Invitation to Bermuda Energy Symposium

 

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The Peak Oil Crisis: A $4 Trillion Hole

Last week reporters at the Wall Street Journal sat down and did some arithmetic.

Tom Whipple

They looked at how much oil was selling for in the spring of 2014 (over $100 a barrel); looked at what it is selling for today (under $50); and concluded that if prices stay low for the next three years, the global oil industry and the countries it finances will be out $4.4 trillion in revenues. As these oil companies, nationalized and publically traded, will be producing roughly the same amount of oil in the next few years, the $4 trillion will have to come mostly out of profits or capital expenditures.

This is where the problem for the future of the world’s oil supply comes in. The big oil companies, especially those that export much of their production, have been doing quite well in recent years. National oil companies have earned vast profits for their political masters. Publically traded ones have developed a tradition of paying out good dividends which they are loathe to cut.

This leaves mostly capital expenditures on exploring for and producing more oil in coming years to take a dive as part of the $4 trillion revenue hit. Even if oil prices of $50 a barrel or less do not continue for the next three years, this still works out to a revenue drop of $1.5 trillion a year or about three times the planned capital expenditures of some 500 oil companies recently surveyed.

The International Energy Agency just came out with a new forecast saying that while current oil prices have the demand for oil products increasing rapidly, there is still so much over-production that the oil glut is expected to last for another year or more before supply/demand comes back into balance. The return of Iran to unfettered production would not help matters.

In looking at the next five years there are several trends or major issues that are likely to impact the supply and demand for oil. First is the recent price collapse that no longer makes it profitable to start projects to produce new oil, most of which now comes from deepwater, tar sands, or shale oil fields and is far more expensive to produce than "conventional" oil. As a result, investment in new oil production projects has dropped substantially in the last year and is likely to fall further.

On the demand side of the equation China is the biggest unknown. For the last 30 years the Chinese have enjoyed unprecedented economic growth, but recently the "world’s factory" has not been doing as well. Its government has been thrashing around wildly trying to stimulate growth and fend off a collapse in its stock market. Some believe China is a huge economic bubble that is about to collapse taking much of the world with it, and obviously reducing its ever-increasing demand for more oil.

The other 800-pound gorilla looming out there is climate change. Except for the drought in California and the storm that flooded New York a few years back, much of America and China for that matter has not been hurt badly enough by anomalous weather to reach an agreement that stopping climate change is the number one priority of all of us. Reports of "feels like" 159°F coming out the Middle East this summer have little impact on those convinced that climate change is a hoax. Should the effects of climate change worsen in the near future to the point that "do something before life on earth becomes impossible" becomes the majority perception of the issue, consumption of fossil fuels could be severely restricted. Although not widely appreciated, there do seem to be viable alternatives to fossil fuels waiting to be exploited.

The violence in the Middle East has grown worse in recent years. Although oil production in some areas has been restricted by geopolitics and violence, most of the oil continues to be produced. It is useless to talk about the next five years in the Middle East; however, we should keep in mind that there are at least a half dozen confrontations going on in the region that could morph into situations where oil production becomes more restricted.

When we net this all together, what do we have? Conventional wisdom currently says that oil prices are likely to be closer to $50 a barrel than to $100 for the next year or more. Capital spending on new production to offset declining production from existing oilfields is likely to drop still further leaving us in the situation where depletion may exceed the oil coming from new wells or fields. This is the argument that those who believe that we are at or near the all-time peak of world oil production about now are using.

The International Energy Agency says that the demand for the cheaper oil is rising rapidly, that production of shale oil currently is falling and the rest of world’s production is relatively static so we should be seeing oil prices rising again by 2017. This is where the turning point in the history of oil production could occur. In recent history rising prices have led oil producers to increase drilling for new oil production again. However the next time around, as mentioned above, there are new factors that may come into play. Will China be increasing its demand for oil in another two years? Will the Middle East still be exporting as much oil, and producing oil given the turmoil and the need to increase air conditioning? Will the world have decided the time has come to clamp down seriously on carbon emissions?

If global oil production does reach some kind of a peak this year and is lower in 2016, can it recover to reach new highs in the years following? Anything from inadequate investment stemming from persistently low oil prices to a major conflict in the Middle East could keep production from rebounding to new all-time highs. We are living in interesting times and just could see peak oil before we realize it. More

 

 

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Obama to Unveil Tougher Climate Plan With His Legacy in Mind

WASHINGTON — In the strongest action ever taken in the United States to combat climate change, President Obama will unveil on Monday a set of environmental regulations devised to sharply cut planet-warming greenhouse gas emissions from the nation’s power plants and ultimately transform America’s electricity industry.

The rules are the final, tougher versions of proposed regulations that the Environmental Protection Agency announced in 2012 and 2014. If they withstand the expected legal challenges, the regulations will set in motion sweeping policy changes that could shut down hundreds of coal-fired power plants, freeze construction of new coal plants and create a boom in the production of wind and solar power and other renewable energy sources.

As the president came to see the fight against climate change as central to his legacy, as important as the Affordable Care Act, he moved to strengthen the energy proposals, advisers said. The health law became the dominant political issue of the 2010 congressional elections and faced dozens of legislative assaults before surviving two Supreme Court challenges largely intact.

"Climate change is not a problem for another generation, not anymore," Mr. Obama said in a video posted on Facebook at midnight Saturday. He called the new rules "the biggest, most important step we’ve ever taken to combat climate change."

The most aggressive of the regulations requires the nation’s existing power plants to cut emissions 32 percent from 2005 levels by 2030, an increase from the 30 percent target proposed in the draft regulation.

That new rule also demands that power plants use more renewable sources of energy like wind and solar power. While the proposed rule would have allowed states to lower emissions by transitioning from plants fired by coal to plants fired by natural gas, which produces about half the carbon pollution of coal, the final rule is intended to push electric utilities to invest more quickly in renewable sources, raising to 28 percent from 22 percent the share of generating capacity that would come from such sources.

In its final version, the rule retains the same basic structure as the draft proposal: It assigns each state a target for reducing its carbon pollution from power plants, but allows states to create their own custom plans for doing so. States have to submit an initial version of their plans by 2016 and final versions by 2018.

But over all, the final rule is even stronger than earlier drafts and can be seen as an effort by Mr. Obama to stake out an uncompromising position on the issue during his final months in office.

The anticipated final climate change regulations have already set off what is expected to be broad legal, legislative and political backlash as dozens of states, major corporations and industry groups prepare to file lawsuits challenging them.

Senator Mitch McConnell of Kentucky, the Republican majority leader, has started an unusual pre-emptive campaign against the rules, asking governors to refuse to comply. Attorneys general from more than a dozen states are preparing legal challenges against the plan. Experts estimate that as many as 25 states will join in a suit against the rules and that the disputes will end up before the Supreme Court.

