Diminishing Marginal Utility

Source: Reuters

NEW YORK, Aug 30 [2006] (Reuters) - U.S. crude oil imports hit their second-highest level on record last week, averaging 11.2 million barrels per day, as shipments to the West Coast peaked due to output problems in Alaska, the U.S. Energy Information Administration said Wednesday.

Refiners on the West Coast imported an average of 1.577 million bpd of crude oil over the week ending Aug. 25, the highest level ever recorded by the EIA since it began breaking down import data into regional districts in 1990.

The record for total crude imports was 11.324 million bpd for the week ending July 23, 2004.

News that BP Plc (BP.L: Quote, Profile, Research) was shutting down half of its 400,000 bpd Prudhoe Bay oil field earlier this month spurred fears of crude oil shortages on the West Coast, which relies heavily on crude supplies from Alaska.

The shutdown prompted refiners to scramble to purchase replacement crude cargoes in Asia, as well as to divert incoming shipments to the West Coast.

Analysts had expected a decline in West Coast crude stocks owing to the anticipated lag between the purchase of replacement supplies and their arrival in the United States.

"It seems we are getting a lot of supplies on the West Coast from places on the west coast of South America such as Ecuador," said EIA analyst John Duff.

"Because of the distance between Ecuador and California, they were able to step in pretty quickly and provide incremental supplies," he added.

Imports elsewhere in the United States were strong as imports into the Midwest surged by nearly 300,000 bpd to 1.276 million bpd after several weeks of below-normal levels.

On the U.S. Gulf Coast, home to nearly half of the refining capacity in the United States, imports held steady above 6.3 million bpd last week, according to the EIA, the statistical arm of the Department of Energy.

Average crude oil imports into the United States surpassed 10 million bpd in 2004 as domestic output continued to decline.

Posted by Hugo Albert Orwell at 07:07 PM | Permalink | TrackBacks (0)

Source: Bloomberg.com

Peak Oil Forecasters Win Converts on Wall Street to $200 Crude

By Deepak Gopinath

Aug. 31 (Bloomberg) -- On a sweltering Tuesday in mid-July, in the fields outside Pisa, Italy, Willem Kadijk scribbles notes as a ragtag troupe of doomsayers predict the end of the Oil Age.

With his shaved head, jeans and sandals, Kadijk, 48, blends into a crowd gathered under a white tent to hear of the coming calamity. The death of cheap, abundant crude, the forecasters warn, might unleash war and plunge the world into a second Great Depression.

That's not the prophecy of some apocalyptic cult. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil.

Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline -- and some geologists say it already has -- oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 -- and keep rising. To the peaksters, today's energy crunch is nothing next to the pain that will follow.

"Peak oil is a reality," says Kadijk, a senior equity salesman at Kepler Equities, an Amsterdam-based brokerage. He plans to start a fund to capitalize on what he sees as a looming crisis for the world's fossil fuel-based economy and the ultimate bull market in oil.

As energy prices soar and violence convulses the Middle East, the peak-oil movement -- an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists -- is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat Web sites, much the way warnings of global warming did a decade ago. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street.

Congressional Caucus

U.S. Energy Secretary Samuel Bodman, former boss of Boston- based Cabot Corp., an oil and chemicals company, has asked the National Petroleum Council, which advises him, to investigate whether oil supplies can keep pace with demand. The U.S. Government Accountability Office, the nonpartisan congressional watchdog, is due to release a study on peak oil this November. Rep. Roscoe Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to sound the alarm.

"The world has never faced a problem like this," Bartlett says.

Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur -- and what will happen then.

Colin Campbell, a British geologist who popularized the peak- oil theory in his book "The Coming Oil Crisis" (Multi-Science Publishing Co. and Petroconsultants SA, 1997, 210 pages) says world production of conventional oil, the kind that comes from gushing wells, is reaching its apex.

End of Oil Age

Society isn't prepared for the consequences, Campbell, 75, says. It's too late to develop alternative sources of power, such as solar cells, nuclear reactors and windmills, to fill the oil gap before energy prices soar, says Campbell, who has a doctorate in geology from the University of Oxford and more than 40 years of experience in the oil industry.

"We have come to the end of the first half of the Oil Age," Campbell says.

Nonsense, says Russ Roberts, a spokesman for Exxon Mobil Corp., the world's largest oil company. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as the New York Times.

The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad says.

Time to Think

"The world is nowhere near running out of oil," Roberts says. Exxon Mobil geologists believe global oil production will keep rising through 2030, he says.

Cambridge Energy Research Associates, whose chairman, Daniel Yergin, is a leading peak-oil critic, says production will reach an "undulating plateau" sometime in the future.

"Our outlook goes to 2020, and we see no evidence of a peak," CERA geologist Peter Jackson says. "Eventually, we will start to see a decline. There is still time to think about alternatives."

Predictions of an imminent oil famine are as old as the industry itself. When production at the first U.S. wells, located in western Pennsylvania, began to decline in the late 19th century, some people predicted the country would soon run out of oil. Then crude was discovered in east Texas, whose oil fields yielded so much black gold that the Texas Railroad Commission capped production to support prices.

Peak Moment

In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010.

Kenneth Deffeyes, a geologist and professor emeritus at Princeton University, first pinpointed Nov. 24, 2005, as the peak- oil date and then revised it to Dec. 16, 2005.

Campbell says the exact day or year isn't important. What matters is that peak oil is coming, and soon. Almost a century and a half after the first U.S. wells were drilled in Titusville, Pennsylvania, production has begun to decline in more than a dozen countries, including the U.S., according to the BP Statistical Review of World Energy. Production at the giant Cantarell oil field in Mexico is likely to decline 8 percent this year, according to Mexican state oil monopoly Petroleos Mexicanos.

U.S. Addiction

At a time when U.S. President George W. Bush has urged the country to break its addiction to foreign oil, the fact is, the U.S. is becoming ever more dependent on overseas crude. U.S. oil production peaked 36 years ago, in 1970, at 11.3 million barrels a day. Since then, output has fallen 39 percent, to 6.8 million barrels a day, or 8 percent of the world total, in 2005, according to BP.

Investors have started to listen to the peaksters. Billionaire Boone Pickens says he's a peak believer. So does Peter Thiel, who co-founded PayPal Inc. and now runs Clarium Capital Management LLC, a $2.1 billion hedge fund firm. Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time.

Even some oil companies and industry veterans sound nervous. Chevron Corp. has run a series of full-page ads in U.S. newspapers that highlight surging oil consumption and declare, "The era of easy oil is over."

Chicken Littles

Thierry Desmarest, chief executive officer of Paris-based Total SA, told the World Gas Conference in Amsterdam in June that global oil production would peak in 2020. Matthew Simmons, whose Houston-based investment bank, Simmons & Co., trades oil and gas stocks, says Saudi Arabia's production may decline soon.

Alex Cranberg, chairman of Denver-based independent oil company Aspect Energy LLC, calls the peaksters Chicken Littles -- misguided souls who think the sky is falling.

In fact, Cranberg hired two people to dress in chicken costumes and hand out fliers dismissing peak oil at the conference Kadijk attended in July.

Like many oil-industry vets, Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy.

$3-a-Gallon Gas

More and more, however, the peaksters are drowning out everyone else, Cranberg says. "You can't turn around without seeing or hearing these ideas," he says. "I think they are gaining."

You don't have to be a geologist to understand why. The price of crude has tripled since 2000. In the U.S., $3-a-gallon gasoline has sapped consumers' confidence. Nearly half of Americans believe the economy is doing poorly, according to a July 28-Aug. 1 Bloomberg/Los Angeles Times poll. Fifty-nine percent of Americans expressed a negative view of Bush's handling of the economy.

"If oil was still at $20, no one would be talking about peak oil," says Manouchehr Takin, senior petroleum upstream analyst at the Centre for Global Energy Studies, a London-based consulting firm.

High oil prices are only part of the story, however. The world is straining to feed its energy habit. Today, we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers.

Big Question Mark

No one knows for sure how much oil the world has. That's a big question mark because the peaksters say production will max out once half of the oil has been pumped. So far, we've extracted about 1 trillion barrels in all. In 2000, the U.S. Geological Survey estimated global resources at 3 trillion barrels, enough to push peak production out to 2037, according to the EIA. Campbell puts the total lower, at 2.5 trillion barrels.

Oil is certainly getting harder -- and more expensive -- to find and extract. Oil discoveries plummeted to 5 billion barrels in 2005 from 90 billion barrels in 1964, according to Campbell.

"Discovery is in long-term decline, and spending more money won't increase it," says Chris Skrebowski, editor of the London- based Petroleum Review, an industry journal.

OPEC's Stash

Oil companies have to find enough crude to offset dwindling production at existing fields, which can decline by more than 8 percent a year, and to keep pace with rising demand. Most of that increase will have to come from members of the Organization of Petroleum Exporting Countries, which are often cauldrons of discontent, war and terror.

The cartel's members -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- together sit atop 75 percent of the world's reserves and account for about 42 percent of total production, according to BP.

OPEC countries are hardly paragons of economic and political stability. Most of the terrorists who attacked the U.S. on Sept. 11, 2001, came from Saudi Arabia. The war in Iraq has hurt that country's ability to pump oil. Bush says Iran is trying to develop nuclear weapons. In Venezuela, President Hugo Chavez has said he wants to diversify oil exports away from the U.S.

In its 2005 Energy Outlook, Exxon Mobil says the combined production of non-OPEC countries will peak sometime from 2010 to 2020. OPEC will be able to fill the gap, the report says. OPEC produced about 30 million barrels a day in 2005; by 2030, OPEC would have to churn out 47 million barrels a day -- almost 57 percent more than it did last year -- to satisfy the world's needs, the report says.

Meeting the Call

"We believe the resource base will support this increase, assuming that investments in development are made in a timely fashion," the report says.

OPEC countries will invest a combined $100 billion in the five years through 2010 so they can increase output, OPEC spokesman Omar Ibrahim says. "We are set to meet the extra call on OPEC to 2030," Ibrahim says.

Yet even now, OPEC nations are struggling to keep up. Since 2000, OPEC has gradually lost the spare pumping capacity its members can use as an emergency reserve to moderate prices. The cushion has dwindled to about 1.5 million barrels a day from 6 million barrels a day, Takin says.

What's more, neither the peaksters nor oil industry executives know for sure how much oil OPEC has and how much it can actually produce. OPEC countries haven't been transparent about their reserves or production capacity, says Mike Rodgers, a partner at PFC Energy, a Washington-based oil industry consulting firm. "OPEC is the big unknown," he says.

Overstated Reserves

Many energy analysts believe OPEC nations began overstating their resources in the 1980s, when the cartel linked members' production quotas to the size of their reserves, says Mamdouh Salameh, an independent oil economist. In the late '80s, cartel members raised their reserve estimates by a combined 300 billion barrels even though none of them had actually found much more oil.

In his 2005 book "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy" (John Wiley & Sons, 448 pages, $24.95), Simmons says the Saudis have pumped so much oil so fast that the country's biggest oilfields face declining output.

"Saudi Arabia is keeping everything in the dark," Simmons, 63, says.

Saudi officials have dismissed peak-oil theorists and suggestions that their country is running on empty.

Saudi Assurances

"We currently manage approximately 260 billion barrels of oil," Abdallah Jum'ah, CEO of Saudi Aramco, the government-owned oil giant, said at an oil and gas conference in June. "We continue to expand our reserve base, and conservatively estimate our additional potential of recoverable oil to be in the range of 200 billion barrels. At Saudi Aramco's present production levels, that means we will have well over a century's worth of oil to produce."

Herman Franssen, former chief economist at the Paris-based International Energy Agency, says some OPEC members, such as Iran, Iraq, Kuwait and Venezuela, may be reluctant or unable to produce more oil even as prices soar, largely for political reasons.

"We may never see the volumes of conventional oil production that we see in official forecasts," says Franssen, who's now an oil industry consultant in Chevy Chase, Maryland.

Sadad al-Husseini, who spent 35 years working for Saudi Aramco, says Saudi Arabia's reserves are sound but that Kuwait, which says it has reserves of 101.5 billion barrels, probably has half that much. Iran, with official reserves of 132.5 billion barrels, has likewise overstated its reserves, says Husseini, who was an executive vice president at Saudi Aramco before retiring in 2004.

Assume the Worst

"Even with high prices, it will be very difficult for world production of conventional oil to exceed 90 million barrels per day within the next 10 years," he says. That's millions of barrels a day short of what the EIA says the world will need in 2015.

Political leaders, business executives and investors should assume OPEC won't be able to satisfy future demand, Rodgers says. "From an energy-security point of view, if you believe in a non- OPEC peak and OPEC is not being transparent, we have to assume they don't have it," he says.

The precarious balance of supply and demand in the oil markets became even clearer in early August when London-based BP Plc announced it would temporarily shut down its Prudhoe Bay oil field on the North Slope of Alaska because of pipeline corrosion. The news drove already-high oil prices up more than $2 to almost $77.

Alaskan Decline

Prudhoe Bay, the largest oil field in the U.S., is part of the peak-oil story. The field was discovered in 1968 and came onstream in 1977. Since then, it has yielded more than 11 billion barrels of oil.

Yet even before the August mishap, this vast field had begun to die. Its output has fallen 73 percent to 400,000 barrels a day from a height of 1.5 million barrels a day in 1989.

Prudhoe Bay is following the life cycle of oil fields across the U.S. and around the world, a phenomenon known as the Hubbert Curve, which takes its name from M. King Hubbert.

Fifty years ago, Hubbert, then a geologist at Shell Oil Co.'s research lab in Houston, postulated that U.S. oil production would follow a bell-shaped curve.

At the 1956 meeting of the American Petroleum Institute in San Antonio, Hubbert predicted that total annual U.S. output would climb steadily, level off sometime between 1965 and '70 and then decline after about half of the country's reserves had been depleted.

