Putin Preaches Energy Security

July 1, 2013 § 1 Comment

In a recent news report President Putin of Russia defends current pricing of natural gas.  One expects self-interest to play roles in the voicing of opinion by country leaders.  But really, invoking buyer energy security to support the Russian position is rather specious.  Russia dominates gas supply to most of Europe, especially southern Europe.  Countries such as Greece are completely dependent.  Their energy security would be enhanced by alternative sources not increased reliance on Russia.

Putin was defending two different, albeit related, Russian stances.  One is the need for take-or-pay long term contracts.  Expensive pipelines require these to justify the investment.  Not indefinitely, though; after the amortized lifetime the argument is weak.

The second issue, pegging the contract terms to the price of oil, is indefensible.  Back in the days when oil and gas had pricing parity on the basis of energy content, this made sense.  Today, with oil anywhere from twice to five times more expensive than gas, pegging to oil gives the gas producer an advantage.  It creates absurd situations such as in India, where imported LNG, pegged to oil, is priced at over $15 per MMBTU, while domestic producers are allowed to sell gas for only $4.20.  Furthermore, all current models indicate that gas price will rise modestly compared to oil prices.  In Europe, gas contracts probably ought to be pegged to landed LNG prices, this being the only serious alternative to Russian gas.

Vikram Rao

What Happened to Global Warming?

May 14, 2013 § 10 Comments

In a recent issue of the Economist is the disturbingly interesting report that in the last decade or so the carbon dioxide emitted was according to predictions but the temperature remained flat.  Between 2000 and 2010 the world added about 100 billion tonne of CO2, but the five year running average of temperature remained flat over the same period.

Global temperature rise

This needs some serious explanation.  That reduced emissions are generally good for us is not in question.  But the models quantifying this ought to be robust if we want the general public energized.  There is nothing robust about the model in the indicated period.  Continued emphasis on energy efficiency is certainly warranted.  This delivers both economic benefit and reduction in emissions.  But the more costly carbon sequestration suggestions may now come under greater scrutiny.

Vikram Rao

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