Leading the legal charge are states like Wyoming and West Virginia with economies that depend heavily on coal mining or cheap coal-fired electricity. Emissions from coal-fired power plants are the nation’s single largest source of carbon pollution, and lawmakers who oppose the rules have denounced them as a "war on coal."

"Once the E.P.A. finalizes this regulation, West Virginia will go to court, and we will challenge it," Patrick Morrisey, the attorney general of West Virginia, said in an interview with a radio station in the state on Friday. "We think this regulation is terrible for the consumers of the state of West Virginia. It’s going to lead to reduced jobs, higher electricity rates, and really will put stress on the reliability of the power grid. The worst part of this proposal is that it’s flatly illegal under the Clean Air Act and the Constitution, and we intend to challenge it vigorously."

Although Obama administration officials have repeatedly said states will have flexibility to design their own plans, the final rules are explicitly meant to encourage the use of interstate cap-and-trade systems, in which states place a cap on carbon pollution and then create a market for buying permits or credits to pollute. The idea is that forcing companies to pay to pollute will drive them to cleaner sources of energy.

That new rule also demands that power plants use more renewable sources of energy like wind and solar power

Mr. Obama tried but failed to push through a cap-and-trade bill in his first term, and since then, the term has become politically toxic: Republicans have attacked the idea as "cap and tax."

But if the climate change regulations withstand legal challenges, many states could still end up putting cap-and-trade systems into effect. Officials familiar with the final rules said that in many cases, the easiest and cheapest way for states to comply would be by adopting cap-and-trade systems.

The rules take into account the fact that some states may refuse to submit plans, and on Monday, the administration will also unveil a template for a plan to be imposed on such states. That plan will include the option of allowing a state to join an interstate cap-and-trade system.

The rules will also offer financial benefits for states that choose to take part in cap-and-trade systems. The final rules will extend until 2022 the timeline for states and electric utilities to comply, two years later than originally proposed. But states that begin to take actions to cut carbon pollution as early as 2020 will be rewarded with carbon reduction credits — essentially, pollution permits that can be sold for cash in a cap-and-trade market.

Climate scientists warn that rising greenhouse gas emissions are rapidly moving the planet toward a global atmospheric temperature increase of 3.6 degrees Fahrenheit, the point past which the world will be locked into a future of rising sea levels, more devastating storms and droughts, and shortages of food and water. Mr. Obama’s new rules alone will not be enough to stave off that future. But experts say that if the rules are combined with similar action from the world’s other major economies, as well as additional action by the next American president, emissions could level off enough to prevent the worst effects of climate change.

Mr. Obama intends to use the new rules to push other countries to commit to deep reductions in their own carbon emissions before a United Nations summit meeting in Paris in December, when a global accord to fight climate change is expected to be signed.

Mr. Obama’s pledge that the United States would enact the climate change rules was at the heart of a pact that he made last year with President Xi Jinping of China, committing their nations, the world’s two largest carbon polluters, to substantially cut emissions.

"It’s the linchpin of the administration’s domestic effort and international effort on climate change," said Durwood Zaelke, president of the Institute for Governance and Sustainable Development, a research organization. "It raises the diplomatic stakes in the run-up to Paris. He can take it on the road and use it as leverage with other big economies — China, India, Brazil, South Africa, Indonesia."

While opponents of the rules have estimated that compliance will cost billions of dollars, raise residential electricity rates and slow the American economy, the administration argues that the rules will save the average American family $85 annually in electricity costs and bring additional health benefits by reducing emissions of pollutants that cause asthma and lung disease.

The rules will be announced at a White House ceremony on Monday and signed by Gina McCarthy, the Environmental Protection Agency administrator. While the ceremony is scheduled to take place on the White House’s South Lawn, officials said it might be moved indoors to the East Room after forecasters predicted that the weather would be too hot.

 

 

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The Peak Oil Crisis: It‘s All Around Us

Ten years ago peak oil was assumed to be a rather straight forward, transparent process. What was then thought of as "oil" production was going to stop growing around the middle of the last decade.

Shortages were going to occur; prices were going to rise; demand was going to drop; economies would falter; and eventually a major economic depression was going to occur. Fortunately or not, depending on your point of view, the last ten years have turned out to a lot more complicated than expected. Production of what is now known as "conventional" oil did indeed peak back around 2005, and many of the phenomena that were expected to result did occur and continue to this day.

Oil prices have climbed several-fold from where they were in the early years of the last decade – surging upwards from $20 a barrel to circa $100. This rapid jump in energy costs did slow many nations’ economies, cut oil consumption, and with some other factors set off a "great" recession. Real economic hardships have not yet occurred

What is so interesting about all this is that a temporary surge in what was heretofore a little known source of oil in the U.S. is masking the larger story of what is taking place in the global oil situation

Much of this is due to the reaction that set in from high oil prices and increased government intervention into the economy. In the case of the U.S., Washington turned on the modern day equivalent of the printing presses and began handing out money that was used to develop expensive sources of oil and gas. The high selling price per barrel, coupled with cheap money led to a boom in U.S. oil production where fortuitous geological conditions in North Dakota and South Texas allowed the production of shale oil at money-making prices provided oil prices stay high.

U.S. unconventional oil production soared by some 3.3 million barrels a day (b/d) in the last four years, and, if the US Energy Information Administration is correct, is due to climb by another million b/d or so in 2015. While this jump in production was unexpected by most, it was just another phenomenon resulting from unprecedentedly high oil prices, which in turn resulted from the lack of adequate "conventional" oil production. As is well known, economic development can have major reactions and feedbacks

What is so interesting about all this is that a temporary surge in what was heretofore a little known source of oil in the U.S. is masking the larger story of what is taking place in the global oil situation. The simple answer is that except for the U.S. shale oil surge almost no increase in oil production is taking place around the world. No other country as yet has gotten significant amounts of shale oil or gas into production. Russia’s conventional oil production seems to be peaking at present, and its Arctic oil production is still many years, or perhaps even decades, away. Brazilian production is going nowhere at the minute, deepwater production in the Gulf of Mexico is stagnating and the Middle East is busy killing itself. On top of all this, global demand for oil continues to increase by some million b/d each year – most of which is going to Asia.

If we step back and acknowledge that the shale oil phenomenon will be over in a couple of years and that oil production is dropping in the rest of the world, then we have to expect that the remainder of the peak oil story will play out shortly. The impact of shrinking global oil production, which is been on hold for nearly a decade, will appear. Prices will go much higher, this time with lowered expectations that more oil will be produced as prices go higher. The great recession, which has never really gone away for most, will return with renewed vigor and all that it implies.

