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Are the Right Issues Debated? Speaker Says No

Price Reverberates Through Politics

Amy Myers Jaffe, speaking to the All-Convention Luncheon in Dallas, not only presented her synopsis on a looming oil crisis, but warned that geopolitical issues could lead to a déjà vu of the energy crises of 1973 and 1979.

Those crises precipitated frantic lineups at gasoline pumps, panicked the American public and led to the introduction of smaller, more energy efficient vehicles across the nation.

Today, however, the pendulum has swung back, with a large percentage of Americans driving gas thirsty sport utility vehicles.

That's a sign, Myers Jaffe suggested, that the lessons of the oil crises in America have been forgotten during the intervening 30 years. She added, tongue-and-cheek, that a paper she wrote as an eighth grader on the 1970s oil crisis could be dusted off and published today in a learned journal.

In a sobering message, she said that while energy consumptive Americans are a large part of the problem, they nonetheless represent part of the future solution.

"In the United States, we have a tendency to externalize oil problems," she said. "We ought to look in the mirror, because the problem is us."

And she pointed to the serious consequences of not having a national energy policy: "The U.S. Senate is a group of people who can't even pass an energy policy."

Provoking thought and discussion amongst the audience, Myers Jaffe asked: "Do we really want to be in exactly the same place again in 30 years?"

Myers Jaffe is an associate director of Rice University's energy program, and a Wallace Wilson Fellow for energy studies at the James A. Baker III Institute for Public Policy at Rice University. An expert in Middle East oil geopolitics, she recently contributed to the joint Baker Institute/Council on Foreign Relations task force on the Guiding Principles for the U.S. Post-Conflict Policy in Iraq.

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All-Convention Luncheon speaker Amy Myers Jaffe: " ... We have a tendency to externalize oil problems. We ought to look in the mirror, because the problem is us."

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Amy Myers Jaffe, speaking to the All-Convention Luncheon in Dallas, not only presented her synopsis on a looming oil crisis, but warned that geopolitical issues could lead to a déjà vu of the energy crises of 1973 and 1979.

Those crises precipitated frantic lineups at gasoline pumps, panicked the American public and led to the introduction of smaller, more energy efficient vehicles across the nation.

Today, however, the pendulum has swung back, with a large percentage of Americans driving gas thirsty sport utility vehicles.

That's a sign, Myers Jaffe suggested, that the lessons of the oil crises in America have been forgotten during the intervening 30 years. She added, tongue-and-cheek, that a paper she wrote as an eighth grader on the 1970s oil crisis could be dusted off and published today in a learned journal.

In a sobering message, she said that while energy consumptive Americans are a large part of the problem, they nonetheless represent part of the future solution.

"In the United States, we have a tendency to externalize oil problems," she said. "We ought to look in the mirror, because the problem is us."

And she pointed to the serious consequences of not having a national energy policy: "The U.S. Senate is a group of people who can't even pass an energy policy."

Provoking thought and discussion amongst the audience, Myers Jaffe asked: "Do we really want to be in exactly the same place again in 30 years?"

Myers Jaffe is an associate director of Rice University's energy program, and a Wallace Wilson Fellow for energy studies at the James A. Baker III Institute for Public Policy at Rice University. An expert in Middle East oil geopolitics, she recently contributed to the joint Baker Institute/Council on Foreign Relations task force on the Guiding Principles for the U.S. Post-Conflict Policy in Iraq.

She described the disconnect in public attitudes in the United States: Americans want cheap domestic energy sources but don't want oil and gas drilling or liquefied natural gas terminals in their communities.

She said the AAPG membership has a significant role to play in the process of public education and awareness building, of dispelling the NIMBY ("not in my backyard") response by the general public.

AAPG should focus on the importance of a strong domestic industry, she said, and should highlight the technological breakthroughs that make drilling safer and lessen the environmental footprint of oil and gas operations.

"Our nation's geologists are a brain trust that can be tapped to enhance public understanding of the importance of a strong domestic industry," she said. "There is no question that the United States should be doing more exploration at home. We have vast resources that could be brought to bear to lower energy costs for all Americans, especially natural gas resources that lie off the coast of Florida, off the East Coast and in the Rocky Mountain areas."

