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Oil and world power
Book reviews OIL AND WORLD POWER by Peter R. Odell
248 pages, 60p, $2.50, Penguin Books, 3rd edition 1974 Professor Odell has brought this compact handbook up to date quickly and effectively, with a new chapter on 'The World of Oil Power in 1974'. He completed the revision last March; up to late September it had not been overtaken by any radical change in the pattern of events he was seeking to interpret. Certainly nothing had occurred to disturb his view of the world oil industry. That view is determinedly idiosyncratic. But Professor Odell could now fairly claim that some elements in the conventional views that he attacks have since been altered a little towards his own. Forecasts and hopes in Brussels about European energy, in particular, have been modified since he wrote. Planners there now hope that 1985 energy consumption in the Community can be held 10% lower than earlier forecasts, and total import dependence down to about 42%. This is still a long way short of Professor Odell's 'European Project Energy Independence 1985', seeking a cut of 15% in West European consumption and less than 20% of imported energy. But these conventional projections have had to change a good deal more than his own. In one sense, also, these official 'objectives' are more uncertain than his. Professor Odell, for some years now, has based his alternative 'energy policy option' for Europe upon greatly increased optimism about the North Sea than any government or oil company involved with petroleum development there will express. (There too, the conventional estimates of reserves and potential production of oil and gas have risen steadily, though remaining far
344
short of his own.) Nobody can know whether that optimism will eventually be justified. Governments could hardly base surprise-free scenarios for policy on it. But Professor Odell has at any rate set out his assumptions clearly, and of late elaborated them mathematically with the help of colleagues at the University of Rotterdam. His data are admittedly inadequate. Some experts from major oil companies have scornfully dismissed such optimism. But the crucial data that might settle this argument-relating notably to the 'up-dating' of known petroleum reserves- can be possessed only by such companies; and so far they have not opened the records. So Professor Odell's optimism, misplaced or not, is at least confidently based upon his own analysis. It is rather doubtful whether the new objectives recently adopted in Brussels are based on any real confidence at all. Professor Odell's optimism about new oil production potential for oil importers as an alternative to OPEC oil extends beyond Europe. He believes this can be built up both on and around Japan's continental shelf and in new exporting areas. These he characterises as 'countries which are unlikely to want to join the OPEC cartel and whose attitudes to the pricing and development of their oil and gas resources will be very different from those of the member countries of the producers' club'. Here his optimism verges on the naive. Your reviewer is a consultant much of whose activity in recent years has been concerned with the governments of countries hoping to develop oil, either to save imports at home or for export. In not one of these has he ever encountered any of those different attitudes towards oil exporting that Professor Odell hopes for. Nor would it be wise for OECD importers to count on them. The moment commercial oil production is achieved in any new country,
governmental attitudes and appetites alter, and very understandably. Whether they want to join OPEC or not is beside the point. They too want whatever windfalls it may bring them. This book also argues for a measure now becoming more popular in some importing countries, such as France: rationing oil and some other energy in order to cut back consumption faster than might be done by price elasticity. Professor Odell faces the implications of this argument more bluntly than most governments h a v e - i n particular, that it would involve a considerable reduction in the role of the automobile in private and public transport, and a much slower growth in air transport. He accepts the restraints on freedom of choice and changes in social values that such energy rationing would involve. He does not take sufficiently explicit account of the economic effects and technical time-lags it would also involve- as for example when he writes of 'the immediate replanning and restructuring of the [electricity] supply and distribution system' to avoid the losses of primary energy input involved in centralised generation. Politically, Professor Odell's analysis of international oil developments in the last few years postulates 'OPEC/oil company collusion... with the positive encouragement of the United States.' The USA, he argues, 'deliberately initiated a foreign policy which aimed at getting oil-producing nations' revenues moving strongly up by talking incessantly to the producers about their low oil prices and by showing them the favourable impact of much higher prices.' He does not cite any of this incessant talk in evidence or say when and where it is supposed to have happened. Because of this collusion (which he feels later got out of control because the OPEC governments realised they could control the
ENERGY POLICY December 1974