An additional factor which has grown considerably worse in the last ten years is climate change, largely brought about by the combustion of fossil fuels. We are already seeing global weather anomalies with record high and low temperatures and record floods as well as droughts. This too will take its toll on economic development as mitigating this change will soon become enormously expensive. We are already seeing migrations of restive peoples. Thousands are dying in efforts to get from the Middle East and Africa into the EU. Millions are already homeless across the Middle East and recent developments foretell hundreds of thousands if not millions more being added to ranks of refugees as decades and even centuries-old political arrangements collapse.

All this is telling us that the peak oil crisis we have been watching for the last ten years has not gone away, but is turning out to be a more prolonged event than previous believed. Many do not believe that peak oil is really happening as they read daily of surging oil production and falling oil prices. Rarely do they hear that another shoe has yet to drop and that much worse in terms of oil shortages, higher prices and interrupted economic growth is just ahead.

We are sitting in the eye of the peak oil crisis and few recognize it. Five years from now, it should be apparent to all. More

 

© 2014

Why Peak Oil Refuses To Die

Perhaps you’ve seen one of the recent barrage of articles claiming that fears of an imminent peak and decline in world oil production have either been dispelled (because we actually have plenty of oil) or are misplaced (because climate change is the only environmental problem we should be concerned with). I’m not buying either argument.

Richard Heinberg

Why? Let’s start with the common assertion that oil supplies are sufficiently abundant so that a peak in production is many years or decades away. Everyone agrees that planet Earth still holds plenty of petroleum or petroleum-like resources: that’s the kernel of truth at the heart of most attempted peak-oil debunkery. However, extracting and delivering those resources at an affordable price is becoming a bigger challenge year by year. For the oil industry, costs of production have rocketed; they’re currently soaring at a rate of about 10 percent annually. Producers need very high oil prices to justify going after the resources that remain—tight oil from source rocks, Arctic oil, ultra-deepwater oil, and bitumen. But oil prices have already risen to the point where many users of petroleum just can’t afford to pay more. The US economyhas a habit of responding to oil price hikes by swooning into recession, and during the shift from $20 per barrel oil to $100 per barrel oil (which occurred between 2002 and 2011), the economies of most industrialized countries began to shudder and stall. What would be their response to a sustained oil price of $150 or $200? We may never know: it remains to be seen whether the world can afford to pay what will be required for oil producers to continue wresting liquid hydrocarbons from the ground at current rates. While industry apologists who choose to focus only on the abundance of remaining petroleum resources claim that peak oil is rubbish, the market is telling Houston we have a problem.

Meanwhile some environmentalists have abandoned the subject of peak oil because they believe it’s just not relevant. For them, climate change is the only thing that matters. Society must deal with its collective carbon habit by going cold turkey on all fossil fuels. We can make the needed energy transition through the strategies of substitution and efficiency. Develop low-carbon energy sources (solar and wind, possibly nuclear), and use energy smarter! Electrify transport with battery-powered cars! Get with the program and stop wasting time on side issues!

Like the abundant-resource argument, this line of thinking proceeds from an unassailable premise. Anthropogenic climate change is indeed the nastiest, gnarliest environmental issue humanity has ever faced. The potential consequences stretch centuries or millennia into the future and imperil not just humanity, but thousands or millions of other species. But peak oil won’t go away just because it’s an inconvenient distraction from addressing that gargantuan issue. In fact, the two problems are closely linked and society will need to address both by way of a realistic, comprehensive strategy. I’ll get back to that point toward the end of this essay.

Is the necessary transition to renewable energy a simple matter of politics and regulation, as many climate campaigners seem to suggest? Hardly. Transitioning the electricity sector is a huge task in itself (the variability of wind and solar power implies soaring costs for energy storage, capacity redundancy, and grid upgrades once these sources start to provide a substantial portion of total electrical energy consumed). But liquid fuels pose an even bigger hurdle. Even the most advanced batteries do a poor job of storing energy when compared to oil; that’s why we’re unlikely ever to see electric airplanes, tractors, ships, 18-wheel trucks, or bulldozers. Some energy pundits tout compressed natural gas as a viable bridge fuel for transport, but that assumes sufficient availability and continued affordability of fracked shale gas—a prospect that seems highly unlikely in view of the results of Post Carbon Institute’s ongoing research into possible shale gas drilling locations and per-well production profiles. Hydrogen could be a niche fuel in some instances, but conversion from other energy sources (electricity or natural gas) to hydrogen implies energy losses, as does hydrogen storage. Further, if we were to make lots of H2 from water, using electricity, in order to fuel much of the transport sector, this would place an enormous extra burden on solar and wind, which already face a daunting job replacing coal and natural gas in the power generation sector.

How about energy efficiency? Good idea! We need to cut energy waste, and the folks at Rocky Mountain Institute have proposed many good ways of doing that. But, at the end of the day, efficiency is subject to the law of diminishing returns; so, while the tie between energy consumption and economic output is somewhat elastic, it cannot be severed. Specifically regarding oil: yes, many nations have reduced petroleum consumption in the last few years as a way of adapting to higher prices. But the fact that their economies have weakened suggests that efficiency gains have tended to lag behind oil price increases. Average vehicle fuel economy has improved, but not fast enough—so our main “efficiency” strategy has in reality simply been to travel less, and then deal with the withdrawal of economic benefits that cheap transport formerly provided.

None of this is trivial: oil is essential to the functioning of the modern industrial world. We use it for just about all transportation, which is key to trade. It’s also the fuel for construction, resource extraction (mining, fishing, forestry), and agriculture. Together, these sectors form the backbone of the real, physical economy of industrialized nations.

Again: the costs of oil production are rising and oil is stubbornly hard to substitute. As I argued in a recent book, this effectively spells the end of the historic period of rapid economic growth that began shortly after World War II. There is no way out; inevitably, society will become less mobile and—this should be cause for much greater concern—it will either produce less food or produce it in more labor-intensive ways.

Of course, peak oil and climate change aren’t the only looming challenges we should be concerned about. Economists rightly worry that the world is mired in far too much debt. Ecologists warn us about biodiversity loss, pervasive chemical pollution, and human overpopulation. Food system analysts try (usually in vain) to direct public attention toward the predicaments of topsoil degradation and depletion of aquifers from over-irrigation. Public health professionals caution us about the specter of pandemics as antibiotics lose effectiveness due to rapid microbial evolution. For city managers, the crumbling of water, sewerage, bridge, gas, and electricity grid infrastructure implies countless disasters just waiting to happen. I could go on. It’s all so overwhelming! Perhaps the only way to avoid crisis fatigue these days is simply to stop paying attention. But amid all these priorities and problems, peak oil refuses to die.

