Crosspost: SPS and $87 billion

--- In ssi_list@yahoogroups.com, "Charles F. Radley"
> The fact that the USA is going to spend $87 billion to secure their
> energy supplies in the Middle East speaks volumes.
>
> $87 billion is "real money" (you know, a billion here, a billion
> there...etc)
>
> For that kind of money, we can certainly build a system of solar
> power satellites, with all the inherent advantages that has over
> importing oil.
>
> The only question remaining now is, for $87 billion, how many SPSes
> can we build, and how long will it take to get them online ?

First off, it's nice to see you posting again. Welcome back.

It's interesting that you raised this question for I've been
thinking about this very issue recently.

As you and I have both noted in the past, our oil dependancy, US
military spending, Mid-East stability, US presence in the Mid-East,
and Islamic threats to the West are all linked together.

Let me deconstruct the logic chain for those who are just joining
this dialogue.

Let me first address the issue of the oil dependency relationship by
looking at the economics and trade flows. Today's price of North Sea
Brent Crude Oil is $28.60 per barrel.
http://www.wtrg.com/daily/brentcrudeoilprice.html

The World's largest petroleum exporters are
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.html

Between them, Saudia Arabia, Iran, United Arab Emirates, Kuwait,
Iraq, Algeria and Libya export 17,150,000 barrels of oil per day.

Their export earnings from the oil industry amount to $179 billion
dollars per year.

In 2002, the US imported 19.8% of its oil from Persian Gulf States,
down from 23.3% in 2001 (slowdown in the economy most likely
accounts for the reduction.)
http://www.eia.doe.gov/emeu/aer/txt/ptb0504.html

Total US imports of oil amounted to 10.6 million barrels per day.
http://www.eia.doe.gov/emeu/cabs/topworldtables3_4.html

In other words, the US contributed $21.9 billion towards the $179
billion the Mid-East countries earn from their oil exports.

You may have noted that I'm not referencing the oil that is imported
from non Mid-East countries. Of course that oil further exacerbates
the West's oil dependency but that dependency isn't AS TIGHTLY
LINKED to the need for US militrary predominance, Mid-East
instability, terror threats to the West and the need to find oil
substitues as is the dependency on Mid-East oil.

While the US may be one of the largest per capita users of oil, they
are not the most dependent on imported oil. These figures capture
the situation as it existed in 2001: Japan, South Korea and France
are all 100% dependent on imported oil, Germany is 96% dependent,
India 65%, the US 55%, China 33%, Brazil 25%, while Russia and
Canada are completely import independent in their oil consumption.
http://www.networkideas.org/news/mar2003/World_Oil_Market.pdf

Current Total World oil consumption is about 75 million barrels/day.
http://www.ott.doe.gov/facts/archives/fotw266.shtml

The current proven reserves (including Canada's extensive Tar Sands)
are about 1,212 billion barrels.

Thus we have extractable oil for about 44 years, but that's not
accounting for growth in demand, nor growth in reserves.

It would be irresponsible to neglect to factor in the rapid
industrialization of the Far East, with particular attention focused
on China.

China has been the economic driver for increasing world oil demand
this past year.

"Global oil demand, meanwhile, was "broadly flat," BP said,
increasing 290,000 bpd to 75.7 mm bpd from 75.5 mm bpd. "All of the
increase is attributable to China where oil consumption increased
5.8 % or 332,000 bpd"

"China, meanwhile, accounted for 68.5 % of the increase in global
primary energy consumption in 2002 and has become a "major energy
consumer and importer," according to BP's report. "Consumption of
coal, which accounts for 66 % of Chinese energy use, grew a massive
27.9 %. Oil consumption increased 5.8 %, or 332,000 bpd, accounting
for all of the world's oil consumption growth in 2002," BP reported,
adding, "China replaced Japan as the world's second largest oil
consumer."

"Coal was "the fastest growing fuel in 2002," BP said, with
consumption of the fuel rising 6.9 % during last year. This increase
was "on the strength of an extraordinary reported increase in China
of 27.9 %," BP said. Excluding China, world consumption of
coal "increased just 0.6 %," BP said. Nuclear power demand,
meanwhile, rose 1.5 %, "with most of the increase coming in Asia,"
BP said. "World consumption of hydroelectric power increased 1.3 %
from 2001 but was still less than in 2000," the report said,
adding, "Nuclear and hydroelectric power each account for about 6 %
of total world energy consumption."

http://www.gasandoil.com/goc/features/fex32825.htm

Recall that China currently imports only 33% of its oil needs. It
has 18.25 billion barrels of reserves. It is now the world's second
largest consumer of oil, and the world's largest consumer of coal.
It's economy is growing at a rapid clip and so too is the demand for
energy intensive lifestyles. As China grows wealthier it's demand
for oil will grow beyond its ability to tap its own reserves and
thus it will increasingly be looking to the Middle-East for its
supply.

