Diminishing Marginal Utility

Source: The Wall Street Journal

By Keith Johnson

Here’s an intriguing thought: Global oil supplies are indeed set to peak within a few years, and no, that is not bullish for oil. Quite the contrary—it will spell the end of the “oil age.”

That’s the take from Deutsche Bank’s new report, “The Peak Oil Market.” In a nutshell: The oil industry chronically under invests in finding new supplies, exemplified both by Big Oil’s recent love of share buybacks and under-investment by big oil-producing nations. That spells a looming supply crunch.

That will send oil to $175 a barrel by 2016—and will simultaneously put the final nail in oil’s coffin and send prices plummeting back to $70 by 2030. That’s because there’s an even more important “peak” moment on the horizon: A global peak in oil demand. That has already begun in the world’s biggest oil-consuming nation, Deutsche Bank notes:

US demand is the key. It is the last market-priced, oil inefficient, major oil consumer. We believe Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era.

The big driver? The coming-of-age of electric and hybrid vehicles, which promise massive fuel-economy gains for short-hop commuting but which so far have not been economic.

Deutsche Bank expects the electric car to become a truly “disruptive technology” which takes off around the world, sending demand for gasoline into an “inexorable and accelerating decline.”

In 2020, the bank expects electric and hybrid vehicles to account for 25% of new car sales—in both the U.S. and China. “We expect [electric propulsion] will reverse the dynamics of world oil demand, and spell the end of the oil age,” the bank writes.

But won’t cheaper oil in the future just lead to a revival in oil demand? That’s what’s happened in every other cycle. Au contraire, says the bank: Just as the explosion of digital cameras made the cost of film irrelevant, the growth of electric cars will make the price of oil (and gasoline) all but irrelevant for transportation.

In a report filled with interesting tidbits, one in particular stands out: The cost of the Iraq war at the pump. Deutsche Bank figures the cost of the war at $1.5 trillion. Amortized over 20 years, that works out to $75 billion a year. “If the US government taxed US gasoline consumers purely to reflect the financial cost of the war in Iraq, gasoline prices should be some 54 cents per gallon higher,” the report notes.

Posted by Hugo Albert Orwell at 11:17 AM | Permalink | TrackBacks (0)

Source: Newsweek

The plunging greenback threatens to cripple U.S. power. Why are the candidates ignoring this critical issue?
Nov 23, 2007 | Updated: 3:50 p.m. ET Nov 23, 2007

Great powers die slowly. It took years before the world realized that Great Britain was an imperial corpse, sapped of its strength by two world wars. The funeral finally occurred on Feb. 21, 1947, a freezing winter day in bomb-torn, bedraggled London, when the British wrote their own epitaph. That was the day that London cabled Washington: "His Majesty's Government, in view of their own situation, find it impossible to grant further financial assistance to Greece," amounting to a half billion dollars a year and a garrison of 40,000 troops. The British also announced the same day that they were withdrawing from Turkey. "The British are finished," remarked a stunned Dean Acheson, who was soon to be Harry Truman's secretary of State. And so they were. It was the early cold war. With the Soviet Union threatening to extend its influence over Greece and Turkey, there was no time for elegies. Instead, a quick passing of the baton took place: the United States would now fill Britain's role and become the central, stabilizing power in the West. This was the moment of "creation" of the U.S.-led world order, Acheson later realized.

One has to wonder now whether the American superpower is also experiencing a terminal illness, with its decline marked by the dollar's downward drift. The one difference being that there is no successor on the horizon (the Chinese have a long, long way to go), and the currency that is replacing the dollar, the euro, is backed not by an emerging superpower but by the feeble cacophony of voices that is the European Union. Yet the signs of imperial decadence are unmistakable. The world is losing confidence in the dollar, in no small part because it has lost confidence in America's strategic judgment and in its sustainability as a great power in the face of record budget and trade deficits, which are forcing the United States to borrow ever more money from future rivals like China and Russia.

Even as the Bush administration savors the calming news out of Iraq, and prepares for a major Mideast peace conference in Annapolis on Tuesday that will look and feel like grand American gestures of the past, finance ministries and central banks around the world--especially in places like Beijing and the wealthy Persian Gulf states--are making decisions that will further undermine U.S. power, perhaps permanently. The irony for George W. Bush, of course, is that more than anything else he began as a president who wanted to build up American power, which he presumed to have been frittered away by Bill Clinton. Bush believed that enemies such as Osama bin Laden and Saddam Hussein perceived America as soft. "It was clear," he said after 9/11, "that bin Laden felt emboldened and didn't feel threatened by the United States." Bush vowed to reverse that image.

Instead, the world monetary system now is making unfavorable comparisons to America at the height of the Clinton years. And bin Laden seems to be achieving his publicly avowed goal of provoking the United States into overextending itself and draining its economy. In a blistering essay in the current Vanity Fair, Nobel laureate Joseph Stiglitz, a former World Bank economist, notes that Bush took a nation with a budget surplus upon assuming office and turned it into a global debtor, and he has underinvested in education and alternative energy. "In breathtaking disregard for the most basic rules of fiscal propriety, the administration continued to cut taxes even as it undertook expensive new spending programs and embarked on a financially ruinous 'war of choice' in Iraq. A budget surplus of 2.4 percent of gross domestic product (GDP), which greeted Bush as he took office, turned into a deficit of 3.6 percent in the space of four years. The United States had not experienced a turnaround of this magnitude since the global crisis of World War II," Stiglitz writes. "Up to now, the conventional wisdom has been that Herbert Hoover, whose policies aggravated the Great Depression, is the odds-on claimant for the mantle 'worst president' when it comes to stewardship of the American economy. The economic effects of Bush's presidency are more insidious than those of Hoover, harder to reverse, and likely to be longer-lasting. There is no threat of America's being displaced from its position as the world's richest economy. But our grandchildren will still be living with, and struggling with, the economic consequences of Mr. Bush."

If the passing of American hegemony happens, it will occur very slowly--death by a thousand cuts of credit. One reason why it's so hard for Americans to contemplate their loss of prestige, symbolized by the fall of the once-almighty dollar, is that politicians and pundits tend to cast the issue as all-or-nothing. What would happen, they say, if China suddenly decided to dump the trillion dollars of U.S. debt it holds in reserves? This, however, will almost certainly never occur. While China and other big dollar-holding countries such as Singapore, Russia and the Persian Gulf states are very worried about the erosion in value of their dollar-denominated holdings and inflationary pressure, they also know that an abrupt move to cut their pegs to the dollar or to sell off in large amounts would force a run on the currency. That would leave them even poorer. Instead these countries are pursuing careful reallocations of their investment holdings, shifting slowly to the euro or a "basket" of currencies that will allow them to hedge against the dollar's decline. Credit will become more expensive, the U.S. economy will find itself increasingly crimped, and America's ability and willingness to act as the defense umbrella to the world will gradually peter out. The effect will be more like a slow-acting poison: drip, drip, drip.

But the financial world order is such a precarious house of cards today that the markets are getting increasingly jittery. Markets operate on confidence. And today's markets seem to have little confidence that the Bush administration can emerge from its economic never-never land, one in which as Dick Cheney's first-term pronouncement that "deficits don't matter" was allowed to stand unchallenged, in which zero-saving Americans continue their profligate spending habits and descent into deeper indebtedness by simply assuming the rest of the world will continue to fund those habits. "The American consumer is dramatically overleveraged," says Bob Hormats a vice chairman of Goldman Sachs International. That "means we have to borrow roughly $3 billion a day from rest of world. That inflow is now slowing down. Foreigners will say 'we're concerned about lending in dollars, so we're going to be more cautious about lending money to you.' At some point, if we get a lot less money, the dollar will plunge and interest rates will go up." Even wealthy Americans, Hormats notes, are beginning to ship their money abroad, to Europe and Asia, to hedge the dollar.

We should be careful, of course, not too pronounce the death of Pax Americana too quickly. That has been done before. The illness need not be terminal: deficits can be cured, and foreigners still crowd cargo containers and the backs of trucks to sneak into the land of opportunity. (China, by contrast, is not undergoing an immigration debate.) But the country is in such a fiscal hole right now that, as David Walker, the comptroller general of the United States, told my colleague Jeff Bartholet last week, "You could decide not to renew the Bush tax cuts, you could eliminate all foreign aid, eliminate all earmarks, eliminate NASA, eliminate the National Endowment for Humanities and eliminate the entire Defense Department tomorrow, and you still wouldn't solve the problem." This most critical of issues has barely made it into the presidential debates. The drooping dollar is driving it to the public's attention, particularly as gas, oil and other essentials continue to go up in price. Perhaps the next president, whoever he or she is, ought to pay more attention, too.

© 2007 Newsweek, Inc.

Posted by Hugo Albert Orwell at 09:20 AM | Permalink | TrackBacks (0)

Source: Clusterfuck Nation

By Jim Kunstler
Novermber 5, 2007

One of the biggest laughs of the season came out of a New York Times business section story last Tuesday by reporter Michael Grynbaum, who wrote, "Oil is on a steady march toward toppling the inflation-adjusted high of $101.70 it set in April 1980, analysts said, though many are at a loss as to what keeps driving the price." (Italics mine.) Actually, lots of people know what is driving up the price -- just not anybody who works at that once-august and now-clueless newspaper. It can be stated simply -- the demand line has crossed the supply line -- though that simple fact has many curious ramifications.

Among the most subtle is a theory out of Doug Noland's latest Credit Bubble Bulletin (published every Friday).

"There are literally trillions of dollars of liquidity sloshing around the world keen to hold “things” of value. Liquidity sources include the massive central bank reserve holdings as well as funds at the disposal of the sovereign wealth funds. Importantly, the more apparent becomes U.S. financial fragility, the keener they are to stockpile real 'things'. . . . Indeed, it should be noted that this is the Federal Reserve’s first attempt at reflation where U.S. securities are not the speculators’ or foreign central banks’ asset class of choice . . . . Not only is the pool of potential global buying power unparalleled in scope. It is fervidly attracted to tangible assets -- as opposed to U.S. securities -- and is highly speculative in character. At the same time, an unwieldy global boom is stoking unprecedented demand in China, India, Asia generally, and the other “emerging” markets including Russia and Brazil. Throw in various weather related issues and energy production constraints and the prospect for some very serious bottlenecks and shortages has developed."

In short, foreigners stuck holding dollars that are hemorrhaging value would rather spend them on something other than dollar-denominated financial paper, and nothing is more crucial to the maintenance of industrial economies than oil. Noland's theory comes on the heels of reported oil and gasoline shortages in China, bad enough to have caused some civil unrest -- and bad enough for China's leadership to want to spend some of its vast US dollar reserves bidding up oil prices in the open markets to quell that unrest.

This is nothing more complicated than hoarding behavior on a global scale, a mounting crisis of frightened self-interest that has already been well-described by investment banker Matthew Simmons. Simmons was only one of many analysts who spoke at the mid-October Houston conference put on by ASPO-USA (the Association for Study of Peak Oil) -- to which The New York Times failed to send a reporter. Simmons has also said that the American public (and its leaders) will probably not "get" the fundamental problem with oil until rising prices are joined by spot shortages -- i.e. gas station lines, which will represent hoarding behavior on the basis of individual motorists.

Behind the hoarding dynamics are several clear circumstances.

One biggie is the growing export crisis, described by geologist Jeffrey Brown. Countries like Saudi Arabia and Mexico that sell oil to importing nations like The USA and Japan are using more of their own oil and producing less. Mexico's trajectory is so steep (due to the severe depletion of its giant Cantarell oil field) that it could easily go from being America's Number 3 source of imports to zero in less than five years. The anticipated yearly growth in worldwide oil demand next year will equal 80 percent of the USA's entire oil production.

The export crisis is only an additional layer on top of the general peak oil situation, but it illustrates the way that complex systems we depend on -- and oil markets are one -- are liable to wobble and fail just as the world comes off the all-time oil production peak for good. Finance is another complex system and it, too, is entering a stage of robust instability. Food production is yet another, with a grain scarcity that has driven wheat prices to all-time highs. The roster of complex systems entering phase change is long and gruesome.

Another big element behind rising oil prices is oil nationalism. The old "major" oil companies -- Exxon-Mobil, Shell, BP, Chevron, et cet -- now only account for about five percent of world oil production. The other 95 percent comes from nationalized oil industries like Saudi Aramco, Mexico's Pemex, Petroleos de Venezuela, and Brazil's Petrobras. Russia's Lukoil and Rosneft are effectively state-controlled. Not only is worldwide oil in depletion (past peak) generally, but most of the remaining oil is controlled by entities that are inclined to both withhold (hoard) some remaining oil for their own future use and to direct whatever oil they do sell into places other than open auctions on the futures markets. Selling oil to favored customers will be an extremely potent instrument of geopolitics in the decade ahead, and is only one aspect of a desperate global resource contest that could turn ugly and violent. For the moment, though, its meaning for the US is that the two-thirds of our daily oil supply composed of imports is in jeopardy.

Another big element of the oil price story is the condition of the equipment used all over the world for getting it out of the ground, moving it around the globe, and refining it into useful byproducts like gasoline and aviation fuel. The world is woefully short of drilling rigs, and the cost of steel is way up. The demand for new equipment is out-of-sight. The existing worldwide inventory of equipment can be fairly described as decrepit. As Simmons points out, there is a frightening gap between the need for investment in new rigs, tankers, and refineries and the money available to just keep production at current levels. The outlook is grim. In fact, the worldwide lack of will to invest in oil industry equipment is itself a symptom of the crack-up of global finance as a complex system under duress. On top of the equipment problem is a human resource problem: the world us not producing enough oil technicians and engineers to keep up with production, let alone increase it, and every year another wave of senior specialists retires out of the system.

Beyond these parts of the oil price story are even more sub-plots, like the political strife in Nigeria that effectively holds its oil industry hostage, not to mention the fragile state-of-affairs throughout the Middle East, and dare we leave out the insane habits of America's Happy Motoring utopia.

There is really no excuse for The New York Times and the rest of the mainstream news media to not understand what is going on out there. The pervasive cluelessness is a symptom of another complex system out of whack -- the system that informs us what's going on. Meanwhile, the danger mounts. The heating season is underway and the furnaces are clanking. Many Americans will have to start choosing whether to pay their mortgage, fill the tank of the Chevy Suburban, buy that brick of Velveeta, or pay the heating oil guy. It looks like China will be spending more of its accumulated dollars bidding up the price of oil (or making favorable contracts with foreign suppliers) instead of buying Freddie Mac bonds. The USA could not find itself in a less favorable position among all these forces roiling the scene. It certainly can't afford to continue its pathetic pose of cluelessness.

Posted by Hugo Albert Orwell at 01:32 PM | Permalink | TrackBacks (0)

Source: Mother Jones

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Posted by Hugo Albert Orwell at 10:54 AM | Permalink | TrackBacks (0)

Source: World Socialist Website

By Bill Van Auken
26 October 2007

In an act unprecedented in the history of international relations, Washington on Thursday unilaterally imposed harsh and potentially crippling economic sanctions against Iran’s main uniformed security force, as well as against more than 20 Iranian companies and the country’s three major banks.

The sanctions, announced by US Secretary of State Condoleezza Rice and Treasury Secretary Henry Paulson, represent a deliberate provocation aimed at precluding any negotiated settlement to the dispute over Iran’s nuclear program and making a US war against the country all but inevitable.

In announcing the measures—which are considerably more punitive than those imposed by Washington during the seizure of the US embassy which followed the 1979 Iranian revolution—Rice said they were designed “to increase the costs to Iran of its irresponsible behavior.”

The sanctions are directed in the first instance against Iran’s Revolutionary Guard Corps, which the US government has now branded as “proliferators of weapons of mass destruction,” and its Quds Force, which has been labeled a “supporter of terrorism.”

The Revolutionary Guards, a force of some 125,000, is responsible for law enforcement, border patrol and resistance against foreign attack. It also organizes Iran’s people’s militia, providing military training to some 12 million volunteers.

The Quds Force is a special unit within the Revolutionary Guards that handles overseas operations. It has acted in a number of countries with the direct approval of Washington.

In Bosnia, it provided arms to the US-backed Muslim government; in Afghanistan, it aided the forces fighting the Soviet military and then supported those fighting the Taliban; in Iraq, it assisted Kurdish guerrillas against the Baathist regime of Saddam Hussein.

Elsewhere, it has aided organizations opposed by the US, principally those resisting Israeli aggression, such as Hezbollah, the mass Shia movement in Lebanon, and organizations in the occupied Palestinian territories.

By imposing these designations upon the official armed forces of a sovereign state, the Bush administration is carrying out a brazen intervention into the internal affairs of Iran. In so doing, it is setting out a pseudo-legal framework for war, spelling out two alternative pretexts—weapons of mass destruction and terrorism—which are identical to those contrived and propagated in preparation for the unprovoked US invasion of Iraq.

Washington has charged that Iran is pursuing its nuclear program in order to construct a nuclear weapon. Tehran has denied this charge, insisting that it is utilizing the program for peaceful purposes, in particular, the development of an alternative power source.

In regard to the second casus belli, the Bush administration and some senior US military commanders have repeatedly accused Iran and the Quds Force, in particular, of arming, funding and training forces in Iraq responsible for attacks on US occupation troops.

Washington has yet to provide concrete evidence to back these charges and has produced no one that it can credibly claim is an Iranian agent engaged in these alleged activities. Tehran has denied responsibility for the attacks, which it points out are carried out in their great majority by Sunni resistance fighters, not the Shia movements with which the Iranians have enjoyed a longstanding relationship.

The sanctions against the Revolutionary Guards are aimed at inflicting significant damage to the Iranian economy. The Guards’ role in Iran includes far-ranging economic activities.

Its engineering unit, for example is involved in a number of major projects, ranging from a $2 billion contract for the development of the country’s main gas field, to a $1.3 billion contract for a new pipeline directed to Pakistan, to the construction of a Tehran metro extension, a high-speed rail link between the capital and Isfahan, shipping ports and a major dam.

The immediate impact of sanctions allowing the freezing of assets in US banks or barring US businesses from economic ties to the Iranian Guards, as well as the named Iranian bank and other companies, is negligible, given that Washington’s imposition of sanctions in response to the 1979 revolution that overthrew the US-backed dictatorship of the Shah had already largely frozen American banks and corporations out of the Iranian market.

Blackmailing foreign banks and corporations

The aim of these measures—which are far more sweeping than anything the US could hope to get passed in the United Nations—is to blackmail foreign banks and corporations with the threat that their continued operations inside Iran could lead to American-imposed penalties and exclusion from the US market.

Treasury Secretary Paulson called upon “responsible banks and companies around the world” to cut off all ties with the named bank, companies and all affiliates of the Revolutionary Guards. US officials have stressed that the Guards’ ties are so widespread that any economic relations whatsoever with Iran carry with them the threat of US retaliation.

The US action won quick endorsement from the British government of Prime Minister Gordon Brown, which, according to some press reports, has also signaled its willingness to go along with eventual US air strikes against Iran. Brown appears prepared to play the same role that Blair played in paving the way for the invasion of Iraq, by pushing for the United Nations Security Council to impose another set of sanctions, a move that is opposed by Russia and China, both of which have substantial interests in Iran and hold veto power on the council. In 2003, Bush invoked the failure of the UN to pass a resolution authorizing military action as the pretext for unilaterally launching the US war.

Other European powers, however, were more cool towards Washington’s diktat. German Foreign Minister Frank-Walter Steinmeir said Thursday that any decision on further sanctions against Iran should await an evaluation of Iran’s willingness to answer more questions from the International Atomic Energy Agency (IAEA). German companies exported $5.7 billion worth of goods to Iran last year, while the German Economics Ministry granted the government in Tehran $1.2 billion in export credit guarantees.

Iran’s new nuclear negotiator, Saeed Jalili, joined by his predecessor, Ali Larijani, held two days of talks this week with the European Union’s foreign policy director, Javier Solana, in Rome to discuss Tehran’s nuclear program. At the end of the talks Wednesday, the Iranian negotiators joined Solana and Italian Prime Minister Romano Prodi in a joint press conference in Rome. Both sides described the talks as “constructive,” while Prodi insisted that “dialogue is the only way to find a solution for Iran’s nuclear program in the UN Security Council and Italy encourages this way.”

Russian President Vladimir Putin voiced a harsh reaction to the US sanctions. Meeting with European Union leaders at a summit in Portugal, he insisted that the controversy over Iran’s nuclear program should be resolved through negotiations, along the lines of those pursued with North Korea.

“Why worsen the situation and bring it to a dead end by threatening sanctions or military action?” Putin said. In an obvious characterization of Bush, he continued, “Running around like a madman with a razor blade, waving it around, is not the best way to resolve the situation.”

Iran dismissed the US sanctions. “The hostile policies of America against the respectful Iranian nation and our legal organizations are against international regulations and have no value,” said Foreign Ministry spokesman Mohammad Ali Hosseini. “Such ridiculous measures cannot rescue the Americans from the crisis they themselves have created in Iraq.”

Speaking at a conference on “Privatization in Iran” held in Dubai for foreign investors, the head of Iran’s Chamber of Commerce, Industries and Mines, Mohammad Nahvandian, said that while the sanctions could lead to “an increase in costs,” they could not “disturb or stop Iran’s massive trade relations with other countries.”

The principal aim of the sanctions, however, appears to be not so much economic as political. By increasing tensions, they are designed to slam the door on any negotiated settlement of the nuclear dispute and pave the way for US military action.

In that sense they are of a piece with the steady escalation of threats against Iran, including Bush’s warning last week about “World War III” and Cheney’s threat last Sunday that Iran would face “serious consequences” if it continued on its present course, and that the US would not “stand by as a terror-supporting state fulfills its most aggressive ambitions.”

Fresh evidence of US war preparations against Iran came in the details of the nearly $200 billion budget request sent to Congress last Monday for funding the continuation of the wars in Iraq and Afghanistan.

Included was nearly $88 million for fitting “bunker-busting” bombs onto B-2 stealth bombers. Some lawmakers and congressional aides pointed out that there is little use for such weapons in the current counterinsurgency campaigns in Iraq and Afghanistan, and that the bombs were in all likelihood intended for attacking Iran’s underground nuclear facilities.

As the Bush administration prepares for yet another war, the Democrats in Congress have once again emerged as willing accomplices. The administration’s imposition of sanctions was actually prefigured by legislation passed in the Democratic-led House—by an overwhelming 397-16 vote—that would impose sanctions on non-US energy companies doing business in Iran.

While Democratic leaders claimed the measure was intended to cut off funding for Iran’s nuclear program, its real intention is evident. American oil conglomerates frozen out of the Iranian market want to deny their competitors any advantage.

In the final analysis, the propaganda about nuclear threats and terrorism notwithstanding, a US war against Iran would be launched to impose American capitalism’s hegemonic control over the strategic oil reserves of the Persian Gulf.

Posted by Hugo Albert Orwell at 01:03 PM | Permalink | TrackBacks (0)

Source: Associated Press

Monday October 15, 1:03 pm ET
By John Wilen, AP Business Writer
Crude Prices Surge As OPEC Estimates Supplies Are Falling While Demand Is Growing

NEW YORK (AP) -- Oil prices surged above $85 a barrel Monday for the first time after OPEC said crude production by non-member countries is likely falling even as global demand for oil is rising.

Prices were also supported by concerns Turkish forces will pursue Kurdish rebels into Iraq, disrupting oil supplies, and by technical buying by investment funds.

Despite the Organization of Petroleum Exporting Countries' decision last month to boost its production by 500,000 barrels per day beginning next month, the rest of the world will likely produce 110,000 fewer barrels of oil per day than expected in the fourth quarter, OPEC said in a report.

At the same time, fourth quarter demand for crude oil will grow by 100,000 barrels a day over last year, OPEC said.

The estimates add to sentiment that crude supplies are tight. Last week, the Energy Department reported that domestic crude inventories fell during the week ended Oct. 5 when they had been expected to rise. And the International Energy Agency concluded that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.

"The fact that U.S. crude inventories fell yet again ... reinforced the market's underlying concern that demand has yet to slow down sufficiently to allow stocks to build, while supply is also perceived to be struggling to catch up," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.

Light, sweet crude for November delivery rose $1.72 to $85.41 on the New York Mercantile Exchange after rising as high as $85.49, a record trading price.

Despite the gains, oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.

In other Nymex trading, gasoline futures rose 4.97 cents to $2.1348 a gallon, while heating oil futures rose 3.95 cents to $2.2859 a gallon.

Nymex natural gas futures rose 34 cents to $7.314 per 1,000 cubic feet on forecasts for cooler weather next week in the Northeast and Midwest, and on worries a storm in the Caribbean Sea will move north and develop in strength, threatening key oil and gas infrastructure in the Gulf of Mexico.

In London, Brent crude futures rose $1.61 to $82.16 a barrel on the ICE Futures exchange.

At the pump, gas prices fell 0.4 cent overnight to a national average of $2.757 a gallon, according to AAA and the Oil Price Information Service.

The Turkish government's decision on Monday to ask Parliament for permission to pursue Kurdish rebels into Iraq stoked worries that hostilities will disrupt oil supplies, analysts said.

"Oil out of the northern (Iraq) fields has been erratic for some time," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. "But complete disruption would definitely be bullish for this market."

Technical buying by investment funds is also driving oil's record run, analysts say. Data released Friday show that speculative buying of oil contracts increased last week.

Many investment funds automatically buy or sell oil futures when prices hit certain levels. In recent days, as oil has pushed into new record territory, several of these resistance prices levels have been broached. That triggers new buying, driving prices even higher.

"Funds tend to trade more on the technicals," Rafield said.

Associated Press Writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.

Posted by Hugo Albert Orwell at 03:21 PM | Permalink | TrackBacks (0)

Source: New York Times

A Quest for Energy in the Globe’s Remote Places

Photo by Geir Jenssen: A natural gas cargo ship passing Melkoya Island, across the bay from Hammerfest, Norway. Gas from this region is to start crossing the ocean, feeding into pipelines for America’s East Coast.

HAMMERFEST, Norway — For a quarter-century, energy executives were tantalized by vast quantities of natural gas in one of the world’s least hospitable places — 90 miles off Norway’s northern coast, beneath the Arctic Ocean.

Bitter winds and frequent snowstorms lash the region. The sun disappears for two months a year. No oil company knew how to operate in such a harsh environment.

But Norway has finally solved the problem. The other day, on an island just offshore, a giant yellow flame illuminated the sky here. It was just a temporary flare for excess gas, but it signaled a new era in energy production.

Across the bay from this small fishing town, where reindeer wander the streets, one of the world’s most advanced natural gas plants is coming to life.

Within weeks, gas will start crossing the ocean in specially designed ships, feeding into the pipeline network for the American East Coast. Before Christmas, furnaces in Brooklyn and stoves in Washington will be burning the gas. It will be the first commercial energy production from waters north of the Arctic Circle.

As global demand soars and prices rise, energy companies are going to the ends of the earth to find new supplies.

In Kazakhstan, petroleum engineers are braving wild temperature swings in the shallow waters of the Caspian Sea to tap the biggest oil discovery of the last 30 years. They are drilling wells six miles deep in the Gulf of Mexico. And on the island of Sakhalin, off far eastern Russia, they have drilled horizontal wells through miles of rock to produce oil from a stretch of ocean notable for giant icebergs.

But as the industry extends its reach, the quest is becoming more arduous. The cost of producing new oil and gas is rising fast, and companies are troubled by worsening delays. Drilling rigs are scarce. Engineers, geologists and petroleum specialists are in critically short supply.

And the politics of oil and gas are getting trickier, with producing countries demanding a bigger share of the revenue and growing angry about project delays that postpone their payments.

Industry executives say their ability to keep up with global demand is badly strained.

“We’re facing bigger risks and bigger difficulties when we go into new frontier regions,” said Odd A. Mosbergvik, a senior manager at the dominant Norwegian energy company, StatoilHydro. “But this is why the oil industry is for big boys. It’s a big gamble.”

The industry’s new reach is shifting the economics of energy extraction. According to a recent study, discovery and development costs, a key indicator for the industry, tripled from 1999 to 2006, to nearly $15 a barrel.

Last year alone, companies spent $200 billion developing new energy projects worldwide, according to the study by the consulting firms John S. Herold Inc. and Harrison Lovegrove — an amount larger than the economies of 147 countries.

These higher costs mean that the industry needs higher energy prices to finance new projects. They are also constraining its ability to expand quickly.

“There are no easy barrels left,” said J. Robinson West, chairman of PFC Energy, an industry consulting firm in Washington. “The only barrels are going to be the tough barrels.”

There is plenty of oil and gas still in the ground, energy executives say. But global consumption is rising so fast that they must keep looking for new sources. Despite worldwide concern over global warming and the role of fossil fuels in causing it, United States government specialists project that global oil and gas demand will increase by some 50 percent in the next 25 years.

At the same time, the big discoveries of the last three decades, like those in the North Sea and on the North Slope of Alaska, are drying up. This is leading oil companies to remote places like Hammerfest.

The United States will need to import about a fifth of the natural gas it uses by 2030, mostly in a liquefied form shipped across the seas in tankers. Such imports are expected to swell more than sixfold from 2005 to 2030, according to the Energy Information Administration. And consumption is rising fast in the economically booming Asian countries.

Producing oil and gas in polar regions is not entirely new, of course. Russian engineers have been doing it in Siberia for decades, with mixed results, and Alaska’s North Slope was long the most important United States oil field.

But those fields are on land. The Norwegian field is the first Arctic project to tap oil and gas reserves far offshore, in water more than 1,000 feet deep, where traditional exploration methods would be too costly.

The gas field, 340 miles north of the Arctic Circle beneath a stretch of ocean more commonly known as the Barents Sea, is called Snow White — Snohvit in Norwegian, where energy projects are named after mythical characters. Though the field was discovered in 1981, oil executives long considered Snohvit out of reach, because of the Barents Sea’s shifting ice packs, brutal waves and extreme cold.

“This is considered an unfriendly place, even by Norwegian standards,” Mr. Mosbergvik said.

Another big problem the engineers faced here was that Snohvit is situated hundreds of miles from Norway’s traditional pipeline network.

Over the years, Statoil considered many ways to get at the gas, including huge offshore platforms armored against the waves, but discarded them as too costly. Building a vast undersea pipeline that would take the gas south along the country’s stretched coastline was also out of the question.

Statoil engineers eventually came up with an ingenious solution. They installed production equipment directly on the seafloor, with no rigs breaking the surface. The wellheads are linked by 90 miles of pipe to a small island just off Hammerfest. Anti-freeze is injected into the pipes to prevent the natural gas from clogging on its way to shore.

On the island, Melkoya, Statoil built a processing facility to separate the brew of natural gas, oil, water and carbon dioxide that flows out of the field. The natural gas is cooled to a temperature of 260 degrees below zero, shrinking its volume to one-six hundredth and turning it into a liquid that can be shipped in tankers.

Construction of the liquefaction plant over the last several years involved 22,000 workers, one of the largest industrial projects in Europe, and cost nearly $10 billion, up from $6 billion when the project was begun in 2002.

“We did not have the experience to operate in an environment like this,” Mr. Mosbergvik acknowledged.

The field is so large that it could eventually supply nearly 10 percent of the demand for natural gas demand in eastern states of the United States. Dominion, an energy company, has expanded a gas import terminal at Cove Point, Md., to accommodate the Arctic gas, according to Donald R. Raikes, its vice president for marketing and customer services.

By the end of October, Statoil’s gas will begin flowing through a network of pipes to a stretch of the country from Maryland to Massachusetts, the largest consumer market in the United States, with some 16 million residential customers and 5 million industrial clients.

With the plant nearly ready, Statoil maintains that the Barents Sea could turn into a major oil and gas region in coming decades. Indeed, the world’s fast-rising use of fossil fuels, by contributing to global warming, could eventually make the Arctic more accessible for oil and gas production.

In Hammerfest,residents have welcomed Statoil’s project, hoping it will offset declines in fishing. Modern buildings are rising to house the influx of gas workers. New taxes from the gas plant are helping finance a cultural center.

Statoil hopes to double its capacity on Melkoya by 2015. That will require finding new gas fields in the Barents Sea.

Hans M. Gjennestad, strategy manager at Statoil for the Barents region, said, “We believe this resource potential may contribute significantly to the long-term security of supplies of Europe and the United States.”

Posted by Hugo Albert Orwell at 09:12 AM | Permalink | TrackBacks (0)

Source: PINR Dispatch

Recent developments in the gas field projects of Myanmar have served to highlight the intense resource diplomacy that is ongoing in the region. The government of Myanmar withdrew India's (under the Gas Authority of India Limited or GAIL) status of "preferential buyer" on the A1 and A3 blocks of its offshore natural gas fields and instead declared their intent to sell the gas to PetroChina. The offshore gas fields of the Shwe project in the Bay of Bengal have estimates of 4.8 trillion cubic feet (TcF) for the current blocks with more exploration ongoing. The controlling interests in the two blocks are Daewoo International (60 percent), O.N.G.C. Videsh Ltd (20 percent), GAIL Ltd (10 percent) and Korea Gas Corporation (10 percent).

The most viable of the proposed pipeline routes for moving the gas to India would have proceeded through Myanmar's Arakan state before entering India's Mizoram and Assam provinces and finally terminating in West Bengal at the proposed Jagdishpur-Haldia distribution line.

Implications for India

First of all, India has clearly lost an important diplomatic initiative in the attempt to counter Chinese influence in Myanmar. Even after the deal was sweetened with US$20 million in "soft credit" and the proposed construction of a power plant in Myanmar, it would appear that Indian influence was quietly denied by the inevitability of China's international support for Myanmar. Beijing's use of its veto to keep Myanmar's human rights record off of the U.N. Security Council agenda turned out to be more important to the Myanmar junta than the economic incentives. Despite support from pro-India voices within the upper echelon, like that of Vice Senior General Maung Aye, the sharp turn in the sales decision serves to illustrate the depth of the relationship currently enjoyed by China and Myanmar. Maung Aye signaled as much as early as January 2007, when he refused to provide guarantees that India would gain access to the gas.

Secondly, the economic implications for India are significant. Recent reductions in the estimates of offshore gas in their own eastern blocks have increased demand to find sources outside of India's borders. The Myanmar fields offered a strong possibility to replace these sources. In particular, the pipeline was destined for the northeastern provinces of India, which are among the most power-starved provinces in the country. If the gas was destined for domestic use, the development-security nexus suggests that the power and resulting development, along with greater cooperation on cross-border counter-insurgency efforts, may have had a strong chance of success in defusing the secessionist movements in the northeastern Indian provinces.

Finally, the pipeline seemed set to heighten attempts for greater integration and further military and economic cooperation along the Myanmar-Indian border. Trade initiatives to date have failed to establish in the Indian northeastern border regions, while security initiatives have occurred in a stovepipe fashion with only communication between the two states rather than truly cooperative exercises. India will likely make more overt efforts in the future to establish a stronger presence in the face of Chinese diplomatic successes in Myanmar. It is likely that joint military initiatives in the border region will be initiated and more direct military aid like the proposed light attack helicopter sales from India to Myanmar will continue. Transfers of military equipment have increased significantly in the last two years between India and Myanmar, while joint counter-insurgency operations have been proposed, which would see an unprecedented level of cooperation, and therefore much higher counter-insurgency activity, between the two countries. These efforts would have had a far greater chance of success when combined with the development possibilities that the pipeline may have provided.

Implications for Myanmar

First of all, on the diplomatic front, the military junta has signaled where its strength lies. The military government has had a long history of a strong relationship with China which it would not risk in this scenario. It is likely that the junta recognizes the desire for India to play a stronger role in the region, thus giving it a stronger position in its dealings with New Delhi. The resources of Myanmar have allowed it to bypass international sanctions in the past and will now allow it to negotiate with its Asian neighbors in order to win necessary international support and recognition. The risk of angering India to the point of withdrawal of support was minimal; indeed, GAIL was criticized by India's External Affairs Ministry for not pursuing the agreement with a strong enough commitment to see it completed. However, the junta must continue to walk a fine line between alienating neighbors, already suspicious of China's growing influence in the region, undermining its own sovereignty and losing the support of its largest strategic partner, China, by playing it off against other regional interests.

Additionally, the recent efforts of the Association of Southeast Asian Nations (A.S.E.A.N.) to condemn the slow progress of national reconciliation may have refocused efforts within the junta to place diplomatic pressure via China onto members of A.S.E.A.N. China has recently been increasing its influence within A.S.E.A.N. and stands as the more active (between India and China) peripheral player in the A.S.E.A.N. orbit. Thus, by using its resources as a bargaining chip, Myanmar may have gained promises from China to use its influence to dampen A.S.E.A.N. members' concerns over the reconciliation process.

Secondly, the strength of the Myanmar position lies in the strong economic demand for resources by all of its neighbors. Bids for the sale of the gas were competitive and Myanmar will not lose much in economic terms for the decision to sell to PetroChina. While the decision may be deemed short-sighted for its apparent slight to India's recent diplomatic advances, it does little to reduce the reality that India, Thailand and China are all in need of dependable energy in order to pursue economic development.

Another facet of this agreement is a proposed oil pipeline that would be built in conjunction with the necessary gas pipeline. This oil pipeline would be constructed by PetroChina as an alternate route to the Malacca Strait. Its origin would be at a deep water port at Ramree Island in Myanmar, built to accommodate large crude tanker ships, and would cross the country to an undisclosed point on the Chinese/Myanmar border (likely the Muse/Ruli border crossing point). The economic advantage for Myanmar would be an additional sale point for their onshore and offshore oil blocks along with the economic spin off of a major trans-shipment point. China's vulnerability inherent in the reliance on the Malacca Strait may well have driven the junta's decision to rescind India's preferential buyer status.

The recent price hikes in domestic fuel that sparked protest in Yangon and resulted in the arrest of a number of former student leaders from the 1988 uprising demonstrates the thin line of economic vulnerability upon which the junta balances. The 1988 uprising that resulted in the current suspended constitution was also sparked by a troubled economy. The junta will need to balance its need for foreign currency, gained through resource rents, with the demands of a population that has not accrued much benefit from the current junta's economic policy. Much of the gas being exported to date and in the future would, arguably, be better used in domestic power generation -- something that the Indian offer would have included.

Third, on the security front, agreements that have been developing alongside the gas sale agreement with India will likely not be disturbed by the decision to sell to China. The pipeline route from Shwe would have brought fewer security implications for Myanmar than for India. However, pipeline construction to the western region of Myanmar would have brought with it a larger military presence in an area of poor infrastructure on both sides of the border. In this sense, the military opportunity cost may have been a considerable chance to improve infrastructure and access to an area that has been historically inaccessible.

In addition, Myanmar military ties to the considerable narcotics and arms trade that utilizes the porous border between the two countries may have produced a conflict of interest between parties within the junta that forced the withdrawal of the pipeline project.

Conclusion

The junta is insisting that the rules of the gas fields have little to do with political decisions; rather, that it is the business as usual approach of offering the sale to the highest bidder. The decision to sell to PetroChina, however, emphasizes the complexity of resource diplomacy for all players within the region. India's current loss in the field of energy security will likely not lead to a decrease in its attempts to win greater cooperation from Myanmar over counter-insurgency efforts, but it does reveal the deep connections between China and Myanmar. This relationship will prove hard for India to compete with in the long run, especially as long as the decision-making process within the junta follows the familiar route of political considerations at the expense of sound domestic economic policy.

An important consideration, unexamined here, is that India will not likely rock the diplomatic boat as long as its companies continue to enjoy privileged access to a country that is closed to U.S. and European competition. Exploration, after all, is still ongoing in the offshore blocks while Myanmar's onshore basins remain largely untapped.

Report Drafted By:
Gideon Lundholm

Posted by Hugo Albert Orwell at 09:41 AM | Permalink | TrackBacks (0)

Source: PINR Dispatch

The first sign of the current protests currently underway in Myanmar occurred in a rare display of public outrage in February 2007 over the economic conditions within the country. A small group calling themselves the Myanmar Development Committee called on the military rulers to address consumer prices, lack of health care, education and the poor electricity infrastructure. Normally unseen in Myanmar, the protest was quickly broken up after only 30 minutes of activity. Likely in response to the protests, the ruling military junta appointed Brigadier-General Than Han of the Myanmar police to the responsibility of handling civil unrest in Rangoon.

On August 15, 2007, the government made significant cuts to national fuel subsidies, which had an immediate effect of increasing the price of diesel fuel by a reported 100 percent, causing a five-fold increase in the price of compressed natural gas, and placing additional inflationary pressure on an economy already facing estimated inflation levels of 17.7 percent in 2005 and 21.4 percent in 2006.

Once again, similar to the event in February, people took to the streets in a rare display of public anger. The current demonstrations have drawn a significant number of Buddhist monks into the streets and have led to national curfews. Violence finally broke out on September 26 as security forces and protesters clashed.

The end of fuel subsidies were likely part of a larger package of reforms that the junta has been planning in order to, among other things, reduce the pressure of global fuel prices in a country that is dependent on diesel imports for its entire economy. Myanmar has an insignificant domestic refinery capacity and a chronic need for foreign currency. The latest Indian proposal intended to regain access to the Shwe gas fields has reportedly included diesel fuel exports, while a deal with Petronas of Malaysia is seeking similar arrangements. [See: "Pipeline Politics: India and Myanmar"]

The International Monetary Fund (I.M.F.) and World Bank made recommendations as recently as last year along the lines of the subsidy cut as part of a larger package of reforms, critically citing the trend toward extraordinarily high budget deficits carried by the junta. The construction of a new capital, Naypyidaw, and the proposed construction of an information technology capital, Yadanabon, along with significant pay raises for civil servants and the military have placed serious pressure on government reserves. The government typically addresses such deficits by printing more money, producing the significant inflationary pressures seen today.

The involvement of private interests should not be overlooked. Leading businessman Tay Za and his holding company Htoo Trading Company may be set to profit from the privatization of the fuel distribution system within the country. In order for the move to be successful, the thriving black market in fuel needs to be eradicated, thus the necessary removal of fuel subsidies and the subsequent rise in prices throughout the country. While powerplays between junta leaders and private businessmen have been cited before as causal factors in economic policy changes, the international pattern of subsidy reduction in the face of rising global oil prices suggests that this was not the underlying motive in the move. However, it would be a fairly typical move for the junta to select reforms beneficial to its business partners rather than to the national interest.

The junta has successfully melded the Myanmar economy into one that is dependent and focused on the export of its resources. Arguably, it appears that the junta has little economic planning experience and its priorities lie in the promotion of military power. However, it has produced a situation in which little value is added to any resources, whether it is copper, timber, or energy, producing an economy dependent on imports and exposed to the volatility of resource prices. It has managed resource rents and foreign investment poorly; planned hydroelectric projects will likely be forced to export electricity due to the inability of domestic infrastructure to handle the increased load.

Similarly, the information technology project of Yadanabon, likely a response to a similar project in Malaysia, is typical of the economic oddity that the junta often embarks on with little thought to planning. Communication infrastructure within the country is archaic and will not support the proposed project. Likewise, the jatropha (physic nut tree) plantations currently being planted across the country, another junta project, will not result in any significant economic development. The fuel requires significant infrastructure to turn into bio-diesel, which likely means it will be exported in its raw form to neighboring countries while the land under plantation could arguably be better utilized to feed the population. Regardless, the aging diesel engines that are in use throughout Myanmar will not be able to burn the resulting fuel stock effectively even if the domestic infrastructure were available.

One of the factors that may exacerbate the situation is the state of Myanmar's banking sector. The junta has announced a restriction on withdrawals from banks, raising echoes of the banking crisis of 2003. These restrictions are typical for unstable times, but due to the shaky status of the private banks especially, it is likely to cause even further economic hardship for the people of Myanmar. Monks may represent the spiritual backbone of the protests, but it is the general populace who has been successfully cowed by the junta into an attitude of self-preservation, which will ultimately have to be driven to demand change.

The military has made a supreme effort to remove itself from contact with the population: barracks and bases are situated away from towns, and the new capital is a study in strategic withdrawal to the hinterland. It is the populace who has the most to lose from rampant inflation and evaporating savings, but faces an incredibly resilient and increasingly isolated military that has kept a stranglehold on power since 1962.

The last major uprising in Myanmar occurred in 1988. The underlying cause of the revolt was economic and resulted in violent repression by the military. The outcome of the current protest could be similar. Regardless, due to the decades of military involvement in the economy, dependency on resource exports and a high rate of corruption that pervades the country, the necessary economic improvements will not come easily. Even with peaceful political change, without significant international oversight, the overwhelming precedence of military intervention and control in the country will likely return Myanmar to state-sponsored economic mismanagement.

Posted by Hugo Albert Orwell at 09:39 AM | Permalink | TrackBacks (0)

Source: PINR Dispatch

The current civil and political situation in Myanmar presents an opportunity for several major powers, namely Russia, China, India and the United States. Of these, Moscow has been working in concert with China to maintain the status quo in the country in order to preserve Russian interests.

For Russia, Myanmar holds a special economic interest since, during the past few years, it has entered into various business dealings with the country. In May, for example, nuclear equipment export monopoly AtomStroyExport forged an agreement to construct a nuclear research center in Myanmar. Leading foreign energy trade company Zarubezhneft, natural gas producer Itera, and Silver Wave Sputnik Petroleum are currently producing Myanmar's off-shore oil deposits alongside the Chinese company PetroChina, after forming a link with the south Russian republic of Kalmykia.

Additionally, Myanmar purchased 15 Russian MiG-29 Fulcrum fighters for approximately US$150 million in 2001. Furthermore, it is negotiating with Russia's state-controlled arms exporter Rosoboronexport on the establishment of an air defense system using the Tor-M1 and Buk-M1-2 missile systems. These business dealings, with a special emphasis on the energy related deals, are especially important to Russia.

Russia, which is currently one of the leading exporters of natural gas, is on the path to achieving a monopoly on energy throughout Europe and is most likely utilizing Myanmar and its oil and natural gas deposits (which it has gained access to after having negotiating the placement of the aforementioned air defense systems) to further its goals of monopolizing Europe's energy industry and possibly expanding its economic and political interest into the East.

It is also important to note that the air defense systems will serve other purposes, such as establishing bases to counter growing Chinese power or U.S. influence.

Demonstrating Russia's position on Myanmar is a recent Foreign Ministry statement that warned that "urgent steps must be taken to prevent the escalation of tensions" in Myanmar. The statement demonstrates that Russia supports an urgent response to stop the escalation of hostilities; however, the purpose of an end to hostilities is simply to reestablish a measure of stability in Myanmar, for Russia does not support the implementation of sanctions against the country, which could work to cripple the ruling junta.

In essence, Russia's interests are the stabilization and continued unsanctioned existence of Myanmar's ruling government, so that Moscow can continue to acquire Burmese oil and retain a stable ally in the region.

Opposition to this policy has come from several sources, one being the United States, which has called for immediate action and sanctions against the military junta in Myanmar. One reason for the United States to push for a change of government in Myanmar is to undermine Russia. If the current regime in Myanmar is disposed, it will be possible that a democratic government will come to power and seek better relations with the United States and its allies. The possibility of a democratic government, and its possible disposition toward friendly relations with the United States, is also an important driving force behind Russia's and China's actions in Myanmar.

Another source of opposition has come from India. The reason for India's involvement is the veritable backstab by Myanmar concerning the removal of India from the status of "preferential buyer" in regard to the off-shore oilfields off the coast of Myanmar. After removing India from preferential buyer status, the junta entered into negotiations with Russian and Chinese oil companies. Possible Indian interests are limited at best since it has been pushed aside by China. It is most likely that the Indian government opposes Russia and China in an attempt to maintain some form of business relations with the small Asian country. [See: "Pipeline Politics: India and Myanmar"]

Currently, with the lack of harsh or committed rhetoric, it is difficult to tell what actions and strategies Russia will adopt when taking action around Myanmar. It is not clear whether or not its strategy will be an active intervention or a more passive campaign of rhetoric. It is also difficult to tell as to whether the involvement of India and the United States will play a significant role in the situation at hand. It is clear, however, that Russia has extended economic interests in Myanmar that it considers critical to its interests.

Posted by Hugo Albert Orwell at 09:37 AM | Permalink | TrackBacks (0)

Source: LifeAfterTheOilCrash.net

By Richard Heinberg for Museletter

September is an equinoctial mont, a time of momentary balance, instability, and change. Day and night are of equal length; however, the rate of change in the relative lengths of day and night is at its peak.

It’s been an unusually busy and stressful month for me personally. Leonardo Dicaprio’s enviro-doc “11th Hour” hit the theaters, featuring yours truly on screen for a few seconds (though the producer and director decided against including a mention of Peak Oil). Early in September I gave a presentation at the UN at the behest of two organic agriculture organizations (the Soil Association of Britain and the Shumei Foundation of Japan). On Thursday the 13th, a CNN Money reporter called wanting information about Peak Oil; his story appeared the next day. The very first copies of my new book, Peak Everything, shipped during the last week of the month. A few days ago a Korean TV crew stopped by and filmed me at home for a three-part documentary to air in November. And a family emergency (aging parent) sent me off to the Midwest for a week. As the saying goes, there’s no rest for the wicked.

The month was no less eventful for the rest of the world—though of course the scale of significance of the following items is approximately 6.7 billion times greater than for the preceding ones.

Maybe the best place to start is with a general comment. It’s getting pretty damn obvious that the world is sliding head-first into the abyss at an accelerating rate, with most Americans as oblivious as ever. The latest indication of impending doom is a festering credit crunch brought on by the inevitable puncturing of a bubble puffed up over the past few years through the issuance of thousands of patently idiotic subprime, adjustable-rate, and interest-only mortgage loans.

The deeper story is that this is just the last of a series of bubbles that the US Federal Reserve has inflated in order to sustain for as long as was humanly possible a fundamentally unsound national financial condition.

As I explained in Chapter 2 of The Party’s Over, the US got rich exploiting its own resources and labor. Its most valuable resource—oil—went into decline forty years ago; since then, we Americans have tried to stay rich by exploiting other nations’ labor and resources, using leveraged trade rules, dollar hegemony, and military threats. All this time, we congratulated ourselves: we were living in a post-industrial information economy; they were doing the dreary, obsolete work of actually making things. They sweated and saved; it was up to us to spend and borrow. We served an indispensable function in the global economy as the consumer of last resort, as the engine of new debt creation (more debt equals more money in circulation—i.e., more GDP growth), and as the global cop keeping order in an unruly world (while also sneaking donuts and taking bribes). The Chinese burned their coal and poisoned their workers and environment to make our stuff, enabling us to enjoy a cleaner environment by keeping our coal in the ground, while they loaned us the money to buy cheap Chinese stuff with. Such a deal!

Life in bubble world was grand while it lasted. First there was the Third World debt bubble of the ’80s; then came the tech bubbles of the ’90s; and finally the real estate bubble of the ’00s. Along the way, Wall Street hoped for a little extra hot air from the privatization of Social Security, but even Americans weren’t stupid enough to sign onto that particular leveraged buyout. All during this time, suburbanites got used to having more gadgets and bigger cars and houses, even if they couldn’t actually afford them.

But now we’re at the end of the line. At last the rest of the world is coming to realize that it doesn’t really need Americans: the Chinese can consume, too, after all. And the Asians can’t really justify loaning us more money; we’re not going to pay it back—or if we do, it will be in devalued dollars. But those loans can also be looked at as investments: other nations have in effect bought US assets, which means that the wealth created from those assets will flow to the new overseas owners, not to Americans. What’s left to buy—other than a lot of soon-to-be-foreclosed real estate? And how much wealth will those assets produce once the bubble deflates?

It’s also clear now that there are alternatives to the dollar, including the euro, the yen, and the yuan. Not that the dollar won’t be missed; when it tanks, there will be as many financial casualties in Mumbai as Manhattan. But currency traders are clearly heading for the exits, and the last one out gets the booby prize—a bag of wooden nickels.

Yes, the rest of the world still must fear America’s awesome weapons of mass destruction: this mighty nation can certainly create an unholy mess when it means to, as it is demonstrating in Mesopotamia. But that doesn’t mean that other nations actually have to obey it any more. The US can bomb to smithereens any country it chooses, but it can’t always count on forcing that country to hand over its resources at gunpoint.

The dollar is hitting record lows. Gold and silver are hot commodities—always a bad sign for the reigning paper currency. There are rumors of possible bank failures (following a run on one British bank). If the Federal Reserve tries to solve the liquidity crisis by lowering interest rates, that just worsens inflation and exacerbates the dollar’s problems. If the Fed raises rates to prop up the dollar, that forces the banks and hedge funds to confront their mountains of worthless paper and leads ultimately to defaults, bank runs, and bank failures. Clearly the Fed fears the latter scenario more than the former, so by lowering interest rates this month it effectively pulled the plug on the dollar. The Saudis are now preparing to de-link their economy from the US currency, while China is quietly selling off dollar-denominated assets. One way or another, Americans are going to soon see a rapid decline in their real standard of living.

Of course, another big event this month was oil’s nose-bleed ascent to record-high prices, over $82US per barrel. Part of the price hike resulted from the dollar’s weakness, but—as Goldman Sachs has pointed out—the main reason was simply that demand is up while supply is down. The May 2005 peak for the rate of production of regular crude and the July 2006 peak for all liquids are still holding. It may be that the technical maximum global rate of flow for liquid fuels is still a couple of years away, but in effect the peak is here now.

As for Iran, “all options” are still on the table, and the pretext for a broad-scale air attack is apparently being patiently laid. Bush has vowed that he will not leave office with the Iran question unresolved, and France’s new neocon leaders are running defense for Bush/Cheney, calling for “the most severe sanctions possible” and for war if those “don’t work.” Meanwhile, when Tehran actually complies with the International Atomic Energy Agency’s requests, this is viewed as a provocation. This month, Newsweek revealed that Vice President Dick Cheney at one point considered asking Israel to launch air strikes on an Iranian nuclear site, so as to provoke Iran to lash out, thus giving Washington a pretext for more extensive attacks (a scenario I discussed in MuseLetter for April 2007, “Iran: We Will Know Soon”). Iranian President Ahmedinejad’s appearances in New York (at the UN and Columbia University) seemed only to give the US media an opportunity to whip up further anti-Iranian public sentiment, while the Senate’s passage of the Lieberman-Kyl amendment (which Hilary Clinton supported) provided a stamp of approval for any future military actions by the current administration.