Those of us who insist on paying attention sooner or later get around to doing a form of mental triage. What are the worst crises that humanity faces over the long run? Which are the worst in the short term? What are the deeper issues, of which many problems are mere symptoms? This sorting process has led many systems thinkers to the conclusion that our species, in essence, faces an ecological dilemma of overpopulation, resource depletion, and environmental degradation resulting from a relatively brief period of rapid expansion enabled by a huge but temporary energy subsidy in the form of fossil fuels. We discovered buried treasure and went on a spending binge, adopting a way of life that cannot be supported long-term. Peak oil, climate change, mineral depletion, soil degradation, species loss, and the rest are justwords that blind men use to describe an elephant.

What we must do now is treat symptoms while keeping in mind the root disease, seeing why and how various crises are related. I have a couple of suggestions in this regard. One is that we begin to speak of peak oil and climate change as two sides of the same coin. The coin itself represents our reliance on fossil fuels and their unique energetic benefits. Both side-problems (the declining economic value of fossil fuels as they deplete, on one side, and the increasing environmental cost of burning them, on the other) demand that we reduce our fossil fuel dependency as rapidly as possible, even though that means sacrificing benefits we have come to depend on. If we maintain this holistic view of the situation, we’re more likely to understand that there is no way to keep eating our cake while having it too, either by continuing to burn fossil fuels of declining quality or by relying on new technology to fix what is actually an ecological problem. We can’t frack our way back to economic prosperity; nor can we unplug a coal plant, plug in a solar panel, and go on expanding population and consumption. We will have to adapt to the quantities and qualities of energy that are actually available from renewable sources alone, and that will mean changing the way we do just about everything.

Which brings me to the second, related suggestion. The constellation of challenges before us ensures that economic growth, as we have known it, is over, finished, kaput. That’s a terrible thing, in that the end of growth will almost certainly entail financial and political turbulence with real human casualties. But from the standpoint of diagnosis and treatment, it simplifies everything marvelously. If our impending crises stem from fossil-fueled expansion of population and consumption, their resolution surely starts with a coordinated, planned, and managed program of decarbonization and degrowth. We must reduce population and energy consumption from fossil fuels, while minimizing the human and environmental impacts of both past growth and the process of contraction. Easily said, not so easily done. But if civilization is to maintain itself in any recognizable form, this is what’s necessary. It would really help if those of us working at treating the various symptoms of the global meta-crisistogether acknowledged that growth is a core part of the underlying problem, not a solution, and that it is effectively over in any case.

Ignore peak oil (this could equally be said of climate change), and our view of the global problem-set immediately becomes distorted. We grasp at apparent solutions that turn out to be a useless waste of effort, or worse. Peak oil helps us understand what we’re faced with, and what we must do. It’s a gift wrapped in a curse. And it refuses to go away no matter how often it is pronounced dead.

By. Richard Heinberg

 

© 2014

Natural Gas in the Palestinian Authority: The Potential of the Gaza Marine Offshore Field

Summary: Although in strict legal terms its status is ambig-uous, a 25-year exploration license for the marine area off the Gaza Strip was awarded by the Palestinian Authority in 1999.

The Gaza Marine field was discovered the following the year though its natural gas has yet to be exploited. Politics as well as failure to agree on commercial terms have been the principal reasons for the delay.

Exploitation of the field would provide the Palestinian Authority with an important revenue stream. Using Gaza Marine gas may also reduce the need of Israel to consume its own natural gas to generate electricity for the Palestinians. Ultimately the decision will be political, but, in economic terms, the case for the exploita-tion of Gaza Marine is strong. Download PDF

 

© 2014

The High Cost of Gas Exports - Australia

The impact of LNG exports, particularly of coal seam gas, on Australian industry continues to be the topic of debate, with one recent report warning that there it will further destroy the local manufacturing industry (already reeling from Dutch disease) - High gas prices threaten thousands of jobs, billions of dollars: industry.

A new report warns the riches promised by exporting Australian gas may have a devastating impact on local industries, particularly manufacturing. A coalition of half-a-dozen industry groups commissioned the report by Deloitte Access Economics.

The report says domestic gas prices are rapidly rising as the market links in with international prices. It warns that, if the rise goes unchecked, the manufacturing sector alone will contract by as much as $118 billion by 2021, with nearly 15,000 jobs lost. The report also finds that mining might contract by $34 billion and agriculture by $4.5 billion.

Peak Energy: The high price of gas exports

 

© 2014

Geo-politics of oil in Saudi Arabia: Potential for Conflict

Saudi Arabia’s New Strategic Game in South Asia

Motivated by old and new security anxieties, and above all, by its sectarian competition with Iran, Saudi Arabia is playing a new game in South Asia. In a dramatic shift from prior decades, warming ties with India have already served Riyadh well by steering New Delhi away from a closer partnership with Tehran. Separately, reenergized links with Pakistan offer Riyadh even more potent ammunition to counter Iran’s nuclear and regional ambitions.

Although Western analysts tend to view Saudi policies through a Middle Eastern lens, Riyadh’s South Asia play is a high-stakes gambit with direct consequences for Iranian nuclear developments, the war in Syria, Pakistan’s stability and Indo-Pakistani peace. Fortunately, if Washington is clever and a little lucky, many of Riyadh’s moves with Islamabad and New Delhi can be turned to the U.S. advantage.

Saudi Anxieties, Old and New

Throughout its modern history, the insular and fabulously wealthy Saudi monarchy has grappled with domestic and regional security anxieties despite extraordinary military expenditures. At home, the state’s official sponsorship of the austere Salafi school of Sunni Islam has created particular problems with the country’s Shia minority on the one hand, and with radical and violent Islamist groups such as Al Qaeda, on the other. At the same time, the tradition-bound, dynastic politics of the Al Saud family poses an obstacle to the sort of reform that would encourage broad-based economic growth and political participation.

Given these domestic political challenges, the events of the 2011 “Arab Spring” raised new Saudi fears about internal unrest and regional strife. Saudi leaders have tended to interpret recent political upheavals in the context of a broader sectarian and strategic competition with Iran. That rivalry for leadership within the Muslim world has driven Saudi defense and foreign policy for decades and shows no serious sign of abating.

Iran’s nuclear ambitions exacerbate Saudi fears, and the latest spate of U.S.-led multilateral negotiations with Tehran has done little to inspire confidence in Riyadh. Like the Israelis and other critics of the process, the Saudis worry that Iran is using talks to slip free from crippling international sanctions in ways that will allow Tehran to expand its regional influence without permanently conceding its nuclear weapons or ballistic-missile ambitions. Unlike the Israelis, the Saudis do not yet have their own nuclear arsenal to deter Iran. But prominent Saudis, such as former intelligence chief Prince Turki Al Faisal, have declared that Riyadh would have no choice but to go nuclear if Iran ever actually crossed that threshold.