Note that in 2001 China burned more coal per year (1.382 billion
short tons), and has for all of the 1990s (that's as far back as
these statistics go) than the US (1.06 billion short tons), or all
of North America (1.147 billion short tons) or the rest of Asia
(1.014 b.s.t.) and nearly as much as all of Europe and Russia
combined (1.483 b.s.t.).

http://www.eia.doe.gov/emeu/iea/table14.html

Before I turn to the other factors, consider what China's rise means
for oil prices in the future, what it's extensive use of coal means
for greenhouse gases, and what this future demand for oil will mean
for export earnings for the Mid-East countries.

Now I'd like to turn the discussion over to the topic of Mid-East
instability.

Each of the Middle-East countries mentioned above has a repressive
government and a citizenry that lacks freedom, opportunity and
economic vitality and under such conditions zealotry and
revolutionary activities become a viable substitute for goals and
activities that we in the West follow. Here we seek a better life
through education, political involvement and career. If youth access
to education was limited, or the education was channeled through a
Madrassa which limited its scope to the strict study of the Koran,
the advancement that following the route of education allowed would
be limited.

If a better life is sought by involving oneself in the polity then
there would be hope for a better tomorrow, but unfortunately that
route has also been curtailed in the countries mentioned above.

How about career advancement and economic enrichment? The economies
of the Middle East are in a shambles. Consider:

". . . many of the so-called 'oil-rich states' are rich in very
little else. Crude oil is their only export, making them uniquely
vulnerable to world oil prices."

"So when prices fell to $10 a barrel in 1998, it had a devastating
effect on their economies."

http://news.bbc.co.uk/1/hi/business/689609.stm

Consider the case of Libya, which has OPEC's highest ratio of oil
exports as a percentage of total exports, at 97.26%, followed by
Kuwait - 92.4%, Iran - 89%, Saudia Arabia - 86.24%, Nigeria -
82.53%, Iraq - 79.7%, Venezuela - 74.06%, Qutar - 67.96%, Algeria -
61.62%, United Arab Emerates - 54.13%, and Indonesia 16.35%.

http://www.networkideas.org/news/mar2003/World_Oil_Market.pdf

When was the last time that you turned over a product and saw "Made
in Saudia Arabia" imprinted on it, or used a drug researched and
developed in Libya, or were entertained by a cultural export from
Kuwait?

All told, Libya earned $12,213,630,000 from oil exports (1.17
million barrels/day * 365 days/year * $28.60/barrel).

This $12.213 billion accounted for 97.26% of its total export
earnings. The remainder of its economy exported just $344,081,000.

Now factor in the population time bomb that the Mid-East is facing
and you have a very dysfunctional region of the world.

http://www.csis.org/stratassessment/reports/demograp.pdf

The world as a whole, at current growth rates, will double its
population in 46 years. The developing world will double in 37
years. The countries of the Middle East: Algeria - 29; Bahrain - 27;
Egypt - 31; Iraq - 24; Jordon - 27; Kuwait - 30; Lebanon - 34;
Libya - 31; Oman - 14; Gaza & West Bank - 16; Qatar - 43; Saudia
Arabia - 23; Syria - 28; United Arab Emirates -36; and Yemen - 22.

The developed world's population will double in 162 years!

The region is in the midst of economic stagnation. Consider:

"For generations, Arab regimes squandered enormous wealth generated
by oil, tourist sites, and strategic ports and waterways, and now
the countries lack the modern institutions needed to absorb a
growing legion of jobless and increasingly restless youths."

"Unleashed into a shrinking job market, they inhabit a near-stagnant
economy that is growing three times slower than its population."

"The rest of the world largely avoids doing business with the Middle
East. Foreign direct investment in the region is less than half the
global average. In Egypt, exports account for about 8 percent of
gross domestic product compared with 15 percent for Mexico and
Thailand and 44 percent for South Korea."

"With 60 percent of its population under the age of 24, the region
faces a looming unemployment crisis. According to the World Bank
report, the average Arab jobless rate, at 15 percent, has doubled in
the last two years and is now among the highest in the world."

"Rather than aggressively pursuing privatization, say economists,
Egypt is expanding the public payroll as an employer-of-last-resort
for its ballooning population."

