This is a sequel to the SustainabiliTank.info article of May 18, 2005 titled MADRID COMES TO NEW YORK (please LINK).The present article analyses Club of Madrid, March 10, 2005 sessions, as per URL:

http://english.safe-democracy.org/keynotes/the-world-over-a-barrel-the-politics-of-energy.html

two parts transcript “The World Over a Barrel: The Politics of Energy”, and “Balancing the Agenda, part 2″, which is actually a continuation of the discussion that followed the material in the first reference.

I got into this material because of comments I received following my May 18, 2005 article, that said the Madrid presentation of former US Senator Gary Hart contained material that was not presented at the New York meeting to which I objected in my last paragraph of the May 18 article.

As a former participant with two think tanks I have very high regard for the operation of such institutions. In the energy security area, back in the 1975-1995 years, I cooperated first with Mr. Hermann Kahn at the Hudson Institute when we prepared what eventually became the only ever official energy policy of the United States - the creation of the Synfuels Corporation. I worked then on oil shales, coal liquids, coal gasses, and biofuels. Mr. Kahn did not worry then that the world will run out of oil; his quest was to figure out the actual cost of producing alternatives so the US, after the first so-called oil-shock, will not be held over a barrel. After the death of Mr. Kahn, and a series of testimonies before Congressional Committees, I cooperated with Charlie Ebinger of CSIS and we introduced to Washington, via the US Department of Defense, as it was rather difficult to work with the oil industry dominated Department of Energy, the technologies, and have demonstration fleets, of Compressed Natural Gas, Ethanol, and Methanol. With this background I was hopeful that the Club of Madrid, and now the newly formed Security and Peace Institute (SPI), will be able to lift again the banner of think tanks trying to work out a real potential energy policy - for the US and for the world at large. Having read now the above mentioned URL, I am confident again that the Club of Madrid has the potential of gathering the high level mix of talent that, with a good functioning leadership, could indeed formulate the sort of ideas and backing needed to help the public make demands for implementation from the Administration.

The March 10, 2005 panel in Madrid was chaired by David Buchan, Senior Editor for Energy, Financial Times, London, and the three members of the panel were: Roger Diwan, managing director of the Washington based Petroleum Finance Corporation (PFC); Alastair Morrison, chairman and CEO of KROLL Security International; and former US Senator Gary Hart who was introduced by the moderator as “a co-chairman of the US Commission on National Security for the 21-st century, which I think (that in the moderator’s words !) forecast a 9/11-type attack a year before it actually happened”.

The panel, and the lively interaction with the audience, managed to come up with material that, in my opinion amounts to the think-tank honored process of creating scenarios. There were enough fertile ideas heard or hinted at, to honor the event, and I intend to come back to just a few that seemed to me of special interest. But first, I want to get out of the way the problem that propelled me to look up this information - the idea of “internationalizing” the security of the flow of oil from the Middle East. Actual quotes from the closing of the session - last page of my print-outs:

- an unnamed participant: “Gary’s proposal for a UN zone of protection in the Persian Gulf, of oil resources and then the question about the practicality of it. Oil being a scarce commodity and strategic commodity it has important historical influences. It doesn’t mean markets can’t work but it means that often people don’t allow markets to work (whether its producers or consumers). When the Japanese expanding empire was pressed by US oil embargoes we saw Pearl Harbour. When in 1945 we saw victorious US want to prevent armed competition for energy resources in Europe and East Asia we saw the emergence in the pattern in the US guarantee. In the late 60s low 70s it was the producers who stepped in. They had the power to take away the markets and form cartels, which they did”…….”I wonder if the panelists would look again at the possibilities of an international system succeeding a natural, or global system which now seems to be in crisis”.

- Roger Diwan: “…issue, the sovereignty of producing countries. And it’s very difficult for foreign powers to come back and say we’re going to impose a code of conduct in Angola, it sounds like colonialism. So the question is how do you go back and force countries to behave in a certain way and how do you intervene in domestic politics. I don’t know”.

“…The notion that the UN will take over the resources or manage that, as an Arab I find shocking. I think technology is a more likely, easier path, and if the technology exists to a large extent to reduce consumption and not let it grow. I mean we have hydrogen cars and we know how they function, we can have smaller lighter cars. We know all those technologies and they are available presently at these prices. It’s a question of deployment and how much governments push for that. The dependency on oil is only going to last another 100 years. Oil is not going to run out but it will peak in ten to fifteen years from now so the decision for policies needs to be taken today and I’m not sure that the policy makers understand that, by 2020 we cant keep looking at where we’re just going to produce more and more, it just doesn’t exist.”.

- Gary Hart: “…it turns out that the terrorists that attacked America were mostly from Saudi Arabia. The rationale, if there was such for their actions, had to do with American presence there, particularly militarily but also the role that American dependence on oil in the region played and therefore we are having this discussion. So I’m actually pleased that I’ve shocked Mr. Diwan, because that is the first step towards thinking different thoughts. If in fact you want to accept the status quo as a given, and therefore believe nothing different can ever be done I would completely agree with him, we’re stuck with what we have and we shouldn’t even try to think of anything new. I’ve tried in public and private life to think of new things and I like to think about - in an age of globalization - where the central resource to the world economy is oil, a situation where US army (generically defined), is not the world’s guarantor of oil for the world, that’s all”.

