Issue 68 Vol III, July 31, 2008

A N A L Y S I S

The facade of peak oil
Prashant Kumar

HUBBERT’S Peak of Oil Production – named after the geophysicist late Dr. M. King Hubbert, it signifies a bell-shaped curve of petroleum production with the zenith denoting the peak point in production. Hubbert prophesied that the global oil production would peak about the year 1995. Hubbert’s theory has become the pivot around which the debate surrounding oil price has come to evolve.

The fanaticism engendered by the massive propagation of the theory has for quite some time been manifesting itself in the form of oil prices. The inconceivable spike from approximately $24 a barrel in 2000 to $144 a barrel in 2008 seems intriguing for despite all forms of instability and near-peak situations in the past, the peak that the oil prices has ever attained is barely half the current mark.

It is one of the most elementary principles of economics and entails no bending and stretching of imagination that if demand overshoots supply, it results in a price-hike. Admittedly, the demand for oil has continually evinced a similar trend. The OECD countries, the major consumers of oil in the world, continue to witness a steady increase in demand. Interestingly, the major aggravating factors have been kudos to the ever-increasing demand from the burgeoning economies of the east: China and India.

It remains an uncontroverted reality that with rapid industrialisation extending its ambit to far-flung economies across the world, the demand for oil is bound to reflect an upward trend. The crucial question that arises then is whether we are blessed with enough resources to meet this ever-increasing demand for oil?

Before we embark on our discussion, it is important to have an understanding as to the distinction between conventional and non-conventional forms of crude oil. Put simply, conventional crude represents the easiest form of recoverable crude oil in contradistinction to non-conventional crude whose extraction has perpetually been fraught with technological limitations. For all practical purposes, non-conventional crude oil reserves are not taken into account as viable reserves of oil.

If statistics are here to be believed, non-conventional crude is estimated to constitute a paltry 3.3 percent of global oil production by 2010 as according to the OPEC’s estimate. The same represents a curious feature when seen in the light of fact that the global reserve of non-conventional crude has trebled to quadrupled the overall reserve of conventional crude over the past few decades. The heavy oil of Orinoco in Venezuela, the oil sands of Alberta in Canada, and the oil shale of Green river basin in the U.S. happen to be the major repositories of non-conventional crude oil across the world.

The world reserve of oil shale itself is estimated to be approximately 2.8 to 3.3 trillion barrels which far exceeds the proven reserve of conventional oil at approximately 1.3 trillion barrels. Further, Alberta is estimated to be sitting on approximately 1.7 to 2.5 trillion barrels of oil besides 1.2 trillion barrels in Orinoco, Venezuela. So, isn’t that a lot of oil? – Supposedly, enough to comfortably satisfy our needs for another century-and-a-half.

However, before statistics act to induce a sense of complacency, the limited progress made in terms of technological development aimed at rendering non-conventional forms of crude extractable at affordable costs needs to be underscored. The gravity of the issue needs to be appreciated in the light of depleting reserves of conventional crude oil. The major deterrent has possibly been the wide discrepancy between the cost of extraction of conventional and non-conventional forms of crude.

As per the statistics released by the Bank of Kuwait, the break-even point (no profit, no loss) for conventional oil for major oil producing nations varies between $20-40 a barrel. The oil sands of Canada operate at a cost of $33 per barrel. Further, as per a 2005 study conducted by the National Technology Energy Laboratory, the U.S. Department of Energy’s laboratory, a first-of-kind oil shale operation in order to be profitable shall cost around $70 - $95 per barrel which may come down to as low as $35 - $48 within a decade of experience induced learning.

After enough of statistical brain teasing, here’s something that would act to enliven the discussion. The ulterior motive behind the aggressive propagation of the peak oil theory shall become clearer as the story unfolds. People must have heard about the phenomenon called future speculative trading which has, of late, made its way into the oil industry. The same needs to be visualised in the light of January 2006 deregulation of trading in U.S. energy futures through the London ICE futures exchange, and the exemption of over-the-counter oil futures trade since 2000 at Enron’s behest. The aforesaid have emerged as expedient routes for American oil traders to evade surveillance by Commodity Futures Trading Commission, the financial futures regulator mandated by Congress to ensure that prices on the futures market mirror the laws of supply and demand.

Eventually, what possibly appears to be fuelling such an exorbitant rise in oil price? The deficient reserve story is certainly for laypersons to believe. Technological limitations argument appears to be a plausible one, nevertheless, the same shall have sustained had we been living in the 19th or early 20th century but definitely not today when technological developments have been so immense that it has surpassed all frontiers of human imagination. Besides, technological limitations in the context of the present debate have manifested mainly in the form of forbidding costs involved in the process of extraction. At the current level of oil prices, the argument could barely stand.