Recent U.S. and Saudi differences over the Arab Spring and Iranian nuclear negotiations exist against a larger backdrop: the gradual deterioration in Riyadh’s relationship with Washington. Throughout the Cold War, that relationship was justified by Washington’s commitment to defending the world’s preeminent energy producer from Soviet conquest. In the post–Cold War period, Washington remained concerned about secure access to Gulf energy supplies, but U.S. wars in Iraq ultimately contributed to the deterioration in bilateral ties with Riyadh, even though the Saudis had no love for Saddam Hussein’s Baathist regime. And, of course, the biggest shock to the U.S.-Saudi relationship came on 9/11, given the Saudi origins of fifteen of the nineteen Al Qaeda hijackers.

Looking ahead, there are additional reasons to anticipate that Saudi-U.S. ties will ebb. Above all, whereas U.S. energy imports from Saudi Arabia used to be taken for granted, the U.S.-led technological revolution in hydraulic fracturing, or “fracking,” and improvements in energy efficiencies are turning the United States into a net energy exporter. Energy sales will no longer offer as significant commercial ballast to the U.S.-Saudi bilateral relationship as they once did.

To be sure, Washington and Riyadh will continue to share important interests. On balance, however, the Saudis see the writing on the wall, and they have been smart to seek new ways to adapt to an increasingly difficult strategic environment. Riyadh has begun to diversify its commercial and strategic relationships and consider its security in an Asia-centric, rather than U.S.-centric, context. Evidence of these shifts is already apparent in the Saudi strategy for South Asia.

A New Game with New Delhi

In early 2012, Saudi authorities arrested Sayeed Zabiudeen Ansari (alias Abu Jundal), a Lashkar-e-Taiba (LeT) operative accused of playing a central role in planning and executing the 2008 terror attacks in Mumbai, India. After months of behind-the-scenes diplomatic wrangling between Islamabad, Riyadh, New Delhi, and Washington, Ansari was deported to India, where he was publicly re-arrested and interrogated extensively. Today he sits in solitary confinement in Mumbai’s central jail, and Indian sources claim that he has shed significant light on the Mumbai operation, including its links with members of the Pakistani intelligence service, or ISI.

Riyadh’s decision to send Ansari to India was remarkable. Ansari had traveled to Saudi Arabia on a Pakistani passport and his interrogation was almost certain to implicate the ISI—and by extension, provide strong evidence on the question of the Pakistani state’s support to terrorists. Pakistani officials undoubtedly would have preferred that Ansari be returned to their custody, and in the past, the intimate ties between Saudi and Pakistani intelligence services would have trumped Indian requests. In this case, however, Indian authorities prevailed. It helped, of course, that the facts were in New Delhi’s favor: Ansari was actually an Indian whose DNA matched with that of his Indian father. Pressure from U.S. intelligence officials and growing Saudi concerns about the genuine threat posed by groups like LeT may have sealed the deal.

Yet the Ansari case was also part of a wider trend in the Saudi-Indian relationship dating back to the end of the Cold War. For decades, India’s tilt toward Moscow and anemic economy had hindered the full flowering of ties between New Delhi and Riyadh. The new post–Cold War order paved the way for Riyadh to reimagine India’s potential as a growing energy consumer, a powerful regional actor, and even a strategic partner.

More important, in the early 2000s, Riyadh had good reasons for concern that India was growing closer to Iran. In 2000, India and Iran agreed to invest in a transit corridor linking an expanded Iranian port of Chabahar on the Arabian Sea to Afghanistan and Central Asia. In 2001, Indian Prime Minister Atal Bihari Vajpayee visited Tehran, and in 2003, Iranian president Mohammed Khatami was India’s chief guest for the annual Republic Day celebration. The 2003 “New Delhi Declaration” included pledges by the two sides to expand and deepen commercial links—especially energy trade—and defense cooperation in a “strategic partnership.” Early signs, such as security-oriented working groups and naval exercises, along with a 35 percent jump in bilateral trade between 2004 and 2005, suggested that this Indo-Iranian partnership had the potential to be more than mere rhetoric.

Riyadh, however, did not sit idly by and watch the Indo-Iranian relationship mature. The Saudis had important cards to play, not least their place as India’s top source for petroleum imports. These existing commercial ties were actively encouraged and bolstered by the diplomatic outreach of Saudi leaders. In 2006, King Abdullah visited New Delhi, the first trip to India by a Saudi monarch since 1955. There the two sides vowed to expand trade and to improve counterterror cooperation. In 2010, Prime Minister Manmohan Singh returned the favor with a three-day, high-profile visit to the kingdom, during which the two sides also declared themselves “strategic partners” and paved the way for a follow-on defense cooperation pact inked in February 2014.

From a Saudi perspective, India is clearly an important energy customer, but the heightened strategic value of closer ties with India is better appreciated when viewed through the lens of Riyadh’s rivalry with Tehran. Here Saudi policy analysts suggest that diplomatic outreach to New Delhi has already achieved significant successes. Point by point, the emergent Indo-Iranian partnership of the early 2000s has been matched by Riyadh’s own diplomatic overtures of the past decade.

In addition, the Saudis have continued to supply about a fifth of India’s petroleum imports, even as total Indian energy demand more than doubled from 1990 to 2009. In an era when India has faced mounting international pressure (especially from the United States) to limit the growth of its oil imports from Iran, reliable Saudi supplies provide a crucial alternative. In 2012, for instance, India cut its Iranian crude imports by 11 percent. In 2013, India cut even further, and Iran fell from number three to number seven on the list of India’s top oil suppliers. Without the confidence inspired by unstinting Saudi energy supplies and royal reassurances, India would also have been less likely to take diplomatic action against Iran by casting multiple important votes in the United Nations’ International Atomic Energy Agency (IAEA) during the period from 2005 to 2009.

To be sure, India has hardly turned into an unabashed supporter of the Saudi agenda. New Delhi remains concerned about the role of Saudi support to Salafist groups throughout the region, including in India itself, home to nearly 10 percent of the world’s Muslims. And Riyadh’s long history of intimate links with Pakistan’s security establishment will remain a source of distrust and tension for the foreseeable future. Moreover, New Delhi tries to maintain cordial, better relations with Iran. Tehran and New Delhi still see eye-to-eye on the situation in Afghanistan, and India has assiduously avoided taking sides in the Syrian civil war.

Nevertheless, the Saudis have clearly mounted an unprecedented effort to minimize India’s dependence on Iran and the gambit has worked in important, if circumscribed, ways.

Reinforced Ties with Pakistan

In April 2014, 130,000 troops took part in Saudi Arabia’s largest-ever military exercises. Dubbed “Abdullah’s Shield,” the show of strength included an impressive parade for visiting dignitaries in honor of King Abdullah’s ninth anniversary on the throne. Pakistan’s army chief, General Raheel Sharif, sat next to Prince Mutaib, the king’s son and National Guard minister, as a public demonstration of their important bilateral ties.