“And that deductively leads me to think of shocking ideas like UN operating the Persian Gulf. I never said that. That would be shocking. But declaring a zone of such importance to the world and world’s economy not just the western economy but China, India, and a lot of other places increasingly, that is in the world’s interest and international institutions interest to guarantee its flow. That’s all”.

“And we in the US will cooperate with producers and consumers, not just consumers, to keep those oil flows going. If the Saudi royal family falls, the role of these new organizations I’m talking about isn’t to re-impose the Saudi royal family but simply keep the oil flowing and let the Saudis sort out what kind of governments”.

David Buchan (the moderator) ended the discussion saying: “Thanks to Alistair Morrison for telling us we shouldn’t panic, I think we’ll hold you to that, to Roger Diwan for reminding us that nonetheless there is quite a lot of economic concern at the lack of spare capacity leading to the vulnerability and volatility in the energy markets, and to Gary Hart for his radical vision of how someone else might police energy”.

To be fair to Gary Hart - what he actually said in Madrid was: “I don’t want the US army becoming a mercenary army for the first time in history, which is what happened in 1991. Instead we should create some sort of force, let’s use NATO as an analogy, such as a Persian Gulf treaty organization of consumers and producers and all those nations producing oil and all those consuming oil, to guarantee those oil supplies”. Clearly, there is nothing wrong in having this as one of the scenarios in a think tank approach at devising different scenarios of how to attack a problem, The pity is that much of his other observations got less attention even in Madrid, and he did not repeat them in New York.

In Madrid, Gary Hart said that the US has in fact an energy policy - “It is the policy of the US to rely, for about half of our petrol supply, on imported oil, so that we can continue to drive large, very inefficient vehicles, and thus, if supplies get cut off, to sacrifice the lives of our sons and daughters to guarantee that supply. That is US energy Policy”. But then he proceeded talking about the “deep concern about greenhouse gas emissions and the catastrophic consequences of continued reliance on carbon based fuels”. He spoke the hybrid vehicles but also mentioned that he would back a standardized 500 megawatt pressurized water cooled nuclear reactor - half the size of the Three-Mile Island and he conducted at the time the Senate hearings on that accident. Clearly subjects that were known to quite a few administrations in Washington.

Gary Hart also mentioned in Madrid that if we were honest with ourselves and identified our economics right, we probably would find that we are already paying $100/barrel of oil, and stated that our petrol dollars are clearly recycled to support Al Qaida. His presentation there was thus helpful in setting the stage for the long discussion.

Having gotten out of the way the “internationalization” issue, from the many topics touched at the Madrid panel, actually the think-tank stage that I pick to write about here was set in Madrid by Roger Diwan.

Diwan, after opening by acknowledging that when he talks about energy prices he will be talking mainly about oil said: “The main risk is price risk; price will rise to a level that will really have an effect on the economy. So of course there is a security risk, but security risk becomes an economic risk through prices”.

Sure, the Madrid International Summit was titled “Democracy, Terrorism and Security”, but this panel, that was supposed to deal with the need of an energy policy, made the case that terrorism against oil targets as such can not create irreparable damage. It is the expectancy of the acts of terrorism, that in tandem with the fact that there is no available spare capacity, except some in the Middle East, drives the price of oil - which then harms the economy. The higher price of oil and the subsequent increase of funding to the oil states, is also making available give-away money that those governing oil exporting states give to the terrorists in order to buy their own peace. The presentations and the discussion included many more subjects, among them the democratization aspects in the oil exporting countries in order to make them safer, by making their own people friendlier to the government and to the foreign corporations. I will not get into this here, but I obviously think these are valid think-tank topics.

So what about a low oil-price scenario to be achieved by any means? Will this be to our advantage? Now, this will continue our dependence on oil.

So how about creating a third scenario - the combination of the two - a low price to the producer, whose cost of production is still about $2/barrel, and a high cost to the consumer. In effect the discussion has all but mapped out the way how to achieve this. First you start by being honest with your own economy and figure out how high is your cost indeed, then you try a series of carbon taxes and oil import taxes in order to gather funds for putting on the market the substitutes to oil. You make sure that people get the correct information about the GHG effect and the high cost to us because of the carbon emissions, and most important of all, you remember that oil is just one way of providing material input in order to supply energy to the economy. Oil is not a synonym to energy - wind, sun, the waves of the sea are much closer to the concept of work that describes energy, then the burning of a fossil fuel. This again is think-tank, not clear politician lingo, but burning hydrogen produced with the help of the previously mentioned energy inputs is a clean way to fuel the economy. That is something people could vote for if it is made understandable to them. I saw this month the wind-mills in Ceara, Brazil, and they will try to use their energy to produce hydrogen.

Fleshing out above three scenarios, enlarging the scope of an energy policy, can then be the task of the CofM and SPI and it would be a tribute to the memory of the victims of 9/11 if it is done as part of a New York or Washington memorial summit in 2005 or 2006. Backing into what interests the Europeans, the effect GHGs have on Global Warming and Climate Change, will also have the effect of bringing the US back into the fold of EU multilateralists. The British and Canadian Prime Ministers, perhaps also German, Brazilian, and Chinese leaders could then be asked to New York or Washington in order to participate. They all are interested to decrease their dependence on oil.

Bringing the CofM to the US should not be viewed as another weapon in the war between the two major parties in the US - the problem is so large, and the danger to planet earth and mankind so big, that we can not exaggerate the importance of operating within a straight-forward-looking think-tank. It is sad to say, but both major parties do not have such a great track record when it comes to oil, and using the issue only as a tool in the intra-party debate will not help us.