Book reviews business alone), he doubts whether the international companies could be trusted to co-operate in the European energy policies that he feels are necessary. As he sees it, after all, these companies 'had the o p t i o n on the basis of some pretext or another - of ensuring that [gas production in Europe] was held back'. and may in future 'choose to sit on the bulk of the new reserves' of petroleum they discover in Europe and elsewhere. (The Dutch, Norwegian and British governments may be absolved from any responsibility here.) His distrust of the companies makes him feel that Europe needs something on the lines of the French domestic oil regime, under a European Oil and Gas Commission. Conspiracy theories of history are always in one sense endearing. They demonstrate a faith that there must be some single, sufficient, quasilogical explanation to every concatenation of international events. (The alternative that ascribes more to bad communications and inadequate understanding, with stupidity playing at least as large a part in human affairs as greed or guile, is perhaps more pessimistic: certainly less dramatic.) Like most conspiracy theories, Professor Odelrs is certainly something of an elastic hold-all. But the more it is stretched the thinner it gets. It might be interesting to know whether this theory could accomodate economic and even military threats from the USA to the Gulf countries in order to bring down crude prices that are paid primarily by the USA's competitors. However, let us hope his theory never has to stand up to such a brutal test. That does not make the book any less worth reading, jibbing at, and annotating indisogreement. It is written with characteristic untidy gusto, and puts the frightening sweep of international oil today together effectively for the general reader. It is also, for the moment, far the most up-to-date general book on world oil.
J.E. Hartshorn, Walter J. Levy, S.A., London
CANADA'S ENERGY CRISIS by James Laxer 136 pages, $3.95, James Lewis & Samuel, Toronto, 1974
The close links between the Canadian and American economy present a problem for those Canadians who object to American policies. In a world where Africans, Latin Americans and Asians have gradually freed themselves from European and American domination and where the American dream has been destroyed by the Viet Nam war and the Watergate scandal, young Canadians feel increasing frustration about the influence of American corporations in Canada, and about the perceived lack of Canadian economic independence. James Laxer's book is one of the best examples of these feelings, and it can be recommended to those who are interested in reading about Canadian history and policy. This book, however, cannot be regarded as a serious analysis of Canada's energy problems. It tries to prove that, although Cabinet Ministers have hotly denied it, a 'continental energy policy' has been implemented. The major component of such a policy would be the development of Canada's petroleum industry according to an investment timetable dictated by the needs of a continental rather than the Canadian market. James Laxer adds that such a 'continental energy policy can only be explained as an aspect of American corporate and state control of the entT"re Canadian economy'. Because this thesis supports the over-simplified concept of Canada as a resource exporter among industrial countries and because American-controlled firms do have a marked influence on the Canadian energy policy, such a thesis can be rather easily defended if one is willing to overlook a number of facts. For instance, one Would expect from a continental petroleum policy that Canada would increase production when the USA needed oil and decrease production when the need
ENERGY POLICY December 1974
became less. Exactly the opposite is occurring. During the second half of the 1970s, when the USA will need considerable oil imports, Canada will progressively reduce exports to almost nothing. However, she is preparing for extensive development of the tar sands which will allow increased exports of crude to the USA in the second half of the 1980s. By this time the USA may no longer need it, having completed her selfsufficiency programme. These exports will probably have to go to Japan. The most remarkable aspect of Canadian/US petroleum relations is not that a continental energy policy has been implemented but, on the contrary, that Canadian petroleum exports will be small in the coming decade in the light of American needs and potential Canadian resources.
In the last five years Canadiancontrolled energy firms have had outstanding success in petroleum exploration. Pan Arctic Oils claims almost half the frontier gas resources that have been discovered until now, despite the company's limited previous experience. This Canadian firm in which the government owns 45% will play a vital role in the Arctic developments. Even more remarkable is Canadian success in providing one of the few alternatives to the American light water reactor in the form of the commercially viable CANDU reactor. There is no doubt that the nuclear reactor industry will be one of the major science-intensive manufacturing industries in Canada. It would be absurd to state that this sector of the Canadian economy is under the control of American corporations. The fact that 'Pan Arctic Oils' and 'CANDU' do not appear in a 136page analysis of Canada's energy crisis is a clear indication of the highly unbalanced approach of James Laxer's book.
