One heart-warming story I have been following has been the epic international showdown between the IRS and the Swiss banking giant UBS. Until recently, if you were to ask any American to name a “good” country, Switzerland would probably have come to mind first, because of its role in World War II. More recent events bracingly remind us that there is a difference between neutrality and goodness. Sometimes neutrality can foster and protect wrong too.

So the IRS finally got the inside track (an internal whistle-blower) on the secret UBS bank accounts of thousands of Americans (and their hundreds of millions of dollars), forcing the bank to divulge depositors’ names, and playing chicken with the tax cheats — Do we have your number? Do you feel lucky? Pay up or else!  More than 7500 Americans fessed up to avoid prosecution . They had banks accounts in 70 countries.

If only we could do that with all the crooks in the world.

Last week, I went to an event at NYU on African economic development. Ghanaian economist Yaw Nyarko, who is co-director at NYU’s Development Research Institute (with famed anti-aid economist, William Easterly) was rightly lamenting the fact that while it’s great to catch American tax cheats, it would completely change the dynamics of the developing world, especially in Africa, if there was a way to track the illegal bank accounts of those dictators, crooks, and cronies who have plundered their countries’ coffers of either aid monies or especially, resource revenues. For example, up to $400 billion in oil money has been stolen in Nigeria alone.

In some socially conscious circles, offshore or complicit banks that hide or launder ill-gotten gains have assumed the role of chief villain once reserved for oil companies. To find and return the money would make a huge difference in the fortunes of these countries, but such initiatives have been slipping lately.

In Nigeria and Indonesia, anti-corruption commissions have been thwarted, its people threatened. Most countries don’t even try. When British Petroleum (BP) agreed to transparency, the Angolan government forced them to back down.  Last week, anti-corruption groups in Zambia organized a honk-a-thon to protest the state’s refusal to pursue former President, Frederick Chiluba’s surprising acquittal in a corruption trial this summer. (Honkers were arrested.)

Of course, it isn’t just oil money. Michela Wrong’s book,  It’s Our Turn to Eat, tracks the entrenched corruption (from stolen aid and other revenues) that fanned the flames of extreme ethnic violence in Kenya after the flawed 2007 election. Earlier this year, NGO Global Witness released its report, Undue Diligence: How Banks Do Diligence with Corrupt Regimes. http://www.globalwitness.org/media_libra… )

Transparency initiatives like Publish What You Pay and Extractive Industries’ Transparency Initiative have spent eight years struggling to get extraction companies and governments to open their books and account for the money, but to little avail.

Ironically, it’s not hard to track such wire transfers or deposits. |Surveillance equipment and banking technology are easily sophisticated enough to track suspicious financial movements.  It just takes political will, which has been sorely lacking from offshore banks and corrupt governments and most noticeably, Western countries. Finally, this September, in Pittsburgh, the G20 asked the international FATF (Financial Action Task Force), which is supposed to set banking standards, to make anti-corruption a higher priority.

In another blog, I’ll write about new US initiatives to force the issue of corruption, the multinationals, and international law and how they might backfire.

A Gallup poll done two weeks ago reveals that of all industries, Americans rated the oil and gas worst, even worse than banking, GM and lawyers.

There have been some annoyed, defensive responses from workers in the oil and gas field — understandable since most people in the industry are hard-working, honest and understandably offended at being categorized as disreputable.

These complaints are undercut by recent oil company actions, like this month’s artificially staged “grassroots” events in Texas against stronger emissions controls. The New York Times reported:

“The event on Tuesday was organized by a group called Energy Citizens, which is backed by the American Petroleum Institute, the oil industry’s main trade group. Many of the people attending the demonstration were employees of oil companies who work in Houston and were bused from their workplaces…
For its part, the oil industry plans to raise the pressure in coming weeks through its public rallies so that it can negotiate more favorable terms in the Senate than it got in the House. The strategy was outlined by the American Petroleum Institute in a memorandum sent to its members, which include Exxon Mobil, Chevron and ConocoPhillips. The memorandum, not meant for the public, was obtained by the environmental group Greenpeace last week.”

In a related story, PR firms for the coal industry were found to have sent more than five dozen fake letters ( supposedly from groups like senior centers and the NAACP) opposing new climate change laws to members of Congress. The PR company, Bonner and Associates, blamed it on a rogue temp. The coal industry has apologized. But it’s understandable that public suspicion continues.

On Friday, the New York Times reported that Iraq’s date production, has fallen to half of what it was in the 1980s, when the country was the world’s leading date producer. “Date palms have been left to die for lack of water, and fungi and pests have ruined thousands of tons of fruit because the country has only three crop-dusting airplanes and three qualified pilots. American military approval is still needed to fly.”

