Platts Forum on Oil, Coal, and Biofuels in Manila

There was a time when nations would wage war just because of spices. Nowadays, we'd find this ridiculous as most of these spices may be found in almost everyone's kitchens and dining tables. The battle nowadays is mainly for oil. It is contemporary society's scarce resource with an insatiable demand. And much like the spices of the past, power driven from oil is mostly guided by geographical luck, politics, and greed.

I got invited to the Platts Forum on Oil, Coal, and Biofuels just a while ago. Platts is an independent and neutral firm that provides reports, researches, other services regarding energy and its sources. The speakers included Department of Energy secretary Carlos Petilla, director of the Oil Industry Management Bureau Zenaida Monsada, Platts global director Jorge Montepeque, Platts Asia & Middle East Oil Markets director Jonty Rushforth, director Ismael Ocampo of Energy Resource Development Bureau, and two more that I unfortunately wasn't able to listen to as I already had to leave the event.

As much as I learned a lot of new technical aspects and interesting trivia about the energy industry, many principles I advocate and policies I fear were confirmed.

During the first few slides of Jorge Montepeque, he provided several factors that affect the price of oil but I found two most notable. The first would be the Federal Reserve and Ben Barnanke's quantitative easing which Montepeque mentioned will be very hard to exit (in my own opinion even impossible) and also the slightest changes in interest rates. The second would be, the most obvious, instability in the Middle East. So in a nutshell, for me, the most significant factors affecting the price of oil would be US monetary policy and US foreign policy.

In one of congressman Ron Paul's exchanges with Bernanke, he makes a strong case for competing currencies, a concept Hayek advocated. Here's what he said:

"You took over the Fed in 2006. I have a silver ounce here and this ounce of silver back in 2006 would buy over 4 gallons of gasoline. Today, it will buy almost 11 gallons of gasoline. That's preservation of value... why is it that we can't consider two of us an option... why don't we allow currencies to run parallel?"

In one of the slides, the supposed correction of gold has also been discussed, perhaps a reaction to Bernanke's bluffs of a supposed exit strategy. It is worth mentioning though that gold also took quite a major dip right before the 2008 recession. And only time will tell if the "recovery" the US economy is experiencing is not merely a short-term remedy.

When it comes to instability in the Middle East, Egypt was a prominent country mentioned and once again I must refer to Ron Paul's take on what truly happened and how the US subsidized Mubarak only to eventually provide aid to the citizens of Egypt who stood up against his tyranny. Here's a video:

And now, they've involved themselves in Syria and continue to send foreign aid to many other dictators and leaders in the Middle East that historically only proves to result in unintended consequences and blowback (see also History, Dictators, and Blowback).

In another topic, I learned more about how the intellectually attractive renewables don't even benefit the consumer, the supplier, and perhaps even the environment. The opportunity cost for wind energy, for instance, is so expensive and yields very little energy. Bioethanol mandates do not drive prices down and send wrong signals in the agricultural industry. Both methods are subsidized and shouldered by the taxpayer. 

And it's interesting to point out that those who legislated and implemented these projects are the biggest stakeholders as well. Who owns the bioethanol plants? Who are the suppliers for the wind turbine projects in Ilocos? We tend to have so much faith in environmentalism that we forget to be skeptical of public policy and spending once this banner of being green has been waived. Corruption is corruption and cronyism is cronyism no matter how noble the intentions seem to be.

Don't get me wrong, I am not against renewable or sustainable energy (who in their right mind wouldn't be?). What I am saying is that the options we have now are not cost-effective and we must always be critical of public policy.

There is a lot of optimism, most especially because of US shale gas production and importation (I don't understand the full technicalities of this but it has to do with the US being energy independent) and supposedly the prices for energy will be dropping significantly. My speculation though is that this is long term and that the volatility and concerns regarding the Yen, Euro, and even the Dollar (as heterodox as it may seem) may drive energy prices up sooner than we think.

At the end of it all, I learned a lot from the forum and got free snacks and buffet lunch. It's the second consecutive day I got free food just because of my blogging. An awesome trend I hope will continue. Thanks for dropping by.

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