Implications of Japanese Earthquake
March 14th, 2011J writes:
Kevin,
Would you comment on what the situation in Japan means for the rest of the world.
I have been trying to get my head around what has happened, and what is still happening, but I’m not able to do it. Millions of Japanese are without water, food and electricity. Some of the largest Japanese corporations are shut down. Some areas of Japan are experiencing rolling blackouts due to the loss of electricity production from several nuclear power plants, two of which may be melting down. Ten thousand people may be dead in Miyagi Prefecture alone.
The bullet points that demonstrate how extremely serious this is could go on and on.
But something dawned on me as I was looking at the situation today:
I can’t even begin to consider what the global implications of this will be. Japan is the third largest economy in the world. Where do we even start when considering the international implications?
What I want to start to do, with your help, even through the emergency situation is ongoing, is to try to start thinking about what the international implications of this disaster are going be. Pick any area you like (economic, political, military, food, energy) and feel free to take a stab at it. I think we would all appreciate links to good information, but since this is so huge, I’m honestly not sure anyone is really going to be able to “see through” this with any level of accuracy.
Initial ideas: Commodities like iron ore, copper and lumber seem like no brainers to watch. But how is the electricity, lost from the down nuclear power plants, going to be replaced? Coal and natural gas?
Japan was already dangerously reliant on food imports before the disaster. How much farmland has been washed over by (salty) sea water that probably picked up unknown amounts of industrial pollutants as the tsunami moved inland? As Japan rebuilds, is inflation everywhere else going to accelerate?
Questions, questions.
Personally, the electricity generation question is the one I’m most curious about. How does Japan keep-the-lights-on, so to speak, going forward?
—Update—
With 11 nuclear reactors out of action in the wake of the quake and rolling blackouts going into effect in the Kanto region, disruption to power supplies is a major wild card in the near and medium term.
Japanese trading houses and the government have been working to secure fuel for utilities’ spare generators to make up for the shortfall; there were reports over the weekend that Russia may boost shipments of liquefied natural gas and coal.
Based partly on California’s experience with rolling power cuts in 2003, during which manufacturers were largely able to cope with the downtime, Nomura estimates that if the power cuts extend through April, the negative impact will amount to 0.29% of GDP.
The Japanese government set a goal last year of increasing the share of zero-emission power sources from 34% to 70% by 2030, with nuclear power a key contributor: Plans call for constructing 14 new reactors nationwide in the next 20 years. Given the traumatic events involving Tepco’s Fukushima nuclear reactors, there’s a good chance that the public will demand a different approach–and not only in Japan.
Expect Japan to build more power plants fueled by liquefied natural gas. Japan is already the world’s largest importer of LNG; it’s likely to put upward pressure on prices in years to come.
—
Japan’s earthquake has left a gaping hole in the nation’s power capacity that looks set to last months, threatening to make economic recovery far more feeble than hoped.
The first rolling power cuts in the history of the giant Tokyo Electric Power Co (TEPCO) have already closed many plants, with Toyota shutting down until at least Wednesday.
Rolling three-hour blackouts have wrecked the clockwork precision of Japan’s railways while a thousand schools across Tokyo cancelled classes. Even Tokyo’s ubiquitous neon signs have gone dark, a big blow to confidence in a country that lives by routine and order.
With a new explosion at a nuclear plant in Fukushima threatening a far more serious radiation leak, the power shortage will not get better anytime soon.
“It looks like Japan could be in a “power down” state for a protracted period,” said Stephen Roberts, Nomura’s chief economist for Australia. “That’s what makes it different from other major quakes.”
“People tend to compare it to Kobe and assume a “v”-shaped recovery, but Kobe never caused this level of power disruption,” he added. “It means any proper recovery could be delayed right out to the fourth quarter.”
…
There is certainly still plenty of unused manufacturing capacity in Japan, but far less when it comes to power supply.
Analysts at Australian investment bank Macquarie estimated the earthquake and resulting tsunami took a quarter of TEPCO’s total capacity of 65 gigawatts, shared between nuclear and oil.
In all some 15 nuclear plants were shut down, and it was not clear how many would re-start or when.
“We think power supply shortages and rations are likely to continue in TEPCO’s supply area for months rather than weeks,” the analysts wrote in a note to clients.
And the growing crisis at the Fukushima plant brings into question Japan’s whole experiment with nuclear power, which provides about one-third of total generating capacity.
…
Nomura’s Stephens said there was perhaps scope to ramp up power output at some of Japan’s oil and coal plants, though at great extra cost. Japan’s increased demand for coal, oil and LNG for generation would also add to upward pressure on resource prices and so to inflation risks elsewhere in Asia.
But even then it was unlikely to be enough to make up the current shortfall in power.
“If this lasts to the summer, which is more than possible, there is no way the system could supply the power for air conditioning,” he warned. “Tokyo in summer, without air con? Doesn’t bear thinking about.”