Hubbert's Peak

The U.S. reached what geologists now refer to as Hubbert's Peak in 1970. Hubbert died in 1989 at the age of 86.

It wasn't until the late 1990s when Hubbert's ideas, which had percolated for decades in academia and oil circles, began to reach a wide audience via Campbell, the British geologist.

Now in his eighth decade, Campbell is a grandfatherly man with a shock of gray hair. He hardly comes across as a doom- monger. He works out of a two-story house in Ballydehob, a village on the western edge of Ireland.

Campbell spent 40 years exploring for oil for Amoco Corp. and other companies. He helped Amoco search for oil in Ecuador and then, during the 1980s, led its exploration in Norway. He later joined PetroFina SA, the oil exploration company now owned by Total.

After retiring from PetroFina in 1990, Campbell joined forces with Jean Laherrere, a retired French geophysicist who had spent 25 years working at Total, to analyze production profiles for the world's countries.

Campbell says he and Laherrere, now 75, looked at their data and concluded global oil production was approaching its zenith. In 1998, they co-wrote an article for Scientific American magazine titled "The End of Cheap Oil" that helped popularize their cause.

Coming Crunch

"The world is not running out of oil -- at least not yet," Campbell and Laherrere wrote. "What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend."

In 2000, Campbell founded the Association for the Study of Peak Oil and Gas, an informal organization for fellow travelers. Now known as ASPO International, the group has sponsored five annual conferences, including the one in Pisa in July, which drew more than 230 people. It's now run by Kjell Aleklett, a physics professor at Uppsala University in Sweden. Twenty independent national ASPO groups have sprung up around the world, from Australia to France, to the U.S.

Many peaksters are driven by a moral imperative to spread the word. Campbell says he's a scientist, not a social or environmental crusader. Even so, he says he's worried that oil has harmed human society and the planet. Since the Oil Age dawned, nearly 150 years ago, the Earth's population has soared six-fold, he says.

Man Alone

"Man is the only animal that uses external energy," Campbell says.

Asked why he has championed the peak-oil theory, Laherrere quotes Antoine de Saint-Exupery, author of "The Little Prince": "We don't inherit the Earth from our ancestors; we borrow it from our children."

Activists have jumped on the peak-oil bandwagon and added their own, often strident, voices to the debate over the future of oil.

Jim Kunstler, a writer-activist who lives in Saratoga Springs, New York, says peak oil will ultimately destroy suburbia and plunge the U.S. into a violent dark age of feudalism.

"The question is, Can we run our shit the way we are running our shit?" Kunstler, 57, says. In 2005, Kunstler wrote "The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century" (Atlantic Monthly Press, 320 pages, $23), which warns of the havoc to come.

Dieoff.com

Lifeaftertheoilcrash.net, a Web site run by lawyer and peak- oil entrepreneur Matt Savinar, warns, "Civilization as we know it is coming to an end soon." The site sells peak-inspired books and products, including an investor's guide to peak oil.

Another site, dieoff.com, says wars over oil and other natural resources will eventually erupt and millions of people will be wiped out.

Stephen Andrews, a Denver-based energy consultant who founded ASPO-USA in June 2005, says the alarmists have hurt the peak-oil movement.

"The peak-oil tent has different voices -- some shrill, some more sober -- reaching different conclusions from the same facts," Andrews, 59, says.

Andrews has attracted more-sober voices to the movement. Last November, Denver Mayor John Hickenlooper helped co-sponsor a two- day peak-oil conference organized by Andrews.

"I think the people most exuberant about peak oil underestimate how much unconventional sources of oil will help flatten the peak, but to say that there is no peak is shortsighted," Hickenlooper says.

Crash Program

The world would have to embark on a crash mitigation program 20 years in advance to prevent peak oil from hobbling the global economy, says Robert Hirsch, a senior energy program adviser at San Diego-based research and engineering firm Science Applications International Corp. "And I consider myself an optimist," says Hirsch, 71, who included his findings in a 2005 study on peak oil for the U.S. Department of Energy and estimates such a program would cost the world $1 trillion a year.

Some investors and analysts see lots of opportunities in a post-peak world.

Charles Maxwell, senior energy analyst at Weeden & Co., an independent research firm based in Greenwich, Connecticut, says high oil prices will spur companies to invest in unconventional sources. Few people, however, realize how much such projects will cost or how long they will take to come onstream, he says.

Take the Canadian oil sands. This region in Alberta holds 175 billion barrels of oil, according to the Canadian Association of Petroleum Producers (CAPP), the world's second-largest reserves.

`Really Big'

"It's big. It's really big," Neil Camarta, senior vice president for oil sands at Calgary-based Petro-Canada, says of the region. "It can keep America going for 25 years."

The oil sands hold vast stores of bitumen, a tarlike substance that is mined, rather than pumped, and then processed into oil that can be refined. The process is expensive -- and getting more so. Rising operating and capital costs have driven the price of mining and upgrading bitumen to as much as $40 a barrel, Camarta says.

By 2020, Canada's oil sands will yield 4 million barrels a day, almost four times what they do now, according to CAPP. That sounds like a lot until you realize that 4 million barrels is just over a third of what Saudi Arabia produced per day in 2005.

Pickens, who built Mesa Petroleum Co. into one of the world's largest independent oil and gas producers, says he sees trouble -- and opportunity -- in peak oil. Pickens, who collected a degree in geology from Oklahoma State University in 1951, has called for the construction of more nuclear power plants and the promotion of alternative energy. He says he's invested in the Canadian oil sands.

Pickens's Picks

"I'm a disciple of Hubbert," Pickens, 77, says. "I think we've peaked and we are going to see an undersupply of oil."

Clarium Capital's Thiel says he began thinking about peak oil in 1999. As the Internet bubble grew that year, Thiel, 38, says he started to wonder about other risks that investors might be ignoring and seized on the uncertain future of oil.

"Energy will be systematically undervalued until peak oil is priced in," Thiel says. He's bought shares of Calgary-based EnCana Corp., which has invested in exploration and new production, and of oil services companies like New York-based Schlumberger Ltd. and Houston-based Weatherford International Ltd., which stand to profit as explorers hunt for oil and drill wells. Thiel says he's leery of U.S. oil majors, such as Exxon Mobil, because they may become targets of new taxes once the government wakes up to peak oil.

Thiel himself says the peak will come by 2008 -- if it hasn't already. "Geology will trump technology," he says.

Coal, Uranium

Eric Sprott, CEO of Toronto-based Sprott Asset Management Inc., says he became a peak-oil convert after hearing Campbell speak in 2004. Sprott, who helps manage 3.6 billion Canadian dollars (US$3.2 billion), says the bull market in energy has only just begun. He's invested 36 percent of his firm's assets in a variety of areas that could benefit from peak oil. His flagship hedge fund returned 41 percent in 12 months ended July 31, he says.

Sprott's investments include St. Louis-based Arch Coal Inc. and Brisbane, Australia-based Macarthur Coal Ltd. His oil and gas picks include Halifax, Nova Scotia-based Corridor Resources Inc.; Denver- based Delta Petroleum Corp.; and Houston-based Ultra Petroleum Corp. He has also invested in Australian uranium companies Energy Resources of Australia Ltd. and Paladin Resources Ltd.

Midnight Ride

Meanwhile, the peaksters aren't about to let up. They'll convene in Boston on Oct. 25-27 to sound their alarm at a conference called "Time for Action: A Midnight Ride for Peak Oil." The title is a reference to the American patriot Paul Revere, whose horse ride in 1775 warned Massachusetts colonists that British soldiers were advancing. The battle that followed, at Lexington and Concord, marked the beginning of the American Revolution.

It was just 84 years after Revere took his ride, on Aug. 27, 1859, that Edwin Drake struck oil in Titusville, ushering in the Oil Age. Exxon Mobil says the era of oil isn't about to end. In one of its ads, the company says, "Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year or for decades to come." The ad depicts a man looking through binoculars at a snowcapped mountain whose summit is hidden by clouds.

Campbell says the illustration actually drives home the point Exxon Mobil is trying to avoid. "Even though it is obscured by clouds, we know there is a peak," Campbell says. His investor followers are betting he's right.

Posted by Hugo Albert Orwell at 06:37 PM | Permalink | TrackBacks (0)

[August 2006] Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- together sit atop 75 percent of the world's reserves and account for about 42 percent of total production, according to BP.

Posted by Hugo Albert Orwell at 05:35 PM | Permalink | TrackBacks (0)

Source: TheTrumpet.com

In a move that could end up hurting the pocketbooks of millions of Americans, Venezuela’s president announced August 23 that his nation will triple its oil exports to China over the next three years.

The outspoken, anti-American Hugo Chavez added that by 2019, Venezuela’s current flow of 150,000 barrels per day to China will have increased more than six-fold. “In 2009, we’ll reach half a million barrels a day, and in the decade after that we’ll see a million barrels,” he said during a visit to China (International Herald Tribune, August 24).

Oil-hungry Beijing is ecstatic, and appears ready and willing to reward Venezuela handsomely. To facilitate the increased oil flow, China is building 18 tankers for Venezuela’s fleet. The day after Chavez announced the move, he revealed that the Chinese premier had privately promised to support Venezuela’s bid for a seat on the United Nations Security Council.

Where will Venezuela get all this additional oil for China? Although it is one of the world’s largest oil producers, its exports are dropping. The fact that Chavez is nationalizing its oil and gas industry, while concurrently levying higher royalty payments on foreign-owned oil companies still operating in Venezuela, portends further strains on national production. How will Chavez keep his promise to Beijing?

The answer, in short, may well be to cut the United States off.

Currently, the U.S.-Venezuela oil relationship is symbiotic: Venezuela is America’s fourth-largest oil supplier; and the U.S. buys up 68 percent of Venezuelan crude exports. Chavez has stated that he wants to reduce Venezuela’s dependence on American oil consumption.

He recently made a worrying move in this direction when he sold more than 1,800 of Venezuela’s American-based Citgo gas stations and one of its refineries. Citgo is the Venezuelan subsidiary that processes and distributes most of Venezuela’s oil in the U.S. Although the gas stations Chavez sold represent only 14 percent of Citgo’s U.S. network, the worry is that this could foreshadow a major trend of Venezuelan sell-offs. Citgo has also previously announced plans to sell two U.S. asphalt refineries and its interests in two large American refined-petroleum pipelines.

If Venezuela were to continue selling Citgo’s American facilities, exporting oil to American consumers would become a far less lucrative venture; shipping to alternative customers would become a more attractive possibility.

For the U.S. to lose its fourth-largest supplier of crude oil would have serious ramifications—one being strained supply and/or higher gas prices.

For Americans, many of whose financial positions are characterized by high debt levels and falling real wages (when adjusted for inflation), higher fuel costs are the last thing needed or wanted.

Posted by Hugo Albert Orwell at 05:23 PM | Permalink | TrackBacks (0)

Source: Reuters

LONDON, Aug 29 (Reuters) - Iraq started pumping crude oil on Tuesday through its vital northern pipeline to Turkey after sabotage stopped shipments for nearly two months, shipping sources said.

Iraq had managed to pump 8.5 million barrels of crude from its giant Kirkuk oilfields to Turkey's Ceyhan export terminal on the Mediterranean before sabotage halted flows on July 9.

"Pumping resumed at 0930 Turkish local time (0630 GMT)," a shipping source said on Tuesday.

An Iraqi oil official downplayed the resumption.

"This is a test, it happens from time to time and it is not for export purposes," he told Reuters.

Iraq had restarted Kirkuk exports in June after a nearly year-long halt due to sabotage, raising hopes of a major increase in export sales and revenue for the country.

Iraqi oil officials had aimed for steady Kirkuk crude exports of 300,000 barrels per day (bpd) via term contracts from August.

But sabotage put paid to this target.

Iraq exported 181,000 barrels per day (bpd) of Kirkuk from Ceyhan in July, compared with 100,000 bpd in June.

When the line is down, the country relies exclusively on exports of around 1.5 million bpd of Basra Light from its southern Gulf terminal. (Additional reporting by Ibon Villelabeitia in Baghdad)

Posted by Hugo Albert Orwell at 06:41 PM | Permalink | TrackBacks (0)

Source: www.informationclearinghouse.info

The Proposed Iranian Oil Bourse

Abstract: the proposed Iranian Oil Bourse will accelerate the fall of the American Empire.

By Krassimir Petrov, Ph.D.

I. Economics of Empires

01/19/06 "Gold Eagle" -- -- A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms-usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax-the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of "severing the link between the dollar and gold", in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond- the world was taxed and it could not do anything about it.

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.

The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.

The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush's Shock-and-Awe in Iraq was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.

Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields-he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have gone into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished-he had successfully defended the U.S. dollar, and thus the American Empire.

II. Iranian Oil Bourse

The Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.

The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.

The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.

The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.

Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace?

Still, we should not forget that currently the two leading oil exchanges are the New York's NYMEX and the London's International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests.

It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.

At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange:

Sabotaging the Exchange - this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.

Coup d'état - this is by far the best long-term strategy available to the Americans.

Negotiating Acceptable Terms & Limitations - this is another excellent solution to the Americans. Of course, a government coup is clearly the preferred strategy, for it will ensure that the exchange does not operate at all and does not threaten American interests. However, if an attempted sabotage or coup d'etat fails, then negotiation is clearly the second-best available option.

Joint U.N. War Resolution - this will be, no doubt, hard to secure given the interests of all other member-states of the Security Council. Feverish rhetoric about Iranians developing nuclear weapons undoubtedly serves to prepare this course of action.

Unilateral Nuclear Strike - this is a terrible strategic choice for all the reasons associated with the next strategy, the Unilateral Total War. The Americans will likely use Israel to do their dirty nuclear job.

Unilateral Total War - this is obviously the worst strategic choice. First, the U.S. military resources have been already depleted with two wars. Secondly, the Americans will further alienate other powerful nations. Third, major dollar-holding countries may decide to quietly retaliate by dumping their own mountains of dollars, thus preventing the U.S. from further financing its militant ambitions.

