Dubai debt woes may cut CO2 but much more needed

POLITICAL ECONOMY

Tough times force OPEC members to close ranks
Cairo (AFP) Dec 6, 2009 - Divisions within OPEC have eased as the dual threat of the global economic crisis and climate change talks force oil producers to be pragmatic and unified, analysts said on Sunday. Two years ago, when oil prices soared to nearly 100 dollars a barrel, the oil exporters cartel, which includes both allies and foes of the United States, was severely tested. The Organisation of Petroleum Exporting Countries was then torn between price hawks like Algeria, Iran, Libya and Venezuela on one side and nations like Saudi Arabia which wanted moderate prices in the interests of consumers. But the stance of the price hawks has since lost support, leading to a convergence of positions within the bloc. Less than three weeks ahead of the next OPEC meeting in Luanda, Angola, the group's oil ministers agree that quotas must remain at their current level of 24.84 million barrels per day (bpd). Even US arch-foes Iran and Venezuela support that view.

Although the price of oil is trading at around 75 dollars a barrel, nobody is daring to ask for 100 dollars. Observers say this unity has come about largely thanks to pragmatism instilled into producers by the events of 2008: an unprecedented price surge to 147.50 dollars a barrel, followed by a plunge to 32.40 dollars in December. "What happened makes you think. An oil price of 75 dollars is higher than they could have hoped for. Even the most hawkish nations are finding it hard to ask for more," said Francis Perrin of the Oil and Gas Journal. This turnaround came about because producers were afraid of another price collapse, according to Julian Lee, analyst at the Centre For Global Energy Studies in London. "They still have a big fear of oil (prices) falling ... They haven't entirely lost that fear," said Lee. Another reason for the appeasement of the hawks was that the countries which traditionally call for high prices have proved less than effective in implementing decisions taken by OPEC.

At a meeting in Oran, Algeria in December 2008, OPEC pledged to withdraw 4.2 million bpd from production from the start of 2009 in order to stabilise the market. However, the bulk of the sacrifice was provided by Saudi Arabia, while Iran did not implement the agreed cut in production. "The influence of the hawks is limited" because "if somebody raises the issue of higher prices ... he will be told to comply more," said David Wech, an analyst at JBC Energy. Finally, while the impact of the global recession is still being felt on oil demand, another key challenge for producers looms in the shape of measures to reduce carbon emissions. Such a deal could be signed this week in Copenhagen during landmark UN-led talks on tackling global warming.

"When you see in the OPEC bulletins the rising concern linked to climate change, you can see that producers are closing ranks," said Perrin. "In the hardest times in its history, OPEC tends to stick together." Measures to reduce the share of fossil fuels in total energy consumption directly threaten the interests of oil producers. OPEC's decision last December to cut production by 4.2 million bpd officially brought down the total output of the 12-member cartel -- excluding Iraq -- to 24.84 million bpd. On Friday, crude prices tumbled in volatile trade, succumbing to a stronger dollar following an improved US jobs report picture. New York's main contract, light sweet crude for January delivery, fell 99 cents to 75.47 dollars a barrel. In London, Brent North Sea crude for delivery in January dropped 84 cents to settle at 77.52 dollars a barrel.

by Staff Writers
Dubai (AFP) Dec 6, 2009
Dubai's debt crisis may make a small dent in its greenhouse gas emissions but the Gulf emirate faces an enormous task to cut carbon to the levels to be proposed at the UN climate summit starting this week.

Dubai and the rest of the United Arab Emirates have the world's highest per capita carbon footprint according to the authoritative WWF Living Planet report, which says the federation must slash them 75 percent to be sustainable.

"Dubai is quite simply an environmental catastrophe," John Foster, a British Green Party member who worked in Dubai for three years and a half years, told AFP.

"Dubai is the epitome of unsustainable living at a time when 'sustainability' is the word on world leaders' lips as they gather in Copenhagen to set out a global road map to combat climate change," said Foster, former editor of Banker Middle East.

The WWF's most recent version of its study found that an average of around 9.5 hectares (23.5 acres) of land per person were needed to provide the resources and waste facilities used by people in the UAE, slightly more than the amount taken up by Americans, the second worst offenders.

If the world's resources are not to run out, the average global requirement must be reduced below 2.1 hectares (5.2 acres) per person, the campaign said in the biennial analysis issued in late 2008.

The Intergovernmental Panel on Climate Change wants developed countries to reduce greenhouse gas production at least 25 percent below 1990 levels by 2020, to limit global warming to two degrees Celsius (3.6 Fahrenheit).

Masood Ahmed, the International Monetary Fund's Middle East chief, told the Financial Times last week that the Dubai economy could contract again in 2010 after Dubai World's shock request for a six month halt to debt payments.

Phil Dickie, WWF international news editor, said the global downturn has led to a reduction in CO2 emissions in some industrial countries and "we would expect something similar" if Dubai's debt moratorium sparks a deceleration of the local economy.

However, while agreeing that the UAE has a lot of work to do, he said the UAE's rulers are fully aware of the problem and are taking action.

"We are actually cooperating with them and a former member of the WWF staff has gone to work on the Masdar project," Dickie told AFP.

The Masdar Initiative, launched by the government of Dubai's neighbouring emirate Abu Dhabi, is splashing out 22 billion dollars to build the world's first carbon neutral city.

Spread over 6.5 square kilometres (2.5 square miles), Masdar City is scheduled to house 55,000 people when ready in 2015 and will run totally on renewable energy.

Despite its rulers' environmental concerns, the UAE sold oil worth more than 100 billion dollars last year, making it the second biggest exporter in the OPEC cartel, only behind Saudi Arabia.

In June, Abu Dhabi won an international vote to host the new International Renewable Energy Agency after it promised loans worth 50 million dollars a year to promote the use of renewable energy in developing countries.

"Many see a contradiction between us being one of the largest oil exporters in the world and our seeking to house the agency," Reem al-Hashemi, a state minister, told AFP at the time.

"On the contrary, this confirms the commitment of a fossil fuel exporter to the enhancement of renewable energy. Since we export energy, we want to export all kinds of it," she added.

"The UAE is committed to environmental issues as a top priority," Hashemi said.

In September, classes started at the Masdar Institute of Science and Technology, billed as the world's first graduate academic institution dedicated to research into alternative energy, environmental technologies and sustainability.

Dubai's own efforts to reduce its carbon emissions are centred on practical measures within the city. A metro rail line opened in September, the first in the Gulf Arab region, and another is under construction.

It is also building a one billion dollar tram line, which, among other stops, will link the metro network to the monorail which runs up the trunk of Dubai's iconic Palm Jumeirah tree-shaped island resort.

But Foster, who stood for the Green Party in the London constituency of Bethnal Green and Bow in the last British general election, is unconvinced.

"It's window-dressing, PR and spin, which Dubai is a master of. People will not use the metro over their 4x4s, partly because of the status of the 4x4, which has become the modern-day eqivalent of a thoroughbred Arabian stallion.

"Dubai is the city of excess in every sense of the word. You can see this as you drive from the airport past manicured lawns and the grand greens of Emirates Golf Course, all soaked in water -- water that has been reclaimed at great expense in a wholly unsustainable way.

"You can see this as you drive past the unregulated construction of hordes of towers on your way to 'New Dubai' which has been reclaimed from the sea, but at the cost of a rare coral reef."

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POLITICAL ECONOMY

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