Populists and Gas

[posted by Callimachus]

Some interesting pieces in the latest "Economist." Here's one that caught my eye:

This article suggests the driving force behind the Democratic takeover in Congress this month was more "populist" than "progressive."

Frustrated by stagnant wages and rising health costs and fearful that their jobs will be sent to China, anxious voters, particularly in the industrial heartland, sent a new brand of Democrat to Congress: one who may believe in God and guns but who is wary of big business and even more dubious about free trade. The rise of these “Lou Dobbs Democrats” (a reference to a globophobic blowhard on CNN) could spell significant changes in American economic policy.

... Not only are the new Democratic lawmakers distinctly more protectionist than the politicians they replaced, but their trade-scepticism was important to voters. An analysis of voters in 50 competitive districts by Stanley Greenberg, a pollster, showed that Republicans' support of trade was one of the main factors that put off swing voters. Almost 70% of voters want the government to “protect jobs and ensure that trade is fair” rather than promote free trade.

All this will be tempered by realities, of course: Realities created by the Bush administration as well as those that pre-existed it. Like it or not, though, anyone who wants to lead America in the next generation has got to shepherd its working people through the volatile consequences of globalization and the wholesale redefinition of what a "job" and a "retirement" is.

"[P]rotectionism and Wal-Mart bashing" might get you elected, but you need more than that to run the country. "The big uncertainty for the Democratic Party is whether the centrist platform can be built in time, and whether the presidential candidates have the sense to stand on it."

Also, if you go there, check out this column on the deteriorating state of Russia's natural gas industry.

Russia has not developed a big new gas field since the Soviet Union collapsed, and those it inherited are depleting fast. The pipes are clapped out (just over half are more than 20 years old). The compressors are so inefficient that they waste 42 bcm a year. Yet, for political reasons, the government is pressing ahead with “gasification”—the extension of gas supplies to private households. That means more domestic demand, just as supply is falling.

... In theory Gazprom can develop new fields. In practice it needs foreign help, but it hates to see the foreigners sharing ownership, which bogs down negotiations. The rich Shtokman field beneath the Barents sea was discovered in 1988, but exploitation has been slowed by technical challenges formidable enough even before Russia’s capricious and xenophobic investment regime takes its toll. Foreign companies might risk a billion dollars here or there in Russia, but in the present climate of uncertain property rights they are not going to commit the tens of billions needed to develop a whole new gas field.

Gazprom’s main stopgap is to buy gas from Central Asia. Leaving aside the irony that a country as gas-rich as Russia should need to import gas at all, there are particular snags here. The implied quantities are huge. Purchases from Turkmenistan are supposed to rise more than tenfold, to 80 bcm a year, by 2009—and the Turkmen gas industry is even worse-run than Russia’s own. Independent producers inside Russia might offer some relief, save that Gazprom is twitchy about allowing independents to use its pipelines. Instead, it likes to buy them up, preserving its monopoly. When that happens they tend to fall to Gazprom’s own woeful standards of inefficiency.

Already Russia is cutting back gas supplies to soft targets such as Belarus, and trying to raise prices wherever it can. Things will get worse before they get better. A badly-needed new power plant in St Petersburg is not yet running because there is no gas arriving to fuel it. If Mr Riley is right, this will be a fascinating winter, and a most uncomfortable one for some households. Will Vladimir Putin decide to freeze his own voters, or those of neighbouring countries? One choice risks provoking a political explosion, the other a diplomatic one. If you live anywhere between Aachen and Amur, do check your stocks of candles and coal.