Dr A.P.H. van Meurs, Consultant, Ottawa, Canada
345
248 pages, 60p, $2.50, Penguin Books, 3rd edition 1974 Professor Odell has brought this compact handbook up to date quickly and effectively, with a new chapter on 'The World of Oil Power in 1974'. He completed the revision last March; up to late September it had not been overtaken by any radical change in the pattern of events he was seeking to interpret. Certainly nothing had occurred to disturb his view of the world oil industry. That view is determinedly idiosyncratic. But Professor Odell could now fairly claim that some elements in the conventional views that he attacks have since been altered a little towards his own. Forecasts and hopes in Brussels about European energy, in particular, have been modified since he wrote. Planners there now hope that 1985 energy consumption in the Community can be held 10% lower than earlier forecasts, and total import dependence down to about 42%. This is still a long way short of Professor Odell's 'European Project Energy Independence 1985', seeking a cut of 15% in West European consumption and less than 20% of imported energy. But these conventional projections have had to change a good deal more than his own. In one sense, also, these official 'objectives' are more uncertain than his. Professor Odell, for some years now, has based his alternative 'energy policy option' for Europe upon greatly increased optimism about the North Sea than any government or oil company involved with petroleum development there will express. (There too, the conventional estimates of reserves and potential production of oil and gas have risen steadily, though remaining far
344
short of his own.) Nobody can know whether that optimism will eventually be justified. Governments could hardly base surprise-free scenarios for policy on it. But Professor Odell has at any rate set out his assumptions clearly, and of late elaborated them mathematically with the help of colleagues at the University of Rotterdam. His data are admittedly inadequate. Some experts from major oil companies have scornfully dismissed such optimism. But the crucial data that might settle this argument-relating notably to the 'up-dating' of known petroleum reserves- can be possessed only by such companies; and so far they have not opened the records. So Professor Odell's optimism, misplaced or not, is at least confidently based upon his own analysis. It is rather doubtful whether the new objectives recently adopted in Brussels are based on any real confidence at all. Professor Odell's optimism about new oil production potential for oil importers as an alternative to OPEC oil extends beyond Europe. He believes this can be built up both on and around Japan's continental shelf and in new exporting areas. These he characterises as 'countries which are unlikely to want to join the OPEC cartel and whose attitudes to the pricing and development of their oil and gas resources will be very different from those of the member countries of the producers' club'. Here his optimism verges on the naive. Your reviewer is a consultant much of whose activity in recent years has been concerned with the governments of countries hoping to develop oil, either to save imports at home or for export. In not one of these has he ever encountered any of those different attitudes towards oil exporting that Professor Odell hopes for. Nor would it be wise for OECD importers to count on them. The moment commercial oil production is achieved in any new country,
governmental attitudes and appetites alter, and very understandably. Whether they want to join OPEC or not is beside the point. They too want whatever windfalls it may bring them. This book also argues for a measure now becoming more popular in some importing countries, such as France: rationing oil and some other energy in order to cut back consumption faster than might be done by price elasticity. Professor Odell faces the implications of this argument more bluntly than most governments h a v e - i n particular, that it would involve a considerable reduction in the role of the automobile in private and public transport, and a much slower growth in air transport. He accepts the restraints on freedom of choice and changes in social values that such energy rationing would involve. He does not take sufficiently explicit account of the economic effects and technical time-lags it would also involve- as for example when he writes of 'the immediate replanning and restructuring of the [electricity] supply and distribution system' to avoid the losses of primary energy input involved in centralised generation. Politically, Professor Odell's analysis of international oil developments in the last few years postulates 'OPEC/oil company collusion... with the positive encouragement of the United States.' The USA, he argues, 'deliberately initiated a foreign policy which aimed at getting oil-producing nations' revenues moving strongly up by talking incessantly to the producers about their low oil prices and by showing them the favourable impact of much higher prices.' He does not cite any of this incessant talk in evidence or say when and where it is supposed to have happened. Because of this collusion (which he feels later got out of control because the OPEC governments realised they could control the
ENERGY POLICY December 1974
