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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

02 September 2005

Katrina effects

Rarely has the human and geopolitical cost of a weather event been as great as that of Hurricane Katrina. Katrina will have a lasting impact on America’s economy; short term because 12% of America’s refining capacity has been impaired due to the hurricane (1); and long term, because the port of South Louisiana is the world’s fifth largest port and a major trade artery for the United States (2).

But there is one story that will make surely headlines as time passes: the limited refining capacity that the United States has and the fact that there has not been a single new refinery built in America in the past twenty five years (3). This explains in large part why America’s refining industry has been operating at near full capacity and it also underlines why the effects of Katrina on energy prices is likely to be severe.

In there, however, lies a bigger truth about American politics: the tendency to refuse that politics is about tradeoffs. More so than any other, the Bush Administration has consistently denied that political acts are interconnected, and that what may be comfortable today might prove dangerous or reckless when seen from a distance.

Take the economy. It was Vice President Cheney who pronounced the deficits do not matter; and it is the general policy of the Bush government to remain uninterested in the broader effects of its twin deficits on the American economy. At its core, this overlooks certain inescapable realities—that a deficit today means either that a government will have to run a surplus in the future, or at least that a greater percentage of the government’s revenue will go to service debt. And a trade deficit means that the credit that foreigners are extending to America will, sooner or later, have to be repaid, most likely by switching the consumption patterns of Americans (who will need to save more to repay the loan).

Or take energy. The Bush administration is emphasizing that increasing energy supply—for example by drilling in Alaska—is the solution to America’s problems. And what about climate change? “Technology” is the answer. These two positions are not unreasonable—but they are reckless when offered as the only remedies. You can’t thin an obese man just by taking away his food—at some point, you have to curb his appetite as well. As the refining story that comes from New Orleans reminds us, it is not possible to avoid building new refineries whilst not compromising the country’s vulnerability to a shock such as Katrina.

Or take foreign policy. After Katrina, the Bush administration might have to approach European countries with whom it has quarreled over Iraq to tap into their petrol reserves; given that Germany, France, Spain (and Italy) have the largest petrol stocks, this is a foreign policy predicament that gives unilateralism and multilateralism a new face (4). But Katrina is hardly the whole story; Americans, not limited to this administration, have only recently awakened to the link between supporting oppressive regimes and fostering enmity among their citizens towards America. And the Bush motto after September 11, “live your lives as usual,” is hardly attuned to the drums of war that the president is beating.

The list could go on, and Bush is hardly the only culprit. To be sure, there is something inspiring about trying to square the trade-off circle and about offering opportunity and hope where none exist. But there is a point when refusing to accept certain political linkages does more harm than.

That’s food for thought in the aftermath of a great catastrophe that is likely to rejuvenate the energy and other debates in America.

(1) Sheila McNulty, “US pays the price of years of living dangerously,” Financial Times, 2 September 2005;
(2) George Friedman, “New Orleans: A Geopolitical Prize,” STRATFOR Geopolitical Intelligence Report, 1 September 2005
(3) The reasons offered vary, but they inevitably have to do with the NIBMY (Not in my back yard) syndrome whereby local communities shun efforts to build new refineries close to where they live, to environmental requirements that make refining less attractive, and to the fact that oil companies have invested less in refining than in other parts of the business. Ref. 1 and also, “US stockpile approach proves too crude,” Financial Times, 2 September 2005
(4) Carola Hoyos, Javier Blas, Edward Alden, “Europe’s offer of petrol places Bush in quandary,” Financial Times, 2 September 2005



Anonymous Peter said...

Your points are an excellent broader view at the situation, a direct contrast to the cowardly PR defense gaining credit right now that everything and anything bad due to Katrina is the responsibility of the Louisiana governor and New Orleans mayor.

Your comments bring light that such disasters, and the preparation for them and reaction to them, necessarily need to be part of a national strategy.

1:51 AM  

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