"There are 7 million civil servants in Egypt, and the government is
still recruiting," said Heba Handoussa, managing director of the
Economic Research Forum, a Cairo think tank. "Payrolls have not been
reduced, and I'm sure they have increased.""

http://www.boston.com/business/globe/articles/2003/08/24/land_of_econ
omic_unrest/

Consider how demographic trends, dependency on oil exports, lack of
economic diversity, limited educational opportunities, and lack of
political freedom combine to form societal dysfunction and a threat
to the West.

Consider that the lack of opportunity often drives disaffected youth
into nationalistic or terrorist organizations. Often their goal is
to drive the infidel out of their lands and to institute pure
Islamic societies. This expunging of Western mores and ideals, and
the resultant isolation further exacerbates the economic decline of
the region, which in turns fuels resentment at their lot. As Bernard
Lewis has noted,

http://www.telegraph.co.uk/opinion/main.jhtml?
xml=/opinion/2002/05/03/do0301.xml

there currently exists a pervasive inferiority complex throughout
the Mid-East with resepct to the West. I have no idea how the Mid-
East can industrialize and develop their economies, take advantage
of their cheaper currencies when they will look upon that economic
bootstrapping process as being beneath them, of being subservient to
the West. Right now, the revenues from oil export are masking many
of the ills that befall these societies but the mask is becoming
increasingly transparent for the per capita income is falling as the
population growth rate rockets upward. There are simply not enough
jobs for the citizenry. These societies are a time bomb.

Further consider that technological advancement may render the bulk
of the Middle East economy no more valuable than Human Waste.

"At present it costs twice as much to produce as diesel fuel.
However the advantage is that, unlike the oil made in the Earth, the
supply of ingredients for this people-derived fuel will never dry
up."
http://news.bbc.co.uk/1/hi/sci/tech/768672.stm

Think about that for a second - your crap is now worth half the cost
of oil and when it reaches price parity, the economic output of 300
million people will be near worthless.

http://devdata.worldbank.org/external/CPProfile.asp?
CCODE=MNA&PTYPE=CP

Also consider all of the difficulties that Africa has to contend
with and realize that "Despite a difficult economic environment,
growth in Africa has averaged about 3 percent in the last fiscal
year, and well-managed countries which have implemented solid reform
agendas and built a record of stability and good governance had an
average growth of 4 percent."

http://www.worldbank.org/afr/countries.htm

and compare the above to the World Bank analysis for the Mid-East,
which states that "Economic growth for the region fell from 3.2
percent in 2001 to 2.5 percent in 2002, with continuing declines in
investor confidence, export market growth, and tourism."

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20040954~
menuPK:34480~pagePK:36694~piPK:116742~theSitePK:4607,00.html

Africa, with all of it's problems, has more economic vitality than
the Middle East! For those of you who are really curious, factor out
the oil revenue from the Gross Domestic Products of the Mid-East
countries and see what kind of economy is left standing.

If you're still reading at this point, you may be wondering what
this whole essay has to do with SPS and the $87.5 Billion
appropriation question that Charles started this thread with. Bear
with me for a little longer as I try to wrap it all up.

I contend that the US went into Iraq because it viewed Iraw as
either an immediate direct threat (W.M.D., Saddam's behavior, etc),
a long term threat (repressive regime, failed state, embittered
populace, terrorist spawning ground, etc) or as a means of
stabilizing a region via a domino principle in order to secure
stable oil supplies for the future for itself and for the rest of
the world. I think these positions wholly encompass the Iraq debate,
pro and con.

The point I'm driving at is that something had to be done, whether
or not you agree with what was done. If the war didn't transpire,
and Saddam remained, then we'd have to pay the piper some time in
the future, for the region is a quagmire. It may not have been Iraq.
Perhaps Iran or Saudia Arabia would have been the powder keg that
threatened world stabilty, whether in the form of a nuclear armed
Iran targeting Israel and then the Sunni's of Saudia Arabia, or the
fall of the House of Saud, and a strict Wahabbi regime taking its
place in Riyadh and cutting off contact and oil exports to the West,
the threat to us would still be real, and would have dire
consequences for the everyday Joe.

Consider the prospect of a nuclear armed Saudia Arabia.

"The Sunni Saudis have concluded that nothing will deter Shiite Iran
from continuing its quest for nuclear weapons. Pakistan, on the
other hand, is openly concerned about the recent armaments agreement
between India, its nuclear rival, and Israel, a long-time nuclear
power whose inventory is estimated at between 200 and 400 weapons.
Iran and India, located on either side of Pakistan, have also signed
a strategic agreement whose aim is regarded with suspicion in
Islamabad."

"To counter what Pakistani and Saudi leaders regard as a
multiregional threats, they have decided quietly to move ahead with
a two-way exchange -- free or cheap oil for nuclear know-how and
expertise."