But surely the single most important event of the month was the revelation that arctic sea ice is melting faster than even the most dire forecasts had predicted. This is significant because it shows the power of reinforcing feedback loops: as sunlight-reflecting ice melts, it leaves dark water in its place—which absorbs more heat, causing more ice to melt, and so on. This year’s minimum extent of ice was about one million square miles (as of September 16); the previous record low was 1.5 million in 2005. The rate of melting this year was 10 times the recent annual average. This month the Northwest Passage was ice-free for the first time in untold millennia. At this rate, the north polar region could be ice-free in summer by 2015.

Altogether, it was an extraordinary 30 days. Yet so far there’s been no instantaneous economic implosion, and there’s not much blood in the streets (except perhaps in Myanmar), and so the mainstream media can safely focus on the truly vital issues like O.J. Simpson’s current legal scrapes and Britney Spears’s performance at the MTV awards.

Many writers who discuss the sort of stuff that interests me (“reality” I think it’s called) wrap the unutterable sadness of it all in a crisp cellophane of cynicism. I’m guilty of that, too, from time to time—certainly in this little monthly summary. How else to make it somehow bearable?

Posted by Hugo Albert Orwell at 10:19 PM | Permalink | TrackBacks (0)

Source: WSJ Online

By BOB DAVIS
October 3, 2007; Page A3

DALLAS -- Hunt Oil Co. Chief Executive Ray Hunt said his ties to the Bush family and the Republican Party didn't help his company cut a deal last month to explore for oil in Iraq's semiautonomous Kurdish region.

The agreement, which gives the closely held Dallas company access to a largely unexplored part of oil-rich Iraq, has been criticized by the Bush administration and Iraqi officials as undermining efforts to strengthen the war-torn country's central government. Some critics also suggested Mr. Hunt was cashing in on his ties to President Bush, while others claimed he was turning his back on the president.

• Outside Politics: Hunt Oil CEO Ray Hunt said his ties to the Bush family and Republican party didn't help it strike a deal with officials in Iraq's Kurdish region.
• Countering Criticism: The State Department says it had warned Hunt against a deal, but Mr. Hunt said his company didn't ask for advice and acts independently.
• Unknown Potential: Iraq is oil-rich, but much of the war-torn country is unexplored and the biggest known reserves are outside Kurdish territory.

In an interview, the 64-year-old Mr. Hunt says that, contrary to the State Department's assertion, the company received no U.S. government advice before striking a deal. "The State Department must have been misinformed," he said. "We did not consult with anyone in the [U.S. government] prior to signing our agreement."

Mr. Hunt, a longtime friend of the Bush family, gave $75,000 to Republican Party fund-raising committees in the past two years, according to the Center for Responsive Politics. But he said his political ties didn't play a role; the company saw an opening in Kurdistan and jumped on it. "It's another example where we're able to move quickly when opportunity presents itself," said Mr. Hunt, who says Kurdish oil executives turned to Hunt because of its oil-development record in Yemen.

Mr. Hunt added: "The fact is, as a matter of policy, we never have and never will go to the government of the U.S. and ask the government's advice on anything we do from a business point of view."

The State Department says it warned Hunt Oil against signing a contract that it viewed as "legally uncertain." In a news conference late last month, Mr. Bush said he was "concerned" the arrangement would "undermine" negotiations for a national oil law.

The Hunt Oil deal has been touted by Kurdish officials, who want to bolster their claim to autonomy in oil-related issues and worry that energy resources are more thoroughly mapped in Shiite-dominated southern Iraq. But the Hunt contract has angered the Baghdad central government, which worries about a breakup of the state.

Hunt Oil is much smaller than super majors such as Exxon Mobil Corp., BP PLC and Royal Dutch Shell PLC. But it has a reputation in the U.S. oil patch as a risk taker. As a closely held company, it feels it can move faster than larger rivals. Mr. Hunt often refers to his firm as a "commando" operation, wooing customers with its derring-do.

Under terms of the Kurdistan contract, Hunt Oil plans to start seismic testing in the next few weeks and to drill its first well sometime next year. But Mr. Hunt emphasized that the contract is for exploration only, not for production, which could take an additional few years to begin -- if the company manages to find oil.

The Kurdish regional government yesterday said it had signed a variety of additional oil deals, which could reduce the political heat on Hunt. They include exploration agreements with two midsize oil companies, Heritage Oil Corp., of Canada, and Perenco SA, of France, and separate agreements to build two oil refineries.

Qubad Talabani, the Kurdish government's representative in the U.S., credited Hunt with boosting the visibility of Kurdistan. "When a name as established as Hunt comes in, it raised eyebrows in the oil-and-gas community," he said.

Iraq is estimated to hold some 115 billion barrels of reserves, making it the third-largest holder after Saudi Arabia and Iran. But after decades of war, the country is relatively unexplored.

Friendly and reserved, Mr. Hunt lacks the family's flamboyance. His father, H.L. Hunt, was a wildcatter who fathered 15 children by three women and used poker winnings for early capital, while two of Ray Hunt's half-brothers tried to corner the world's silver market.

But Ray Hunt shares his family's thirst for business risk and penchant for secrecy. The company won't release its revenue or even the number of Hunt employees.

Mr. Hunt has expanded its business overseas, including the North Sea and Yemen. Hunt Oil is also a big investor in a natural-gas project in Peru's Amazon and is now building a liquefied-natural-gas export facility in Peru.

Hunt is used to politically precarious situations. It struck oil in northern Yemen in the early 1980s and built the operation during periodic civil wars. Yemen expropriated a big part of its holdings in 2005, which Hunt is contesting in international arbitration, though it still has interests elsewhere in the country.

Its record in Yemen helped get it a leg up in Kurdistan, said Mr. Talabani, the Kurdish official. Over the years, Hunt has also kept up contacts with Ashti Hawrami, the Kurdish oil minister.

"We consider ourselves to be loyal American citizens as individuals and as a company," Mr. Hunt said. His company won't deal with countries that are being sanctioned by the U.S., like Cuba or Iran, or look for legal loopholes that would give it a leg up there, he said.

--Chip Cummins and Neil King Jr. contributed to this article.

Posted by Hugo Albert Orwell at 03:19 PM | Permalink | TrackBacks (0)

Source: The Oil Drum

Posted by Prof. Goose on September 26, 2007 - 10:00am

I have intentionally paraphrased this wonderful Christmas song because it has much to say about the future after peak oil which I am now ready to say has already happened. As energy declines, we will indeed go to our grandmother's house--one without electricity and running water, sewer or septic and deep, mechanically pumped water wells. At least that was MY grandmother's house. She lived on the Kansas prairies of the 1890s. In the 1960s I asked my grandmother what the greatest invention of her life had been. She said electricity because before they had lights, everyone went to bed shortly after sun down because it was simply too dark to do to much. There was no air conditioning, so the summers were very hot. In the winter, trips to the outhouse were cold (and brutally awakening if during the middle of the night). While she had wood where she lived, about 100 miles west of her home, people had to burn dung as is done in Tibet today. See the picture below of the dung plastered against the house. When one wants to cook, one retrieves a patty.

Without cheap energy, we go back to my grandmother's house or one quite like it...

Yes, folks, peak oil is here, that thing that politicians don't speak of; that event which cornucopians (those who believe that we will not run out of energy) believe is a fraud or misunderstanding is here. The cornucopians believe we are wrong because many have predicted that we would run out of energy before and have been wrong. What they lacked was the 20-20 that hindsight gives one. Today, we can see the peak behind us.

First, how do we recognize when peak oil is about to happen or has happened? The first thing is that it always comes with a gradual decline in production. Steep changes in production curves are due to political or economic decisions. Let's look at Saudi production from 2001 to the present. (NB: Click all graphics throughout this post to expand them to full size.)

The first thing we notice is that it is declining from January 2001 to January 2002. That is the recession resulting from the collapse of the tech stock bubble, causing a worldwide reduction in oil demand. The world then began to recover. In January, 2003 political events in Venezuela shut in that country's oil. We find this

"January 12, 2003: OPEC held its 123rd meeting to review oil markets in Vienna, Austria. OPEC decided to raise its production quotas from 23 million barrels per day to 24.5 million barrels per day, effective February 1, 2003, in order to ensure adequate supplies of crude in response to the oil supply shortfall in Venezuela" http://www.eia.doe.gov/cabs/opec.html

This was a short-lived, very steep increase in production, followed a couple of months later by a nearly equivalent sharp drop in production. This is not a sign of peak oil; it is a sign of political manipulation of production. The next thing we notice is the sharp rise in production in April, 2004. This was due to the rise of price above $40/bbl, a level which OPEC had previously thought would cause a recession. They opened the taps to try to damp down the price. What they didn't count on was that China's and India's consumption had taken off like a rocket because of their economic growth. The price continued to rise, showing that scarcity of oil had come.

After a year and a half of all out production, we see the first signs of decline, normal natural decline in the Saudi production. The plateau of production is followed by a gradual decline in output. One might be tempted to say that the decline in production was due to declining prices, but this isn't true for the period from Oct. 2005 until July 2006. The price rose but the production declined. The gradualistic tail on Saudi production is what an oil field decline looks like.

Just as I was finishing writing this page, I saw this report.

Nicosia, Sept 8: Saudi Aramco in its Annual Review 2006 said that last year the company's crude oil production declined by 1.7 percent, while exports declined by 3.1 percent, compared with the previous year.

Crude oil production in 2006 averaged 8.9 million barrels of oil a day (b/d) and exports 6.9 million b/d. (http://www.dailyindia.com/show/172345.php/Saudi-Aramco-reports-oil-outpu... ) To me, the interesting thing about this is that with a 3.1 decrease in exports, this means that there is a reduction of 266,000 barrels per day available to the rest of the world. Production doesn't really matter to the rest of the world. Only exports matter. If the Saudi's used all of their oil, there would be nothing left for us to use. This data confirms that their exports are decreasing faster than their production is decreasing.

Let's take another example, the United Kingdom.

From 1995 until 1999, the UK production was a plateau. But in mid-1999, the monthly production began to gradually decline. I moved to the UK in August 2001, looked at the curves and told a colleague and fine geologist, Steve Daines, that the UK had peaked production. He disagreed. We made a bet for a lunch that at the end of 2000, the UK would produce no more than 130,000 tonnes of oil. I took below that figure, he took above. Instead of a lunch, he and his wife had me and my wife over for a wonderful Malaysian dinner cooked by his beautiful Malay wife. We ate that meal with gusto along with a Turkish couple, that they knew. The sad thing was that the UK production decline has continued even into this year. When I left the UK, I told one young geologist that if she wanted to have a career in the oil business, she was going to have to leave the UK. While that day hasn't come for her yet, it will. No one will pay geologists to manage fields that aren't producing. The above curve is what peak oil looks like for a country--a plateau followed by a gradual decline that is inexorable.

Now that we know what peak oil looks like, lets look at the current global production of both black oil (crude) and Total Liquids (crude plus condensate--a liquid that comes out of natural gas wells which is usually clear).

What we see here is that following the post-911 recession, there is the ramp up of production to supply the increasing demand from China and India. By late 2004, the rate of increase in world crude production (blue curve) slowed, reaching a peak of 74.3 million barrels per day in May 2004, marked by an arrow. The trend from that time has been down, gradually I would admit, but down none the less.

So, why do I call this the peak of world crude production? Isn't it possible that new production will come on line and lift that number above the 74.3 million bbl/day? Possible, barely, probable, no. Why? All the world's biggest fields are in decline, and they produce a large percentage of the world's oil. We saw Saudi Arabia's production, and that represents 10% of world oil. So, we know that 10% of the world's oil in in decline. But the Saudi's are the second largest producer. Russia, the largest producer of oil, is, at best, flat in production now. The U.S. is the third largest producer of oil (something that surprises everyone) and we have been declining in oil production for 30 years. These three countries account for 28% of the world's production, all in decline.

Mexico has the 3rd largest oil field and that one field represents 2/3 of its crude production. It is in decline, plummeting 20% last year. The UK, Norway, Indonesia, Oman and China are all in production declines. The only places on earth that are undergoing significant increases in crude production are Angola, Kazakhstan and Brazil. Kazakhstan will always be limited to the size of the pipeline it has available. Pipelines have fixed capacity.

Given all this, it is hard to see how the future is going to bring forth vast new quantities of daily production.

Another objection: Above I said that peak oil was a plateau followed by a decline. Could we be in the plateau of world production? Yes, that is certainly possible but for the reasons I list above, the current levels of production simply can't be maintained. Annually, the world loses 5 million bbl/day of productive capacity. The curve above shows that we are not adding to world productivity rates even 5 million bbl/day per year of productive capacity since 2005, which would have keep us absolutely flat.

Now, one other thing makes me think that this is the peak of world crude production. The price response in relation to the supply. Usually if price is going to bring forth new supplies from OPEC (who supposedly has all these vast untapped oil fields just waiting to be turned on), it would happen in sharp steps. The Saudi's have not increased production since late 2004 or early 2005. Yet, because the price has gone up from that time, if they had the oil, they could have made lots and lots of money. But they don't seem to be able to take additional advantage of the oil price. In spite of high prices, indeed, increasing prices, no one on earth seems to have the excess capacity sell more oil into this rising price environment. Given the past history of cheating on the part of the OPEC members, the lack of new supplies coming to market must say something important about its availability

Another interesting feature is the total liquids curve (the red curve). This is both black oil plus the clear condensate from natural gas wells. This curve also seems to have peaked, but peaked a year later, in July 2006. Thus, we are 2 years out from peak crude oil, but only one year out from a probable peak liquids.

What are the implications?

The most important thing we need to know is the rate of decline, which of course, we don't know and won't know for a while. We can delimit it a bit. a 1 million bbl/day decline from May 2005 until May 2007 represents approximately a .75% decline per year. Hardly something to worry about right? The first year of UK decline was only about .5%. The second year of decline was 9%, but then, the UK is a much smaller place than the world, so it is unrealistic to expect the world to follow precisely the UK pattern of decline. We can expect the world crude production to decline much faster in the next few years than it is right now. How fast remains to be seen, but even a 5% decline will mean that in 10 years we will be producing only 60% of what we do today! Instead of having 85 million barrels per day of total liquids, we would only have access to 50 million barrels per day.

Driving

Clearly that kind of restriction in oil supply means that either mass transit must come to America as it is in China, or we must only go to work 3 days per week. In 10 years, having only 60% of the oil we have today means 40% less driving for everyone. Going to work only 3 days per week, would mean the destruction of the economy. Most jobs can't be handled across the internet. How does one do the job of grocery store stocker by telecommuting? Even today though, the relatively mild oil prices we have experienced have altered the driving habits of the American public. I sent this chart to a friend last summer. The chart shows the change in mileage driven on US highways from last year. If we drive more this year than last year, the number will be positive; if we drive less, then the number is negative. As you can see, the response to the rise in the price of oil (green curve) has been that for the first time in 27 years Americans are driving less than the previous year. The last time this happened was during the Iranian hostage crisis!

Expect more of this in the future.

Another implication is that automakers shouldn't make gas guzzlers. Those old enough to remember the Iranian hostage crisis, when everyone had to take turns getting gasoline on alternate days, knows a bit of what it will feel like. Back then, people stopped buying big cars. The V8 went out of style in the 1970s; it was too expensive. I expect the Hummer will meet a similar fate.

Suburban sprawl won't work

American cities will need to restructure to be more like European cities, where one can walk to the stores. In Aberdeen, Scotland, most Aberdonians shopped daily because they had tiny refrigerators. But that didn't matter, if they forgot something, they could walk to the store in about the same time it takes me to drive to the store here.

Flying

Flying will become like it was when I was a child--the province of the rich. I did not get on a commercial jet until I was 25 years old. My children grew up with flying and have seen far more of the world than I have at an equivalent age. But, as oil prices rise, fuel costs will bury many airlines. As far as I know, I own no airline stocks either directly or indirectly through mutual funds. They are not going to have a growing clientele as energy costs go up. We have already seen one of the impacts of the energy costs to this sector. Years ago, I was speaking with my wife's brother-in-law who used to work with Boeing. Boeing had made the choice to go energy efficient with their planes, while Airbus had decided to go BIG. I told my wife's brother-in-law that Boeing had made the correct choice. This is from a Business Week web site:

"Instead, the show could highlight a growing list of woes at the company, based in Toulouse, France. On June 1, Airbus acknowledged that the first deliveries of the A380 will be delayed up to six months, from mid-2006 until early 2007, due to unspecified production difficulties. Then Emirates airlines, which had been expected to announce a big order for the A350 at the air show, said it was not ready to make a decision. Airbus sales chief John J. Leahy, who said earlier that he might announce more than 100 orders for the A350 in Paris, now says big orders could come "a week or two after."

Has Airbus lost its mojo? The past few months have been rough. Boeing, after trailing Airbus on orders for the past three years, has racked up 255 orders as of the end of May, compared with only 196 for Airbus. Even more worrisome, Boeing's new 787, which boasts better fuel efficiency thanks to lightweight composite materials and next-generation engine design, is proving a hit with airlines. They have placed orders and commitments for 266 of the jets, while Airbus has yet to announce a major deal for the competing A350. Meanwhile, the A380's order book has been stuck at 154 since last year." Why Airbus is Losing Altitude," June 20, 2005, http://www.businessweek.com/magazine/content/05_25/b3938069_mz054.htm

And a more recent news source notes that Boeing has won 706 orders for its Dreamliner while Airbuss has only 154 for the A350. Energy is king in the airline industry, even if a government run airplane manufacturer thinks they can change the laws, both of the land and of physics.

Food

One percent of world energy use goes to fertilizers. High energy prices will affect fertilizer use. Indeed, we can see that now. This is a plot of inflation adjusted oil price divided by 100 (so it will fit on the same chart) with the barrels of oil equivalent energy of fertilizer applied per acre of wheat. One can see that when oil prices are high, fertilizer use is low; and vice versa.

Few city people know that an acre of wheat has 1.3 million wheat plants--a density hard to achieve if one is throwing seed by hand. Corn is sown at 30,000 plants per acre. Such densities require mechanical sowers. To sow corn at these densities by hand would require 42 hours (5 seconds per seed). This kind of puts into perspective the utility of energy for our tractors. If the price of oil goes up, there will be fewer bushels per acre because of the combined effects of less mechanization and less fertilizer. Now clearly for a while efficiencies will help. People will figure out how to apply fertilizer more effectively; but eventually not having fertilizer will come into play.

I am fond of citing a little known fact I got from a Walter Youngquist article. Mechanization allows a farmer to spend 4 hours per acre and produce 160 bushels of corn per acre. Back in the 19th century, it was 500 hours per acre an 30 bushels of corn per acre. This of course brings an interesting conundrum to those expecting corn-based ethanol to fuel the world. Without petroleum-based fertilizers, there won't be enough corn to feed us much less fuel the world. A five fold drop in corn yields would leave many in the world starving.

It is unlikely that we will be able to have air-shipped strawberries from Argentina in the winter, so food will once again become seasonal, like it was in my childhood before globalization.

Water

Water and food are entirely linked. Without water, many crops won't grow, but we also need water to drink. A few weeks back the Wall Street Journal gave a couple of interesting facts about farming in India.

"Since the 1990s, India has been a major net exporter of rice, shipping nearly 4.5 million tons last year.
"But annual yield increases began to slow over the past decade. Farmers cranked up fertilizer and water use, draining the water table. Many began planting two crops a year, taxing the soil. Punjabi area officials discouraged farmers from planting two crops and in some places outlawed it, but many farmers ignored them."
"I'm doing mischief against the government,' concedes Kanwar Singh, a second rice crop recently on a stretch of flooded land near the northern India city of Karnal. He says he now has to pump water from 300 feet below the surface, compared with 70 feet 10 years ago." 'In a year or two, maybe it will be finished,' he says." Patrick Barta, "Feeding Billions, A Grain at a Time," Wall Street Journal, Saturday/Sunday July 28-29, 2007, p. A10

and

"Lakhbir Singh, 35, this year planted aerobic rice for the first time. He says his costs have tripled over the past decade. His well was about 60 feet deep 10 years ago; now, it's down to 450 feet, and he has to use a special submersible engine to help haul the water to surface. The health of his soil has deteriorated, so he's using more fertilizer." Patrick Barta, "Feeding Billions, A Grain at a Time," Wall Street Journal, Saturday/Sunday July 28-29, 2007, p.A10

One simply MUST have energy to pull that water up from depths of 300 to 450 feet. Without it, there will be no water. Which raises the question, what will these poor guys do when the electricity isn't there to run their pumps?

But this isn't a problem for poor Indian farmers. When the electricity is off, the water pumps, which pump water out of deep wells will not be running. That means that agricultural irrigation will be interrupted. That means that city water supplies won't flow either. Both wells and surface water systems require electricity to move the water from source to your favorite drinking fountain.

Energy source

Another implication is that coal will have to play a larger role in the US energy budget over the near term. We can use coal to make diesel, electricity and thus mitigate, for a while, the coming problems. Coal can be used to manufacture fertilizer and avoid the problems (for a while) cited immediately above. We will use coal or our economy will not function. We will simply have to lose our aversion to coal and the CO2 it produces. I have asked many greens this question: If it comes to a choice between your child freezing in the dark or burning coal, which would you choose. I have yet find one so pure to their principles that they tell me they would let their kid freeze in the dark of a winter night. They all will burn coal to keep warm. Having lived in a society (China) where coal is the major source of energy, the smog is almost unbearable. There were days I could taste the sulfur in my mouth as I walked to work in Beijing. But we are no different than they. Their choice is also one of burn oil or have no heat in the winter or cooked food. The only alternative would be to chop down all the trees (which has almost been done in wide areas of China).

Yesterday there was an article in the Wall Street Journal talking about the coming electricity problems for Texas. Due to the success of the Greens at stopping TXU from building coal-fired power plants, in 3-4 years, Texas will probably start having similar problems to those California is having. California, and now Texas, stupidly decided that we would rather freeze in the dark rather than burn coal. We get 60% of our electricity from fossil fuels, coal, oil and natural gas! The decisions we make today will have immense impacts on your ability to go to work (how is your computer going to function without electricity? Do you really want to be able to drink water from the fountain on your 27th story office? Won't you just love walking those 27 stories each morning to get to work, which will put you in great shape if you don't have a heart attack during that first month of climbing). I suppose deodorant sales will increase in such a situation.

Conclusion

I will finish with personal story from my life overseas. When I lived in the UK, I saw what happens when the oil is shut off. In Sept 2000, the lorry drivers blockaded the refineries. My wife and I were brand new in the UK and driving back from a play in Aberdeen one night, we saw huge lines at the petrol stations. We wondered what was going on, but we drove on home not wanting to be in such long lines anyway. Unfortunately, those people in line, knew that the refineries had been blockaded, I didn't. By the time we realized it, the petrol was gone. That led to many interesting experiences. In one week, the food on the store shelves was gone. By two weeks, police and fire and ambulance were having trouble responding. Farmers were about to have to slaughter chickens because they couldn't get feed after only 2.5 weeks. Construction sites shut down. I learned through that experience that a society has about 3 weeks after the oil is shut off. Food ceases to moveinto the cities.

How can economic growth continue if each day into the future we have less energy than we had the day before??? This is a historic moment in human history. For the first time in 10,000 years, we have less energy than we had yesterday. And that will continue into the foreseeable future.

Posted by Hugo Albert Orwell at 05:26 PM | Permalink | TrackBacks (0)

Source: Treehugger.com

by Eckhart Beatty
San Francisco on 11.23.06

Roger Duncan serves as the Campaign Coordinator for Plug-in Partners, a national campaign for plug-in electric vehicles (PHEVs) striving to demonstrate clearly the viability of this market by doing the following: garnering support in the form of online petitions and endorsements by city governments across the country; procuring "soft" fleet orders; and developing rebates and incentives. TreeHugger's Eckhart Beatty recently had the chance to chat with Mr. Duncan about plug-ins and the future of automotive transportation.

TreeHugger: Why was Plug-in Partners founded in Austin, Texas?

Roger Duncan: As one of the more progressive utilities in the nation, Austin Energy has long led the nation in energy conservation. I was asked to see what else we could be doing in the area of clean energy, and I told the City Council we should start a new initiative in the transportation sector since I saw an eventual convergence between the electric and transportation industries. In my capacity as a manager we might be able to take advantage of the abundance of wind and solar potential to power cars. Soon we began seeing a convergence between the electric and transportation industries.

So in August of 2005, we founded Plug-In Austin. We realized from the beginning what we really had to do was to link similar ongoing efforts taking place across the country. We started by targeting the 50 largest cities in the U.S. Now we have members from utilities, environmental groups, businesses, as well as many other federal, state, and local organizations.

I had originally heard of the efforts of Felix Kramer and CalCars, Electric Power Research Institute EPRI, and Andy Frank, a UC Davis professor at who invented the plug-in technology some 30 years ago.

TH: What's the most important thing you want the average individual to know about plug-ins?

RD: They are very energy efficient, cleaner, and cheaper to operate.

TH: What’s the most efficient way of getting the most people to understand their importance in the shortest possible time?

RD: Invite folks to visit the website Plug-In Partners and recommend they sign up for the newsletter. Consider working with the media, as well getting promotions for us.

TH: If Proposition 87 had passed in CA, what would it have meant for the future of PHEVs?

RD: I really don’t know much about it. I’m not a big fan of initiatives. This one could only stand to help, though. It could well stand to buttress the campaigns of lots of alternative energy technologies—as well as ours.

TH: What would you recommend that everyone who doesn't live in California do in this regard? For instance, would similar initiatives be feasible in other states like Texas, as well?

RD: It (an initiative like California’s 87 ballot measure) probably wouldn’t occur in TX. I’m less interested in (proposing) legislation than in demonstrating a market for PHEVs.

TH: Are all hybrid designs the same—or are some different?

RD: There are different varieties. There’s the serial, the parallel—and then the hydraulic (a protoype still). Although, principal variations in designs relate to battery design such as Nickel-Metal Hydride versus Lithium Ion, there are other differences in the size of the battery compared to the engine (with some new ones proposing smaller gas engines and larger electric motors).

Andy Frank: "Just as in the case of any emerging product or technology, there are many ways to implement PHEV technology, optimize for various factors and conditions. We’re looking forward to sorting this out when car-makers begin building PHEVs." [Mr. Frank is the inventor of the PHEV.]*

TH: What is the longevity of battery systems compared to 100% electric cars?

RD: They may be more powerful per unit mass than the batteries in non-hybrids, but less powerful than pure electric cars. Also, plug-ins require a deep discharge of their batteries, whereas fully electric cars don’t need to discharge the batteries as much.

AF: "While the price/performance ratio of pure electric cars may match or exceed that of PHEVs, it’s not likely. I'll bet on the PHEV staying as the ultimate end game for the remainder of the century," he said. "Lithium is coming up fast and will definitely take over the Metal Hydride in power, weight, life, size, and costs," he concluded.*

TH: By their nature, cars are somewhat "disposable," to be replaced by a new model on average every seven years—or less! Is “planned obsolescence” addressed better by plug-ins, in addition to their superior efficiency?

RD: Not really. Cars stay on the road an average of 16 years. It’s unlikely this figure will decline sharply any time soon.*

TH: Could factory-built plug-ins be made to be "upgradable" with respect to engine designs (for a few years going forward so they won’t become outdated like the first generation Prius did)?

AF: "Not really. As cars become more computer-oriented and more telemetric, possibilities for upgraded systems increase. Most products get better over time—no surprise there."

According to Dr. Frank, although "upgrading is always possible," with upgraded parts becoming interchangeable, "you may be flogging a dead horse for a long time." He concludes by predicting, "The technology of these systems will change very fast and may not stabilize for many years—if ever!"

TH: Bush has backed plug-ins. How helpful has all the political rhetoric been so far?

RD: He "gets it," and his support has been helpful. The Department of Energy is now conducting serious discussions, and a new initiative has been launched within its R&D arm.

TH: What are some ways the Partnership could be strengthened?

RD: It’s actually moving faster than we can keep up with.

TH: Does the association have growth plans?

RD: Yes. We’re starting to approach more corporations. Some notable examples of these and other large organizations are P.G.&E., Edison Electric Institute, the U.S. Conference of Mayors, and the National Consumer Federation of America (with over 100 million members)..

TH: What’s the minimum number of cars in a fleet needed for a "soft order"?

RD: We consider four to five as the minimum, but may consider fewer. It’s called a "soft" order to signify simply an intent to built, since they haven’t been mass-produced yet; it is not an actual purchase order--yet. Also, they can’t be built on speculation, due to the matter of expense.

TH: With all the good news that came regarding PHEVs this year, what are the biggest hurdles in our way to getting them mass-produced?

RD: Only certain kinds of cars manufactures would seriously consider it for particular models.

TH: What’s the latest word on the largest car manufacturers warming up to the idea of producing PHEVs?

RD: Ford and GM have both begun focusing on PHEV initiatives. Initially, they had expressed resistance and uncertainty. The bottom line is they are still researching them. Nissan will develop one—perhaps by 2010.

TH: What does Google really intend to do when it says it "wants to build a plug-in"? Would it support CalCars, Edrive Systems, Energy, CS etc. to do this—or exactly what?

RD: It’s true we’re engaged in discussions with Google, but I’m not at liberty to offer any details today.

TH: What are the largest companies and associations involved with the organization?

RD: P.G.&E., Edison Electric Institute, the U.S. Conference of Mayors, and the National Consumer Federation of America (with over 100 million members).

TH: Who are some of the most noteworthy spokespersons of this idea?

RD: Hillary Clinton, Lester Brown, Orin Hatch, Jr., Barack Obama, George Pataki (Gov. NY), George Schulz, R. James Woolsey (former Director of CIA). Plug-in Partners maintains a list of partners.

TH: What can we do as consumers to get them to do so?

RD: They should visit the Plug-In Partners website: sign up, spread the word, and put in a fleet order if applicable to their business.

TH: What about the notion of the PHEV plugging into a grid concept? Where is that idea today?

RD: True, it’s an interesting idea, and I believe it will happen, but it will be years before it will have significant import, since millions of cars are needed to make an impact.

TH: If you lived in remote area, could you set up your PHEV to power your home during blackouts?

RD: Yes. Toyota recently built a prototype that would allow people to generate electricity at 13kW and 120 volts. This would be especially useful for those living off the grid.

TH: What is your impression of companies’ individual commitments to grappling with the issues of PHEVs?

RD: Yes, I think they will remain committed for the long haul.

TH: If everyone who reads this interview could do just one thing a week to help promote the future of plug-ins as a proven viable alternative to fossil fuels, what should it be?

RD: They should visit the website, sign up, and consider getting involved in our work.::

*Note: I am grateful to Felix Kramer, founder of CalCars and Dr. Andy Frank for help with some of these answers.::

Posted by Hugo Albert Orwell at 10:14 AM | Permalink | TrackBacks (0)

Source: The New York Times

Published: September 19, 2007

Backed by the White House, corn-state governors and solid blocks on both sides of Congress’s partisan divide, the politics of biofuels could hardly look sunnier. The economics of the American drive to increase ethanol in the energy supply are more discouraging.

American corn-based ethanol is expensive. And while it can help cut oil imports and provide modest reductions in greenhouse gases compared to conventional gasoline, corn ethanol also carries considerable risks. Even now as Europe and China join the United States in ramping up production, world food prices are rising, threatening misery for the poorest countries.

The European Union has announced that it wants to replace 10 percent of its transport fuel with biofuels by 2020. China is aiming for a 15 percent share. The United States is already on track to exceed Congress’s 2005 goal of doubling the amount of ethanol used in motor fuels to 7.5 billion gallons by 2012. In his State of the Union speech in January, President Bush set a new goal of 35 billion gallons of biofuels by 2017. In June, the Senate raised it to 36 billion gallons by 2022. Of that, Congress said that 15 billion gallons should come from corn and 21 billion from advanced biofuels that are nowhere near commercial production.

The distortions in agricultural production are startling. Corn prices are up about 50 percent from last year, while soybean prices are projected to rise up to 30 percent in the coming year, as farmers have replaced soy with corn in their fields. The increasing cost of animal feed is raising the prices of dairy and poultry products.

The news from the rest of the world is little better. Ethanol production in the United States and other countries, combined with bad weather and rising demand for animal feed in China, has helped push global grain prices to their highest levels in at least a decade. Earlier this year, rising prices of corn imports from the United States triggered mass protests in Mexico. The chief of the United Nations Food and Agriculture Organization has warned that rising food prices around the world have threatened social unrest in developing countries.

A recent report by the Organization for Economic Cooperation and Development, an economic forum of rich nations, called on the United States and other industrialized nations to eliminate subsidies for the production of ethanol which, the report said, is driving up food costs, threatening natural habitats and imposing other environmental costs. “The overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel,” it said.

The economics of corn ethanol have never made much sense. Rather than importing cheap Brazilian ethanol made from sugar cane, the United States slaps a tariff of 54 cents a gallon on ethanol from Brazil. Then the government provides a tax break of 51 cents a gallon to American ethanol producers — on top of the generous subsidies that corn growers already receive under the farm program.

Corn-based ethanol also requires a lot of land. An O.E.C.D. report two years ago suggested that replacing 10 percent of America’s motor fuel with biofuels would require about a third of the total cropland devoted to cereals, oilseeds and sugar crops.

Meanwhile, the environmental benefits are modest. A study published last year by scientists at the University of California, Berkeley, estimated that after accounting for the energy used to grow the corn and turn it into ethanol, corn ethanol lowers emissions of greenhouse gases by only 13 percent.

The United States will not meet the dual challenges of reducing global warming and its dependence on foreign suppliers of energy until it manages to reduce energy consumption. That should be its main goal.

There is nothing wrong with developing alternative fuels, and there is high hope among environmentalists and even venture capitalists that more advanced biofuels — like cellulosic ethanol — can eventually play a constructive role in reducing oil dependency and greenhouse gases. What’s wrong is letting politics — the kind that leads to unnecessary subsidies, the invasion of natural landscapes best left alone and soaring food prices that hurt the poor — rather than sound science and sound economics drive America’s energy policy.

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

Source: AlterNet

How Canada Went from 21st to 2nd in World's Oil Reserves

By Dan Woynillowicz
World Watch. Posted September 17, 2007.

The United States has its hopes pinned on Canada's "tar sands" for North American security in the oil market. But their "black gold" is an environmental nightmare.

It's well-known that the United States consumes more oil per capita than any other country in the world, absorbing two-thirds of global oil production. This heavy dependence has often, and aptly, been described as an addiction; even U.S. President George W. Bush trotted out the metaphor in his 2006 State of the Union address ("America is addicted to oil").

Most of us regard addictions (to anything) as inherently unhealthy and admission of the problem as the first step toward getting clean. In this case, however, U.S. policy has simply been to seek increased oil imports from more reliable sources closer to home, in effect, to replace distant and unstable dealers with one from the neighborhood -- specifically, Canada, already the kingpin dealer of oil to the United States. In 2005 Canada exported almost 1.5 million barrels per day to the United States, about 7 percent of U.S. daily consumption. Canada exports 66 percent of its domestic crude oil production, and since 1995 the United States has received 99 percent of these exports. At first glance, it would seem that Canada wouldn't be able to boost oil production to fill the gap; production of conventional light and heavy oil in Canada was predicted to peak in 2006 and then rapidly decline. But that's where Canada's "unconventional" tar sands come in.

Production

The vast bulk of Canada's tar sands is found in the province of Alberta, the country's most prolific producer of fossil fuels. The tar sands deposits underlie more than 140,000 square kilometers of relatively pristine boreal forest, an area larger than the state of Florida. It's estimated that the tar sands hold approximately 1.7 trillion barrels of crude bitumen (the technical term for the fossil fuel extracted from the tar sands). But most of this bitumen will never be recovered and only a fraction, 174 billion barrels, is estimated to be recoverable with today's technology and under current and anticipated economic conditions.

When the U.S. Department of Energy formally acknowledged these reserves in 2003, it vaulted Canada's oil reserves from 21st to 2nd in the world, behind only Saudi Arabia. It's little wonder then that the U.S. Energy Policy Development Group has described the tar sands as "a pillar of sustained North American energy and economic security." Canada's so-called "black gold" has come to be regarded as an abundant, secure, and affordable source of crude oil. But development of this unconventional fossil fuel comes with unconventional risks and consequences. Everything about the tar sands is big, most significantly its global warming and environmental implications -- leading some to now describe the tar sands as "Canada's dirty secret."

Producing oil from the tar sands is scraping the bottom of the oil barrel. Tar sands consist of a mixture of 85 percent sand, clay, and silt; 5 percent water; and 10 percent crude bitumen, the tarlike substance that can be converted to oil. Bitumen doesn't flow like crude oil, and getting it out of the tar sands is a messy job. The current technology, which has evolved relatively little since it was first developed in the early 20th century, is a hot water-based separation process that requires huge quantities of water and energy (see diagram). Imagine mixing a bucket of roofing tar into a child's sandbox. Then boil some water, pour it into the sandbox, and try to wash the tar out of the sand.

Most tar sands production takes place in vast open-pit mines, some as large as 150 square kilometers and as deep as 90 meters. Before strip-mining can begin, the boreal forest must be clear-cut, rivers and streams diverted, and wetlands drained. The overburden (the soil, rocks, and clay overlying the tar sands deposit) must be stripped away and stockpiled to reach the bitumen. Four tons of material are moved to produce every barrel of bitumen.

At current production rates, with just three mines operating, enough material is moved every two days to fill a 60,000-seat stadium. But only a small fraction of the bitumen deposits is close enough to the surface to be strip-mined. Over 80 percent of the established tar sands reserves are deeper and must be extracted in situ (in place) by injecting high-pressure steam into the ground to soften the bitumen so it can be pumped to the surface.

Once separated from the sand, the bitumen is still a low-grade, heavy fossil fuel that must undergo an energy-intensive process to upgrade it into a synthetic crude oil more like conventional crude, either by adding hydrogen or removing carbon. Upgrading the bitumen usually occurs before it is shipped to refineries, but sometimes raw bitumen is diluted (e.g., with naphtha) and pipelined to a refinery where it is both upgraded and refined. In the United States about three-quarters of the oil is refined into transportation fuels.

But even then not just any refinery will do. A certain amount of reconfiguring must occur at refineries more accustomed to handling conventional crude oil. Some American refineries, primarily in the Midwest and the Rocky Mountain region, already accept some synthetic crude oil from the tar sands. But with growing reliance on this source of oil, numerous American refineries are converting or expanding in order to handle tar sands-derived synthetic crude oil or raw bitumen.

Impacts

The environmental consequences of oil production from tar sands are major, beginning with its effect on climate change. North America's transition to oil from the tar sands not only perpetuates, but actually worsens, emissions of greenhouse gas pollution from oil consumption.

While the end products from conventional oil and tar sands are the same (mostly transportation fuels), producing a barrel of synthetic crude oil from the tar sands releases up to three times more greenhouse gas pollution than conventional oil. This is a result of the huge amount of energy (primarily from burning natural gas) required to generate the heat needed to extract bitumen from the tar sands and upgrade it into synthetic crude. The energy equivalent of one barrel of oil is required to produce just three barrels of oil from the tar sands.

In 2002 the Canadian government ratified the Kyoto Protocol on global warming, legally committing to a target of reducing the country's greenhouse gas pollution by 6 percent below 1990 levels by 2012. But the rapid growth of tar sands development and oil industry lobbying have undermined efforts to reduce greenhouse gas pollution for over a decade.

Since 1990, Canada's total emissions have risen 25.3 percent, a pace far exceeding the 16.3 percent increase in the United States, the second-fastest-rising nation, according to United Nations data. Regulations introduced in early 2007 are so fraught with loopholes and gaps that greenhouse gas pollution from tar sands is predicted to triple by 2020. Canada's greenhouse gas emissions in 2020 are projected to be 2 percent above 1990 levels. The environmental consequences of tar sands development hardly stop with climate change. Nowhere in the world is there a form of oil extraction and processing with more intense impacts on forests and wildlife, freshwater resources and air quality.

Forests. The tar sands are found beneath boreal forest, a complex ecosystem that comprises a unique mosaic of forest, wetlands and lakes. Canada's boreal forest is globally significant, representing one-quarter of the world's remaining intact forests. Beyond the ecosystem services it provides (cleansing water, producing oxygen and storing carbon), it is home to a wide variety of wildlife, including bears, wolves, lynx and some of the largest populations of woodland caribou left in the world. Its wetlands and lakes provide critical habitat for 30 percent of North America's songbirds and 40 percent of its waterfowl.

If currently planned tar sands development projects unfold as expected, approximately 3,000 square kilometers of boreal forest could be cleared, drained and strip-mined to access tar sands deposits close to the surface, while the remaining 137,000 square kilometers could be fragmented into a spider's web of seismic lines, roads, pipelines and well pads from in situ drilling projects. Studies suggest that this scale of industrial development could push the boreal ecosystem over its ecological tipping point, leading to irreversible ecological damage and loss of biodiversity.

Satellite images readily illustrate the magnitude of boreal forest impacts from tar sands mining operations. The United Nations Environment Program has identified Alberta's tar sands mines as one of 100 key global "hotspots" of environmental degradation. According to Environment Canada (the Canadian equivalent to the U.S. Environmental Protection Agency), development of the tar sands presents "staggering challenges for forest conservation and reclamation."

Very little of the area directly affected by mining operations has been reclaimed, and after 40 years of mining, not a single operation has received a reclamation certificate from the government of Alberta. Suncor Energy's operation, the longest-operating tar sands mine, says it has reclaimed 858 hectares of land since starting operations in 1967, less than 9 percent of the land its operations have disturbed to date. Syncrude Canada, the largest daily producer of tar sands, says its operations have disturbed 18,653 hectares since 1978, with just 4,055 hectares of land reclaimed. None of this reclaimed land has been certified as such. At best, reclamation of the tar sands region will be a large-scale experiment that is unlikely to restore a self-sustaining boreal forest ecosystem within the next century.

Waters. The Athabasca River winds nearly 1,500 kilometers from its source at the Athabasca Glacier in Jasper National Park to Lake Athabasca in Wood Buffalo National Park. It is Alberta's longest river and one of North America's longest undammed rivers. It enters Lake Athabasca at the Peace-Athabasca Delta, the largest boreal delta in the world, a World Heritage Site, and one of the most important waterfowl nesting and staging areas in North America.

It also passes directly through the boreal forest being cleared and strip-mined, and serves as the primary source of water used to separate the bitumen from the mined tar sands. Water withdrawals for tar sands surface mining operations pose threats to both the sustainability of fish populations in the Athabasca River and to the sustainability of the Peace-Athabasca Delta, jeopardizing the subsistence and commercial fisheries of local aboriginals.

Tar sands mining operations withdraw 2-4.5 barrels of fresh water from the river for every barrel of oil they produce. Current operations are permitted to withdraw more than 349 million cubic meters of water per year, a volume equivalent to the amount required by a city of 2 million people. But unlike city effluent waters, which are treated and released back into the river, tar sands mining effluent becomes so contaminated that it must be impounded.

Historically it was believed that the Athabasca River had sufficient water flows to meet the needs of tar sands operations. But it is becoming clearer that this might not be the case, particularly during the winter months, when river flows are naturally lower and growing demand for water withdrawals could lead to long-term ecological impacts. The sustainability of fish populations in the Athabasca River is threatened by continuous tar sands water withdrawals during the winter months in years when low precipitation rates in the Athabasca River basin lead to low flow conditions. Nonetheless, the government has failed to implement regulations that would require tar sands withdrawals to stop when the health of the river is at risk. In fact, the government explicitly allows the tar sands industry to continue withdrawing water no matter how low the river flows become.

For certain in situ drilling operations, significant amounts of water are required to create steam to be injected underground. Because the steam condenses into water and is pumped up with the bitumen, the water can be recycled. However, because some water remains underground, a continuous source of additional water (about half a barrel of water per barrel of bitumen) is required.

These operations are located much farther from the river and, as a result, rely mainly upon groundwater. Where shallower freshwater aquifers are used, the continuous pumping of water can lower the water table in the region. Because these groundwater aquifers are connected to lakes, rivers and wetlands, reducing their levels can cause lakes to shrink and wetlands to dry out. As a result, some operators have switched to deeper sources of salty groundwater. But because they require fresh water, the salty water must be treated, which produces large amounts of waste sludge that must be disposed of.

Both tar sands mining and in situ operations produce large volumes of waste as a result of their water use. For in situ operations, the primary waste stream, a result of treating salt water and the water that is pumped up with the bitumen, is disposed of in landfills or injected underground. Tar sands mining operations present a much more significant risk, because they produce large volumes of waste in the form of mine tailings (six barrels of tailings per barrel of bitumen extracted). These tailings, a slurry of water, sand, fine clay and residual bitumen, are stored in vast wastewater reservoirs.

The industry misleadingly refers to them as "tailings ponds," but collectively these pools of waste cover more than 50 square kilometers and are so extensive that they can be seen from space. One tailings pond at Syncrude's mining operation is held in check by the third-largest dam in the world. These tailings dumps pose an environmental threat resulting from the migration of pollutants through the groundwater system and the risk of leaks to the surrounding soil and surface water.

The high concentrations of pollutants such as naphthenic acids, which are found at concentrations 100 times greater than in the natural environment, are acutely toxic to aquatic life, yet the government has no water-quality regulations for these substances. Migratory birds fare slightly better: To prevent them from landing, propane cannon go off at random intervals and scarecrows stand guard on floating barrels. How this tailings waste, and its grave risks, might be dealt with in the long term remains unknown.

Air. Tar sands air pollution, both provincial and transboundary, is rapidly increasing. Since 2003 Alberta has been the industrial air pollution capital of Canada. Criteria Air Contaminants (CACs) are the most common air pollutants released by heavy industry burning fossil fuels. CACs are defined as "air pollutants that affect our health and contribute to air pollution problems" and include such things as nitrogen oxides (NOX), sulfur dioxide (SO2), volatile organic compounds and particulate matter, all of which are emitted in large volumes by tar sands operations.

Modeling of the impacts of approved tar sands development, which includes three operating mines and three operations at various stages of planning and construction, shows that maximum predicted ambient air concentrations of NOX and SO2 would exceed provincial, national and international guidelines. Emissions of volatile organic compounds such as benzene are also on the rise because of both emissions from burning fossil fuels (e.g., natural gas, diesel, coke) and the growing number of tailings ponds. The costs of such air pollution have not been considered.

The coming tar sands rush

Major global powers are positioning themselves to ensure access to oil from tar sands. To date, four of the five largest publicly traded oil companies in the world (Royal Dutch/Shell, ExxonMobil, ChevronTexaco, and TotalFina) have invested or committed themselves to invest billions of dollars in tar sands development. National oil companies have also staked their claim, ranging from Norway's Statoil to China's Sinopec.

Tar sands speculation, investment and development has grown dramatically. The oil industry's production target of 1 million barrels per day was achieved in 2004, 16 years ahead of the ambitious schedule for growth it laid out in 1995. That year the industry invested almost US$9 billion in Alberta's tar sands. More than US$100 billion of investment has been announced for development between 2006 and 2015.

The tar sands industry is now focused on quintupling production as quickly as possible. It is projected that tar sands production will reach 3-4 million barrels per day by 2015 and could grow to 5 million barrels per day by 2030, if not sooner. It is the prospect of this growth that has led Canadian Prime Minister Stephen Harper to label Canada an "emerging energy superpower."

The magnitude of the environmental risks and liabilities arising from Canada's tar sands rush is unprecedented in the history of North American energy production. Growing awareness about the global warming and environmental consequences of relying upon growth in tar sands production throws into sharp relief the perils of our addiction to oil in the 21st century. All North Americans, including future generations, have a stake in the outcome.

To address the impacts of tar sands production, a novel suite of government policies and innovative technologies must be deployed that drastically reduce the environmental impacts by achieving "carbon neutral" (no net greenhouse gas pollution) production, ensuring that development doesn't proceed any faster than reclamation of the boreal forest and reducing dependence on scarce freshwater resources.

The most immediate opportunity to begin our rehabilitation lies in the more efficient use of transportation fuels. To do so requires tackling another sacred cow: the flagging North American auto industry, which is in trouble partly because it is producing the wrong vehicles for the times. The abysmal fuel-efficiency of North America's SUVs, trucks and cars has actually declined since 1986.

The governments of the United States and Canada must collectively commit to implementing regulations that will make North America a global leader in fuel efficiency. By deploying more efficient technologies today, we can begin to ease the demand for transportation fuels and slow the headlong rush into extracting oil from the tar sands. This will afford policymakers and the private sector the time needed to drive investment toward low-carbon and no-carbon fuels, and to evolve our transportation systems and urban design into a state that is compatible with a carbon-free future. North America stands at a critical juncture in its transportation fuel future.

As conventional oil sources disappear, we face a stark choice: We can develop new, even dirtier sources of transportation fuels derived from fossil fuels like the tar sands, or we can set a course for a more sustainable energy future by improving the efficiency of our oil consumption while aggressively transitioning to clean and renewable transportation fuels and sustainable transportation systems.

The environmental and global warming consequences of even 1 million barrels per day of tar sands production must serve as a wake-up call, and we must acknowledge that increased reliance upon this unconventional, high-impact fossil fuel is not a viable path forward.

Dan Woynillowicz is a senior policy analyst with the Pembina Institute, based in Calgary, Alberta.

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

Source: Middle East Times

September 13, 2007

TEHRAN -- Iran's foreign currency reserves held in banks abroad have risen to $65 billion as of the end of June 2007, on the back of high crude oil prices, media reported Thursday.

The figure represents a jump of 37 percent on the same period, a year earlier, Iran's central bank said in a statement quoted by the Hamshahri newspaper.

Iran, the world's fourth-largest oil exporter, and the second in the Organization of Petroleum Exporting Countries (OPEC), has been helped by soaring crude prices that are helping the country weather domestic economic problems.

Amid US threats of further sanctions action over its nuclear program, Iran has announced it is switching its foreign reserves out of US dollars into euros and other currencies, to prevent damage to its economy from the US pressure.

However, the central bank is still accounting the total foreign currency reserves in US dollars.

Posted by Hugo Albert Orwell at 01:34 PM | Permalink | TrackBacks (0)

Source: AP Writer via Yahoo

Wednesday September 12, 3:09 pm ET
By John Wilen, AP Business Writer

Oil Prices Reach $80 a Barrel for First Time After Government Reports Decline in Inventories

NEW YORK (AP) -- Oil futures prices rose sharply Wednesday, briefly climbing above a record $80 a barrel after the government reported a surprisingly large drop in crude inventories and declines in gasoline supplies and refinery activity.

The report from the Energy Department's Energy Information Administration suggested oil supplies are tightening as demand remains strong. That's why oil prices are rising despite OPEC's decision on Tuesday to boost crude production by 500,000 barrels per day this fall, analysts said.

Despite Wednesday's jump, oil is still well below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.

Oil's recent advance has been largely due to speculative buying by big investment funds, who are responding to a price structure in which oil contracts for delivery in future months are cheaper than the current front-month contract, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

That kind of structure signifies tight demand in the immediate future, and is a buying incentive. Investors who buy now will end up with more oil contracts later, when October futures roll over to cheaper contracts for delivery in later months, Ritterbusch said.

"This is a market that wants to run up on the slightest bit of information," Ritterbusch said.

Prices were also being supported by worries a tropical depression that formed in the western Atlantic on Wednesday will become a hurricane and hit critical Gulf of Mexico oil and gas infrastructure.

"The National Hurricane Center says there's a good chance that could get into the Gulf," Ritterbusch said.

Light, sweet crude for October delivery rose $1.68 to settle at a record $79.91 on the New York Mercantile Exchange after rising as high as $80.18 earlier. October gasoline rose 3.49 cents to settle at $2.016 a gallon.

Nymex heating oil futures rose 3.64 cents to settle at $2.2191 a gallon, while natural gas futures jumped 50.4 cents to settle at $6.438 per 1,000 cubic feet. Natural gas prices typically react strongly to news of tropical weather due to the concentration of gas infrastructure in the Gulf.

At the pump, meanwhile, the average national price of a gallon of gas inched higher by 0.1 cent overnight to $2.815, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May.

In its weekly report on petroleum inventories, the EIA said crude oil supplies fell by 7.1 million barrels in the week ended Sept. 7, more than twice the 2.7 million-barrel decline analysts surveyed by Dow Jones Newswires, on average, had expected.

Gasoline inventories fell by 700,000 barrels, slightly more than the expected 500,000 barrel decline.

Refinery utilization fell by 1.6 percentage points to 90.5 percent of capacity. Analysts had expected a 0.1 percentage point decline. And inventories of distillates, which include heating oil and diesel fuel, grew by 1.8 million barrels, more than the 1.4 million-barrel increase analysts had expected.

Crude imports fell by 674,000 barrels a day on average last week to 9.56 million barrels, while gasoline imports fell an average of 298,000 barrels a day to 1.02 million barrels a day.

Demand for gasoline averaged about 9.6 million barrels a day over the last four weeks, about 0.9 percent above last year, EIA said.

Oil's run-up has perplexed some analysts, who expect demand for oil and petroleum products to cool this fall.

"We're at records, but it doesn't appear to be sustainable," said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.

Indeed, the Paris-based International Energy Agency on Wednesday slightly lowered oil demand forecasts for this year and next.

Posted by Hugo Albert Orwell at 03:22 PM | Permalink | TrackBacks (0)

Source: CNN.com

AUSTIN, Texas (AP) -- Millions of inventions pass quietly through the U.S. patent office each year. Patent No. 7,033,406 did, too, until energy insiders spotted six words in the filing that sounded like a death knell for the internal combustion engine.

An Austin-based startup called EEStor promised "technologies for replacement of electrochemical batteries," meaning a motorist could plug in a car for five minutes and drive 500 miles roundtrip between Dallas and Houston without gasoline.

By contrast, some plug-in hybrids on the horizon would require motorists to charge their cars in a wall outlet overnight and promise only 50 miles of gasoline-free commute. And the popular hybrids on the road today still depend heavily on fossil fuels.