Book reviews business alone), he doubts whether the international companies could be trusted to co-operate in the European energy policies that he feels are necessary. As he sees it, after all, these companies 'had the o p t i o n on the basis of some pretext or another - of ensuring that [gas production in Europe] was held back'. and may in future 'choose to sit on the bulk of the new reserves' of petroleum they discover in Europe and elsewhere. (The Dutch, Norwegian and British governments may be absolved from any responsibility here.) His distrust of the companies makes him feel that Europe needs something on the lines of the French domestic oil regime, under a European Oil and Gas Commission. Conspiracy theories of history are always in one sense endearing. They demonstrate a faith that there must be some single, sufficient, quasilogical explanation to every concatenation of international events. (The alternative that ascribes more to bad communications and inadequate understanding, with stupidity playing at least as large a part in human affairs as greed or guile, is perhaps more pessimistic: certainly less dramatic.) Like most conspiracy theories, Professor Odelrs is certainly something of an elastic hold-all. But the more it is stretched the thinner it gets. It might be interesting to know whether this theory could accomodate economic and even military threats from the USA to the Gulf countries in order to bring down crude prices that are paid primarily by the USA's competitors. However, let us hope his theory never has to stand up to such a brutal test. That does not make the book any less worth reading, jibbing at, and annotating indisogreement. It is written with characteristic untidy gusto, and puts the frightening sweep of international oil today together effectively for the general reader. It is also, for the moment, far the most up-to-date general book on world oil.
J.E. Hartshorn, Walter J. Levy, S.A., London
CANADA'S ENERGY CRISIS by James Laxer 136 pages, $3.95, James Lewis & Samuel, Toronto, 1974
The close links between the Canadian and American economy present a problem for those Canadians who object to American policies. In a world where Africans, Latin Americans and Asians have gradually freed themselves from European and American domination and where the American dream has been destroyed by the Viet Nam war and the Watergate scandal, young Canadians feel increasing frustration about the influence of American corporations in Canada, and about the perceived lack of Canadian economic independence. James Laxer's book is one of the best examples of these feelings, and it can be recommended to those who are interested in reading about Canadian history and policy. This book, however, cannot be regarded as a serious analysis of Canada's energy problems. It tries to prove that, although Cabinet Ministers have hotly denied it, a 'continental energy policy' has been implemented. The major component of such a policy would be the development of Canada's petroleum industry according to an investment timetable dictated by the needs of a continental rather than the Canadian market. James Laxer adds that such a 'continental energy policy can only be explained as an aspect of American corporate and state control of the entT"re Canadian economy'. Because this thesis supports the over-simplified concept of Canada as a resource exporter among industrial countries and because American-controlled firms do have a marked influence on the Canadian energy policy, such a thesis can be rather easily defended if one is willing to overlook a number of facts. For instance, one Would expect from a continental petroleum policy that Canada would increase production when the USA needed oil and decrease production when the need
ENERGY POLICY December 1974
became less. Exactly the opposite is occurring. During the second half of the 1970s, when the USA will need considerable oil imports, Canada will progressively reduce exports to almost nothing. However, she is preparing for extensive development of the tar sands which will allow increased exports of crude to the USA in the second half of the 1980s. By this time the USA may no longer need it, having completed her selfsufficiency programme. These exports will probably have to go to Japan. The most remarkable aspect of Canadian/US petroleum relations is not that a continental energy policy has been implemented but, on the contrary, that Canadian petroleum exports will be small in the coming decade in the light of American needs and potential Canadian resources.
In the last five years Canadiancontrolled energy firms have had outstanding success in petroleum exploration. Pan Arctic Oils claims almost half the frontier gas resources that have been discovered until now, despite the company's limited previous experience. This Canadian firm in which the government owns 45% will play a vital role in the Arctic developments. Even more remarkable is Canadian success in providing one of the few alternatives to the American light water reactor in the form of the commercially viable CANDU reactor. There is no doubt that the nuclear reactor industry will be one of the major science-intensive manufacturing industries in Canada. It would be absurd to state that this sector of the Canadian economy is under the control of American corporations. The fact that 'Pan Arctic Oils' and 'CANDU' do not appear in a 136page analysis of Canada's energy crisis is a clear indication of the highly unbalanced approach of James Laxer's book.
Dr A.P.H. van Meurs, Consultant, Ottawa, Canada
345