"In their private talks, according to the United Press International
source, Abdullah and Musharraf also discussed the possibility of
Pakistan supplying troops, not to Iraq, but to the kingdom. Abdullah
can see that the world's largest oil reserves look increasingly
vulnerable over the next 10 years."

"To this day, the Saudi clergy continues to fund Pakistan's madrasas
that are a substitute for the country's non-existent national
education system. The only schools outside madrasas are expensive
private institutions. Pakistan, with a crushing defense burden, only
spends 1.7 percent of GDP on education (vs. 8 percent in India and
16.5 percent in the United States)."

"Some 12,000 Koranic schools provide free room and board to some
700,000 Pakistani boys (ages 6 to 16) where they are taught to read
and write in Urdu and Arabic and recite the Koran by heart. No other
disciplines are practiced, but students are proselytized with anti-
American, anti-Israeli and anti-Indian propaganda. By the time they
graduate, the majority is convinced that becoming a jihadi, or holy
warrior, is the only way to block America's alleged plans to destroy
Islam."
http://www.upi.com/view.cfm?StoryID 031020-115059-8319r

It is the last sentence in the above quote that provides the tie in
to the next point I wish to make.

The US in particular, and the rest of the West in general, has
chosen to engage with the Mid-East rather than disengage, because it
must do so in order to insure a reliable supply of oil.

The form of engagement is primarily of a military nature in order to
insure stable, though despicable, regimes, who in turn insure a
steady supply of oil.

The $87.5 billion that the US is commiting to Iraq for THIS YEAR, is
far out of proportion to the amount of oil it imports from the
region as a whole, recall from above, that amounts to a total of
$21.9 billion, just shy of a 4x premium. Does this look like a cheap
tactic to secure oil for the US? No, but it is securing oil for the
world as a whole, which includes the free riders of China and Europe.

This military presence in Iraq and the whole campaign has spawned
retribution from the Islamic terrorists who are taught to believe
that America is out to destroy Islam.

Now, in light of all of the above, do you really think that the
price of gas at the pump is the REAL cost of gas that you are paying?

The only reason that a policy of engagement is being followed is
that the region has oil that we need. If we didn't need that oil,
who really thinks that America would be as deeply involved in the
region? I don't.

I do hope that sooner, rather than later, a policy of disengagement
will be developed that will be centered on a national security
premise of energy independence. I'm certain though, that this policy
will come later rather than sooner because trying to squeeze
incremental improvements from the status quo is an easier task, and
a more obvious policy choice, than redesigning the energy policy and
infrastructure of a modern, industrialized society. But it will
happen for the powder keg that is the Middle East will make the
changing of the status quo a more appealing option as the region
becomes more and more unstable and security of energy supply will
require greater sacrifices of blood and treasure.

Now rather than paying the $87.5 billion tax for THIS YEAR, what if
that was expended on developing CATS, developing orbital
infrastructure, developing SPS, creating markets in orbit? These
tasks couldn't be financed on just $87.5 billion, but if you think
that the US will be finished with it's Iraq commitments after this
expenditure, that no part of the military budget goes to insuring
stable and secure shipping lanes, foiling terrorist threats, and
stabilizing regimes with oil to sell, then I'd like to hear your
case for that position.

The status quo with respect to the Middle-East is throwing good
money after bad; at least with orbital development, we would have
energy independence, could develop a hydrogen economy through the
electrolysis of water, rather than the chemical process of
extracting hydrogen from natural gas and then having to deal with
carbon sequestration, we'd get the benefits that derive from volume
with respect to launch activities which in turn would lower the
price threshold for now marginal space activities. Further, we'd get
orbital resource development which I hope would be self-sustaining
after it reaches some "ignition point" of critical mass of volume of
resources used and the diversity of actors using them.

Lastly, we could use the cheap electricity to synthesize Human waste
to produce oil and then completely disengage from involvement with
the Middle East. Of course, no one really suspects that this would
molify the region, for even though they'd be left to engage with the
West on their own volition, we'd still be looked upon as the cause
of their dysfunction by our very act of disengagement but at least
we wouldn't be held hostage to engagement, nor would we have to
dedicate significant military and budgetary resources to securing a
stable oil supply for the entire world.

TangoMan

PS, below are a few sources that I wanted to work into this post but
forgot about and I don't want to edit the above to make their
inclusion cohesive.

If you're interested please take a look.

US transportation network analysis of trains vs. planes as a
comparison to Europe and to PARTIALLY explain higher US per capita
oil consumption figures.
http://avoyagetoarcturus.blogspot.com/2003_10_01_avoyagetoarcturus_ar
chive.html#106592169754609424

Oil Outlook for the Future
http://www.eia.doe.gov/oiaf/ieo/oil.html