"It's a paradigm shift," said Ian Clifford, chief executive of Toronto-based ZENN Motor Co., which has licensed EEStor's invention. "The Achilles' heel to the electric car industry has been energy storage. By all rights, this would make internal combustion engines unnecessary."

Clifford's company bought rights to EEStor's technology in August 2005 and expects EEStor to start shipping the battery replacement later this year for use in ZENN Motor's short-range, low-speed vehicles.

The technology also could help invigorate the renewable-energy sector by providing efficient, lightning-fast storage for solar power, or, on a small scale, a flash-charge for cell phones and laptops.

Skeptics, though, fear the claims stretch the bounds of existing technology to the point of alchemy.

"We've been trying to make this type of thing for 20 years and no one has been able to do it," said Robert Hebner, director of the University of Texas Center for Electromechanics. "Depending on who you believe, they're at or beyond the limit of what is possible."

EEStor's secret ingredient is a material sandwiched between thousands of wafer-thin metal sheets, like a series of foil-and-paper gum wrappers stacked on top of each other. Charged particles stick to the metal sheets and move quickly across EEStor's proprietary material.

The result is an ultracapacitor, a battery-like device that stores and releases energy quickly.

Batteries rely on chemical reactions to store energy but can take hours to charge and release energy. The simplest capacitors found in computers and radios hold less energy but can charge or discharge instantly. Ultracapacitors take the best of both, stacking capacitors to increase capacity while maintaining the speed of simple capacitors.

Hebner said vehicles require bursts of energy to accelerate, a task better suited for capacitors than batteries.

"The idea of getting rid of the batteries and putting in capacitors is to get more power back and get it back faster," Hebner said.

But he said nothing close to EEStor's claim exists today.

For years, EEStor has tried to fly beneath the radar in the competitive industry for alternative energy, content with a phone-book listing and a handful of cryptic press releases.

Yet the speculation and skepticism have continued, fueled by the company's original assertion of making batteries obsolete -- a claim that still resonates loudly for a company that rarely speaks, including declining an interview with The Associated Press.

The deal with ZENN Motor and a $3 million investment by the venture capital group Kleiner Perkins Caufield & Byers, which made big-payoff early bets on companies like Google Inc. and Amazon.com Inc., hint that EEStor may be on the edge of a breakthrough technology, a "game changer" as Clifford put it.

ZENN Motor's public reports show that it so far has invested $3.8 million in and has promised another $1.2 million if the ultracapacitor company meets a third-party testing standard and then delivers a product.

Clifford said his company consulted experts and did a "tremendous amount of due diligence" on EEStor's innovation.

EEStor's founders have a track record. Richard D. Weir and Carl Nelson worked on disk-storage technology at IBM Corp. in the 1990s before forming EEStor in 2001. The two have acquired dozens of patents over two decades.

Neil Dikeman of Jane Capital Partners, an investor in clean technologies, said the nearly $7 million investment in EEStor pales compared with other energy storage endeavors, where investment has averaged $50 million to $100 million.

Yet curiosity is unusually high, Dikeman said, thanks to the investment by a prominent venture capital group and EEStor's secretive nature.

"The EEStor claims are around a process that would be quite revolutionary if they can make it work," Dikeman said.

Previous attempts to improve ultracapacitors have focused on improving the metal sheets by increasing the surface area where charges can attach.

EEStor is instead creating better nonconductive material for use between the metal sheets, using a chemical compound called barium titanate. The question is whether the company can mass-produce it.

ZENN Motor pays EEStor for passing milestones in the production process, and chemical researchers say the strength and functionality of this material is the only thing standing between EEStor and the holy grail of energy-storage technology.

Joseph Perry and the other researchers he oversees at Georgia Tech have used the same material to double the amount of energy a capacitor can hold. Perry says EEstor seems to be claiming an improvement of more than 400-fold, yet increasing a capacitor's retention ability often results in decreased strength of the materials.

"They're not saying a lot about how they're making these things," Perry said. "With these materials (described in the patent), that is a challenging process to carry out in a defect-free fashion."

Perry is not alone in his doubts. An ultracapacitor industry leader, Maxwell Technologies Inc., has kept a wary eye on EEStor's claims and offers a laundry list of things that could go wrong.

Among other things, the ultracapacitors described in EEStor's patent operate at extremely high voltage, 10 times greater than those Maxwell manufactures, and won't work with regular wall outlets, said Maxwell spokesman Mike Sund. He said capacitors could crack while bouncing down the road, or slowly discharge after a dayslong stint in the airport parking lot, leaving the driver stranded.

Until EEStor produces a final product, Perry said he joins energy professionals and enthusiasts alike in waiting to see if the company can own up to its six-word promise and banish the battery to recycling bins around the world.

"I am skeptical but I'd be very happy to be proved wrong," Perry said.

Posted by Hugo Albert Orwell at 11:14 PM | Permalink | TrackBacks (0)

Source: The Wall Street Journal Online

By JUDY SHELTON
August 30, 2007; Page A10

American fighter jets scrambled to intercept Russian bombers earlier this month near the island of Guam. It was the first time since the end of the Cold War that the Kremlin sought to provoke a U.S. response. It likely will not be the last. Fueled by revenues from energy exports, Russia appears bent on ratcheting up tensions.

But don't expect the next foray to take place over international waters. Vladimir Putin laid bare his ambitions at the St. Petersburg International Economic Forum in June by calling for a "new international financial architecture" to provide a base for economic development. Russia's next move is to challenge U.S. supremacy in world financial markets.

The notion of nudging America off its central perch in global economic affairs hardly seems plausible. But Russia's leader strikes a chord with other emerging-market economies -- Brazil, China, India -- when he describes current monetary and financial arrangements as "archaic, undemocratic and unwieldy."

Given the recent turmoil in world financial markets, Mr. Putin can expect heightened interest in his pitch for new regional alliances "based on trust and mutually beneficial integration" versus continued dependence on global institutions like the International Monetary Fund. Both Europe and Asia blame U.S. credit woes for their own unsettled markets. And newly independent nations on the periphery of established trade and security blocs have their own reasons to align with powerful patrons.

Mr. Putin even suggests that central banks should begin to hold reserves in a wider selection of currencies than dollars and euros in recognition of the "existing balance of power." It's hard to miss the implication: the ruble as a global reserve currency.

Is the man serious? The only reason the European Central Bank, say, or China's central bank, might hold reserves in rubles would be to pay for purchases from Russia. Today it is possible to buy Russian oil and gas using dollars or euros. The leading market exchanges for conducting international energy transactions are located in New York and London. But that is why officials at the White House, the Federal Reserve and the U.S. Treasury should be scrambling right now.

Mr. Putin is more than serious. He is determined to establish a world-class oil exchange on Russian territory and shift energy business away from existing global financial centers. A new facility is being readied in St. Petersburg's historic Bourse -- an imposing, white-colonnaded Greek Revival building that dominates the majestic sweep of the Strelka, or Spit, of Vasilievsky Island in the Neva delta and which is visible from the Winter Palace -- that will open to market traders within months and where transactions will be denominated in rubles.

It's a daring gambit and it constitutes no less than a demand for new international monetary arrangements on the scale of the post-World War II Bretton Woods agreement. "The global economy has experienced a transition," Mr. Putin notes pointedly. "Fifty years ago, 60% of world gross domestic product came from the Group of Seven industrial nations. Today 60% of world GDP comes from outside the G7."

Mr. Putin's plan to confront the privileged global role of U.S. currency resonates with Russians eager to recapture nationalist pride. Lampooning the sickly American dollar is popular with members of the Kremlin-financed youth group Nashi (meaning "ours"). And it potentially accommodates the burgeoning economic aspirations and swelling egos of Russia's partners in the Shanghai Cooperation Organization: Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and China.

China, like Russia, bristles at its second-tier status within the global financial architecture. Harangued by the U.S. over exchange-rate policies, China has recently been flexing its monetary muscle by hinting that it might dump a portion of its considerable dollar reserves. The prospect of such a shock to the U.S. economy in the midst of a housing slump threatens to bring the whole edifice crashing down. Throw in statements of support from oil-producers Venezuela and Iran, and you have the makings of a devastating dollar rout.

If Russia insists that its energy clients pay in rubles, we cannot expect our allies to strenuously resist. Europe purchases nearly 30% of its energy from Russia. Rising energy demand in Asia will likewise boost demand for rubles as Russia targets China, India and Japan. Last month, Japan quietly acquiesced to Iran's request that it switch from dollars to yen in payment for Iranian oil.

Can U.S. leaders and financial authorities meet the challenge from the Kremlin? Is America prepared to offer its own proposals for establishing more stable currency and financial conditions for global trade? Or are we just interested in protecting our turf?

The next Bretton Woods should be launched as an earnest initiative from the nation that gave birth to democratic capitalism. Not as an act of aggression from a pumped-up Russian pretender.

Ms. Shelton is an economist and author of "Money Meltdown" (Free Press, 1994).

Posted by Hugo Albert Orwell at 07:48 AM | Permalink | TrackBacks (0)

Source: The Tribune Democrat

Published: August 24, 2007 01:31 pm
By ZACHARY HUBBARD

All eyes in Washington are focused on the Middle East as the war there continues, the troop surge in Iraq nears its climax and the ever-elusive Osama bin Laden, assuming he’s still alive, continues to evade capture. Iran is rattling its sword and the hawks in Washington are demanding satisfaction. The 2008 election countdown has started and politicians on both sides of the aisle have begun the traditional blame game of finger pointing, name calling and jockeying for political advantage. The American political process is once again paralyzed by the politicians’ lust to retain power. Forget the business of running the nation; there’s an election to be won! And so it will go until November of next year.

Meanwhile, in a country far, far away, the political, military and economic downfall of the United States is being planned by an intelligent, patient, industrious enemy who hopes never to fire a shot in anger, yet fully expects to win. Its goal: To replace the United States as the world’s reining superpower. The war, by all indications, may have already begun.

China’s grasp of history

China counts its history in millennia. It has seen enemies come and go, yet one thing remains constant – China continues. Why should the Chinese expect America to be different from their enemies of yore? Chinese politicians and military officers study history. They know the writings of Sun Tzu, a legendary warrior-philosopher whose 6th century BC military treatise “The Art of War” is mandatory reading for military officers worldwide.

Sun Tzu has dozens of notable quotes, but the greatest may be, “For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.”

The Chinese may have already begun a campaign to subdue the United States following Sun Tzu’s model. As Sun Tzu said, you can subdue an enemy without fighting. In fact, it is best to win without having to go to war. Some would argue that this is what diplomacy is about. Certainly, diplomacy is part of the strategy, but there is far more to the Chinese game plan.

Reflecting Sun Tzu’s philosophy, many recent Chinese writings have focused on asymmetric warfare as a means of defeating a militarily superior enemy. Asymmetric warfare uses political, economic, informational and military power. Military power is the least emphasized.

A different kind of war

Qiao Liang and Wang Xiangsui, two colonels in China’s Peoples’ Liberation Army, published a treatise in 1999 titled “Unrestricted Warfare.” The treatise was not an official publication of the Chinese government, but it was published by the official PLA publishing house, indicating at least some degree of acceptance. “Unrestricted Warfare” contains chilling instructions on how to defeat an enemy using asymmetric attacks in such a manner that the enemy may not even realize they are under attack until it is too late to respond effectively. The techniques they describe include cyber warfare, attacks against financial institutions and critical infrastructure, terrorism, manipulating the media, biological warfare, chemical warfare and a variety of other ruthless methods.

Developments since “Unrestricted Warfare” was published seem to suggest that China may be waging such warfare today. China now faces many of the same problems that Germany faced in the buildup to World War II. Like Nazi Germany, China has a booming economy, a growing population and a hunger for energy and other resources to fuel its economic growth.

The Germans needed to expand their “lebensraum” (living space) to attain the natural resources needed to fuel their economy. China appears to be implementing a sort of “lebensraum” program of its own. As the United States was engaged in returning the Panama Canal Zone to Panama, China was busy establishing a beachhead there. Through land deals with Panama, the Chinese have gained control of both ends of this critical waterway, today controlling port facilities in Balboa, the canal's only Pacific port, and a major Atlantic port in Cristobol. The agreements allow China to run them for the next half-century.

China’s hunger for natural resources

China also is stretching out to grasp resources needed to fuel its economy. In January 2005, Venezuelan President Hugo Chavez (no friend of the U.S.) and Chinese Vice President Zeng Qinghong signed 19 agreements covering oil, agriculture and technology. These included five agreements between Venezuela and the Chinese National Petroleum Corporation. In 2006 China signed an oil exploration agreement with Nigeria, one of the largest oil exporters to America. Today China is conducting a diplomatic “love-in” across Africa.

The BBC reported in January 2006 that there were an estimated 700 Chinese-funded ventures in Africa. Many are in the fields of energy and natural resources, including oil and gas development, copper, cobalt, coal and gold mining. Unlike many Western powers whose diplomatic policies prevent or restrict dealing with ruthless regimes, China has no qualms about making deals with repressive governments having human rights issues. The Chinese are busy cutting deals to gobble up resources in such countries in Africa. For example, the U.S. Public Broadcasting System reported in April 2006 that China imports 10 percent of its oil from Sudan. Not surprisingly, China has worked diligently in the U.N. Security Council to water down potential punitive measures against Sudan, thereby helping to prolong the Darfur crisis.

Cuban oil is in China’s crosshairs as well. While environmentalists continue to block offshore drilling along Florida’s coastline, China is moving to capitalize on Cuba’s oil potential. In February 2005 the Havana Journal reported that Cuba’s Ministry of Basic Industry announced that the Cuba Oil Company (Cubapetroleo) signed a production contract with the China Petroleum & Chemical Corp (SINOPEC) to explore areas around Cuba believed to contain petroleum deposits. The agreement means that while Americans continue to squabble about the wisdom of offshore drilling in Florida, the Cubans and Chinese are beginning exploration some 50 miles from the Florida coastline.

China recently has begun to extend its oil search into the Caspian Sea region of Asia. The German army pushed towards the Caspian oil fields in the summer of 1942, nearly reaching the Soviet oil center of Grozny before the attack faltered. You may recall Grozny is the embattled capital of the Russian region of Chechnya, where Russia has fought against a violent Islamic separatist movement for nearly 10 years. Grozny today is an important transit route and confluence for petroleum pipelines coming out of the Caspian oil fields headed towards Europe. Although in this instance the immediate impact is on Europe, China’s thirst for oil is affecting global oil markets and forcing prices higher.

‘Loot a burning house’

Can China succeed in bringing America to its knees without firing a shot? It is not inconceivable given today’s global situation.

Sun Tzu said, “Loot a burning house.” By this he meant kick your enemies when they are down. How is China doing this? By arming America’s global adversaries and attacking the U.S. economy.

North Korea, a thorn in the sides of President Bush and former President Clinton, is overflowing with Chinese arms. North Korea’s nuclear program and missile tests in the Sea of Japan have caused President Bush great consternation. Fortunately, recent diplomatic efforts by the Bush Administration appear to have put an end to Korea’s quest for nuclear weapons, but at great cost in aid paid to the North Korean regime.

Meanwhile, China is arming the Middle East and other potential hot spots. In February 2004 the Washington Post reported that Chinese nuclear weapons design plans provided to Pakistan made it into the hands of Libya. CNN later reported that China was concerned about these allegations and was conducting an investigation. The Pentagon reported in May 2007 that Chinese-made armor-piercing missiles fell into the hands of anti-American militants in Iraq. It is assumed the missiles came through Iran.

The Iranians, who have nuclear ambitions of their own, depend upon Chinese and North Korean technology to keep their nuclear missile delivery program moving forward. The Iranians also have purchased sophisticated Chinese cruise anti-ship missiles that can be employed to interdict the free flow of oil from the Persian Gulf. The conservative think tank Heritage Foundation suggested in September 2006 that China is providing Iran diplomatic cover for its nuclear ambitions in exchange for lucrative oil and gas deals.

In January 2002, the Congressional Research Service published a report titled “China: Possible Missile Technology Transfer from U.S. Satellite Export Policy.” The report chronicles how in 1996, after a series of NASA satellite launch failures, the Clinton administration moved export control of commercial satellite technology from the State Department to the Department of Commerce. China subsequently launched numerous American satellites into orbit. A New York Times exposé in 1998 prompted a criminal investigation into whether Loral Space and Communications Ltd. and Hughes Electronics Corporation, both parties to the Chinese satellite launches, had provided technology information to the Chinese which enhanced their ballistic missile technology and ergo their nuclear weapons delivery capability. A subsequent congressional investigation produced the classified Cox Report in December 1998, indicating that indeed China’s military capabilities had benefited from U.S. exports for the past 20 years, including the launching of American communications satellites.

China recently has extended its realm of influence closer to the U.S. border. In July 2006, the conservative Web site Human Events reported that China has been working actively to developing North American Free Trade Agreement ports in Mexico. Using the economic shield of the NAFTA agreement between the United States, Mexico and Canada, China can avoid U.S. tariffs by shipping Chinese manufactured goods through Mexico into the United States. The plan reportedly could reduce Chinese transportation costs to the United States by as much as 50 percent and could flood the U.S. market with more cheap Chinese goods, further weakening the struggling U.S. dollar.

China’s high-tech military developments in the field of cyber warfare also are alarming. The technology Web site ZDNet News reported in November 2005 that U.S. officials had revealed details of Chinese computer hacking attacks against the U.S. government. The Chinese reportedly obtained information about Falconview, the flight-planning software used by the U.S. Army and Air Force. Such information could be used to help interdict U.S. flight operations against Chinese forces in a future conflict. The PLA has also developed a sizable force of professional computer hackers trained to disrupt the computer networks of China’s enemies. Potential targets include banking and electronic commerce networks and electric power grids, transportation networks and oil and gas pipelines, all of which are at least partially controlled by computers through SCADA systems (short for Systems Control and Data Acquisition).

The situation today

Today, the United States finds itself in an untenable position with China. American industry’s compulsion for outsourcing manufacturing to cheap overseas labor markets has resulted in American stores being glutted with shoddy Chinese products while the American manufacturing base that was once the envy of the world is vanishing. The situation has become so serious that a number of congressmen are formulating a political plank based upon revamping the U.S. manufacturing base.

The Chinese, in turn, have enacted tariffs against many American goods. The U.S. government has accused China of manipulating the value of the Chinese currency, the yuan, in international currency markets to give Chinese exports an unfair advantage in U.S. markets. The Chinese have tied the yuan’s value to the U.S. dollar at a fixed rate. China regulates its import market and the exchange of foreign currency with an iron fist in order to keep the yuan strong against the dollar. In the process of supporting the yuan, China has purchased more than $1 trillion in U.S. debt through international markets.

Today the Chinese appear ready to foreclose on the United States. In recent days the Chinese have hinted they may flood the international market with dollars to force the dollar value down. The mere suggestion sent U.S. stocks tumbling. President Bush responded that China would be foolhardy to act in such a manner. But what is to stop the Chinese? The Federal Reserve was forced to release billions in U.S. dollar reserves to calm the jittery markets.

Conflict looms in the Taiwan straits

The Pentagon has been warning about a Chinese military buildup for years. In November 2005 the Christian Science Monitor reported on this buildup. The Monitor stated that about 15 percent of the PLA’s 2 million-man force has been converted into a modern, highly mobile force designed to conduct rapid operations against smaller foes. The military buildup includes amphibious ships capable of transporting and landing military ground forces by sea.

What is the ultimate purpose of this buildup? Taiwan of course! Such an operation against Taiwan would involve highly mobile airborne and amphibious forces, naval and air operations to secure the Taiwan straits, and a massive missile and cyber warfare attack aimed at paralyzing Taiwan’s ability to react.

With the U.S. bogged down in the Middle East and Afghanistan, the time is quickly approaching when the Chinese will be able to deal a strategic death blow against Taiwan with impunity. This could be the death knell for U.S. superpower status. Already alienated from many of its traditional allies as a result of the war in Iraq, a Chinese attack on Taiwan would reveal the extent of the United States’ military’s weakened state and the inability of the U.S. government to stand by its alliances and obligations.

Food for thought

Not worried about China? Then here’s some food for thought: A series of recent China-related events, all potentially tied to asymmetric warfare against the United States, warrant close observation. These include toxic gluten in pet food, antifreeze in toothpaste, lead paint on toys, toxic levels of formaldehyde on pajamas, the recall of hundreds of thousands Chinese-manufactured tires in the United States for safety concerns … and the list goes on.

Potential problems with imported Chinese-produced foodstuff are particularly worrisome, as are the joint Russian-Chinese military exercises that recently took place for the first time in history. Coincidence? Maybe. Unrelated? Maybe. Worth watching? Certainly.

As Sun Tzu said, “All war is deception.”

Is China already at war with America?

Zachary Hubbard is a retired Army officer residing in Upper Yoder Township, Cambria County. He holds a master’s degree in military art and science from the U.S. Army Command and General Staff College. Since 1998 he has been involved in the study and teaching of asymmetric warfare. Hubbard is a member of The Tribune-Democrat Readership Advisory Committee.

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Source: Oh My News

When will the country's oil bourse finally start trading?

Angelique van Engelen (clixy123)
Published 2007-08-15 15:08 (KST)

Iranian President Mahmoud Ahmadinejad is reshuffling the oil ministry. He says, this way, he hopes to deliver on his promise to redistribute wealth. He's also sacked the industry minister. And next on the agenda is the Foreign Affairs Ministry.

It's not the first time Ahmadinejad's gone about rearranging the furniture back home. But so far, he's tended to project his zest for change to officials dealing with the outside world. Shortly after coming into power two years ago, his replacing 40 ambassadors sent out a strong message -- the Iranian president was unlikely to budge over the nuclear program his country was running.

The replacement of the oil and industry ministers is explained as a tactical move by the Iranian president to increase his control over areas that he believes key to economic prosperity. So now, there's no outside world that he can pitch the rationale for his action against. What's more, the move draws attention to one of Ahmadinejad's failures as president. Having been elected on a highly populist agenda, he's not delivered many of the goodies he promised in his election campaign in 2005. His luring promises to a young population faced with high levels of unemployment, were to the average Iranian just what the country needed.

Ahmadinejad offered to drag the fledgling economy out of the mess it was in and oil revenues were going to be a key factor in this plan. However, Ahmadinejad's plan to reshape the oil sector has been met with strong resistance from within the industry. The oil minister that was sacked, Kazem Vaziri Mahaneh, is known to be highly opposed to restructuring the industry.

Plans to open an Iranian oil bourse to compete with NYMEX in New York and the IPE in London have been continuously deferred for the past two years. At least three deadlines have expired without any progress being made. The bourse, which will be located in the Iranian Free Trade Zone on the island of Kish, is meant to attract international oil trading to the Middle East.

Outside observers say the potential for an oil-trading platform in the Middle East is promising but its main risk will be stability. Oil markets, like currency markets, react much more intensely to political instability than other capital markets. The Iranian nuclear issue won't do the country any favors in creating the best circumstances for a successful oil bourse.

According to many observers, Saddam Hussein's plan to swap dollars into euros was the main reason behind the U.S. invasion of Iraq.

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Source: Yahoo - Associated Press

By IVAN SEKRETAREV, Associated Press Writer 1 minute ago

CHEBARKUL TESTING RANGE, Russia - President Vladimir Putin placed strategic bombers back on long-range patrol for the first time since the Soviet breakup, sending a tough message to the United States on Friday hours after a major Russian military exercise with China.

Putin reviewed the first Russian-Chinese joint exercise on Russian soil before announcing that 20 strategic bombers had been sent far over the Atlantic, Pacific and Arctic oceans — showing off Moscow's muscular new posture and its growing military ties with Beijing.

"Starting today, such tours of duty will be conducted regularly and on the strategic scale," Putin said. "Our pilots have been grounded for too long. They are happy to start a new life."

Putin said halting long-range bombers after the Soviet collapse had hurt Russia's security because other nations — an oblique reference to the United States — had continued such missions.

"I have made a decision to resume regular flights of Russian strategic aviation," Putin said in nationally televised remarks. "We proceed from the assumption that our partners will view the resumption of flights of Russia's strategic aviation with understanding."

U.S.-Russian relations have been strained over Washington's criticism of Russia's democracy record, Moscow's objections to U.S. missile defense plans and differences over crises such as the Iraq war. But the Bush administration downplayed the significance of the renewed patrols.

"We certainly are not in the kind of posture we were with what used to be the Soviet Union. It's a different era," State Department spokesman Sean McCormack said. "If Russia feels as though they want to take some of these old aircraft out of mothballs and get them flying again, that's their decision."

Soviet bombers routinely flew missions to areas where nuclear-tipped cruise missiles could be launched at the United States. They stopped in the post-Soviet economic meltdown. Booming oil prices have allowed Russia to sharply increase its military spending.

Russian Air Force spokesman Col. Alexander Drobyshevsky said that Friday's exercise involved Tu-160, Tu-95 and Tu-22M bombers, tanker aircraft and air radars. NATO jets were scrambled to escort the Russian aircraft over the oceans, he said, according to the ITAR-Tass news agency.

Eleven Russian military planes — including strategic bombers and fighter jets — carried out maneuvers west of NATO member Norway on Friday, a military official said.

Norway sent F-16 fighter jets to observe and photograph the Russian planes, which rounded the northern tip of Norway and flew south over the Norwegian Sea toward the Faeroe Islands before turning back, said Brig. Gen. Ole Asak, chief of the Norwegian Joint Air Operations Center.

A pair of Russian Tu-95 strategic bombers approached the Pacific Island of Guam — home to a major U.S. military base — this month for the first time since the Cold War.

Last month, two similar bombers briefly entered British air space but turned back after British fighter jets intercepted them. Norwegian F-16s were also scrambled when the Tu-95s headed south along the Norwegian coast in international air space.

"This is a significant change of posture of Russian strategic forces," Alexander Pikayev, a senior military analyst with the Moscow-based Institute for World Economy and International Relations, told The Associated Press. "It's a response to the relocation of NATO forces closer to Russia's western border."

NATO has expanded in recent years to include the former Soviet republics of Latvia, Lithuania and Estonia as well as the Czech Republic, Hungary and Poland.

As of the beginning of the year, Russia had 79 strategic bombers, according to data exchanged with the United States under the START I arms control treaty. At the peak of the Cold War, the Soviet long-range bomber fleet numbered several hundred.

Friday's war games with China near the Urals Mountain city of Chelyabinsk involved some 6,000 troops from both countries, along with soldiers from four ex-Soviet Central Asian nations that are part of the Shanghai Cooperation Organization, a regional group dominated by Moscow and Beijing.

The former Cold War rivals share a heightening distrust of what they see as the United States' outsized role in global politics, and they have forged a "strategic partnership" aimed at counterbalancing Washington's policies.

The United States, Russia and China are locked in a tense rivalry for influence in Central Asia, the site of vast hydrocarbon resources. Washington supports plans for pipelines that would carry oil and gas to the West and bypass Russia, while Moscow has maneuvered to control exports. China also has shown a growing appetite for energy to power its booming economy.

Putin, Chinese leader Hu Jintao and other leaders of the SCO nations attended the joint exercise, which followed their summit Thursday in Kyrgyzstan's capital Bishkek.

The summit concluded with a communique that sounded like a thinly veiled warning to the United States to stay away from the region: "Stability and security in Central Asia are best ensured primarily through efforts taken by the nations of the region on the basis of the existing regional associations."

Putin hailed the exercise — which involved dozens of aircraft and hundreds of armored vehicles countering a mock attack by terrorists and insurgents striving to take control of energy resources — "as another step to strengthen relations between our countries." Hu said the maneuvers "underlined the SCO's readiness to confront terror."

The exercises underlined that "the SCO wants to show that Central Asia is its exclusive sphere of responsibility," said Ivan Safranchuk, an analyst at World Security Institute

Russian Deputy Foreign Minister Alexander Losyukov said the exercise was not aimed at the United States.

"I don't see anything anti-American in the SCO exercise," he was quoted as saying by the ITAR-Tass news agency.

The SCO was created 11 years ago to address religious extremism and border security issues in Central Asia. In recent years, the group has grown into a bloc aimed at defying U.S. interests in the region.

In 2005, the SCO called for a timetable to be set for the withdrawal of U.S. troops from two member countries, Uzbekistan and Kyrgyzstan. Uzbekistan evicted U.S. forces later that year, but Kyrgyzstan still has a U.S. base, which supports operations in nearby Afghanistan. Russia also maintains a military base in Kyrgyzstan.

Iranian President Mahmoud Ahmadinejad, whose country has SCO observer status, attended the summit for the second consecutive year. On Thursday, he echoed Russia's criticism of U.S. plans to deploy missile interceptors in Poland and a radar in the Czech Republic, saying they were a threat to the entire region.

___

Associated Press Writer Vladimir Isachenkov contributed to this report from Moscow.

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Source: WashingtonPost.com

U.S. Moving Against Revolutionary Guard

By Robin Wright
Washington Post Staff Writer
Wednesday, August 15, 2007; A01

The United States has decided to designate Iran's Revolutionary Guard Corps, the country's 125,000-strong elite military branch, as a "specially designated global terrorist," according to U.S. officials, a move that allows Washington to target the group's business operations and finances.

The Bush administration has chosen to move against the Revolutionary Guard Corps because of what U.S. officials have described as its growing involvement in Iraq and Afghanistan as well as its support for extremists throughout the Middle East, the sources said. The decision follows congressional pressure on the administration to toughen its stance against Tehran, as well as U.S. frustration with the ineffectiveness of U.N. resolutions against Iran's nuclear program, officials said.

The designation of the Revolutionary Guard will be made under Executive Order 13224, which President Bush signed two weeks after the Sept. 11, 2001, attacks to obstruct terrorist funding. It authorizes the United States to identify individuals, businesses, charities and extremist groups engaged in terrorist activities. The Revolutionary Guard would be the first national military branch included on the list, U.S. officials said -- a highly unusual move because it is part of a government, rather than a typical non-state terrorist organization.

The order allows the United States to block the assets of terrorists and to disrupt operations by foreign businesses that "provide support, services or assistance to, or otherwise associate with, terrorists."

The move reflects escalating tensions between Washington and Tehran over issues including Iraq and Iran's nuclear ambitions. Iran has been on the State Department's list of state sponsors of terrorism since 1984, but in May the two countries began their first formal one-on-one dialogue in 28 years with a meeting of diplomats in Baghdad.

The main goal of the new designation is to clamp down on the Revolutionary Guard's vast business network, as well as on foreign companies conducting business linked to the military unit and its personnel. The administration plans to list many of the Revolutionary Guard's financial operations.

"Anyone doing business with these people will have to reevaluate their actions immediately," said a U.S. official familiar with the plan who spoke on the condition of anonymity because the decision has not been announced. "It increases the risks of people who have until now ignored the growing list of sanctions against the Iranians. It makes clear to everyone who the IRGC and their related businesses really are. It removes the excuses for doing business with these people."

For weeks, the Bush administration has been debating whether to target the Revolutionary Guard Corps in full, or only its Quds Force wing, which U.S. officials have linked to the growing flow of explosives, roadside bombs, rockets and other arms to Shiite militias in Iraq and the Taliban in Afghanistan. The Quds Force also lends support to Shiite allies such as Lebanon's Hezbollah and to Sunni movements such as Hamas and the Palestinian Islamic Jihad.

Although administration discussions continue, the initial decision is to target the entire Guard Corps, U.S. officials said. The administration has not yet decided when to announce the new measure, but officials said they would prefer to do so before the meeting of the U.N. General Assembly next month, when the United States intends to increase international pressure against Iran.

Formed in 1979 and originally tasked with protecting the world's only modern theocracy, the Revolutionary Guard took the lead in battling Iraq during the bloody Iran-Iraq war waged from 1980 to 1988. The Guard, also known as the Pasdaran, has since become a powerful political and economic force in Iran. Iranian President Mahmoud Ahmadinejad rose through the ranks of the Revolutionary Guard and came to power with support from its network of veterans. Its leaders are linked to many mainstream businesses in Iran.

"They are heavily involved in everything from pharmaceuticals to telecommunications and pipelines -- even the new Imam Khomeini Airport and a great deal of smuggling," said Ray Takeyh of the Council on Foreign Relations. "Many of the front companies engaged in procuring nuclear technology are owned and run by the Revolutionary Guards. They're developing along the lines of the Chinese military, which is involved in many business enterprises. It's a huge business conglomeration."

The Revolutionary Guard Corps -- with its own navy, air force, ground forces and special forces units -- is a rival to Iran's conventional troops. Its naval forces abducted 15 British sailors and marines this spring, sparking an international crisis, and its special forces armed Lebanon's Hezbollah with missiles used against Israel in the 2006 war. The corps also plays a key role in Iran's military industries, including the attempted acquisition of nuclear weapons and surface-to-surface missiles, according to Anthony H. Cordesman of the Center for Strategic and International Studies.

The United States took punitive action against Iran after the November 1979 takeover of the U.S. Embassy in Tehran, including the breaking of diplomatic ties and the freezing of Iranian assets in the United States. More recently, dozens of international banks and financial institutions reduced or eliminated their business with Iran after a quiet campaign by the Treasury Department and State Department aimed at limiting Tehran's access to the international financial system. Over the past year, two U.N. resolutions have targeted the assets and movements of 28 people -- including some Revolutionary Guard members -- linked to Iran's nuclear program.

The key obstacle to stronger international pressure against Tehran has been China, Iran's largest trading partner. After the Iranian government refused to comply with two U.N. Security Council resolutions dealing with its nuclear program, Beijing balked at a U.S. proposal for a resolution that would have sanctioned the Revolutionary Guard, U.S. officials said.

China's actions reverse a cycle during which Russia was the most reluctant among the veto-wielding members of the Security Council. "China used to hide behind Russia, but Russia is now hiding behind China," said a U.S. official familiar with negotiations.

The administration's move comes amid growing support in Congress for the Iran Counter-Proliferation Act, which was introduced in the Senate by Gordon Smith (R-Ore.) and in the House by Tom Lantos (D-Calif.). The bill already has the support of 323 House members.

The administration's move could hurt diplomatic efforts, some analysts said. "It would greatly complicate our efforts to solve the nuclear issue," said Joseph Cirincione, a nuclear proliferation expert at the Center for American Progress. "It would tie an end to Iran's nuclear program to an end to its support of allies in Hezbollah and Hamas. The only way you could get a nuclear deal is as part of a grand bargain, which at this point is completely out of reach."

Such sanctions can work only alongside diplomatic efforts, Cirincione added.

"Sanctions can serve as a prod, but they have very rarely forced a country to capitulate or collapse," he said. "All of us want to back Iran into a corner, but we want to give them a way out, too. [The designation] will convince many in Iran's elite that there's no point in talking with us and that the only thing that will satisfy us is regime change."

Staff researcher Madonna Lebling contributed to this report.

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Source: Reuters

Fri Jul 20, 2007 3:20PM EDT
By Lucia Mutikani

NEW YORK, July 20 (Reuters) - Iran's decision to switch some dollar-based oil revenues to the Japanese yen was negative for U.S. government bond market sentiment, but would not make a dent on the flow of petrodollars into Treasuries.

Analysts said although Iran held a small fraction of government bonds, its initiative to ditch the falling dollar was further confirmation of diversification away from the currency and related assets.

"It's negative for Treasuries overall because it does fit with the idea that there is a diversification away from the use of the dollar by various means," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co. in New York.

Iran, the world's fourth biggest oil producer, confirmed this week it had asked Japanese customers to pay for crude oil in yen instead of dollars, a move it said was aimed at maximizing oil export revenue. It is locked in a row with the United States over its nuclear program.

Foreign purchases of Treasuries by institutions such as central banks and oil producing countries have helped keep government bonds yields lower in recent years even as the Federal Reserve raised its benchmark overnight lending rate to 5.25 percent.

But the dollar's poor performance has resulted in a gradual diversification in the composition of foreign central bank currency reserves.

"The proportion of money held by central banks in dollars is shrinking. It was once 70 percent and now it's in the mid-60s. Diversification is a key theme that is negative for the dollar and Treasuries, and that has been the case this year," said Crescenzi.

IDEAglobal currency strategist David Powell estimates Iran supplies about 15 percent of Japan's oil imports, roughly translating into $10 billion annually and suggesting little or no impact on petrodollar flows.

"It does not have a huge implication. They probably weren't keeping this $10 billion in Treasuries, more likely in short-term instruments. Iran is not a country that is flush with cash as other oil producing countries are," said Powell.

U.S. government data on Tuesday showed oil exporting nations raised their Treasury holdings by $9.1 billion to $121.3 billion in May.

When British holdings, viewed as including Middle Eastern accounts using London-based accounts, are factored in, about $42.2 billion worth of petrodollars were pumped into Treasuries in May.

"That is more than four times the annual sales in oil from Iran to Japan. Iran is not leading the trend for oil producing or Middle Eastern countries as far as the data shows us," said Powell.

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Source: Treehugger.com

by Jeremy Elton Jacquot
Los Angeles on 08. 1.07

Narrowly edging out the previous record set by Spectrolab late last year, two scientists at the University of Delaware have just created a new device that can convert 42.8% of the light striking it into electricity. The solar cell, built by Christina Honsberg and Allan Barnett, splits light into three components — high, medium and low energy light — and directs it to several different materials which can then extract electrons out of its photons.

One of the device's key elements is an optical concentrator — a lens-type component that increases the cell's efficiency by directing more sunlight to it than would happen naturally (a boost that contributed in great measure to its record-setting performance). It measures in at just below 1 cm thick, a major improvement over the Spectrolab model which featured a concentrating lens about 1 foot thick. Unlike most concentrators that use a two-axis tracking system to follow the sun, this optical concentrator is also stationary — a major feat.

The Defense Advanced Research Projects Agency (DARPA) — which has been funding this and similar efforts through its Very High Efficiency Solar Cell (VHESC) program — hopes to eventually incorporate this technology into portable solar cell battery chargers for American troops. It will now fund a newly formed DuPont-University of Delaware VHESC Consortium to shift production from a lab-scale model to a full-on manufacturing prototype model.

UPDATE: A reader wanted us to clarify an important point — namely the fact that the concentrator itself doesn't increase the efficiency (it actually increases the power output by intensifying the beam of sunlight), the spectrum splitting optics and solar cells accomplish that.

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Source: Wired.com

by Will Wade
11.15.05 | 2:00 AM

The barren deserts of Southern California are known for relentless sunshine and miles of empty space -- the perfect combination for the world's most ambitious solar-energy projects.

Two Southern California utility companies are planning to develop a pair of sun-powered power plants that they claim will dwarf existing solar facilities and could rival fossil-fuel-driven power plants.

Southern California Edison and San Diego Gas & Electric are working with Stirling Energy Systems, a Phoenix startup that has paired a large and efficient solar dish with a 200-year-old Stirling engine design.

Stirling Energy Systems is planning to build two separate solar farms, one with the capacity to generate 500 megawatts of electricity in the Mojave Desert near Victorville, California, for SoCal Edison, and a 300-megawatt plant in the Imperial Valley, near Calexico, California, for SDG&E. The utilities have signed 20-year deals to buy all the juice the farms can turn out, and have options to expand the plants if they are successful.

"Without question, this will be the largest solar project in the world," said Gil Alexander, a spokesman for SoCal Edison. "It will be bigger than all U.S. solar-energy projects combined."

Alexander said traditional coal or gas plants typically generate 500 to 1,000 megawatts, and that current solar farms are much smaller -- generally in the 35- to 80-megawatt range. At the end of 2004, the United States had only 397 megawatts of solar-energy capacity, according to the U.S. Department of Energy's Energy Information Administration.

"There is a possibility with this project that solar energy could go commercial in a big way for the first time," said Alexander. "It's playing in the big leagues."

Instead of using panels of photovoltaic cells -- solar power's mainstay technology for decades -- Stirling Energy Systems uses 40-foot-tall curved dishes that focus the sun's energy onto Stirling engines.

Also called an external heat engine, the Stirling engine is a completely sealed system filled with hydrogen. Its design dates to 1816, and it's named for its inventor, a Scottish minister named Robert Stirling. The focused solar energy, which can reach 1,350 degrees Fahrenheit, heats the hydrogen, making it expand and drive the engine's four pistons.

Though Stirling engines have been around for almost two centuries, there have been few efforts in the past to harness the sun to run them, said Stirling Energy Systems CEO Bruce Osborn.

Osborn said the Stirling dishes are 30 percent efficient -- 30 percent of the sun's energy is converted into electricity -- which is two to three times as efficient as conventional photovoltaic cells.

"Solar panels are more common, and they have gotten more efficient, but they still have a long way to go," he said.

Osborn said his company's dishes are easy to maintain because the engine is a closed system that never needs to be refilled -- an important factor for a large-scale facility in the middle of the desert. In fact, the only resource it consumes is "a little bit of water to wash the mirrors off every few weeks," he said.

The company is currently operating a six-dish test site at Sandia National Laboratories to showcase the concept, but the SoCal Edison and SDG&E plants are Stirling Energy Systems' first commercial contracts.

The first phase of the SoCal Edison project will be to build a 1-megawatt test site using 40 dishes, which should be complete by spring 2007. Construction on the full, 500-megawatt facility is expected to begin in mid-2008, and should take three to four years. Each dish can produce up to 25 kilowatts, and the site will eventually have 20,000 dishes stretching across 4,500 acres of desert.

Stirling plans to begin construction on SDG&E's 300-megawatt project in late 2008, and it should take about two years to install the 12,000 dishes covering about 2,000 acres.

None of the companies would give a price for building the solar sites or disclose the rates the utilities will pay for power, but both said the cost would be similar to traditional coal or gas.

But as oil prices go up, so could the cost of electricity from fossil fuels.

"Soon, solar may be less expensive," Osborn said.

Joel Makower, co-founder of market-research firm Clean Edge, said Stirling Energy Systems' solar-thermal power systems are impressive but unproven. One promising sign is the utility companies' level of commitment to the new technology.

"This is all on paper so far," he said. "They haven't delivered anything yet. And until they do, we can't say what it will cost."

Still, Makower said he was optimistic.

"Photovoltaic was the first-generation, utility-scale solar technology," he said. "The Stirling engine looks like it will be the second generation."

Posted by Hugo Albert Orwell at 01:12 PM | Permalink | TrackBacks (0)

Source: Rolling Stone

From Issue 1032

JEFF GOODELL
Posted Jul 24, 2007 1:36 PM

The great danger of confronting peak oil and global warming isn't that we will sit on our collective asses and do nothing while civilization collapses, but that we will plunge after "solutions" that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn.

Ethanol, of course, is nothing new. American refiners will produce nearly 6 billion gallons of corn ethanol this year, mostly for use as a gasoline additive to make engines burn cleaner. But in June, the Senate all but announced that America's future is going to be powered by biofuels, mandating the production of 36 billion gallons of ethanol by 2022. According to ethanol boosters, this is the beginning of a much larger revolution that could entirely replace our 21-million-barrel-a-day oil addiction. Midwest farmers will get rich, the air will be cleaner, the planet will be cooler, and, best of all, we can tell those greedy sheiks to fuck off. As the king of ethanol hype, Sen. Chuck Grassley of Iowa, put it recently, "Everything about ethanol is good, good, good."

This is not just hype -- it's dangerous, delusional bullshit. Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price.

Three factors are driving the ethanol hype. The first is panic: Many energy experts believe that the world's oil supplies have already peaked or will peak within the next decade. The second is election-year politics. With the first vote to be held in Iowa, the largest corn-producing state in the nation, former skeptics like Sens. Hillary Clinton and John McCain now pay tribute to the wonders of ethanol. Earlier this year, Sen. Barack Obama pleased his agricultural backers in Illinois by co-authoring legislation to raise production of biofuels to 60 billion gallons by 2030. A few weeks later, rival Democrat John Edwards, who is staking his campaign on a victory in the Iowa caucus, upped the ante to 65 billion gallons by 2025.

The third factor stoking the ethanol frenzy is the war in Iraq, which has made energy independence a universal political slogan. Unlike coal, another heavily subsidized energy source, ethanol has the added political benefit of elevating the American farmer to national hero. As former CIA director James Woolsey, an outspoken ethanol evangelist, puts it, "American farmers, by making the commitment to grow more corn for ethanol, are at the top of the spear on the war against terrorism." If you love America, how can you not love ethanol?

Ethanol is nothing more than 180-proof grain alcohol. To avoid the prospect of drunks sucking on gas pumps, fuel ethanol is "denatured" with chemical additives (if you drink it, you'll end up dead or, at best, in the hospital). It can be distilled from a variety of plants, including sugar cane and switch- grass. Most vehicles can't run on pure ethanol, but E85, a mix of eighty-five percent ethanol and fifteen percent gasoline, requires only slight engine modifications.

But as a gasoline substitute, ethanol has big problems: Its energy density is one-third less than gasoline, which means you have to burn more of it to get the same amount of power. It also has a nasty tendency to absorb water, so it can't be transported in existing pipelines and must be distributed by truck or rail, which is tremendously inefficient.

Nor is all ethanol created equal. In Brazil, ethanol made from sugar cane has an energy balance of 8-to-1 -- that is, when you add up the fossil fuels used to irrigate, fertilize, grow, transport and refine sugar cane into ethanol, the energy output is eight times higher than the energy inputs. That's a better deal than gasoline, which has an energy balance of 5-to-1. In contrast, the energy balance of corn ethanol is only 1.3-to-1 - making it practically worthless as an energy source. "Corn ethanol is essentially a way of recycling natural gas," says Robert Rapier, an oil-industry engineer who runs the R-Squared Energy Blog.

The ethanol boondoggle is largely a tribute to the political muscle of a single company: agribusiness giant Archer Daniels Midland. In the 1970s, looking for new ways to profit from corn, ADM began pushing ethanol as a fuel additive. By the early 1980s, ADM was producing 175 million gallons of ethanol a year. The company's then-chairman, Dwayne Andreas, struck up a close relationship with Sen. Bob Dole of Kansas, a.k.a. "Senator Ethanol." During the 1992 election, ADM gave $1 million to Dole and his friends in the GOP (compared with $455,000 to the Democrats). In return, Dole helped the company secure billions of dollars in subsidies and tax breaks. In 1995, the conservative Cato Institute, estimating that nearly half of ADM's profits came from products either subsidized or protected by the federal government, called the company "the most prominent recipient of corporate welfare in recent U.S. history."

Today, ADM is the leading producer of ethanol, supplying more than 1 billion gallons of the fuel additive last year. Ethanol is propped up by more than 200 tax breaks and subsidies worth at least $5.5 billion a year. And ADM continues to give back: Since 2000, the company has contributed $3.7 million to state and federal politicians.

The Iraq War has also been a boon for ADM and other ethanol producers. The Energy Policy Act of 2005, which was pushed by Corn Belt politicians, mandated the consumption of 7.5 billion gallons of biofuels by 2012. After Democrats took over Congress last year, they too vowed to "do something" about America's addiction to foreign oil. By the time Sen. Jeff Bingaman, chair of the Committee on Energy and Natural Resources, proposed new energy legislation this spring, the only real question was how big the ethanol mandate would be. According to one lobbyist, 36 billion gallons became "the Goldilocks number -- not too big to be impractical, not too small to satisfy corn growers."

Under the Senate bill, only 15 billion gallons of ethanol will come from corn, in part because even corn growers admit that turning more grain into fuel would disrupt global food supplies. The remaining 21 billion gallons will have to come from advanced biofuels, most of which are currently brewed only in small-scale lab experiments. "It's like trying to solve a traffic problem by mandating hovercraft," says Dave Juday, an independent commodities consultant. "Except we don't have hovercraft."

The most seductive myth about ethanol is that it will free us from our dependence on foreign oil. But even if ethanol producers manage to hit the mandate of 36 billion gallons of ethanol by 2022, that will replace a paltry 1.5 million barrels of oil per day -- only seven percent of current oil needs. Even if the entire U.S. corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use.

Another misconception is that ethanol is green. In fact, corn production depends on huge amounts of fossil fuel -- not just the diesel needed to plow fields and transport crops, but also the vast quantities of natural gas used to produce fertilizers. Runoff from industrial-scale cornfields also silts up the Mississippi River and creates a vast dead zone in the Gulf of Mexico every summer. What's more, when corn ethanol is burned in vehicles, it is as dirty as conventional gasoline and does little to solve global warming: E85 reduces carbon dioxide emissions by a modest fifteen percent at best, while fueling the destruction of tropical forests.

But the biggest problem with ethanol is that it steals vast swaths of land that might be better used for growing food. In a recent article in Foreign Affairs titled "How Biofuels Could Starve the Poor," University of Minnesota economists C. Ford Runge and Benjamin Senauer point out that filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn -- roughly enough calories to feed one person for a year.

Thanks in large part to the ethanol craze, the price of beef, poultry and pork in the United States rose more than three percent during the first five months of this year. In some parts of the country, hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars. And since America provides two-thirds of all global corn exports, the impact is being felt around the world. In Mexico, tortilla prices have jumped sixty percent, leading to food riots. In Europe, butter prices have spiked forty percent, and pork prices in China are up twenty percent. By 2025, according to Runge and Senauer, rising food prices caused by the demand for ethanol and other biofuels could cause as many as 600 million more people to go hungry worldwide.

Despite the serious drawbacks of ethanol, some technological visionaries believe that the fuel can be done right. "Corn ethanol is just a platform, the first step in a much larger transition we are undergoing from a hydrocarbon-based economy to a carbohydrate-based economy," says Vinod Khosla, a pioneering venture capitalist in Silicon Valley. Next-generation corn- ethanol plants, he argues, will be much more efficient and environmentally friendly. He points to a company called E3 BioFuels that just opened an ethanol plant in Mead, Nebraska. The facility runs largely on biogas made from cow manure, and feeds leftover grain back to the cows, making it a "closed-loop system" -- one that requires very few fossil fuels to create ethanol.

Khosla is even higher on the prospects for cellulosic ethanol, a biofuel that can be made from almost any plant matter, including wood waste and perennial grasses like miscanthus and switchgrass. Like other high-tech ethanol evangelists, Khosla imagines a future in which such so-called "energy crops" are fed into giant refineries that use genetically engineered enzymes to break down the cellulose in plants and create fuel for a fraction of the cost of today's gasoline. Among other virtues, cellulosic ethanol would not cut into the global food supply (nobody eats miscanthus or switchgrass), and it could significantly cut global-warming pollution. Even more important, it could provide a gateway to a much larger biotech revolution, including synthetic microbes that could one day be engineered to gobble up carbon dioxide or other pollutants.

Unfortunately, no commercial-scale cellulosic ethanol plants exist today. In one venture backed by Khosla, a $225 million plant in central Georgia is currently being built to make ethanol out of wood chips. Mitch Mandich, a former Apple Computer executive who is now the CEO of the operation, calls it "the beginning of a real transformation in the way we think about energy in America."

Maybe. But oil-industry engineer Robert Rapier, who has spent years studying cellulosic ethanol, says that the difference between ethanol from corn and ethanol from cellulose is "like the difference between traveling to the moon and traveling to Mars." And even if the engineering hurdles can be overcome, there's still the problem of land use: According to Rapier, replacing fifty percent of our current gasoline consumption with cellulosic ethanol would consume thirteen percent of the land in the United States - about seven times the land currently utilized for corn production.

Increasing the production of cellulosic ethanol will also require solving huge logistical problems, including delivering vast quantities of feedstock to production plants. According to one plant manager in the Midwest, fueling an ethanol plant with switchgrass would require delivering a semi-truckload of the grass every six minutes, twenty-four hours a day. Finally, there is the challenge of wrestling the future away from Big Corn. "It's pretty clear to me that the corn guys will use all their lobbying muscle and political power to stall, thwart and sidetrack this revolution," says economist C. Ford Runge.

In the end, the ethanol boom is another manifestation of America's blind faith that technology will solve all our problems. Thirty years ago, nuclear power was the answer. Then it was hydrogen. Biofuels may work out better, especially if mandates are coupled with tough caps on greenhouse-gas emissions. Still, biofuels are, at best, a huge gamble. They may help cushion the fall when cheap oil vanishes, but if we rely on ethanol to save the day, we could soon find ourselves forced to make a choice between feeding our SUVs and feeding children in the Third World. And we all know how that decision will go.

Posted by Hugo Albert Orwell at 12:50 PM | Permalink | TrackBacks (0)

Source: The Daily Green

If Every Field Were Planted With Corn, U.S. Would Only Offset 15% Of Fuel

In a new report released at noon today, three environmental and research organizations raise serious questions about the future of corn ethanol, a fuel that Congress has invested subsidies in already, and which is often viewed as a silver bullet solution to the nation’s energy and environmental problems.

Corn-based ethanol would, contrary to that belief, add pollution and contribute to other environmental problems — including the Gulf of Mexico dead zone that a separate report released yesterday showed could reach its largest size ever, due in part to the record acreage of corn planted in the Midwest this year, and the attendant runoff of fertilizer.

The “The Rush to Ethanol” was released by Food & Water Watch, the Network for New Energy Choices and the Vermont Law School Environmental Law Center.

The key findings from the report, as defined by the groups releasing it:

• Not all bio-fuels are equal. Corn, which is the source 95% of ethanol in the U.S., is among the least efficient, least sustainable biofuels. Cellulosic ethanol, while not yet ready for market, has more favorable energy ratios than corn and presents more room for productivity gains, making it appealing to investors, farmers, and refiners. Yet, most biofuels policies being debated in Congress would primarily benefit corn ethanol refiners in the near future.
• Corn ethanol has little promise of reducing U.S. fossil fuel emissions. Even if the entire U.S. corn crop was dedicated to ethanol, it would displace less than 15 percent of national gasoline use. But a modest increase in auto fuel efficiency standards, such as those passed by the Senate last month, would cut petroleum consumption by more than all alternative fuels and replacement fuels combined.
• The current path of corn-ethanol based biofuels is unsustainable. Using coal to power ethanol refineries can increase emissions in comparison to the gasoline fuel replaced. And since corn production uses more than twice the amount of pesticides than any other major U.S. crop, uncontrolled ethanol industry growth could exponentially increase environmental toxins.
• Even large-scale development of cellulosic ethanol is plagued by potential environmental problems. Turning cellulose into fuel, for instance, would require a huge expenditure of increasingly scarce water resources and the mass production of cellulosic ethanol would likely impact soil quality and convert land currently in conservation programs.
• Ethanol is not the solution to revitalizing rural America. While higher commodity prices and cooperatively owned ethanol refineries could be a boon to independent farmers, unregulated ethanol industry growth will further concentrate agribusiness, threatening the livelihood of rural communities.