The parade was the latest in a series of recent events that suggest a rekindling of intimate relations between Riyadh and Islamabad, starting in mid-2013. The Saudi crown prince and foreign minister have each visited Pakistan, and General Sharif’s attendance at the military parade in April was his second high-profile trip to the kingdom since ascending to Pakistan’s top army job only six months earlier. Even more striking, however, was Islamabad’s March 2014 announcement that an unnamed friend—undoubtedly Saudi Arabia—had given Pakistan a “gift” of $1.5 billion, aimed at bolstering Pakistan’s currency. Well-placed Pakistani sources have since suggested that the total aid package could actually end up being twice or three times that amount.

Government officials in Islamabad contend that the recent Saudi embrace is nothing new. Saudi Arabia has had a long history of close ties with Pakistan: Islamabad started sending military trainers to the Kingdom in the 1960s, and during the 1970s and 1980s stationed thousands of troops—possibly as many as 20,000—there to bolster internal and external defenses. In return, the Saudis delivered to Pakistan nearly $1 billion in aid per year throughout most of the 1980s.

Also in the 1980s, the Saudis worked hand-in-hand with the United States to funnel billions of dollars to the anti-Soviet Afghan mujahedeen, all by way of Pakistan’s ISI. But the Saudi-Pakistani cooperation in Afghanistan did not end when the United States pulled away at the end of the Cold War. Indeed, the two continued to collaborate in their support to friendly factions—including the Taliban—during the Afghan civil war of the 1990s. Nor did Riyadh withdraw its support when Pakistan tested its nuclear weapons in 1998. To the contrary, the Saudis reportedly provided Islamabad with a desperately needed infusion of free energy, to the tune of 50,000 barrels of oil per day, to offset the pain of international sanctions.

For decades, the Saudis have played an influential political role in Islamabad. Riyadh’s willingness to host exiled Prime Minister Nawaz Sharif throughout most of General Pervez Musharraf’s regime was a tangible manifestation of that influence, as was Sharif’s well-financed return to Pakistan during the 2007-8 national parliamentary campaign. More than that, rumors are rife that many of Pakistan’s elite leaders—from across the political spectrum—quietly receive generous gifts from royal Saudi benefactors.

Saudi largesse and influence thus have a pronounced history in Pakistan, but the first five years of civilian rule after Musharraf’s departure in 2008 never saw the senior Saudi visits or generous aid packages of 2013 and 2014. The cooling of Pak-Saudi relations between 2008 and 2013 was primarily a consequence of Riyadh’s distrust of then-President Asif Ali Zardari. That distrust was rooted in several factors, including the Saudi belief that Zardari, the widower of former Prime Minister Benazir Bhutto and inheritor of the Pakistan People’s Party (PPP) that was founded in 1967 by her father, Zulfikar Ali Bhutto, is less of a loyal friend than Pakistan’s military leaders or the current prime minister, Nawaz Sharif (no relation to the current army chief).

This point was reinforced when Zardari’s PPP lost the May 2013 elections to Nawaz Sharif’s Pakistan Muslim League party, and Riyadh and Islamabad quickly got back to business-as-usual. From a Saudi perspective, Sharif’s loyalties—both sectarian and geopolitical—are unimpeachable. Now that they have their man in Islamabad, the Saudis expect that Pakistan will not tilt toward Tehran in any matter of significant concern.

The question is exactly what the Saudis expect to get from Pakistan for their generous financial assistance and friendly diplomacy. Initially thought to be at the top of a speculative quid pro quo list was the idea that the Saudis sought to spring former president Musharraf from house arrest (imposed while he stands trial for actions he took as Pakistan’s president) into a comfortable exile of the sort Nawaz Sharif enjoyed. Although this outcome would still be a plausible way for Musharraf’s current political drama to end, so far he continues to languish in Pakistan despite new rumors cropping up each time a senior Saudi official lands in Islamabad.

Other Pakistani analysts speculate that Riyadh’s friendly coercion was aimed at blocking plans for a gas pipeline from Iran, originally called the IPI for its ambition of running from Iran’s South Pars field through Pakistan to India. Saudi Arabia would clearly like to keep Iran from poking any holes in international sanctions, but it is less certain that Riyadh needed to pay Pakistan in order to kill the IPI. The pipeline deal was already plagued by delays, and major financial and security obstacles remain in the way of a line that would run through Baluchistan, some of the region’s most insecure and violent real estate.

Pipeline or no, Pakistan may be on track to deliver on two far more sensitive issues: Syria and nuclear weapons. Regarding Syria, despite subsequent claims to the contrary, Pakistan appeared to alter its policy stance after the February 2014 visit to Islamabad by the Saudi Crown Prince and Defense Minister, Salman bin Abdulaziz Al Saud. In a joint communiqué, Pakistan expressed support for the Saudi goals of forming a Syrian “transitional governing body” and removing all foreign (read: Iranian) military forces.

In addition, Pakistani military officers appear to be involved in the training of Syrian groups fighting the Assad regime, and the Saudis may have purchased a range of Pakistani-manufactured small arms, possibly even antiaircraft and antitank missiles, for use by anti-Assad insurgent groups. When asked, Pakistani officials have denied that their troops are training Syrian rebels and claim that the use of any weapons sold to Saudi Arabia would be contractually restricted to the Saudis themselves. But these deflections suggest obvious loopholes; retired Pakistani officers are not “serving troops,” and if the Saudis break end-use restrictions on Pakistan-made weapons, there is no reason to expect Islamabad would ever hold them accountable.

On the nuclear front, the picture is even more opaque. Pakistani officials uniformly insist that they learned their lesson from the experience of Dr. A.Q. Khan’s infamous international proliferation network that being involved in the transfer of nuclear materials and know-how is a dangerous and costly game—one they should never again play. The Saudis are also careful to explain that they have no claim on the Pakistani nuclear program, despite decades of rumors to the contrary, that like any self-respecting state, Pakistan guards its arsenal jealously, and that the only Saudi plan for nuclear development is to improve the nation’s indigenous technological capabilities.

These claims are difficult to accept at face value for two main reasons. First, both Riyadh and Islamabad have every incentive to hide the extent of their nuclear cooperation. If a nuclear transfer were exposed, the two states would not only feel the wrath of the international community for breaking rules enshrined in the Nuclear Nonproliferation Treaty (NPT), but they would also give Iran new reasons to accelerate its own nuclear-weapon development—precisely the outcome that Riyadh would prefer to avoid.

Second, if Iran does actually cross the nuclear-weapons threshold, Riyadh has signaled that it would stop at nothing to match Tehran’s feat—and fast. At present, the only realistic, cost-effective, quick way for Riyadh to make good on that threat is through a Pakistani nuclear transfer. No other nuclear state has as intimate a security relationship with Saudi Arabia, and Riyadh currently lacks the wherewithal to build an arsenal of its own.