The current situation seems to be a clear exemplification of how the facade of well-received notions of society is conveniently used to engineer moves in order to dupe the ignorant masses. The steady increase in oil price is one such specially crafted move aimed at raking in as much money as possible in the transitional phase from conventional to non-conventional forms of oil.

[hiprashantkumar@hotmail.com, hiprashantkumar@yahoo.co.in]

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Drugs, teenage crime and the society
Randeep Wadehra

THE menace of drug addiction cannot be over emphasized. What had started as a fad amongst the well healed is now a staple for the poor, and an indispensable means of killing time amongst teenagers. Teenage crime and the rising domestic violence can be directly linked to drugs. India has become one of the most favored transit routes for drug traffickers. This has resulted in the rather easy availability of hard drugs both in our cities and the countryside.

Sometime back, at Patiala, I came across a youth who is typical of our neo-rich drug addicts. He has plenty of pocket money at his disposal with no compulsion for accounting to anybody regarding its disposal. At an age when kids normally find life wonderful and thrilling he has already become bored with such mundane activities like school going, sports and ‘silly hobbies’. Let us call him Tubby. His father is employed in a multinational company in Saudi Arabia while his mother is a regular at kitty parties.

Tubby was packed off to an expensive school in New Delhi. During the impressionable age an adolescent needs parental guidance the most. Any carelessness on the parents’ part could lead to disastrous consequences. He began drifting into bad company.

He had his first smoke at sixteen, courtesy one of his filthy rich classmates. Tubby joined the kids who smoked marijuana, gambled and generally wasted their time, energy and money. Thanks to his father’s liberal attitude, Tubby could afford all these 'fashionable' dos. It was not long before Tubby was on to the hard drugs like heroin, brown sugar and later on smack.

“That was the turning point when the real problem started.” Recounts Tubby ruefully, “despite the liberal allowance I started falling short of money. That’s when I committed my first theft. We, that is my roommates, and I unbolted the wheels of a parked Mercedes Benz and sold them off in the chor bazaar for a pittance. Since we did not get caught we felt emboldened to try more daring escapades.”

Theft became a child’s play for Tubby and his gang. Soon they attempted a highway robbery on the Delhi-UP border. Their fluent English, ‘sophisticated’ manners and cherubic looks helped them ensnare their victims and escape the police. However, nemesis caught up with them soon enough. Their hostel warden was already suspicious about their nocturnal activities. Their class teachers too started reporting against their increasing indiscipline, bordering on violence.

“In fact it was my room mate who betrayed us. He was a coward, who believed in a bland life.” There was a tinge of contempt in Tubby’s voice, “Fearing that he too might have to face the consequences of our actions he revealed the details of our activities to the warden. One night there was a surprise police raid and we were all nabbed. We had loads of the stuff in our cupboards, there was no way we could bluff our way out of the trouble.”

After a stint in the reformatory his parents brought Tubby home. Now he is a regular at a de-addiction center in Patiala. He does not seem very repentant. I ask, “Tubby, after you get rid of this habit what do you intend to do?” The kid looks at me, gives an elaborate shrug and remarks wryly, “I don’t know. Dad will go back to Saudi Arabia to earn more lucre, ma will return to her kitty parties and I…” he lets the answer hanging in mid air.

This problem is not Tubby’s alone. Our society is in a state of flux. The joint family system, with all its drawbacks did have its plus points. It provided emotional security to the impressionable and vulnerable kids. Today the rat race up the corporate ladder, the get-rich-quick culture and the fast disappearing traditional family structure is extracting a price that may well prove to be our undoing as a society.

[Randeep Wadehra is a poet writer and a columnist with The Tribune, Chandigarh]

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India punishing families that flee violence

ANDHRA Pradesh should protect and assist thousands of families who have fled the conflict in neighboring Chhattisgarh, Human Rights Watch said today. State officials should act immediately to end the government’s discrimination against the displaced people, Human Rights Watch has demanded from government of India and the states.

In a 182-page report, “‘Being Neutral is Our Biggest Crime’: Government, Vigilante, and Naxalite Abuses in India’s Chhattisgarh State”, Human Rights Watch documented how since mid-2005, the Andhra Pradesh state government has failed to provide indigenous tribal communities displaced from Chhattisgarh state with basic assistance, including food, water, shelter, medical services, sanitation, and livelihood opportunities. The authorities have repeatedly burned down at least nine hamlets of those displaced, and deny them existing government welfare benefits.