Posted by Hugo Albert Orwell at 03:04 PM | Permalink | TrackBacks (0)

Source: Bloomberg

By Megumi Yamanaka

July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it's cutting holdings of the U.S. dollar.

Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.

The yen rose on expectations for an increase in demand for the currency to buy shipments from Iran, Japan's third-largest oil supplier. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency, while the United Nations Security Council is preparing for another round of sanctions against Iran because of the nation's nuclear research.

``What else can Japan do but to accept the request, once the oil producer sent its wish?'' said Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co. in Tokyo. ``The tensions between the U.S. and Iran are escalating, and it's Iran's measure to hedge risk.''

A spokesman for Iran's oil ministry in Tehran said he could neither confirm nor deny that the letter had been sent. Most Japanese oil refiners have until now used U.S. dollars to pay Iran for oil, said the spokesman, who declined to be identified by name because of government policy.

Yen Advances

The yen advanced to 122.15 per dollar at 10:34 a.m. in New York, from 122.42 late yesterday.

The Islamic republic, holder of the world's second-largest oil and gas reserves, has refused to halt uranium enrichment that it says is for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. Enriched uranium can be used to make nuclear fuel or build nuclear weapons.

The government in Tehran has failed to suspend its nuclear activities after the imposition of two sets of United Nations- sponsored sanctions since December.

Iran isn't alone in wanting to drop the dollar for pricing oil. Russia has been examining plans to price the Urals oil export blend in rubles to curb currency risks. The nation plans to open the Energy Stock Exchange in St. Petersburg in the first half of next year to trade oil in rubles, UBS AG reported June 14.

`New Payment Mechanism'

Iran asked the refiners to use the yen exchange rate quoted at the Bank of Tokyo Mitsubishi UFJ on the date oil cargoes are loaded. The use of yen-based letters of credit for oil ``has finally been approved'' by the Iranian central bank and the NIOC, according to the letter, titled ``New payment mechanism for Iranian Crude Oil Cargoes.''

Payments from Japanese refiners to Iran rose 12 percent last year to 1.24 trillion yen ($10.1 billion), according to the finance ministry in Tokyo. Japan imported 1.59 million kiloliters of Iranian crude oil in May, the least since June 2006, according to government data.

Iran is cutting its U.S. dollar reserves to less than 20 percent of total foreign currency holdings, and will buy more euros and yen as tensions with the U.S. increase, Central Bank Governor Ebrahim Sheibany said on March 27.

Only Saudi Arabia and the United Arab Emirates are larger oil suppliers to Japan than Iran.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka [a] bloomberg.net .
Last Updated: July 13, 2007 10:59 EDT

Posted by Hugo Albert Orwell at 11:22 AM | Permalink | TrackBacks (0)

Source: Orion Magazine

Alarming tales of a most prevalent and problematic substance
by Alan Weisman
(Published in the May/June 2007 issue of Orion magazine)

THE PORT OF PLYMOUTH in southwestern England is no longer listed among the scenic towns of the British Isles, although prior to World War II it would have qualified. During six nights of March and April 1941, Nazi bombs destroyed seventy-five thousand buildings in what is remembered as the Plymouth Blitz. When the annihilated city center was rebuilt, a modern concrete grid was superimposed on Plymouth’s crooked cobbled lanes, burying its medieval past in memory.

But the main history of Plymouth lies at its edge, in the natural harbor formed at the confluence of two rivers, the Plym and the Tamar, where they join the English Channel and the Atlantic Ocean. This is the Plymouth from which the Pilgrims departed; they named their American landfall across the sea in its honor. All three of Captain Cook’s Pacific expeditions began here, as did Sir Francis Drake’s circumnavigation of the globe. And, on December 27, 1831, H.M.S. Beagle set sail from Plymouth Harbor, with twenty-two-year-old Charles Darwin aboard.

University of Plymouth marine biologist Richard Thompson spends a lot of time pacing Plymouth’s historic edge. He especially goes in winter, when the beaches along the harbor’s estuaries are empty—a tall man in jeans, boots, blue windbreaker, and zippered fleece sweater, his bald pate hatless, his long fingers gloveless as he bends to probe the sand. Thompson’s doctoral study was on slimy stuff that mollusks such as limpets and winkles like to eat: diatoms, cyanobacteria, algae, and tiny plants that cling to seaweed. What he’s now known for, however, has less to do with marine life than with the growing presence of things in the ocean that have never been alive at all.

Although he didn’t realize it at the time, what has dominated his life’s work began when he was still an undergraduate in the 1980s, spending autumn weekends organizing the Liverpool contingent of Great Britain’s national beach cleanup. In his final year, he had 170 teammates amassing metric tons of rubbish along eighty-five miles of shoreline. Apart from items that apparently had dropped from boats, such as Greek salt boxes and Italian oil cruets, from the labels he could see that most debris was blowing east from Ireland. In turn, Sweden’s shores were the receptacles for trash from England. Any packaging that trapped enough air to protrude from the water seemed to obey the wind currents, which in these latitudes are easterly.

Smaller, lower-profile fragments, however, were apparently controlled by currents in the water. Each year, as he compiled the team’s annual reports, Thompson noticed more and more garbage that was smaller and smaller amid the usual bottles and automobile tires. He and another student began collecting sand samples along beach strand lines. They sieved the tiniest particles of whatever appeared unnatural, and tried to identify them under a microscope. This proved tricky. Their subjects were usually too small to allow them to pinpoint the bottles, toys, or appliances from which they sprang.

He continued working the annual cleanup during graduate studies at Newcastle. Once he completed his PhD and began teaching at Plymouth, his department acquired a Fourier Transform Infrared Spectrometer, a device that passes a microbeam through a substance, then compares its infrared spectrum to a database of known material. Now he could know what he was looking at, which only deepened his concern.

“Any idea what these are?” Thompson is guiding a visitor along the shore of the Plym River estuary, near where it joins the sea. With a full moonrise just a few hours off, the tide is out nearly two hundred meters, exposing a sandy flat scattered with bladderwrack and cockle shells. A breeze skims the tidal pools, shivering rows of reflected hillside housing projects. Thompson bends over the strand line of detritus left by the forward edge of waves lapping the shore, looking for anything recognizable: hunks of nylon rope, syringes, topless plastic food containers, half a ship’s float, pebbled remains of polystyrene packaging, and a rainbow of assorted bottle caps. Most plentiful of all are multicolored plastic shafts of cotton ear-swabs. But there are also the odd little uniform shapes he challenges people to identify. Among twigs and seaweed fibers in his fistful of sand are a couple dozen blue and green plastic cylinders about two millimeters high.
“They’re called nurdles. They’re the raw materials of plastic production. They melt these down to make all kinds of things.” He walks a little farther, then scoops up another handful. It contains more of the same plastic bits: pale blue ones, greens, reds, and tans. Each handful, he calculates, is about 20 percent plastic, and each holds at least thirty pellets.

“You find these things on virtually every beach these days. Obviously they are from some factory.”

However, there is no plastic manufacturing anywhere nearby. The pellets have ridden some current over a great distance until they were deposited here—collected and sized by the wind and tide.

IN THOMPSON’S LABORATORY AT THE UNIVERSITY of Plymouth, graduate student Mark Browne unpacks foil-wrapped beach samples that arrive in clear zip-lock bags sent by an international network of colleagues. He transfers these to a glass separating funnel, filled with a concentrated solution of sea salt to float off the plastic particles. He filters out some he thinks he recognizes, such as pieces of the ubiquitous colored ear-swab shafts—to check under the microscope. Anything really unusual goes to the FTIR Spectrometer.

Each takes more than an hour to identify. About one-third turn out to be natural fibers such as seaweed, another third are plastic, and another third are unknown—meaning that they haven’t found a match in their polymer database, or that the particle has been in the water so long its color has degraded, or that it’s too small for their machine, which analyzes fragments only to twenty microns—slightly thinner than a human hair.

“That means we’re underestimating the amount of plastic that we’re finding. The true answer is we just don’t know how much is out there.”

What they do know is that there’s much more than ever before. During the early twentieth century, Plymouth marine biologist Alistair Hardy developed an apparatus that could be towed behind an Antarctic expedition boat, ten meters below the surface, to sample krill—the ant-sized, shrimplike invertebrate on which much of the planet’s food chain rests. In the 1930s, he modified it to measure even smaller plankton. It employed an impeller to turn a moving band of silk, similar to how a dispenser in a public lavatory moves cloth towels. As the silk passed over an opening, it filtered plankton from water passing through it. Each band of silk had a sampling capacity of five hundred nautical miles. Hardy was able to convince English merchant vessels using commercial shipping lanes throughout the North Atlantic to drag his Continuous Plankton Recorder for several decades, amassing a database so valuable he was eventually knighted for his contributions to marine science.

He took so many samples from around the British Isles that only every second one was analyzed. Decades later, Richard Thompson realized that the ones that remained stored in a climate-controlled Plymouth warehouse were a time capsule containing a record of growing contamination. He picked two routes out of northern Scotland that had been sampled regularly: one to Iceland, one to the Shetland Islands. His team pored over rolls of silk reeking of chemical preservative, looking for old plastic. There was no reason to examine years prior to World War II because until then plastic barely existed, except for the Bakelite used in telephones and radios, appliances so durable they had yet to enter the waste chain. Disposable plastic packaging hadn’t yet been invented.

By the 1960s, however, they were seeing increasing numbers of increasing kinds of plastic particles. By the 1990s, the samples were flecked with triple the amount of acrylic, polyester, and crumbs of other synthetic polymers than had been present three decades earlier. Especially troubling was that Hardy’s plankton recorder had trapped all this plastic ten meters below the surface, suspended in the water. Since plastic mostly floats, that meant they were seeing just a fraction of what was actually there. Not only was the amount of plastic in the ocean increasing, but ever smaller bits of it were appearing—small enough to ride global sea currents.

Thompson’s team realized that slow mechanical action—waves and tides that grind against shorelines, turning rocks into beaches—were now doing the same to plastics. The largest, most conspicuous items bobbing in the surf were slowly getting smaller. At the same time, there was no sign that any of the plastic was biodegrading, even when reduced to tiny fragments.

“We imagined it was being ground down smaller and smaller, into a kind of powder. And we realized that smaller and smaller could lead to bigger and bigger problems.”

He knew the terrible tales of sea otters choking on poly-ethylene rings from beer six-packs; of swans and gulls strangled by nylon nets and fishing lines; of a green sea turtle in Hawai’i dead with a pocket comb, a foot of nylon rope, and a toy truck wheel lodged in its gut. His personal worst was a study on fulmar carcasses washed ashore on North Sea coastlines. Ninety-five percent had plastic in their stomachs—an average of forty-four pieces per bird. A proportional amount in a human being would weigh nearly five pounds.

There was no way of knowing if the plastic had killed them, although it was a safe bet that, in many, chunks of indigestible plastic had blocked their intestines. Thompson reasoned that if larger plastic pieces were breaking down into smaller particles, smaller organisms would likely be consuming them. He devised an aquarium experiment, using bottom-feeding lugworms that live on organic sediments, barnacles that filter organic matter suspended in water, and sand fleas that eat beach detritus. In the experiment, plastic particles and fibers were provided in proportionately bite-sized quantities. Each creature promptly ingested them.

When the particles lodged in their intestines, the resulting constipation was terminal. But if the pieces were small enough, they passed through the invertebrates’ digestive tracts and emerged, seemingly harmlessly, out the other end. Did that mean that plastics were so stable that they weren’t toxic? At what point would they start to naturally break down—and when they did, would they release some fearful chemicals that would endanger organisms some time far in the future?

Richard Thompson didn’t know. Nobody did, because plastics haven’t been around long enough for us to know how long they’ll last or what will happen to them. His team had identified nine different kinds in the sea so far, varieties of acrylic, nylon, polyester, polyethylene, polypropylene, and polyvinyl chloride. All he knew was that soon everything alive would be eating them.

“When they get as small as powder, even zooplankton will swallow them.”

TWO SOURCES OF TINY PLASTIC PARTICLES hadn’t before occurred to Thompson. Plastic bags clog everything from sewer drains to the gullets of sea turtles that mistake them for jellyfish. Increasingly, purportedly biodegradable versions were available. Thompson’s team tried them. Most turned out to be just a mixture of cellulose and polymers. After the cellulose starch broke down, thousands of clear, nearly invisible plastic particles remained.

Some bags were advertised to degrade in compost piles as heat generated by decaying organic garbage rises past one hundred degrees Fahrenheit. “Maybe they do. But that doesn’t happen on a beach, or in salt water.” He’d learned that after they tied plastic produce bags to moorings in Plymouth Harbor. “A year later you could still carry groceries in them.”

Even more exasperating was what his PhD student Mark Browne had discovered while shopping in a pharmacy. Browne pulls open the top drawer of a laboratory cabinet. Inside is a cornucopia of feminine beauty aids: shower massage creams, body scrubs, and hand cleaners. Several are by boutique labels: Neova Body Smoother, SkinCeuticals Body Polish, and DDF Strawberry Almond Body Polish. Others are international name brands: Neutrogena, Clearasil, Pond’s Fresh Start, even a tube of Colgate Icy Blast toothpaste. Some are available in the United States, others only in the United Kingdom. But all have one thing in common.

“Exfoliants: little granules that massage you as you bathe.” He selects a peach-colored tube of St. Ives Apricot Scrub; its label reads: 100% natural exfoliants. “This stuff is okay. The granules are actually chunks of ground-up jojoba seeds and walnut shells.” Other natural brands use grape seeds, apricot hulls, coarse sugar, or sea salt. “The rest of them,” he says, with a sweep of his hand, “have all gone to plastic.”

On each, listed among the ingredients are “micro-fine polyethylene granules,” or “polyethylene micro-spheres,” or “polyethylene beads.” Or just polyethylene.

“Can you believe it?” Richard Thompson demands of no one in particular, loud enough that faces bent over microscopes rise to look at him. “They’re selling plastic meant to go right down the drain, into the sewers, into the rivers, right into the ocean. Bite-sized pieces of plastic to be swallowed by little sea creatures.”

Plastic bits are also increasingly used to scour paint from boats and aircraft. Thompson shudders. “One wonders where plastic beads laden with paint are disposed. It would be di;cult to contain them on a windy day. But even if they’re contained, there’s no filter in any sewage works for material that small. It’s inevitable. They end up in the environment.”

He peers into Browne’s microscope at a sample from Finland. A lone green fiber, probably from a plant, lies across three bright blue threads that probably aren’t. He perches on the countertop, hooking his hiking boots around a lab stool. “Think of it this way. Suppose all human activity ceased tomorrow, and suddenly there’s no one to produce plastic anymore. Just from what’s already present, given how we see it fragmenting, organisms will be dealing with this stuff indefinitely. Thousands of years, possibly. Or more.”

IN ONE SENSE, PLASTICS HAVE BEEN AROUND for millions of years. Plastics are polymers: simple molecular configurations of carbon and hydrogen atoms that link together repeatedly to form chains. Spiders have been spinning polymer fibers called silk since before the Carboniferous Age, whereupon trees appeared and started making cellulose and lignin, also natural polymers. Cotton and rubber are polymers, and we make the stuff ourselves, too, in the form of collagen that comprises, among other things, our fingernails.

Another natural, moldable polymer that closely fits our idea of plastics is the secretion from an Asian scale beetle that we know as shellac. It was the search for an artificial shellac substitute that one day led chemist Leo Baekeland to mix tarry carbolic acid –- phenol—with formaldehyde in his garage in Yonkers, New York. Until then, shellac was the only coating available for electric wires and connections. The moldable result became Bakelite. Baekeland became very wealthy, and the world became a very different place.

Chemists were soon busy cracking long hydrocarbon chain molecules of crude petroleum into smaller ones, and mixing these fractionates to see what variations on Baekeland’s first man-made plastic they could produce. Adding chlorine yielded a strong, hardy polymer unlike anything in nature, known today as PVC. Blowing gas into another polymer as it formed created tough, linked bubbles called polystyrene, often known by the brand name Styrofoam. And the continual quest for an artificial silk led to nylon. Sheer nylon stockings revolutionized the apparel industry and helped to drive acceptance of plastic as a defining achievement of modern life. The intercession of World War II, which diverted most nylon and plastic to the war effort, only made people desire them more.

After 1945, a torrent of products the world had never seen roared into general consumption: acrylic textiles, Plexiglass, polyethylene bottles, polypropylene containers, and “foam rubber” polyurethane toys. Most world-changing of all was transparent packaging, including self-clinging wraps of polyvinyl chloride and polyethylene, which let us see the foods wrapped inside them and kept them preserved longer than ever before.

Within ten years, the downside to this wonder substance was apparent. In 1955, Life magazine coined the term “throwaway society.” However, Stanford archaeologist William Rathje, who has made a career of studying garbage in America, finds himself continually disabusing waste management officials and the general public of what he deems a myth: that plastic is responsible for overflowing landfills across the country. Rathje’s decades-long Garbage Project, wherein students weighed and measured weeks’ worth of residential waste, reported during the 1980s that, contrary to popular belief, plastic accounts for less than 20 percent by volume of buried wastes, in part because it can be compressed more tightly than other refuse. Although increasingly higher percentages of plastic items have been produced since then, Rathje doesn’t expect the proportions to change, because improved manufacturing uses less plastic per soda bottle or disposable wrapper.

The bulk of what’s in landfills, he says, is construction debris and paper products. Newspapers, he claims, again belying a common assumption, don’t biodegrade when buried away from air and water. “That’s why we have three-thousand-year-old papyrus scrolls from Egypt. We pull perfectly readable newspapers out of landfills from the 1930s. They’ll be down there for ten thousand years.”

He agrees, though, that plastic embodies our collective guilt over trashing the environment. Something about plastic feels uneasily permanent. The difference may have to do with what happens outside landfills, where a newspaper gets shredded by wind, cracks in sunlight, and dissolves in rain—if it doesn’t burn first.

What happens to plastic, however, can be seen most vividly in places where trash is never collected. Humans have continuously inhabited the Hopi Indian Reservation in northern Arizona since AD1000—longer than any other site in today’s United States. The principal Hopi villages sit atop three mesas with 360-degree views of the surrounding desert. For centuries, the Hopis simply threw their garbage, consisting of food scraps and broken ceramic, over the sides of the mesas. Coyotes and vultures took care of the food wastes, and the pottery sherds blended back into the ground they came from.

That worked fine until the mid-twentieth century. Then, the garbage tossed over the side stopped going away. The Hopis were visibly surrounded by a rising pile of a new, nature-proof kind of trash. The only way it disappeared was by being blown across the desert. But it was still there, stuck to sage and mesquite branches, impaled on cactus spines.

SOUTH OF THE HOPI MESAS rise the 12,500-foot San Francisco Peaks; east of the peaks are the even taller Rockies; and to their west are the Sierra Madres, whose volcanic summits are higher still. Impossible as it is for us to fathom, all these colossal mountains will one day erode to the sea—every boulder, outcrop, saddle, spire, and canyon wall. Every massive uplift will pulverize, their minerals dissolving to keep the oceans salted, the plume of nutrients in their soils nourishing a new marine biological age even as the previous one disappears beneath their sediments.

Long before that, however, these deposits will have been preceded by a substance far lighter and more easily carried seaward than rocks or even grains of silt.

Captain Charles Moore of Long Beach, California, learned this one day in 1997 when, sailing out of Honolulu, he steered his aluminum-hulled catamaran into a part of the western Pacific he’d always avoided. Sometimes known as the Horse Latitudes, it is a Texas-sized span of ocean between Hawai’i and California rarely plied by sailors because of a perennial, slowly rotating high-pressure vortex of hot equatorial air that inhales wind and never gives it back. Beneath it, the water describes lazy, clockwise whorls toward a depression at the center.

Its correct name is the North Pacific Subtropical Gyre, though Moore soon learned that oceanographers had another label for it: the Great Pacific Garbage Patch. Captain Moore had wandered into a sump where nearly everything that blows into the water from half the Pacific Rim eventually ends up, spiraling slowly toward a widening horror of industrial excretion. For a week, Moore and his crew found themselves crossing a sea the size of a small continent, covered with floating refuse. It was not unlike an Arctic vessel pushing through chunks of brash ice, except what was bobbing around them was a fright of cups, bottle caps, tangles of fish netting and monofilament line, bits of polystyrene packaging, six-pack rings, spent balloons, filmy scraps of sandwich wrap, and limp plastic bags that defied counting.

Just two years earlier, Moore had retired from his wood-furniture-finishing business. A lifelong surfer, his hair still ungrayed, he’d built himself a boat and settled into what he planned to be a stimulating young retirement. Raised by a sailing father and certified as a captain by the U.S. Coast Guard, he started a volunteer marine environmental-monitoring group. After his hellish mid-Pacific encounter with the Great Pacific Garbage Patch, his group ballooned into what is now the Algita Marine Research Foundation, devoted to confronting the flotsam of a half century, since 90 percent of the junk he was seeing was plastic.

What stunned Charles Moore most was learning where it came from. In 1975, the U.S. National Academy of Sciences had estimated that all oceangoing vessels together dumped 8 million pounds of plastic annually. More recent research showed the world’s merchant fleet alone shamelessly tossing around 639,000 plastic containers every day. But littering by all the commercial ships and navies, Moore discovered, amounted to mere polymer crumbs in the ocean compared to what was pouring from the shore.

The real reason that the world’s landfills weren’t overflowing with plastic, he found, was because most of it ends up in an ocean-fill. After a few years of sampling the North Pacific gyre, Moore concluded that 80 percent of mid-ocean flotsam had originally been discarded on land. It had blown off garbage trucks or out of landfills, spilled from railroad shipping containers and washed down storm drains, sailed down rivers or wafted on the wind, and found its way to this widening gyre.

“This,” Captain Moore tells his passengers, “is where all the things end up that flow down rivers to the sea.” It is the same phrase the geologists have uttered to students since the beginning of science. However, what Moore refers to is a type of runoff and sedimentation that the Earth had hitherto never known in 5 billion years of geologic time-but likely will henceforth.

DURING HIS FIRST THOUSAND-MILE CROSSING of the gyre, Moore calculated half a pound for every one hundred square meters of debris on the surface, and arrived at 3 million tons of plastic. His estimate, it turned out, was corroborated by U.S. Navy calculations. It was the first of many staggering figures he would encounter. And it only represented visible plastic: an indeterminate amount of larger fragments get fouled by enough algae and barnacles to sink. In 1998, Moore returned with a trawling device, such as Sir Alistair Hardy had employed to sample krill, and found, incredibly, more plastic by weight than plankton on the ocean’s surface.

In fact, it wasn’t even close: six times as much.

When he sampled near the mouths of Los Angeles creeks that emptied into the Pacific, the numbers rose by a factor of one hundred, and kept rising every year. By now he was comparing data with University of Plymouth marine biologist Richard Thompson. Like Thompson, what especially shocked him were plastic bags and the ubiquitous little raw plastic pellets. In India alone, five thousand processing plants were producing plastic bags. Kenya was churning out four thousand tons of bags a month, with no potential for recycling.

As for the little pellets known as nurdles, 5.5 quadrillion—about 250 billion pounds—were manufactured annually. Not only was Moore finding them everywhere, but he was unmistakably seeing the plastic resin bits trapped inside the transparent bodies of jellyfish and salps, the ocean’s most prolific and widely distributed filter feeders. Like seabirds, they’d mistaken brightly colored pellets for fish eggs, and tan ones for krill. And now God-knows-how-many quadrillion little pieces more, coated in body-scrub chemicals and perfectly bite-sized for the little creatures that bigger creatures eat, were being flushed seaward.

What did this mean for the ocean, the ecosystem, the future? All this plastic had appeared in barely more than fifty years. Would its chemical constituents or additives—for instance, colorants such as metallic copper—concentrate as they ascended the food chain, and alter evolution? Would it last long enough to enter the fossil record? Would geologists millions of years hence find Barbie doll parts imbedded in conglomerates formed in seabed depositions? Would they be intact enough to be pieced together like dinosaur bones? Or would they decompose first, expelling hydrocarbons that would seep out of a vast plastic Neptune’s graveyard for eons to come, leaving fossilized imprints of Barbie and Ken hardened in stone for eons beyond?

MOORE AND THOMPSON BEGAN consulting materials experts. Tokyo University geochemist Hideshige Takada, who specialized in EDCs—endocrine-disrupting chemicals, or “gender benders”—had been on a gruesome mission to personally research exactly what evils were leaching from garbage dumps all around Southeast Asia. Now he was examining plastic pulled from the Sea of Japan and Tokyo Bay. He reported that in the sea, nurdles and other plastic fragments acted both as magnets and as sponges for resilient poisons like DDT and PCBs.

The use of aggressively toxic polychlorinated biphenyls—PCBs—to make plastics more pliable had been banned since 1970; among other hazards, PCBs were known to promote hormonal havoc such as hermaphroditic fish and polar bears. Like time-release capsules, pre-1970 plastic flotsam will gradually leak PCBs into the ocean for centuries. But, as Takada also discovered, free-floating toxins from all kinds of sources—copy paper, automobile grease, coolant fluids, old fluorescent tubes, and infamous discharges by General Electric and Monsanto plants directly into streams and rivers—readily stick to the surfaces of free-floating plastic.

One study directly correlated ingested plastics with PCBs in the fat tissue of puffins. The astonishing part was the amount. Takada and his colleagues found that the plastic pellets eaten by the birds concentrated poisons to levels as high as 1 million times their normal occurrence in seawater.

By 2005, Moore was referring to the gyrating Pacific dump as 10 million square miles—nearly the size of Africa. It wasn’t the only one: the planet has six other major tropical oceanic gyres, all of them swirling with ugly debris. It was as if plastic exploded upon the world from a tiny seed after World War II and, like the Big Bang, was still expanding. Even if all production suddenly ceased, an astounding amount of the astoundingly durable stuff was already out there. Plastic debris, Moore believed, was now the most common surface feature of the world’s oceans. How long would it last? Were there any benign, less-immortal substitutes that civilization could convert to, lest the world be plastic-wrapped evermore?

THAT FALL, MOORE, THOMPSON, AND TAKADA convened at a marine plastic summit in Los Angeles with Dr. Anthony Andrady. A senior research scientist at North Carolina’s Research Triangle, Andrady is from Sri Lanka, one of South Asia’s rubber-producing powers. While studying polymer science in graduate school, he was distracted from a career in rubber by the surging plastics industry. An eight-hundred-page tome he eventually compiled, Plastics in the Environment, won him acclaim from the industry and environmentalists alike as the oracle on its subject.

The long-term prognosis for plastic, Andrady told assembled marine scientists, is exactly that: long term. It’s no surprise that plastics have made an enduring mess in the oceans, he explained. Their elasticity, versatility (they can either sink or float), near invisibility in water, durability, and superior strength were exactly why net and fishing line manufacturers had abandoned natural fibers for synthetics such as nylon and polyethylene. In time, the former disintegrate; the latter, even when torn and lost, continue “ghost fishing.” As a result, virtually every marine species, including whales, is in danger of being snared by great tangles of nylon loose in the oceans.

Like any hydrocarbon, Andrady said, even plastics “inevitably must biodegrade, but at such a slow rate that it is of little practical consequence. They can, however, photodegrade in a meaningful time frame.”

He explained: When hydrocarbons biodegrade, their polymer molecules are disassembled into the parts that originally combined to create them-carbon dioxide and water. When they photodegrade, ultraviolet solar radiation weakens plastic’s tensile strength by breaking its long, chainlike polymer molecules into shorter segments. Since the strength of plastics depends on the length of their intertwined polymer chains, as the UV rays snap them, the plastic starts to decompose.

Everyone has seen polyethylene and other plastics turn yellow and brittle and start to flake in sunlight. Often, plastics are treated with additives to make them more UV-resistant; other additives can make them more UV-sensitive. Using the latter for six-pack rings, Andrady suggested, might save the lives of many sea creatures.

However, there are two problems. For one, plastic takes much longer to photodegrade in water. On land, plastic left in the sun absorbs infrared heat, and is soon much hotter than the surrounding air. In the ocean, not only does it stay cooled by water, but fouling algae shield it from sunlight.

The other hitch is that even though a ghost fishnet made from photodegradable plastic might disintegrate before it drowns any dolphins, its chemical nature will not change for hundreds, perhaps thousands of years.

“Plastic is still plastic. The material still remains a polymer. Polyethylene is not biodegraded in any practical time scale. There is no mechanism in the marine environment to biodegrade that long a molecule.” Even if photodegradable nets help marine mammals live, he concluded, their powdery residue remains in the sea, where the filter feeders will find it.

“EXCEPT FOR A SMALL AMOUNT that’s been incinerated,” says Tony Andrady the oracle, “every bit of plastic manufactured in the world for the last fifty years or so still remains. It’s somewhere in the environment.”

That half century’s total production now surpasses 1 billion tons. It includes hundreds of different plastics, with untold permutations involving added plasticizers, opacifiers, colors, fillers, strengtheners, and light stabilizers. The longevity of each can vary enormously. Thus far, none has disappeared. Researchers have attempted to find out how long it will take polyethylene to biodegrade by incubating a sample in a live bacteria culture. A year later, less than 1 percent was gone.

“And that’s under the best controlled laboratory conditions. That’s not what you will find in real life,” says Tony Andrady. “Plastics haven’t been around long enough for microbes to develop the enzymes to handle it, so they can only biodegrade the very-low-molecular-weight part of the plastic”—meaning, the smallest, already broken polymer chains. Although truly biodegradable plastics derived from natural plant sugars have appeared, as well as biodegradable polyester made from bacteria, the chances of them replacing the petroleum-based originals aren’t great.

“Since the idea of packaging is to protect food from bacteria,” Andrady observes, “wrapping leftovers in plastic that encourages microbes to eat it may not be the smartest thing to do.”

But even if it worked, or even if humans were gone and never produced another nurdle, all the plastic already produced would remain—how long?

“Egyptian pyramids have preserved corn, seeds, and even human parts such as hair because they were sealed away from sunlight with little oxygen or moisture,” says Andrady, a mild, precise man with a broad face and a clipped, persuasively reasonable voice. “Our waste dumps are somewhat like that. Plastic buried where there’s little water, sun, or oxygen will stay intact a long time. That is also true if it is sunk in the ocean, covered with sediment. At the bottom of the sea, there’s no oxygen, and it’s very cold.”

He gives a clipped little laugh. “Of course,” he adds, “we don’t know much about microbiology at those depths. Possibly anaerobic organisms there can biodegrade it. It’s not inconceivable. But no one’s taken a submersible down to check. Based on our observations, it’s unlikely. So we expect much-slower degradation at the sea bottom. Many times longer. Even an order of magnitude longer.”

An order of magnitude—that’s ten times—longer than what? One thousand years? Ten thousand?

No one knows, because no plastic has died a natural death yet. It took today’s microbes that break hydrocarbons down to their building blocks a long time after plants appeared to learn to eat lignin and cellulose. More recently, they’ve even learned to eat oil. None can digest plastic yet, because fifty years is too short a time for evolution to develop the necessary biochemistry.

“But give it a hundred thousand years,” says Andrady the optimist—he was in his native Sri Lanka when the Christmas 2004 tsunami hit, and even there, after those apocalyptic waters struck, people found reason to hope. “I’m sure you’ll find many species of microbes whose genes will let them do this tremendously advantageous thing, so that their numbers will grow and prosper. Today’s amount of plastic will take hundreds of thousands of years to consume, but, eventually, it will all biodegrade. Lignin is far more complex, and it biodegrades. It’s just a matter of waiting for evolution to catch up with the materials we are making.”

And should biologic time run out and some plastics remain?

“The upheavals and pressure will change it into something else. Just like trees buried in bogs a long time ago—the geologic process, not biodegradation, changed them into oil and coal. Maybe high concentrations of plastics will turn into something like that. Eventually, they will change. Change is the hallmark of nature. Nothing remains the same.”

[Alan Weisman's article in this issue is an abridged excerpt from his book The World Without Us, published by St. Martin's Press in July, 2007 and used by permission. He lives in Tucson and teaches at the University of Arizona.]

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Source: AlterNet

By James Howard Kunstler
Posted April 4, 2007

The following is James Howard Kunstler' recent speech to the Commonwealth Club of California. An audio stream of the speech is available.

Two years ago in my book The Long Emergency I wrote that our nation was sleepwalking into an era of unprecedented hardship and disorder -- largely due to the end of reliably cheap and abundant oil. We're still blindly following that path into a dangerous future, lost in dark raptures of infotainment, diverted by inane preoccupations with sex and celebrity, made frantic by incessant motoring.

The coming age of energy scarcity will change everything about how we live in this country. It will ignite more desperate contests between nations for the remaining oil and natural gas around the world. It will alter the fundamental terms of industrial economies. It will ramify and amplify many of the problems presented by climate change. It will require us to behave differently. But we are not paying attention.

As the American public continues sleepwalking into a future of energy scarcity, climate change, and geopolitical turmoil, we have also continued dreaming. Our collective dream is one of those super-vivid ones people have just before awakening, as the fantastic transports of the unconscious begin to merge with the demands of waking reality. The dream is a particularly American dream on an American theme: how to keep all the cars running by some other means than gasoline. We'll run them on ethanol! We'll run them on biodiesel, on synthesized coal liquids, on hydrogen, on methane gas, on electricity, on used French-fry oil... !

The dream goes around in fevered circles as each gasoline-replacement is examined and found to be inadequate. But the wish to keep the cars going is so powerful that round and round the dream goes. Ethanol! Biodiesel! Coal Liquids. ...

And a harsh reality indeed awaits us as the full scope of the permanent energy crisis unfolds. The global oil production peak is not a cult theory, it's a fact. The earth does not have a creamy nougat center of petroleum. The supply in finite, and we have ample evidence that all-time global production has peaked.

Of course, the issue is not about running out of oil, and never has been. There will always be some oil left underground -- it just might take more than a barrel-of-oil's worth of energy to pump each barrel out, so it won't be worth doing.

The issue is not about running out -- it's about what happens when you head over the all-time production peak down the slippery slope of depletion. And what happens is that the complex systems we depend on for everyday life in advanced societies begin to falter, wobble, and fail -- and the failures in each system will in turn weaken the others. By complex systems I mean the way we produce our food, the way we conduct manufacture and trade, the way we operate banking and finance, the way we move people and things from one place to another, and the way we inhabit the landscape.

I'll try not to dwell excessively on the statistics since I am more concerned here with the implications for everyday life in our nation. But it is probably helpful to understand a few of the numbers.

Oil production in the US peaked in 1970. We're now producing about half of what we did then, and our own production continues to run down steadily at the rate of a few percentage points of recoverable reserves each year. It adds up. In 1970, we were producing about 10 million barrels a day. Now we're down to less than five -- and we consume over 20 million barrels a day. We have compensated for that since 1970 by importing oil from other nations. Today we import about two-thirds of all the oil we use. Today, the world is consuming all the oil it can produce. As global production passes its own peak, the world will not be able to compensate for its shortfall by importing oil from other planets.

Nor is there any real likelihood that new discoveries will be adequate to compensate. Discovery precedes production, of course, because you can't pump oil that you haven't discovered. Discovery of oil in the US peaked in the 1930s -- and production started declining roughly 30 years later. Discovery of oil peaked worldwide in the 1960s, and now the signs suggest the world has peaked. Discovery of new oil worldwide in recent years has amounted to a tiny fraction of replacement levels. In fact, we may be burning more oil just in our exploration efforts than we will get from the oil we're discovering.

The oil industry has been dominated by what are called supergiant fields. The four reigning supergiant fields of oil our time were discovered decades ago and are now in decline. The Burgan field of Kuwait, the Daqing of China, Cantarell of Mexico, and Ghawar of Saudi Arabia. Together in recent decades they were responsible for 14 percent of the world's oil production, and they are now in decline. All except Ghawar of Saudi Arabia have been declared officially past peak by their own governments and Ghawar is showing clear signs of trouble -- though Aramco itself won't say so. Ghawar has provided 60 percent of Saudi Arabia's production. Saudi Arabia's total production is down 8 percent in the year past, despite a massive increase in drilling rigs, and the incentive of high prices.

Last year, the Mexican national oil company, Pemex, declared its supergiant field, Cantarell, to be officially past peak and in decline. As in the case with Ghawar and Saudi Arabia, Cantarell has been responsible for 60 percent of Mexico's oil production. Cantarell is now crashing at an official decline rate of at least 15 percent a year -- perhaps steeper. Mexico has been our No. 3 source of oil imports (after Canada and Saudi Arabia). The crash of Cantarell means in just a few years Mexico, our No. 3 source of imports, will have no surplus oil to sell to the US. It also means that the Mexican government will be strapped for operating revenue -- and you can draw your own conclusions about the political implications.

The North Sea and Alaska's North Slope were some of the last great discoveries of the oil era. Plentiful North Sea and Alaskan production took away OPEC's leverage over the oil markets. This led to the oil glut of the 1990s, driving oil prices down finally to $10 a barrel. It is also what induced the American public to fall asleep on energy issues. It seemed as if cheap oil was here to stay. Forever.

Both The North Sea and Alaska are now past peak and in depletion. Prudhoe Bay proved to be Alaska's only super giant oil field. Several other key fields were discovered. None were even 1/6th the size of Prudhoe Bay.

North Sea oil was produced using the latest-and-greatest new technology for drilling and guess what: it only allowed the region to be drained more rapidly and efficiently. Now 57 of Norway's 69 oil fields are past peak and the average post-peak decline rates average 17 percent a year. The UK's share of the North Sea has declined to the extent that England is now a net energy importer.

Russia, despite current high levels of post-Soviet-era production, peaked in the 1980s, and may now be past 70 percent of its ultimate recoverable reserves. Iran is past peak. Indonesia, an OPEC member, is so far past peak it became a net oil importer last year. Venezuela is past peak. Iraq and Nigeria are consumed by political insurrection. The companies developing Canada's tar sands have announced this past year that their costs will double original estimates -- in other words, whatever comes out of the ground there will be very expensive.

Meanwhile, in the background, completely ignored by the US media, an additional problem is developing on the oil scene. Net world production is going down by just under 3 percent a year, but total exports from the top ten exporters are going down at an even steeper rate. Geologist Jeffrey Brown, among the excellent technicians at TheOilDrum.com website, writes that the top ten exporters are showing a net export decline rate of 7 percent the past year, trending toward a 50 percent export decline over the coming ten years. Why? Because on top of production decline rates, nations like Saudi Arabia, Iran, and Venezuela are using more of their own oil at home with rising populations and more automobiles.

A few additional background items. Most of the easy-to-get, light and sweet crude oil is gone. We got that out of the ground in the run-up to peak [oil]. We found that high quality oil in temperate places onshore, like Texas, where it was easy and pleasant to work, and the stuff was relatively close to the surface. The remaining oil is, each year, proportionally made up more of heavy and sour crudes that are hard to refine and yield less gasoline. Most of the refinery capacity in the world cannot process these heavy and sour crudes and there is no world-class industrial effort to build new ones -- and on top of that, existing world refinery infrastructure is old and rusty. Finally, most of the remaining oil in the world exists either in geographically forbidding places where it is extremely difficult and expensive to work, like deep water out in the ocean or in frozen regions, or else it belongs to people who are indisposed to be friendly to us.

The natural gas situation is at least equally ominous, with some differences in the technical details -- and by the way, I'm referring here not to gasoline but to methane gas (CH4), the stuff we run in kitchen stoves and home furnaces. Natural gas doesn't deplete slowly like oil, following a predictable bell curve pattern; it simply stops coming out of the ground very suddenly, and then that particular gas well is played out. You get your gas from the continent you're on. Natural gas is moved to customers in the US, Canada, and Mexico in an extensive pipeline network. To import natural gas from overseas, it has to be liquefied, loaded in a special kind of expensive-to-build-and-operate tanker ship, and then offloaded at specialized marine terminal, all adding layers of cost. The process also obviously affords us poor control over not-always-friendly foreign suppliers.

Half the homes in America are heated with gas furnaces and about 16 percent of our electricity is made with it. Industry uses natural gas as the main ingredient in fertilizer, plastics, ink, glue, paint, laundry detergent, insect repellents and many other common household necessities. Synthetic rubber and man-made fibers like nylon could not be made without the chemicals derived from natural gas. In North America, natural gas production peaked in 1973. We are drilling as fast as we can to keep the air conditioners and furnaces running.

That's the background on our energy predicament. Against this background is the whole question of how we live in the United States. I wrote three books previously about the fiasco of suburbia. There are many ways of describing it, but lately I refer to it as the greatest misallocation of resources in the history of the world. Why? Because it is a living arrangement with no future. Why doesn't it have a future? Because it was designed to run on cheap oil and gas, and in just a few years we won't have those things anymore.

Having made these choices, we are now hobbled by a tragic psychology of previous investment -- that is, having poured so much of our late-20th century wealth into this living arrangement -- this Happy Motoring utopia -- we can't imagine letting go of it, or substantially reforming it.

We have compounded the problem lately by making the building of suburban sprawl the basis of our economy. Insidiously, we have replaced America's manufacturing capacity with an economy based on building evermore suburban houses and the accessories and furnishings that go with them -- the highway strips, the big box shopping pods, et cetera -- meaning that our economy is now largely based on building more and more stuff with no future -- on a continued misallocation of resources. Roughly 40 percent of the new jobs created between 2001 last year were in housing bubble related fields -- the builders, the real estate agents, the mortgage brokers, the installers of granite countertops. If you subtracted the housing bubble from the rest of the economy in recent years, there wouldn't be much left besides hair-styling, fried chicken, and open heart surgery. Much of this housing bubble itself was promulgated by an equally unprecedented lapse in standards and norms of finance -- a tragedy-in-the-making that has now begun to unwind. What are we going to do about our extreme oil dependence and the living arrangement that goes with it?

There's a widespread wish across America these days that some combination of alternative fuels will rescue us; will allow us to continue enjoying by some other means what has been called "the non-negotiable American way of life." The wish is perhaps understandable given the psychology of previous investment.

But the truth is that no combination of alternative fuels or systems for using them will allow us to continue running America the way we have been, or even a substantial fraction of it. We are not going to run Wal Mart, Walt Disney World, Monsanto, and the interstate highway system on any combination of solar or wind energy, hydrogen, nuclear, ethanol, tar sands, oil shale, methane hydrates, thermal depolymerization, zero-point energy, used french-fry oil, or anything else you can name. We will desperately use many of these things in many ways, but we are likely to be disappointed by what they can actually do for us, particularly in terms of scale -- apart from the fact that most or all of them are probably net energy losers in economic terms.

For instance, we are much more likely to use wind power on a household or neighborhood basis rather than in deployments of Godzilla-sized turbines in so-called wind farms.

The key to understanding what we face is that we have to comprehensively make other arrangements for all the normal activities of everyday life. It is a long, detailed "to do" list that we can't afford to ignore. The public discussion of these issues is impressively incoherent. This failure of the collective imagination is reflected in the especially poor job being done by the mainstream media covering this story -- in particular, The New York Times, which does little besides publish feel-good press releases from Cambridge Energy Research Associates, the oil industry's chief public relations consultant.

These days, the only aspect of these issues that we are willing to talk about at all is how we might keep all our cars running by other means. We have to get beyond this obsession with running the cars by other means. The future is not just about motoring. We have to make other arrangements comprehensively for all the major activities of daily life in this nation.

We'll have to grow our food differently. The ADM/Monsanto/Cargill model of industrial-scale agribusiness will not survive the discontinuities of the Long Emergency -- the system of pouring oil-and-gas-based fertilizers and herbicides on the ground to grow all the cheez doodles and hamburgers. As oil and gas deplete, we will be left with sterile soils and farming organized at an unworkable scale. Many lives will depend on our ability to fix this.

We will find out the hard way that we can't afford to dedicate our crop lands to growing grains and soybeans for ethanol and biodiesel. A Pennsylvania farmer put it this way to me last month: "It looks like we're going to take the last six inches of Midwest topsoil and burn it in our gas tanks." The disruptions to world grain supplies by the ethanol mania are just beginning to thunder through the system. Last months there were riots in Mexico City because so much Mexican corn is now being already being diverted to American ethanol production that poor people living on the economic margins cannot afford to pay for their food staples.

You can see, by the way, how this is a tragic extension of our obsession with running all the cars.

In the years ahead, farming will come back much closer to the center of American economic life. It will necessarily have to be done more locally, at a smaller-and-finer scale, and will require more human attention. Many of the value-added activities associated with farming -- making products like cheese, wine, oils -- will also have to be done much more locally. This situation presents excellent business and vocational opportunities for America's young people. It also presents huge problems in land-use reform. Not to mention the fact that the knowledge and skill for doing these things has to be painstakingly retrieved from the dumpster of history.

We're going to have to move people and things from place to place differently. It is imperative that we restore the US passenger railroad system. No other project we could do right away would have such a positive impact on our oil consumption. We used to have a railroad system that was the envy of the world. Now we have a system that the Bulgarians would be ashamed of.

The infrastructure for this great task is lying out there rusting in the rain. This project would put scores of thousands of people to work at meaningful jobs, at every level, from labor to management. It would benefit all ranks of society. Fixing the US passenger rail system doesn't require any great technological leaps into the unknown. The technology is thoroughly understood. The fact that from end-to-end of the political spectrum there is no public discussion about fixing the US passenger rail system shows how un-serious we are.

There's another compelling reason we should undertake the great project of repairing the US passenger rail system: it is something that would restore our confidence, a way we could demonstrate to ourselves that we are competent and capable of meeting the difficult challenges of this energy-scarce future. ... And it might inspire us to get on with the other great tasks that we will have to face.

By the way, it is important that we electrify our railroad system. All the other advanced nations have electric rail systems which allow them to run on something other than fossil fuel or to control the source point of the carbon emissions and pollution in the case of coal-fired power generation. Electric motors are far simpler and way more efficient even than diesel engines. The US was well underway with the project of electrifying our railroad system, but we just gave up after the Second World War as we directed all our investment to the interstate highway system instead.

We're going to have to move things by boat. But we've just finished a 50-year effort in taking apart most of the infrastructure for maritime trade in America. Our harbors and riverfronts have been almost completely de-activated. The public now thinks that harbors and riverfronts should only be used for condo sites, parks, bikeways, band shells and festival marketplaces. Guess what: We're going to have to put back the piers and warehouses and even the crummy accommodations for sailors.

We're going to have to move a lot more stuff by water or our ability to do commerce will suffer. Meanwhile, if we use trucks, it will be for the very last local increment of the journey. Leaders in business and municipal politics will have to wrap their minds around this new reality.

We are probably in the twilight of Happy Motoring -- as we have known it. The automobile will be a diminished presence in our lives. I'm not saying that cars will disappear, but it will become self-evident that our extreme dependency will have to end. It is possible, but not likely, that affordable electric cars will come on the market before we get into serious trouble with oil. More likely, we'll be facing an entirely new political problem with cars as motoring becomes increasingly only something that the economic elite can enjoy.

For decades, motoring has been absolutely democratic. Everybody from the lowliest hamburger flipper to the richest Microsoft millionaire could participate in the American motoring program. Right now, let's say six percent of adults in this nation can't drive, for one reason or another: They're blind, too old, too poor, et cetera. What if that number rose to 13 percent, or 26 percent of Americans because either the price of fuel or the cost of a vehicle rose beyond their means. Do you suppose that a whole new mood of grievance and resentment might arise against those who were still driving cars? And how would the large new class of non-drivers feel about paying taxes to maintain the very expensive interstate highway systems?

Back to the task list:

We're going to have to make other arrangements for commerce and manufacturing. The national chain discount stores that took over American retail in recent decades will not survive the discontinuities of the Long Emergency. Their business equations and methods of operations will fail, in particular their remorseless cancer-like drive toward replication and expansion. They will lack the resilience to adapt due to their gigantic scale of operations -- a scale that will no longer be appropriate to the contracting available energy "nutrients."

The so-called "warehouse on wheels" composed of thousands of trucks circulating incessantly around the interstate highways will not work economically in a new era of scarcer and expensive oil. Not to mention the 12,000-mile supply line to the factories of Asia which we have tragically come to depend on for so many of our household goods.

We have to check all our assumptions at the door about how things will work in the years ahead. Lately, thanks to Tom Friedman and other cheerleaders for the global economy, we've adopted the notion that globalism is a permanent condition of life. I think we will be disappointed to learn the truth -- that globalism was a set of transient economic relations made possible at a particular time by very special conditions, namely half a century of cheap energy and half a century of relative peace between the great powers.

Those conditions are about to end, and with them, I predict, will go many of the far-flung economic relations that we've come to rely on. When the US and China are contesting for the world's remaining oil resources, do you think it's possible that our trade relations might be affected? These are things we had better be prepared to think about it. China has way outstripped its own dwindling oil supply. China has gone all over the world in recent years systematically making contracts for future delivery of oil with other nations, including Canada, as that nation ramps up production of the tar sands in Alberta.

I want to remind you that there is such a thing as the Monroe Doctrine, an American foreign policy position that essentially forbids nations outside the western hemisphere from intruding in or exploiting affairs in this part of the world. It may be an old and perhaps an arrogant policy -- but I predict the time will come when the United States will invoke it in order to preserve our access to Canadian oil supplies. And if-and-when that occurs, what do you suppose that will mean to our trade relations with China? How many plastic wading pools and salad shooters will Wal-Mart be ordering then?

These are the kinds of things we are not thinking about at all, and which leave us woefully unprepared to face a very uncertain future.

Getting back to retail trade in the US -- it is important to recognize the damage that the national discount chain stores have already done in systematically destroying local commercial economies. If you travel around the main street towns of this nation, as I do, you see places in Pennsylvania, and Michigan, and Alabama, and Oklahoma, and Connecticut, and in my region of the upper Hudson Valley in New York that look like former soviet backwaters. The destruction, the abandonment and desolation in the fabric of our towns is just out of this world.

This era of chain store supremacy will not continue far into the future, and as it wobbles and falls we will be faced with a tremendous task of rebuilding the fine-grained, multi-layered local networks of economic interdependency that the chain stores destroyed. As that rebuilding occurs we will restore social roles as well as economic roles that have long been absent in our home places.

In destroying local retail infrastructures, the chain stores wiped out a whole mercantile middle class. These were the people ran local businesses, who sat on the library and hospital boards, who sponsored the little league baseball, who employed their neighbors and had to behave decently toward them, as well as treating their neighbors decently in matters of trade. They were people who uniformly had to take care of at least two buildings in town -- the place where they did business and the place where they lived. These were the people who were the caretakers of our communities, and the extermination of this class of citizens has been devastating.

We don't know how we are going to make things again in America, for instance, ordinary household products. We're not going to re-live the 20th century, when the US was on a great upswing of energy resources and we made everything for ourselves from toasters to record players. Where I live, in the upper Hudson and Mohawk Valley region of New York, most of the factories have actually been knocked down in the past 20 years. The water power is still there in many of these places, but the buildings are gone. Among all our other wishes, there is a wish that we will innovate stunning new methods for making things, such as nanotechnology. I'd repeat that we'd better check all our assumptions at the door and that we are liable to be disappointed by what these wishes will eventually lead to.

I think the truth is, we are going to have fewer things to buy. The Blue-Light-Special retail orgy of recent decades will fade into history, and shopping will retreat into the background of daily life. Consuming things will not be our sole reason for living.

The role of finance as we know it today will be severely challenged by the Long Emergency. Declining energy supplies have one particular grave implication for industrial societies: that they can no longer take for granted the 3 to 7 percent annual growth in gross domestic product that has been assumed to be normal throughout recent history. In fact, the energy picture -- the dwindling of a particular, extraordinary, one-time, very special resource -- implies a general contraction of productive activity.

Our expectations for growth are vested in tradable paper certificates -- currencies, stocks, bonds, and other instruments that represent our confidence that society will produce more wealth, and that this increase can be enjoyed in the form of profits and dividends. What happens when that consensus about reliable increase falls apart? What happens to the entire edifice of finance when these abstract certificates are no longer backed by the faith of people who have been trading them?

We can see the beginning of this process right now in the unwinding of the home mortgage sector. This recent experiment in the abolition of moral hazard, in the suspension of norms-and-standards in lending, in the fobbing off of risk, is climaxing in one of the great debacles of modern economics. It was based on the idea that immense numbers of promises for future payment could be bundled into bonds, resold, and parlayed to leverage evermore abstract casino-like bets masquerading as investments. This is anything but investment in future productive activity.

It is now being discovered that at the foundation of all this jive-finance activity lie bundles of broken promises, "non-performing loans," as they're called. It remains to be seen how this mortgage-and-housing bubble fiasco will play out, but I think it will be one of the major events leading to an overall loss of presumed wealth for American society. And is likely, as well, to infect the jury-rigged structures of global finance to a disastrous degree.

The key to all our everyday activities in the future is scale. We will probably have to live more locally than has been the case in recent decades. I think we can state categorically that anything organized on the gigantic scale, whether it is an agricultural system, or a finance system, or a corporation, or a chain of stores, or a school, or a government, is going to run into trouble.

School is another item on our "to do" list of things that we have to make other arrangements for. The gigantic centralized public school systems all over America that depend on the massive fleets of yellow school buses for collecting the students every morning around the 50-mile-radius 'pupil sheds' -- this way of doing things will probably encounter failure. Not to mention that we used the same kind of sprawling, one-story, flat-roofed buildings in Florida as in Minnesota -- and given the situation with natural gas we'll have trouble heating these buildings in the colder states. Of course there are plenty of reasons to suspect that schools this large, designed like medium security prisons, are not optimum settings for learning even if oil and gas were plentiful.

Complicating the issue is the fact that our school systems are at the center of the psychology of previous investment. We have put so much of our collective wealth in these sprawling, oversized, vehicle-dependent institutions -- with all their fabulous amenities of swimming pools, video labs, and free parking -- that it will be very difficult for us to let go of them -- even after it is self-evident that they are no longer working. What will replace our giant centralized public schools? School districts will be starved for cash in the Long Emergency. I doubt that we will be able to replace the centralized schools with a whole new system of smaller buildings distributed more equitably around the places where people live. If anything, I suppose a replacement may arise out of home schooling, especially as home schools aggregate into larger neighborhood units so that every parent doesn't have to duplicate the vocational role of teacher (and of course not all parents would even be capable of acting in that role).

