Another Shoe Has Dropped (And It’s a Big One)

by | published August 1st, 2013

I wasn’t more than 30 minutes outside of D.C. last night before my cell phone started ringing.

The calls involved breaking new developments overseas that promise to have a big impact on the global energy markets.

The information was vitally important, so I toyed for a bit with the idea of turning around and going back into the swamp.

But since the meetings over the past few days had been unproductive, I pressed on.

Now don’t get me wrong. Even though the elected circus had decided to hightail it out of town, there were still plenty of people working inside The Beltway.

In fact, the folks that remained are the ones I prefer to work with.

These are the career specialists, seasoned veterans and experts who remain in the policy trenches—and they know their business.

And despite their differing political opinions, the crew I know has managed to work together quite well. It is what has attracted me to this kind of work from the beginning.

As a pundit noted awhile back, the the ship of state is the only one that leaks from the top. But these days the vessel is taking on water on all decks.

I have mentioned this in OEI before. But an essential element in a democracy is compromise. Unfortunately, there is less of that in Washington today than at any time in the four decades I have been making this trek.

What elected officials used to stand for has been replaced by what they now stand against. Legislative skill has been replaced by ideology.

In this political minefield, the middle ground where the compromise used to take place has disappeared.

Which brings me back to why my cell phone started ringing before I even reached the Rockville exit on I-270…

Teetering Dominoes in the Middle East

The calls involved a major global energy situation that is likely to create a domino effect that will have carry on consequences for U.S. domestic policy.

No, this is not a doomsday script or a peak oil scenario.

It concerns what I have often termed the “energy balance.” And the problem will hit in other parts of the world first.

It will result in supply constrictions and regionally-specific pricing accelerations.

From a policy standpoint, the professional crew in Washington (largely the folks, remember, who are staying not rushing back home) have one overriding priority in the sequence of events that are unfolding. It is the simple fact that American strategic interests are advanced more easily if affordable energy is available worldwide.

The problem is rising energy shortages and costs are now a direct route to instability and radical solutions elsewhere. These limit leverage and realistic policy options while having a rather linear connection to import-export considerations defining U.S. prices at home.

These limits are already apparent in Washington’s response to the events unfolding in Egypt. Make no mistake: While the focus has been on counter demonstrations in and about Cairo’s Tahrir Square, there are more pervasive concerns afoot.

One relates to the genuine threat to regional stability should the Egyptian military crackdown of the Muslim Brotherhood force the movement underground. Another involves the splintering of the civilian opposition to deposed President Mohamed Morsi, making a return to democratic decision making uncertain.

That opposition was a popular uprising in response to deteriorating economic conditions in the most populous MENA (Middle East North Africa) country. Once the dust settles (and that may be some time off), all of those problems will remain for any subsequent government.

Except now they are going to be more serious because of the underlying reason for the collapse.

Here is where the other shoe falling…

A Serious Situation Made Worse

Reliable projections currently accepted in Cairo, Washington, and in Brussels (the seat of the European Union) indicate Egypt will reach an acute energy crisis before the end of this year. Those projections suggest the national electricity grid is facing a meltdown with widening parts of the country subject to increasing rolling brown outs followed by suspension of power altogether.

This situation will cause a further implosion of the economic infrastructure and the detailed prognosis is becoming alarming. Some very short-term U.S. assistance is possible but requires an expansion of aid packages and that further requires Congressional action.

But remember these are the same guys scheduled to “work” for only nine days out of the next 60.

And in less than a week, we have witnessed an even broader decline in Egyptian energy prospects. This situation will create a more facilitating climate for more dangerous domestic remedies inside an already torn country.

What’s troublesome is that after four days of discussions, nobody I met with believes matters will be improving until they first get even worse.

But that’s not why my cell phone started going off like crazy on a Maryland interstate.

Toward the end of yesterday, another problem was reaching a head elsewhere in the region. It concerns a country whose energy woes have been alarming its neighbors.

Unfortunately, these matters are unwinding more quickly than originally feared. A new government is facing a rising energy crisis, as their economy shrinks and radical solutions intensify. They also have nuclear weapons.

I’m talking about Pakistan. And what is going there is much bigger problem than most people realize.

As this dangerous situation continues to develop, I’ll be bringing you all of the details. So stay tuned.

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  1. Tiger Yawnghwe
    August 1st, 2013 at 13:58 | #1

    I thought that the Shale Oil Calvary was coming to the rescue of USA. But I suppose they can’t as it has been known for years by geologists & production engineers that shale oil well draw-downs are 90 to 100% in the first year.
    Tiger Yawnghwe.

  2. enthusceptic
    August 2nd, 2013 at 08:02 | #2

    Wow, thanks!
    It´s still the economy, and leguslators are more stupid than ever before. Say what you want about Bill Clinton, but he got this one right.

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