurs, largely unhindered by suffocating state or federal rules and restrictions, had the freedom to invest in drilling in shale –an endeavor what at the beginning seemed to most experts a perfectly crazy idea, destined to failure.

Well, the seasoned experts were wrong. After a few years of trial and error, the daring energy entrepreneurs were proven right, and America now –thanks to fracking—is in the midst of this incredible “Energy Renaissance”. This huge additional domestic production, in this moment of international bewilderment caused by the brazen attacks on Saudi oil facilities, provides precious support and reassurance to both the US economy and US national security.

Broader lesson: encourage free enterprise

So, here is the broader lesson. As a Nation, let us do all we can to encourage more innovation and entrepreneurship –in all sectors. Do not place roadblocks on the path of those who seek to create new products, new systems and new solutions. And I am not just talking about energy here. I am talking about all economic sectors.

Sure, all
economic activities have to be conducted within the boundaries of the law,
while they have to comply with all necessary safety and public health
standards. These are the common sense rules of a modern, civilized society.
But, once reassured that there is genuine compliance with the basic norms of
our nation, let people be free to do what they want to do.

In the case of fracking we see the enormous economic and now national security benefits brought about by daring spirits, ingenuity and enterprise. About other economic sectors, God only knows what new benefits commercially viable innovation may bring to us. 




America’s Energy Future

WASHINGTON – The good news is that America is now among the top three world fossil fuels producers. The bad news is that increased US fossil fuels production will create a disincentive in exploring and then deploying needed alternatives to fossil fuels.

The real challenge

The energy policy challenge for the US –both the government and the private sector–is to be able to look at current and future reliance on abundant domestic oil and gas both as a providential support for current energy needs but also as a temporary “necessary evil”, as we get busy trying to identify non carbon energy sources that will power America in the long run.

Indeed, these –oil and gas– are the essential energy sources that we badly need right now. However, as we take advantage of the fossil fuels bonanza, at the same time we must be steadfast and relentless in the all out pursuit of economically viable, emissions free energy alternatives, however long this may take. Put it simply, if we do not want to cook up the planet, our long term future –America’s future and the world’s future– has to be powered by clean, emissions free energy sources.

The fracking revolution 

That said, if you did not know anything about the immense threat represented by man-made global warming, and therefore you had no reason to doubt that fossil fuels are the best answer to America’s massive energy needs, then you would be reassured and comforted by recent trends. Indeed, thanks to abundant domestic oil and gas, this is a great season for the American economy, and for the US fossil fuels industry.

Thanks to hydraulic fracturing technologies, (better known as “fracking”), and horizontal drilling, scores of US energy companies, large and small, in the last decade managed to tap into vast energy resources, (located mostly in Texas, Oklahoma, North Dakota, Louisiana, and Pennsylvania), until recently deemed to be uneconomic because of the technical challenges represented by drilling into shale formations in order to free up the hydrocarbons trapped in shale.

Well, thanks to old-fashioned Yankee ingenuity, the technical challenges were overcome –with spectacular results. Thanks to fracking, US oil and natural gas production jumped to almost unimaginable heights, this way transforming not just the American energy market, but the entire dynamics of global energy markets.

US is ahead 

Let’s take stock. America is now the number one world producer of natural gas, and poised to surpass Russia as the biggest oil producer in 2019, having already overtaken Saudi Arabia. (This forecast may change, of course, because both Russia and Saudi Arabia have ample spare capacity that could be easily tapped, this way increasing their production).

A mere decade ago, the idea of a massive scale US fossil fuels renaissance would have been labeled a silly fantasy. Any reliable forecast would have pointed out that the US had already used most of its known fossil fuels reserves.

In 2008 the consensus was that, going forward, America could have powered itself only via massive additional energy imports, (both oil for transportation and natural gas for power generation and heating).

This unpleasant assessment created unease in many quarters, given the enormous cost involved in importing most of the hydrocarbons needed to power America, the second largest energy consumer, (after China), and given the worrisome negative national security implications of utter dependence on foreign suppliers for such vital commodities.

The impact of fracking 

Well, today we have a completely different scenario. While America continues to rely on some oil imports, the percentage has shrunk substantially. Furthermore, today the national security concerns related to imported oil are far less significant, because our oil imports come mostly from our close neighbors: Canada and Mexico, (and some from Venezuela), therefore these supplies are relatively secure. Which is to say that America is now close to achieving what the experts call “Hemispheric Energy Independence”. Indeed, as most of our additional energy needs come from stable countries located in our immediate neighborhood, we no longer rely on a significant scale on distant and potentially unreliable suppliers.

And it gets better. In fact, while we still import some oil, now we also export oil, and growing amounts of oil products. And the quantities of our energy exports are growing.