In that hypothetical scenario, time would be of the essence. If the Pakistanis were to transfer warheads to the Saudis immediately after Iran goes nuclear, the international backlash would probably be muted, with primary blame assigned to Iran for starting the proliferation chain reaction. If, however, the Saudis take months or years to ready their own nuclear capability or negotiate a transfer from Pakistan, both Riyadh and Islamabad would almost certainly run up against a concerted international effort to close the nuclear door after Iran’s breakout. There are other good reasons for Riyadh to want to be able to move quickly. Armed with an immediate and dramatic counter to Iran’s new nuclear status, Riyadh would steal Tehran’s thunder, deny Iran a coercive advantage, and enter a marginally more stable world of nuclear deterrence from day one.

Just how Pakistan would transfer a nuclear capability to Saudi Arabia is a matter of some speculation. A dual-key arrangement with a contingent of Pakistani nuclear forces based in Saudi Arabia would hold some advantages, including that it might not technically violate the NPT (in the same way as U.S. nuclear forces have historically been based within nonnuclear allied territories). Such a deal would require a significant Pakistani military footprint inside Saudi Arabia, presumably a development that might be spotted by U.S. and other intelligence services.

At least as likely, however, both Riyadh and Islamabad would prefer to mask their cooperation, with the Saudis claiming, if implausibly, that they had developed their own indigenous nuclear capability, and the Pakistanis denying any involvement. At best, these fabrications would offer a diplomatically convenient way for states—possibly even the United States—to keep the punitive focus squarely on Iran, rather than on Pakistan or Saudi Arabia.

In almost any conceivable instance of a Pakistani nuclear transfer to Saudi Arabia, Pakistan’s leaders would have to be convinced that they could survive the consequences with neighboring Iran. Pakistan has already suffered a great deal from being caught between Iran and Saudi Arabia. Their sectarian rivalry was exported to Pakistan in the 1980s, when both sides indoctrinated, trained and funded brutal militant proxy groups, in turn contributing to a vicious cycle of communal separation that persists to this day. In 2013 alone, 650 Pakistanis died and over 1,100 were injured in Sunni-Shia violence. Like most acts of terrorism, the death toll pales in comparison to its broader political consequence; Pakistan’s sectarian attacks threaten to shred the unity of a nation nominally founded as an inclusive homeland for South Asian Muslims.

Although there is no longer evidence of official Saudi support to these groups, Pakistanis complain bitterly about private Saudi donations to mosques, madrassas and organizations behind the attacks, and many also fear that Iran could do much more to fuel reprisal attacks by Shia hit squads if Tehran wanted to cause trouble for Pakistan. In the past, Iran has also turned up the pressure on Pakistan in other ways, including by working closely with India to support proxy groups in Afghanistan and by allowing India to use the port of Chabahar along the Arabian Sea as a means to circumvent Pakistan and gain overland access to Central Asia.

Such concerns will almost certainly continue to lead Islamabad to play a diplomatic balancing act in its dealings with Tehran. That said, if Islamabad judges the potential for an Iranian nuclear breakout to be low and believes that preliminary nuclear dealings with Saudi Arabia (prior to the unveiling of an actual nuclear transfer) can be covert and deniable, then the immediate benefits of an offer from Riyadh would be nearly impossible for Pakistani leaders to resist. This is almost certainly the situation they face today.

Consequential New Links for Riyadh…and for South Asia

To make sense of Saudi Arabia’s geopolitical options now and into the future, it will be increasingly necessary to take Riyadh’s relationships with India and Pakistan into account. This holds true even though the primary battleground for Saudi-Iranian rivalry remains the Middle East, and Saudi-U.S. military and intelligence cooperation will persist for years to come. Keeping New Delhi from closer ties with Tehran will be crucial as India grows into a global economic, political, and military power. Utilizing Pakistan as a counter to Iran’s threats at the opposite ends of the security spectrum—terrorist proxies and nuclear weapons—will be even more vital to Riyadh.

The potential for a nuclear transfer from Pakistan to Saudi Arabia is by far the most consequential aspect of Riyadh’s dealings in South Asia. Although fraught with risk, the looming threat of a transfer from Pakistan to Saudi Arabia also holds potential advantages. The more credible the threat, the more Tehran will need to take it into account as it calculates the strategic benefits of crossing the nuclear-weapons threshold. Combined with the threat of Israeli air strikes on Iranian nuclear facilities, the risk of a broader nuclear domino effect in the region would also help to motivate other states to enforce the sanctions regime against Iran until a deal is done.

Like any deterrent policy, the greatest costs would be suffered only if it fails; that is, if Iran rejects or circumvents a nuclear deal. Even then, however, the regional-security picture would be made only incrementally worse by the simultaneous emergence of two new nuclear states as compared to a lone Iranian breakout. If anything, the regional nuclear balance against Iran would be easier to maintain, and less of the weight would rest on Israel’s shoulders.

Nuclear issues aside, Riyadh is successfully finding other ways to harness its relationships in South Asia. Whether by purchasing Pakistan-made arms for Syrian rebels, securing favorable Indian votes in the IAEA, or closing potential loopholes in the Iran sanctions regime, the Saudis have played South Asia more effectively than the Iranians have. Riyadh will continue to hold important tools of influence in both Islamabad and New Delhi because of its wealth, energy supplies and status as host to an enormous population of visiting South Asian workers who collectively send home billions in remittances each year.

Viewed from the South Asian perspective, Saudi Arabia’s regional security policy will always be judged by how it plays into the Indo-Pakistani context. There are reasons to hope that Riyadh can play a stabilizing role. For instance, if Saudi counterterror cooperation with New Delhi on Indian-born LeT operatives is just a start, then Riyadh will have other strings to pull as well, from controlling financial networks to limiting travel within its borders, that could also be directed against groups like the Haqqani network that have attacked Indians in Afghanistan. A more muscular Saudi campaign against these groups would improve security in India and would also send a firm message to sympathizers and backers inside Pakistan that the use of terrorist proxies against India is no longer something Riyadh condones.

On the other hand, if such Saudi moves are not handled with great care, they would backfire by contributing to Pakistan’s security anxieties and sense of isolation. For India, unofficial Saudi support to Salafist groups in South Asia and Riyadh’s defense ties to Pakistan will undoubtedly worry policy makers in New Delhi. All told, Riyadh’s pursuit of closer relationships with both India and Pakistan, without being sucked into the paralysis of their own hyphenated (Indo-Pakistani) conflict, will require great diplomatic finesse.

How Washington Should Play the New Saudi Game in South Asia

The United States has never been able to dictate or control Saudi Arabia’s foreign policy, but Washington retains unparalleled diplomatic access to Saudi leadership—owing in part to billions in high-tech defense sales—that affords U.S. policy makers a chance to explain their priorities and interests with respect to South Asia. Washington should make South Asia a regular focal point in future dialogues with Saudi senior leaders.