Finally, Iran has strategic alliances with other powerful nations that may trigger their involvement in war; Iran reputedly has such alliance with China, India, and Russia, known as the Shanghai Cooperative Group, a.k.a. Shanghai Coop and a separate pact with Syria.

Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis-between deflation and hyperinflation-it will be forced fast either to take its "classical medicine" by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.

The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard's America's Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.

About the Author: Krassimir Petrov (Krassimir_Petrov@hotmail.com) has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria. He is looking for a career in Dubai or the U. A. E.

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Information Clearing House has no affiliation whatsoever with the originator of this article nor is Information Clearing House endorsed or sponsored by the originator.)

Posted by Hugo Albert Orwell at 05:33 PM | Permalink | TrackBacks (0)

Source: AL-AHRAM On-line [Cairo]

The greatest beneficiary of Israel's military misadventure in Lebanon is Iran, writes Mustafa El-Labbad*

The smoke cleared and the dust settled over Lebanon to reveal a configuration of regional geopolitical dynamics markedly different to those that existed before the Israeli invasion. Israel's architecture of destruction, drafted by its raiding aircraft across large swaths of southern Lebanon, could not conceal the limits of Israeli military might. The Israeli war machine has lost its aura of invulnerability. Hizbullah, by contrast, now stands taller in the region than ever, having succeeded in grinding the Israeli invasion to a halt and, simultaneously, in retaining its own arms and regional alliances. As a result, the US flew to Israel's rescue, producing Security Council Resolution 1701, turning a debacle on the ground to Israel's relative strategic advantage. But no UN resolution can alter the shift in the regional balances that ensued from the confrontation, and there is no doubt that Iran, Washington's actual target in this war, has emerged even more influential.

In the opening phases of Israel's aerial bombardment of Lebanese civilians and civilian infrastructure, Condoleezza Rice remarked that the death and destruction were the birth pangs of a new Middle East. Yet it appears that the new Middle East that is emerging is not the one she had in mind. After a full month of warfare, which Israel failed to resolve in its favour in spite of the complete military and political support it received from the US, a new set of strategic balances has begun to impose itself on the regional map. In keeping with the laws of Hegelian dialectics, the quantitative political and geo-strategic changes that have taken place in our region as the result of the occupation of Afghanistan in 2001, the occupation of Iraq in 2003 and, finally, the war on Lebanon in 2006, have given rise to profound and far reaching qualitative changes. At the heart of these changes is the emergence of Iran as a prominent regional power.

Iran's growing regional influence is the product of the interaction of numerous factors, foremost being the catalogue of policy failures of the ruling neo-conservative administration in Washington. True, Tehran has slowly and steadily worked to weave a fabric of relations extending from its western boundaries across Iraq and Syria to southern Lebanon, making it possible to speak of an "Iranian-Israeli frontier." However, there can be no denying that America's floundering military adventures in the region have given Iran just the boon its regional ambitions needed. The failure of US policy towards Iraq, in particular, opened the door to Iran to become a key player in Iraqi politics. In like manner, the failure of the Israeli venture in Lebanon has strengthened the moral and political hand of Hizbullah and, by extension, Iran, the Lebanese resistance movement's source of spiritual authority and political and military support.

One of the main aims of 1701 may well have been reducing Iranian-Israeli geopolitical proximity by compelling Hizbullah forces to withdraw north of the Litani River, an objective Israel failed to accomplish militarily. However, international political boundaries are, in reality, no more than a theoretical construct that ultimately reflects the current balances of regional and international power. Lebanon, since its establishment as an independent nation in 1943, has been a focal point of regional tensions and an infallible gauge of the shifts in regional balances of power. This year, the US has tangibly acknowledged the Lebanese dynamic by backing a military adventure the major purpose of which was to sap Iran's regional strength by stripping Hizbullah of its arms. Helping to pave the way to this was the White House's perception of the efficacy of Israel's military might. Key figures in the Bush administration had been under the impression that Israel's army could accomplish the mission of disarming Hizbullah in the space of a couple of weeks, providing that Israeli forces had an internationally acceptable pretext for going on the offensive and that their military operations would focus on the predominantly Shia areas of Lebanon (the south, the Bekaa Valley and the southern suburbs of Beirut), so as to neutralise Lebanon's other religious parties.

Iran, for its part, was operating under different assumptions. It believed that a military confrontation between Hizbullah and Israel would put Arab regimes under unprecedented strain, especially in view of the collapse of the peace process and Israeli belligerency in the occupied territories. Tehran would then be able to turn the fallout from these pressures towards the further expansion of its regional standing and influence. Iran also knew that it could count on the ideological and combat fervour of Hizbullah fighters, through whom it would be able to deliver political and military messages to various regional and international forces.

Where the thinking of Washington and Tehran coincided was in regarding Lebanon as a "rehearsal" for future wars. While Israel was testing American-made military high-tech hardware and demonstrating the ability of "smart" bombs to destroy underground fortifications (Iran's underground nuclear facilities being their eventual target), Hizbullah forces proved their efficacy at thwarting an Israeli advance and at harvesting Israeli tanks and artillery using Iranian-made anti-tank missiles. In addition, Hizbullah succeeded in delivering some powerful messages on its behalf and on behalf of Tehran via the Iranian-made missiles it dispatched in ever increasing depths into Israel. Above all, Washington was given to understand that Tehran could indeed strike heavily populated Tel Aviv with its Shihab-3 missiles if Washington launched an attack against Iran.

Iran has improved its regional hand with consummate skill. Building on its geographic position overlooking the Gulf, from where it could obstruct the passage of oil to international markets, and upon its network alliances, it has so enhanced its spiritual and ideological standing among Arab Shia that Iran has become to them what the Soviet Union was to communists around the world. In this context, the fight of the southern Lebanese Shia to liberate Shebaa Farms and other such just causes has worked to promote Iran's regional interests, just as the Soviet Union once sought to capitalise on the struggles of communist movements elsewhere in the world.

In the absence of an Arab alternative, two regional projects are vying with one another: the neo-conservatives' "new Middle East", stripped of its Arab identity and dominated by Israel, and the other new Middle East, dominated by the Shia "International" or "Comintern". Because the Arabs are highly suspicious of both, but have no alternative of their own, or the ability to impose one even if they had, the region appears headed for another collision revolving around Iran's nuclear capacity. During the Israeli invasion of Lebanon, Washington, which has been outmanoeuvred by Iran at every turn, pressured the Security Council to pass Resolution 1696, giving Iran until the end of this month to halt all uranium enrichment activities or face sanctions under Chapter VII of the UN Charter. But, rather than dampening Iran's regional ambitions, international sanctions, which are certain to be forthcoming, will only fuel its resolve. We can therefore expect next month to usher in a new and qualitatively different burst of escalating tensions in the region.

Iran has demonstrated, on numerous occasions, that it has the political acumen to strengthen its presence as a regional power using means far less formidable than those available to the US. The neoconservatives in Washington, by contrast, are plodding their way from one disaster to the next, constantly leaving one predicament by plunging headlong into another with absolute confidence in the ability of military force to solve their problems while blind to the impact their pugnacity has on US interests, and on those of its allies, in the region.

American policymakers still have to wake up to the fact that to the Arabs the regional power struggle with Iran comes second in importance to the Arab-Israeli conflict. They should also realise that Washington's policies have hampered the ability of Arab governments to perform their regional roles effectively and in a manner that would enable them to keep Iranian ambitions within proper bounds and, simultaneously, to secure their own regional goals. If Iran's persistence at promoting itself as a regional power at the expense of the Arabs may have momentarily blurred the above-mentioned order of priorities, Washington's stubborn refusal to respond to the Arabs' minimum demands for resolving the Arab-Israeli conflict will inevitably propel the region into the embrace of the "Iranian Comintern".

* The writer is a political analyst specialised in Iranian affairs.

Posted by Hugo Albert Orwell at 07:55 PM | Permalink | TrackBacks (0)

Source: The Financial Express [India]

BEIJING, AUG 24 : Venezuela, seeking to diversify its crude exports and ease reliance on the US market, hopes to increase oil sales to China by six times to 1 million barrels a day in the next decade, President Hugo Chavez said on Thursday.

On his fourth visit to Beijing, Chavez also said Chinese President Hu Jintao gave him a personal assurance of support in his bid for a seat on the United Nations’ Security Council - in opposition to US-backed Guatemala. Energy cooperation is the cornerstone of the burgeoning relationship between the world’s second-largest consumer and fifth largest exporter. The plan by Chavez to ramp up supplies is likely to help cement ties that are worrying Washington.

“We hope in a few years to reach a half million barrels a day of oil to China, and further forward, 1 million barrels in the next decade,” Chavez told reporters after a formal welcome at the Great Hall of the People in Beijing. Venezuela currently supplies China with around 160,000 bpd of crude — out of total Chinese imports of nearly 3 million bpd — and has said it aims to more than triple that by 2009. The two countries have signed billions of dollars worth of investment agreements, including energy and petrochemical deals worth around $2 billion, Chavez said.

These included a deal for China National Petroleum Corp. (CNPC) to operate the eastern Zumano fields, and for the joint operation of the Junin 4 block of the Orinoco heavy oil belt with state oil firm PDVSA, officials said at a signing ceremony.

They declined to put a value on individual contracts. China has been keen to keep the trip focused on business to avoid antagonising Washington, which gets around 12% of its imports from Venezuela.

—Reuters

Posted by Hugo Albert Orwell at 07:32 PM | Permalink | TrackBacks (0)

Source: Bloomberg.com

Excerpts:

Aug. 23 (Bloomberg) -- Finance Minister Sadakazu Tanigaki said it would be difficult for Japan to cut off Iranian oil imports should the United Nations impose sanctions against Iran for its nuclear development program.

Japan is seeking to exempt oil from economic sanctions that the UN would impose upon Iran if the country doesn't abandon the program, the Yomiuri newspaper said on Aug. 21, without saying where it got the information. Japan gets about 14 percent of its petroleum from Iran, making it the third largest supplier of oil to Japan. Iran yesterday said it is ready to hold negotiations on nuclear development.

"Given Japan's high reliance on Iran for oil, it won't be so easy for Japan's economy to stop'' importing it, Tanigaki said in a speech to the Foreign Correspondents Club of Japan in Tokyo. ``While the issue of nuclear non-proliferation is very important for Japan, securing sufficient oil supplies is in the national interest.''

Tanigaki reiterated that Japan's relations with China and South Korea have are "abnormal'' now and need to be improved. He said that Japan's friendly ties with the U.S. can't solve Japan's political issues with Asian nations.

"The Japan-U.S. alliance is a key one and should continue to be so,'' Tanigaki said. ``We certainly cannot conclude that smooth relations between Japan and the U.S. will solve all our problems.''

Posted by Hugo Albert Orwell at 06:24 PM | Permalink | TrackBacks (0)

Source: The Mercury News [San Francisco Bay Area]

2006-08-24

Excerpts:

"We are creating a situation where everything we're going to try short of military force is going to fail," said Ilan Berman, an Iran expert at the American Foreign Policy Council, which favors an aggressive approach. "By the spring of next year, we're going to be looking at very serious discussions about next steps, including military options."

"If George Bush is serious about denying Iran nuclear weapons and Iran doesn't respond to our diplomacy, then we're headed to a conflict," said Michael Rubin, an Iran expert at the American Enterprise Institute, a research center with strong ties to the "neo-conservatives" who shaped Iraq policy in the Bush administration.

"There exists a very real possibility that, if the U.S. attacks Iran, then Iran will inflict a devastating defeat upon the U.S. in Iraq, and also take the fight to the U.S. across the Middle East," concluded an analysis Wednesday by Chatham House, a respected British research center.

A unilateral U.S. strike probably would inflame world opinion anew against America. It could send global oil prices over $100 a barrel and tip the world into recession. And U.S. voters weary of war could punish Bush and his Republican Party in 2008 - as might Congress in the meantime if Democrats win control of it in November.

"When all the political and strategic pros and cons of an American military strike on Iran are taken into account, there is good reason to believe that the U.S. will stick to diplomacy," Philip Gordon, a foreign policy specialist at the Brookings Institution, a center-left research center, concluded in a recent article. "I know of almost no one who ... sees it as anything other than a last resort."

Still, Gordon added, "it would be foolish" to completely dismiss the idea that "Washington is getting ready to bomb Iran."

There are other possible scenarios. Iran might cave to international pressure and give up its uranium-enrichment programs. A diplomatic stalemate might leave the issue unresolved through Bush's term. The international community might be able to force Iran's cooperation by imposing tough economic sanctions.

That's the American game plan for the moment. U.S. diplomats are trying to come up with a package of sanctions that could win Security Council approval, but Russia and China oppose tough measures and each holds veto power. Both have strong economic ties to Iran.

Many experts think the right mix of sanctions could work. Despite the windfall it's reaped from skyrocketing oil prices, Iran's economy is shaky. Although Iran is the second-largest exporter of Middle East oil, behind Saudi Arabia, it imports about 40 percent of its refined gasoline. The government has drafted plans for fuel rationing.

"The mullahs have terribly mismanaged the economy. They're economically vulnerable," said Peter Brookes, an Iran specialist at the Heritage Foundation, a conservative research center. "The hard part, when you're talking about sanctions, is getting the Europeans to do it and getting the Chinese and the Russians not to oppose it at the Security Council."

The Security Council passed a resolution in July demanding that Iran shut down its uranium-enrichment program, but Russia and China blocked American efforts to include an automatic trigger for sanctions if Iran failed to comply.

Iran says it wants enriched uranium for nuclear power plants, not bombs, but few accept that. U.S. intelligence officials think Iran is on track to produce a nuclear weapon over the next four to nine years.