—
More: From Gas to Gadgets: Japan’s Disaster Means Higher Prices
The one I keep coming back to is this: Radioactive Releases in Japan Could Last Months, Experts Say http://www.nytimes.com/2011/03/14/world/asia/japan-fukushima-nuclear-reactor.html?_r=1&hp
How much radiation will that be? How much area — in Japan, and even perhaps North America (and…?) might become uninhabitable?
And maybe there will be a silver lining. Maybe safe and renewable energy sources will finally be allowed to flourish.
massive sell off upfront. societal demand destruction, immigration to the cities with power?
Contract signed for first floating nuclear reactor
June 16, 2006
An Arctic military shipbuilding plant and Russia’s Atomic Power Agency signed a contract yesterday to build the world’s first floating nuclear reactor.
The 9bn ruble (£267m) reactor will be built by the Sevmash plant in the Arctic port of Severodvinsk next year, and will be commissioned in October 2010, said Sergei Obozov, head of the state-controlled Rosenergoatom consortium in charge of nuclear power plants.
The reactor is intended to provide heating and electricity to the remote northern coast. Russian authorities are also looking at 11 other possible sites for such reactors.
http://www.guardian.co.uk/international/story/0,,1798974,00.html
Toshiba’s Home Nuclear Reactor
By Rob Beschizza
December 18, 2007
http://blog.wired.com/gadgets/2007/12/toshibas-home-n.html
the only thing they can do is urge/force individuals and organisations to reduced electricity consumption on a semi-permanent basis.
they cannot replace all the generating capacity they just lost.
it will be a huge hit on the Japanese economy.
my main income earning period over the summer could be kaput. i don’t know yet. if so, can’t pay the rent so will have to move somewhere cheaper.
all one has to do to get truly terrified is to look at the current maps of fallout from the chernobyl event. look at just how much land is contaminated, banned from use, closed, or under permanent military closure. extrapolate to japan.
you are looking at the beginning of a radioactive diaspora.
all i can recommend is prayer, for those affected, and for the rest of us, too.
cybele
re: the Forbes commentary
my personal hunch is that Nomura is underestimating the hit that this is going to have on GDP by a wide margin. i don’t know why they think it’s only going to be 0.29%. the flow-on effects of people not being able to get to work, or of customers not being able to get to the places where they access goods and services is going to be huge, imho. no reliable train service in greater tokyo is going to partially shut this place down. small businesses with fixed expenses will be killed off by the tens of thousands in a few months.
and on the news this afternoon, they said Putin was ordering the Sakhalin natgas project to send extra LNG shipments to Japan. they also said some shipments (from various places) bound for South Korea would be diverted to Japan, after the Korean government intervened.
Post on zerohedge: Does Anyone Seriously Believe The Global Recovery Is Still Intact?
http://www.zerohedge.com/article/guest-post-does-anyone-seriously-believe-global-recovery-still-intact
After the loss of life – that seems very accurate, that their economy and connected economies will be seriously impacted by losing 30% of the country’s electricity provided by nuclear. However.. isn’t one of the minor themes of Cryptogon the debunking of strict peak-oil perspective by pointing out dozens of examples of alternative energy generation and storage that have been demonstrated, but seem to be permanently stuck in beta-testing stage? I don’t know why those devices never come to market unless the flaws aren’t pointed out in the initial press notes, or production would be far more expensive than oil. But it looks like Japan still has manufacturing capacity and could install some flywheels and whatever generation could work for cities. Wave energy?geothermal?
Odd, the power here in PA has been flickering, almost indiscernably tonight. Electricity is power from the past I guess.
@quintanus – Cryptogon does point out the discrepancy between what could be and what is re power soures. Dya think anyone who owns the “power that be” wants, or will allow any of the proven alternative energies to come to be? I don’t think so. Too much invested. Most likely we’ll go through a period of dark ages while the dinosaurs of power breathe their last gasps. Get your lanterns trimmed, batteries charged, and what not going. Electricity as we’ve known it I think at minimum is going to be too vulnerable to changes in the solar system. Learn how to live in a power down mode methinks.
I don’t mean to overlook the human cost in any way, but I am seeing that a significant radiation leak or explosive meltdown at Fukushima would create a global stigma on the brands and goods associated with Japan. (Would you buy a car, a chip, or anything made in Chernobyl? And how long will rumors of radioactive Toyotas/Sonys/Toshibas/Hondas et al take to fill the Internet?)
So not only is physical production of Japan already impaired, with its ripple effects on the world’s tech production, but there is a real potential that what goods Japan can produce will be rejected, and even refused at shipment if the radiation is perceived to be severe. This would have a compounding effect that I can’t begin to calculate.
I think it all depends on the commercial and public perception of how severe the contamination is.