The destiny of higher education ought to be especially troubling. The giant universities are exactly the kinds of institutions that will prove unwieldy and unsupportable in the Long Emergency. College will cease to be the mass consumer activity it became in the cheap energy heyday. If it survives at all, it is likely to be -- as earlier in history -- an activity for a much smaller economic elite.

The question of class relations per se will be affected by our energy situation, since it is necessarily linked to our economy. The Long Emergency is going to produce a lot of economic losers -- a whole new group I call the formerly middle class. They will lose jobs, vocations, and incomes that they will never get back. They are going to be full of grievance, anger, resentment, and bewilderment at the loss of their entitlements to the "non-negotiable" American way of life, including home ownership and affordable happy motoring. They are likely to express these feelings politically. We will be lucky if they do not turn to demagogues who promise to mount one sort of campaign or another to restore the entitlements of suburbia.

Such a campaign would be an enormous exercise in futility and a gross waste of our scarce remaining resources. But it is the kind of thing that happens when a society comes under extreme stress, and we had better be prepared for it. Social friction may also be prompted as agriculture comes closer to the center of our economic life, and we're faced with conflict between those who retain wealth in productive land and those who must resort to working in agriculture to make a living. In history, this typically sets the stage for the radical redistribution of property, seizure of land, in short, for political revolution. It could happen here. We are certain to experience epochal demographic shifts in any case. The 200-year-long trend of people leaving the rural places and the small towns to go to the big cities will very likely go into reverse.

Our hyper-gigantic cities and so-called metroplexes are a pure product of the 200-year-long upward arc of cheap energy. Like other things of gigantic scale, our cities will get into trouble. They are going to contract substantially. The cities that are composed overwhelmingly of suburban fabric will be most susceptible to failure. Orlando, Houston, Atlanta. The cities that are overburdened with skyscrapers will face an additional layer of trouble -- the skyscraper, like the mega-city, was a product of cheap energy, and we are going to have trouble running them, especially heating them without cheap natural gas.

As our cities contract, I think they will re-densify at their centers and around their waterfronts, if they are located favorably on water, and depending on how (or if) rising ocean levels might affect them. The process of contraction in our cities is likely to be difficult, disorderly and unequal. Some cities will do better than others. In my opinion, Phoenix and Tucson will be substantially depopulated. They will face additional problems with their ability to produce food locally and with water.

In Las Vegas, the excitement will be over. That will be a good thing since it has become the holy shrine of America's new chief religion: the worship of unearned riches -- based on the belief that it is possible to get something for nothing -- a belief that underlies, by the way, a great deal of the delusional thinking abroad in this land about the ability of alternative fuels and energy schemes to rescue our current mode of living.

It is hard to be optimistic about the destiny of our suburbs. My referring to them as the greatest misallocation of resources in the history of the world pretty much says it all. There will be a wish to rescue them, of course, but it is unlikely to go beyond the wishing stage. We will be a less affluent society in the years ahead than we were when we built the suburbs in the first place, and we will have fewer resources to fix them or retrofit them. The Jolly Green Giant is not going to come and move the houses closer to the shopping -- to undo the vast absurdities of single-use-zoning.

We could reform our codes and regulations which have virtually mandated a suburban sprawl outcome in every American locality -- but it's a little late for that. The horse is out of the barn on that one. And anyway, I believe the mortgage-and-housing bubble fiasco will mark the end of the whole project of suburbanization per se. I don't believe the production home builders will ever recover from it in our lifetimes; we certainly don't need a single additional WalMart or fried food joint; and the energy problems we face will eventually overcome all our wishes to keep that system going, whether we like it or not.

Realistically, I think we will have to return to a set of traditional ways of inhabiting the terrain -- towns, smaller-scaled cities composed of walkable neighborhoods, and a productive rural landscape with more of a human presence than we see in today's countryside. We have thousands of smaller towns and cities waiting to be re-inhabited and re-activated. Most of them occupy geographically important or valuable sites, especially the ones near fresh running water.

For the past two decades I have been associated with the New Urbanist movement. The New Urbanists were architects, planners, and developers who recognized the tremendous weaknesses and liabilities of the suburban pattern and have been campaigning to reform the way we build things in this country. Their methods are consistent with what we are going to need in the decades ahead to refashion human habitats that have a future and which are worth caring about.

The great achievement of the New Urbanists was not in the projects and new towns that they designed and caused to get built in recent years, but in their heroic act of retrieving lost knowledge from the dumpster of history -- a whole body of principles, methods, and skills necessary to design places worth living in. This was knowledge and principle that we had thrown away in our mad rush to become a drive-in utopia. We threw it away thinking that we could replace urban design and artistry with mere traffic engineering and statistical analysis. The result of that is now visible for all to see in the tragic landscape of the highway strips and the single-income housing pods. What we managed to do was build a land full of scary places that turned us into a nation of scary people. But this was the final tragedy of suburbia: we put up thousands of places that aren't worth caring about, not understanding that when we had enough of them, we might be left with a nation not worth defending.

So there you have a comprehensive "to do" list of efforts we can make to meet the challenges of the permanent global energy crisis, things we can do to mount an intelligent response to these circumstances that reality is sending our way. Growing more of our food locally; restoring our railroads and other forms of public transit; rebuilding local networks of commerce and economic interdependency; reorganizing education at an appropriate scale for the future.

We cannot assume a seamless transition between where we are today and where we're going. It maybe turbulent and disorderly.

We cannot assume that technology alone will rescue us. In fact, one of the major obstacles to clear thinking these days is the mistaken belief that technology and energy are the same thing; that they are interchangeable; that if you run out of one, you can just plug in the other.

Energy and technology are related to each other but they are not the same. Technology may help us get energy resources, or use energy resources, but it is not an energy resource itself. We assume magical properties for technology largely because, in our lifetimes, the energy has always been there behind it, steady, dependable, and cheap.

What's more energy and technology both entail very insidious side effects. Energy throws off entropy, a protean force of disorder and loss that manifests in everything from the wasted heat coming out of an engine tailpipe to the immersive ugliness of the American commercial highway strip -- which is entropy-made-visible.

Technology throws off diminishing returns, in the sense that the more complex you make things, often the worse the effect on society as a whole. My favorite example is the telephone system. For more than two decades we have invested billions in computerizing every phone system in the land. The net result, after all that investment and effort, is that it is practically impossible to reach a live human being on a telephone -- not to mention the monumental ten-times-a-day aggravation of getting booted into a computerized phone menu leading to the purgatory of terminal "hold."

I hope we can overcome our tendencies to try to get something for nothing and to engage in wishful thinking. The subject of hope itself is an interesting one. College kids on the lecture circuit always ask me if I can give them some hope. Apparently, they find this view of the future to be discouraging. It may mean fewer hours playing Grand Theft Auto with a side order of Domino's pepperoni pizza, but there are many positive implications for our lives in the future. We may once again live in places worth caring about, where beauty and grace are considered everybody's birthright. We may work side-by-side with our neighbors, on things that are meaningful. Instead of canned entertainments, we may hear the sounds of our own voices making music, see the works of our own dramatists and dancers.

Hope is something we really have to supply for ourselves. We are our own generators of hope, and we do it by demonstrating to ourselves that we are capable of facing the circumstances of our time, of working competently to meet these challenges, and of learning the difference between wishing and doing. In fact, what we need is not so much hope, but confidence in our inherent abilities and the will to act.

We've got a lot to do. We've got to put down the iPods and get busy. There's no time for hand-wringing and whining. As Yogi Berra said, our whole future's ahead of us.

Posted by Hugo Albert Orwell at 05:18 PM | Permalink | TrackBacks (0)

Source: Free-Market News Network

By Noel Gibeson
Thursday, January 11, 2007

In the petrodollar wars, stage one was Iraq and stage two is Iran. Both dared to propose to use the euro instead of the U.S. dollar (USD) to buy Middle East oil. That was a big mistake because it jeopardized the solvency of the USD, a fiat currency; and, therefore, the very heart of the U.S. economy itself. Big business will not stand for that.

What is a fiat currency? A fiat currency in the case of the USD is a currency that is NOT based on gold, silver, or anything else of tangible value; but rather it is "a promise to pay." Essentially, it is an IOU ("I owe you") note that is based on the good faith and credit of the issuer that it will be redeemed at the face value of the note, a USD in this case. This is its weakness for holders of the note, but its strength for the issuer of the currency, in this case the U.S. government who simply continues to print as much money as it wants to in hopes that it will never have to redeem these dollars at their face value all at one time. It is much like an international Ponzi scheme. In reality, it is play money or monopoly money.

New York Post columnist Ralph Peters in "Eyeing Iran" (NYP, January 8, 2007) described the new U.S. military Middle East leadership lineup with General Patreus going to Iraq and Admiral Fallon going to CENTCOM as a sign for the future. Appointing a naval officer to command CENTCOM for the first time is seen as a harbinger of things to come with regard to Iraq, Somalia, and in particular, Iran. The Persian Gulf and the Indian Ocean are key geographical areas in this region. Any attempts by Iran (or anyone else for that matter) to block key strategic geographic features, such as the Strait of Hormuz, or otherwise impede the transport of oil or strategic materials could be met with an instantaneous naval military response. The presence of increased naval forces in the area could also be a sign of potential military action.

What has become more even important than national boundaries, according to Anthony Wile in High Alert (High Alert Publishing, 2007), is the control and domination exercised by global elites over the economies of nations and the destinies of people. Few people are aware of this relationship and this excellent book goes into detail describing how this works. These are the forces that are currently in play worldwide that affect the U.S., Iraq, and Iran, among many other nations.

So when Iraq President Saddam Hussein said in 2000 that Iraq would begin selling Iraqi oil using the euro instead of the USD he instantly became a marked man. Why; because it is vital to the solvency of U.S. fiat currency that there are many foreign holders of the USD in order to keep it afloat; to keep it solvent. This is particularly important in the oil markets where trade must be conducted using the USD that the United States set as the standard long ago for oil purchases. This was done on purpose (Krassimir Petrov, "The Proposed Iranian Oil Bourse," Energy Bulletin, January 26, 2006).

Iran's plan to compete with dollar-dominated and American-owned New York's NYMEX and London's IPE, met with frosty reception from the beginning and things never got better. Because of the United States' high debt levels and stated neo-conservative quest for world domination, the euro inroads to establish a foothold in the dollar-dominated world oil market and posed a direct threat both to the U.S. dollar and to the U.S. economy (William Clark, "The Real Reasons Why Iran is the next Target," Energy Bulletin, October 26, 2004).

The chief obstacle to establishment of a euro-denominated marker has been the three dollar-denominated oil pricing standard, or oil markers as they are referred to in the industry. They are the West Texas Intermediate crude (WTI), Norway Bent crude, and the Dubai crude. Since 2003 Iran has been selling their oil exports to Europe and Asia/ACU in euros. However, in 2004 when Iran announced that it intended to establish an Iranian Oil Bourse that was euro-based, that sent shockwaves through the U.S.-dominated international oil industry because it would compete with the U.S. owned NYMEX and IPE. That set Iran on a path of confrontation with the United States (William Clark, Oil, Iraq, and the Future of the Dollar, New Society Publishers, 2005).

While the United States has no bone with the people of Iran who are generally viewed with great favor in the U.S., it does have a major problem with the Ahmadinejad government of Iran for two reasons; first, their desire to establish an Iranian Oil Bourse, and second, their continued development of a nuclear weapons along with their vow to destroy Israel. Israel would never allow this to happen, nor would the United States.

But perhaps a sin even greater than continued nuclear weapons development has been their quest to establish the Iranian Oil Bourse.

For contrast, North Korea has an even more developed nuclear weapons program and is guilty of proliferating missile technology to Pakistan, Indian and Iran, yet the U.S. does not seem interested in invading them, at least so far. What is the difference? North is not an oil producer, whereas, Iran not only is a major oil producer but intends to setup a non-dollar denominated oil bourse as well. That is why Iran is the next U.S. target.

Posted by Hugo Albert Orwell at 09:12 AM | Permalink | TrackBacks (0)

Source: Axis of Logic

The Proposed Iranian Oil Bourse
By Krassimir Petrov
Dec 29, 2006, 05:48

I. Economics of Empires

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 went 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.

--------------------------------------------------------------------------------

Recommended Reading
William Clark “The Real Reasons for the Upcoming War in Iraq”
William Clark “The Real Reasons Why Iran is the Next Target”

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.