Iran's leaders show no sign of backing down on the nuclear issue. Their prestige in the region is on the rise, as Iranian support for Shiite militias in Iraq and Hezbollah militants in Lebanon has expanded Tehran's influence.

f diplomacy fails and the Iranian regime presses ahead with its nuclear program, Bush could order airstrikes, although Iran's nuclear facilities are hidden and scattered. Or he could let Israel do it; in 1981, Israel bombed a nuclear plant in Iraq to prevent it from being used to develop weapons. It's the nation most at risk from a nuclear Iran.

"Political reality may force him to punt it. His credibility is, in a sense, shot internationally. Domestically, there's no appetite for a military confrontation," said Thomas Alan Schwartz, who teaches diplomatic history at Vanderbilt University in Nashville, Tenn. "He might be faced with the issue of whether he wants to go out with a bang, so to speak, or leave it to his successor."

Brookes of Heritage, who agrees with Bush's zero-tolerance policy toward a nuclear-armed Iran, suggested that events may force a compromise.

"We may have to live with a nuclear Iran," he said.

Posted by Hugo Albert Orwell at 05:40 PM | Permalink | TrackBacks (0)

Source: Yahoo/Associated Press

JERUSALEM - In a letter to the troops, Israel's military chief acknowledged publicly for the first time Thursday that there were shortcomings in the military's performance during the recent fighting with Hezbollah guerrillas in Lebanon.

Israel went into the monthlong war as a united front against Hezbollah, but since the fighting ended last week, the country has splintered into a cacophony of reproachful voices.

Criticism of the military's preparedness and tactics swelled after the battles ended without a clear-cut victory for Israel. Questions about the wisdom of 11th-hour battles and reports of food and water shortages have fueled demands for a state inquiry into the war's conduct and the resignation of Israel's wartime leaders.

In a letter to Israeli fighters, military chief Lt. Gen. Dan Halutz wrote: "Alongside the achievements, the fighting uncovered shortcomings in various areas — logistical, operational and command. We are committed to a thorough, honest, rapid and complete investigation of all the shortcomings and successes."

"Questions will be answered professionally, and everyone will be investigated — from me down to the last soldier," according to the letter, released by the military Thursday.

War broke out July 12, hours after Hezbollah fighters killed three Israeli soldiers and captured two in a bold cross-border raid. About 160 Israelis — one-quarter of them civilians — died in the fighting, and northern Israel was all but paralyzed by nearly 4,000 rockets fired from across the border in Lebanon.

While Halutz was owning up to military missteps, the head of the Shin Bet security service was calling the war "a fiasco" in his first public statement on the fighting.

"The north was abandoned, the government systems collapsed there completely," Shin Bet director Yuval Diskin told a closed security forum, according to meeting participants. "There were many failures, and the public sees and understands this. This is not the time to whitewash. The truth must be told. ... Someone has to provide explanations and take responsibility."

During a visit to the rocket-scarred north on Thursday, Prime Minister Ehud Olmert promised that rebuilding the region would be a top priority.

"Billions will be invested ... to turn the north into the paradise it can be," Olmert said, estimating that up to $2.3 billion could be budgeted over the course of several years.

Additionally, more than $300 million raised abroad will be channeled to help towns in the north, he said, promising that a plan would be approved within two weeks.

In the meantime, Olmert has acquiesced to calls for a war probe, and is expected to decide within days what kind of inquiry to conduct.

The most sweeping inquiry would be a state commission, with powers to dismiss government and military officials.

A vocal group of reserve soldiers and bereaved parents has been demanding that Olmert, Halutz and Defense Minister Amir Peretz step down, or that the government conduct an honest reckoning of what went wrong by appointing a state commission of inquiry.

The war's outcome has also unleashed a fierce spasm of political infighting. The governing coalition, established in May, has become even more brittle, with partners feuding over proposed budget cutbacks to pay for the war, which cost up to an estimated $9 billion.

Peretz — a former union boss with scant military experience — has especially come under fire, both within and outside his Labor Party. On top of having his credentials questioned, Peretz now faces a rebellion within his own party by members who oppose the budget cutbacks on the ground they would hurt Israel's disadvantaged.

"Never has his leadership seemed more short-lived," political writer Nadav Eyal wrote in Israel's Maariv newspaper on Thursday.

----

It seems that Israel's efforts at dismantling Hizbollah were a complete failure. Not only did they not succeed but Israel's leaders are being widely criticized both from withing and without Israel. What does this mean for future support for such incursions?

Posted by Hugo Albert Orwell at 03:06 PM | Permalink | TrackBacks (0)

Source: EasyBourse (French)

Tuesday August 22nd, 2006 / 11h15

BUCHAREST (AP)--A Romanian oil rig off the coast of Iran came under fire from an Iranian military warship and was later occupied by Iranian troops, a company spokesman said.

The Iranians first fired into the air and then fired at the Orizont rig, said GSP spokesman Radu Petrescu. Half an hour later, troops from the ship boarded and occupied the rig and the company lost contact with the 26 crew members shortly afterward.

Petrescu said he had no information about any injuries or deaths. The Orizont rig has been moored near the Kish island since 2004, he told the AP.

Posted by Hugo Albert Orwell at 04:51 PM | Permalink | TrackBacks (0)

Source: Thanh Nien News

The US-based Pogo Producing Co. and a PetroVietnam Exploration and Production affiliate are set to conduct 3-D seismic exploration on Block 124 offshore central Vietnam.

The process is scheduled to take place from September 7 to October 31 [2006], the central Phu Yen Provincial People’s Committee told the local Nguoi Lao Dong Tuesday.

Block 124 is located in Phu Khanh Basin covering a 6.007 sq.km area along the country’s central coastal line between Phu Yen and Khanh Hoa provinces.

The exploration block was offered for international tender by PetroVietnam in October 2004.

PetroVietnam signed an oil exploration contract with US Pogo and Canada’s Keeper Resources on Block 124 in April.

Under the 7-year-term contract, the foreign contractors committed to conduct 3-D seismic exploration on an 850 sq.km area and drill two exploration wells in the first 3 years of exploration.

PetroVietnam is entitled to 20 percent equity participation when oil or gas is discovered under the contract, in which US Pogo is the main operator.

According to Pogo, the company’s preliminary analysis utilizing existing 2-D seismic data indicated the presence of several promising leads in Miocene and Paleozoic aged rocks.

Pogo Producing Company engages in the exploration, development, acquisition, and production of oil and gas in the US.

It owns or holds interests in offshore properties in the Gulf of Mexico, and onshore properties in the states of Texas, New Mexico, Wyoming, and Louisiana. The company also operates in the Gulf of Thailand, New Zealand, and in Hungary.

The Vietnamese oil and gas giant is targeting deepwater areas off the nation's coast in a bid to expand petroleum reserves, as output from existing fields slows.

Global oil and gas giants are planning investment and expansion of business in Vietnam, making the petroleum sector one of the busiest at the threshold of WTO entrance.

Total turnover from the industry now amounts to 25 percent of total tax collection.

Posted by Hugo Albert Orwell at 04:45 PM | Permalink | TrackBacks (0)

Source: Bloomberg.com

Excerpt:

Exxon Mobil has only the $12.8 billion Sakhalin-1 development in Russia. The project, off the country's Pacific coast, is based on a production-sharing agreement signed with the Russian government in 1996. The Irving, Texas-based company began pumping oil there in October.

Exxon Mobil's next biggest rivals, Royal Dutch Shell Plc and BP Plc, have bigger investments in the country, including the Shell-led Sakhalin-2 project and BP's TNK-BP joint venture. Exxon Mobil, Shell and BP ventures so far have been mostly unaffected by President Vladimir Putin's campaign to increase government control over the Russian energy sector.

Russia pumped 9.68 million barrels of oil a day during the second quarter, more than any other nation, according to the International Energy Agency in Paris. Saudi Arabia was No. 2 with 9.01 million barrels

Crude prices have more than doubled in the past three years as growing demand for petroleum-based fuels strains production and wars, hurricanes, labor strikes and political unrest disrupt supplies.

International oil producers such as Exxon Mobil and Shell have more expertise than state-owned entities that control some of the world's biggest oil fields, Tillerson said. That expertise is required to fully develop difficult-to-reach reserves, he said

Each $1 increase in the price of a barrel of oil boosts Exxon Mobil's per-share earnings by 1.5 percent, according to Citigroup Inc. estimates.

Exxon Mobil, which pumps more oil than every member of OPEC except Saudi Arabia and Iran, is expected to have profit of $37.5 billion this year, based on the average estimate from 14 analysts surveyed by Thomson Financial. That would surpass last year's $36.1 billion, a record for any company in U.S. history

Shares of Exxon Mobil rose 38 cents to $70.21 in New York Stock Exchange composite trading. The stock has climbed 25 percent this year.

Tillerson said unilateral tax and royalty increases may discourage investment by international oil companies, jeopardizing future petroleum supplies.

Venezuelan President Hugo Chavez has raised royalties on oil companies and forced them to convert operating contracts to joint ventures in which the state oil company holds majority stakes. The U.K. has increased taxes on North Sea production twice in four years.

"Investment is needed across the industry,'' Tillerson said. ``And to encourage such investment, stable fiscal terms are needed, even in times of high earnings."

Exxon sold its 25 percent stake in Venezuela's Quiamare-La Ceiba oil field to Repsol YPF SA in December rather than convert its operating contract to a joint venture with Petroleos de Venezuela.

Since October 2004, Exxon Mobil's royalties on its Cerro Negro heavy-oil venture have risen to 33.3 percent from 1 percent. State-owned Petroleos de Venezuela SA has signaled it plans to take a majority stake in the venture

Exxon Mobil could also face higher income taxes. Venezuelan lawmakers are debating a bill that would raise the rate on heavy-oil ventures to 50 percent from 34 percent.

When asked whether Exxon Mobil would sue Venezuela over the changes, Tillerson said, ``I think there are a lot of other things we can talk about before we get to that point. I think that's down the road.''

Tillerson also noted that Exxon Mobil plans to increase production in Nigeria at a time when other oil companies are idling wells because of militant attacks and sabotage.

The company's Nigerian output will probably increase to 600,000 barrels of oil a day from 500,000, Tillerson said. The fact much of the company's operations in Nigeria are offshore has helped, he said.

The deepwater Erha field will drive much of the gain in production. The field began producing earlier this year.

Posted by Hugo Albert Orwell at 04:27 PM | Permalink | TrackBacks (0)

Source: UK Times Online

A series of strategic errors by the Bush Administration in its War on Terror has left Iran holding virtually all the cards in the power play of the Middle East, according to a report by Britain's most influential think-tank published today.

The report from the Royal Institute of International Affairs at Chatham House - entitled Iran, its neighbours and the regional crises - paints a bleak picture of the prospects for the United States and its Western allies as they try to put a cap on Iran's nuclear programme.

It describes Iran as a state that sits with "confident ease" in the region and says, crucially, that Iran has replaced the United States as the most influential power in Iraq, able to influence events on the street and not just behind the security barricades of Baghdad's Green Zone.

"There is little doubt that Iran has been the chief beneficiary of the War on Terror in the Middle East," says the report from Chatham House's Middle East Programme.

"The United States, with coalition support, has eliminated two of Iran’s regional rival governments - the Taleban in Afghanistan in November 2001 and Saddam Hussein’s regime in Iraq in April 2003 - but has failed to replace either with coherent and stable political structures."

The Chatham House experts wrote that their original report was to analyse Iran's regional influence in the context of international efforts to prevent it developing nuclear weapons.

Its scope was also to encompass the complexities of Iranian domestic politics and the clash between the "apocalyptic world-view" of President Ahmadinejad and the more pragmatic, conservative Supreme Leader, Ayatollah Ali Khamenei.

But as the conflicts grew in Gaza and the Lebanon, where Iran is the key backer of the Hezbollah militia, the 50-page report was expanded to consider all other inter-connected regional crises.

"A recurring theme is the desire of most states to maintain good relations with Iran or, where the relationship is less strong, to avoid antagonisation or any further deterioration," the report says.

"There exist a variety of reasons for this which have generally been strengthened by the turmoil in Afghanistan, Iraq, Palestine and Lebanon. Iran is in a powerful regional position and its co-operation and positive influence are needed to douse the many fires currently alight.

"Were Iran to feel seriously threatened by outside forces, it does have the potential to inflame the region yet further."

The Chatham House report was published the day after Iran delivered its formal response to a UN Security Council resolution offering a range of incentives if it agrees to end enrichment of uranium, which can be used to fuel nuclear power stations or produce atomic warheads. The resolution holds the threat of sanctions against Iran if it refuses to do so.

Diplomats close to the discussions said that the Iranian response, as expected, was neither a "yes" or "no" answer. Instead, Iran has proposed further talks, without explicitly rejecting the UN demands.

Although President Bush has said that he intends to find a diplomatic solution to the crisis, he has repeatedly said that no option is off the table, including that of military action against Iranian nuclear facilities.

On that score, the Chatham House analysis will make uncomfortable reading for White House planners.

"If the US were to attack Iran, then it would do so knowing that its forces in Iraq would be at an even greater risk than they currently are. Any US attack against Tehran would expose the US presence in Iraq to retaliatory destabilising interventions by Tehran," the report says.

"Washington's biggest security headache, as it considers whether to embark upon an assault against the Islamic Republic, is neither Iran's ability to fight in the airspace, nor even in the streets of its border towns (if the US were indeed to surprise most analysts and attempt a land invasion). The greatest threat to the US is Iran's ability to further destabilise the already chaotic public spaces of Iraq."

The report adds: "The great problem facing the US is that Iran has superseded it as the most influential power in Iraq. This influence has a variety of forms but all can be turned against the US presence in Iraq with relative ease, and almost certainly would heighten US casualties to the point where a continued presence might not be tenable."

Such a destabilisation, the analysts say, would have profound implications for the British contingent serving in Basra, Iraq's southern oil capital, where there is a "turf war" between Shia Muslim parties and militias, backed by Iran.

Chatham House says that both the Supreme Council for Islamic Revolution in Iraq (SCIRI), the former exile group founded in Tehran in 1982 during the Iran-Iraq war, and the Iranian-trained Badr Army are making "considerable political gains" in Basra.

