Month: June 2020

The Balconies of Lives: Representing Eastern European Energy

What is energy? This broad question is one I tackle each day. And for each person, it means different things. In the social sciences, I like to say it is the way we go about our day. How we live, how we move, and what we consume. It is not only in the physical consumption and use of energy, but how the environment around us responds to our habits, desires, and ways of living.

The task to represent what energy is, and what this means through a cultural lens just became harder for me. Now, after finishing my book, ‘Energy Cultures’, focused on Eastern Europe it is with the publisher, Edward Elgar. But I still have the task of finding and choosing the cover image. I’ve selected a few with two described below.

This first picture is of the Ignalina Nuclear Power Plant in Visaginas Lithuania. This is a great picture because it represents both the nuclear capability of the Soviet Union. It is in Lithuania, a former USSR republic. And it shows the planned industrial architecture of the nuclear power plant and the surrounding nature neatly manicured around the industrial facility. Lithuania, now an EU member state, symbolizes both the dramatic political-economic changes of the region, but also a reorientation of the society.

The Ignalina Nuclear Power Plant in Visaginas, Lithuania. Screenshot from Adobe Stock, since I didn’t pay for it.

The second picture, and the one I’ll probably go with, shows a typical modern residential building in Wroclaw, Poland. What struck me here was the representation of the built infrastructure and the everyday energy consumption of the people. It is in our daily lives that we create a culture, and we create our own energy cultures through our lived experiences, even when we don’t think about it. The utilitarian building here with the recessed balconies is reminiscent of the panel houses dominate in Eastern Europe. Each apartment displays a limited but functional living space. The lack of expression of individuality in these buildings also confines the inhabitants to a defined way of living. Shading on the side of the building, bars on the railings, provide a representation of jail constraining the dwellers.   

Building in Wroclaw, Poland Source: Wiktor Karkocha https://unsplash.com/photos/Dt3y3dQR6Qk

It turns out the focus on balconies also caught the attention of documentary filmmakers. ‘Enter Through the Balcony’ provides a more in-depth perspective of the conversion of balconies in Ukrainian life. The trailer does a good job of capturing this push for more personal space and against the structure imposed by the state. That is, by the state giving people accommodation, they needed to accept smaller living spaces. But in their everyday lives, they pushed out for more space and representation of how they live, despite what architects and the state-imposed on them.

Representing cultural practices in the energy system only requires looking at two sides of how people live and what they do. There is surface level practices, such as how people drive, walk, or take a bus. But there are also the deeper structures that force people to live their lives or influences their choices of transport modes. Such as government funding for roads or public transport. Even deeper is understanding the interplay between government funding and ownership and interests in transport companies or relations between countries and firms. For example, Russian nuclear power plants provide huge amounts of electricity to power public transport and reduce oil imports. Under the Soviet System, when nuclear technology was essentially free and used as a geopolitical tool (as it is today) but oil could be used for generating hard currency, the choice of energy infrastructure also influenced the types of transport available for people. Restrictions on buying cars also limited personal transport options. The cultural practices of society were influenced by the energy infrastructure.

Energy, and understanding, ‘What is energy?’ provides the means to explore and engage with our everyday lives. This engagement exposes the role of the state and the power of those leading the state. It also shows what society expects and accepts in their everyday. The built environment and our balconies are only one representation of this. But how to represent this in one picture or one object? How do we succinctly represent our everyday practices? Maybe I can just use a picture of me on my Budapest balcony where I write in every season but winter. In the early spring and late fall an electric heater helps me start the day. Thus, even the production of this blog represents the production of own everyday energy culture in Eastern Europe.

My writing space in my Budapest veranda. With pre-socialist windows.