Also by this author
“China’s Great Depression”
“Masters of Austrian Investment Analysis”
“Austrian Analysis of U.S. Inflation”
“Oil Performance in a Worldwide Depression”
See: www.financialsense.com/editorials/petrov/main.html

~~~~~ Notes from the Editor of Energy Bulletin~~~~~

An excellent and thought provoking article by Krassimir Petrov!

However, I think perhaps it's not entirely correct to state that "critics can’t explain why Bush would want to seize those fields." The Bush regime are probably aiming to set themselves up as policeman of the Middle East oil fields, 'protecting' oil supply to Asia and Europe in return for various advantages at any future negotiation tables. Meanwhile billions of dollars of unaccountable no-bid contracts have been handed to corporations with ties to Bush administration, and the Iraqi oil industry is set to be privatised. So the reasons for the war are rich and varied. However Petrov has given us one of the clearest explanations yet of one of the most important, and certainly least understood, motivations for the war.

-AF

http://www.energybulletin.net/12125.html

Posted by Hugo Albert Orwell at 10:33 AM | Permalink | TrackBacks (0)

Source: Agence France-Presse

by Sebastian Smith
December 28, 2006

MOSCOW (AFP) - The tense countdown to Russia's threatened cutting of gas supplies to Belarus, which could also hit deliveries to western Europe, has entered its final hours of confrontation over pricing.

Negotiations continued in Moscow Thursday, said Sergei Kupriyanov, spokesman for Russia's state-controlled monopoly Gazprom.

He refused to give details of the talks, slightly more than three days before a deadline laid down by Russia which is causing concern in the
European Union.

Gazprom chairman Alexei Miller has warned that gas supplies to Belarus will be turned off at 10:00 am in Moscow (0700 GMT) on Monday if Belarus, an ex-Soviet republic, does not agree to a more than doubling of price.

With Gazprom and Belarus both warning of a knock-on effect for western European customers who rely on Belarus as a transit point for Russian gas, the crisis increasingly resembles the showdown between Russia and Ukraine at New Year's 2006.

"A second gas war has been declared," said the respected Vedomosti business daily in Moscow. "Belarus will be cut off, like Ukraine."

The European Union, where Russian imports accounted for 24 percent of total gas requirements in 2005, is watching closely.

"I call on the two parties to reach as soon as possible a satisfactory agreement that does not put in question gas transits to the EU," Energy Commissioner Andris Piebalgs said in a statement.

"The Commission is following the situation very closely since it may affect gas supplies to the European Union."

Gazprom accuses Belarus of preparing to siphon off gas destined for Europe in the event of a cut to its domestic supplies and has warned that compensation for a loss in volumes might be impossible.

Belarus argues that if it is unable to agree with Gazprom on a new contract for its domestic supplies in 2007, then the contract governing transit of Russian gas westward will also become void.

Gazprom says the price increase would bring Belarus' fee closer to international standards and away from Soviet-style subsidies, while critics accuse the giant company of using energy as a weapon to bring neighbouring countries under Kremlin dominance.

Ironically, the dispute pits Belarus' President Alexander Lukashenko against the one major country that supports his authoritarian regime.

In contrast, Gazprom's strong-arm tactics in Ukraine 12 months ago, culminating with the brief cut-off in gas, were widely seen as part of a Kremlin strategy to weaken strongly pro-Western President Viktor Yushchenko.

The current crisis is on a smaller scale than the Ukraine episode, since just 20 percent of Russian gas exports to Europe go through Belarus, compared to 80 percent through Ukraine.

Last winter was also one of the coldest recorded in Europe.

So far, this winter is one of the mildest and so demand for energy is lower. According to the European Union, reserves are big enough to deal with any temporary shortfall.

Russia's media predicted that Belarus, a country of 10.3 million people sandwiched between Russia and the European Union, will find the cost too high to maintain defiance for long.

"Unpredictable he may be, but Lukashenko will not continue the conflict with Russia for long," Vedomosti quoted an unnamed Kremlin official as saying, suggesting that Lukashenko might accept a compromise in which Belarus took a loan from Moscow that covered the increased gas price.

However, commentators in Belarus said the country was ready to stand firm.

"In the end they will come to a deal. Belarus has its own cards in this fight -- transit, Russian military bases stationed on its territory, political relations," said analyst Andrei Fyodorov.

Belarus currently pays Gazprom a highly subsidised 46.68 dollars per 1,000 cubic metres of gas and Gazprom originally demanded an increase to 200 dollars, which is closer to western European prices, unless Belarus agreed to sell 50 percent of its pipeline operator Beltransgaz.

This would give the Russian state-owned giant an important strategic foothold on the European Union's eastern border.

Gazprom has since reduced that demand to 105 dollars per 1,000 cubic metres -- 75 dollars per 1,000 cubic metres in cash payments, plus the equivalent of another 30 dollars in shares of Beltransgas.

Belarus is so far refusing to accept the deal.

"Russia is not only after extra revenues, but wants to take under control certain parts of the property in neighbouring countries," Belarussian parliament deputy Anatoly Krasutsky said. "The government should have diversified its energy sources earlier, but you learn by your mistakes."

Posted by Hugo Albert Orwell at 09:32 AM | Permalink | TrackBacks (0)

As the symptoms of peak oil and gas production become more evident, the competition for these resources will likely also become more visible. There is trouble brewing in Eastern Europe over former Soviet countries who are unhappy with the prices they are being forced to pay Russia for badly needed natural gas supplies.

Since Russia supplies much of Europe with natural gas through pipelines that run through Belarus and Ukraine, those countries have a degree of leverage over Russia in their negotiations for the price of their own gas deliveries.

------

Source: Reuters

By Andrei Makhovsky and Dmitry Zhdannikov
2 hours, 16 minutes ago

MINSK/MOSCOW (Reuters) - Belarus issued an implicit threat that it could stop Russian gas deliveries through its pipelines to western Europe unless Russia's gas monopoly Gazprom relented on demands Minsk pay steep price increases in 2007.

The threat is likely to revive unpleasant memories of gas cuts to Europe last year when Russia was locked in a similar pricing row with Ukraine. But Belarus ships smaller volumes of gas to Europe via its territory and Russia said Europe was safe as Gazprom (GAZP.MM) had stockpiled extra gas in Germany.
"We are inter-dependent. If I don't have a domestic gas supply contract, Gazprom won't have a transit deal," Belarus's Deputy Prime Minister Vladimir Semashko said at Minsk airport late on Tuesday after his return from failed talks in Moscow.

About 80 percent of Russian exports to Europe are pumped via Ukraine, with the rest going through Belarus. Russia supplies a quarter of Europe's gas to more than 20 countries.

Belarus, whose President Alexander Lukashenko is accused in the West of crushing human rights, has long been a Russian ally.

Vladimir Putin's distaste for Belarus's Soviet-style economic policy and reluctance to share enterprises with Moscow.

Semashko did not say whether Belarus was prepared to stop all gas transit via its territory.

Two years ago, Minsk took no such action in a similar dispute, but Gazprom accused it of taking gas from transit pipelines for its domestic needs. Gazprom said it viewed Semashko's latest comments as a new threat to steal gas.

Two years ago, the row generated no major criticism of Russia in the West due to Lukashenko's poor political image.

Last year, Russia came under fire from politicians in the European Union and the United States following gas cuts to Ukraine. The dispute accentuated rocky relations between Moscow and Ukraine's pro-Western leadership, since tempered by the return of a prime minister friendlier to Russia.

U.S. ACCUSATION

The sniping reached a climax when Vice President smaller neighbors.

Some analysts say Moscow may decide against resorting to cuts this year given the Ukrainian experience and the growing importance of Germany as its top trade partner.

"Belarus has a very strong negotiating position with its gas transportation infrastructure and we believe that Gazprom will have to be very flexible with its Belarus pricing policy," said Yelena Savchik from Renaissance Capital brokerage.

But a Gazprom source told Reuters some top employees had been told to cancel New Year holidays: "It looks exactly like one year ago with Ukraine."

Gazprom still hopes for a deal to allow Belarus to receive supplies and Gazprom to transit gas to Poland and Germany.

Gazprom says it offered major concessions to Belarus on Tuesday such as lowering the proposed price to $110 per 1,000 cubic meters from the previous proposal of $200. On Wednesday, it lowered its offer still further to $105. Gazprom has also said the country could pay part of its bill in assets.

Belarus now pays $46.7, or as much as consumers in Russia. By comparison, Gazprom will charge Moldova $170 in 2007 and Georgia $235, while consumers in Europe pay over $250.

Posted by Hugo Albert Orwell at 10:15 AM | Permalink | TrackBacks (0)

Source: Kuwait Times

By Peter J. Cooper
December 25, 2006

KUWAIT: It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output. Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al-Zanki told Bloomberg. He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 million a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.

Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?

The news about the Burgan oil field also lends credence to the controversial opinions of investment banker and geologist Matthew Simmons. His book 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' claims that ageing Saudi oil fields also face serious production falls.

The implications for the global economy are indeed serious. If the world oil supply begins to run dry then the upward pressure on oil prices will be inexorable. For the oil producers this will come as a compensation for declining output, and cushion them against an economic collapse.

However, the oil consumers then face a major energy crisis. Industrialized economies are still far too dependent on oil. And the pricing mechanism of declining oil reserves will press them into further diversification of energy supplies, particularly nuclear, wind and solar power.

All this was foreshadowed in the energy crisis of the late 1970s when a serious inflection in oil supply by the year 2000 was clearly forecast. How ironic that those earlier forecasts now look correct, while more modern and recent forecasts begin to look over optimistic and out-of-date with geological reality.

Nobody can change the geology, and forces of nature that laid down reserves of oil and gas over millions and millions of years. Could it be that we have been blinded by technological advances into thinking that there is some way to beat nature?

The natural world has an uncanny ability to hit back at the arrogance of man, and perhaps a reassessment of reality at this point is called for, rather than a reliance on oil statistics that may owe more to political manoeuvring than geological facts. - AME Info FZ LLC.

Posted by Hugo Albert Orwell at 10:12 PM | Permalink | TrackBacks (0)

Source: NRDC.org

December 10, 2006

How bad is the current energy crisis? Really, really bad, says oil expert Charley Maxwell.

After half a century in the oil business, Charles Maxwell is widely referred to as the dean of energy analysts. As a Marshall Scholar at Oxford he specialized in Arabic and Persian language and history before joining Mobil in 1957. He spent a decade with the oil giant, scheduling tanker shipments, working in a field office in Nigeria, and negotiating Middle East production agreements. When the Arab oil embargo hit in 1973, he was already being hailed by Institutional Investor as Wall Street's number-one oil analyst. Today he is a senior energy analyst with Weeden & Co., which provides proprietary research to institutional investors.

Charley Maxwell is not your classic environmentalist -- he favors further development of coal and nuclear energy and sits on the board of a coal-bed methane company in Denver. But in this late-September conversation with Sonia Shah, author of Crude: The Story of Oil, Maxwell urges a new conservation ethic that may -- or may not -- save us from the worst energy crisis we have yet faced.

You are famous for coining the term "energy crisis" in the 1970s. Do you think that we're entering another crisis now?

I do. In the first energy crisis, we tried to keep prices low and ration the physical gasoline. People sat in these long queues and it was a huge loss of time and money. When the second energy crisis hit, in the late seventies and early eighties, we just allowed the price to rise. And that's what we're doing now -- rationing by price. The fact that gasoline recently hit $3.20 a gallon would suggest that we are in crisis. I would say even $2.50, which is where it is now, represents some form of crisis.

What are the underlying reasons?

There are four, I think. First and foremost, there was a lot of oil that could have been discovered that wasn't, because the national oil companies such as Saudi Aramco didn't invest enough in exploration. Second, the big oil companies didn't exercise much vision. When prices went up in 2000, they basically pocketed the money. Of course, if you're an executive and you have stock options, you start to think that the whole world depends on your stock price rather than on getting more oil. And who's to say that we should have more oil? If it means that everyone is going to work harder and longer to make possible the greater use of SUVs, is that a worthy end in the world of God?

And the other two reasons?

The third is political instability around the world. And the fourth is that we are now approaching the 50 percent mark of recoverable oil. Global oil production will reach a maximum rate and then it will inexorably start to go down. I predict that will be between 2015 and 2020. When that happens it will be the single biggest problem that we face.

And we're using more oil all the time.

Yes, as the world economic system grows, we're needing about 1.5 percent to 2 percent more oil every year. Right now the non-OPEC countries are providing about half of that. But those proportions are changing fast. In 2010 that door slams shut, and we will have to call on OPEC for all the new oil we need. So they will have complete control over its availability and its price.

How much more oil is still waiting to be discovered?

There is still a lot of oil out there. But if it takes 30 years rather than 10 to discover it, then we're not going to be producing enough each year to meet our needs. What's happened is that the search has slowed dramatically. So we're in deep trouble.

Exxon has said there could be up to 4.8 trillion barrels of oil still recoverable. And there are other industry estimates that go as high as 7 trillion.

I read that stuff and it's good background humor, you know what I mean? But I really hope they don't think anyone takes them seriously.

So is it just a PR thing?

No, I think Exxon actually believes it, which is really sad.

What's the outlook for new sources of oil, so-called unconventional sources?

Most of that is actually gas. There's coal-bed methane, which is the gas from coal deposits. There's the gas from so-called tight sands, which are geologic formations on the way to becoming sandstone. And then there's shale, which gives up the gas very slowly. That makes it uneconomic when [natural] gas costs $2 [per million Btu], but in a world of $7 gas, you'd accept the slow production and you'd still be happy to get it.

Do you think price levels are high enough at the moment to start triggering changes in our behavior?

Even with $3 gas, nobody's saying, "I can't take Johnny to the soccer match." But there's no doubt we're going to have to change our habits. We're going to have to design our cities differently. We're going to need greater population densities and more public transportation. We're going to have to build our houses to different building codes. But the system can't change overnight. We can change our habits in two or three years and the next generation of equipment will be developed with energy conservation in mind, but people will have to go on with their present equipment for a time.

Even so, I think we're already triggering some favorable changes at $3, like the decline in SUV sales and the increased sales of smaller sedans. I read the other day that in 10 years, 10 percent of the country will be using hybrids -- which isn't that much. So there's got to be more than hybrids, and I think Honda is on to it with a new small diesel with a very efficient engine. One advantage of diesel is that the engine lasts longer than the gasoline engine.

But doesn't our whole model of economic growth depend on throwing things out and getting new ones?

Yes, but I think this new conservation ethic is going to come in. It will be hard on General Motors and Ford and Chrysler, and it may take some subsidies. I don't think the government can afford to put any of those companies into bankruptcy.

Do you see any prospect of a gasoline tax? Or is that still a taboo?

I think it's changing. But there are lots of ways to do it. You don't have to have a gasoline tax; you can have a tax on horsepower and thus give a huge lift to lighter cars with less powerful engines. There's a recognition that we have to decrease the weight of vehicles. We can now make cars with traditional engines that are half the weight of the cars today. There are some marvelous new plastics that give us this very light weight with great strength, so we'll be able to hold on to these cars for much longer.

Where's the political leadership on all this? I mean, when the president talks about our being "addicted to oil" and needing more ethanol...

Well, he's just being told what to say by his minions, you know. Ethanol, for the moment -- meaning ethanol from corn -- is a stupid investment, as people are discovering. Pretty close to 100 percent of the savings [in oil consumption] that you get on ethanol is consumed by the hydrocarbon fuel that has to be used to grow the corn. You do save something in national security terms -- it's not from the Middle East, and you're not putting dollars out into the wider world. But if they can convert cellulose to sugar, and sugar to alcohol, then we will really have something.

They're using sugarcane in Brazil, of course. But you mean other crops, like switchgrass?

Yes, that's right, and that would give you maybe a 40 percent savings. That's coming, but probably not for six or seven years.

What about solar and wind and other alternatives?

I'm very keen on solar, because it works and it's getting more efficient every year. But the problem is that today it represents maybe one-tenth of 1 percent of the energy we produce. In 10 years it may be half a percent. So it won't solve the problem. Wind will be a little better, a little bigger. And I do believe that when the problem is solved, it will be solved by a host of small contributions like this, from different directions.

And that will take a lot of technological innovation.

Yes. You know, entrepreneurs are doing all kinds of things -- racing to design new types of wiring for electric motors, new types of batteries for cars. In garages around the country, the inventive geniuses are being let loose. I think it's going to become an American jamboree, in a way, because what we do best is innovate.

Does that make you an optimist?

I think we'll get through this problem by about 2020 to 2025. My worry is how we get there. We have a time when oil is winding down before anything is able to slide over and solve the problem. A lot of nuclear development is being brought along by the incipient shortage of future oil, and it's putting people into a proliferation mode. The whole world could come under this threat, and it's a terrible one. We could also be in deep trouble as a social system. How do we achieve fairness [in rationing scarce energy supplies] when the gridlock between rich and poor already stops us from having an energy policy in this country? We could see democracy entering its death throes.

Posted by Hugo Albert Orwell at 12:57 PM | Permalink | TrackBacks (0)

Source: Times Online UK

Julian Evans in Moscow

The Russian Government is considering hiring a foreign fund manager for a proposed oil-and-gas fund that it hopes will account, eventually, for 60 per cent of its GDP, or about $500 billion (£255 billion) at present estimates, a source at the Ministry of Finance told The Times.

It would be one of the biggest funds in the world. The Government has stowed $83 billion in petrodollars in its Stabilisation Fund, which the central bank manages and is invested entirely in AAA-rated US Treasury bills.

However, the ministry wants to take more risks with its money. It is proposing that the Government set up two new funds, including a reserve fund, accounting for 7 per cent to 10 per cent of GDP, which, a ministry source said would probably be managed by the central bank. However, it would be allowed to invest in all investment-grade assets. The fund would be used to manage oil price shocks.

The second fund would be a savings fund and, eventually, it would account for 60 per cent of GDP, according to sources. This fund could be dipped into by the Government. It would have a more aggressive risk profile and be allowed to invest in foreign equities, corporate debt and money-market instruments.

A source from the Ministry of Finance said: “We are considering who should manage this. It could be a foreign investment firm, the central bank or a state-owned bank.” The state-owned Vnesh-econombank (VEB) looks like a favourite to win the enormous mandate. Not to be confused with Vneshtorgbank (VTB), VEB is a Soviet-era state-owned bank whose original mandate was to manage the debt of the USSR. However, its ambitious management, led by Vladimir Dmitriev, its chief executive, is expanding its remit aggressively.

A botched reform process in 2003 meant that Russian citizens did not have the time or education to choose private fund managers for their state pensions, so about 95 per cent of pensions ended up being managed by VEB. Private fund managers, including Deutsche UFG and Raiffeisen Bank, were disappointed.

VEB has since put almost all the pension fund in Russian government bonds, so the state pension fund significantly underperforms privately managed pension funds. VEB is considered a Silovik bank, meaning that it has close ties to the Russian security services. It is thought to have covertly shifted federal money to the state-owned Rosneft in December 2004 to help it to acquire Yuganskneftegaz, Yukos’s main asset, in a controversial auction. The Kremlin denies that Rosneft used federal money to buy the asset.

VEB is also the favourite to become the new Russian development bank, which the Government wants to set up next year to help to renovate the country’s infrastructure via multibillion-dollar public- private partnership deals. And now it is favoured to manage what will be one of the biggest investment funds in the world.

A source at the Ministry of Finance said: “VEB manages the Government’s debt, so perhaps it should also invest the Government’s money. However, it has little experience of active investment management . . . The problem is that few private Russian fund managers have much experience, either. Only foreign managers have much experience.” Hiring foreign managers would be sensitive, but it would allay fears that the Government’s petrodollars could be misused.

Another option being considered is setting up a special agency to manage the fund, under the auspices of the central bank but employing a large team of professional investment managers, similar to what Norway did to manage its huge petrofund.

Capitalism at its finest

- Russian Government has accumulated $83 billion in oil revenues in its Stabilisation Fund

- Fund, managed by the central bank, is invested 45% in US Treasury bills, 45% in euroland government bonds and 10% in gilts

- The Kremlin wants to set up two new funds. One will have a conservative risk profile, investing only in investment-grade securities

- The other fund will be allowed to invest in equities, corporate bonds and other instruments

- Eventually, sources say, it will account for 60% of Russian GDP, which could be $500 billion, making it one of the biggest funds in the world

- The Government has not decided who will manage the fund, but is considering holding tenders and accepting bids from foreign managers

Posted by Hugo Albert Orwell at 12:39 PM | Permalink | TrackBacks (0)

Source: Bloomberg

By Bill Varner

Dec. 23 (Bloomberg) -- The United Nations Security Council voted 15 to 0 to impose sanctions on Iran for its nuclear program for the first time, including a ban on acquisition of materials and technology that might be used to build an atomic bomb.

The measure demands that Iran halt uranium enrichment and heavy-water projects that the U.S. and its European allies have said may lead to the development of nuclear weapons. It freezes the financial assets of 12 named individuals and 11 groups such as the Atomic Energy Organization of Iran.

The resolution also requires the UN's nuclear watchdog agency, the International Atomic Energy Agency, to report on Iran's compliance within 60 days. ``Further appropriate measures'' such as economic penalties and severance of diplomatic relations will be required if Iran doesn't comply, it says.

``We are sending Iran an unambiguous message that there are serious repercussions to its continued disregard of its obligations and defiance of this body,'' U.S. Acting Ambassador Alejandro Wolff said. ``We look forward to Iran's full, unconditional and immediate compliance with this resolution.''

The vote, the result of more than two months of negotiations largely aimed at winning Russia's support, occurred as the U.S. and Britain are close to increasing naval power in the Persian Gulf in a display of military resolve, the New York Times reported, citing unidentified Pentagon and military officials.

Serious Message

``Russia views this resolution as a serious message being sent to Iran regarding the need more actively and more openly to cooperate with the IAEA to lift or resolve the remaining concerns relating to their nuclear program,'' Russian Ambassador Vitaly Churkin said. ``We hope that Iran will correctly and very seriously perceive the contents of this resolution and take the necessary measures to redress their situation.''

The Security Council action will likely add to tensions in the region and may contribute to rising oil prices in 2007, according to Ian Bremmer, president of the Eurasia Group, a New York-based organization that analyzes political risk for businesses. Iran is the second-biggest oil producer in the Middle East.

``Oil markets won't move very much on this resolution,'' Bremmer said. ``But we think Iran is one of the biggest risks out there and that there will be escalation of tensions in 2007 as Iran retaliates. They can disrupt markets by driving proxy wars in Iraq, Lebanon and the Palestinian territories.''

Retaliation

Senior Iranian lawmakers said today that their parliament might retaliate by blocking inspections by the IAEA, according to IRNA, the state-run Iranian news agency. Legislation to suspend inspections has been passed by the parliament's security and foreign affairs committee, the agency reported.

At the UN, Iranian Ambassador Javad Zarif said suspension of enrichment activities was ``not a solution,'' that it was instead a ``temporary, stop-gap measure'' that didn't work from November 2003 to February 206. Without specifying how Iran would react to the vote, he said the ``days of bullying, pressure and intimidation by some nuclear-weapons holders are gone.''

Zarif said the Security Council was guilty of hypocrisy for taking no action against Israel after Prime Minister Ehud Olmert appeared to confirm recently that Israel has nuclear weapons.

The U.S. and its European allies, Zarif said, which ``pushed this council to take groundless punitive measures against Iran's peaceful nuclear program, have systematically prevented any action to nudge the Israeli regime towards submitting itself to the rules governing the nuclear non-proliferation regime.''

Russia agreed to vote for the resolution after Britain, France and Germany dropped a proposed travel ban on Iranian officials and narrowed the scope of the trade embargo to ``proliferation sensitive'' materials and technology. An earlier version of the text, first circulated in October, would have banned any item that could contribute to Iran's nuclear or missile programs.

Nuclear Power Plant

The resolution's sponsors also deleted any mention of the Bushehr commercial nuclear power plant that Russia is helping Iran build. An earlier text would have barred delivery of fuel to the plant.

``It is an important symbolic move, but it is hard to see that this puts sufficient pain on Iran to compel it to do anything,'' said Bruce Reidel, senior fellow at the Brookings Institution in Washington. ``At best, this is a warning shot across the bow of the Iranian state, a long way from authorizing the use of force.''

Iran ignored a July 31 resolution requiring it to suspend enrichment activities by Aug. 31, and President Mahmoud Ahmadinejad, pronounced ah-ma-deen-ah-ZHAD, has said his government will continue its nuclear program.

Vigilance

The resolution creates a Security Council committee to monitor implementation of the sanctions and calls on UN member nations to ``exercise vigilance'' regarding the international travel of the 12 Iranian officials and any ``specialized teaching or training'' of Iranian nationals.

UN member governments are to report to the committee within 60 days on steps they have taken to implement the resolution.

The sanctions would be suspended by Iran's decision to suspend enrichment activities and terminated by a report that the government in Tehran has complied with all UN Security Council and IAEA requirements.

Undersecretary of State Nicholas Burns said in a conference call with reporters that the U.S. would follow the vote with new efforts to persuade other nations to enact the same type of financial and trade sanctions on Iran that the U.S. has had in place for 27 years.

``Russia and China tell us that want to deny Iran a nuclear weapons capability,'' Burns said. ``We want to see more vigorous action by them. We would like to see them stop selling arms to Iran and limit export credits to Iran. We think it is time to an end for business as usual.''

To contact the reporter on this story: Bill Varner in the United Nations at wvarner_at_bloomberg.net.
Last Updated: December 23, 2006 13:02 EST

Posted by Hugo Albert Orwell at 11:51 AM | Permalink | TrackBacks (0)

Source: Houston Chronicle.com

Dec. 21, 2006, 11:18AM
By ALEX NICHOLSON AP Business Writer
© 2006 The Associated Press

MOSCOW — A golden statue of Saparmurat Niyazov rotates on a pedestal in Turkmenistan's capital to always face the sun _ a testament to the leader's personality cult and a garish product of the Central Asian nation's vast energy wealth.

Now, the autocratic president's death on Thursday is set to fuel a rivalry between Russia, the United States and China for access to the former Soviet republic's massive gas reserves in what analysts call a repeat of 19th-century rivalries in the region.

"Turkmenistan has returned as a key piece in the new Great Game," said Alfa Bank strategist Chris Weafer, referring to Russia and Britain's jostling for pre-eminence in Central Asia in the 1800s. "It is a big prize."

Over the past year Niyazov, who personally brokered the country's energy deals, had sought to balance Russia's influence _ courting Turkish and, in particular Chinese companies, to help explore and develop its nearly 3 trillion cubic meters of proven gas reserves.

Russia's state-controlled gas monopoly OAO Gazprom controls the only transit route for Turkmen gas exports to other former Soviet states and Europe.

Keen to lock in fresh energy sources to feed its exploding economy, China saw its efforts rewarded with Niyazov's promise to pipe 30 billion cubic meters of gas beginning in January 2009. It also won an invitation last month to tap the giant Iolotan fields, which the late president declared, to international disbelief, to contain 7 trillion cubic meters of natural gas _ or more than even Saudi Arabia's proven reserves.

Washington, meanwhile, has lobbied for a pipeline out of Turkmenistan across the Caspian Sea to the west, bypassing Russian territory. That would meet a U.S. strategy of tapping sources of crude and gas outside the Middle East, and drawing Caspian states away from Russia and closer to the West.

Niyazov ultimately proved "too difficult" for U.S. officials to deal with, Weafer said.

The Turkmen leader used revenues from energy investments to nourish lavish construction projects _ a huge, man-made lake in the Kara Kum desert, a vast cypress forest to change the desert climate, a ski resort and a 40-meter (130-foot) pyramid to celebrate the anniversary of the country's independence from the Soviet Union.

"Russia will want to retain its political influence in the country and one assumes that the U.S. will try to use the opportunity (of Niyazov's death) to get back in there, increase its influence and resurrect the plan for the pipeline across the Caspian," Weafer said. "But my guess is that the Chinese will have the biggest delegation at the funeral."

Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, says that multinational oil companies will prick up their ears at the news of Niyazov's death, but serious reforms would need to be undertaken before they could enter the promising market.

"The big guys, the people who might be interested, can't touch the place _ it doesn't come close to meeting the standards of corporate responsibility," he told The Associated Press.

"Obviously they can't afford not to look that this place and the possibility that it might open up _ it's obviously clear that they need to consider this," he said. "I just don't think we'll see any rapid developments. We need to finds out if there will be real change in status quo."

That could come in the form of some indication of democratization in the capital Ashgabat or open auctions of its hydrocarbon reserves.

"Given the resource base, it's always been at the back of peoples minds, but it's become increasingly difficult to work there because of the centralized decision-making and dominance of state-run monopolies," said analyst Hilary McCutcheon of energy consultants Wood MacKenzie. "That may be on the brink of changing."

Turkmenistan's burgeoning relationship with China has also rattled Ukraine, which relies on cheap Turkmen gas supplies to keep its domestic bill down.

Gazprom has a contract until 2009 to buy 50 billion of the 60 billion cubic meters that Turkmenistan produces annually, most of which it then re-exports to Ukraine.

While a recent price hike secured by Niyazov just months before his death suggests that pact is unlikely to be reconsidered in the near future, analysts say little will be clear until a successor is named.

Turkmenistan's State Security Council named Deputy Prime Minister Kurbanguli Berdymukhamedov the acting president, even though the Constitution required Parliament Speaker Overzgeldy Atayev to take over as acting head of state. The council said the Prosecutor General's office has opened a criminal investigation against Atayev, making him ineligible to fill in as president. The move could herald a battle for succession between rival groups in the Turkmen administration.

If Ashgabat makes good on its deal with China, and if fresh reserves are not developed apace, supplies to Ukraine could be cut, analysts say.

If that happens, Kiev would be forced to buy more expensive Russian gas, potentially putting it into a situation similar to a price fight with Gazprom last winter, which resulted in some cuts in supplies to some European cities.

Posted by Hugo Albert Orwell at 03:11 PM | Permalink | TrackBacks (0)

Source: Wikipedia

Iran is planning to open a commodity exchange, referred as 'Iran Petroleum Exchange', 'International Oil Bourse' or 'Iranian Oil Bourse'. A Petrobourse for Petroleum, petrochemicals and gas in various non-dollar currencies, primarily the Euro. If successful, this would establish a euro-based pricing mechanism for oil trading, or oil marker as it is called by traders.

The acronym 'IOB' has been used as it can be interpreted as either "International Oil Bourse" or "Iranian Oil Bourse", but it has no official status.

The geographical location is expected to be the Persian Gulf island of Kish (which is designated by Iran as a free trade zone.)[1].
Contents

Background

The three current oil markers are all US dollar denominated: North America's West Texas Intermediate crude (WTI), North Sea Brent Crude, and the UAE Dubai Crude. The two major oil bourses are the New York Mercantile Exchange (NYME) in New York City and the International Petroleum Exchange (IPE) in London. The proposed Iranian bourse would establish a fourth oil marker, denominated by the euro.

Timeline

The Iranian oil bourse, first reported in 2005, was to have a planned opening date of March 20, 2006 [2], which is the Iranian New Year, Nauroz. According to an April 2005 report, the Tehran Stock Exchange (TSE), the Wimpole Consortium and a private staff fund for retired petroleum workers will together form the consortium developing the exchange [3].

In January 2006, Chris Cook of the Wimpole Consortium referred to delays in the process due to the election to the presidency of Mahmoud Ahmadinejad and subsequent difficulty in appointing a new oil minister acceptable both to the president and parliament [4].

In March 2006, the Petroleum Minister of Iran, Kazem Vaziri Hamaneh, announced that due to "technical glitches", the Bourse launch was postponed, with no new date set. [5]. However, as of April 26 Iran had restarted its move to open the oil market, and Kazem announced the bourse was set to open the first week of May [6].

In May 2006, Minister of Economic Affairs and Finance Davud Danesh-Jafari said the Oil Ministry has a two-month deadline for presenting the Articles of Association of the Iranian Oil Bourse. Danesh-Jafari said that the Euro had not yet been finalized as the legal tender of transactions in the oil bourse, and the final decision about that depends upon the Oil Ministry’s proposed IOB Articles of Association [7]

During the first phase of its implementation, the Iranian Oil Bourse plans to offer financial derivatives relating to crude oil.

In July 2006, a building has been purchased and the projected opening date is September 2006. [8] On September 15, Oil Minister Kazem Vaziri-Hamaneh stated that all preparatory requirements had been arranged for launching the oil stock market in the country.[9]

In December 2006 Bloomberg cited two Iranian newspapers reporting Iran's Minister of Economy Davoud Danesh-Ja'fariIran as wanting to cut US dollar based transactions to a minimum.[10] Iran-Kyrgyzstan Joint Economic Commission will credit 50 Million Euros to Kyrgyzstan for primarily industrial joint projects, showing a strong commitment to large Euro dealing. [citation needed]

See also

* Ministry of Petroleum of Iran
* Petrobourse
* Petroeuro
* Petrodollar
* Petroruble
* Petrodollar warfare
* Economy of Iran

Citations

1. ^ Kish Oil Exchange Planned, Iran Daily, January 24, 2006
2. ^ The Iranian line in the sand, Dan Crawford, The Republic (Vancouver), August 18 to 31, 2005
3. ^ A star rises in the east, Stella Farrington, April 2005
4. ^ Speaking freely: What the Iran 'nuclear issue' is really about, Chris Cook, January 21, 2006, Asia Times/energybulletin.net
5. ^ A frenzied Persian new year, March 22, 2006, Asia Times
6. ^ Iran oil bourse next week, April 26, 2006, Iranian.ws
7. ^ Ministry to offer IOB Articles of Association in two months, May 19, 2006, Mehr News Agency
8. ^ Iranian Journel, building has been purchased and new date is September, accessed July 6 2006
9. ^ Iran's oil bourse to be launched, September 15, 2006, Mehr News Agency
10. ^ Iran May Reduce Use of Dollar, Tehran Papers Say, December 6, 2006, Bloomberg

Literature

* Clark, William R.: Petrodollar Warfare : Oil, Iraq and the Future of the Dollar, New Society Publishers, 2005, ISBN 0-86571-514-9

External links

* PetroTalk Portal for petro related Articles, Discussion, Links and more
* infowars article, infowars, May 9, 2006
* Iran oil bourse next week, Persian Journal, Apr 26, 2006
* Iran takes on west's control of oil trading, The Guardian
* The Real Reasons Why Iran is the Next Target: The Emerging Euro-denominated International Oil Marker
* Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse
* The Proposed Iranian Oil Bourse
* Trading oil in euros – does it matter?
* Will the Iranian Oil Bourse Threaten the Dollar?
* Petrodollars and Nuclear Weapons Proliferation: Understanding the Planned Assault on Iran, Centre for Research on Globalization, February 10, 2006
* The Iranian line in the sand
* Petrodollar or Petroeuro? A new source of global conflict
* The Iranian Threat: The Bomb or the Euro?
* The Real Reasons Why Iran is the Next Target
* Will Iran’s oil kill the U.S. dollar?
* Strange ideas about the Iranian oil bourse (a counterpoint with countercounterpoints in comments...)
* Why Iran's Oil Bourse can't break the Buck

Posted by Hugo Albert Orwell at 10:00 AM | Permalink | TrackBacks (0)

Source: The Financial Express

Posted online: Thursday, December 07, 2006 at 0000 hours IST

DEC 6: Iran, the world’s fourth-largest oil exporter, plans to reduce its use of the US dollar in world trade and increase use of the euro, two Tehran-based newspapers reported.

The Tehran Times said on Wednesday Iran has started substituting euros for dollars in oil sales, citing an unidentified person at the oil ministry. Iran Daily reported Iran wants to cut its dollar-based transactions to a minimum, citing minister of economy Davoud Danesh-Ja’fari. Iran’s policy of selling oil in US dollars ‘‘has not changed yet,’’ said Hojatollah Ghanimifard, executive director for international affairs at National Iranian Oil Co., in a statement read to Bloomberg News from his office.

The US and several European nations are pushing the United Nations to sanction Iran for its nuclear programme.

The dollar touched a 20-month low against the euro this week, and central banks in the Middle East including the United Arab Emirates have plans to convert some of their dollar reserves into euros. Exporting nations ‘‘are only holding so many dollars because of all the trade in the currency, but if the trend begins to move out of it, then it’s going to be a positive for the euro and add to the negative sentiment on the dollar,’’ said David Mann, a foreign-exchange strategist at Standard Chartered Bank Plc in Hong Kong.

Organisation of Petroleum Exporting Countries members including Qatar earlier this week expressed concern about the falling dollar, saying output should be cut to drive prices higher.

—Bloomberg

Posted by Hugo Albert Orwell at 09:56 AM | Permalink | TrackBacks (0)

Source: Digital Journal

Posted Dec 8, 2006 by Sam Elfassy

The end of the petrodollar is the end of the dollar hegemony. And the end of the dollar hegemony is the end of the United States of America as a superpower, if not worst than that.

Full story: financialexpress.com

The Tehran Times, a central media outlet of the world’s fourth-largest oil exporter, said that Iran has started substituting euros for dollars in oil sales. The minister of economy, Davoud Danesh-Ja’fari, announced that Iran wants to cut its dollar-based transactions to a minimum.
Bloomberg News reports: "Iran's oil export contracts for months have included a clause that allows the nation to seek payment in the euro and other currencies, creating a mechanism for a switch should Iran's policy change, according to traders who buy Iranian oil".

It was expected: Iran seems like it is defending itself from Iraq's diabolic fate generated by the same US which declares it to be next.

Accordingly, Iran, as an act of self defense, signals straight to Washington it can hurt harder.
And it can indeed: by shifting the most valuable commodity on earth nowadays, oil and gas, from a dollar tied commodity (hence “the petrodollar”, trading oil in US dollars) to a euro tied commodity (hence “the petroeuro”) it can collapse, surprisingly easily, the already fragile dollar hegemony. Due to the fact that others will follow.

Other economies around the world will join Iran out of their own substantial reasons. like Iran, they have their own motivation and necessity to get loose from United States’ violent grip. Venezuela, another important OPEC member is one, Russia another, and others. Add it to the just announced new Chinese oil wholesale market plus the upcoming Iranian oil bourse plus the efforts of major central banks to get rid of their dollars while the collapse of the petrodollar looming and the reason for Washington’s panic is getting much clearer.

Iran still leaves an open door for diplomacy, it is sending the message “I can do this already”, but on the other hand “I didn’t start operating the whole transition yet”. It looks as if the Iraq Study Group that showed up suddenly to recommend a diplomatic channel with Iran was formed only to enable Washington to climb down the tall tree it is on.

When asked for an official statement regarding Iran's energy trade policy, by US Bloomberg news, Hojatollah Ghanimifard, executive director for international affairs at National Iranian Oil Co., played the game of the official lines and replied that Iran’s policy of selling oil in US dollars ‘‘has not changed yet’’.

Posted by Hugo Albert Orwell at 09:53 AM | Permalink | TrackBacks (0)

Source: Financial Times (FT.com)

By Haig Simonian in Zurich and Javier Blas and Carola Hoyos in London

Published: December 10 2006 20:11 | Last updated: December 10 2006 20:11

Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements.

The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency.

Market liquidity is traditionally low in December, and many traders have locked in profits, potentially reinforcing volatility.

Russia and the members of the Organisation of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second.

Meanwhile, they increased their holdings of euros from 20 to 22 per cent, the BIS said. The speed of the shift may help to explain the weakness of the dollar, which recently fell to a 20-month low against the euro and a 14-year low against sterling.

The BIS, the central bank for the developed world’s central banks, is customarily cautious in its language. However, it noted: “While the data are not comprehensive, they do appear to indicate a modest shift over the quarter in the US dollar share of reporting banks’ liabilities to oil exporting countries.”

The review shows that Qatar and Iran, whose foreign exchange policy has sparked widespread market speculation, cut their dollar holdings by $2.4bn and $4bn respectively.

Such shifts may be modest compared with the total assets held, but they provide a crucial indication on future thinking.

Currency switches are likely to be progressive, subtle and discreet, as untoward attention could hit the dollar, lowering the value of depositors’ remaining dollar-denominated assets.

The last time oil-exporting countries cut their exposure to the dollar – in late 2003 – it pushed the euro to an all-time high against the dollar. Eighteen months ago, the exposure to the dollar of oil producing countries was above 70 per cent.

BIS data is the best guide financial markets have to the currency investment trends of oil producers, which otherwise do not provide figures. The rise in oil prices since 2002 means oil producing countries have amassed a current account surplus of about $500bn, according to the IMF. This is 2½ times the current account surplus of China.

Overall, Opec’s dollar deposits fell by $5.3bn, while euro and yen-denominated deposits rose $2.8bn and $3.8bn, respectively. Placements of dollars by Russians rose by $5bn, but most of their $16bn additional deposits were denominated in euros.

The dollar has suffered weakness because of concerns about global imbalances and the future course of the Federal Reserve’s interest rate policy.

Additional reporting by Peter Garnham in London

Copyright The Financial Times Limited 2006

Posted by Hugo Albert Orwell at 03:30 PM | Permalink | TrackBacks (0)

Source: Falls Curch News Press Online

By Tom Whipple
Thursday, 07 December 2006

On November 29, the Washington Post carried an op-ed by Nawaf Obaid, an advisor to the Saudi government. Despite the obligatory "the opinions expressed are his own", and a press release denying government involvement, the piece clearly carries an important message from Saudi King Abdullah to President Bush, Washington, and the American people.

"Stepping Into Iraq" starts by reminding President Bush that in February 2003 the Saudi Foreign Minister had warned him that if the US removed Saddam Hussein by force he would only be solving one problem by creating five more.

Obaid goes on to point out that had the President followed the Foreign Minister's advice, Iraq would not now be facing "full blown civil war and disintegration."

The thrust of the message, however, is a thinly veiled warning to the US not to walk away from Iraq. Obaid quotes the Saudi Ambassador who said last month: "Since America came into Iraq uninvited, it should not leave Iraq uninvited." And Obaid adds, "If it does, one of the first consequences will be massive Saudi intervention to stop Iranian-backed Shiite militias from butchering Iraqi Sunnis."

"As the economic powerhouse of the Middle East, the birthplace of Islam and the de facto leader of the world's Sunni community (which comprises 85 percent of all Muslims), Saudi Arabia has both the means and the religious responsibility to intervene," he continues.

The Saudis, of course, are reminding us that while America can get on its ships and planes and go home, Saudi Arabia is going to be left right at the heart of what is starting to look more and more like the beginnings of a regional war. Should the fighting increase, it is only a manner of time before the vital interests or perhaps the very existence of the Kingdom, or at least the Royal family, is threatened.

The Saudis are clear about why they are sending this message to America. "Just a few months ago it was unthinkable that President Bush would prematurely withdraw a significant number of American troops from Iraq. But it seems possible today." Obviously the American election, with the unmistakable message that the American voters want out is much on Saudi minds. "The Saudi leadership is preparing to substantially revise its Iraq policy," says Obaid.

The critical part of all this is just what the Saudis are going to do in the face of an American threat to withdraw. The op-ed lists three options. First Riyadh could give their Sunni kinsmen (money, arms and logistical support. So far they claim to have refrained from doing this because the Sunni insurgents were busy shooting and blowing up Americans so it was considered highly impolitic to aid them. This of course shows commendable self-restraint as the Iranians have been supporting the Shiites for years.

The second Saudi option would be to fund, equip, and train new "Sunni brigades" to offset the Shiite militias. This of course would formalize the "civil war."

Now, however, we get to the Saudis' third option as suggested by Obaid— oil. "King Abdullah may decide to strangle Iranian funding of the militias through oil policy." "If the Saudis boosted production and cut the price of oil in half, the kingdom could still finance its current spending. But it would be devastating to Iran, which is facing economic difficulties even with today's high prices."

Now the notion of the Saudis flooding the 85 million barrel a day world oil market with enough oil to halve the world price and destroy the Iranian economy is a stretch. Saudi oil production has been dropping in recent months and some analysts believe this is from necessity not choice. Even if the Saudis were to attempt to increase output, it would likely be hard-to-sell heavy crude, and the effort would probably damage future oil production by over producing existing fields.

The Saudis may no longer be able to increase production enough to attain their political objectives, however, there is no reason why they can't cut their production. Cutting is easy and it can be done is many ways varying from an overt embargo as happened in the 1970's to more subtle reductions.

Why are the Saudi's continuing to produce circa 9 million barrels a day? Given the tight worldwide oil market, the Saudi's could cut their production in half; the price of oil would more that double; they would get richer; their oil fields would get a much needed rest; and there would be oil left for their great-grand children to export.

What keeps them from cutting production and reaping all these benefits? That too is simple, their relationship with the USA. So long as the US was their number one protector, and needed the oil to keep flowing, the Saudis historically would bend over backwards to help Washington out. The only exception was the short-lived oil boycott back in 1973.

Now, however, everything has changed. Against Saudi advice, the US charged into Baghdad and set 27 million Iraqis at each other's throats. America's partners in the invading "coalition" are bailing out one by one. The US people have just voted to change something and it is clear that "stay the course" is not going to obtain for much longer.

The key Saudi foreign policy objective at the minute clearly is to keep sufficient US military forces in Iraq to keep the lid on the situation for as long as it takes to keep the mess from spilling over into Saudi Arabia itself.

The threat to the existence of the Saudi Royal Family from a spreading civil war now is much greater than any threat from an unhappy Washington. Can anyone imagine the new US Congress voting to invade some other large Middle Eastern country in the near future? With what?

Could a major cutback in Saudi oil production bring down America? Maybe not, but it sure could do a lot of harm. The most blatant action would be cut their oil production in half. Taking 4-5 million barrels a day off the world oil market would get everybody's attention very quickly. Oil prices would certainly go well over $100 per barrel. In short order, the US and world economies would suffer greatly.

The Saudis could, however, bring pressure without doing anything so provocative as a major production cut. Simply ratcheting down production in an unobtrusive manner should be enough to scare Washington into reconsidering leaving Riyadh, as the leader of the world's Sunnis to deal with the mess on its own.

Just before President Bush met with the Iraqi Prime Minister in Jordan last week, Vice President Cheney was summoned to Riyadh to receive the whole Saudi message. It may be many years before we learn exactly what that message was, but already President Bush is back to talking about "staying the course."

It may be a lot harder, or a lot more expensive, for the US to get out of Iraq than anyone ever thought.

Posted by Hugo Albert Orwell at 09:54 AM | Permalink | TrackBacks (0)

Source: RTE Business

November 28, 2006

ASPO to hold key oil conference in Cork

November 28, 2006 13:21

The Association for the Study of Peak Oil and Gas (ASPO) is to hold its sixth International Conference in UCC in Cork in September 2007. The conference will be sponsored by NTR.

ASPO is a global not-for-profit organisation which aims to raise awareness about the timing of the peak of the world's production of oil and gas.

The scientists and engineers who set up ASPO five years ago have assembled a data base and have used this to make an independent assessment of future hydrocarbon supply. This suggests that the generally held opinion that the world can rely on oil supplies continuing to meet demand for several decades more is simply wrong.

'Ireland may well be one of the countries which will be most affected by oil and gas supply failing to meet demand,' commented Jeremy Gilbert, ASPO President.

'Holding the ASPO Conference in Ireland provides a great opportunity for our politicians and decision makers to become better informed and to begin developing strategies for dealing with a frightening situation,' he said.

This year's conference was held in Italy.

Posted by Hugo Albert Orwell at 10:29 AM | Permalink | TrackBacks (0)

Source: Popular Mechanics

BY Jeff Wise
Published in the November, 2006 issue

WHEN ASSESSING THE State of the Union in 2003, President Bush declared it was time to take a crucial step toward protecting our environment. He announced a $1.2 billion initiative to begin developing a national hydrogen infrastructure: a coast-to-coast network of facilities that would produce and distribute the hydrogen for powering hundreds of millions of fuel cell vehicles. Backed by a national commitment, he said, "our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom, so that the first car driven by a child born today could be powered by hydrogen, and pollution-free." With two years to go on the first, $720 million phase of the plan, PM asks that perennial question of every automotive journey: Are we almost there?

And the inevitable answer from the front seat: No. Promises of a thriving hydrogen economy — one that supports not only cars and trucks, but cellphones, computers, homes and whole neighborhoods — date back long before this presidency, and the road to fulfilling them stretches far beyond its horizon.

The Department of Energy projects the nation's consumption of fossil fuels will continue to rise — increasing 34 percent by 2030. When burned, these carbon-based fuels release millions of tons of carbon dioxide into the atmosphere, where the gas traps heat and is believed to contribute to global warming.

At first glance, hydrogen would seem an ideal substitute for these problematic fuels. Pound for pound, hydrogen contains almost three times as much energy as natural gas, and when consumed its only emission is pure, plain water. But unlike oil and gas, hydrogen is not a fuel. It is a way of storing or transporting energy. You have to make it before you can use it — generally by extracting hydrogen from fossil fuels, or by using electricity to split it from water.

And while oil and gas are easy to transport in pipelines and fuel tanks — they pack a lot of energy into a dense, stable form — hydrogen presents a host of technical and economic challenges. The lightest gas in the universe isn't easy to corral. Skeptics say that hydrogen promises to be a needlessly expensive solution for applications for which simpler, cheaper and cleaner alternatives already exist. "You have to step back and ask, 'What is the point?'" says Joseph Romm, executive director of the Center for Energy & Climate Solutions.

Though advocates promote hydrogen as a panacea for energy needs ranging from consumer electronics to home power, its real impact will likely occur on the nation's highways. After all, transportation represents two-thirds of U.S. oil consumption. "We're working on biofuels, ethanol, biodiesel and other technologies," says David Garmin, assistant secretary of energy, "but it's only hydrogen, ultimately, over the long term, that can delink light-duty transportation from petroleum entirely."

The Big Three U.S. automakers, as well as Toyota, Honda, BMW and Nissan, have all been preparing for that day. Fuel cell vehicles can now travel 300 miles on 17.6 pounds of hydrogen and achieve speeds of up to 132 mph. But without critical infrastructure, there will be no hydrogen economy. And the practical employment of hydrogen power involves major hurdles at every step — production, storage, distribution and use. Here's how those challenges stack up.

HURDLE 1: Production
The United States already uses some 10 million tons of hydrogen each year for industrial purposes, such as making fertilizer and refining petroleum. If hydrogen-powered vehicles are to become the norm, we'll need at least 10 times more. The challenge will be to produce it in an efficient and environmentally friendly way.

FOSSIL FUELS: At present, 95 percent of America's hydrogen is produced from natural gas. Through a process called steam methane reformation, high temperature and pressure break the hydrocarbon into hydrogen and carbon oxides — including carbon dioxide, which is released into the atmosphere as a greenhouse gas. Over the next 10 or 20 years, fossil fuels most likely will continue to be the main feedstock for the hydrogen economy. And there's the rub: Using dirty energy to make clean energy doesn't solve the pollution problem-it just moves it around. "As a CO2 reducer, hydrogen stinks," Romm says.

Capturing that carbon dioxide and trapping it underground would make the process more environmentally friendly. In July, General Electric and BP Amoco PLC announced plans to develop as many as 15 power plants over the next 10 years that will strip hydrogen from natural gas to generate electricity; the waste carbon dioxide will be pumped into depleted oil and gas fields. And the Department of Energy is largely funding a 10-year, $950 million project to build a coal-fed plant that will produce hydrogen to make electricity, and likewise lock away carbon dioxide to achieve what it bills as "the world's first zero-emissions fossil fuel plant."

Whether carbon dioxide will remain underground in large-scale operations remains to be seen. In addition, natural gas is a limited resource; the cost of hydrogen would be subject to its price fluctuations.

ELECTROLYSIS: Most of the remainder of today's hydrogen is made by electrically splitting water into its constituent parts, hydrogen and oxygen. This year, a PM Breakthrough Award went to GE's Richard Bourgeois for designing an electrolyzer that could drastically reduce the cost of that process. But because fossil fuels generate more than 70 percent of the nation's electrical power, hydrogen produced from the grid would still be a significant source of greenhouse gas. If solar, wind or other renewable resources generate the electricity, hydrogen could be produced without any carbon emissions at all.

NUCLEAR POWER: Next-generation nuclear power plants will reach temperatures high enough to produce hydrogen as well as electricity, either by adding steam and heat to the electrolysis process, or by adding heat to a series of chemical reactions that split the hydrogen from water. Though promising in the lab, this technology won't be proved until the first Generation IV plants come on line — around 2020.

HURDLE 2: Storage
At room temperature and pressure, hydrogen's density is so low that it contains less than one-three-hundredth the energy in an equivalent volume of gasoline. In order to fit into a reasonably sized storage tank, hydrogen has to be somehow squeezed into a denser form.

LIQUEFACTION: Chilled to near absolute zero, hydrogen gas turns into a liquid containing one-quarter the energy in an equivalent volume of gasoline. The technology is well-proven: For decades, NASA has used liquid hydrogen to power vehicles such as the space shuttle. The cooling process requires a lot of energy, though-roughly a third of the amount held in the hydrogen. Storage tanks are bulky, heavy and expensive.

COMPRESSION: Some hydrogen-powered vehicles use tanks of room-temperature hydrogen compressed to an astounding 10,000 psi. The Sequel, which GM unveiled in January 2005, carries 8 kilograms of compressed hydrogen this way-enough to power the vehicle for 300 miles. Refueling with compressed hydrogen is relatively fast and simple. But even compressed, hydrogen requires large- volume tanks. They take up four to five times as much space as a gas tank with an equivalent mileage range. Then again, fuel cell cars can accommodate bigger tanks because they contain fewer mechanical parts.

SOLID-STATE: Certain compounds can trap hydrogen molecules at room temperature and pressure, then release them upon demand. So far, the most promising research has been conducted with a class of materials called metal hydrides. These materials are stable, but heavy: A 700-pound tank might hold a few hours' fuel. However, exotic compounds now being studied could provide a breakthrough to make hydrogen storage truly practical. "High-pressure tanks are a stopgap until we can develop materials that will allow us to do solid-state storage efficiently," says Dan O'Connell, a director of GM's hydrogen vehicle program.

HURDLE 3: Distribution
Even in portable form, hydrogen is a tough substance to move from place to place. It can embrittle steel and other metals, weakening them to the point of fracture.

CLEAN FUEL: This fueling station in Burlington, Vt., uses electricity to convert water into hydrogen for powering fuel cell cars. It is part of a Department of Energy program for testing alternative fuels in colder climates.

TRUCKING AND RAIL: Currently, most hydrogen is transported either in liquid form by tankers or as compressed gas in cylinders by trailers. Both methods are inefficient. Trucking compressed hydrogen 150 miles, for instance, burns diesel equivalent to 11 percent of the energy the hydrogen stores. It also requires a lot of round trips: A 44-ton vehicle that can carry enough gasoline to refuel 800 cars could only carry enough hydrogen to fuel 80 vehicles.

PIPELINES: One way to avoid this endless back-and-forth would be to send the hydrogen through a pipeline. About 700 miles of hydrogen pipelines now operate in the States, generally near large users such as oil refineries. The longest in the world is a 250-mile line between Belgium and France. Treating pipelines to protect them from embrittlement and high pressure makes them expensive up front-about $1 million per mile. But once built, they are the cheapest way to deliver high volumes of hydrogen.

LOCAL PRODUCTION: Given the difficulty of transporting hydrogen, why not just make it where you need it? That's what's done at roughly half the 36 hydrogen fueling stations currently operating in the U.S. Four rely on natural gas; the rest use electrolysis. In 2003, Honda introduced a Home Energy Station that performs steam reformation right in the owner's garage-but because natural gas is the feedstock, it still releases carbon dioxide to the atmosphere.

A greenhouse gas-free approach would use on-site wind or solar power to produce hydrogen through electrolysis. Honda also designed a solar-powered hydrogen refueling station, which has been operating at the company's California lab since 2001. If the national power supply becomes more eco-friendly, clean electrolysis could run off the grid.

ON-BOARD PRODUCTION: Several prototype vehicles make their own hydrogen from stored hydrocarbons, eliminating the question of distribution altogether. The DaimlerChrysler NECAR 3, for example, produces hydrogen from methanol. Researchers are also experimenting with more futuristic on-board production technologies, which combine ordinary water with reagents like boron or aluminum to produce hydrogen, oxygen and a metal oxide residue. These, however, are still a long way off.

HURDLE 4: Use
Once hydrogen reaches consumers, is there anything they can do with it except drive vehicles? Home energy generation is one other option. The question is whether hydrogen would be more practical than current methods. Hydrogen produced by steam reformation or by electrolysis loses energy when it is converted into electricity. The resulting efficiency is roughly equal to that of today's power plants — which pay a lot less for raw materials. Direct generation of electricity through wind and solar power will also be more efficient for most stationary applications. That leaves transportation as the most promising use for hydrogen.

INTERNAL COMBUSTION: The most straight-forward approach is to burn hydrogen in an adapted model of your garden-variety internal-combustion engine (ICE). Since little modification is required, these engines are relatively cheap, and 25 percent more efficient than gasoline-powered engines. BMW built its first hydrogen ICE back in the 1970s, and the concept still has legs: Ford began production of a hydrogen ICE shuttle bus last July.

FUEL CELL: First invented in 1839, a fuel cell combines hydrogen and oxygen to generate electricity without any moving parts. Several different varieties exist, but only the proton exchange membrane (PEM) fuel cell is lightweight and responsive enough to be practical for vehicle use. Though twice as efficient as ICEs, PEM fuel cells are hindered by high prices — even in mass production, they would currently cost about $36,000 each.

Once the technical hurdles are crossed, hydrogen's huge price tag may still make the technology prohibitive. A recent analysis by the Department of Energy projected that a supply network adequate for even 40 percent of the light-duty fleet could cost more than $500 billion. And that leads to a classic chicken-and-egg problem: How do you get millions of Americans to buy hydrogen-powered vehicles before there's an infrastructure in place to refuel them? And how do you get energy companies to build that infrastructure before there's a potential customer base?

"Companies are not willing to invest if they don't think there's going to be a market," says Daniel Sperling, director of the Institute of Transportation Studies at UC Davis. "The government has to be behind it. There has to be leadership."

There's reason to hope the technology will advance even without much government involvement. Hydrogen fuel cells already replace batteries in niche equipment, such as TV cameras and forklifts, and provide power at remote locations, such as at cellphone towers. They even power the police station in New York's Central Park. As these applications continue to develop, they will force advances in technology that will make hydrogen vehicles more feasible. Even then, hydrogen might make the most sense for fleet vehicles that don't require widespread infrastructure for service and refueling.

Ultimately, hydrogen may be just one part of a whole suite of energy alternatives. Any one of them will involve investing heavily in new infrastructure. Though the price tag will be steep, we can't afford oil's environmental, economic and political drawbacks any longer.

SIDE BAR:

Hydrogen: How To Make it or Break It
By Alex Hutchinson
Diagram by Transluszent.de

HYDROGEN IS THE universe's simplest atom: a single electron orbiting a single proton. In a fuel cell, incoming hydrogen gas is separated by a catalyst at the anode into protons and electrons. The protons pass directly through a proton exchange membrane (PEM), while electrons are forced through an external circuit, causing electric current to flow. When the protons and electrons meet at the cathode, they join with oxygen to form water and heat, which are released as exhaust.

A single fuel cell produces just over 1 volt, so hundreds are stacked together for typical applications. PEM fuel cells, used in NASA's Gemini flights in the 1960s, are the design of choice for fuel cell cars, but other configurations are suited for applications ranging from laptops to power plants.

Electrolysis is the exact opposite process. Electricity from a power supply splits incoming water into protons, electrons and oxygen, which is released as a gas. Electrons reunite with protons at the cathode to produce hydrogen gas.

Other electrolysis designs being developed use solid-oxide membranes instead of PEMs, which improve efficiency but require operating temperatures of 900 to 1500 F — heat that could be supplied by nuclear reactors.

Posted by Hugo Albert Orwell at 03:32 PM | Permalink | TrackBacks (0)

Source: PINR

October 2, 2006

Russian troops in Georgia were put on "high alert" on Sunday and ordered to "shoot to kill if provoked" while defending Moscow's two military bases in the Caucasian country. Tensions between Russia and Georgia are escalating after Tbilisi arrested four Russian officers on September 27 on spying charges.

As a consequence, Moscow withdrew its diplomats from Tbilisi and warned that it could postpone pulling out its troops by 2008 as initially planned. Russian Foreign Minister Sergei Lavrov told the press on September 27 that the situation is "very serious," and, therefore, "when the U.N. Security Council will consider the Georgia-Abkhaz settlement in the next two weeks, we will insist on assessing Georgia's activities as subversive."

The crisis has its roots in the pro-Western, pro-U.S. turn of Georgian national elites epitomized by President Mikhail Saakashvili and his "Rose Revolution." The situation had already worsened in August when Georgian security forces attempted to secure control of the Abkhazian river valley of the Kodori Gorge in order to regain control of the breakaway regions of Abkhazia and South Ossetia. Tbilisi then called for the replacement of Russia as the official mediator in Georgia's regional conflicts. Moscow maintains peacekeepers there along with two military bases.

This escalation signals that Georgia is likely to become the catalyst for U.S.-Russian geopolitical conflict for strategic and economic influence in the Caucasus. Washington criticized Moscow's reaction to the officers' arrests and continues to sponsor Tbilisi's gradual integration into N.A.T.O. Saakashvili has never concealed his pro-U.S. stance and frequently accuses Russia of being the destabilizing force behind breakaway regions South Ossetia and Abkhazia. Although Moscow officially says that Georgia is a sovereign state and is free to join N.A.T.O., Russia is working to maintain strong influence in the Trans-Caucasus region.

As PINR pointed out on September 19, the recent Russian-backed Transdniester pro-independence referendum may be a pattern for the two Georgian separatist regions' attempts to gain national independence. The United States and N.A.T.O., however, are likely to be more active in preserving Georgia's national integrity by strongly supporting Saakashvili than they have been in Transdniester. Therefore, a continued dispute between Tbilisi and Moscow with significant U.S. and European participation on the Georgian side is to be expected in the coming months. [See: "Intelligence Brief: Transdniester Votes for Independence"]

The stakes in the southern Caucasus region are significant. Georgia and Azerbaijan form a gateway linking the Black Sea to the Caspian Sea and are vital for the control of Central Asia's massive fossil resources, as the well-known Baku-Tbilisi-Ceyhan pipeline testifies.

Georgia's geographic position is also critical to N.A.T.O.'s ability to secure the Black Sea region and it allows Washington to project power toward the Middle East. Furthermore, at a time of uncertainty on Turkey's E.U. accession bid and on Ankara's geostrategic orientation -- due to Turkish Prime Minister Recep Tayyip Erdogan's unwillingness to subscribe to U.S. military actions in Iraq -- Georgia's geostrategic importance for Washington is increasing.

Tbilisi's new pro-Western course is predicated upon a strategic relationship with the United States and N.A.T.O. and serves the purpose of a post-Soviet national elite that is eager to eliminate Russian hegemony. Disputes with Abkhazia and South Ossetia are worrying Tbilisi, but, on the other hand, they are enabling the Saakashvili administration to distract international attention from its increasingly authoritarian rule and provide him an effective ideological tool to boost nationalism and use it against remaining Russian influence.

As a consequence, tensions are likely to remain high in the coming months. While it is unlikely that Russia and N.A.T.O. will make moves that could openly put one against the other in the region, Moscow's support for separatist movements in Abkhazia and South Ossetia will probably continue. Chances that a smooth diplomatic solution to Georgia's regional issues will be implemented soon are decreasing, while Tbilisi's approach to separatism remains militaristic.

Posted by Hugo Albert Orwell at 08:42 PM | Permalink | TrackBacks (0)

Source: Yahoo News, AP

By MISHA DZHINDZHIKHASHVILI, Associated Press Writer
September 29, 2006

TBILISI, Georgia - Russia warned on Friday that its plans to close military bases in Georgia were in doubt and Georgia claimed Russia was moving troops near their shared border, as relations between the countries deteriorated in one of their worst crises since the collapse of the Soviet Union.

Tensions between Russia and Georgia, which have increased since pro-Western President Mikhail Saakashvili came to power in 2003, escalated after the arrest in Georgia on Wednesday of four Russian military officers accused of spying.

Russia has recalled its ambassador, evacuated some diplomats and their families and issued a formal protest to the United Nations. Russian Defense Minister Sergei Ivanov has denounced Georgia as a "bandit" state.

Georgia on Friday accused Russia of redeploying additional troops closer to the border and said the Russian Black Sea fleet was expected to start maneuvers in the next few days. "I would advise our colleagues to stop saber-rattling. "This is unacceptable for a democratic country and we don't understand that," Interior Minister Vano Merabishvili told reporters.

Since gaining power in the Rose Revolution, Saakashvili has pledged to move the country out of Russia's orbit, take control of breakaway provinces of Abkhazia and South Ossetia and join NATO in 2008. Georgia's pro-Western course has vexed the Kremlin, and Georgian authorities accused Russia of backing separatists.

Tbilisi courts on Friday ordered the four Russian officers remanded in custody for two months, Anzor Khvadagiani, a Tbilisi prosecutor, told The Associated Press. A fifth serviceman also arrested Wednesday was released the next day for lack of evidence. The courts also extended the arrest of 10 Georgian citizens accused of involvement in a Russian spy ring.

Gen. Andrei Popov, commander of Russian military forces in Georgia, said Russia's obligation to close its two remaining military bases in Georgia by the end of 2008 still stands, but added that "if our servicemen are arrested and put in custody, there will be problems with the withdrawal since there will be no people left to prepare weapons for the pullout," the Interfax news agency reported.

Popov's spokesman, Col. Vladimir Kuparadze, confirmed his statement.

Russia has between 3,000 and 4,000 troops at its two military bases in Georgia proper, and 2,500 peacekeepers deployed to separatist regions of Abkhazia and South Ossetia.

Ivanov, meeting Friday with NATO members in Slovenia, said the arrests were aimed at pushing Russian troops out of Georgia so the government could seize control of the breakaway provinces by force, and he accused unnamed newer NATO members of illegally supplying Georgia with Soviet-made weapons.

"It is absolutely clear to us that Georgia has chosen the military path, the forceful path, for resolving the conflicts in South Ossetia and Abkhazia," he said, adding that Georgia's actions were "to push Russian peacekeepers out by any means possible ... and then to submit an application to join NATO."

Two Russian planes, meanwhile, evacuated 84 diplomats and their relatives from Georgia, officials said. The Russian ambassador to Georgia, Vyacheslav Kovalenko, said after returning to Moscow that families of all Russian military in Georgia also will depart, Interfax reported.

Georgian police surrounded the Russian military headquarters in Tbilisi on Friday, hoping to detain another Russian officer accused of spying. Russia has refused to surrender the officer.

In Moscow, police blocked streets around the Georgian Embassy. They allowed some 20 nationalists to protest briefly against Georgia's president before detaining them for holding an unsanctioned rally.

Russia's ultranationalist leader Vladimir Zhirinovsky called on Friday for "the most resolute action, up to the deployment of forces and air raids." A Kremlin-connected lawmaker, Konstantin Kosachev, said Moscow would not yield to what he called Georgia's provocation and stressed that "any forceful measures are absolutely excluded."

Separately, an official in South Ossetia claimed that masked Georgian officers shot out the tires of a car carrying four Russian peacekeepers, a woman and a child Thursday night, then ordered the men out and beat them. One peacekeeper sustained a fractured skull, according to the internationally unrecognized South Ossetian government, and Ivanov said there was proof they were "brutally beaten."

Georgian officials denied the allegations, saying police stopped a car with Russian peacekeepers, checked their documents and released them.

Russia's Foreign Ministry advised its citizens to refrain from traveling to Georgia, citing security concerns, and its embassy in Tbilisi stopped issuing visas to Georgian citizens.

Saakashvili denounced the moves as hysteria.

NATO Secretary-General Jaap de Hoop Scheffer called for "moderation and de-escalation, and that goes for both parties," and a U.S. State Department official said both sides had to work toward a solution.

Matthew J. Bryza, in Berlin for diplomatic consultations on Abkhazia, also told journalists that "Georgia has expressed its sovereign view ... that it doesn't want Russian peacekeepers on its territory. There is a question of what is prudent, and what is the most effective way of asserting that right in the case of Tbilisi."

Posted by Hugo Albert Orwell at 04:26 PM | Permalink | TrackBacks (0)

Source: Reuters

By Ikuko Kao
September 28, 2006

TOKYO, Sept 27 (Reuters) - Talks between Japan and Iran over a development project in the giant Azadegan oilfield appear to be hitting a dead end, Japan's new trade minister said on Wednesday.

But negotiations should continue past the deadline at the end of September as the Azadegan project is strategically important for Japan's energy security, Trade and Industry Minister Akira Amari told a group of reporters.

As trade minister, Amari faces several thorny energy issues, including slow progress on Japan's investment in Iran's Azadegan oilfield, a spat over a gas field in the East China Sea, and Russia's turning the screws on Sakhalin energy projects in which Japanese companies have big stakes.

The development of Azadegan, tipped as one of the largest untapped oil reserves in the world, has become caught between international politics and energy security, and Japan should not ignore global concerns over Tehran's nuclear ambitions, the minister said.

"The talks seem to be hitting a dead end," Amari said. "One of the issues is how we interpret the deadline of Sept. 30. I don't think it is Iran's intention that everything becomes invalid after that."

Amari was appointed as part of new Japanese Prime Minister Shinzo Abe's cabinet on Tuesday.

In May, Japan spelled out a long-term energy policy to target increased imports of crude produced at equity oilfields, where Japanese companies have upstream stakes, to 40 percent of its total imports by 2030 from about 15 percent now.

"Azadegan is large as a single lot, so I am aware that it would be tough (to achieve the target) if this project faces difficulty."

Resource-poor Japan has rights to the Azadegan oilfield but talks have stalled since the deal was signed in 2004, when the project was thought to require an investment of $2 billion.

Past deadlines have regularly been missed or pushed back because of split views over the valuation of the deal, including the cost of steel to be used in the project, and the extent to which the borderland field has been safely cleared of mines laid during the 1980-1988 Iran-Iraq War.

