Sunday, October 22, 2006

Electricity blackouts are the wave of the future

"Demand for electricity will go up 19 percent, but power capacity will go up 6 percent"

17 October 2006: The North American Electric Reliability Council,
an organization funded by the power industry issued a grim report.

"The adequacy of North America's electricity system will decline
unless changes are made soon," said Rick Sergel, president and CEO
of the North American Electric Reliability Council. "Our economy and
quality of life are more reliant on electricity every day, yet the
operation and planning for a reliable and adequate electricity
system is becoming increasingly difficult. The transmission system
requires additional investment to address reliability issues and
economic impacts. Expansion and strengthening of the transmission
system continues to lag demand growth and expansion of generating
resources in most areas."

Today, the US power grid - three interconnected grids made up of
3,500 utilities serving 283 million people - still hangs together by
a thread. The slightest glitch on the transmission superhighway
could upset the smooth distribution of electricity over thousands of
miles of transmission lines and darken states from Ohio to New York
in a matter of seconds, bringing hospitals and airports to a
standstill and putting an untold number of lives at risk.

Since the 2003 blackout, neither the Bush administration nor
federal energy regulators appointed by the president have developed
a comprehensive plan to handle, at the very least, the annual
increase in demand. As a result, blackouts will likely become more
frequent in areas like New York and New England, NERC said in its
For the most part, power companies maintain grid reliability by
following voluntary guidelines designed by the power industry.

The neglect of the nation's transmission grid will likely have
long-term repercussions, as demonstrated by the dozens of scattered
blackouts in the month of July throughout the nation this summer -
one of the hottest on record. Since July, all seven of the country's
regional grid operators that monitor power flow throughout the
nation reported record electricity consumption as temperatures
increased. Blackouts struck many parts of the country during the
month of July, not because of a shortage of supply, but because the
dilapidated power grid could not handle the amount of electricity
that was sent back and forth across the transmission lines.

In fact, severe power shortages and rolling blackouts will now
become a daily occurrence around the country over the next few
years, according to NERC, because the antiquated power grid will be
continuously stretched beyond its means - mainly a result of
electricity deregulation, whereby power is sent hundreds of miles
across the grid to consumers by out-of-state power companies instead
of being sent directly to consumers by their local utilities, which
is what the grid was designed for.

While deregulation has proven to be a disastrous experiment, on
the power supply front, the situation is even worse, particularly
for the Northeast, Midwest, and Western United States, according to
the NERC report,.

"Demand for electricity is expected to increase over the next
ten years by 19 percent in the U.S., but confirmed power capacity
will increase by only 6 percent," the agency stated in its
report. "Capacity margins are projected to drop below minimum target
levels in Texas, New England, the Mid-Atlantic area, the Midwest,
and the Rocky Mountain area, in the next two to three years, with
other portions of the Northeastern U.S., Southwest, and Western U.S.
falling below minimum target levels later in the period. In Canada,
projected margins are adequate except in Western Canada, where
additional resources will be needed as soon as 2008."

Congress called for spending of up to $100 billion to reduce severe
transmission bottlenecks and increase capacity so the transmission
lines could carry additional electricity from power plants to homes
and businesses. But the money that would have funded a reliable
power grid was spent on the wars in Iraq and Afghanistan.

The US/UK takeover of Iraqi Oil

16 October 2006: (snip) Both independent analysts and officials
within Iraq's Oil ministry anticipate that when all is said and
done, the big winners in Iraq will be the Big Four - the American
firms Exxon-Mobile and Chevron-Texaco, and the British BP-Amoco and
Royal Dutch-Shell - that dominate the world oil market. Ibrahim
Mohammed, an industry consultant with close contacts in the Iraqi
Oil Ministry, told the Associated Press that there's a universal
belief among ministry staff that the major U.S. companies will win
the lion's share of contracts. "The feeling is that the new
government is going to be influenced by the United States," he said.