Challenge the Paradigms

Myers Jaffe challenged AAPG members to question several paradigms, chief amongst them the assertion that Americans should have access to cheap oil.

"We cannot understand the oil world today unless we understand a fair price for oil," she said. "Three dollars per gallon for gasoline is cheap compared to Europe. The long-term trends in the United States will eventually marry itself with those in Europe."

In today's global marketplace — driven by the free trade of goods and services — Myers Jaffe questioned why oil should be treated differently than any other commodity.

"One-third of the world's population (or 1.8 billion people) lives with no modern energy services (electricity) so that 10 countries can have a high standard of living," she said, showing the audience a "map of global energy poverty."

The developing nations are questioning the paradigms embraced by the developed nations, she said, asking: "Why should our economies stand still so yours can grow?"

"We're not debating the right issues," she said of the geopolitical factors affecting global oil prices. "The U.S. needs to go back to its lies; OPEC needs to go back to its lies. We need open access to energy policy so that more than 10 countries can prosper."

Myers Jaffe presented a scenario for a sustainable future for the entire international community that was predicated on a fair price for oil. She laid out a theoretical road map to create a sustainable future for Iraq's oil production — a permanent government with an elected representative body empowered to establish a natural resources policy.

"Iraq's national oil industry must have clear authority to make investments and have access to funds to invest in oil field refurbishment and enhancement," she said. "This requires the creation of a national budget. Longer term, a national resources law is needed if the country wants to solicit foreign investment.

"The U.S. and the United Nations have an obligation to do the thing properly," she added. "They have to define the role of the state, of the oil ministry and set up independent oil and gas regulators."

And she was adamant that the introduction of petroleum laws in developing nations include a framework of environment, health and safety laws.

"The system in Iraq should be set up to the best international best practices," she said. "What's the point of being 30 years behind the world's standards?"

Working Smarter

AAPG member Tom O'Connor echoes Myers Jaffe's comments on the importance of building environment, health and safety legislation into a modern oil and gas regulatory regime.

O'Connor, an international petroleum management adviser, is one of three editors of the AAPG Special Publication, International Oil and Gas Ventures — A Business Prospective.

"It's completely unacceptable for oil companies to enter into the developing world and muck up the place in ways that would not be acceptable in their home neighborhoods," O'Connor said. "Shell is trying to deal with that issue right now in Nigeria."

However, O'Connor, the former principal petroleum engineer of the World Bank, approaches these issues pragmatically: "The Russian Federation has some of the best environmental laws and regulations in the world," he commented, "yet the place remains a mess because there are no effective regulatory compliance mechanisms."

O'Connor attended the Dallas meeting with guest Chaman Shah Ahmady, the chief of Afghanistan's Department of Oil & Gas Assessment and Contracts & Projects. Afghanistan is attempting to reorganize its oil and gas sector — despite ongoing battles with the Taliban — to attract foreign investment dollars.

Ahmady, he said, was educated in Romania, and has traveled extensively throughout the Eastern Block and the Former Soviet Union but had never visited the West before, let alone participated in an professional meeting like the AAPG session in Dallas.

"It was amazing to watch his transformation from day one to the day he left," O'Connor said. "His English got better."

O'Connor agrees with Myers Jaffe that Americans need to change their paradigms on access to energy — "but, you cannot be prescriptive," he added. "You can't tell people what to do. Over time, you can present issues and a series of options with associated costs."

Despite the fact that many American E&P firms had left the continental United States, he said, "There's plenty of hydrocarbons in the United States — it's just a question of cost."

O'Connor also called for a domestic energy policy that would meet the nation's future demands.

O'Connor said that OPEC stopped being a cartel during the 1970s oil crises, with the emergence of Alaskan North Slope and North Sea oil.

"As a cartel, it's been difficult to police," he said. "Many OPEC countries are actively trying to dodge the quota system."

O'Connor described OPEC instead as a "blunt tool" to increase and decrease production that has little control over the global market." OPEC controls only 25 of the 75 million barrels sold in the marketplace daily, he said.

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