It is still not clear when INPEX Holdings Inc. (1605.T: Quote, NEWS, Research), in which the Japanese government is a major stakeholder, will be able to start development work there. The company signed a contract in 2004 to develop the southwestern part of the field.

To move the project ahead, Amari said, it is vital that Tehran accept United Nations calls to stop its uranium enrichment.

"The Japanese government will continue to send messages that Iran comply with requests from the international community. Doing so will prompt the project to progress without problems."

MORE TOUGH NEGOTIATIONS

Friction with China over the development of gas fields in disputed parts of the East China Sea is another issue that the Abe administration has to face.

China is still carrying out work at the field despite Japan's repeated calls for a halt.

Amari said Japan will aim for joint development, taking the same stance as the former trade minister.

"However, the negotiations will be extremely tough. The block China is offering for joint development is different from the one Japan is offering."

Ties between Japan and China, rivals for influence in Asia, have been soured by the friction as well as by former Prime Minister Junichiro Koizumi's visits to the controversial Yasukuni war shrine.

Abe has not spelled out his views on visiting the shrine.

"The new prime minister has not made his stance clear on Yasukuni," Amari said. "I understand it is his message that he wants to keep it distant from politics."

Sakhalin Island, in Russia's far east, is the most recent concern to emerge surrounding Japan's energy security, but Amari played down signs of trouble.

Russia this week piled pressure on the foreign companies involved in massive energy projects there, ordering a full environmental probe of Royal Dutch Shell's (RDSa.L: Quote, Profile, Research) Sakhalin-2 oil and gas project.

"Sakhalin-2 will find a way. The basic contract (regarding the project development) is not scrapped," Amari said.

The minister said Sakhalin-2 will move on by solving environmental concerns and letting Russian gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research) join the project.

Moscow's move spurred criticism from European countries and Japan, as Sakhalin-2 involves the construction of the world's biggest liquefied natural gas plant, which would supply gas to customers in Japan, the United States and Asian countries.

Shell has a 55 percent stake in the project, while Japan's Mitsui & Co. Ltd. (8031.T: Quote, NEWS, Research) and Mitsubishi Corp. (8058.T: Quote, NEWS, Research) own a combined stake of 45 percent.

Posted by Hugo Albert Orwell at 02:54 PM | Permalink | TrackBacks (0)

Source: MarketWatch.com

BEIJING (MarketWatch) -- Nigerian National Petroleum Corp. signed an agreement with China Petrochemical Corp., or Sinopec Group, to double its crude oil exports to 100,000 barrels a day, said a Sinopec executive Friday.

The year-long agreement, signed in August between Nigeria's state-owned oil company and its counterpart in China will take effect from October, the executive said.

NNPC also renewed its crude oil exports agreement with China National Petroleum Corp. (CNPC.YY), which is China's largest oil producer by output, for shipments of 30,000 b/d, said an executive from CNPC.

The combined crude cargo exports from Nigeria to China's two biggest oil companies will be 130,000 b/d - up from last year's 80,000 b/d. Neither of the executives disclosed the value of the contracts.

The deals come as China seeks a closer relationship with resource-rich African nations including Nigeria and Angola, to reduce its dependence on oil imports from the instability-prone Middle East.

Chinese oil titans have been purchasing crude cargoes and acquiring assets from Nigeria in past years. CNPC secured four oil blocks in Nigeria earlier this year in a deal that also saw it agree to invest $2 billion in the NNPC-owned Kaduna refinery there.

Sinopec has stakes in three oil blocks in Nigeria. Two blocks haven't started production, while one of the blocks has been producing 4,000 barrels of crude a day.

China National Offshore Oil Corp. or CNOOC, the country's third-largest oil producer, is also active in exploration and production in Nigeria.

In March, CNOOC bought a 35% working interest in a license to explore for oil offshore Nigeria for $60 million. It is also in talks to secure right of first refusal on at least two more oil blocks to be offered in an international tender by Nigeria and an agreement is expected to be signed in November.

Nigerian crude is a high-quality light, low sulfur grade referred to as sweet, and is highly prized by oil consuming nations because of its high gasoline content and relatively cheap processing costs.

-Edited by Jarrett Banks

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Source: Representative Roscoe Bartlett Website

May 2, 2006 Special Orders Speech

By Congressman Roscoe Bartlett
Re: Oil Crisis

The SPEAKER pro tempore (Ms. Foxx). Under the Speaker's announced policy of January 4, 2005, the gentleman from Maryland (Mr. Bartlett) is recognized for half of the time remaining before midnight.

Mr. BARTLETT of Maryland. Madam Speaker, I have here in my hands two pretty big reports that were paid for by our government and have for reasons that it is difficult for me to understand been pretty much ignored apparently by the organizations that paid for them.

The first of these is a big report paid for by the Department of Energy called The Peaking of World Oil Production: Impacts, Mitigation and Risk Management. This is generally known as the Hirsch Report, because the project leader was Dr. Robert Hirsch from SAIC, a very prestigious scientific and engineering organization. This report is dated February, 2005.

For reasons that we are trying to find, this was bottled up, apparently, inside the Department of Energy, because it didn't become publicly available until several months after that.

The second report I have here is the report by the U.S. Army Corps of Engineers. This obviously is paid for by the Army. It is dated September of 2005, and it was just about 2 months ago that it finally got out of the Pentagon into the public. This one is called Energy Trends and Their Implications For U.S. Army Installations. I would submit that wherever they mention ``Army,'' you could substitute ``the United States'' and it would be completely appropriate.

What I would like to do for the first few minutes is to look at some of the comments and recommendations in these two reports; and I would like to keep asking the question, why have these two government agencies which paid for these reports done essentially nothing to promulgate this information across the country? Rather, it would seem that there was an intent to keep this information from the public, because the Hirsch Report was bottled up inside the Department of Energy for several months, and the Army Corps of Engineers report is dated September of 2005, and it says on the cover here, ``Approved for public release. Distribution is unlimited.'' But there was essentially no distribution of that until just about 2 months ago.

As you will see, Madam Speaker, if the content of these two reports is correct, if their observations and recommendations are correct, you would have expected these two government agencies to be using every vehicle at their disposal to get this information out to the public.

Let's look first at a few quotes from the Hirsch Report. The first here says, ``The peaking of world oil production presents the United States and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically,'' oil was almost $75 a barrel today, ``and without timely mitigation, the economic, social and political costs will be unprecedented.

``Viable mitigation options exist on both the supply and demand sides, but to have substantial impact they must be initiated more than a decade in advance of peaking.''
A little later we will talk more about this. I am not sure that this is exactly the way that I would have articulated our challenge. We will talk about that a little later.

``Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort.''
Now another quote from this Hirsch Report. ``We cannot conceive of any affordable government-sponsored crash program to accelerate normal replacement schedules so as to incorporate higher energy efficiency technologies into the privately owned transportation sector. Significant improvements in energy efficiency will thus be inherently time-consuming, of the order of a decade or more.''

If we are talking about transportation, Madam Speaker, that is indeed true. Because the average automobile and small truck is in the fleet about 17-18 years and the average 18-wheeler about 28 years. So any improvements that we ever make, we are making in energy efficiency in automobiles and trucks, is going to take quite some time to show any meaningful effect because of how long they are in the fleet.
Now a third quote from the Hirsch Report. Madam Speaker, I would like us to keep in our mind the question, if this is true and we have two reports, as you will see, that have reached essentially the same conclusion, we have no reason to believe there was any collusion between them. Indeed, their dates of publication are quite different, February to September. And if these observations and recommendations in these reports are in fact correct, then one might wonder why haven't these agencies been using every vehicle at their disposal to get this information out to the American public and to initiate programs to deal with these problems?

``World oil peaking is going to happen. World production of conventional oil will reach a maximum and decline thereafter. That maximum is called the peak. A number of competent forecasters project peaking within a decade. Others contend it will occur later. Prediction of the peaking is extremely difficult because of geological complexities, measurement problems, pricing variations, demand elasticity and political influences. Peaking will happen, but the timing is uncertain.''

Then this, Madam Speaker, a very significant statement. ``Oil peaking presents a unique challenge,'' they say, and then this statement. ``The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the
problem will be pervasive and will not be temporary. Previous energy transitions, wood to coal and coal to oil, were gradual and evolutionary. Oil peaking will be abrupt and revolutionary.''

Now I would like to read a few of the quotes and recommendations from the Corps of Engineers study just out about 2 months ago, although the date was September of last year.

``Historically, no other energy source equals oil's intrinsic qualities of extractability, transportability, versatility and cost. The qualities that enabled oil to take over from coal as the frontline energy source for the industrialized world in the middle of the 20th century are as relevant today as they were then. Oil's many advantages provide 1- 1/3 to 2 1/2 times more economic value per million BTUs than coal. Currently, there is no viable substitute for petroleum.''

Madam Speaker, that is a startling statement. If in fact the world is peaking in oil production and there is no viable substitute for petroleum, wouldn't you think that the agencies paying for these studies would have used every vehicle available to them to get this word out to the American public and to articulate a rational program for dealing with this emergency?

``Oil prices may go significantly higher,'' they say, ``and some have predicted prices ranging up to $180 a barrel in a few years.'' Just under $75 today, $180 a barrel in a few years.

``In general, all non-renewable resources follow a natural supply curve: Production increases rapidly, slows, reaches a peak and then declines at a rapid pace, similar to its initial increase. The major question for petroleum is not whether production will peak, but when. There are many estimates of recoverable petroleum reserves, giving rise to many estimates of when peak oil will occur and how high the peak will be. A careful review of all of the estimates leads to the conclusion that world oil production may peak within a few short years, after which it will decline.'' Campbell and Deffeyes, several references here.

Let me digress for just a moment. One of these, Dr. Deffeyes, predicted that the peak did occur a couple of months ago, and he says he is no longer a prognosticator, he is now a historian, because the peak, he believes, is behind us.

``Once peak oil occurs, then the historic patterns of world oil demand and price cycles will cease. Unfortunately, Saudi Arabia has not been able to increase supply above its monthly production peak of April 2003.''

And I am reminded here of a recent book by Matt Simmons called Twilight in the Desert. He has done a very scholarly and exhaustive study of all of the open literature and believes that Saudi Arabia has peaked in oil production.

Iraq may also have significant excess capacity if it can be brought into production. Under Saddam Hussein, we got about 2 1/2 million barrels a day from Iraq; now we are lucky to get 1 1/2 million barrels a day.

Meanwhile, domestic oil production in both the lower 48 States and Alaska continues to decline. Many non-OPEC oil producers have also passed or are currently reaching their peaks of production. Indeed, Madam Speaker, of the 48 largest oil-producing countries in the world, 33 have already peaked.

And now their recommendations. And excuse me for reading, but to paraphrase this would not have quite the impact of reading exactly their words. The coming years will see significant increases in energy costs across the spectrum. Not only are energy costs an issue, but also reliability, availability, and security.

It is time to think strategically about energy and how the Army, and please substitute here the United States, should respond to the global and national energy picture. A path of enlightened self-interest is encouraged. The 21st century is not the 20th century.

Issues will play out differently and geopolitics will impact the energy posture of the Nation. Technology will change more rapidly and flexibility will be a crucial part of installation operations. This must also extend to the energy infrastructure and its operational concepts.

And then this very interesting statement: the days of inexpensive, convenient, abundant energy sources are quickly drawing to a close. When I read that, Madam Speaker, I was reminded of the short paragraph that Matt Savinar uses in introducing his discussion of peak oil.

He says: ``Dear reader. Civilization as we know it is coming to an end soon.'' I hope that he is overly pessimistic. We will see. Domestic natural gas production peaked in 1973. Now, note this statistic, Madam Speaker: the proved domestic reserve lifetime for natural gas at current consumption rates is about 8.4 years.

What this says is, if we can get all of our gas from our resources, it would last 8.4 years. Of course, we cannot get it out that fast. So we are importing gas. But that is all we have remaining is 8.4 years. This is the Corps of Engineers.

The proved world reserve lifetime for natural gas is about 40 years, but will follow a traditional rise to a peak, then a rapid decline. Domestic oil production peaked in 1970 and continues to decline. This is a really startling statistic. Proved domestic reserve lifetime for oil is about 3.4 years.

That means if we could pump oil as fast as we are using it, our 2 percent of the world's reserve would last us, at the rate at which we are using oil, 3.4 years.

World oil production is at or near its peak; and current world demand exceeds the supply, which is why oil is about $75 a barrel. Saudi Arabia is considered to be the bellwether nation for oil production and has not increased production since April of 2003. After peak production, supply no longer meets demand; prices and competition increase.

World proved reserves lifetime for oil is about 41 years, most of this at a declining availability. Our current throwaway nuclear cycle uses up the world reserve of low-cost uranium in about 20 years. We will see significant depletion of Earth's finite fossil resources in this century. We must act now to develop the technology and infrastructure necessary to transition to other sources.

This is dated September of last year, Madam Speaker. Have you seen anybody in authority in our country telling the American people this? We must act now to develop the technology and infrastructure necessary to transition to other energy sources.
Policy changes leap ahead of technology breakthroughs, cultural changes and significant investment is requisite for this new energy future. Time is essential to enact these changes. The process should begin now.

Indeed, if they had written this 20 years ago, they would use exactly that same language. Because we really should have started some 20 years ago.

Madam Speaker, what is all of this about? What are they talking about? To understand that, we need to go back about six decades and to the life of a very, now very famous oil geologist, Dr. M. King Hubbert, who worked for the Shell Oil Company.

In 1956, as a result of his studies, he published a paper that the 50th-year anniversary of that was March 8, in which he predicted that the United States would peak in oil production about 1970.

Now this was revolutionary. Because at that time I believe we were the largest producer of oil in the world, and probably the largest exporter of oil in the world. Shell Oil Company pleaded with him not to publish a paper, that we would make him and them look really silly.

He published the paper anyhow. And 14 years later when right on target we peaked, he became kind of a celebrity. What we have here, Madam Speaker, is his predicted curve, the smooth green curve. And then the more ragged curve, green curve with the largest symbols represents the actual data points.

And you see that right on schedule in 1970, oil production peaked. Now, this is the lower 48. He did not know about Alaska at that time, and in just a moment we will look at another chart which includes Alaska.

The red there, by the way, is the Soviet Union. More oil than we, peaked just a bit after us. They kind of fell apart when the Soviet Union fell apart, and they are now having a second small peak. But after that it will be continually downhill.
The next chart shows where we have been getting our oil from. Not just in the lower 48. And that is this blue curve and the dark blue one under it, Texas and the rest of the United States. But then you see the natural gas liquids and the Alaska oil, and the Gulf of Mexico oil.

And you see that in 1970 we peaked, and just a little blip in the downhill side of what is called Hubbert's peak here. I remember particularly, Madam Speaker, the fabled Gulf of Mexico oil discoveries which were supposed to get us home free. That is the yellow on this chart. Notice the relatively trifling contribution that the Gulf of Mexico oil discoveries made, about 4,000 wells out there. We were reminded of that last fall with these hurricanes, when a number of them were damaged.

The next chart is from the Hirsch report, and that shows you what we do with this oil. It is really kind of interesting. The light blue here represents transportation. That is about 70 percent of all of the energy from the oil that we use is used in transportation. Then there is industrial and a little bit of electric power and a little bit commercially. But the major part of our oil is used in transportation.
That is a liquid fuel. And, you know, the challenge is to find something to replace that. The next chart is a really interesting one, and we could spend a long time on this chart, because it has so much information on it.

But I want to look at it just in gross form here. The bar graphs here represent the discovery of oil, and you see that way back in 1940 we were discovering some big fields of oil. And then a little later in the 1950s, the 1960s, the 1970s, we were discovering a lot of oil.

And our use of oil was very small then. The heavy black line here represents our use of oil, and notice that we were finding enormously more oil than we were using.
So there was every reason to believe that for the foreseeable future and beyond everything was going to be just fine, because we were finding enormous amounts of oil and we were not using very much oil. But then that all turned around about 1980.
Because at about that time, the discoveries of oil reached a maximum, and then they trailed off. And you can see it here on the downslope here. And in spite of improved techniques, in spite of intense drilling, year by year, we have found on the average less and less oil.

For those who are familiar with curves like this, it is quite obvious that the area under this curve, if we were to draw a smooth line through this discovery curve, the area under that curve represents the total volume of oil which has been discovered.
And the area under the consumption curve represents the total amount of oil that we have consumed. Now, it is very obvious that you cannot consume oil that you have not discovered, and so to find out how much consumption we can have in the future, all one needs to do is to look at the area under this discovery curve, and then to project where you think the consumption curve is going.

Now, this chart has peaking occurring, what, in 5 years or so, about 2010. There are a number of people who believe that peaking has occurred about now or will occur very shortly.

The lightly shaded part of this graph, of course, is to the future; and, Madam Speaker, you can make that future within limits look about any way you want to make it look. For instance, if we use enhanced oil recovery, and we drill a lot more wells, the United States has drilled 530,000 wells. I believe there are about 400 wells in Saudi Arabia and maybe 300 in Iraq, both of which have enormously more reserves than we have.

But if you vigorously go after this oil, you might get it sooner. But if you get it sooner, there will be less later, unless you are really good at enhanced oil recovery and you are able to get significantly more out of the ground. The next chart kind of puts this in long-range perspective, and this is a really interesting chart.
Looking at the top chart here, we are looking back about 400 years through history; and we see that the quadrillion Btus, it is so near the zero line here that you probably cannot see the difference. And then we began the Industrial Revolution in the late 1700s. And we began that with wood, of course. We denuded the hills of New England, the mountains of New England, carrying charcoal to England to make steel. We have a little furnace up here in Frederick County, and we denuded the hills of northern Frederick County to provide charcoal for that little furnace there.
The Industrial Revolution was stuttering with wood when we found coal and were able to utilize that. And then look what happened, Madam Speaker, when we discovered gas and oil. It just took off. This is an exponential curve at about a 2 percent growth rate.
In a moment we will show this same curve with different units on the ordinate abscissa, and it will appear to be a much less dramatic curve there because it really spread out the abscissa here.

But I would like to note that the world population has reasonably followed this energy cycle. So that we went from about one-half a billion to about 1 billion people here. Steady state for quite a long time until we now have between 6 and 7 billion people.
And that dramatic increase in the world's population was largely due to the incredible quantity and quality of energy from oil and natural gas. I would like to reflect for just a moment on the quality of this energy, the energy density of these fossil fuels.
One barrel of oil, and you will now pay a bit more than $100 for the refined product at the pump, 42 gallons, will buy you the work output of 12 people working all year for you.

If you worked really hard in your yard this weekend for a full day, I will get more work, more mechanical work out of an electric motor for less than 25 cents' worth of electricity. And that may be kind of humbling to recognize that we are worth less than 25 cents a day in terms of the energy available in these fossil fuels.
Madam Speaker, our children and certainly our grandchildren will look back at our generation and the generation of our parents, and I say that because my father lived almost half way through the age of oil, and they will wonder how we could have behaved the way we have behaved.

When we found this incredible resource, this wealth, we should have stopped and asked ourselves, what do we need to do so we can provide the most good for the most people for the longest time with this incredible wealth. It should have been obvious to everybody that this was not infinite. The earth is not made of oil. It is a finite resource.

We are now, as this chart shows in 5,000 years of recorded history, about 100, 150 years into the age of oil. In another 100, 150 years, we will be through the age of oil. What, then, when we have had to transition to the renewables?

Notice here, Madam Speaker, what happened in the 1970s. That was really quite dramatic. There was a worldwide recession, demand for oil fell, the price collapsed, and we reduced our energy consumption. It is now with China and India and the developing world demanding more and more oil increasing again at the same kind of a rate that it did up till 1970.

Madam Speaker, I would like to give one statistic that is just startling. Up until the Carter years, in every decade we used as much oil as had been used in all of previous history. What that means is, had we continued on that course, and fortunately we did not as this chart shows, but had we continued on that course when we had used up half of the world's supply of oil, only one decade of oil would have remained. In 5,000 years of recorded history, the age of oil would be just a blip, about 300 years long is all, out of 5,000 years of recorded history.
The next chart shows the predictions of some of the experts about when peaking should occur, and this is from the Hirsch report, and this was about a year ago, and they could not have known that Dr. Deffeyes was going to conclude that the peaking has already occurred. He gave a specific date for that, and he rather humorously said he is no longer a prognosticator, he is a historian.

Well, all these people believe the peak is going to occur in the next 5 years; and then there are a few that believe it will occur about 5 years after that. Then there are Serum, Shell Oil Company, a few who believe it will be sometime in the future. Nobody, Madam Speaker, will contend that we will not have peaking. It is not if. It is when.

The next chart is a simple depiction. It shows the same curve, that really dramatic one you saw a couple of charts ago, when we had this dramatic increase in the production of energy, same curve. You can make it short and very high or spread out, depending upon the units you use in the ordinate and the abscissa.

This is a 2 percent exponential growth rate, and notice that starts out rather slow, but 2 percent, leave the interest in the bank, it grows and grows till it is now getting quite steep, even on this expanded abscissa scale.

As you saw from the previous chart, most of the experts believe that oil peaking is either now or very shortly in the future. If, as we have indicated here, we are at this point, then the peaking will indeed occur a couple of years or so hence.

But notice that the discrepancy between the oil we would like to use, the demand curve and the oil which is available to use, begins before the curve. It will not be as smooth as this. It will be ups and downs, and oil may again fall down to $50 a barrel. That will be nice. Do not count on it.

What we have produced here is what is called a gap. That is a difference between what is available to use and what we would like to use; and, as the next chart shows, the Hirsch Report focused on the problems of filling that gap. What they did is look at the consequences of filling the gap, dependent upon when you start to fill the gap, and if you wait until peaking has occurred, you see zero here, that is when it has occurred. Then there will be significant shortfall. You will be able to do some mitigation.

In a few minutes, we will talk more about that mitigation; and I wonder if, in fact, we should try to mitigate or whether we need to effect a steady state where we can live happily and productively at the current energy level and thus leave a little more for our kids and our grandkids and a little more for the next few years just ahead of us.

What it shows here is that if you are going to have no supply shortfall, that you need to begin the mitigation 20 years before peaking occurs. Now, from all of the experts' predictions that we saw, that is going to be manifestly impossible because almost nobody believes that peaking is two decades from now. So what one would conclude from this is that there are going to be consequences.

The next chart shows what we would be using to peak. We would be using enhanced oil recovery, coal liquids; and, by the way, South Africa and Hitler's Germany demonstrated you can indeed do that; heavy oil, that is the oil shales, tar sands and so forth, gas-to-liquids and then vehicle efficiency.

I mentioned previously how long these vehicles stay in the fleet. If you start here, there will be several years before you notice any effect, and then slowly over 50 years. That is a little less than the average lifetime of the average car and pickup in the fleet and about half the average lifetime of an 18-wheeler in the fleet.

Madam Speaker, I would like to wonder if, in fact, we ought to be trying to fill the peak, that is, to fill this gap till there is no shortfalls so that the world can continue to use all the oil that it would like to use. Notice that, except for vehicle efficiency, we are dealing here with finite resources. They are not forever, and the more we use now, the less we will have to use in the future.

Today, we are amassing the largest intergenerational debt transfer in the history of the world. I would like not to include with that an enormous energy deficit that we are going to pass on to our kids and our grandkids. We are already burdening them with an enormous responsibility to not only run their government on current revenue but to pay back all of the money that we borrowed from their generations to run our government today. In good conscience, Madam Speaker, can we also borrow from their generations the fossil fuel energies which will be essential for establishing any reasonable quality of life in their generations?

I would submit that the challenge should not be to fill the gap. The challenge should rather be to establish an infrastructure and economy, lifestyles that can be interesting and productive and sustaining while we make the inevitable transition to renewables. These are all finite. You cannot fill that gap forever with these. As a matter of fact, for some of them, you cannot fill it very long.

The next chart shows us something about the consequences of excessive consumption. This is a really interesting chart. I would like to start here with this little insert where I think we are, and this is from our Energy Information Agency, and they get the data from the USGS. We talked to the Energy Information Agency, and they just use the information from USGS, and I think this is a rather meaningful misrepresentation of what the world will look like.

Madam Speaker, for any statisticians out there, it will be quite obvious that the 50 percent probability is not the mean. The most rightly thing to happen is the 95 percent probability. That is a high probability. It is the lesser, the lower amount of oil.

By the way, the 50 percent probability means that there could be a whole lot more oil. It also means there could be a whole lot less oil. You just do not know. What the Energy Information Agency does and the USGS is to assume that 50 percent probability is the mean. This is an unusual, and one might say bizarre, use of statistics, but using these statistics, you end up with almost twice the recoverable oil left in the world.

You see, they said that the ultimate recovery would be about 2 trillion barrels of oil with a 95 percent probability. We have already used about half of that, about 1 trillion barrels. So there is about 1 trillion left.

With the mean, which they say is expected, now that is not the expected value. The expected value is the 95 percent probability. That is the most probable. That is what it means. It is the most probable.

But with this assumption that that is the mean, which is a bizarre use of statistics, that pushes the peak out only from here at about 2000 to about 2016. So even if there is that much more oil there, and, by the way, only half of that yet to be pumped 2 trillion barrels have been found, you remember that earlier chart that showed the steep decline in discoveries, one must project something phenomenal in the future, that it will look just vastly different than the last few years. It would discover enormous basins of oil, and there is no expert out there that I know who believes that anything like that is going to happen. Notice that you push the peak out only about 10 years if you have that much more oil.

Now there is another interesting assumption that is made here, and that is if you can produce it with enhanced oil recovery and then you have a 10 percent decline, look what happens. You are really falling off a cliff.

The next chart kind of puts this in perspective; and it is these numbers, Madam Speaker, which prompted Boyden Gray and Frank Gafney and Jim Woolsey and 27 other prominent Americans, four-star admirals and generals, to write to the President some months ago, a number of months ago, saying, Madam Speaker, the fact that we have only 2 percent of the world oil reserves and we use 25 percent of the world's oil, importing almost two-thirds of what we use, is an unacceptable national security risk. Mr. President, we have got to do something about that.

Even if you think that the only problem with oil is a national security risk, we ought to be about freeing ourselves from the dependence on foreign oil. Even if there was no such thing as peaking, our behavior today needs to be vastly different than it is.

We are less than 5 percent of the world's population, about one person out of 22, and we use a fourth of the world's energy.

Madam Speaker, when we found all of that oil, and we more than others fit this characterization, rather than a responsible response to that discovery, which would ask the question how can we get the most good for the most people for the longest time, we acted like kids that found the cookie jar. We just pigged out, and here in the United States we are now using 25 percent of all the world's oil, and we represent a bit less than 5 percent of the world's population.

These top two numbers are significant. With only 2 percent of the oil reserves, we are pumping 8 percent of the world's oil. That means we are pumping our wells four times faster than the average in the world, which means that we are going to be increasingly dependent on foreign oil as we pump down our reserves.

The next chart kind of puts this in a global perspective. Because what this shows, and many people now recognize this, that for the last several years China has been scouring the world for oil. We have symbols here which show who has access to the major sources of oil in the world, and notice the symbol for China is all over this map. They have bought all of the increased capacity of the Canadian oil sands. They have major commitments from South American countries. They almost bought Unocal in our country. They have really major commitments from the Middle East.

Madam Speaker, not only this, but they recognize that we have the only blue water Navy, that is the Navy that sails the seven seas of the world and can control all of the access lanes. They see that we could, if we wish, cut off their source of oil.

So they are very aggressively building a blue water Navy.

Last year, we launched one submarine; they launched 14 submarines. Now theirs are not the quality of ours, certainly, but they are improving.

Well, what do we do? And the next chart kind of presents this challenge and this picture. Obviously, if what these two big reports say is true, that we are just about reached peaking, then we need to be about transitioning. In fact, we should have been about transitioning from fossil fuels to the renewables.

Madam Speaker, we knew of a certainty 26 years ago in 1980 we had already slid 10 years down the other side of Hubbard's Peak. Now, M.P. Hubbard was right about the United States. He predicted that the world would be peaking about now. Madam Speaker, he was right about the United States.

Would you not think that our leaders have wondered maybe, just maybe, he might be right about the world, and maybe we ought to be doing something about that? There has been a deafening silence on this subject for the last 26 years.

Any rational person, get a bright fifth grader and he will tell you what we need to be doing: We need to call upon all of our finite resources to help us through this transition period, and those finite resources are the tars and the oil shales and coal. And then there is nuclear as kind of a separate class, light water reactors, breeder reactors.

And note the quote from the Corps of Engineers study that the high-quality cheap, that is fissionable, uranium, will be exhausted in about 20 years, so we will need to move to breeder reactors which, as the name implies, makes more fuel than they use and so they are kind of self-sustaining. But, with that, you buy some problems of transportation and enriching and products that could be used by bad guys for making nuclear weapons.

I have a number of colleagues who have been stoutly opposed to nuclear, but when they are now rationally considering the alternative of shivering in the dark, nuclear is looking better and better.

Nuclear fusion, if we ever got there, Madam Speaker, we are home free. There is nothing else on this chart that gets us home free. Fusion does. I support happily the roughly $250 million a year that we put into this technology. But I think that counting on solving our energy future challenges with fusion is a bit like me or you, Madam Speaker, planning to solve our personal economic problems by winning the lottery, and I think the odds are probably somewhere near the same.

Once we have gone through these finite resources and have developed all the nuclear that we wish to develop, then we will ultimately, and the geology will assure it, because coal, gas and oil are not forever, we will transition to the renewables, and these are what they are, solar and wind and geothermal. That is true geothermal, where you are tapping into the molten core of the earth. There is not a chimney in all of Iceland because all of their energy is geothermal there, ocean energy, the tides and thermal gradients and so forth.

Agriculture resources, a lot of talk today about ethanol and methanol and soy diesel and biodiesel and biomass. Waste energy, a great idea. Instead of putting it in a landfill, burn it. There is lots of energy there. A very productive plant, state-of-the-art plant up in Montgomery County who would be happy, Madam Speaker, to have you come visit them there.

And then hydrogen from renewables. That is significant. Today, we are getting all of our hydrogen from natural gas. That is not renewable. That, by and by, will be gone, and then we will have to get hydrogen from renewables or from nuclear.

Just a word of caution. Hydrogen is not an energy source. We will always use more energy to produce hydrogen than we get out of it, or else we will have to suspend the second law of thermodynamics. And, Mr. Speaker, if we can do that, we can suspend the law of gravity and we are really home free, are we not?

Why even talk about hydrogen then? Well, because of the two characteristics of hydrogen. One is when you finally burn it, you get water that is not polluted. And if you have used a nonpolluting energy source to produce it like nuclear, for instance, or wind or solar, then you are totally nonpolluting.
The second advantage of hydrogen is that it is quite ideal for fuel cells if in fact we are ever able to make fuel cells that are economic. With the fuel cell, you get about twice the efficiency or at least twice the efficiency that you get out of reciprocating engine.

The next chart looks at coal. And some will tell you do not worry about energy because we have got an incredible supply of coal, they will tell you, in 500 years. That is not true. At current use rates, we do have 250 years of energy, of coal.

Albert Einstein said that compound interest was the most powerful force in the universe. If you increase its use only 2 percent, that 250 years shrinks to about 85 years. And, now, if you have to use some of the energy from the coal to convert to a gas or a liquid, and we will have to do that because we have limited uses for coal itself, then you reduce it to 50 years. That is meaningful. But it is a finite resource. It is not forever. It is dirty. You are either going to pay a big environmental penalty or an economic penalty for cleaning it up.

The next chart is an interesting one, and that looks at the opportunities and limitations from the agricultural world. On the top here, we have two little sequences which indicate the energy transformation from petroleum, and notice that you start out with maybe 5 equivalents of energy and end up with 4, so it is 5:4. And with corn to ethanol, you ought to do better, because you are getting some energy from the sun here. There are lots of challenges. It is or it can be energy positive. It certainly is in South America, where Brazil is converting sugar cane, which is a bit better than corn, to ethanol, and they are now freeing themselves from dependence on imported oil and soon all of their cars will be ethanol cars.

The bottom pie chart here is something I wanted to spend just a moment on because it is so startling. This shows you the energy input into producing a bushel of corn. Notice the purple area there, almost half of it, it says nitrogen, that is nitrogen fertilizer made from natural gas. When natural gas is gone, that source of nitrogen fertilizer is gone.

Madam Speaker, before we learned how to do that, the only source of nitrogen fertilizer was barnyard manure and guano. The guano is gone. It took tens of thousands of years to produce it, we believe, and now it is harvested, and it is gone. That is the droppings from birds and bats on tropical islands and caves and so forth.

All those other segments of the pie here are other fossil fuel energy inputs into growing corn. I would just like to emphasize in very large measure the food we eat is just transformed gas and oil, and without gas and oil it would be very difficult to produce the amounts of food that we are producing today.

The next chart is a really interesting one. The little analogy that I use here is that we are very much like a young couple whose grandparents have died and left them a big inheritance, and they have established a lifestyle where 85 percent of all the money they spend comes from their grandparents' inheritance and only 15 percent from their income. They look at the inheritance and how old they are and project a reasonable life span, and, gee, the grandparents' inheritance is going to give out long before we retire. So, obviously, Madam Speaker, they have got to do one or both of two things: Either they have got to make more money, or they have got to spend less money.

I use that 85/15, and others will use 86/14. The 85/15 shows what our energy dependence is now. About 85 percent of all the energy we use comes from fossil fuels. That is like the inheritance from our grandparents: It will not last forever. And only about 15 percent of it comes from other sources. A bit more than half of it that comes from nuclear power, 8 percent of our total energy, 20 percent of our electricity.

As you drive home tonight, note that every fifth business and every fifth house would be dark if it weren't for nuclear power.

Then we look at that 7 percent which is renewable energy, and the biggest chunk of that is conventional hydro that will not grow in our country. We may get some micro-hydro, but the big rivers have all been dammed and probably more than we should have dammed.

The next biggest chunk of that comes from wood, and that is the paper industry and the timber industry wisely burning a waste product that would otherwise end up in the landfill.

And then waste energy, that 8 percent. By the way, this 1 percent is 0.07 percent, because that is 1 percent of 7 percent from solar. That is a tiny, tiny amount of energy. But this was in 2000. That has been growing at 30 percent a year, so now it is about four times bigger. It is now 0.28 percent. Big deal, Madam Speaker. 0.28 percent? And that is about the same thing for wind, maybe a bit more from agriculture.

Those are the energy sources we are going to have to increasingly rely on in the future. So we have got a big challenge ahead of us.

The next chart depicts what we ought to be doing. The first thing we need to do is to buy some time. You see, it takes three things to develop these renewables: It takes money, and it takes energy, and it takes time. Mr. Speaker, we will not worry about the money, although we should. Because when it comes to money we just borrow it from our kids and our grandkids by running up a big debt. So let us not worry about the money here.

But we cannot borrow time from our kids, and we cannot borrow energy from our kids. The only way to buy some time and free up some energy is with a pretty massive conservation program which frees up some energy.

Today, Madam Speaker, there is no surplus energy to invest in alternatives. All of it is needed by the economies of the world, or oil would not be roughly $75 a barrel.

Madam Speaker, what this chart denotes is a program that I think needs three qualities if we are going to make this transition in any acceptable way. First, we must have everybody involved, a total commitment like World War II. I lived through that. Everybody had a victory garden, everybody saved their household grease and took it to a central repository. It was the last war, the last time that everybody in our country was involved. We need a program, Madam Speaker, that has the total commitment of our population in World War II. It needs to have the technology focus of putting a man on the moon, because we are going to have to have a lot of technology breakthroughs and applications here if we are going to make it.

Thirdly, it needs to have the intensity of the Manhattan Project. Minus that, I think we are going to have a very rough ride. We should have begun 26 years ago.

Once we have freed up some time and freed up some energy, we need to use it wisely. And what has the biggest potential? What will have the biggest payoff? I think there are enormous benefits to this. I can see the American people going to bed every night thinking to themselves, gee, I really contributed today. I used less energy, I lived very comfortably, and I am really working on that new project which is going to help my kids and my grandkids to live as well as I live or maybe even better.

I think that we can be a role model for the world. I think that we can develop a lot of technology that we can export, but, Mr. Speaker, we will never get there unless we start.

I am wondering again, unless we close in the way we started, these two big studies paid for by our government noting the problems that we face in the future, why have not those parts of the government that paid for these reports claimed ownership? Why are they not using the resources available to them to make this information available to the American people? Why are they not coming to us with a program that says we have a big challenge, we have big opportunities, we really need to get going?
Madam Speaker, I think that we have a great bright future if we challenge the American people and marshal the resource. I think we have a very bumpy ride if we do not.

I look forward, Madam Speaker, to our leadership showing the way. I think Americans will follow. I think that we can be a role model to the world, and I think that we can get through this with less problems than many are depicting, but we won't get there unless we start.

Posted by Hugo Albert Orwell at 02:40 PM | Permalink | TrackBacks (0)

Source: Yahoo, AP Diplomatic Writer

By BARRY SCHWEID, AP Diplomatic Writer
September 27, 2006

WASHINGTON - The Bush administration said Wednesday it was willing to defer seeking U.N. sanctions against
Iran for a few weeks if there is a chance for a diplomatic resolution of a long-running dispute over Iran's nuclear programs.

Secretary of State Condoleezza Rice telephoned senior European diplomat Javier Solana on Wednesday "and we do fully support his efforts" to hold talks with Iranian nuclear negotiator Ali Larijani, State Department spokesman Sean McCormack said.

The United States had demanded Iran suspend its uranium processing as a precondition to negotiations. McCormack said whether Iran was agreeable to a temporary suspension would not be known until Solana met with Larijani.

"Their disposition to this point has not been to give clear answers" and it may require several meetings to find out, McCormack said.

And yet, the spokesman said, "There may be an opportunity here, there may be a little opening if we just give the Iranians a little time and space."

"Perhaps they will come through with a positive answer," he said.

Senior administration officials warned Iran after it did not meet an Aug. 31 deadline to suspend uranium enrichment that the United States would seek sanctions against Iran in the U.N. Security Council, possibly by the end of September.

But McCormack said Wednesday that Solana saw an "opportunity" in his meeting with Larijani "if we give the Iranians a little time and space."

"Our response was, 'absolutely, if it's a matter of a few days, a few weeks here to see if there is a possibility of keeping open a negotiated diplomatic solution,'" McCormack said.

"We want to give that every opportunity to succeed," he said.

The administration's sanctions strategy is to impose a series of increasingly potent penalties against Iran, beginning with curbs on technology that could be used in military programs.

The United States and the European Union contend Iran is trying to build nuclear weapons. Iran disputes the accusation and says it is merely seeking more energy with its nuclear work.

Posted by Hugo Albert Orwell at 01:13 PM | Permalink | TrackBacks (0)

Source: SFGate.com

Robert Collier, Chronicle Staff Writer
Sunday, September 24, 2006

(09-24) 04:00 PDT El Tigre, Venezuela -- On the hot, shrub-covered plains around this dusty, dingy town, an odd courtship is being carried out between the world's most prominent revolutionary and the world's biggest oil companies.

Just as there is no love between President Hugo Chavez and the Bush administration, there is little love lost between Chavez and the foreign oilmen who are pumping up the huge reservoirs of underground oil. But they need each other. The United States needs Venezuela to help quench its bottomless thirst for oil, and Chavez needs America to buy it from him in order to fund his dreams of spreading his leftist ideology around the hemisphere.

The stakes here are huge. The area around El Tigre, known as the Orinoco Oil Belt, possesses the world's biggest petroleum reserves -- 1.3 trillion barrels of so-called extra-heavy oil. Chevron, Exxon Mobil, ConocoPhillips and dozens of other foreign firms are here, using recently developed technologies to extract the tarlike, sulfurous crude and refine it.

"Everyone agrees that the Orinoco Belt has the biggest reserves in the world," said Alberto Quiros, a Chavez critic and former president of Royal Dutch Shell's Venezuela operations. "What Chavez will do with them is another question, but there's no doubt that Venezuela will take Saudi Arabia's place as No. 1."

Chavez already is forcing Chevron, which is based in San Ramon, and other oil companies to swallow some bitter pills.

In the past two years, he has raised foreign oil companies' corporate income tax to 50 percent from 30 percent and increased royalties payable to the government from as low as 1 percent to 33 percent. After he threatened to confiscate their operations elsewhere in Venezuela, 26 foreign oil companies, including Chevron, agreed earlier this year to convert their operations into joint ventures with the state-owned Petroleos de Venezuela (known as Pdvsa), with the government holding the majority share. Two European firms -- Total of France and ENI of Italy -- refused, and Chavez promptly expelled them.

Now, the government is demanding similar concessions at the four Orinoco Belt operations, in which Chevron, Exxon Mobil and others have invested about $17 billion. The government is demanding that Pdvsa's ownership share of the projects be increased from an average of 40 percent to at least 51 percent and that Pdvsa take over operational control of the oilfields.

Negotiations over these demands are coming to a head, and the outcome may influence whether Venezuela's rising tensions with Washington subside or even escalate. Analysts say foreign companies may seek international arbitration to block Chavez's takeover attempt.

"It will be quite a fight," said Gersan Zurita, an oil-industry analyst with credit evaluator Fitch Ratings in New York, which advises investors who have purchased $3.9 billion in bonds for the Orinoco Belt projects. In June, Fitch Ratings downgraded the projects' credit scores, saying Chavez's demands could damage the projects' viability.

But for Chavez, it's a matter of national pride -- and political bragging points. Around the country, the government has put up posters and billboards showing Chavez extending his arms in a victory salute, accompanied by the slogan, "Full oil sovereignty: Joint ventures -- more benefits for the people!"

As top-secret negotiations begin, all sides in the conflict have tried to keep a low profile. Chevron, Exxon and ConocoPhillips declined Chronicle requests to interview their officials and to visit their installations in Venezuela.

Zurita said the companies fear being blacklisted by Chavez and losing out on future oil deals.

"It's a very delicate situation. It involves more than just these contracts. Any comment by any of these companies could be used by the government to demand more concessions," Zurita said. "The biggest incentive (for the companies) is to preserve access for the future. These are enormous reserves."

Luis Giusti, president of Pdvsa from 1994 to 1999, noted that many companies have little choice but to look to Venezuela because their reserves elsewhere are dwindling and their access to the Middle East is limited by the firm grip of those nations' government monopolies.

"The foreign companies will accept his conditions because they have so much capital sunk there, and they can't afford a confrontation with the government," said Giusti, who during his time at Pdvsa championed many of the privatization policies that Chavez is now reversing.

For its part, the government seems to have adopted a bunker mentality. Pdvsa's Caracas headquarters declined a Chronicle request to interview its officials or to visit its facilities. One official said that all visits were suspended "for security reasons" after a July 17 fire damaged the country's largest oil refinery, at Amuay in the northwest -- a sign that the government is nervous about the company's high rate of accidents, which it blames partially on sabotage by U.S.-inspired domestic opposition groups.

The only government official willing to talk about the subject was Fadi Kabboul, the oil attache at Venezuela's embassy in Washington.

"For the market, the Orinoco extra-heavy oil operations are very profitable, and they will continue being very profitable. There will be ever-greater interest and participation by foreign companies," Kabboul said.

The Orinoco conflict carries echoes of the knock-down, drag-out battle for control that erupted in December 2002, after Chavez ordered Pdvsa to directly fund and operate major social-welfare projects in poor communities. The company's executives, engineers, technicians and ship captains accused Chavez of "politicizing" Pdvsa, went on strike and shut down almost all operations for three months.

The strikers had hoped to topple Chavez by reviving a military-civilian coup effort that overthrew Chavez for two days in April 2002. But Chavez defeated the strike and fired 18,000 of the strikers -- about 90 percent of Pdvsa's white-collar workforce. The company is still struggling to recover, and most energy analysts believe that Pdvsa's production is only one-half of its pre-strike level. Nevertheless, Chavez's oil revenue has been buoyed by the increase of production by foreign companies, which has risen from 400,000 barrels per day to 620,000 per day, and the more-than-doubling of international oil prices.

In El Tigre, dozens of fired Pdvsa employees gather every day at 3 p.m. in a neighborhood park to exchange job tips and speculate hopefully about Chavez's downfall.

"This could be the issue that finally forces the Bush administration to take a stronger stand against Chavez," said Antonio Cardona, a former director of Pdvsa's crude pumping operations for the region. "Foreign companies have been afraid of Chavez, and they're staying just so they don't lose all they have invested, but he may have finally overplayed his hand now."

Cardona said he worked for Pdvsa for 20 years until he joined the strike. Three and a half years later, like his fellow strikers, Cardona is blacklisted throughout the oil industry by Pdvsa, which prohibits even private companies from hiring any ex-striker. Cardona must scrabble for work, doing small engineering jobs for private-sector construction projects.

At the same time, Chavez has begun shifting oil exports away from the United States, where Venezuelan crude is the fifth-largest foreign source of petroleum. During the first half of 2006, Venezuelan oil exports to the United States dropped by approximately 6 percent from the year before to about 1.3 million barrels per day, according to U.S. Energy Department figures.

At the same time, Chavez has struck oil deals with Beijing, including $5 billion of Chinese investments in Venezuelan energy projects by 2012. Venezuela's exports to China, while still relatively small at 150,000 barrels per day, are projected to reach 500,000 barrels by 2010.

Chevron may wind up playing an unwilling role in Chavez's most audacious plan -- construction of a 5,700-mile natural-gas pipeline through South America. The proposed $25 billion project, the central element of Chavez's plan to unify the continent's economies, would start in the eastern Venezuelan city of Puerto Ordaz, slice through Brazil's Amazon jungle and end in Argentina, with trunk lines to Peru, Bolivia and Chile.

Chevron is already a major player in helping Venezuela exploit its offshore natural gas deposits in the Caribbean and Atlantic, which at 151 trillion square feet are the eighth-largest proven reserves in the world. Recently, Venezuelan officials have suggested that despite prior understandings that Chevron would be allowed to convert the production from its Deltana field in the Atlantic into liquefied natural gas and export it to the United States, this supply will instead be sent south via the new pipeline -- whether Chevron likes it or not.

Some experts scoff at Chavez's pipeline idea. "It's a very large and very costly project," said Giusti. "It will never be built to transport reserves of gas that don't exist to markets that don't exist."

Other analysts call it far-thinking. A recent study by the Latin American Energy Organization, a regional alliance headquartered in Quito, Ecuador, concluded that Chavez's pipelines could save the area's governments $100 billion over the next 20 years by lowering imports of liquid natural gas from Asia and Africa.

One smaller project is already under construction -- a 140-mile gas pipeline linking Venezuela to Colombia, with an extension planned to Panama.

In El Tigre, a sprawling small city of 150,000 in Anzoategui state, there is little evidence of the nearby oil bonanza. Main streets are nondescript, and the highways leading out into the surrounding savanna are narrow and potholed.

But billboards are everywhere touting Chavez and the state's governor, Tarek William Saab.

"With Tarek and Chavez, Anzoategui is progressing!" blare the signs, showing a triumphant Chavez leading a slightly sheepish governor, both wearing revolutionary-red shirts and surrounded by cheering crowds.

But even many Chavez supporters complain that the president's grand ambitions have not benefited the people of Anzoategui.

"Because of oil we have everything, yet we have nothing," said El Tigre Mayor Ernesto Paraqueima, a member of Chavez's ruling coalition.

Speaking in his simple office in El Tigre's concrete-block municipal building as a broken sprinkler downstairs coated the windows with water, he bitterly criticized what he said was the waste of huge sums of money.

"The bureaucracy is enormous, and corruption is gigantic," Paraqueima said. "Anzoategui is a rich state, with rich land. You can look on either side of any highway in Anzoategui, and you won't see anything being cultivated anywhere. That's because of oil. We prefer to bring rice and potatoes from Colombia than growing it here. We produce almost nothing but oil.

"Every foreign oil company in the world is here, but where is the benefit?"

Chavez's oil money

In the past three years, as international oil prices have soared, Chavez has eliminated his political opposition's influence over government finances and drawn a tight curtain of secrecy around them.

In 2003, after the opposition led a chaotic strike by executives and technicians at the state-owned, yet formerly autonomous, oil company Petroleos de Venezuela, or Pdvsa, Chavez fired 18,000 of the white-collar strikers. In 2005, Chavez gained full control of the formerly independent Central Bank, and opposition parties' boycott of legislative elections gave his coalition all 167 seats in Congress that December.

Even Citgo, the U.S. refiner and gas retailer wholly owned by Pdvsa, earlier this year paid off all its debt and stopped the routine practice of reporting data to Moody's financial service -- thus ending all outside scrutiny of the company's books.

What's more, much of Venezuela's oil revenue now stays outside the government's budgetary channels. In recent years, Congress has set each year's government budget by setting Pdvsa's tax payments artificially low. This year, for example, Pdvsa's taxes are pegged to a price of $26 per barrel for Venezuela's blend of heavy crudes -- which currently sells for $58. The $32 per barrel difference remains largely off-budget, with no legislative supervision or disclosure of line-item details.

Documents released by the government earlier this month showed oil revenues of $49 billion for Pdvsa in the first six months of 2006, a 21 percent increase from the same period last year.

In Caracas, Pdvsa declined to make officials available to The Chronicle for an interview.

-- Robert Collier

Posted by Hugo Albert Orwell at 10:28 AM | Permalink | TrackBacks (0)

Source: Znet

Transcript
September 21, 2006

Madam President, Excellencies, Heads of State, Heads of government and other government’s representatives, good morning.

First, and with all respect, I highly recommend this book by Noam Chomsky, one of the most prestigious intellectuals in America and the world, Chomsky. One of his most recent works: Hegemony or Survival: America’s Quest for Global Dominance (The American Empire Project) . It’s an excellent work to understand what’s happened in the world in the 20th Century, what’s currently happening, and the greatest threat on this planet; the hegemonic pretension of the North American imperialism endangers the human race’s survival.

We continue warning about this danger and calling on the very same U.S. people and the world to stop this threat, which resembles the Sword of Damocles over our heads. I had considered reading from this book, but for the sake of time, I shall just leave it as a recommendation. It reads easily. It's a very good book. I'm sure, Madam, you are familiar with it.

(APPLAUSE)

The book is in English, in Russian, in Arabic, in German.

I think that the first people who should read this book are our brothers and sisters in the United States, because their threat is in their own house. The devil is right at home. The devil -- the devil, himself, is right in the house.

And the devil came here yesterday.

(APPLAUSE)

Yesterday, the devil came here. Right here. Right here. And it smells of sulfur still today, this table that I am now standing in front of.

Yesterday, ladies and gentlemen, from this rostrum, the president of the United States, the gentleman to whom I refer as the devil, came here, talking as if he owned the world. Truly. As the owner of the world.

I think we could call a psychiatrist to analyze yesterday's statement made by the president of the United States. As the spokesman of imperialism, he came to share his nostrums, to try to preserve the current pattern of domination, exploitation and pillage of the peoples of the world.

An Alfred Hitchcock movie could use it as a scenario. I would even propose a title: "The Devil's Recipe."

As Chomsky says here, clearly and in depth, the American empire is doing all it can to consolidate its system of domination. And we cannot allow them to do that. We cannot allow world dictatorship to be consolidated.

The world parent's statement -- cynical, hypocritical, full of this imperial hypocrisy from the need they have to control everything.

They say they want to impose a democratic model. But that's their democratic model. It's the false democracy of elites, and, I would say, a very original democracy that's imposed by weapons and bombs and firing weapons.

What a strange democracy. Aristotle might not recognize it or others who are at the root of democracy.

What type of democracy do you impose with marines and bombs?

The president of the United States, yesterday, said to us, right here, in this room, and I'm quoting, "Anywhere you look, you hear extremists telling you can escape from poverty and recover your dignity through violence, terror and martyrdom."

Wherever he looks, he sees extremists. And you, my brother -- he looks at your color, and he says, oh, there's an extremist. Evo Morales, the worthy president of Bolivia, looks like an extremist to him.

The imperialists see extremists everywhere. It's not that we are extremists. It's that the world is waking up. It's waking up all over. And people are standing up.

I have the feeling, dear world dictator, that you are going to live the rest of your days as a nightmare because the rest of us are standing up, all those who are rising up against American imperialism, who are shouting for equality, for respect, for the sovereignty of nations.

Yes, you can call us extremists, but we are rising up against the empire, against the model of domination.

The president then -- and this he said himself, he said: "I have come to speak directly to the populations in the Middle East, to tell them that my country wants peace."

That's true. If we walk in the streets of the Bronx, if we walk around New York, Washington, San Diego, in any city, San Antonio, San Francisco, and we ask individuals, the citizens of the United States, what does this country want? Does it want peace? They'll say yes.

But the government doesn't want peace. The government of the United States doesn't want peace. It wants to exploit its system of exploitation, of pillage, of hegemony through war.

It wants peace. But what's happening in Iraq? What happened in Lebanon? In Palestine? What's happening? What's happened over the last 100 years in Latin America and in the world? And now threatening Venezuela -- new threats against Venezuela, against Iran?

He spoke to the people of Lebanon. Many of you, he said, have seen how your homes and communities were caught in the crossfire. How cynical can you get? What a capacity to lie shamefacedly.

The bombs in Beirut with millimetric precision? Is this crossfire?

He's thinking of a western, when people would shoot from the hip and somebody would be caught in the crossfire.

This is imperialist, fascist, assassin, genocidal, the empire and Israel firing on the people of Palestine and Lebanon. That is what happened. And now we hear, "We're suffering because we see homes destroyed.'

The president of the United States came to talk to the peoples -- to the peoples of the world. He came to say -- I brought some documents with me, because this morning I was reading some statements, and I see that he talked to the people of Afghanistan, the people of Lebanon, the people of Iran. And he addressed all these peoples directly.

And you can wonder, just as the president of the United States addresses those peoples of the world, what would those peoples of the world tell him if they were given the floor? What would they have to say?

And I think I have some inkling of what the peoples of the south, the oppressed people think. They would say, "Yankee imperialist, go home." I think that is what those people would say if they were given the microphone and if they could speak with one voice to the American imperialists.

And that is why, Madam President, my colleagues, my friends, last year we came here to this same hall as we have been doing for the past eight years, and we said something that has now been confirmed -- fully, fully confirmed.

I don't think anybody in this room could defend the system. Let's accept -- let's be honest. The U.N. system, born after the Second World War, collapsed. It's worthless.

Oh, yes, it's good to bring us together once a year, see each other, make statements and prepare all kinds of long documents, and listen to good speeches, like Evo's yesterday, or President Lula's. Yes, it's good for that.

And there are a lot of speeches, and we've heard lots from the president of Sri Lanka, for instance, and the president of Chile.

But we, the assembly, have been turned into a merely deliberative organ. We have no power, no power to make any impact on the terrible situation in the world. And that is why Venezuela once again proposes, here, today, September 20th, that we re-establish the United Nations.

Last year, Madam, we made four modest proposals that we felt to be crucially important. We have to assume the responsibility, our heads of state, our ambassadors, our representatives, and we have to discuss it.

The first is expansion, and Lula talked about this yesterday right here: The Security Council’s expansion, both regarding its permanent and non-permanent categories. New developed and developing countries, the Third World, must be given access as new permanent members. That's step one.

Second, effective methods to address and resolve world conflicts, transparent decisions.

Point three, the immediate suppression -- and that is something everyone's calling for -- of the anti-democratic mechanism known as the veto, the veto on decisions of the Security Council.

Let me give you a recent example. The immoral veto of the United States allowed the Israelis, with impunity, to destroy Lebanon. Right in front of all of us as we stood there watching, a resolution in the council was prevented.

Fourthly, we have to strengthen, as we've always said, the role and the powers of the secretary general of the United Nations.

Yesterday, the secretary general practically gave us his speech of farewell. And he recognized that over the last 10 years, things have just gotten more complicated; hunger, poverty, violence, human rights violations have just worsened. That is the tremendous consequence of the collapse of the United Nations system and American hegemonistic pretensions.

Madam , Venezuela a few years ago decided to wage this battle within the United Nations by recognizing the United Nations, as members of it that we are, and lending it our voice, our thinking.

Our voice is an independent voice to represent the dignity and the search for peace and the reformulation of the international system; to denounce persecution and aggression of hegemonistic forces on the planet.

This is how Venezuela has presented itself. Bolivar's home has sought a nonpermanent seat on the Security Council.

Let's see. Well, there's been an open attack by the U.S. government, an immoral attack, to try and prevent Venezuela from being freely elected to a post in the Security Council.

The imperium is afraid of truth, is afraid of independent voices. It calls us extremists, but they are the extremists.

And I would like to thank all the countries that have kindly announced their support for Venezuela, even though the ballot is a secret one and there's no need to announce things.

But since the imperium has attacked, openly, they strengthened the convictions of many countries. And their support strengthens us.

Mercosur, as a bloc, has expressed its support, our brothers in Mercosur. Venezuela, with Brazil, Argentina, Paraguay, Uruguay, is a full member of Mercosur.

And many other Latin American countries, CARICOM, Bolivia have expressed their support for Venezuela. The Arab League, the full Arab League has voiced its support. And I am immensely grateful to the Arab world, to our Arab brothers, our Caribbean brothers, the African Union. Almost all of Africa has expressed its support for Venezuela and countries such as Russia or China and many others.

I thank you all warmly on behalf of Venezuela, on behalf of our people, and on behalf of the truth, because Venezuela, with a seat on the Security Council, will be expressing not only Venezuela's thoughts, but it will also be the voice of all the peoples of the world, and we will defend dignity and truth.

Over and above all of this, Madam President, I think there are reasons to be optimistic. A poet would have said "helplessly optimistic," because over and above the wars and the bombs and the aggressive and the preventive war and the destruction of entire peoples, one can see that a new era is dawning.

As Silvio Rodriguez says, the era is giving birth to a heart. There are alternative ways of thinking. There are young people who think differently. And this has already been seen within the space of a mere decade. It was shown that the end of history was a totally false assumption, and the same was shown about Pax Americana and the establishment of the capitalist neo-liberal world. It has been shown, this system, to generate mere poverty. Who believes in it now?

What we now have to do is define the future of the world. Dawn is breaking out all over. You can see it in Africa and Europe and Latin America and Oceania. I want to emphasize that optimistic vision.

We have to strengthen ourselves, our will to do battle, our awareness. We have to build a new and better world.

Venezuela joins that struggle, and that's why we are threatened. The U.S. has already planned, financed and set in motion a coup in Venezuela, and it continues to support coup attempts in Venezuela and elsewhere.

President Michelle Bachelet reminded us just a moment ago of the horrendous assassination of the former foreign minister, Orlando Letelier.

And I would just add one thing: Those who perpetrated this crime are free. And that other event where an American citizen also died were American themselves. They were CIA killers, terrorists.

And we must recall in this room that in just a few days there will be another anniversary. Thirty years will have passed from this other horrendous terrorist attack on the Cuban plane, where 73 innocents, in a Cubana de Aviacion airliner, died.

And where is the biggest terrorist of this continent who took the responsibility for blowing up the plane? He spent a few years in jail in Venezuela. Thanks to CIA and then government officials, he was allowed to escape, and he lives here in this country, protected by the government.

And he was convicted. He has confessed to his crime. But the U.S. government has double standards. It protects terrorism when it wants to.

And this is to say that Venezuela is fully committed to combating terrorism and violence. And we are one of the people who are fighting for peace.

Luis Posada Carriles is the name of that terrorist who is protected here. And other tremendously corrupt people who escaped from Venezuela are also living here under protection: a group that bombed various embassies, that assassinated people during the coup. They kidnapped me and they were going to kill me, but I think God reached down and our people came out into the streets and the army was too, and so I'm here today.

But these people who led that coup are here today in this country protected by the American government. And I accuse the American government of protecting terrorists and of having a completely cynical discourse.

We mentioned Cuba. Yes, we were just there a few days ago. We just came from there happily.

And there you see another era born. The Summit of the 15, the Summit of the Nonaligned, adopted a historic resolution. This is the outcome document. Don't worry, I'm not going to read it.

But you have a whole set of resolutions here that were adopted after open debate in a transparent matter -- more than 50 heads of state. Havana was the capital of the south for a few weeks, and we have now launched, once again, the group of the nonaligned with new momentum.

And if there is anything I could ask all of you here, my companions, my brothers and sisters, it is to please lend your good will to lend momentum to the Nonaligned Movement for the birth of the new era, to prevent hegemony and prevent further advances of imperialism.

And as you know, Fidel Castro is the president of the nonaligned for the next three years, and we can trust him to lead the charge very efficiently.

Unfortunately they thought, "Oh, Fidel was going to die." But they're going to be disappointed because he didn't. And he's not only alive, he's back in his green fatigues, and he's now presiding the nonaligned.

So, my dear colleagues, Madam President, a new, strong movement has been born, a movement of the south. We are men and women of the south.

With this document, with these ideas, with these criticisms, I'm now closing my file. I'm taking the book with me. And, don't forget, I'm recommending it very warmly and very humbly to all of you.

We want ideas to save our planet, to save the planet from the imperialist threat. And hopefully in this very century, in not too long a time, we will see this, we will see this new era, and for our children and our grandchildren a world of peace based on the fundamental principles of the United Nations, but a renewed United Nations.

And maybe we have to change location. Maybe we have to put the United Nations somewhere else; maybe a city of the south. We've proposed Venezuela.

You know that my personal doctor had to stay in the plane. The chief of security had to be left in a locked plane. Neither of these gentlemen was allowed to arrive and attend the U.N. meeting. This is another abuse and another abuse of power on the part of the Devil. It smells of sulfur here, but God is with us and I embrace you all.

May God bless us all. Good day to you.

Posted by Hugo Albert Orwell at 04:23 PM | Permalink | TrackBacks (0)

Source: The Progressive

By Greg Palast, The Progressive
July 2006 Issue

You’d think George Bush would get down on his knees and kiss Hugo Chávez’s behind. Not only has Chávez delivered cheap oil to the Bronx and other poor communities in the United States. And not only did he offer to bring aid to the victims of Katrina. In my interview with the president of Venezuela on March 28, he made Bush the following astonishing offer: Chávez would drop the price of oil to $50 a barrel, “not too high, a fair price,” he said—a third less than the $75 a barrel for oil recently posted on the spot market. That would bring down the price at the pump by about a buck, from $3 to $2 a gallon.

But our President has basically told Chávez to take his cheaper oil and stick it up his pipeline. Before I explain why Bush has done so, let me explain why Chávez has the power to pull it off—and the method in the seeming madness of his “take-my-oil-please!” deal.

Venezuela, Chávez told me, has more oil than Saudi Arabia. A nutty boast? Not by a long shot. In fact, his surprising claim comes from a most surprising source: the U.S. Department of Energy. In an internal report, the DOE estimates that Venezuela has five times the Saudis’ reserves.

However, most of Venezuela’s mega-horde of crude is in the form of “extra-heavy” oil—liquid asphalt—which is ghastly expensive to pull up and refine. Oil has to sell above $30 a barrel to make the investment in extra-heavy oil worthwhile. A big dip in oil’s price—and, after all, oil cost only $18 a barrel six years ago—would bankrupt heavy-oil investors. Hence Chávez’s offer: Drop the price to $50—and keep it there. That would guarantee Venezuela’s investment in heavy oil.

But the ascendance of Venezuela within OPEC necessarily means the decline of the power of the House of Saud. And the Bush family wouldn’t like that one bit. It comes down to “petro-dollars.” When George W. ferried then-Crown Prince (now King) Abdullah of Saudi Arabia around the Crawford ranch in a golf cart it wasn’t because America needs Arabian oil. The Saudis will always sell us their petroleum. What Bush needs is Saudi petro-dollars. Saudi Arabia has, over the past three decades, kindly recycled the cash sucked from the wallets of American SUV owners and sent much of the loot right back to New York to buy U.S. Treasury bills and other U.S. assets.

The Gulf potentates understand that in return for lending the U.S. Treasury the cash to fund George Bush’s $2 trillion rise in the nation’s debt, they receive protection in return. They lend us petro-dollars, we lend them the 82nd Airborne.

Chávez would put an end to all that. He’ll sell us oil relatively cheaply—but intends to keep the petro-dollars in Latin America. Recently, Chávez withdrew $20 billion from the U.S. Federal Reserve and, at the same time, lent or committed a like sum to Argentina, Ecuador, and other Latin American nations.

Chávez, notes The Wall Street Journal, has become a “tropical IMF.” And indeed, as the Venezuelan president told me, he wants to abolish the Washington-based International Monetary Fund, with its brutal free-market diktats, and replace it with an “International Humanitarian Fund,” an IHF, or more accurately, an International Hugo Fund. In addition, Chávez wants OPEC to officially recognize Venezuela as the cartel’s reserve leader, which neither the Saudis nor Bush will take kindly to.

Politically, Venezuela is torn in two. Chávez’s “Bolivarian Revolution,” a close replica of Franklin Roosevelt’s New Deal—a progressive income tax, public works, social security, cheap electricity—makes him wildly popular with the poor. And most Venezuelans are poor. His critics, a four-centuries’ old white elite, unused to sharing oil wealth, portray him as a Castro-hugging anti-Christ.

Chávez’s government, which used to brush off these critics, has turned aggressive on them. I challenged Chávez several times over charges brought against Súmate, his main opposition group. The two founders of the nongovernmental organization, which led the recall campaign against Chávez, face eight years in prison for taking money from the Bush Administration and the International Republican [Party] Institute. No nation permits foreign funding of political campaigns, but the charges (no one is in jail) seem like a heavy hammer to use on the minor infractions of these pathetic gadflies.