Although there will be a strong temptation to try and dissuade the Saudis from pursuing a nuclear-weapons capability via Pakistan, that approach will almost certainly be a waste of time. Washington should accept that the Saudis (like the Pakistanis before them) will try to go nuclear if they believe their mortal enemy will otherwise enjoy an overwhelming strategic advantage. Neither sales of conventional armaments, nor realistic U.S. security guarantees will solve Riyadh’s security dilemma. For the United States, the preferred means by which to reduce the likelihood of a Saudi nuclear program will be by successfully concluding and implementing a serious deal with Tehran.

U.S. officials should instead make the best of the Saudi-Pakistani nuclear nexus by embracing the threat as a deterrent against Iran as well as potential defectors from the present international sanctions regime. Through diplomatic channels with friends, allies and the Iranians themselves, U.S. officials should quietly share the assessment that a nuclear transfer between Pakistan and Saudi Arabia is a realistic scenario and nearly impossible to forestall if Iran crosses the threshold. At the same time, U.S. officials should explain that they do not anticipate a Pakistani-Saudi transfer under any other circumstances, given the costs that both Islamabad and Riyadh would incur from moving first.

Separately, Washington should use secure channels to communicate to the Pakistanis and Saudis that as long as any potential nuclear transfer takes place only after an Iranian breakout, the principal U.S. concern would be the safety and security of nuclear materials in transit and after deployment in Saudi Arabia. In the unlikely event that either Riyadh or Islamabad is willing to discuss the topic at length, perhaps as a hypothetical scenario or in a Track II setting, U.S. officials should try to ferret out how the Saudis understand the challenge of balancing a nuclear Iran and how the Pakistanis envision their own ability to weather the likely Iranian reaction. U.S. wargaming exercises that play out the post-nuclear regional balance would be useful ways to inform those conversations.

On other fronts, the deepening of counterterror cooperation between Saudi Arabia and India serves U.S. interests and should be advanced along two tracks in Washington’s dealings with Riyadh. First, U.S. officials should work to improve operational intelligence sharing so that South Asian terrorists like Ansari are more easily tracked, apprehended and extradited. A three-way Saudi-U.S.-Indian counterterror dialogue and standing intelligence coordination cell should be started to advance this effort.

Second, Washington should continue using diplomatic, financial, law enforcement and intelligence ties with the Saudis to press the point that Pakistan-based terrorists, including those lacking direct Al Qaeda ties, represent a significant threat to regional and international security. Despite past efforts, U.S. officials have never managed to translate the aggressive post-9/11 security measures the Saudis have used at home against Al Qaeda into a wider campaign that would dry up resources flowing to other groups engaged in terrorism. Part of the problem is that neither Riyadh, nor Islamabad wishes to pick new fights with the full array of radical groups they now face. Another part of the problem is that both Pakistan and Saudi Arabia also have a long history of using terrorist groups as proxies, and a persistent difficulty drawing lines between the radical organizations they support and those they oppose. Pakistan, for instance, has always tried to differentiate between “good Taliban” and “bad Taliban,” defining different militant groups not by their worldview, but by whether they serve or oppose Islamabad at any given time.

In today’s Syria, a similar problem has emerged. Whereas Washington is acutely concerned that arming anti-Assad groups could easily have Afghanistan-like repercussions, Saudi support (including training rebels and supplying weapons of Pakistani origin) appears to be more focused on the short term. Because the United States shares the basic Saudi desire to remove Assad from power, Washington should first aim to monitor and direct, but if necessary, also to curtail, the flow of Pakistani weapons and trainers in an effort to keep them away from radically anti-Western groups. The paucity of Syrian “moderates,” the stunning battlefield successes of the Islamic State in Iraq and Syria (ISIS), and shifting wartime politics will make this more easily said than done. More

 

 

© 2014

Here’s Why Al Gore Is Optimistic About the Fight Against Climate Change

Al Gore has something of a reputation as the Cassandra of climate change. But amid the doom and gloom—melting glaciers, ever-rising carbon levels, accelerating species extinction—the former vice president has been positively sunny of late.

Why? Solar energy. “There is surprising—even shocking—good news: Our ability to convert sunshine into usable energy has become much cheaper far more rapidly than anyone had predicted,” Gore wrote recently in Rolling Stone. “By 2020—as the scale of deployments grows and the costs continue to decline—more than 80 percent of the world’s people will live in regions where solar will be competitive with electricity from other sources.”

Now a new report substantiates Gore’s optimism. Research firm Bloomberg New Energy Finance predicts renewable energy will account for 49 percent of the world’s power by 2030, with another 6 percent coming from carbon-free nuclear power plants. Solar, wind, and other emissions-free sources will account for 60 percent of the 5,579 gigawatts of new energy capacity expected to be installed between now and 2030, representing 65 percent of the $7.7 trillion that will be invested.

Gore is right that solar is driving the shift away from fossil fuels, thanks to plummeting prices for photovoltaic panels and the fact that solar fuel—sunshine—is free.

“A small-scale solar revolution will take place over the next 16 years thanks to increasingly attractive economics in both developed and developing countries, attracting the largest single share of cumulative investment over 2013–26,” the report states.

Solar will outpace wind as an energy source, with photovoltaic power accounting for an estimated 18 percent of worldwide energy capacity, compared to 12 percent for wind. That’s not surprising given that a solar panel can be put on just about any home or building where the sun shines. Erecting a 100-foot-tall wind turbine in your backyard usually isn’t an option.

In the United States, solar is projected to supply 10 percent of energy capacity, up from 1 percent today. In Germany, though, solar and wind will account for a whopping 52 percent of all power generated by 2030, according to the BNEF estimate.

These are all projections, of course, based on the existing pipeline of projects and national policies and involving a certain amount of guesswork.

The big wild card is what happens in developing nations like China and India, where energy demand is expected to skyrocket with a burgeoning middle class. Energy consumption will grow to an estimated 115 percent in China and 200 percent in India over the next 16 years. (Falling birth rates in the West mean that energy use will drop 2 percent in Japan, for instance, and 0.2 percent in Germany.)

Whether the world kicks its reliance on coal-fired electricity will depend in large part on what kind of energy choices China and India make. China installed a record amount of solar capacity last year and has set ambitious goals for ramping up renewable energy production.

But old ways die hard. While the Obama administration has proposed regulations to slash carbon emissions from coal-fired power plants, the U.S. Export-Import Bank, on the other hand, is considering financing a 4,000-megawatt coal-fired power station in India.

The good news, though, is that individuals around the world can make a difference with their personal power choices. According to BNEF, much of the solar energy to be generated over the next 16 years will come from solar panels installed on residential roofs. More

 

© 2014