Not so Fast! The Carter Doctrine and cheap oil in the Covid-19 era

The tremendous economic and security gains the United States made in domestic oil and gas production in the past 10 years fostered a global power rebalancing. The withdrawal of the US military from the Middle East corresponds to the rising US self-sufficiently in oil and gas. Shale oil and gas underpin this dramatic reconfiguration. According to Tina Soliman Hunter, Professor of Energy, Environment, and Resources Law, at Macquarie Law School, University of Macquarie, this disengagement may now end. The once spurned US military protectorate of the Middle East may hold renewed value to ensure a global economic recovery and benefit US shale oil producers.

The Covid-19 economic collapse created a price plunge of global oil and gas prices. Marked by negative oil prices in April 2020. The overall trend moved from above $50 a barrel, to a June 2020 price of somewhat above ten dollars. Before the pandemic the US had recently become the top oil and gas producer in the world, reliant on hydraulic fracturing technologies to extract oil and gas from the plentiful shale formations. This performance created a pricing band for global oil which the US could influence from its production capacity. The theory was global oil prices would be influenced by this shale pricing band.

Professor Tina Soliman Hunter, Professor of Energy, Environment, and Resources Law, at Macquarie Law School, University of Macquarie in Australia

The rapid and swift drop in global oil and gas resulted in the band breaking. Low prices now favor those with conventional oil wells, which can’t easily stop the flow of oil out of tapped wells. Middle Eastern producers sit at the bottom of the pricing scale. The cheap oil of the region may now be more valuable to sustain a weakened global economy and necessitate the US military presence to ensure access and low prices for US and global consumers. For Professor Soliman Hunter, it is a return to the Cold War era of the Middle East limiting external interference in the region.

Support for the traditional US oil allies of Saudi Arabia and Kuwait means a reassertion of the Carter Doctrine. A doctrine that followed previous policies but was elucidated by President Jimmy Carter in 1980.  The doctrine states the US will use military force to keep out external influence. In the 1980s this was aimed at the Soviet Union after the Soviet invasion of Afghanistan. Looking at the Middle East today, and the US withdrawal from Afghanistan, Iraq and Syria both the determination to exert influence and the retreat of this intent are apparent.

There is an almost corresponding rise of US as a major oil and gas producer with its declining role in the Middle East. It is hard to separate the actions of the US and whether President Trump blew this agreement up for the hatred of foreign US engagement and international coalitions, or because of the US self-sufficiency in oil and gas. Nonetheless, Middle Eastern dynamics around military engagement and the price of oil and gas were shifting under President Obama. In addition, the shale revolution underpinned the US economic recovery after the 2008 financial crisis. Keeping oil and gas cheap. Is it possible a similar cheap fossil fuel policy will underpin the Covid-19 economic recovery?

Source: EIA, 2019

According to a Federal Reserve Bank of Dallas report, the US may be reliant more on sustained investment into the oil and gas sector, rather than low prices. With limited ability of consumers to take advantage of low prices, due to stay-at-home orders, and a general curtailment of economic activity, low energy prices hold limited benefits for the economy. Rather, it may be the lack of financial spending in the oil and gas sector that will reduce economic activity even further. 

“In the current environment, the sharp reduction in capital expenditures by oil companies explains why this oil price decline, on balance, actually hurt U.S. investment spending—and hence, economic growth”

The US the shale boom previously acted as a price floor and ceiling. Not allowing oil and gas prices to drop below or rise above a certain level. Shale fracturing to extract oil or gas could either done or not done, depending on the price. With a general band around $50 to $60 per barrel, oil producers could withstand previous pricing wars with OPEC countries, by using more efficient techniques, but they could also act as regulators to high global oil prices. The new dynamic exposes how much the US is reliant not only on low prices from shale production, but on the investments going into the shale plays. 

Professor Soliman Hunter demonstrates this link. “Shale relies on continued hydraulic fracturing, so there’s always on costs, ongoing costs. So you need to continue to fracture in order to get continued field development. And so when there’s no appetite for that, and there’s no sort of economic drivers to continue, then essentially your incomes going to dry up.” And not only the income for the company disappears but also for the workers and the communities where these workers live and work, along with the larger economic ripples through communities.