SCIRI, it says, backs an expansive "Region of the Centre and the South", a kind of super-province including Basra and the two Shia Muslim holy cities of Najaf and Karbala.

"This scenario is probably of most interest to the geopolitically-savvy Iranians, and SCIRI's increasing prominence almost certainly comes hand in hand with enhanced Iranian support," the report says.

"From the perspective of Iran, SCIRI is also the most "controllable" of the Iraqi Shia parties, especially when compared with the Sadr Movement, or Fadilah. Maintaining influence in Iran's backyard of southern Iraq is of paramount importance to Tehran."

Posted by Hugo Albert Orwell at 10:47 AM | Permalink | TrackBacks (0)

Source: People's Daily, Online, China

Excerpts:

Iranian Minister of Petroleum Seyed Kazem Vaziri Hamaneh has said Iran and Indonesia agreed to promote energy cooperation in various fields, the local daily "Iran News" reported on Monday.

The Indonesian delegation had declared readiness of Indonesian government to take part in oil, petrochemical and exploration projects as well as information technology plans implemented by the National Iranian Oil Company (NIOC), Hamaneh told reporters.

He also noted that Indonesia had called on Iran for supply of needed chemical fertilizer to Indonesia.

"In view of superior situation of Pars Special Economic Energy Zone in Assaluyeh, the Indonesian side is interested in investment in production of chemical fertilizer in Assaluyeh," Hameneh was quoted as saying.

Meanwhile, Hamaneh noted that Iran had taken part in a joint venture for building refinery in Indonesia and the Indonesian side also had expressed its interest in building gas condensate refinery in Iran, the report said.

Both Iran and Indonesia are members of the Organization of Petroleum Exporting Countries (OPEC).

Posted by Hugo Albert Orwell at 03:54 PM | Permalink | TrackBacks (0)

Source: Zaman Daily Newspaper, Online, Istanbul

Excerpts:

With recent energy issues on Turkey’s agenda, a new link is being forged in the Turkish-Iranian chain of energy cooperation.

In a bid from Iran to bypass Russia and access the European natural gas market via Turkey, Iran appears ready to allow Turkey to search for oil in the country in return.

Turkey is also operating oil fields in brother countries Azerbaijan and Kazakhstan.

TPAO (Turkey's state-owned petroleum company) has the authorization to search for oil in Syria, Iraq and Libya.

During today’s talks, TPAO, which specializes in international oil exploration, will ask permission from Iran to rent potential oil fields and conduct feasibility studies.

Iranian authorities will reportedly focus on strengthening their border compressor stations as well as the transfer of natural gas to Europe via Turkey.

As tension between Russia and Ukraine continues, the Turkish Ministry of Energy intensified its contacts with alternative oil-supplier Iran to prevent future shortages.

In addition to the new agreements, Turkey wants to renew current mutual agreements in order to allow Iran to open to Europe via Turkey.

Another important issue on Ankara’s agenda is the Tehran administration committing to a price discount and guarantee of supply.

Iranian natural gas supplied to Turkey fell by nearly one third in winter 2005.

Posted by Hugo Albert Orwell at 03:46 PM | Permalink | TrackBacks (0)

Source: President Ahmadinejad's blog

autobiography 2006/8/11

In the Name of God, the Most Merciful, the Most Compassionate

Oh Almighty God, please, we beg you to send us our Guardian- who You have promised us- soon and appoint us as His close companions.

During the era that nobility was a prestige and living in a city was perfection, I was born in a poor family in a remote village of Garmsar-approximately 90 kilometer east of Tehran. I was born fifteen years after Iran was invaded by foreign forces — in August of 1940 — and the time that another puppet, named mohammad Reza — the son of Reza Mirpange- was set as a monarch in Iran. Since the extinct shah — Mohammad Reza — was supposed to take and enter Iran into western civilization slavishly, so many schemes were implemented that Iran becomes another market for the western ceremonial goods without any progress in the scientific field. Our Islamic culture would not allow such an infestation, and this was an impediment in front of shah and his foreign masters’ way. Thus, they decided to make this noble and tenacious culture weak gradually that Iran be attached strongly to the west as far as its economy, politics, and culture was concern. After the implementation of this policy and the unreal and outward of upswing, the villagers began to rush to the cities. Upon the enforcement of the land reform, the status of the villages became worst than the past and villagers for earning some breadcrumbs, they were deceived by the dazzling look and the misleading features of the cities and became suburban and lived in ghettos. My family was also suffered in the village as others. After my birth -the fourth one in the family- my family was under more pressures. My father had finished 6 grade of elementary school. He was a hard-bitten toiler blacksmith, a pious man who regularly participated in different religious programs. Even though never the dazzling look of the world was appealing to him, but the pressure of the life caused that he decided to migrate to Tehran when I was one year old. We chose to live in south central part of Tehran where is called Pamenar.
* * *

My father used to buy newspaper all the time. I remember one day, when I was in first grade, by looking through a newspaper — with the help of the adults in our house- I read the news of the capitulation passage by the shah’s so called —parliament.— Even though I did not understand the meaning of that issue at that time, but due to the protests and the objections of the religious schools of thoughts with the leadership of Imam Khomeini -Almighty God bless his soul- and the relentless reaction of the extinct shah, I realized that Mohammad Reza attempted to add another page to his vicious case history which was the humiliation and indignity of the Iranian people versus Americans. That was the year that the extinct shah slaughtered many followers of Imam Khomeini.

Imam Khomeini was released from prison. I never forget Imam Khomeini’s speeches during those years which was very persuasive and appealing. You would hear the strong faith to Almighty God in his orations. He invited the people to pure Islam. His message was invitation to the belief of monotheism- Unity and Oneness of God- and also justice, elimination of oppression, injustice and sedition in the world. He was courageous and had a valiant heart. He spoke firmly and securely. His orations were simple and honest. The people accepted his guidance sincerely. Due to these characteristics, he was a beloved leader for every individuals-young or elderly. Of course he was a disgrace for shah’s regime and his Americans masters. Notably, even among his enemies, he was respected with a special honor.
* * *

Eventually, the existence of Imam Khomeini was unbearable for the extinct shah and he could not tolerate him any more. Since they knew if they kill him-as they did a great number of his followers- the bloody uprising can not be controlled. Consequently they decided to exile him in order to separate the leader from his followers and to restrain the revolution which was occurring. They send him into exile overnight and his exile lasted 14 years. While Imam Khomeini was in exile, I became more familiar with his ideas, thoughts and philosophy through his companions and disciples in different classes and meetings. The more I became familiar with his thoughts and philosophy, the more affection I had for that divine leader and his separation and absence was intolerable for me. Although the enemies of the Iranian Muslims separated their leader from them, but always he was in people’s hearts and was more close to them than ever.
* * *

When I used to go to high school, shah celebrated the 2500 years of monarchy of Iran. Those years, poverty among the oppressed people of Iran was escalated and doubled. The imposition of the cost and the expenditure of these festivals and ceremonies and also the crapulence of shah’s debauched clan and their foreign companies, broke the people’s back. All necessary materials and supplies of these illegitimate functions were brought to Iran from Europe by the exclusive and specific airplanes. Probably one can claim that the disgraceful festivals of the 2500 years of kingdom in Iran -which was arranged by the traitorous shah- were the most expensive festivals in the history of the civilized human.

Anyway, in this situation, my father’s sledgehammer and anvil could not cover my family’s necessary expenses. Thus, I had to start working in a shop- that made certain parts for cooling system of buildings- to make some money to cover a portion of my family’s expenses and also my educational costs. Even though I was very playful those days, but was aware of my school & education. I was a distinguished student. From that time, I was interested and attached to teaching. I used to teach my friends and others in their houses. The last year of my high school, I prepared myself for university admission test-conquer. And later on that year, I took the test. Although I had nose bleeding during the test, but I became 132nd student among over 400 thousand participants. I was admitted for civil engineering major in one of the technical universities in Tehran. That was three years before the revolution. Even though the revolution was taking place and I was involved in certain activities against the illegitimate regime of the monarch in Iran-the mercenary & puppet of U.S. & Britain- but I was aware of my education and did not give it up. * * *

In order to stop the university students from joining the revolution, the traitorous shah and his clan tried to abolish Islamic belief and revolutionary motives among students, by propagating immorality, promiscuity, and perversion in universities in Iran. Although a small number of students fell into their traps, but in general, university converted to a base for demonstration against shah’s regime. The people’s faith and devotion to Islam was the main reason that they became ready to face bloodthirsty shah with his brutal and savage torture and encounter his death squad.
* * *

Imam Khomeini after being in exile in Iraq and elsewhere- came back to Iran. The manner is which Imam Khomeini was warmly welcomed on his return after fifteen years of exile by Iranian nation will always be remembered in the records of history. Whole Iran poured out in the streets to welcome Imam. The eyes of those watching Iran from the outside world were dazzled to see this great event and they were helpless to understand and come up with an explanation for what they saw.

The Islamic Revolution of the nation of Iran achieved victory after several years of severe hardships, brave perseverance and sacrifices of thousands of martyrs to the unbelievable astonishment of political analysts of East and West and right in front of the watchful eyes of Intelligence apparatuses of the great World powers at that time. Our Revolution was unique in its own kind. The whole Iranian nation with empty hands and only relying on the divine weapon of faith and under the leadership of an 80 years old man, was able to give a crushing defeat to the mercenary of USA, the Shah (King) of Iran and disclose the real disgraceful face of his powerful supporters to the countries of the region and the whole world.
* * *

Although, right at the beginning of the movement of Imam Khomeini, the type of Government Imam was seeking to establish was known to everybody, however, Imam repeatedly laid great emphasis that everyone’s opinion should be taken into consideration (by holding a referendum) for the establishment of the type of new government in Iran. This he did so as to show right at the outset that it is with the wishes of the nation as well as in accordance with the principles of Islam, that an Islamic Government is established. Although, there was absolutely no need of a referendum, but Imam with his wise foresight, proved his point of view to everyone and left no place for those who wished to seek alternatives. This action of Imam and vehement participation and positive reply to the establishment of Islamic Republic by the Iranian nation, caused disappointment of some of the political groups that were affiliated to great world powers. These terrorist groups with the support and directions from arrogant powers, the leader of them being USA at that time, started massacring innocent people as well as the leading figures of the Islamic Revolution. They, like their supporting masters, thought that they can undermine and collapse the new government right in its beginning. But, the nation of Iran was not ready to give this precious and great Revolution from their hands so easily. They stood firmly and with great difficulties, remained loyal to Revolution and protected it at all costs. They were ultimately able to force these terrorist groups out of their own country. Although these terrorist groups are still under the protection and shameful support of Great Satan USA, however, the slap that these groups have received from the brave nation of Iran will never be forgotten by them.

The global arrogance had determined to defeat the Islamic Revolution of Iran at all costs. The reason was that they were afraid that this revolution will become a model and ideal path for other nations in the region and in the world. On the other they also wished to get back their lost prestige. Thus, they, in addition to supporting daily terrorist activities inside Iran, they also supported regime of Saddam to attack Iran and start the imposed war. The analysis of corrupt politicians at that time was that Iranian revolution was in its beginning and the government was not fully established and was not powerful enough to survive. The security apparatus of state, they thought, was not fully functional and was weak and didn’t have enough weaponry and experience. And, on the other side was Saddam, whatever he wanted, they provided him, and they thought that he will win the war on Iran. Saddam, intoxicated with power and while receiving all the economic, military and intelligence support that USA and other Western countries provided him, proudly announced that he will capture Tehran within 3 days. The war that was imposed on Iran, continued for more than 8 years instead of 3 days and ultimately in the end, not even an inch of Iranian land reach the hands of Saddam and his supporters.

During these 8 years, Saddam fought with us and also with his own people. He bombarded our cities with chemical weapons provided by the Western powers and also Iraqi villages and towns. During the whole period of war, while Saddam was bombarding our cities, Islamic Republic of Iran, obeying the laws of Islam and humanitarian principles, never attacked cities and limited the war with the army of Iraq in the battlefield. It is sad, that even this humane attitude of Islamic Republic didn’t impress those who at world stage watched the war at that time.
* * *

At the beginning of war, I was 25 years of age. My mother and wife and all the mothers and wives of the Iranian nation, whose youths and their wives participated in war and defended their country, patiently trained and educated the next generation, which is brave, resisting and faithful. Today’s brave and strong youths are the fruits of hardships and untiring efforts of the days of past.

The sacred defense in the universities was related to teaching human values. Side by side, the experience of life and death during war made this life like a heaven on earth and hereafter, such that what was said and heard about it and carried out at that time, was truly godly.

Brotherhood, faithfulness, seriousness and loving hard work, spirituality and worship, eagerness and happiness to do good, sacrifice and bravery, all these values have proved to us time and again that this world and hereafter are not opposite to each other, rather they both are completely in harmony with each other. At that time, martyrdom was the only wish of our defending fighters.

In the year 1988, one year before the demise of Imam Khomeini, may peace of God be upon him, the United Nations Security Council passed the resolution to stop the war and Imam unwillingly accepted it and announced that this acceptance on his part is like drinking poison. The war ended and in a situation when all the international organizations strived very hard to distort and hide the facts that Saddam was the aggressor and that the arrogant powers had fully supported him. For those who were not aware of the close working of these international organizations and arrogant powers of the world, this indifference to and distortion and hiding of the facts was a very shocking experience.
* * *

I will continue this topic later on as it took long in the beginning. From now onwards, I will try to make it shorter and simpler.

With hope in God, I intend to wholeheartedly complete my talk in future with allotted fifteen minutes.

Posted by Hugo Albert Orwell at 06:01 PM | Permalink

Source: MarketWatch.com

TEHRAN (MarketWatch) -- Iraq's crude oil production is back at 2.5 million barrels a day after the pipeline that takes oil to Turkey was repaired, Iraq's Oil Minister Hussain al-Shahristani told the Iranian daily Sharq Monday.