The real challenge is to develop emissions free energy sources

That said, this positive short and medium term energy outlook is deceptive. This fossil fuels renaissance is not the end of the story when it comes to America’s energy sources and their impact on the environment.

We now know that continued reliance –on a massive scale– on burning fossil fuels will contribute to additional greenhouse gases emissions and therefore to the exacerbation of global warming.

Of course, we know that many companies and scientists are busy trying to find workable –that is technologically viable and cost-effective– alternatives to reliance on hydrocarbons. But this is not easy.

Bad policies will not help 

And it seems that policy-makers are approaching the problem in the wrong way. The prevailing policy choice is to “force” the adoption of currently available renewable energy solutions –today– by creating mandates for renewable energy usage, and tax subsidies for wind, solar and electric vehicles. In my view, while these policies of mandates and subsidies may be well intentioned, they will not succeed.

The fact is that new forms of energy production and new types of vehicles will be spontaneously adopted on a massive scale only once they prove to be cost-effective, without the distorting incentives of mandates and tax subsidies.

Fund more R&D 

Public policy can help not via subsidies but by providing significantly more funding for additional research in alternative, emissions free, fuels. We simply do not know today what the future ideal new energy mix will be. It is too early to say.

Electric vehicles, EVs, look very promising. And yet manufacturers still need to find ways to make cheaper, more energy-efficient, and lighter batteries. The good news is that the cost of wind and solar has gone down –very significantly. But we still do not have effective ways to store the electricity they produce so that it can be used when the wind is not blowing and the sun is not shining.

In other words, still plenty of work to do before we can reliably move away from hydrocarbons for both power generation and transportation.

Fast track the development of clean energy sources 

So, here is the challenge for America. By all means, let’s take advantage of the incredible fossil fuels renaissance, simply because today there is no reliable alternative technology that could be deployed on a massive scale.

But let’s not fool ourselves. Oil and gas are not and should not be looked at as long term energy solutions. The long term solution has to be in emissions free, clean energy sources –whatever they may be. With this goal in mind, let us unleash American ingenuity so that we can get to a reliable, and economically viable post-fossil fuels era as soon as possible.

We all love our planet. Let’s do our best to preserve it.




Coal Makes India The Super Polluter

WASHINGTON – In case you were wondering, we are not making much progress in our planetary war against global warming. There is cause for serious alarm. However, despite the exaggerated media focus on Washington, the real problem is not President Donald Trump and his denial of the dangers of global warming, illustrated for instance by exiting the Paris Accord, and by his “promises” to support US coal miners in order to make coal great again.

America failing to lead

Sure, the fact that America, the world’s number two country (behind China) when it comes to emissions, is failing to lead is not helpful, to say the least. That said, while America’s position on this global threat is very disappointing, America is not the main problem.

The problem is India

The monstrous size problem is India. The Subcontinent’s economy, (with a population now in excess of 1.2 billion people), is growing, and with growth comes a voracious appetite for energy, specifically for thermal coal, the kind of cheap coal used for electric power generation. A recent long survey in The Economist paints a rather horrible picture. 3/4 of India’s electricity is generated by coal, and coal consumption is actually growing.

Too much coal

Sure, India has also launched a large number of important renewable energy projects. But compared with the amount of electric power generated by coal they are not very significant.

And cutting down on coal used for power plants is almost impossible, for economic and political reasons. Coal mining is concentrated in the rather poor East of the country. Which is to say that this industry provides badly needed jobs and income to many low income Indians. By the same token, coal transportation is a major source of revenue for Indian freight railways. And coal is relatively cheap. Hard to see how India’s policy-makers can cut down its use without causing major upheavals.

Dependence here to stay

If you take all is this together, unless the cost of renewable energy goes down more rapidly, it is easy to realize that India’s heavy dependence on coal is not going to go away any time soon. And this means that India will continue to lead on global greenhouse gas emissions, because of its super sized fleet of coal-fired plants.

Paolo von Schirach is the Editor of the Schirach Report www.schirachreport.com. He is also President of the Global Policy Institute www.globalpi.org and Professor of International Affairs and Economics at BAU International University www.bau.edu

 




Does America Need Nuclear Energy?

WASHINGTON – Can nuclear power come back as a cost-effective modality to generate electricity in America? Some scientists and innovators claim that the sector, challenged by prohibitively high costs of construction and fears of accidents may have a future after all, and it is called Small Modular Reactors, or SMRs. According to them, it would appear that the sweet spot for nuclear will not be in the traditional model of large scale, expensive and difficult to build power plants that will serve millions of customers. The future is in Small Modular Reactors, SMRs that can be built quickly and cheaply.

Small nuclear?

If this were indeed so, if we could indeed quickly build several SMRs at a reasonable cost, this would be a true game changer, for the nuclear power industry, for the future of electrical power generation in the U.S., and more broadly for all efforts aimed at devising a mix of electrical power generation sources that will help us drastically reduce carbon emissions, and therefore finally put a stop to global warming.