During the twelve-year sanction period, the Big Four were forced
to sit on the sidelines while the government of Saddam Hussein cut
deals with the Chinese, French, Russians and others (despite the
sanctions, the U.S. ultimately received 37 percent of Iraq's oil
during the period, according to the independent committee that
investigated the Oil-for-food program, but almost all of it arrived
through foreign firms). In a 1999 speech, Dick Cheney, then CEO of
the oil services company Halliburton, told a London audience that
the Middle East was where the West would find the additional fifty
million barrels of oil per day that he predicted it would need by
2010, but, he lamented, "while even though companies are anxious for
greater access there, progress continues to be slow."

And Iraq's oil sector is largely undeveloped. Former Iraqi Oil
Minister Issam Chalabi (no relation to the neocons' favorite exile,
Ahmed Chalabi) told the Associated Press that "Iraq has more oil
fields that have been discovered, but not developed, than any other
country in the world." British-based analyst Mohammad Al-Gallani
told the Canadian Press that of 526 prospective drilling sites, just
125 have been opened.

But the real gem - what one oil consultant called the "Holy
Grail" of the industry - lies in Iraq's vast Western desert. It's
one of the last "virgin" fields on the planet, and it has the
potential to catapult Iraq to number one in the world in oil
reserves. Sparsely populated, the Western fields are less prone to
sabotage than the country's current centers of production in the
North, near Kirkuk, and in the South near Basra. The Nation's Aram
Roston predicts Iraq's Western desert will yield "untold riches."

The execs from Big Oil didn't just want access to Iraq's oil; they
wanted access on terms that would be inconceivable unless negotiated
at the barrel of a gun. Specifically, they wanted an Iraqi
government that would enter into Production Service Agreements
(PSAs) for the extraction of Iraq's oil.The war-torn country stands
to lose up to $194 billion vitally important dollars in revenues on
just the first 12 fields developed, according to a conservative
estimate by Platform.

PSAs often have long terms - up to 40 years - and
contain "stabilization clauses" that protect them from future
legislative changes. As Muttit points out, future governments "could
be constrained in their ability to pass new laws or policies." That
means, for example, that if a future elected Iraqi
government "wanted to pass a human rights law, or wanted to
introduce a minimum wage [and it] affected the company's profits,
either the law would not apply to the company's operations, or the
government would have to compensate the company for any reduction in
profits." It's Sovereignty Lite.

What is clear is that the future of Iraq ultimately hinges to a
great degree on the outcome of a complex game of chess - only part
of which is out in the open - that's playing out right now, and oil
is at the center of it.

Erik Leaver, a senior analyst at the Institute for Policy Studies
in Washington, told me that wrangling over the distribution of
Iraq's oil wealth is "definitely causing problems on the ground" but
the entire topic is taboo in polite DC circles. "Nobody in
Washington wants to talk about it," he said. "They don't want to
sound like freaks talking about blood for oil." At the same time, a
recent poll asked Iraqis what they believed was the main reason for
the invasion and 76% gave "to control Iraqi oil" as their first

We do know a few things about Dick Cheney's now infamous Energy
Taskforce thanks to documents obtained by the conservative legal
group JudicialWatch. As Mark Levine wrote in The Nation($$):

… a map of Iraq and an accompanying list of "Iraq oil foreign
suitors" were the center of discussion. The map erased all features
of the country save the location of its main oil deposits, divided
into nine exploration blocks. The accompanying list of suitors
revealed that dozens of companies from thirty countries-but not the
United States-were either in discussions over or in direct
negotiations for rights to some of the best remaining oilfields on

Also according to The New Yorker, at the same time, a top-secret
National Security Council memo directed NSC staff to "cooperate
fully with the Energy Taskforce as it considered melding two
seemingly unrelated areas of policy." The administration's national
security team was to join "the review of operational policies
towards rogue states such as Iraq, and actions regarding the capture
of new and existing oil and gas fields."
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