“The Andhra Pradesh government should be protecting and helping displaced tribal communities, but instead it’s punished them for seeking refuge here,” said Jo Becker, children’s rights advocate at Human Rights Watch and member of the research team. “Andhra Pradesh should give these people the help they’re entitled to.”

Since mid-2005, 30,000 to 50,000 people have fled to Khammam and Warangal districts of Andhra Pradesh following escalating violence in southern Chhattisgarh between Naxalites, an armed Maoist group, and state-backed vigilante Salwa Judum groups. More than 50 eyewitnesses who fled from 18 different villages in Chhattisgarh described to Human Rights Watch direct participation by government security forces in violent Salwa Judum raids. Their accounts contradicted government claims that Salwa Judum is a “peaceful citizen’s movement against Naxalites.”

Once in neighboring Andhra Pradesh, many displaced tribal families settled in protected forest areas. The authorities say these settlements are illegal, and have repeatedly burned down the hamlets of hundreds of displaced persons and forcibly evicted them from forest lands, in violation of international safeguards. They gave no prior notice, nor did they follow due process. Of the 17 displaced-person hamlets that Human Rights Watch visited, villagers from nine hamlets reported repeated destruction of their hamlets, beatings, and forced relocation by forest department officials. In some instances, displaced persons, including women and children, were forced into trucks and transported to the state boundary, a two-day walk from their settlement. Forcible evictions and harassment has decreased since the intervention of the Andhra Pradesh High Court in September 2007, but they continue.

Andhra Pradesh officials have tried to absolve themselves of responsibility by portraying the attacks on displaced-person hamlets as a conflict between local tribal communities and those displaced. However, Human Rights Watch’s investigations, which included accounts from displaced persons, indicate that forest department officials were involved in all instances of hamlet destruction; animosity between local tribal communities and displaced tribal communities were recorded only in three of the nine hamlets. Moreover, police officials have failed to take suitable action when they received complaints.

Displaced tribal communities settled in Andhra Pradesh face harassment by Salwa Judum members and government security forces, and live in constant fear. The Andhra Pradesh authorities have taken no measures to prevent such harassment or initiate criminal action.

Many displaced children drop out of schools because of the language barrier in local government schools: schools in Andhra Pradesh teach in Telugu, while schools in Chhattisgarh teach in Hindi. The Andhra Pradesh government has yet to sanction a single Hindi-language residential bridge course to help displaced children integrate into local schools.

Human Rights Watch called on the Indian central government to immediately draw up a plan to address the specific protection and assistance needs of displaced persons, including children, in Andhra Pradesh. The government should take immediate steps to prevent the Andhra Pradesh and Chhattisgarh governments from unlawful forced relocation, and extend all government welfare schemes to displaced persons without discriminating against them.

The Indian government should also develop a comprehensive national policy for internally displaced persons in consultation with displaced persons, governmental, nongovernmental, and inter-governmental organizations, and in accordance with the UN Guiding Principles on Internal Displacement.

“Thousands have been driven from their homes by the violence in Chhattisgarh, only to find themselves persecuted once again in Andhra Pradesh,” Becker said. “It’s high time that the central and state governments act to protect these people so that they can live as normal a life as possible until they can go home.”

Select accounts featured in the report:

“One of the villagers had saved 5,000 rupees [roughly US$125] and they burned that also. When they were about to burn everything, we begged them to at least allow us to take our food grains and money but they beat us more and set everything on fire. They also took away our poultry, goats, and cattle … We had no where to go and so every time our huts were burned, we used to stay under the trees over here. One time they came during the monsoons – we stayed under the trees for three days because we could not go out and get help. The nearest help is 14 kilometers away. So we starved for three days.”

– Displaced person settled in village in Khammam district, December 2007.

“In June or July 2007, four forest officials came here and took away the adult males to the [forest] range office and locked us in a room overnight. The next day, the children and women were taken, loaded in a truck, dropped in Cherla, and threatened. After forcibly putting people in trucks, the forest officials burned our huts. They burned about 12 huts and left five or six huts. The women and children walked for two days to return to the village.”

– Displaced person settled in a village in Warangal district, November 2007.

“Immediately, about two or three days after the incident [burning of hamlet], the police called everyone to the police station and made us sign papers. Later we were told that it was the razinama [settlement between parties] saying that we agreed to withdraw the case. Then they booked a case against the five of us who had gone to the police station to complain [against the officials for burning the hamlet] … for illegally occupying the land. We were produced before the magistrate in Bhadrachalam and were in jail for 12 days. I got my relative to stand as surety for us and we were released on bail.”

– Displaced person settled in Khammam district of Andhra Pradesh, who had sought police protection against unlawful forced eviction, December 2007.

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