Peak Oil News: Peak Oil in Guatemala and the U.S.: Energy Crises at Both Ends of the Development Spectrum

Wednesday, September 14, 2005

Peak Oil in Guatemala and the U.S.: Energy Crises at Both Ends of the Development Spectrum

Global Public Media

By Gregory Nipper

In Brief:

Historian Gregory Nipper spent three months studying energy issues in Guatemala. In this article he explores the situation Guatemala faces as the second poorest nation in the hemisphere with respect to energy sources, shortages, related environmental problems, and new alternatives.

Gregory Nipper recently completed his studies at Portland State University. His master's thesis was on the history of the political conflict over Oregon's Trojan Nuclear Power Plant, which was the nation's largest commercial nuclear facility of its time.

Peak Oil in Guatemala and the U.S.: Energy Crises at Both Ends of the Development Spectrum By Gregory Nipper

Each nation on earth has been transformed to varying degrees by the general abundance of energy from fossil fuels, and each will face many fundamental challenges as declining global production of petroleum can no longer meet demand. However, there will almost certainly be enormous variation in the changes and reactions on the part of eaach nation. Accordingly, energy problems and their near-future consequences in Guatemala reveal striking differences from those of the United States, and can show a great deal about the global scope of the problem of peak oil and how to respond to it.

In short, as the second-poorest country in the Western Hemisphere, Guatemala is at an extreme economic disadvantage in its ability to withstand and respond to large-scale challenges. Also, with an export-based agricultural economy, Guatemala's already precarious system will be dealt a severe blow by diminished international commerce from vastly higher transportation costs. Crucially, however, there are two interrelated factors which put Guatemala in a far better position than heavily industrialized nations: its meager consumption of fossil-fuels and its status as an agrarian society able to re-localize its base of food production. In stark contrast, the United States by virtue of its wealth and economic power has attained the privilege of being among the very least sustainable societies in terms of energy consumption, resource management, and other related factors. The bigger they come, the harder they fall, as the saying goes.

Guatemala's energy crisis has developed within two related contexts. First is the nation's debilitating poverty. Following centuries of plunder by foreign enterprises and Guatemala's own political elite, 75% of the population remains below the level of poverty. The overwhelming majority lack sufficient access to basic nutrition, health care, and education. The second context is the brutal civil war that over a period of 36 years left hundreds of thousands dead, disappeared, or displaced. The war officially ended in 1996 but, due largely to the corrupt government's systematic failure to implement most crucial provisions of the peace accords, the society still struggles to make substantial progress.

These political challenges have not left Guatemalan society in a position to address energy problems that are now in the foreground of its social and economic woes. Increases in the price of petroleum, of which the vast majority in Guatemala is imported, have driven up the cost of production and transportation. Combined with already insufficient pay, this has presented a large portion of wage-earners with a severe crisis. For example, bricklayer Mario R. Diaz explained to Guatemalan daily Prensa Libre in August that he now needs to spend Q100 (around US$13) on gasoline each day to get to his job, where he earns around Q2000 per month. Thus, if he works five days per week, his remaining salary after transportation costs is roughly zero. Public transportation exists in many areas, but many fear to use it because of rampant crime. Robbery and assault pose a genuine risk to most bus commuters. Those that accept this risk do not escape higher transportation costs. All fares on the extra-urban bus routes that bring many rural residents into the cities increased 10% on September 1, and intra-urban fares have increased at a similar level. The higher oil price has not only put a strain on the urban population, where the majority of gasoline, diesel, and propane are used; it has also driven up prices of food and other basic necessities, sufficient quantities of which were already impossible for most families to afford. Guatemala's oil expenditures have increased 87% since 2002, a trend that has strained its unstable economy and will continue to do so.

Prices of other fuels in Guatemala have also jumped up suddenly. The price of propane rose 17% suddenly in late August, only one of a number of increases this year. Electricity is another volatile economic factor. Much of the country's electricity is generated in facilities powered by fossil fuels; in 2002, 46% was by oil and 34% by coal. To its great disadvantage, Guatemala's electricity is controlled largely by Union Fenosa, a private monopoly in Spain, and by other corporations based in industrialized nations. The Guatemalan government, with no real ability to prevent rate increases, recently approved an 18% boost in electricity rates, announced by Union Fenosa utility a matter of days before it took effect.

To avoid calamity from rising rates, the Guatemalan government has introduced new energy subsidies in order to maintain the existing retail price structure - a band-aid measure in response to a worsening economic ill. The subsidy is paid for with increased import duties, which will eventually accumulate to the point of inflicting serious damage on the domestic economy. Inescapably, the Guatemalan government like that of other nations faces a considerable period of increasing energy costs.

