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Gazprom, the Russian gas company, is six times bigger than Royal Dutch Shell

The Wichita Eagle

Expert shares views on energy, politics

BY DAN VOORHIS

Michael Economides counts himself both a liberal Democrat and a big proponent of offshore drilling.

Economides, a University of Houston professor and internationally known energy expert, really considers himself a realist about world energy and energy politics.

He presented to members of the Kansas Independent Oil and Gas Association earlier this week his analysis of how energy affects geopolitics and vice versa at the association’s annual meeting in Wichita.

The key long-term issue, he told members, is that demand for energy is growing and neither conservation nor alternative sources will curb world need for oil and gas.

That’s because energy use correlates with standard of living, he said: The amount of energy used is what separates rich countries from poor ones.

And anyone who suggests policies that tinker with the U.S. energy supply should be careful.

“We need to be very concerned when people get cavalier about the country’s energy supply,” he said.

Long-term, the price of oil will stay over $100 a barrel, he said, because of Vladimir Putin.

The Russian prime minister understands better than anyone the connection between energy and political power.

Russia has excess oil and gas and by controlling that excess can keep prices high.

The current conflict in Georgia is a perfect example, Economides said. During the invasion, the Russians bombed the pipeline carrying natural gas from the country of Azerbaijan to the West, knocking out a key competitor.

He estimated that supply and demand contribute $50 to the price of a barrel of oil.

The political ambitions of producers, such as Putin, Venezuela’s Hugo Chavez and Iran’s Mahmoud Ahmadinejad, add another $30 per barrel. Environmental rules add another $30.

Above that price level is what Economides calls “the fear factor” by oil traders and consumers.

It’s definitely not the fault of Big Oil, he said. Their reserves are falling.

Gazprom, the Russian gas company, is six times bigger than Royal Dutch Shell, he said.

“Our biggest challenge is to diversify our sources,” he said.

In the shorter term, he said, if the U.S. could increase its oil supplies by 1 or 2 percent, it would cut oil prices by $50 a barrel, he said.

Conservation isn’t much of a solution to America’s high energy prices, he said, because America would immediately expand its economy to consume the extra amount.

Alternative energy such as solar and wind is too expensive to ever capture more than a small slice of the market.

And corn-based ethanol, he said, is a “scam” because of its high costs to make. And cellulosic ethanol may be great, but it doesn’t exist yet.

The solution, he said, is more drilling offshore and in the Arctic National Wildlife Refuge.

“I consider myself a liberal Democrat,” he said, after the speech. “That’s the irony.

“Energy and energy abundance should be a populist issue, not relegated to the right-wing fringes of the Republican Party.”

Reach Dan Voorhis at 316-268-6577 or [email protected].

http://www.kansas.com/623/story/501152.html

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