The Iraqi government says it cannot spare any oil income to save the agricultural sector.

If, for thousands of years, Iraq, “the Fertile Crescent”, had a decent agricultural sector, and until the 1980s, also a stable manufacturing sector, its economy is now about only one commodity: oil. According to a senior Iraqi economist quoted in the article, 95% of the government’s revenue now comes from oil. It isn’t only the war’s destruction that threatens the Iraqi date crop. Even under the best of circumstances, countries with a heavy extractive sector have to work especially hard to sustain their agricultural or manufacturing sector in the face of the so-called Dutch disease, which vastly inflates the value of the resource country’s currency.

This means that a country’s other exports become too expensive to compete internationally and the economy withers. The country becomes totally dependent on its oil or gas. And extraction sectors bring in far fewer jobs than is commonly thought, leaving a lot of unemployed, bored, angry and restive people.

When you think of what the Dutch disease done to large sections of the Middle East, Nigeria, Gabon, Angola, and many other countries, you can see why this bodes very, very ill for Iraq in the long run. It would be smart for USAID or another American agency to start focusing on helping Iraq with more than oil and peace.

The Democratic-led Senate Energy and Natural Resource Committee supported legislation today that would allow for oil and gas exploration off the coast of Florida. In an ironic twist, this includes an area that Republican President George W. Bush took off limits in 2002. Far more Congressional action is needed before the legislation is past, but today’s action is a sign of a changing political landscape.

Seven years ago, at the behest of his brother, Republican Governor of Florida Jed Bush, President George W. Bush spent over $100 million to curtail drilling near Florida’s coast by buying back seven of nine federal leases from oil companies in a resource rich area called Destin Dome. The government secured a ten-year nonproduction agreement from Murphy Oil, which decided not to sell back its two leases in a calculated decision to wait till the government reversed course.

The decision helped bolster the governor’s standing in his state while the Bush Administration heralded the deal – which also included buying back leases near the everglades — on environmental grounds. He said, “Florida is known worldwide for its beautiful coastal waters and the Everglades. Today we are acting to preserve both.” But it was a costly way to prolong the inevitable: more offshore drilling.

Now Byron Dorgan (D-ND) is leading the charge. His amendment is a bit more pragmatic. It is an attempt to get more Republican senators on board with a larger climate bill, by opening up for exploration a proven, hydrocarbon-rich area that could be developed quickly due to its proximity to existing infrastructure. The legislation does not open up all of the water near Florida as it codifies a moratorium elsewhere.

But even those areas may be eventually under threat, …..click here to read more

Chevron CEO David O’Reilly spoke out last week against the Administration’s plan to use a cap and trade system to limit carbon emissions. His stance against US policy is nothing new.

from a policy standpoint, America has been moving in the wrong direction for a very long time.

He further outlines his list of grudges against US policy: taxes, restrictions on oil and gas development, and the belief that we can drill our way to energy independence (although the latter is not policy).

With such a grudge list, his apprehension against a cap and trade system is no surprise. His call for a carbon tax after he berated US policy is.

One of the main reasons why people support a carbon tax to limit carbon emissions is because it is simple and easy to employ quickly. (For other reasons check out the Carbon Center’s rationale.) In addition, it can also reduce emissions as well as a cap and trade system because it increases the cost of CO2. (The debate has become more intense recently as cap and trade legislation is being discussed.) O’Reilly’s decision to support the tax, however, is part business calculation, part negotiating tactic.

O’Reilly wants a stable and predictable business environment. A cap and trade system, which puts a variable cost to a unit of emissions, is intended to create incentives when demand to pollute is high. But the oil and gas industry with its long-term investment does not like short-term instability. Rex Tillerson, CEO of ExxonMobil, derided Europe’s cap and trade system last year, saying it is “all about moving the money around” as people buy and sell emission credits. Although a tax may increase the cost of their products, it would reduce uncertainty in their cost structures, which may be a greater management obstacle.

Cynics argue that he is trying to forestall the debate on climate action by bringing forth unpalatable idea: a call for a tax during a recession, which the American public is loathe to support. After all, it’s highly improbable you will see him lobbying for a $.50 gas tax just as you would not see a CEO of a steel company ask to increase taxes of iron ore.

O’Reilly knows that future climate legislation is near certainty. The more supportive he appears of some type of legislation, the more likely his views will be accepted in the debate.