The Guatemalan government's attempts to sidestep the recent surges in the price of petroleum are even more short-sighted. So far, instead of introducing new subsidies, as it has done in the past, the country has used its strategic petroleum reserves to offset the rising prices in the vain hope that they will soon fall to affordable levels. However, there are proposals in Guatemalan congress to eliminate the tax on diesel in order to maintain a lower retail price. If passed, Guatemala would lose roughly US$250 million in direly needed tax funds for social services. In any case, most projections indicate that the diesel prices will soon rise beyond the point that such measures will forestall price surges in transportation and manufacturing. The inefficacy of these sorts of straw-grasping is revealed by the profound instability of the energy market exemplified by Hurricane Katrina's effects on the price and availability of oil in the United States, from whom Guatemala imports 52% of its petroleum. This self-deception about the future of energy is hardly unique to Guatemala, of course; it is also present, arguably in a more pathological form, in the Bush administration.

These early symptoms of Guatemala's lack of preparedness for the decline of cheap fossil fuels point to what should be a main priority for any nation: the development of sustainable and local bases of energy production with which to anchor the basic needs of the population.

Guatemala has a long way to go before achieving this, as demonstrated by the electricity shortages that persist across the nation. More than enough energy is produced by plants owned by the Union Fenosa, but a substantial amount of this electricity is sold to neighboring El Salvador leaving Guatemalans with a consistent energy deficit. Guatemalan President Oscar Berger plans to eliminate this deficit with a rash of no less than 36 new hydroelectric facilities. But as long as Guatemala's state electric company is foreign-owned these will further set back the cause of self-reliance. As in many other parts of the world, what is urgently needed to protect local interests, especially in the difficult transition into the end of the era of fossil fuels, are sustainable energy projects that are publicly controlled by the municipalities they serve for the direct benefit of their residents.

Many planners favor harnessing the power of Guatemala's river system. However, the tendency of its hydroelectric projects has been to bury irreplaceable river habitats under reservoirs and to displace nearby indigenous communities against their will. Furthermore, the total capacity of the 36 new hydroelectric dams would total a mere 251 megawatts. This amounts to less than 15% of the electricity currently being produced in Guatemala, a far cry from the amount needed to relieve shortages and overcome petroleum dependence, as Berger has promised when promoting the projects. Ethanol, Berger's other plan to solve these problems, is equally hopeless. In the United States, ethanol is known as a fuel additive normally derived from corn, which makes it extremely popular in Midwestern states. One of the problems with corn-based ethanol is that the entire production cycle requires more energy than the fuel produces when burned. Viewed broadly, this heavily subsidized process is terribly wasteful from the standpoint of energy expenditure, and is hardly among the most promising courses of action for Guatemala, or any nation.

Fortunately, there exist more sensible alternatives to petroleum, and forward-looking investors and non-profit organizations within and outside Guatemala are beginning to explore their potential there. Geothermal energy is one of the most viable of these, according to Erick Gonzalez of Guatemala's University of San Carlos. He points out that geothermal sources could produce approximately 4000 megawatts, more than double the quantity of electricity currently produced in Guatemala. Other alternatives are being explored by Fundaci�n Solar, a Guatemalan renewable energy non-profit. As their name suggests, solar energy projects are among their activities, and they are also studying the feasibility of wind energy. Biomass, the use of methane gas from waste matter, is also another possibility. In the capital city, some of the garbage that has piled up over the last 30 years is being put to use in a small experimental biomass plant and research station. Developers hope it will serve as a prototype to attract foreign investment in biomass projects on a national scale. At the grassroots, an organization called the Appropriate Technology Infrastructure Development Group is working on promotion and training on the use of biomass devices and wind-generating technologies in a number of rural areas.

Additionally, alternatives to diesel are sorely needed in Guatemala. One of the principal forms of transportation in Guatemala, which currently lacks any form of vehicular emissions standards, are old school buses that burn large quantities of diesel and fill the air with copious amounts of noxious black exhaust. In addition to the problem of higher petroleum prices, these vehicles present a severe threat to air quality. In response to these crises, a Guatemala City-based organization called Octagon is currently conducting extensive research on how to produce biofuels to maximum advantage, as well as plant-based engine lubricants and additives.

However, proponents of alternative energy infrastructure in Guatemala must deal with constraints on both time and funding. These vital projects have emerged only very recently and even now, as energy instability threatens a worsening social and economic crisis globally and nationally, the Guatemalan government fails to take adequate measures in support of these alternatives. It claims there are insufficient funds in the budget for the development of new energy projects - not even for the proposed 36 new hydroelectric plants touted by President Berger, for which he has simply made an open plea for foreign investment. Lack of funding is a genuine obstacle in a country with as many problems as Guatemala - but consider the military budget. It is enormous for a nation its size, and following a one-time post-war reduction the government's tendency has been to increase it, sometimes by degrees that violate the nation's own peace accords. The proposed 2006 budget allocates 10% more for the military than the previous year, and surpasses the funding for the Ministry of the Environment by more than 27 times. In the United States, the government has pushed military funding to a level never seen in history, and it now accounts for roughly half of the entire world's military spending. This level of spending can have little to do with simply defending against potential enemies. For instance, in 2004, the U.S. military budget was more than 30 times the combined spending of the seven "rogue" nations. These figures represent an incomprehensible waste and a profound hostility toward social welfare with respect to energy, the environment, the economy, and many other areas of the common good. It will be necessary in these nations and many others to use these vast resources to develop sound alternatives to fossil fuels in order to minimize potentially immense disruption in the transition to new energy infrastructure and the corresponding changes in the economy, agriculture, and so on.