Professor Soliman Hunter talks about shale and its reliance on continued hydraulic fracturing.

Due to the US competitive price advantage from shale wells, the country essentially had a freer rein in global politics. There was reduced reliance on OPEC countries to maintain low oil prices underpinning the country’s economic growth. The use of the military to ensure US economic domestic and international dominance could be seen as waning. In fact, the ripple effects of shutting down shale and conventional wells in the US demonstrates the economic reliance on investments into oil and gas well developments. This further calls into question the ability of the US to economically move away from domestic fossil fuels for climate change targets.

Internationally, the fall in price may reset the US relationship back to what it was before it was a giant producer of oil and gas. This changing role of the US from global consumer to producer shifts the geopolitical perspective and assumptions underpinning the Carter Doctrine. For Professor Soliman Hunter, this was questioned, “in the last half a dozen years, I’ve looked at the Carter Doctrine and thought, is that really relevant now that the US is producing, you know, 12 to 13 million barrels of oil and gas a day?” With the US the top oil producer why would it need the Middle East to sustain its oil hungry nation? According to Professor Soliman Hunter, 

“The US has just become the biggest oil and gas producer in the world. And in three months, that’s been wiped out, their gains that they’ve made in the last 10 years have been wiped out, as shale producers cannot sustain that. So, where does that leave us in terms of the value of the Middle East and Saudi Arabia in particular?”

Professor Soliman Hunter explains the Carter Doctrine.

The US military presence in the Middle East can act both as a protector of oil supplies and limit conflict risks. Lower prices through geopolitical stability can ensure some economic recovery. However, tension in the Middle East, can also increase prices and benefit US producers, if oil climbs above the break-even points for domestic producers. Military tension can influence the price both ways, and influence the US economy, along with oil producers as well. The abrasiveness of the Trump administration may just benefit from the unstable relationship with Iran and any military tension. The Persian Gulf Wars may be done, but low-grade conflicts also move markets and ensure the US stays a top oil and gas producer, benefiting its economy and security.

The current state in June 2020, is the huge rise and self-sufficiency of oil and gas production in the US is stagnate. Production is shut down and shale wells abandoned due to their higher operating costs. The US shale industry is broken and it accomplishes previous attempts by Russia and Saudi Arabia to reassert their former dominance over the global oil economy. It is hard to see a clear short-term path when US shale producers reclaim their global influence. Nonetheless, falling company investments into oil and gas field development expresses the significant economic impact technologies and innovation have in the US economy. A US transition away from fossil fuels may be even further away than projections may hold.  Geopolitically, it remains to be seen the importance of the 40-year-old Carter Doctrine in an era with more renewables but drastically low oil prices. Nonetheless, US military presence can influence markets both ways. Professor Soliman Hunter succinctly summarizes the future. “This is a new world order now, where this is going to lead us. I have no idea. But it’s exciting.”

References:

Federal Reserve Bank of Dallas. “How Falling Oil Prices in Early 2020 Weakened the U.S. Economy.” Dallasfed.org. Accessed June 8, 2020. https://www.dallasfed.org/research/economics/2020/0519.

LaBelle, Michael. “MyEnergy2050: Oil and Gas Markets in the Covid-19 Era: Interview with Tina Soliman Hunter.” Fossil Fuel Markets, n.d.

Plante, Michael D., and Kunal Patel. “Breakeven Oil Prices Underscore Shale’s Impact on the Market – Dallasfed.Org.” Federal Reserve Bank of Dallas, May 21, 2019. https://www.dallasfed.org/research/economics/2019/0521.

U.S. Energy Information Administration (EIA). “U.S. Total Energy Exports Exceed Imports in 2019 for the First Time in 67 Years.” Today in Energy, April 20, 2020. https://www.eia.gov/todayinenergy/detail.php?id=43395.

Scroll to top