The minister also said he believed the Organisation of Petroleum Exporting Countries will maintain their current output ceiling at its next meeting In September.

"The pipeline was recommissioned two days ago and with that Iraq's production rose to 2.5 million b/d," Shahristani said. The pipeline to Turkey, a popular sabotage target, has a capacity of 400,000 b/d.

Shahristani said plans are under way to raise Iraq's oil production to between 2.9 million and 3 million b/d by the end of the current year, and raise it by 500,000 b/d annually by 2010.

"Therefore, Iraq's oil production will rise to 4.5 million b/d by the end of the current (Iraqi) government in 2010," Shahristani said.

The surge in Iraq's production will be realized through the utilization of domestic resources and without any foreign involvement, he said. Any hike in the country's national oil production using foreign oil companies will raise production above and over the projected output.

"If the agreements with international oil companies on the development of oil fields are signed, Iraq's oil production will rise to 6 to 8 million b/d," Shahristani said, without giving any timeframe for this target.

He also said agreements being negotiated with foreign oil companies will be by no means limited to U.S. companies, and Iraq will take the advantage of such European energy firms as BP PLC (BP), Royal Dutch Shell PLC (RDSA), Total SA (TOT) and firms from China.

As to what OPEC plans to do with its output at its September 11 meeting in Vienna, Shahristani said: "We are currently deliberating with one another, but I am of the opinion that the current production ceiling be maintained."

Shahristani arrived in Tehran on Friday on a four-day official visit to follow up on the agreements between the two countries in the oil sector. The two countries are to explore the possibility of developing jointly their shared oil fields and a technical group was set up to advise on that.

On the likelihood of U.S. opposition to close cooperation with Iran in the vital oil industry, Shahristani said Baghdad decides on the basis of maximizing its own interests.

It was also agreed Iran would receive 100,000 b/d of Iraqi oil to refine at Abadan and Kermanshah refineries, of which Iraq would receive 2 million liters of kerosene among other derivatives.

Posted by Hugo Albert Orwell at 06:00 PM | Permalink

Source: The Seattle Times

Excerpts:

Fifty-eighty percent of all petroleum burned in the United States comes from abroad, the U.S. Energy Information Administration says in its 2005 annual report. That stark dependency on outsiders, analysts say, will grow even if the last pockets of oil in America are drilled.

Oil and anger in Nigeria

Back in Nigeria, Felicia, Beatrice and Comfort were running through their village of Itak Abasi. They clutched packets of rehydration salts.

The medicine was free, distributed by health officials. The village wells were tainted with fecal matter. And people were dying of acute gastric infections, possibly cholera. Two children had succumbed that day. Another two would die the next week. The doctors were angry.

Itak Abasi — "Foundation of God" in the local Ibibio language — is a rural slum festering atop a sandbar at the mouth of the Akwa Ibom River. Its hovels squat half a mile from the Exxon Mobil oil-export terminal that supplied the bulk of African crude purchased by Marathon and sold in South Elgin. Since 1971, the facility has funneled billions of dollars' worth of petroleum to the United States. Itak Abasi seethes next door with neither plumbing nor electricity.

"The oil companies are no good," said villager Sunday Jeremiah, 40. "We are crying daily."

He is a fisherman. And the young girls — ages 10, 11 and 13 — are three of his seven children. Exxon Mobil's local subsidiary, Mobile Producing Nigeria, pumps the local oil fields in a joint venture with the Nigerian National Petroleum Corp. The U.S. oil giant has a complex relationship with its destitute neighbors. It helped renovate the village's schoolhouse, but it also spilled at least 40,000 barrels of crude into the sea in 1998. Fishermen say the spill permanently destroyed the village's traditional livelihood.

The Texas-based giant is both courted and reviled by the Ibibio people. The Nigerian central government for the most part is invisible. Asked why villagers didn't dig latrines — a simple way to blunt fatal gastrointestinal epidemics — Itak Abasi's old, bald-headed chief snapped, "That's the oil company's job!"

Seeking new sources

Few Americans realize it, but they have hitched their wagon — or rather their 210 million cars and trucks — to Africa's troubled star.

The planet's only remaining superpower is rattling its half-empty oilcan at the poorest continent in the world.

This state of affairs has come about because two-thirds of the world's oil is controlled by the Organization of the Petroleum Exporting Countries (OPEC), and most of it is pooled in the Middle East. Chronic instability in that region — today stoked by the U.S. intervention in Iraq and Israel's battle with Hezbollah — has further encouraged the United States to hedge its oil bets elsewhere.

U.S. companies have trudged to Central Asia looking for low-quality oil. They are punching wells into the ecologically fragile shallows of the Caspian Sea. And they are investing billions in upgrading huge but risky oil fields in business-hostile Russia.

Nigeria, Africa's oil heavyweight with 36 billion barrels of reserves, boasts one-seventh of Saudi Arabia's bounty. Still, African crude has its advantages. It is light and low in sulfur — well-suited to pollutant-sensitive U.S. refineries. Its reservoirs are closer.

Americans already get more oil from Africa than from Saudi Arabia. By 2015, oil experts say, African states will supply one-quarter of U.S. imports, up from 15 percent today. The United States quietly signaled this shift in 2002, when the State Department declared African oil a "strategic national interest," meaning in diplomatic code that U.S. troops may intervene to protect it.

"I think the U.S. military would find our swamps worse than Iraq," snorted Austin Onuoha, a Nigerian human-rights activist who specializes in oil issues. "But at least they might build some infrastructure after they invade. Americans always do this, right?"

Onuoha's sarcasm was well-earned. He was talking from his blacked-out house in the oil-rich Niger Delta. The electricity in Africa's petro-giant had winked out again. And this fit sourly into his main thesis: Oil is rotting Africa's frail democracies.

According to the World Bank, 80 percent of Nigeria's $340 billion in oil revenue has been pocketed by 1 percent of the population — a cast of thugs who include the world's most venal politicians and generals. In short, geysers of easy petrodollars corrupt weak African institutions. They unleash reckless government spending. And they usually stoke internecine fighting.

Port Harcourt, the decaying commercial center of the Niger Delta, should be the booming capital of a tropical oil kingdom that spouts as much crude as three Alaskas. Instead, it's a handmade slum. Foreign oil workers zip around in curtained minivans, hoping to avert kidnapping by criminal gangs and ethnic militias. The hotels are guarded by men sporting aviator sunglasses and Kalashnikovs.

Rounding out the picture is world-class pollution (at least 4,800 oil spills over 20 years), "bunkerers" (oil thieves who drill into pipelines, often incinerating themselves and hundreds of others), and brutish military tactics (Nigerian troops torching thatched villages and strafing oil smugglers' barges with helicopter gunships). Nobody knows the death toll in the delta.

The tightest crude market in 30 years is turning Nigeria's obscure swamp skirmishes into a global energy flash point. Nigerian insurgents announce their next attack on a Shell platform — and crude futures quiver in Tokyo and New York. Oil first hit the $50-a-barrel mark in 2005 when an SUV-driving warlord named Mujahid Dokubo-Asari threatened "all-out war" in the delta.

"We know the world covets Nigerian oil more than ever," said Onengiya Erekosima, a Bible-quoting spokesman for the Niger Delta People's Volunteer Force, one of many militias in the lawless squalor of Nigeria's oil patch.

About one-quarter of Nigeria's 2.3 million-barrel-a-day crude flow is regularly choked off by the likes of Erekosima.

"We will force the international community to respond to our suffering," he said, "because we can cut off their crude at any time."

Exxon Mobil says it paid coastal communities millions of dollars in restitution after the huge 1998 spill. Company spokeswoman Susan Reeves said Exxon Mobil's subsidiary, in cooperation with the Nigerian national oil company, also spends $10 million to $12 million a year on community development, most of it on education, health, roads, micro-enterprises and agricultural assistance. Little of such money is evident in Itak Abasi, however.

Posted by Hugo Albert Orwell at 05:59 PM | Permalink

Quote of the Day

Source: Agence France-Presse

"Though we do not deny that fact that Jews were killed in the (second world) war, why should the Palestinians pay for it?" ~Masoud Shojai, head of Iran's "Iran Cartoon" Association and fair organizer

He added that around 1,100 cartoons were submitted by participants from more than 60 countries and that more than 200 are on show.

Shojai did not elaborate on the source of the prize money, but emphasized that it did not come from any governmental body.

The fair is being staged by Iran Cartoon and the country's largest selling newspaper Hamshahri newspaper, which is published by Tehran's conservative municipality.

The contest was announced in February in a tit-for-tat move after caricatures of the Prophet Mohammed were first printed in Denmark and then picked up and published worldwide, enraging Muslims.

Posted by Hugo Albert Orwell at 05:45 PM | Permalink

Source: John R. Wilson and Griffin Burgh, "The Hydrogen Report: An Examination of the Role of Hydrogen in Achieving US Energy Independence", TMG (The Management Group), July 2003

Excerpt:

In most instances, the total energy cost of producing, compressing, liquefying, transporting and deliverying [hydrogen] to the user will be far higher than the energy recovered from it. In addition, it is inconvenient and often dangerous to use. It makes no contribution whatever to energy independence — i.e., to weaning the US off Imported energy supplies — and almost no real contribution to eliminating or minimizing environmental issues such as global warming — that all has to be dealt with at the hydrogen or energy manufacturing plant and is independent of the choice of fuel.

Alternate document source: The Hydrogen Report: An Examination of the Role of Hydrogen in Achieving US Energy Independence

Posted by Hugo Albert Orwell at 11:39 PM | Permalink

The research and aggregated content contained in this blog are the basis for a documentary that my crew and I began filming in October 2006 in Boston at the ASPO-USA (Association for the Study of Peak Oil & Gas) conference. The documentary is based on the research done by William Clark for his book, Petrodollar Warfare.

Petrodollar Warfare concerns United States geostrategy, the geologic phenomenon called Peak Oil and currency hegemony.

William Clark's latest research (December 2006) is contained in his essay titled, Hysteria Over Iran and a New Cold War with Russia.

Contact me: hugo[NoSpamNo]@diminishingmarginalutility.com

Posted by Hugo Albert Orwell at 10:38 AM | Permalink

Posted by Hugo Albert Orwell at 04:28 PM | Permalink

Energy experts say this kind of portfolio-wrenching spike in the price of oil isn't far off. They chalk it up to two factors:

• There are basic underlying energy shortages, while global demand from economic hot spots like China and India ratchets higher every month.
• A half-dozen potential geopolitical flash points around the globe could flare up at any moment, increasing worries among oil buyers at best and disrupting supply at worst.

"We think $100-a-barrel oil is very possible," says Frank Holmes, who manages the U.S. Global Investors' Global Resources Fund (PSPFX), one of the top-performing energy funds, up nearly 50% in the past year.

Strictly speaking, that kind of spike would be nothing new. Adjusted for inflation, oil traded at equivalent levels early in the 1980s. But a lasting move above $100 a barrel would have devastating effects on your investment portfolio if you were ill-prepared.

You would miss out on gains if you aren't long energy producers with long-lived reserves in politically safe regions like North America -- think Encana (ECA), Canadian Natural Resources (CNQ) and Suncor Energy (SU). Also getting a boost would be alternative-energy plays such as Pacific Ethanol (PEIX) and Green Plains Renewable Energy (GPRE), and ethanol and uranium supplier Cameco (CCJ).

The bad news is that a move to $100 for oil would send gasoline above $4 a gallon, taking another bite out of consumer spending. This would hurt retailers serving lower-income consumers, such as Wal-Mart Stores (WMT), Dollar Tree Stores (DLTR) and 99 Cents Only Stores (NDN), and restaurant chains such as Wendy's International (WEN), Brinker International (EAT) and CBRL Group (CBRL).

Supply-demand constraints

Holmes thinks supply constraints alone will be enough to put oil above $100, without any help from geopolitical flare-ups. In a world with 6.5 billion people, Holmes said, "3.5 billion are in economies that must grow at 6% a year or politicians lose their jobs."

By this he means that a sharp economic slowdown in rapid-growth countries such as China or India could lead to regime-toppling social unrest. So political leaders know they have to keep their economies humming, and that requires more oil. "They are embracing the American dream," says Holmes.

They have a ways to go, but a few quick numbers show why oil consumption should increase dramatically along the way. Per capita oil consumption in China and India stands at 1.7 barrels a year. In Mexico, the number is 7 barrels; it's 17 in Japan and 28 in the United States.

China's demand for oil grew by 11% in the most recent quarter, and demand in India was up 5%, according to UBS Securities analyst Jan Stuart. He thinks global demand for oil will grow by 2% a year through 2008.

But at the same time, there are supply constraints. A dearth of investment by oil companies during the 1990s when oil was cheap resulted in limits on reserves and production now. Spare capacity among Organization of the Petroleum Exporting Countries (OPEC) members is tight, while non-OPEC growth is flat except for new production from former Soviet Union countries, says Goldman Sachs oil sector analyst Arjun Murti.

