Energy Contradictions Continue
We’ve written about the insidious, unintended, consequences of dramatic and inflexible subsidies, nowhere more n evidence than the MidEast, where sub $1 natural gas, sub nickel water and power costs, while well intentioned for the masses, are proving untenable over the longer term. Add to this the social unrest which argues against subsidy reform at this time, and some forecast that the Middle East Entitlement Program (by another name) is even more dangerous than the United States.’ An example is the study which suggests that, left in place, the ‘breakeven’ price of oil for Saudi Arabia, currently $84/bbl (including all subsidies), will exceed $300/bbl by 2030. (MEES, August 15, 2011). On the assumption that the rest of the world will probably substitute for oil at much lower prices, the prospects for train Wrecks in both the US and Saudi (different reasons, or one causing the other!) come into focus.
And, in this month’s version of “UAE, Jordan, considering importing coal,” two new signs of unsustainable energy policies in the region. Dubai authorities have ordered the freezing of electricity prices at 1-2 cents/kwh, while imposing a program to “curtail demand.” Reporters note that residents routinely leave air conditioning on around the clock, and that Dubai has twice the carbon intensity per capita of the US. Separately, Bahrain is evaluating the purchase of oil-linked LNG ($12-16/mmcf), from Shell, for domestic resale/use at $1.50/mcf (roughly 2 cents/kwh variable cost for power). Hello?