On the road to extinction

By most account, here in the U.S.,nuclear power plants are on the road to a silent and unlamented extinction. A combination of fears of accidents, uncertainties about a reliable way to dispose of all the spent fuel and then huge, in fact prohibitive, upfront construction costs for new plants created almost insurmountable policy, political, psychological and financial barriers that work against the very notion that nuclear is a viable, safe, reliable, non carbon solution to our needs for electricity.

As all this was debated here in America several years ago, the Fukushima Daiichi accident of March 11, 2011, in Japan was an additional and huge body blow to the entire nuclear power sector and the companies and policy-makers that support it.

Leaving aside all the technical analyses about the very specific circumstances that caused that major accident in Japan, (a major tsunami that flooded the plant, disabling the pumps), U.S. public opinion, or at least a big chunk of it, became even more convinced that nuclear power generation is inherently dangerous.

There are other options

Therefore, energy experts argued, as we do indeed have choices, let’s discard  nuclear power as a means to generate safe and reliable electricity. The Greens of course advocated renewables. Others focused on the emerging and promising shale gas sector. Indeed, with so much new and cheap natural gas coming on line, America could reliably generate all the affordable electricity it needs, for decades.

And so, as a result of all this skepticism regarding nuclear, while other commercially viable alternatives have been developed, we are witnessing the progressive shrinking of the U.S. nuclear power electricity generation sector. The stark reality is that no new nuclear plants are built, while old plants little by little are phased out and decommissioned.

This is a big deal. Nuclear used to provide about 20% of all electrical power generation in America, a huge percentage of the total and a large overall amount for an advanced industrial power like the U.S. that produces and consumes a great deal of electricity.

Nuclear is dangerous and too expensive 

As indicated above, for some this transformation may not be so bad. Nuclear –they argue– is dangerous, as we do not have an effective way to dispose of all the waste produced by the plants. And then there are possible accidents. May be not of the Fukushima kind. But other possible malfunctions may cause the release of harmful radiations in the atmosphere. The consequences of such events would be dire.

On top of that, the fact that nuclear is now so expensive is an additional reason for deciding to move on to other more promising technologies. If you are Green, you want to focus on solar and wind, technologies that have become much more cost-effective in recent years. If solar has become so cheap, why bother with nuclear? If you are not Green but are simply looking at cost-effective ways to generate electricity, you focus on shale gas, not exactly clean, but far better than coal when it comes to emissions.

Renewables are not enough 

Well, the advocates of SMRs argue against complete reliance on renewables as the silver bullet that will deliver enough safe and sustainable, non carbon based, power. Unless renewables become dramatically more efficient, they argue, you simply cannot install enough renewable energy sources to meet current and future power needs. As things stand today, it is impossible to build enough wind farms and solar plants to power the entire planet. And if we seriously want to progressively “decarbonize” our power generation mix, they tell us, then shale gas will not do it. Yes, it is better than coal, but it is not clean.

In the end, say the SMRs advocates, if we want green solutions, solar and wind, plus hydro power wherever it may be possible to develop it, will simply not be enough. You also need nuclear.

Small Modular Reactors to the rescue 

Here is the strong argument in favor of a new generation of SMRs. If we agree that coal is bad, and natural gas from shale only somewhat less harmful, we simply cannot focus solely on solar and wind as the means to deliver all the power we need.

Unless we assume tremendous technological breakthroughs that will substantially increase the productivity of all existing renewable technologies, while solving at the same time the huge bottle neck of the lack of energy storage systems — a problem that limits the flexibility and therefore the usefulness of solar and wind power generation–  renewables are simply not enough. Without large scale, effective storage solutions, renewables produce electricity; but not 24/7. No sun at night. No power when there is no wind.

And then there is the energy density issue. We simply cannot successfully address our planetary electrical power generation needs by building thousands upon thousands of wind farms, while covering large chunks of the Earth’s surface with solar panels. It is just not practical.

That said, if we want to drastically diminish and eventually phase out our dependence on carbon based electrical power generation, we better come up with something else that can be successfully added to the mix.

Are SMRs commercially viable?

Hence the importance of refocusing on nuclear, albeit a different type of nuclear: small, modular, cheap, and effective. Of course, all this is very interesting. Except for one basic fact. SMRs, although the object of serious studies and research, are not commercially viable at this stage. They are much more than concepts, but they are not part of the choices commercially available today to utilities and consumers. At this stage, SMRs are a hope, not a real alternative.

If this SMRs hope does not soon become reality in terms of companies that can offer safe and reliable SMRs to utilities at a competitive price, we are in a real bind. We can generate all the electricity we need; but we are and we shall be unable to seriously curtail greenhouse gases emissions. And this means that Global Warming will get worse.

This is bad news for Planet Earth.