The risks are global -- and huge

Besides basic supply-demand constraints, several geopolitical hot spots could flare up and make oil prices spike:

• Iran: Iran says it wants to produce more electricity from nuclear power so it can sell more oil abroad. But U.S. intelligence experts suspect the country is also developing nuclear weapons that could fall into the hands of terrorists. "The U.S. is pretty determined to stare 'em down," says Tom Petrie of Petrie Parkman & Co., the Denver brokerage and investment bank that specializes in the energy sector. If the confrontation boils over into military strikes on Iranian nuclear facilities, the price of oil would go bonkers. Iran could retaliate by cutting back production or closing the Strait of Hormuz (map), through which much of the oil from the region passes, speculates Rep. Roscoe Bartlett, R-Md., who follows energy issues closely.
• Iraq: Ongoing attacks by insurgents on the energy infrastructure make it impossible for Iraq to reach its goal of producing 3 million barrels of oil a day. Recent levels are closer to 2.5 million per day.
• Saudi Arabia: Saudi Arabia is the largest OPEC producer and controls much of the cartel's spare capacity. But it faces threats from al-Qaida and potential terror strikes on its oil infrastructure. The country's regime also faces civil unrest. "One scary scenario is that zealots take over in Saudi Arabia because they are unhappy with the royal family," says Bartlett.
• Nigeria: Nigeria's rich reserves make it one of the world's top oil-producing nations. But most of Nigeria's oilfields are in the Niger Delta, a region where poverty and unemployment fuel a long-running conflict between locals and the oil companies. Attacks by rebels on the energy infrastructure have shut down about a quarter of the country's production this year.
• Venezuela: Venezuela, the world's fifth-largest oil exporter, is in talks to become a major supplier to China. That would tighten supplies around the globe, since more oil would be locked up in transport during the trip to China, says Petrie. Another potential problem is Venezuela's increasing ties with countries such as Russia, which is supplying military equipment, says Holmes. If this rekindles the Monroe Doctrine and the United States takes steps to limit Russian involvement in Venezuela, that would be bad news for oil prices.
• Hurricane season: Last year's hurricanes along the Gulf Coast destroyed energy infrastructure, causing a temporary spike in the price of oil and gas. Hurricane season just began, and the same thing could happen this year.

Profiting from $100 oil

Goldman Sachs analyst Murti says that the recent pullback in energy company shares means the current high price of oil is priced into the stocks. But he thinks oil can go even higher, so he is telling clients to buy stocks like ExxonMobil (XOM), ConocoPhillips (COP), Canadian Natural Resources, Suncor, XTO Energy (XTO), Southwestern Energy (SWN) and Bill Barrett (BBG).

Here are some other approaches:

The safety plays: In case of heightened geopolitical strife in the Middle East, oil companies with holdings in "safe" regions like North America would "go through the roof," says U.S. Global Investors' Holmes. These include Suncor, EnCana and Canadian Natural Resources.

Likewise, investors would view these three as "safe" in a lasting $100-a-barrel oil scenario since they have long-lived reserves locked up in the form of Canadian oil sands, says Morningstar analyst Elizabeth Collins, though she thinks these stocks still look too pricey to buy here.

A related Canadian oil-sands play is Compton Petroleum (CMZ). It produces natural gas near the oil-sands companies, which will use a lot of natural gas in production. And since Compton Petroleum's energy fields are in Canada, it could benefit if hurricanes shut down production again along the Gulf Coast and push up natural gas prices, says Morningstar's research director, Patrick Dorsey.

Unhedged energy companies: Energy companies that haven't used financial instruments to hedge against changes in oil prices will benefit if oil spikes, says Amir Arif, an analyst with Friedman, Billings, Ramsey & Co. This includes Suncor, and any of the integrated majors, such as ExxonMobil.

Alternative energy plays: A spike in oil prices would give a boost to alternative energy plays like Pacific Ethanol and Green Plains Renewable Energy in ethanol, and uranium plays like Cameco.

Natural gas plays: These would benefit as well, because energy users would switch to natural gas, says Morningstar's Eric Chenoweth. The key is to go with companies that already have a lot of reserves locked up for production, so they don't have to buy pricier reserves after oil tops $100. Companies in this category include: Cimarex Energy (XEC), Apache (APA), Anadarko Petroleum (APC) and Devon Energy (DVN), plus Goodrich Petroleum (GDP) and Chesapeake Energy (CHK), which continue to see a lot of insider buying.

The losers

At $100 a barrel for oil, gasoline would go above $4 and hurt retailers serving lower-income consumers, like Wal-Mart Stores and the fast-food chain Wendy's. Airlines also would suffer from higher fuel costs.

But there's a chance that gasoline prices of $4 to $5 could cause a significant consumer slowdown that might lead to a recession, says Ed Yardeni, the chief investment strategist at Oak Associates. "The psychological impact of $4 or $5 at the gas pump would probably push consumers over the edge. It would be pretty ugly across the board," he says.

The good news is the Federal Reserve would lower interest rates, Yardeni believes, because a superspike in oil would increase the chance of a recession more than it would spark higher inflation.

Source: Michael Brush

Posted by Hugo Albert Orwell at 03:08 PM | Permalink

Source: People's Daily - China

In China's northwestern Xinjiang Uygur Autonomous Region, the China-Kazakhstan pipeline's Eastern destination carries crude to the PetroChina Dushanzi Petrochemical Company's oil tank field and refinery in Dushanzi .

Posted by Hugo Albert Orwell at 02:48 PM | Permalink

Source: ASPO-5 Live

Excerpts:

“We have 1,500 days until peak and tomorrow we’ll have one day less,” Chris Skrebowski, the editor of Petroleum Review, told the ASPO-5 crowd today. Skrebowski’s projections, which focus on oil flows instead of reserves, has the world peaking at between 92 and 94 million barrels per day. Unfortunately, he said, “collectively we’re still in denial.”

Skrebowski joins a growing group that sees the peak occurring earlier than later. “It can’t be far off,” he said. And the consequences couldn’t be more profound. “We’ve built are entire society around oil. Everything depends on cheap and plentiful oil. We will have to change everything we do.”

The massive jump of oil prices since 2002 corroborates the emerging reality of tightening supplies, Skrebowski said. “What is the price telling us? Desperately it’s saying ‘send us more oil.’ That’s what economics does.”

But new supplies aren’t coming forth, he said. Nor is demand being appreciatively destroyed. “Neither is working. New supplies are not coming on line and demand is not falling, with the exception of the third world, which is getting priced out of the market. It just hasn’t hit us yet.”

Skrebowski’s comprehensive model balances incremental new oil flows with shrinking production for existing fields. Net increases seem possible for a few more years, he said, but by 2010-2011, declines will start outweighing gains—and that’s when the world will hit the peak. He dismisses optimistic projections from organizations such as Cambridge Energy Associates (CERA) as “utter tosh.”

Skrebowski says that mitigation efforts won’t affect the peak date by much—a few months or a year at the most. Oil-producing countries, for example, could decide to divert more supplies to domestic consumption, tightening the price noose on industrialized nations. “It’s an exquisite form of torturing us.” And the result could lead to an interesting sight: “SUVs on the streets of Mexico and Smart Cars in Houston.”

Posted by Hugo Albert Orwell at 11:55 PM | Permalink

Source - Yahoo News

BEIJING (AFP) - Southwest China is experiencing a serious drought, with 2.39 million people facing a shortage of drinking water, state media have said.

The dry spell has descended over Sichuan province, which is located only a few hundred kilometers (miles) from Guizhou region which is currently soaked in torrential rains.

Xinhua news agency said 53 counties were hit by drought in spring, followed by 113 counties during the summer months, affecting not just large numbers of people but also more than three million head of livestock.

By the end of last month, over 60 percent of small-scale irrigation systems in the drought-stricken areas had dried up, resulting in total crop failure on 120,000 hectares (300,000 acres) of farmland, Xinhua said.

Posted by Hugo Albert Orwell at 11:43 PM | Permalink

Note: I will be adding to this as I go along.

bpd = barrels per day

One barrel of crude = 42 gallons

The United States makes up 5% of the world population yet consumes ~25% of the daily global production of petroleum.

The world consumes 84.6 million bpd = 58,750 barrels/min or 30.88 billion barrels/year [Source: IEA, 2006-10, 86 million bpd is projected demand for 2007]

The US consumes 21.6 million bpd = 15,000 barrels/min or 7.9 billion barrels/year

The US imports 15 million bpd

The US Strategic Petroleum Reserve contains 727 milliion barrels of oil, which, given the 12 million bpd imported, gives the US 60 days of oil independence in case of emergency.

Canada is the largest supplier of US crude.

U.S. petroleum reserves accounted for as much as 3% of all known world reserves in 2004. That percentage places U.S. reserves at about 340 billion barrels of oil.

58% of all petroleum burned in the US comes from abroad. Source: U.S. Energy Information Administration 2005 Annual Report.

Two thirds of the world's oil is controlled by OPEC and most of that can be found in the Middle East.

Nigeria, Africa's oil heavyweight with 36 billion barrels of reserves, boasts one-seventh of Saudi Arabia's bounty. Still, African crude has its advantages. It is light and low in sulfur — well-suited to pollutant-sensitive U.S. refineries. Its reservoirs are closer.

Americans already get more oil from Africa than from Saudi Arabia. By 2015, oil experts say, African states will supply one-quarter of U.S. imports, up from 15 percent today. The United States quietly signaled this shift in 2002, when the State Department declared African oil a "strategic national interest," meaning in diplomatic code that U.S. troops may intervene to protect it.

According to the World Bank, 80 percent of Nigeria's $340 billion in oil revenue has been pocketed by 1 percent of the population — a cast of thugs who include the world's most venal politicians and generals. Oil is rotting Africa's frail democracies.

Americans consume about 2.3 billion gallons of gasoline each year simply idling in traffic. That equals the annual oil output of Equatorial Guinea, Africa's most promising new petro-state.

Dubai also has 117-billion cubic metres of natural gas reserves. Source: GulfNews.com

According to industry sources, Dubai has two billion barrels of oil reserves, and the daily production does not exceed 90,000 barrels. Source: GulfNews.com

Iraq has a 400,000 bpd capacity oil transit line to Turkey which is a popular sabotage target.

Iraq's daily production of oil is 2.5 million bpd.

Iraqi oil minister, Shahristani, said plans are under way to raise Iraq's oil production to between 2.9 million and 3 million b/d by the end of the current year, and raise it by 500,000 b/d annually by 2010. "Therefore, Iraq's oil production will rise to 4.5 million b/d by the end of the current (Iraqi) government in 2010," Shahristani said.

The surge in Iraq's production will be realized through the utilization of domestic resources and without any foreign involvement, he said. Any hike in the country's national oil production using foreign oil companies will raise production above and over the projected output. "If the agreements with international oil companies on the development of oil fields are signed, Iraq's oil production will rise to 6 to 8 million b/d," Shahristani said, without giving any timeframe for this target.

It was also agreed Iran would receive 100,000 b/d of Iraqi oil to refine at Abadan and Kermanshah refineries, of which Iraq would receive 2 million liters of kerosene among other derivatives.

Russia pumped 9.68 million barrels of oil a day during the second quarter, more than any other nation, according to the International Energy Agency in Paris. Saudi Arabia was No. 2 with 9.01 million barrels

Each $1 increase in the price of a barrel of oil boosts Exxon Mobil's per-share earnings by 1.5 percent, according to Citigroup Inc. estimates.

Exxon Mobil, which pumps more oil than every member of OPEC except Saudi Arabia and Iran, is expected to have profit of $37.5 billion this year, based on the average estimate from 14 analysts surveyed by Thomson Financial. That would surpass last year's $36.1 billion, a record for any company in U.S. history

Shares of Exxon Mobil rose 38 cents to $70.21 in New York Stock Exchange composite trading. The stock has climbed 25 percent in 2006.

Exxon sold its 25 percent stake in Venezuela's Quiamare-La Ceiba oil field to Repsol YPF SA in December 2005 rather than convert its operating contract to a joint venture with Petroleos de Venezuela.

Tillerson also noted that Exxon Mobil plans to increase production in Nigeria at a time when other oil companies are idling wells because of militant attacks and sabotage.

ExxonMobil's Nigerian output will probably increase to 600,000 barrels of oil a day from 500,000, Tillerson said. The fact much of the company's operations in Nigeria are offshore has helped, he said.

ExxonMobil's deepwater Erha field will drive much of the gain in production. The field began producing earlier this year.

Energy cooperation is the cornerstone of the burgeoning relationship between the world’s second-largest consumer [China] and fifth largest exporter [Venezuela].

Venezuela currently supplies China with around 160,000 bpd of crude — out of total Chinese imports of nearly 3 million bpd — and has said it aims to more than triple that by 2009.

The US gets around 12% of its imports from Venezuela.

NEW YORK, Aug 30 (Reuters) - U.S. crude oil imports hit their second-highest level on record last week, averaging 11.2 million barrels per day, as shipments to the West Coast peaked due to output problems in Alaska, the U.S. Energy Information Administration said Wednesday.

Todayn [August 2006], we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers.

Oil discoveries plummeted to 5 billion barrels in 2005 from 90 billion barrels in 1964. ~Colin Campbell

Posted by Hugo Albert Orwell at 11:36 PM | Permalink

Source: Yahoo News - AP

Excerpts:

ANCHORAGE, Alaska - In a sudden blow to the nation's oil supply, half the production on Alaska's North Slope was being shut down Sunday after BP Exploration Alaska, Inc. discovered severe corrosion in a Prudhoe Bay oil transit line.

Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production as of May 2006 or about 2.6 percent of U.S. supply including imports, according to data from the U.S. Energy Information Administration.

The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.

A 400,000-barrel per day reduction in output would have a major impact on oil prices, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

Only one of BP's three transit lines is operating. The third was shut down in March after 267,000 barrels of oil spilled, and BP is working on a bypass line for that.

A prolonged shutdown would be a major blow to domestic oil production, but even a short one could be crippling to Alaska's economy.

Posted by Hugo Albert Orwell at 11:31 PM | Permalink

It doesn't look like Arab support for Hezbollah's struggle against Israel is going to dry up anytime soon. Quite the contrary, it appears that Israel's airstrikes and incursions into Lebanon have only strengthened Hezbollah's political and, most likely, military support.

Source: eitb24.com, Basque Radio and Television

Excerpts:

Khamenei criticised the US for supporting Israel's evil acts in Lebanon and called on the Islamic world to unite against them. "The aggressive nature of America and Israel will revive the spirit of resistance," he said.

"The only way to succeed is to continue resistance against the occupier regime (Israel)," said Khamenei, who has the final say on all matters of state in Iran and who dominates the country's policy on the Middle East conflict. "Iran will stand by ... the brave Lebanese nation and the combatant Palestinian nation."

