Energy Standard

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Chris Cook:

"At a high-level conference in Tehran in January I made a proposal in respect of an “Energy Standard” for international trade which was very well received, to the extent that it has been suggested that a presentation be made to the Economic Cooperation Organisation (ECO) states concentrated around the Caspian Sea, but extending to Pakistan and Turkey.

The concept is extremely simple, and it is that international trade should be denominated not in dollars, but in energy. Producers of energy, such as Russia and Iran may then – in exchange for value received - would issue Units redeemable either in electricity, or in “energy vector” fuels such as gasoline, heating oil, fuel oil and above all natural gas, which all have a fixed value denominated in energy.

Global transactions will then take place within the framework of an International Energy Clearing Union subject to the collective guarantees of energy producer and consumer nations generally. Both energy creditor nations – such as Russia, Iran, the GCC and Norway – and energy debtor nations, such as the US, UK and EU would all pay an amount into a global “energy pool” in support of the guarantee. The resulting balances would be deployed in massive investment in new renewable energy infrastructure and energy efficiency savings.

The US, which is the biggest energy debtor by far, could therefore be funded by the Pool in redeploying much of its increasingly baroque military expenditure not just into the “Green New Deal” proposed in the US, but also globally, in partnership with the immense UK and EU intellectual capital at the cutting edge of research and development.

The use of an “energy dollar” or “Petro” energy unit, as it was referred to in Iran, addresses one of the most pressing issues. This is the catastrophic waste of carbon-based energy in those countries blessed or cursed with large oil and gas reserves. Anyone who wishes to see the negative effects of gasoline available at 30 cents per gallon on the environment and on the quality of life, need only travel to Tehran.

President Ahmadinejad recently proposed to massively raise gasoline prices and to compensate the population with cash subsidies, and the Majlis threw out the proposal. The unitisation of gasoline, on the other hand, allows the price of gasoline to be raised to global levels, and for the population to be compensated with Units redeemable for gasoline but priced in Petros. While some will continue profligate use of gasoline, most will cut back on gasoline use and exchange their Units for something else of value, again by reference to, rather than in exchange for, the Petro.

Perhaps the most interesting potential lies in the global market in natural gas, where Iran, Qatar and Russia own two thirds of global reserves and recently instituted a Gas OPEC based in Doha. I believe the unitisation and clearing of natural gas offers the potential basis for an International Energy Clearing Union. The massive loans which financed Qatar's LNG infrastructure may be refinanced interest-free simply by selling Units redeemable in natural gas to major consumers such as China, who thereby both lock in a price, and may found a new global energy-based reserve currency.

I believe that it is only through the use of an energy standard – rather than a fiat currency or gold - that the transition from carbon-based fuels to renewable energy may be painlessly made, and in so doing, allow the US, and other nations to repay their energy, and other resource debts.

President Obama, for his part, may dispense with the deficit-based “Cap and Trade” mechanism which, like emissions trading, attempts to monetise by political fiat something with no intrinsic value – which of course brings us back to Treasury Secretary Geithner's proposal also to do just that.

So I will conclude by saying, not for the first time, that oil is not priced in dollars: dollars are priced in oil , and recommending that the G20 turn their attention to leading a sustainable International Energy Clearing Union alternative to our current demonstrably unsustainable global monetary system." (