OPEC and large Asian oil consuming countries led by Japan, India and China met on Sunday for the third Asian Ministerial Energy Roundtable. The group’s goal is to

To foster dialogue between Asia’s resource producers, primarily Middle East countries, and consumers, such as China and India, and to send a message to the world that both sides are cooperating in Asia to stabilize the international energy market.

The group called for greater transparency in oil markets and reductions in price fluctuations. Lofty goals — but the group put forward little policy solutions to meet them. Japanese Trade Minister Toshihiro Nikai comments after the discussions encapsulated the lack of concrete outcomes.

We will take actions to avoid any excessive volatility in commodity futures, and Japan will look into what measures are appropriate

The group hopes that limiting positions speculators can take will reduce volatility in the oil market. Countries, like India, have previously banned some commodities trading and US legislators now are considering different options to police the markets. Countries are reluctant to ban futures trading as those who trade physical oil use these derivative markets to lock-in prices. There is also open debate regarding the extent that futures trading influences the price of the underlying physical product. However, OPEC and others at the meeting believe that such speculative trading “largely contributed to skyrocketing prices, in the past” as Saudi Oil Minister Ali al-Naimi stated.

But separating speculators from traders is a difficult regulatory task that would likely have to be done by individual country. And to date, no country has been able to find an adequate regulatory framework.

The meeting also highlighted the growing concern over a lack of investment in oil infrastructure. Oil companies are finding it difficult to access credit to invest in new production and — due to the fall in oil prices — they also lack their own capital to fund new projects. The Roundtable highlighted the potential for oil to spike, as many others have predicted, if investment in infrastructure continues to flounder. However, other than the Saudis, who stated that they planned to continue to increase output to 12.5 mln barrels per day (up from 8 mln currently), few other nations have the capital to spend. Even Kuwait which plans to reach a goal of 4 mln barrels a day by 2020, up from roughly 3 mln, scrapped plans to build several projects including a refinery.

Senior US Representatives Henry Waxman (D-Calif) and Ed Markey (D-Mass) today released draft cap-and-trade legislation that would reshape US energy and climate policy through drastic cuts in emissions in the next 20 years and significant increases in renewables by 2025.

The American Clean Energy and Security Act of 2009 (ACES), intended to “create jobs, help end our dangerous dependence on foreign oil, and combat global warming” according to the official announcement of the House of Representatives Committee on Energy and Commerce, centers around four titles:

• A clean energy title that promotes renewable sources of energy, carbon capture and sequestration technologies, low-carbon fuels, clean electric vehicles, and the smart grid and electricity transmission;
• An energy efficiency title that increases energy efficiency across all sectors of the economy, including buildings, appliances, transportation, and industry;
• A global warming title that places limits on emissions of heat-trapping pollutants; and
• A transitioning title that protects U.S. consumers and industry and promotes green jobs during the transition to a clean energy economy.

The bill seeks emissions reductions greater than those proposed by the president: calling for a 20 percent cut in emissions from 2005 by 2020 instead of the 14 percent included in Obama’s Feburary budget. It also calls for utilities to produce one-quarter of US electricity from renewables sources by 2025, and includes a federal low carbon fuel standard modeled on California legislation.

…..click here to read more

Over the next year, the Obama Administration and Congress will debate how to address a wide variety of energy tax and fee issues. This comes on the heels of last year’s high oil and gas prices and record profits for companies in the industry which had Congress deliberating windfall taxes and more drastic action. Now that prices have dropped (at least for the moment), a more nuanced energy policy debate seems to be underway.

The Administration has begun the debate by outlining a plan in its budget that would amend taxes on the oil and gas industry. However, the Administration appears willing to negotiate with Congress on some of the details, which will eventually have to balance incentives, taxes, fees and access to resources. Even though the legislation will affect tax revenue and domestic energy production levels years into the future, it will be a product of oil prices and domestic economic activity when the legislation is passed. After all, Congress will not push a windfall tax when corporate profits aren’t at their peak or raise fuel taxes in a recession, regardless of the long-term implications.

What is needed is foresight. The President once commented:

I will tell you with $55 oil, we don’t need incentives to oil and gas companies to explore. There’s plenty of incentive. What we need is to put a strategy in place that will help this country over time become less dependent. It’s really important. It’s an important part of our economic security and it’s an important part of our national security.

When President George W. Bush said this in April 2005 he could have added that a strategy is an important part of environmental and fiscal policy, too.

Times have changed since then. Fluctuations in the price of oil have tested our wallets, but they have not changed our relationship with the commodity. Moreover, they have highlighted our need for a long-term strategy.