Khamenei criticised the United States for supporting Israel's "evil acts" in Lebanon and called on the Islamic world to unite against Israel. "The aggressive nature of America and Israel will revive the spirit of resistance more than before in the Islamic world," Khamenei said.

An influential hardline cleric on Tuesday called on Muslim nations to arm Lebanese Hezbollah in its fight against Israel.

Posted by Hugo Albert Orwell at 09:53 AM | Permalink

Source: Washington Post

CARACAS, Venezuela (Reuters) - Global oil prices could hit $200 per barrel if the United States pursues sanctions against Iran for its nuclear development program, an Iranian official told Venezuelan state TV on Thursday.

Iran's Foreign Relations Vice Minister Manuchehr Mohammadi said, "The first consequence of these sanctions would be an increase in the price of oil to around $200 per barrel."

Posted by Hugo Albert Orwell at 09:50 AM | Permalink

Posted by Hugo Albert Orwell at 10:02 AM | Permalink

Posted by Hugo Albert Orwell at 11:28 PM | Permalink

Source: Iran Mania

Russia will clearly block any attempts at 'automatic' sanctions against Iran for refusing the package of incentives offered in exchange for discontinuation of their Uranium enrichment program. Since they have veto power in the Security Council, military action is out of the question.

Some excerpts:

LONDON, August 1 (IranMania) - A UN Security Council demand that Iran suspend uranium enrichment does not carry the "automatic" threat of sanctions, Russian Deputy Foreign Minister Sergei Kislyak said Tuesday, AFP reported.

"Of course, no one is going to look at any use of force," he added.

"We are interested in a political resolution of the problem," he said.

If Iran does not suspend its nuclear work, the council would consider adopting "appropriate measures" under Article 41 of Chapter 7 of the UN Charter, which could be economic and political sanctions.

Posted by Hugo Albert Orwell at 04:45 PM | Permalink

Posted by Hugo Albert Orwell at 04:33 PM | Permalink

Source: Iran Mania
Tuesday, August 01, 2006

LONDON, August 1 (IranMania) - OPEC member Iran has signed a 2,7-billion-dollar oil refinery upgrade deal with China which will help feed the Islamic republic's hunger for fuel, Iranian state television reported.

Under the accord, a consortium led by Chinese firm Sinopec will upgrade capacity at a refinery in the central Iranian city of Arak from the current 150,000 barrels of crude oil per day to 250,000 barrels.

"Currently, Arak refinery produces about six million liters (1.6 million gallons) of petrol a day and when the upgrade operation is done the figure will reach about 16 million liters (four million gallons)," said deputy oil minister in charge of refining affairs, Mohammad-Reza Nematzadeh.

The project will take less than four years to complete, he added.

Iran is OPEC's second biggest oil producer after Saudi Arabia, AFP noted.

Most of its refineries, however, were built by American companies before the 1979 Islamic revolution and refurbishment has been hampered by trade sanctions imposed since then.

The contract with the Sinopec consortium marks an effort by the Islamic republic to increase its petrol production.

Its refineries have a capacity of 40 million liters (10 million gallons) of petrol a day, but demand is over 70 million liters (18 million gallons) a day, AFP stated.

Iran pays several billion dollars per year to import petrol to meet growing domestic consumption by its 68-million-strong population.

Posted by Hugo Albert Orwell at 03:36 PM | Permalink

This data was current in 1990. It's interesting to note how incorrect the author's conclusions could be concerning the future demand for oil and natural gas. He also predicts an erosion of OPEC's economic power in the future due to alternative fuel sources.

Source: The Concise Encyclopedia of Economics

by Benjamin Zycher

Few people are aware of it today, but OPEC (the Organization of Petroleum Exporting Countries) was formed in response to the U.S. imposition of import quotas on oil. In 1959 the U.S. government established a Mandatory Oil Import Quota Program (MOIP) restricting the amount of crude oil (and refined products) that could be imported into the United States. The MOIP gave preferential treatment to oil imports from Mexico and Canada. This partial exclusion of the U.S. market to Persian Gulf producers depressed prices for their oil. As a result oil prices "posted" (paid to the selling nations) by the major oil companies were reduced in February 1959 and August 1960. In its early years the U.S. import quota program also discriminated against oil from Venezuela.

In September 1960 four Persian Gulf nations (Iran, Iraq, Kuwait, and Saudi Arabia) and Venezuela formed OPEC, the purpose of which was to obtain higher prices for crude oil. By 1973 eight other nations (Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon) had joined OPEC. Ecuador withdrew on the last day of 1992.

OPEC was unsuccessful in its first decade. Real (that is, inflation-adjusted) world prices for crude oil continued to fall until 1971. In 1958 the real price was $10.85 per barrel (in 1990 dollars). By 1971 it had fallen to $7.46 per barrel. However, real prices began to rise slowly beginning in 1971, and then jumped dramatically in late 1973 and 1974 from roughly $8 per barrel to over $27 per barrel in the wake of the Arab-Israeli ("Yom Kippur") War.

Contrary to what many noneconomists believe, the 1973 price increase was not caused by the oil "embargo" (refusal to sell) directed at the United States and the Netherlands that year by the Arab members of OPEC. Instead, OPEC reduced its production of crude oil, thus raising world oil prices substantially. The embargo against the United States and the Netherlands had no effect whatever: both nations were able to obtain oil at the same prices as all other nations. The failure of this selective embargo was predictable. Oil is a fungible commodity that can easily be resold among buyers. Therefore, sellers who try to deny oil to buyer A will find other buyers purchasing more oil, some of which will be resold by them to buyer A.

Nor, as is commonly believed, was OPEC the cause of oil shortages and gasoline lines in the United States. Instead, the shortages were caused by price and allocation controls on crude oil and refined products, originally imposed in 1971 by President Nixon as part of the Economic Stabilization Program. By preventing prices from rising sufficiently, the price controls stimulated desired consumption above the quantities available at the legal maximum prices. Shortages were the inevitable result. Countries that avoided price controls, such as West Germany and Switzerland, also avoided shortages, queues, and the other perverse effects of the controls.

OPEC is a cartel—a group of producers that attempts to restrict output in order to keep prices higher than the competitive level. The heart of OPEC is the Conference, which comprises national delegations, usually at the level of oil minister. The Conference meets twice each year to assign output quotas, which are upper limits on the amount of oil each member is allowed to produce. The Conference may also meet in special sessions when deemed necessary, particularly when downward pressure on prices becomes acute.

OPEC faces the classic problem of all cartels: overproduction and cheating by members. At the higher cartel price, less oil is demanded. That is why OPEC assigns output quotas. Each member of the OPEC cartel has an incentive to produce more than its quota and "shave" (cut) this price because the cost of producing an additional barrel of crude is typically well below the cartel price. The methods available to shave official OPEC prices are numerous. Credit can be extended to buyers for periods longer than the standard thirty days. Higher grades (or blends) of oil can be sold for prices applicable to lower grades. Transportation credits can be given. Buyers can be offered side payments or rebates.

This tendency for individual producers to cheat on the cartel agreement is a long-standing feature of OPEC behavior. Individual producers usually have exceeded their production quotas, and so official prices have been unstable. But OPEC is an unusual cartel in that one producer—Saudi Arabia—is much larger than the others. That is why the Saudis are the "swing" producer. When prices start downward, they cut their production to keep prices up. One reason the Saudis have behaved that way is that departures from the official prices impose larger total losses on them than on other OPEC members in the short run. Because other producers have huge incentives to produce in excess of their quotas, the Saudis, in order to defend the official OPEC price, have had to reduce their sales dramatically at times. This erosion of Saudi production and sales has tended to reduce their revenues and profits substantially. In 1983 and 1984, for example, the Saudis found themselves producing only about 3.5 million barrels per day, despite their (then) production capacity almost three times that level.

How successful has OPEC been since the early seventies? Not as successful as many people perceive. Except in the wake of the 1979 Iranian revolution, and in anticipation of possible destruction of substantial reserves in the 1990-91 Persian Gulf conflict, real (inflation-adjusted) prices of crude oil have fallen since 1973. Prices began dropping very rapidly in the early eighties after the Saudis concluded that lower prices and higher production were in their best interests. Official prices fell from $34 (for the benchmark crude oil, Arabian light) to $29 in 1983, $24 in 1984, and about $18 in 1986 to 1988. Indeed, even prices unadjusted for inflation often have fallen. For example, prices fell from $35.10 per barrel ($49.10 in 1990 dollars) in 1981 to $16.69 ($18.69 in 1990 dollars) in 1987. (Price data are shown in table 1, and current reserves, production capacity, and production levels are shown in table 2.)

TABLE 1
World Crude Oil Prices (U.S. dollars per barrel)
Year	Nominal Price	1990 Dollars		Year	Nominal Price	1990 Dollars
1955	2.25	10.88		1973	3.27	8.69
1956	2.36	11.04		1974	11.17	27.20
1957	2.73	12.34		1975	11.57	25.66
1958	2.45	10.85		1976	12.41	25.86
1959	2.27	9.82		1977	13.33	26.05
1960	2.23	9.49		1978	13.43	24.46
1961	2.27	9.57		1979	20.19	33.78
1962	2.26	9.32		1980	32.27	49.52
1963	2.25	9.13		1981	35.10	49.10
1964	2.23	8.91		1982	32.11	42.22
1965	2.22	8.64		1983	27.73	35.10
1966	2.24	8.42		1984	27.44	33.50
1967	2.27	8.31		1985	25.83	30.63
1968	2.24	7.81		1986	12.52	14.47
1969	2.27	7.50		1987	16.69	18.69
1970	2.35	7.36		1988	13.25	14.36
1971	2.52	7.46		1989	16.89	17.59
1972	2.64	7.47		1990	20.42	20.42
SOURCE: U.S. Departments of Energy, Commerce, and Labor.

TABLE 2
OPEC Reserves, Production Capacity, and Production Levels
Nation	Reservesa	Capacityb	Productionc
Algeria	9,200	800	750
Ecuador	1,514	330	280
Gabon	733	200	260
Indonesia	8,200	1,300	1,200
Iran	92,860	3,000	3,100
Iraq	100,000	3,500	3,100
Kuwait*	97,125	2,200	1,800
Libya	22,800	1,600	1,250
Neutral Zone	n/a	600	300
Nigeria	16,000	1,700	1,700
Qatar	4,500	600	365
Saudi Arabia*	257,559	7,000	5,300
Un. Arab Em.	94,105	2,210	2,060
Venezuela	58,504	2,400	2,000
OPEC Total	763,100	27,440d	23,465
World Total	1,001,572	63,740d	60,320
aMillions of barrels on January 1, 1990. bMaximum sustainable as of August 1990, thousands of barrels per day. cThousands of barrels per day as of May 1990, excluding natural gas liquids. dNon-OPEC capacity for first quarter 1991, from internal Department of Energy/Energy Information Administration estimate. * Includes one-half of the Neutral Zone. SOURCE: U.S. Department of Energy, Central Intelligence Agency.

This downward trend has increased tensions between two rival groups within OPEC. The price "hawks," usually nations with smaller crude oil reserves relative to population, argue for lower oil output and higher prices. The principal hawks within OPEC are Iran and Iraq. The price "doves," usually nations with larger reserves relative to population, argue for higher output and lower prices to preserve, over the longer term, their oil markets and thus the economic value of their oil resources. The principal doves within OPEC are Saudi Arabia, Kuwait, and the United Arab Emirates.

Such relatively lower prices serve the interests of the doves because oil consumers have used less oil in response to prior price increases. For example, U.S. energy use per dollar of GNP (adjusted for inflation) was 27.49 thousand BTUs in 1970. By 1988, after the price increases of 1973 and 1979, it had decreased to 19.93 thousand BTUs. Thus, the price "doves," led by Saudi Arabia, generally have resisted pressures for higher prices.

Over the long run, real prices of natural resources and commodities usually fall, largely because of technological advances. Crude oil is no exception. Technological advances in seismic exploration have dramatically reduced the cost of finding new reserves, thus increasing oil reserves greatly. Horizontal drilling and other new techniques have reduced the cost of recovering known reserves. Also, improvements in technology provide both substitutes for oil and ways to use less oil to achieve given ends.

Moreover, advances in technology will reduce prices for such substitute fuels as natural gas, thus exerting continuing downward pressure on crude oil prices. And increasing willingness to devote resources toward environmental improvement suggests that the market for crude oil will decline relative to those for such "cleaner" energy sources as natural gas and nuclear technology, unless other technical advances yield substantial improvement in the ability to use oil cleanly. Thus, the demand for crude oil is likely over the long term to decline relative to the demand for competing fuels. This has been the experience of mankind, as wood gradually gave way to coal, which in turn declined as the use of oil expanded. These facts suggest that the economic power of OPEC inexorably will erode.

About the Author

Benjamin Zycher is a senior economist at the Rand Corporation and a visiting professor of economics at the University of California at Los Angeles. He was formerly a senior staff economist with President Reagan's Council of Economic Advisers.

Posted by Hugo Albert Orwell at 09:23 AM | Permalink

It appears that the rising price of oil is not only impacting gasoline prices, but the inflationary pressures of the increasing cost of petroleum is finally bubbling up to the consumer level in the form of the many products and services which are made or made possible by natural gas and oil.

Source: AP

Excerpts:

WASHINGTON - Consumer spending was weak for a fourth straight month in June as rising gasoline prices left Americans with little to spend on other items. A key measure of inflation rose at the fastest pace in more than a decade.

Consumer spending accounts for two-thirds of total economic growth and the slowdown in this area was a big factor in the slowing of the overall economy in the spring to a growth rate of just 2.5 percent, less than half the 5.6 percent pace of the first quarter.

Stagflation: The Federal Reserve is hoping to slow the economy enough to keep inflation under control. However, the new report showed the opposing forces facing the central bank. While consumer spending and the overall economy are slowing, inflation is getting worse.

Posted by Hugo Albert Orwell at 08:11 AM | Permalink