The facts of Guatemala's worsening economic crisis, stemming from its systemic dependence on foreign investors and a gradually imploding energy market, indeed paint a bleak picture. However, Guatemala possesses two characteristics that are highly advantageous: its extremely meager energy consumption, and the potential of its agricultural system to convert to more sustainable and localized food production.

Consider a comparison between Guatemala and the United States: petroleum consumption in Guatemala has been approximately 66,000 barrels per day or 2.09 barrels per year per capita. In the U.S. annual petroleum consumption in recent years has been around 26 barrels per capita. The gap in electricity use between the two nations is even greater. Per capita consumption of electricity in the U.S. is between 27 and 35 times higher than per capita consumption in Guatemala (due to statistical variation that exists between studies).

This immense difference is accounted for by the difference in wealth between a nation that has suffered centuries of exploitation and underdevelopment on the one hand and the world's richest society on the other. Colossal wealth entails colossal waste. For Guatemala, using large amounts of energy is simply not an option. For example, the hot water heaters that even poor U.S. families take for granted are virtually nonexistent in Guatemala. Water is heated by the sun in black rooftop tanks and then, in many areas, heated further as it flows through an electric shower head. Dishes and laundry are largely done by hand with cold or lukewarm water. There are also many rural areas in which the majority of the population makes do with no electricity whatsoever. Firewood provides the fuel for most cooking and heating in Guatemala. This way of life, in contrast to that of the U.S., adds immeasurably to Guatemala's ability to adapt to power outages and a considerable period of generally decreasing availability of affordable energy. For example, as the price of propane becomes prohibitively expensive, more Guatemalans will return to using firewood - a practice that is becoming increasingly sustainable with the spread of newer stoves that burn the wood with 70% greater efficiency.

Also, Guatemala is far closer to a traditional agrarian society, which is characterized by a large percentage of the population involved in food production and a high potential for agricultural self-sufficiency. Also, like the U.S., it has seen a small but growing resurgence of traditional ("organic") farming as chemical inputs have proven to introduce more problems for farmers than they solve, including steadily decreasing yields. Still, unsustainable methods of raising crops and livestock persist and have contributed to rapid deforestation and other problems on a national scale.

Of course, the fact that Guatemala's low energy use is a function of its poverty does not mean that poverty itself will help the nation respond to its energy crisis. Hurricane Katrina provides a recent example of how poverty exacerbates a disruption. However, in working to raise its standard of living it is crucial that Guatemala avoid becoming entrapped by "structural adjustment" and all it entails, and by self-destructive patterns of unsustainable agriculture, industry, and ways of life.

Unfortunately, both Guatemala's remarkably low energy consumption and its sturdy base of food production are regressing. For example, its petroleum consumption has more than doubled in the last ten years. This trend has been accompanied by broad changes in the country's agriculture and other areas of the economy, as the nation has become increasingly indebted, dependent on large exports to maintain a stable currency, a cycle that introduces volatile capital flow and decreased wages and standards of living. These trends will become even more pronounced with the advent of CAFTA (Central American Free Trade Agreement), Plan Puebla-Panama, or similar investors' rights agreements. Still, Guatemala will remain for the foreseeable future closer than the U.S. to being able to re-localize food production and maintain low levels of energy consumption with minimal social and economic disruption. Guatemala's challenge is to increase the standard of living by reversing its present course with respect to energy consumption, population growth, corporate globalization, debt, dependency, and other problems related to these.

People in the U.S. can learn a great deal by comparing and relating their own energy predicament to Guatemala's. First, it is important to consider the leading U.S. role in promoting international trade agreements that advance the rights of investors, as well as the effect existing agreements such as NAFTA have had on standard of living and other economic and environmental conditions potentially exacerbated by severe shortages of energy. Mainly, this comparison demonstrates common problems but vastly different levels of wealth and energy consumption. In order to prepare for the many effects of ever-declining supplies of inexpensive energy in the near future, all levels of U.S. society - from the individual to the federal government - have ahead of them almost inconceivably large tasks: substantial energy conservation, the elimination of debt, re-localization of economies and food production systems, and the large-scale development of sustainable agriculture and energy projects. The good news is that U.S. society has immense wealth and privilege to devote to accomplishing these goals. Many opportunities exist for those who choose to find and pursue them.

Information Sources
CIA World Fact Book, 2005
Department of Energy, Energy Information Administration
Diario de Centro America (Guatemala City, Guatemala) August 31, 2005
Earth Trends
Prensa Libre (Guatemala City, Guatemala), various issues, July - September 2005
Matthew Rudolf, "Has the Time Come for Renewable Energy Programs in Guatemala?", Entre Mundos, (Quetzaltenango, Guatemala) March/April 2005


At 10:47 PM, December 26, 2005, Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.


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