Bush’s reaction to Chávez has been a mix of hostility and provocation. Washington supported the coup attempt against Chávez in 2002, and Condoleezza Rice and Donald Rumsfeld have repeatedly denounced him. The revised National Security Strategy of the United States of America, released in March, says, “In Venezuela, a demagogue awash in oil money is undermining democracy and seeking to destabilize the region.”

So when the Reverend Pat Robertson, a Bush ally, told his faithful in August 2005 that Chávez has to go, it was not unreasonable to assume that he was articulating an Administration wish. “If he thinks we’re trying to assassinate him,” Robertson said, “I think that we really ought to go ahead and do it. It’s a whole lot cheaper than starting a war . . . and I don’t think any oil shipments will stop.”

There are only two ways to defeat the rise of Chávez as the New Abdullah of the Americas. First, the unattractive option: Cut the price of oil below $30 a barrel. That would make Chávez’s crude worthless. Or, option two: Kill him.

Palast: Your opponents are saying that you are beginning a slow-motion dictatorship. Is that what we are seeing?

Hugo Chávez: They have been saying that for a long time. When they’re short of ideas, any excuse will do as a vehicle for lies. That is totally false. I would like to invite the citizens of Great Britain and the citizens of the U.S. and the citizens of the world to come here and walk freely through the streets of Venezuela, to talk to anyone they want, to watch television, to read the papers. We are building a true democracy, with human rights for everyone, social rights, education, health care, pensions, social security, and jobs.

Palast: Some of your opponents are being charged with the crime of taking money from George Bush. Will you send them to jail?

Chávez: It’s not up to me to decide that. We have the institutions that do that. These people have admitted they have received money from the government of the United States. It’s up to the prosecutors to decide what to do, but the truth is that we can’t allow the U.S. to finance the destabilization of our country. What would happen if we financed somebody in the U.S. to destabilize the government of George Bush? They would go to prison, certainly.

Palast: How do you respond to Bush’s charge that you are destabilizing the region and interfering in the elections of other Latin American countries?

Chávez: Mr. Bush is an illegitimate President. In Florida, his brother Jeb deleted many black voters from the electoral registers. So this President is the result of a fraud. Not only that, he is also currently applying a dictatorship in the U.S. People can be put in jail without being charged. They tap phones without court orders. They check what books people take out of public libraries. They arrested Cindy Sheehan because of a T-shirt she was wearing demanding the return of the troops from Iraq. They abuse blacks and Latinos. And if we are going to talk about meddling in other countries, then the U.S. is the champion of meddling in other people’s affairs. They invaded Guatemala, they overthrew Salvador Allende, invaded Panama and the Dominican Republic. They were involved in the coup d’état in Argentina thirty years ago.

Palast: Is the U.S. interfering in your elections here?

Chávez: They have interfered for 200 years. They have tried to prevent us from winning the elections, they supported the coup d’état, they gave millions of dollars to the coup plotters, they supported the media, newspapers, outlaw movements, military intervention, and espionage. But here the empire is finished, and I believe that before the end of this century, it will be finished in the rest of the world. We will see the burial of the empire of the eagle.

Palast: You don’t interfere in the elections of other nations in Latin America?

Chávez: Absolutely not. I concern myself with Venezuela. However, what’s going on now is that some rightwing movements are transforming me into a pawn in the domestic politics of their countries, by making statements that are groundless. About candidates like Morales [of Bolivia], for example. They said I financed the candidacy of President Lula [of Brazil], which is totally false. They said I financed the candidacy of Kirchner [of Argentina], which is totally false. In Mexico, recently, the rightwing party has used my image for its own profit. What’s happened is that in Latin America there is a turn to the left. Latin Americans have gotten tired of the Washington consensus—a neoliberalism that has aggravated misery and poverty.

Palast: You have spent millions of dollars of your nation’s oil wealth throughout Latin America. Are you really helping these other nations or are you simply buying political support for your regime?

Chávez: We are brothers and sisters. That’s one of the reasons for the wrath of the empire. You know that Venezuela has the biggest oil reserves in the world. And the biggest gas reserves in this hemisphere, the eighth in the world. Up until seven years ago, Venezuela was a U.S. oil colony. All of our oil was going up to the north, and the gas was being used by the U.S. and not by us. Now we are diversifying. Our oil is helping the poor. We are selling to the Dominican Republic, Haiti, Cuba, some Central American countries, Uruguay, Argentina.

Palast: And the Bronx?

Chávez: In the Bronx it is a donation. In all the cases I just mentioned before, it is trade. However, it’s not free trade, just fair commerce. We also have an international humanitarian fund as a result of oil revenues.

Palast: Why did George Bush turn down your help for New Orleans after the hurricane?

Chávez: You should ask him, but from the very beginning of the terrible disaster of Katrina, our people in the U.S., like the president of CITGO, went to New Orleans to rescue people. We were in close contact by phone with Jesse Jackson. We hired buses. We got food and water. We tried to protect them; they are our brothers and sisters. Doesn’t matter if they are African, Asian, Cuban, whatever.

Palast: Are you replacing the World Bank and the International Monetary Fund as “Daddy Big Bucks”?

Chávez: I do wish that the IMF and the World Bank would disappear soon.

Palast: And it would be the Bank of Hugo?

Chávez: No. The International Humanitarian Bank. We are just creating an alternative way to conduct financial exchange. It is based on cooperation. For example, we send oil to Uruguay for their refinery and they are paying us with cows.

Palast: Milk for oil.

Chávez: That’s right. Milk for oil. The Argentineans also pay us with cows. And they give us medical equipment to combat cancer. It’s a transfer of technology. We also exchange oil for software technology. Uruguay is one of the biggest producers of software. We are breaking with the neoliberal model. We do not believe in free trade. We believe in fair trade and exchange, not competition but cooperation. I’m not giving away oil for free. Just using oil, first to benefit our people, to relieve poverty. For a hundred years we have been one of the largest oil-producing countries in the world but with a 60 percent poverty rate and now we are canceling the historical debt.

Palast: Speaking of the free market, you’ve demanded back taxes from U.S. oil companies. You have eliminated contracts for North American, British, and European oil companies. Are you trying to slice out the British and American oil companies from Venezuela?

Chávez: No, we don’t want them to go, and I don’t think they want to leave the country, either. We need each other. It’s simply that we have recovered our oil sovereignty. They didn’t pay taxes. They didn’t pay royalties. They didn’t give an account of their actions to the government. They had more land than had previously been established in the contracts. They didn’t comply with the agreed technology exchange. They polluted the environment and didn’t pay anything towards the cleanup. They now have to comply with the law.

Palast: You’ve said that you imagine the price of oil rising to $100 dollars per barrel. Are you going to use your new oil wealth to squeeze the planet?

Chávez: No, no. We have no intention of squeezing anyone. Now, we have been squeezed and very hard. Five hundred years of squeezing us and stifling us, the people of the South. I do believe that demand is increasing and supply is dropping and the large reservoirs are running out. But it’s not our fault. In the future, there must be an agreement between the large consumers and the large producers.

Palast: What happens when the oil money runs out, what happens when the price of oil falls as it always does? Will the Bolivarian revolution of Hugo Chávez simply collapse because there’s no money to pay for the big free ride?

Chávez: I don’t think it will collapse, in the unlikely case of oil running out today. The revolution will survive. It does not rely solely on oil for its survival. There is a national will, there is a national idea, a national project. However, we are today implementing a strategic program called the Oil Sowing Plan: using oil wealth so Venezuela can become an agricultural country, a tourist destination, an industrialized country with a diversified economy. We are investing billions of dollars in the infrastructure: power generators using thermal energy, a large railway, roads, highways, new towns, new universities, new schools, recuperating land, building tractors, and giving loans to farmers. One day we won’t have any more oil, but that will be in the twenty-second century. Venezuela has oil for another 200 years.

Palast: But the revolution can come to an end if there’s another coup and it succeeds. Do you believe Bush is still trying to overthrow your government?

Chávez: He would like to, but what you want is one thing, and what you cannot really obtain is another.

Investigative reporter Greg Palast, who interviewed President Hugo Chávez for the British Broadcasting Corporation (BBC), is the author of “Armed Madhouse: Dispatches from the Front Lines of the Class War,” from which this is adapted.

Posted by Hugo Albert Orwell at 04:54 PM | Permalink | TrackBacks (0)

Fantastic explantion of the history of oil, oil's influence in war, Peak Oil and US Dollar currency hegemony. All done with humor, amusing analogies and in lay person's terms.

http://video.google.com/videoplay?docid=7374585792978336967

Posted by Hugo Albert Orwell at 11:18 AM | Permalink | TrackBacks (0)

Source: AlterNet

By Greg Palast, AlterNet
Posted June 25, 2003

Well, actually, he's not. How the American media distorted events in Venezuela beyond all recognition is clear to one who reported from there.

[Editors note: As a globetrotting investigative reporter who has worked for major news outlets on both sides of the Atlantic, Greg Palast has had ample opportunity to see how media coverage can strongly skew how events are seen by the public. Last week, in an original article published on AlterNet, "The Screwing of Cynthia McKinney", he showed how sloppy reporters at the New York Times and National Public Radio were complicit in the political destruction of progressive Rep. Cynthia McKinney. Now, in another case study, he takes on U.S. media coverage of Venezuela's political turmoil.]

Last June, on Page One of the San Francisco Chronicle, an Associated Press photo of a mass of demonstrators carried the following caption:

"TENS OF THOUSANDS OF VENEZUELANS OPPOSED TO PRESIDENT HUGO CHAVEZ..."

The caption let us know this South American potentate was a killer, an autocrat, and the people of his nation wanted him out. The caption continued: "[Venezuelans] marched Saturday to demand his resignation and punishment for those responsible for 17 deaths during a coup in April. 'Chavez leave now!' read a huge banner."

There was no actual story in the Chronicle -- South America simply isn't worth wasting words on -- just the photo and caption. But the Chronicle knew no story was needed. Venezuelans hated their terrible president, and all you needed was this photo to prove it.

And I could confirm the large protests. I'd recently returned from Caracas and watched 100,000 march against President Chavez. I'd filmed them for BBC Television London.

But I also filmed this: a larger march, easily over 200,000 Venezuelans marching in support of their president, Chavez.

That picture, of the larger pro-Chavez march, did not appear in a single U.S. newspaper. The pro-Chavez marchers weren't worth a mention.

By the next month, when the New York Times printed a photo of anti-Chavez marchers, they had metastasized. The Times reported that 600,000 had protested against Chavez.

Once again, the larger pro-Chavez demonstrations were, as they say in Latin America, "disappeared." I guess they didn't fit the print.

Look at the Chronicle/AP photo of the anti-Chavez marchers in Venezuela. Note their color. White.

And not just any white. A creamy rich white.

I interviewed them and recorded in this order: a banker in high heels and push-up bra; an oil industry executive (same outfit); and a plantation owner who rode to Caracas in a silver Jaguar.

And the color of the pro-Chavez marchers? Dark brown. Brown and round as cola nuts -- just like their hero, their President Chavez. They wore an unvarying uniform of jeans and T-shirts.

Let me explain.

For five centuries, Venezuela has been run by a minority of very white people, pure-blood descendants of the Spanish conquistadors. To most of the 80 percent of Venezuelans who are brown, Hugo Chavez is their Nelson Mandela, the man who will smash the economic and social apartheid that has kept the dark-skinned millions stacked in cardboard houses in the hills above Caracas while the whites live in high-rise splendor in the city center. Chavez, as one white Caracas reporter told me with a sneer, gives them bricks and milk, and so they vote for him.

Why am I explaining the basics of Venezuela to you? If you watched BBC TV, or Canadian Broadcasting, you'd know all this stuff. But if you read the New York Times, you'll only know that President Chavez is an "autocrat," a "ruinous demagogue," and a "would-be dictator," who resigned when he recognized his unpopularity.

Odd phrasings -- "dictator" and "autocrat" -- to describe Chavez, who was elected by a landslide majority (56 percent) of the voters. Unlike our President.

On April 12, 2002, Chavez resigned his presidency It said so, right there in the paper -- every major newspaper in the USA, every single one. Apparently, to quote the New York Times, Chavez recognized that he was unpopular, his time was up: "With yesterday's resignation of President Hugo Chavez, Venezuelan democracy is no longer threatened by a would-be dictator."

Problem was, the "resignation" story was a fabulous fib, a phantasmagoric fabrication. In fact, the President of Venezuela had been kidnapped at gunpoint and bundled off by helicopter from the presidential palace. He had not resigned; he never resigned; and one of his captors (who secretly supported Chavez) gave him a cell-phone from which he called and confirmed to friends and family that he remained alive -- and still president.

Working for the Guardian and the BBC, I was able within hours of the kidnapping to reach key government people in Venezuela to confirm that this "resignation" factoid was just hoodoo nonsense.

But it was valuable nonsense to the U.S. State Department. The faux resignation gave the new U.S.-government-endorsed Venezuelan leaders the pretense of legitimacy -- Chavez had resigned; this was a legal change of government, not a coup d'etat. (The Organization of American States bars recognition of governments who come to power through violence.) Had the coup leaders not bungled their operation -- the coup collapsed within 48 hours -- or if they had murdered Chavez, we would never have known the truth.

The U.S. papers got it dead wrong -- but how? Who was the source of this "resignation" lie? I asked a U.S. reporter why American news media had reported this nonsense as stone fact without checking. The reply was that it came from a reliable source: "We got it from the State Department."

Oh.

"He's crazy," shouts a protester about President Chavez on one broadcast. And if you watched the 60 Minutes interview with Chavez, you saw a snippet of a lengthy conversation -- a few selective seconds, actually -- which, out of context, did made Chavez look loony.

In the old Soviet Union, dissidents were packed off to insane asylums to silence and discredit them. In our democracy we have a more subtle -- and more effective -- means of silencing and discrediting dissidents. Television, radio, and print press obligingly sequester enemies of the state in the media's madhouse. In this way, Bush critic Rep. Cynthia McKinney became "loony" (see "The Screwing of Cynthia McKinney"); Chavez a mad "autocrat."

It's the electronic loony bin. You no longer hear what they have to say because you've been told by images, by repetition, and you've already dismissed their words ... if by some chance their words break through the television Berlin Wall.

Try it: Do a Google or Lexis search on the words Chavez and autocrat.

For who is the autocrat? Today, there are hundreds of people held in detention without charges in George Bush's United States. In Venezuela, there are none.

This is not about Venezuela but about the Virtual Venezuela, created for you by America's news wardens. The escape routes are guarded.

January 5, 2003, New York City. Picked up bagels and the Sunday Times on Delancey Street. Looks like that s.o.b. Chavez is at it again: Here was a big picture of a half-dozen people lying on the ground. The Times story read: "Protesters shielded themselves from tear gas during an anti- government rally on Friday in Caracas, Venezuela. In the 33rd day of a national strike, several protesters were shot."

That was it -- the entire story of Venezuela for the Paper of Record.

Maybe size doesn't matter. But this does: Even this itty-bitty story is a steaming hot bag of mendacity. Yes, two people were shot dead -- those in the pro-Chavez march.

I'd be wrong to say that every U.S. paper repeated the Times sloppy approach. Elsewhere, you could see a photo of the big pro-Chavez march and a photo of the "Chavista" widow placed within an explanatory newswire story. Interestingly, the fuller and correct story ran in an outlet that's none too friendly to Chavez: El Diario, New York City's oldest Spanish-language newspaper.

Lesson: If you want to get accurate news in the United States, you might want to learn a language other than English.

Friday, January 3, 2003. The New York Times ran a long "News Analysis: Venezuela Outlook." Four experts were quoted. For balance, two of them don't like Chavez, while the other two despise him.

The Times reporter wrote that "the president says he will stay in power." "In power?" What a strange phrase for an elected official. Having myself spoken with Chavez, it did not sound like him. He indicated he would stay "in office" -- quite a different inference than "in power." But then, the Times' phrasing isn't in quotes.

That's because Chavez never said it.

This article was based on a contribution to the compendium, "Abuse Your Illusions," released this month by Disinformation Press. Oliver Shykles, Fredda Weinberg, Ina Howard, and Phil Tanfield contributed research for this report. Palast, an investigative reporter for BBC television, is author of the New York Times bestseller, "The Best Democracy Money Can Buy" (Penguin/Plume 2003).

Posted by Hugo Albert Orwell at 10:32 AM | Permalink | TrackBacks (0)

Source: The Observer

NO MORE CHEAP OIL SAYS CHAVEZ
By Meirion Jones
Producer, BBC Newsnight
Monday April 3, 2006

If you thought high oil prices were just a blip think again. In an exclusive interview with Greg Palast for BBC Newsnight the Venezuelan President Hugo Chavez has ruled out any return to the era of cheap oil.

The colourful Venezuelan leader hosts the OPEC meeting on June 1 in Caracas and he will ask OPEC to set $50 a barrel - the average price last year - as the long term level. During the 1990s the price of oil had hovered around the $20 mark falling as low as $10 a barrel in early 1999.

Chavez told Newsnight "we're trying to find an equilibrium. The price of oil could remain at the low level of $50. That's a fair price it's not a high price". Hugo Chavez will have added clout at this OPEC meeting.

US Department of Energy analyses seen by Newsnight show that at $50 a barrel Venezuela - not Saudi Arabia - will have the biggest oil reserves in OPEC. Venezuela has vast deposits of extra heavy oil in the Orinoco. Traditionally these have not been counted because at $20 a barrel they were too expensive to exploit - but at $50 a barrel melting them into liquid petroleum becomes extremely profitable.

The US DoE report shows that at today's prices Venezuela's oil reserves are bigger than those of the entire Middle East including Saudi Arabia, the Gulf states, Iran and Iraq. The US DoE also identifies Canada as another future oil superpower. Venezuela's deposits alone could extend the oil age for another 100 years.

The US DoE estimates that Chavez controls 1.3 trillion barrels of oil - more than the entire declared oil reserves of the rest of the planet. Hugo Chavez told Newsnight's Greg Palast that "Venezuela has the largest oil reserves in the world. In the future Venezuela won't have any more oil - but that's in the 22nd century. Venezuela has oil for 200 years." Chavez will ask the OPEC meeting in June to formally accept that Venezuela's reserves are now bigger than Saudi Arabia's.

Chavez's increased muscle will not go down well in Washington. In 2002 the Bush administration welcomed an attempted coup against Chavez. He told Newsnight that the Americans had organised it in an attempt to get hold of Venezuela's oil.

Ironically by invading Iraq George Bush has boosted oil prices and effectively transferred billions of dollars from American consumers to Chavez. Up to $200 million a day - half of it from the US - is flooding into Caracas. Chavez is spending this on building infrastructure and increasing the minimum wage and improving health and education in the poor ranchos which surround the cities. As a result even his opponents accept that Chavez is extremely popular and will easily win the next Presidential election in December.

Chavez is also spending billions in the rest of Latin America - exchanging contracts for oil tankers and infrastructure projects and buying up loans in Argentina and Brazil. He has made cheap oil deals with Ecuador and the Caribbean.

He has also spent some of the dollars which have come in from the US supporting Fidel Castro in Cuba. In return Cuba has supplied the thousands of doctors and teachers who are transforming conditions in the barrios of Caracas. Washington accuses Chavez of buying influence in Latin America.

The Newsnight team had to endure the long speeches and marathon six hour TV shows which Hugo Chavez delights in. Chavez posed for Newsnight posing with the sword of Simon Bolivar the 18th century liberator who drove out Spanish imperialists from South America. The symbolism was clear but behind the showman is a clever political brain.

Chavez has not invaded any foreign countries. He does not have secret prisons at home or abroad. Chavez has repeatedly won democratic elections and the opposition operates freely although some members have been charged with accepting illegal foreign donations. Nonetheless George Bush's administration repeatedly targets Chavez on human rights and finances his opponents.

Earlier this year US Defense Secretary Donald Rumsfeld compared Chavez to Hitler - because he was elected democratically - and last year the influential American evangelist Pat Robertson called for his assassination. Robertson later apologized and said that he did not "necessarily" have to be killed so long as he was kidnapped by American special forces.

Chavez told Newsnight that he was still concerned that George Bush had not learnt the lessons of Iraq and would order an invasion to try to secure Venezuela's oil. "I pray this will not happen because US soldiers will bite the dust and so will we, Venezuelans". He warned that any such attempt would lead to a prolonged guerilla war and an end to oil production. "The US people should know there will be no oil for anyone".

Chavez does not accept Tony Blair's criticism of him for lining up with Fidel Castro. He told Newsnight "if someone is sleeping together it is Bush and Blair. They share the same bed."

Posted by Hugo Albert Orwell at 09:58 AM | Permalink | TrackBacks (0)

Source: Mehrnews.com

September 15, 2006

TEHRAN, Sept. 15 (MNA) -- Oil Minister Kazem Vaziri-Hamaneh said here on Friday that all preparatory requirements were arranged for launching the oil stock market in the country.

Speaking to the reporters at the Mehrabad International Airport upon arriving in Tehran from an OPEC conference in Vienna, Vaziri-Hamaneh said that all un-subsidized oil products can be offered in this stock market.

He also rejected rumors about the preparation of a plan to gradually increase the gasoline price, but added that the cabinet had submitted a bill to the Majlis for importing gasoline.

“If the bill is ratified, the present condition will continue and rationing will be put into practice later.”

Hamaneh further noted that the plan to issue fuel debit cards will be finalized within three months.

As for the decisions made during that OPEC conference, the minister said that the member countries were quite concerned for the downward trend of oil price, and so decided to maintain the present oil production ceiling.

Elsewhere in his remarks, Vaziri-Hamaneh referred to the development of the Azadegan oilfield and said that an agreement has been inked with the Japanese, granting to them a 15-day opening to meet their commitments.

He explained “the Total Company anyway stresses cooperating with the Japanese and is interested in starting the conduction of project after the cooperation contract is finalized with the Japanese contractor.”

Answering a question about the development of the Arash oilfield, Iranian oil minister said that an Iranian delegation will head for Kuwait within 7 to10 days, adding that however, Iran and Kuwait are determined to jointly develop their joint oilfield.

Hamaneh said that a two-month opening has been also granted to the Chinese contractor to develop Yadavaran oilfield.

Elaborating on the development process of the Peace Pipeline, he said the consultant party is supposed to estimate and submit the gas price as soon as possible so that Iran can negotiate it with the Indian and Pakistani ministers.

Posted by Hugo Albert Orwell at 05:10 PM | Permalink | TrackBacks (0)

Source: Baltimore Sun.com

By Cynthia Tucker
Originally published September 18, 2006

ATLANTA // You haven't heard a word about oil from President Bush or his Cabinet as they've gone about the country on their pre-Halloween scarefest, trying to frighten voters into supporting their so-called war on terror. They've spoken of freedom and civilization, courage and cowardice, Nazis and appeasers.

But they haven't mentioned oil.

By now, of course, most Americans have long since ceased giving any credence to the administration's public explanations for the war in Iraq. Most Americans no longer believe toppling Saddam Hussein was worth the sacrifices, nor do they connect the invasion to the broader war against Islamic jihadists.

The idea that the president has pitched most recently - that the very foundations of Western civilization are at stake, as they were in World War II - is no more persuasive. If Mr. Bush genuinely believed the stakes were that high, he would have called on all the nation's resources, including a military draft. Instead, the White House has gone about business as usual: cutting taxes, refusing to take port security seriously and relying on an all-volunteer military.

While several agendas converged to drive the war wagon to Baghdad, providing the United States access to Middle East oil reserves was always a critical factor. It's not just liberals - Democrats, environmentalists, Hummer-haters - who say so. So do candid conservatives.

In his book The New American Militarism: How Americans are Seduced by War, Boston University professor and West Point grad Andrew Bacevich analyzed four military interventions of the Reagan era: "None of the four episodes can be fully understood except in relation to global reserves of fossil fuels and America's growing dependence on imported oil."

Kevin Phillips, a former Republican political strategist, is blunt in his latest book, American Theocracy: "Oil abundance has always been part of what America fights for, as well as with."

Most Americans don't want to concede that. Perhaps that's why Mr. Bush was able to con the voters into re-electing him: Americans wanted to believe that we went to Iraq to clean out a terrorist infrastructure and to establish a base camp for democracy in the Middle East. No matter that the facts didn't point in that direction; it was easier for us to believe that than to believe we went to secure U.S. access to Mideast oil.

Yet history clarifies the point. The CIA intervened in Iran in the 1950s, clearing a path for the shah, because Iran had nationalized its oilfields, displeasing Anglo-American petroleum interests. Mr. Phillips notes that in 1973, Secretary of State Henry A. Kissinger and others in President Richard M. Nixon's Cabinet "promoted, just short of openly, a plan for using U.S. airborne forces to seize the oilfields of Saudi Arabia, Kuwait and Abu Dhabi." And surely no one still thinks the United States would have driven Mr. Hussein out of Kuwait in 1991 had petroleum reserves not been at stake.

The current administration kept oil at the forefront of its planning after 9/11, too. In a speech last year, retired Army Col. Lawrence Wilkerson, who served as chief of staff to former Secretary of State Colin L. Powell, revealed discussions about "mounting an operation to take the oilfields in the Middle East, internationalize them, put them under some sort of U.N. trusteeship, and administer the oil and the revenues accordingly."

Mr. Bush and his Cabinet deserve their share of blame for failing to confront Americans with the consequences of our addiction to oil. But we've gone along with their deception. Until we admit the blood price we pay for petroleum, we'll never be able to construct a sane policy toward the Middle East.

Cynthia Tucker is editorial page editor for the Atlanta Journal-Constitution. Her column appears Mondays in The Sun. Her e-mail is cynthiaF*CKSPAM@ajc.com.

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Source: The New York Times

By JANE PERLEZ
Published: September 18, 2006

STUNG TRENG, Cambodia — In the dense humidity of northern Cambodia, where canoes are the common mode of transportation, a foreman from a Chinese construction company directs local laborers to haul stones to the ramp of a nearly completed bridge.

Nearby, engineers from the China Shanghai Construction Group have sunk more than a dozen concrete pylons across a tributary of the mighty Mekong River, a technical feat that will help knit together a 1,200-mile route from the southern Chinese city of Kunming through Laos to the Cambodian port of Sihanoukville on the Gulf of Thailand.

This is the new face of China’s foreign aid to poor Asian countries: difficult construction in remote places that benefits the recipient, and China, too.

"It is the favor of our government to the Cambodian people," said Ge Zhen, 26, one of the more than 50 engineers and 250 other Chinese workers on the four-year project.

Flush with nearly a trillion dollars in hard currency reserves and eager for stable friends in Southeast Asia, China is making big loans for big projects to countries that used to be the sole preserve of the World Bank, the Asian Development Bank, the United States and Japan.

With the Singapore meeting of the World Bank on Sept. 19 and 20, China, one of the bank’s biggest customers, is quietly shaking up the aid business in Asia, competing with the bank at its own game.

For poor countries like Cambodia, Laos and Myanmar, and somewhat better-off countries like the Philippines, China’s loans are often more attractive than the complicated loans from the West.

The Chinese money usually comes unencumbered with conditions for environmental standards or community resettlement that can hold up major projects. The aid does not carry penalties for corruption that are being increasingly used by the World Bank president, Paul D. Wolfowitz. And China’s offers rarely include the extra freight of expensive consultants, provisions that are common to World Bank projects.

For its part, China benefits from the added infrastructure — roads, ports and bridges — in the underdeveloped but growing region around it, to help increase trade and to move natural resources from China’s periphery to its heartland.

Liqun Jin, vice president of the Asian Development Bank and a former vice minister of finance in Beijing, said in an interview at the bank’s headquarters in Manila that China had carefully considered how to use its increasing wealth.

"China is attracting external capital, and as a balance China wants to help developing countries in the region by financing infrastructure projects," Mr. Jin said. "Helping your neighbors to have a good life is no sin."

He added, "China makes no bones that we want a peaceful neighborhood to develop our own economy."

The effects are likely to be enormous. Tom Crouch, country director for the Philippines at the Asian Development Bank, said, "Here comes a very large new player on the block that has the potential of changing the landscape of overseas development assistance."

Already, in the past several years, China has given aid to African countries, where it is buying oil and gas. They include some with repressive governments like Nigeria, Sudan and Angola.

Even during the cold war, China spread aid around Africa, sometimes to counterbalance assistance from rival countries, which were being helped by Taiwan. In the 1960’s and 70’s, for example, China aided Angola while Taiwan helped neighboring South Africa.

In Cambodia, Prime Minister Hun Sen boasts of China’s offer last spring of $600 million in "no strings attached" loans, made during a visit from the Chinese prime minister, Wen Jiabao. The money will help pay for two major bridges near the capital, Phnom Penh, that will link to a network of roads; a hydropower plant; and a fiber-optic network that will connect Cambodia’s telecommunications with that of Vietnam and Thailand.

In contrast, Mr. Hun Sen points out that the traditional lenders together pledged just $1 million more than China. And the money came laden with conditions, including World Bank anticorruption clauses.

Four World Bank programs in Cambodia worth about $70 million were recently suspended by the bank after its investigators found corruption among Cambodian officials in the procurement process.

China’s generosity to Cambodia has caught Washington’s attention. The United States Navy is planning a port visit to Sihanoukville early next year, a first since the Khmer Rouge seized power in 1975.

In the Philippines, China is also making a big splash, offering an extraordinary package of $2 billion in loans each year for the next three years from its Export-Import Bank.

That made the $200 million offered separately by the World Bank and the Asian Development Bank look puny, officials from those banks said, and easily outstripped a $1 billion loan under negotiation with Japan.

Officially, the World Bank says it is not concerned about competition from China’s increasingly energetic aid program. "The more important impact of China on these countries’ development is trade rather than aid," said Homi Kharas, the bank’s chief economist for East Asia and the Pacific.

The aid, chiefly for infrastructure, was being focused by China on the integration of trade in the region, a useful result for poor countries, he said.

But Western aid donors complain that China is secretive about its aid projects, and that it declines to attend the traditional meetings presided over by the World Bank to coordinate aid activities in poor countries. They also say they doubt that China always delivers the full value of the projects that it announces.

And Western aid officials said they were taken aback when the news of the $2 billion Chinese aid package came out at a lunch meeting of more than 100 aid donors in Manila last month. The size of the Chinese loans came as a shock, in part because the Philippines serves as the headquarters of the Asian Development Bank, a lender dominated by Japan and the United States. China is also a shareholder.

The secretary general of the National Economic and Development Authority in the Philippines, Romulo Neri, compared the Chinese aid package to those from other sources, and noted the appealing absence of the expensive consultant fees common to Western projects.

After being a favorite of the Bush White House, the Philippine president, Gloria Macapagal Arroyo, fell out of favor when she pulled her country’s troops out of Iraq in 2004.

The Chinese appeared to have quickly filled the economic breach for the Philippines and, according to a memorandum from Mr. Neri’s office, a number of projects are expected to be completed when Mr. Wen visits Manila in December.

They include two toll roads and a water supply system for Manila, and further financing for a rail project already under way to connect northern Manila with four provinces.

In some countries, like Cambodia, China’s construction projects seem clearly aimed at helping to assure China’s access to natural resources.

Western diplomats and aid officials in Phnom Penh said they believed that Cambodia had recently granted China the rights to one of five offshore oil fields that could yield as much as $700 million to $1 billion a year. Chevron already has an agreement for exploratory drilling at one of the Cambodian fields.

Washington does not know yet, and would like to know, whether China plans to offer loans for an often-discussed deep-sea port at Sihanoukville that would allow China a convenient delivery point for its Middle East oil imports.

In resource-rich Myanmar, the former Burma, Beijing’s only real competitor on the aid front is India. China has built dams and roads connecting the interior of the country to China’s southern flank, and is currently reported to be working on a deep-water port on Myanmar’s west coast.

Myanmar is in deep arrears to the World Bank, which said it had no loan program there. The United States offers no official aid, either, because of the repressive nature of the government.

In Laos, China has built a major road up the spine of the country, and has been influential as much by the prospect of what it might do, than by what it has actually accomplished.

After years of study on the impact on the environment, the World Bank broke ground on a environmentally controversial major dam, known as Nam Theun 2, in Laos last year, because it knew that China was ready to step in to build the dam, bank officials say.

Beyond its no-strings approach, China is often appreciated as a lender by poor countries because it is willing to take on complicated projects in distant areas that others are not.

The bridge that Mr. Ge, the engineer, and his colleagues have sweated over during the last four years — the temperature creeps up as high as 106 in April — is in one of the most underdeveloped corners of Southeast Asia, the area where the Khmer Rouge first took power.

Running from the bridge is a new, smooth 130-mile road built by Mr. Ge’s team that connects Kratie, a village to the south of Stung Treng, to the Laotian border.

"When we came here four years ago, we would leave at breakfast time from Kratie and we would arrive here for dinner — eight hours," Mr. Ge said. "It now takes two hours."

Posted by Hugo Albert Orwell at 03:38 PM | Permalink | TrackBacks (0)

Source: Falls Church News-Press Online

By Tom Whipple
Thursday, 14 September 2006

The story broke the morning after Labor Day, when the Wall Street Journal ran a front-page piece reporting that Chevron along with two partners had announced the results of a major oil production test in the Gulf of Mexico. The partners Chevron, Statoil, and Devon Energy ran the test on a well known as Jack No. 2 that was drilled last year in the Lower Tertiary zone of the Gulf of Mexico. This zone is about 80 miles wide, 300 miles long and is located about 175 miles off shore. The well was unusual in that it went to a depth of 28,000 feet and the drilling began under 7,000 feet of water.

Released details of the test noted that a number of technical breakthroughs had been achieved. By using the latest technology, Chevron was able to discern and drill into promising geological structures that had previously been hidden below a layer of sound-absorbing silt. The test, which achieved flow rates of 6,000 barrels per day (b/d), established that oil could be extracted at acceptable rates from very deep deposits. It also set several records for extracting oil under conditions of extreme pressures and temperatures.

Although no formal estimate as to the size of this particular find was announced, background briefers spoke of the possibility that the zone could contain from 3 to 15 billion barrels of oil in scattered deposits. If this speculation were to prove true, it would put the Lower Tertiary in a class with Alaska’s Prudhoe Bay and increase domestic US oil reserves by 50 percent.

The news of this great “discovery” naturally was replayed by nearly every newspaper and TV network in the country. Katie Couric ran a segment about the discovery on her first evening news show. Most reporting emphasized the possibility that the US might have found another 15 billion barrels of oil in its own backyard, but tempered the jubilation with the news that the find would have no immediate impact on gasoline prices.

A few, mostly financial journalists, took the announcement as an opportunity to disparage the idea of imminent peak oil. These writers are aware that should world oil production go into decline within the next decade the world’s economy would be in a lot of trouble, not to mention the credibility of those who make a living by forecasting decades of growth ahead. Therefore, they eagerly accepted the dubious premise that this one test proves that plenty of oil can be found by drilling deeper so long as oil prices remain high enough to support the costs of ultra-deep oil production; advanced technology is used to the fullest; and environmental restrictions are lifted. Several pronounced peak oil a dead issue.

As the week wore on however, knowledgeable geologists and petroleum engineers began to question all the euphoria. First they noted that the Jack No. 2 test was not conducted on a single oil field that might contain 15 billion barrels oil. Rather, it was one test of a well in a zone that extends for hundreds of miles under the Gulf of Mexico. Whatever producible oil the zone contains will likely be found in numerous smaller deposits.

A number of wells have already been sunk in the Lower Tertiary. Some were dry holes and a few struck oil bearing rock, which may have the potential to produce oil profitably. So far, only a handful of these exploratory wells have struck deposits of light oil, which may be possible to produce. Others have struck thicker oils that may be impossible to extract from extreme depths at acceptable rates.

What seems to be turning up in the deeper waters of the Gulf are a series of smaller oil fields — some of which may someday be profitable to produce and some of which probably won’t. Extrapolating this situation to a major new discovery that will delay the onset of peak oil is clearly a reach.

To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each. To drill and set in place the production equipment for The story broke the morning after Labor Day, when the Wall Street Journal ran a front-page piece reporting that Chevron along with two partners had announced the results of a major oil production test in the Gulf of Mexico. The partners Chevron, Statoil, and Devon Energy ran the test on a well known as Jack No. 2 that was drilled last year in the Lower Tertiary zone of the Gulf of Mexico. This zone is about 80 miles wide, 300 miles long and is located about 175 miles off shore. The well was unusual in that it went to a depth of 28,000 feet and the drilling began under 7,000 feet of water.

Released details of the test noted that a number of technical breakthroughs had been achieved. By using the latest technology, Chevron was able to discern and drill into promising geological structures that had previously been hidden below a layer of sound-absorbing silt. The test, which achieved flow rates of 6,000 barrels per day (b/d), established that oil could be extracted at acceptable rates from very deep deposits. It also set several records for extracting oil under conditions of extreme pressures and temperatures.

Although no formal estimate as to the size of this particular find was announced, background briefers spoke of the possibility that the zone could contain from 3 to 15 billion barrels of oil in scattered deposits. If this speculation were to prove true, it would put the Lower Tertiary in a class with Alaska’s Prudhoe Bay and increase domestic US oil reserves by 50 percent.

The news of this great “discovery” naturally was replayed by nearly every newspaper and TV network in the country. Katie Couric ran a segment about the discovery on her first evening news show. Most reporting emphasized the possibility that the US might have found another 15 billion barrels of oil in its own backyard, but tempered the jubilation with the news that the find would have no immediate impact on gasoline prices.

A few, mostly financial journalists, took the announcement as an opportunity to disparage the idea of imminent peak oil. These writers are aware that should world oil production go into decline within the next decade the world’s economy would be in a lot of trouble, not to mention the credibility of those who make a living by forecasting decades of growth ahead. Therefore, they eagerly accepted the dubious premise that this one test proves that plenty of oil can be found by drilling deeper so long as oil prices remain high enough to support the costs of ultra-deep oil production; advanced technology is used to the fullest; and environmental restrictions are lifted. Several pronounced peak oil a dead issue.

As the week wore on however, knowledgeable geologists and petroleum engineers began to question all the euphoria. First they noted that the Jack No. 2 test was not conducted on a single oil field that might contain 15 billion barrels oil. Rather, it was one test of a well in a zone that extends for hundreds of miles under the Gulf of Mexico. Whatever producible oil the zone contains will likely be found in numerous smaller deposits.

A number of wells have already been sunk in the Lower Tertiary. Some were dry holes and a few struck oil bearing rock, which may have the potential to produce oil profitably. So far, only a handful of these exploratory wells have struck deposits of light oil, which may be possible to produce. Others have struck thicker oils that may be impossible to extract from extreme depths at acceptable rates.

What seems to be turning up in the deeper waters of the Gulf are a series of smaller oil fields — some of which may someday be profitable to produce and some of which probably won’t. Extrapolating this situation to a major new discovery that will delay the onset of peak oil is clearly a reach.

To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each. To drill and set in place the production equipment for one of these fields may cost on the order of $1.5 billion, or more, as the cost of oil production equipment is inflating rapidly.

Add to this the problem of what to do with very hot oil and the associated natural gas as it comes flowing to the top of a well 7,000 feet under the Gulf and 175 miles from shore. The decision to attempt production from these ultra-deep fields will not be taken lightly by the oil companies involved.

Although there are no geopolitical problems or nationalistic governments involved in producing oil from the Gulf of Mexico, the fields are right in its center — out where the Category 4 and 5 hurricanes really get wound up. On top of this there are questions of how much oil can be extracted from an ultra-deep field with extreme pressures. Although the recent test produced 6,000 barrels a day, for a month, a knowledgeable old geologist opined that he would like to see a test run for a year or more before committing billions to a whole new regime of oil production.

Assuming that producing oil from the Lower Tertiary turns out to be economically and technically feasible, will new production from the region have anything to do with delaying peak oil? The answer is an emphatic NO.

Knowledgeable observers who have commented on the issue agree that even if all goes well, it is unlikely that more than 300-500,000 b/d of production could come into production from all the possible fields in the Lower Tertiary over the next five to seven years. In the meantime, the world will have burned another 150 to 200 billion barrels of oil and US production from existing fields will decline from the current 5 million b/d to somewhere around 4 million b/d.

This suggests that it will take some spectacular and unlikely gains from new production to offset the natural decline currently underway in the US. Of still greater concern is production from Mexico’s giant 2 million b/d Cantarell oilfield, most of which is exported to the US. Creditable reports suggest that Cantarell is entering very rapid depletion and may be producing at a fraction of its current level five years from now. It would be virtually impossible for this level of new production from the Lower Tertiary to come online in the next five years.

So long as the world continues to consume some 31 billion barrels of oil a year, there is still nothing in sight that can forestall imminent peak oil.

Posted by Hugo Albert Orwell at 03:24 PM | Permalink | TrackBacks (0)

Source: Gulf Times, Doha, Qatar

Published: Thursday, 14 September, 2006, 08:50 AM Doha Time

VIENNA: Saudi Arabia, the world’s biggest oil producer, said improving technology and new fields may help the world unlock 2tn barrels of oil in the next 25 years, or about double the existing proven reserves.

Abdullah Jum’ah, the chief executive officer of state-run Saudi Aramco, challenged engineers to raise oil-field recovery rates by 20% in 25 years, adding 1tn barrels to world reserves. New finds could add another 1tn. He expects Saudi Arabia alone to gain 200bn barrels of reserves in 30 years.

Saudi Arabia has “not had to draw down reserves in the last 10 years because we have been adding at least as much as we produce,’’ Jum’ah told reporters in Vienna, where he was attending a conference. “Saudi Arabia is under-explored. We will probably add 200bn barrels of oil 25 to 30 years from now.’’

Proven Saudi reserves now total about 260bn barrels, he said. Proven global oil reserves ended 2005 at 1.2tn barrels, with 264bn in Saudi Arabia, according to BP Plc’s Statistical Review of World Energy. To those reserves can be added another 1.5tn barrels from sources like oil sands and oil shale, Jum’ah said in a speech yesterday in Vienna, at a conference hosted by the Organisation of Petroleum Exporting Countries.

Taken together, with the additional 2tn barrels possible from new oil finds and improved recovery rates, Jum’ah’s estimates show a potential of 4.7tn barrels of oil, “or more than 140 years of supply at today’s current rate of production.’’

He gave no estimate of long it would take before that oil could be recovered.

The Saudi Aramco executive and the head of the US government’s energy forecasting agency both expressed confidence technology will increase oil reserves and production rates in coming years.

“Technological transfer occurs more quickly in this industry than in any other,’’ and high oil prices will speed up such advances, Guy Caruso, the head of the US Energy Department’s Energy Information Administration, said in Vienna yesterday.

Saudi Aramco has boosted its computing power 300-fold since 1999 and now has a better understanding of its reserves, Jum’ah said. He said reserves will probably grow in the US Gulf of Mexico, though he declined to provide any geographical detail of where world reserves might expand.

The size of existing reserves and resources discredits the “peak oil’’ theory that world oil production is already close to peaking, the Saudi executive said, repeating a view he has expressed previously.

Rex Tillerson, the chief executive officer of ExxonMobil Corp, the world’s largest publicly owned oil company, said at the same conference that technological progress will continue. “There has never been an era of easy oil,’’ Tillerson said. “Our industry has constantly operated at the technological frontier.’’

Caruso said some years ago, when prices were lower, companies operating in the North Sea “said they were reducing upstream development costs 10% a year.’’

“Now we are in a higher price environment, we are seeing developments in non-conventional oil that we could not conceive of at $20 a barrel,’’ Caruso said.

Non-conventional oil includes new methods of producing oil, or oil-like fuel, from sources such as rocks, coal, gas and plants.

Even so, Caruso’s estimates show non-conventional oil in coming years will contribute relatively little to the world’s oil supply. For example, oil sands may produce 3.6mn bpd by 2030, up from 1mn barrels a day last year, Caruso said.

Oil shale will rise to 100,000 bpd from zero now. Gas-to-liquids and coal-to-liquids supply will each rise to 2.1mn bpd in 2030 from about 200,000 bpd combined last year, he said. Biofuels supply will rise to 2.1mn bpd from 700,000 bpd. – Bloomberg

Posted by Hugo Albert Orwell at 03:14 PM | Permalink | TrackBacks (0)

Source: Yahoo News

By Rene Pastor
September 13, 2006

NEW YORK (Reuters) - El Nino, an extreme warming of equatorial waters in the Pacific Ocean that wreaks havoc with world weather conditions, has formed and will last into 2007, the U.S. National Oceanic and Atmospheric Administration said on Wednesday.

The El Nino has already helped make the Atlantic hurricane season milder than expected, said a forecaster for the NOAA.

"The weak El Nino is helping to explain why the hurricane season is less than we expected. El Ninos tend to suppress hurricane activity in the Atlantic," said Gerry Bell, a hurricane forecaster for NOAA.

The NOAA's Climate Prediction Center (CPC) said the El Nino probably will spur warmer-than-average temperatures this winter over western and central Canada and the western and northern United States.

It said El Nino also will cause wetter-than-average conditions in the U.S. Gulf Coast and Florida, and spark dry conditions in the Ohio valley, the Pacific Northwest and most U.S. islands in the tropical Pacific.

In Asia and South America, the last severe El Nino killed hundreds of people and caused billions of dollars in damage as crops shriveled across the Asia-Pacific basin. This El Nino has caused drier-than-average conditions across Indonesia, Malaysia and most of the Philippines.

Indonesia is the most populous Moslem country with over 200 million people, while the Philippines have nearly 90 million. Both are major importers of U.S. grains.

The CPC Web site said surface temperatures were substantially warmer than normal by early September in the Pacific. Scientists detect formation of El Ninos by monitoring sea surface temperatures with a system of buoys.

"Currently, weak El Nino conditions exist, but there is a potential for this event to strengthen into a moderate event by winter," Vernon Kousky, the chief El Nino expert at NOAA's Climate Prediction Center, said in a statement.

"The latest...predictions indicate El Nino conditions for the remainder of 2006 and into the northern hemisphere spring (of) 2007," the CPC Web site explained.

El Nino, which means 'little boy' in Spanish, hits once every three years or so. Anchovy fishermen in South America noticed the phenomenon in the 19th century and named it for the Christ child since it appeared around Christmas, and it normally peaks late in the year.

EL NINO HINDERS HURRICANES

One immediate impact of the El Nino is during the current Atlantic hurricane season, which follows on the heels of the record 28 storms and 15 hurricanes which struck in 2005.

Last year's howlers included monsters like Hurricanes Katrina, Rita and Wilma. But this El Nino apparently has helped hinder storm formation in 2006. So far, there has only been seven tropical storms and two hurricanes halfway through the hurricane season, which begins June 1 and ends November 30.

Scientists said El Ninos disrupt storm formation because it allows wind shear to rip apart thunderstorms in the center of the hurricanes, reducing power and intensity as a result.

U.S. NORTHEAST IN FOR MILDER WINTER

An El Nino also usually leads to milder winter weather in the U.S. northeast, the top heating oil market in the world.

Bell said scientists will have a better idea in the fall how long this El Nino will last. "There's no way to say at this time how strong it is going to be. It's too early," he said.

The last severe El Nino struck in 1997/98. The weather phenomenon caused searing drought in Indonesia, Australia and the Philippines while causing rampant flooding in Ecuador and Chile, the world's top producer of copper.

The NOAA's climate prediction Web site is: http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_a dvisory/index.html

(Additional reporting by Jim Loney in Miami)

Posted by Hugo Albert Orwell at 05:08 PM | Permalink | TrackBacks (0)

Source: Eurasia Daily Monitor
By Igor Torbakov
Friday, September 8, 2006

Russia’s ambitious attempts to cast itself as the principal energy supplier to world markets explain the new deal on an oil pipeline linking the Black Sea with the Aegean. During his September 4 visit to Greece, Russian President Vladimir Putin made a seemingly attractive offer to the Greek and Bulgarian leadership to turn their countries into energy transit hubs for Russia’s oil exports. The main result of the negotiations in Athens between Putin, Greek Prime Minister Costas Karamanlis, and Bulgarian President Georgy Parvanov was the decision to revive a long-stalled project aimed at carrying Russian crude from Bulgaria to Greece.

Following the talks, the leaders of the three countries told journalists that the final deal on the 280-kilometer $900 million pipeline linking Burgas on the Black Sea coast and Alexandroupolis on the Aegean is to be signed by the end of this year. Although no concrete dates were given as to the beginning of construction work on the pipeline, the Russian side believes that oil could start flowing by 2009. Plans call for the pipeline to initially transport 15 million tons of crude per year and increase to its full capacity, 35 million tons, by 2012. “I don't think anybody can stop [the pipeline] now,” Karamanlis asserted.

First advanced some 12 years ago as a way to reduce tanker traffic through the overcrowded Turkish Straits, the project was abandoned over disputes related to transit tariffs, ownership, and construction contracts. Furthermore, in the 1990s Russian oil companies were reluctant to make a firm commitment to supply 35-50 million tons of oil yearly to fill the pipeline: in 1996-98, oil prices on the world market went down to $8-12 dollars per barrel, and under these conditions it did not make much sense to spend additional costs on increasing supplies and conquering new markets.

Nowadays the situation has changed; there are several reasons that make Russia particularly interested in the realization of the trans-Balkan pipeline project.

First, the current sky-high oil prices, in the range of $70 dollars per barrel, have significantly boosted the financial attractiveness of the Burgas-Alexandroupolis route.

Second, the U.S.-backed Tbilisi-Baku-Ceyhan (BTC) oil pipeline, which began operating this summer after four years of construction, likely acted as a catalyst for the revival of the trans-Balkan project. When the BTC came on stream, some Russian analysts say, Moscow started worrying that it might lose the strategic competition over exports to the Balkans and Southern Europe.

Third, the congestion in the Bosporus is being exacerbated by the growing rivalry between Russia and Kazakhstan and the problems related to the throughput capacity of the pipeline operated by the Caspian Pipeline Consortium (CPC) that transports the Kazakh crude from the Caspian oilfields to the Black Sea port of Novorossiysk. The Kazakhs have long pushed Moscow to double the capacity of the CPC pipeline to 67 million tons per year. Kazakhstan has said it plans to triple its crude exports within a decade, most of which travel through Russia via the Caspian pipeline. If Russia eventually agrees to expand the CPC pipeline, the pressure on the Bosporus will rise dramatically as a further 700,000 to 1 million barrels per day will be shipped through the Straits.

Finally, Moscow is keen to open new energy export routes to reach the lucrative European markets and reduce dependence on such “unreliable” transit countries as Ukraine.

But despite the tripartite agreement reached in Athens, there is a significant amount of uncertainty and hidden tension that might eventually derail the Burgas-Alexandroupolis project.

Energy analysts note that the shareholdings in Trans-Balkan Pipeline, the project developer, are still being negotiated. The Russian side, represented by GazpromNeft, Rosneft, and TNK-BP, is pushing for the controlling stake as the oil supplier. But other participants -- Bulgaria’s state-controlled Bulgargaz and Greece’s oil refiner Hellenic Petroleum, and pipeline constructor Prometheus -- appear to be in favor of all partners having equal stakes.

Furthermore, Bulgaria is reportedly interested in expanding the number of project participants. “We are talking about an inclusive project, not an exclusive one,” Bulgarian leader Parvanov was quoted as saying. A well-informed source close to the Athens talks told the Moscow-based daily Vremya novostei that the Bulgarian team had suggested inviting the Kazakh energy company KazMunayGaz and U.S. Chevron into the Trans-Balkan consortium. Their reasoning appears to be quite simple: as a transit country, Bulgaria is interested in guarantees to fill the pipe, and having the Kazakh and U.S. oil majors participate in the project seems to provide such guarantees, as these companies would get transit privileges for transporting their crude through the pipeline. Indeed, some energy experts suggest that Chevron could be looking to access new European pipelines to move its Kazakh crude.

The idea of Kazakh oil competing with Russian fuel on the European markets cannot look very attractive to Russia’s oil majors. “An alternative to the Bosporus needs to be found, of course without leaving the competition from Kazakhstan the chance to take the place,” a TNK-BP spokesperson told the Moscow Times on September 5.

(Krasnaya zvezda, September 7; Vedomosti, Vremya novostei, Izvestiya, Moscow Times, September 5; Strana.ru, Gazeta.ru, September 4)

Posted by Hugo Albert Orwell at 01:06 PM | Permalink | TrackBacks (0)

Source: The Pioneer [India]
By Sandhya Jain

If Iranian President Ahmadinejad is serious about opening a Euro-based oil bourse in Tehran to undermine the US dollar, now is the time to strike. Strategic experts believe that internationally, the mega strategic energy deals are slipping away from corporate America, whose strong arm tactics are alienating growing nationalist sentiment across the world.

Washington's use of the September 2001 New York terror strike to cynically assume a commanding position in oil and gas rich Central Asia has startled the international community, especially after the unwarranted invasion of Iraq and takeover of its economy by cronies of the White House. This has forced a major rethink in world capitals, and resource-rich regimes in the Gulf and Central Asia are responding to Russia and China, who are cooperating to combat America's monopolistic ambitions.

Pakistan is Washington's non-NATO ally in the war against terror, but has turned to China for economic development, as evident in troubled Balochistan. It is keen on an energy deal with Iran, bete noire of Uncle Sam, but the tripartite energy deal with India cannot take off due to Pakistan's status as the epicentre of jihadi terrorism. As a rising Asian economy, India is also engaging with the Central Asian Republics for better energy security, though its anxiety for American goodwill has upset Iran and caused a stalemate over the price of LNG.

Saudi Arabia, however, is moving out of the American orbit by sewing up energy deals with China and India, though Washington has compensated itself with the oilfields of Libya. Yet the unmistakable geo-political trend among oil and gas producing nations of the Gulf, Latin America, Africa and Central Asia is to avoid US oil companies in favour of nations that do not interfere in their internal affairs. America's high comfort levels with dictatorial regimes on one hand, and promotion of puppet democracies on the other, as per its corporate convenience, has diminished its value as a desirable economic and strategic global partner.

Central Asia is alert after the string of 'coloured' revolutions. America currently retains bases in Kyrgyzthan, Tajikistan, Ukraine, Georgia and Azerbaijan. But Uzbekistan asked it to vacate the crucial Karshi-Khanabad (K2) base after the failed Andijan riots. President Islam Karimov was warned by ousted Georgian leader Eduard Shevardnadze against American financier George Soros and West-funded NGOs; he promptly expelled the Open Society Institute, stifled other NGOs, and courted Russian President Putin. A gas deal with Russia's Gazprom is expected to affect America's hydrocarbon pipeline over Afghanistan to the Arabian Sea. Karimov has invited India to share an energy partnership along with Russia and China, a move that makes profound geo-political sense.

Meanwhile, the Shanghai Cooperation Organisation (SCO) is pressing America to wind up its bases in Central Asia, especially as heightened tensions with Iran raise fears of another regional misadventure. Kazakhstan, which has enormous hydrocarbon resources, is also upset with President Bush, and even allies like Kyrgyzstan and Tajikistan favour a security relationship with Russia. Tajikistan made the Russian military base there permanent after President Putin's visit in October 2004, while Russia has a base at Kant in Kyrgyzstan.

China is very proactive in the region. There is a thousand kilometre pipeline from Kazakhstan's central Karaganda region to Xinjiang, part of an ambitious three thousand kilometre link to the Caspian Sea. China has also invested heavily in Russia's energy sector, especially Siberia's coal and oil. It is active in Uzbekistan, Tajikistan and Kyrgyzstan.

Experts opine that Russia is leading the attempt to marginalise Western multinational oil companies. The move strikes a chord because the White House is dominated by a cartel of the oil and gas industry and some banker-financiers, and the oil-rich nations of Central Asia, the Gulf and Latin America prefer joint ventures with State enterprises rather than these rapacious multinationals. Thus, a very basic economic nationalism drives their tilt towards Russia and China. The West, used to more than a century of de facto imperialism in the oil and gas sector, finds itself on a sticky wicket.

The new oil-and-gas producer States and the key consumer Asian economies (China, India) are joining hands to forge State-to-State joint ventures and arrive at strategic energy security. Analysts say this could eventually diminish the role and status of OPEC in future. Russian leaders had cleverly positioned the Russian Federation to take advantage of global energy trends, and is now emerging as natural leader of the world's key producing and consuming powers.

Washington facilitated this process by its unacceptable oil greed in Iraq. In a path-breaking work, "The Bush Agenda: Invading the World, One Economy at a Time," Antonia Juhasz exposes the US corporate invasion of Iraq. So far, 150 US corporations have received a staggering $50 billion worth of contracts for the failed reconstruction of Iraq, even as a new oil law has opened the oil sector to private foreign corporate investment.

Copyright © 2006 Nick Anderson, Houston Chronicle

Under the Geneva Convention, it is completely illegal for an occupying power to change the laws or political structure of the occupied country. Yet the United Nations and the international community have been idle bystanders as the Bush Administration has changed all basic economic and political laws, while totally failing in the primary task of providing for the security and basic needs of the Iraqi people. Thus, as many as 30 oil contracts signed by President Saddam Hussein with oil companies from all around the world, except the US, were simply cancelled. Iraq oil is now being guzzled by Chevron, Exxon and Marathon. And when you consider that some geologists believe that Iraq's oil reserves are larger or at par with those of Saudi Arabia, you can envisage a very slow American pullout from the region. No wonder the Central Asian nations with American military bases are no longer keen to play host to Uncle Sam.

America's obduracy has reinforced the global preference for State-to-State long-term agreements and contracts which serve the energy-security interests of nations, rather than private corporate entities. Russia's domination of oil and gas flowing to the West has helped it re-emerge as a global power in concert with its strategic partners. And, surprising as it may seem, Washington lacks the global leverage to refashion events in its favour.

Posted by Hugo Albert Orwell at 10:30 AM | Permalink | TrackBacks (0)

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)

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: 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: 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: 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: 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

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

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

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

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

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.)

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

Posted by Hugo Albert Orwell at 05:10 PM | Permalink

Source: Mumbai's Diligent Media Corporation
Sunday, July 30, 2006 17:41 IST

TEHRAN: Venezuelan Energy Minister Rafael Ramirez on Sunday repeated a threat to halt oil exports to the United States if Washington continues its "hostile policies" towards Caracas.

"Our policy is transparent. If the US wants to carry out hostile policies against us, we stop oil exports to this country," Ramirez was quoted as saying by the official Iranian news agency IRNA after a meeting with his Iranian counterpart in Tehran.

"We can not steadily export oil to the US and be steadily subject to its hostility. Some actions should be taken against this situation," said the minister, who is accompanying President Hugo Chavez on a visit to the fellow anti-American state.

Ramirez has also blamed US policies in Iraq and against Iran and other oil exporters for high oil prices of above $70 per barrel.

"The situation in Iraq is awful. The hostile US reaction against Iran and some oil producers and exporters is the reason why oil prices have reached the current level."

Posted by Hugo Albert Orwell at 01:53 PM | Permalink

Source: Petrodollar Warfare by William R. Clark

One of the crucial concept required to understand the importance of Peak Oil relates to a phenomenon in physics commonly described as Energy Return on Energy Invested, or EROEI. Unlike the traditional financial metric, Return on Investment (ROI), EROEI refers to the amount of energy spent compared to the energy extracted. EROEI is the ratio between energy expended to extract a barrel of oil, versus the energy provided by that barrel of oil.

Fifty years ago when some of the super-giant oil fields were still being discovered, one of these could produce an EROEI of 200, that is, energy 200 times greater than the actual energy expended to extract the oil. In contrast, oil wells in deep water currently achieve an EROEI of 5. Oil removed from the tar sands, as found in Canada (and Venezuela), have a very low EROEI of 1.5, along with a slow extraction process.

Once global Peak Oil is reached and exceeded, a critical point is attained on the downward side of Hubbert's curve, when it requires more energy to extract a given unit of oil than what it will produce if extracted. Of the remaining oil in the ground or at the bottom of the ocean, a positive EROEI is required if that oil is the be used as transportation fuel. To reiterate, when the energy required to extract very low-grade or geographically undesirable oil is equal to or greater than the energy that would be provided by that new barrel of oil, it will no longer be logical to expend the energy to extract the oil. In such a scenario, the EROEI for that oil field becomes an energy sink, and the oil will simply remain in the ground.

It is for these reasons that the world will never technically run out of oil; rather, it will ultimately become simply too energy-intensive to extract low-quality or geographically inaccessible oil. Unlike ROI calculations, the amount of money invested in a mature oil field is completely irrelevant if the energy required to extract the oil is greater than the energy that would be derived from recovering the oil.

Despite the historic, social, economic, and geopolitical implications of global Peak Oil, many governments still appear reluctant to publish this information — even though the facts regarding global oil discovery and production are perfectly apparent to the rational observer. Instead, the global society has acquired an unfounded belief that more oil will be discovered as needed in order to further economic growth, but this is a false construct.

Source: Petrodollar Warfare by William R. Clark

Posted by Hugo Albert Orwell at 04:59 PM | Permalink

Source: http://www.energybulletin.net/primer.php

What is Peak Oil?

Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil 'production,' meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence 'peak'. Peak Oil means not 'running out of oil', but 'running out of cheap oil'. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable.

Why does oil peak? Why doesn't it suddenly run out?

Oil companies have, naturally enough, extracted the easier-to-reach, cheap oil first. The oil pumped first was on land, near the surface, under pressure, light and 'sweet' (meaning low sulfur content) and therefore easy to refine into gasoline. The remaining oil, sometimes off shore, far from markets, in smaller fields, or of lesser quality, takes ever more money and energy to extract and refine. Under these conditions, the rate of extraction inevitably drops. Furthermore, all oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless.

M. King Hubbert - the first to predict an oil peak

The Hubbert Curve is used to predict the rate of production from an oil producing region containing many individual wells. Source: aspoitalia.net

In the 1950s a U.S. geologist working for Shell, M. King Hubbert, noticed that oil discoveries graphed over time, tended to follow a bell shape curve. He posited that the rate of oil production would follow a similar curve, now known as the Hubbert Curve (see figure). In 1956 Hubbert predicted that production from the US lower 48 states would peak between 1965 and 1970. Shell tried to pressure Hubbert into not making his projections public, but the notoriously stubborn Hubbert went ahead and released them. In anycase, most people inside and outside the industry quickly dismissed Hubbert's predictions. In 1970 US oil producers had never produced as much, and Hubbert's predictions were a fading memory. But Hubbert was right, US continental oil production did peak in 1970, although it was not widely recognized for several years, and only with the benefit of hindsight.

No oil producing region fits the bell shaped curve exactly because production is dependent on various geological, economic and political factors, but the Hubbert Curve remains a powerful predictive tool.

Although it passed by largely unnoticed, the U.S. oil peak was arguably the most significant geopolitical event of the mid to late 20th Century, creating the conditions for the energy crises of the 1970s, leading to far greater U.S. strategic emphasis on controling foreign sources of oil, and spelling the begining of the end of the status of the U.S as the world's major creditor nation. The U.S. of course was able to import oil from elsewhere, and life continued there with only minimal interuption. When global oil production peaks however, the implications will be far greater.

So when will oil peak globally?

Hubbert went on to predict a global oil peak between 1995 and 2000. He may have been close to the mark except that the oil shocks of the 1970s slowed our use of oil. As the following figure shows, global oil discovery peaked in the late 1960s. Since the mid-1980s, oil companies have been finding less oil than we have been consuming.

Source: peakoil.ie

Of the 65 largest oil producing countries in the world, up to 54 have past their peak of production and are now in decline, including the USA (in 1970/71) and the North Sea (in 2001). Hubbert's methods, and variations on them, have been used to make various projections about the global oil peak, with results ranging from 'already peaked', to the very optimistic 2035. Many of the official sources of data used to model oil peak such as OPEC figures, oil company reports, and the USGS discovery projections, upon which the international energy agencies base their own reports, can be shown to be very unreliable. Several notable scientists have attempted independent studies, most notably Colin Campbell and the Association for the Study of Peak Oil and Gas (ASPO).

Source: peakoil.ie

ASPO's latest model suggests that 'regular' oil peaked in 2004. If heavy oil, deepwater, polar and natural gas liquids are considered, the oil peak is projected for around 2010. Combined oil and gas, as shown above, are expected to also peak around 2010. Other researchers such as Kenneth Deffeyes and A. M. Samsam Bakhtiari have produced models with similar or even earlier projected dates for oil peak. Precise predictions are difficult as much secrecy shrouds important oil and gas data.

Other quite different types of analysis have provided supporting evidence to these 'early peak' scenarios, most notably UK Petroleum Review editor Chris Skrebowski's Oilfields Megaproject reports, and energy banker Matthew Simmons' analysis of Saudi Arabian oil fields.

The effects of natural gas peak are more localized due to the economic and energetic expense of liquefying and transporting natural gas as LNG. Both British and North American natural gas production have already peaked, so these nations may be facing dual energy crises.

What does Peak Oil mean for our societies?

Our industrial societies and our financial systems were built on the assumption of continual growth – growth based on ever more readily available cheap fossil fuels. Oil in particular is the most convenient and multi-purposed of these fossil fuels. Oil currently accounts for about 43% of the world's total fuel consumption [PDF], and 95% of global energy used for transportation [PDF]. Oil is so important that the peak will have vast implications across the realms of geopolitics, lifestyles, agriculture and economic stability. Significantly, for every one joule of food consumed in the United States, around 10 joules of fossil fuel energy have been used to produce it.

The 'Hirsch Report'

A risk mitigation study on Peak Oil was released in early 2005, commissioned by the US Department of Energy. Prepared by the Science Applications International Corporation (SAIC), and titled “Peaking of World Oil Production: Impacts, Mitigation and Risk Management” [PDF], it is known commonly as the Hirsch Report after its primary author Robert L. Hirsch. The executive summary of the report warns that "as peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking." [Emphasis added.] Unfortunately nothing like the kind of efforts envisaged have yet begun.

But it's just oil - there are other fossil fuels, other energy sources, right?

To evaluate other energy sources it helps to understand the concepts of Net Energy, or the Energy Returned on Energy Invested ratio (EROEI). One of the reasons our economies have grown so abundant so quickly over the last few generations is precisely because oil has had an unprecedently high EROEI ratio. In the early days of oil, for every barrel of oil used for exploration and drilling, up to 100 barrels of oil were found. More recently, as oil recovery becomes more difficult, the ratio has become significantly lower. Certain alternative energy 'sources' may actually have EROEI ratios of less than one, such most methods of industrially producing biodieseland ethanol. That is, when all factors are considered, you probably need to invest more energy into the process than you get back.

Hydrogen, touted by many as a seamless solution, is actually an energy carrier, but not an energy source. Hydrogen must be produced using an energy source such as natural gas or nuclear power. Because of energy losses in transformation, the hydrogen will always contain less energy than was invested in it.

Some alternatives such as wind and hydro-power may have much better ERoEI, however their potential expansion may be limited by various physical factors. Even in combination it may not be possible to gather from renewable sources of energy anything like the amount of energy that industrial society is accustomed to. Richard Heinberg uses the metaphor that whereas fossil fuels might be considered a massive energy inheritance, and one spent perhaps unwisely, renewables are much more akin to a hard won energy wage.

For certain tasks, such as air travel, no other energy source can readily be substituted for oil. As noted by the Hirsch Report, alternative energy infrastructures require long periods of investment, on the scale of decades, to be widely implemented. We may be already leaving the period of cheap energy before we have begun seriously embarking on this task.

It's perhaps worth noting briefly that any ERoEI study is complex and different methods of accounting can come up with vastly different results, so any net energy study might be viewed with some suspicion. Perhaps the best method yet developed is Howard Odum's eMergy analysis. But we may not know with total certainty the usefulness of any renewable energy technologies until the hidden fossil fuel energy subsidies are finally removed.

What can be done?

Many people are working on partial solutions at various different levels, but there is probably no cluster of solutions which do not involve some major changes in lifestyles, especially for the global affluent. Peak Oil presents the potential for quite catastrophic upheavals, but also some more hopeful possibilities, a chance to address many underlying societal problems, and the opportunity return to simpler, healthier and more community oriented lifestyles.

The Post Carbon Institute Outposts. The Post Carbon Institute is a think tank devoted to exploring the implications of, and preparing for, Peak Oil, focusing on relocalization. They write, “the most important initiative of the Post Carbon Institute is working with groups of concerned citizens to prepare their community for the Post Carbon Age. These groups are Outposts in the sense that they are community-based extensions of the Post Carbon Institute; they operate autonomously yet receive guidance and electronic infrastructure from the Institute. Outposts work cooperatively in their local community to put theory about living with less hydrocarbons into practice while sharing knowledge and experiences with the global network of outposts.”
www.postcarbon.org
www.relocalize.net

The Community Solution to Peak Oil. Many excellent resources are available through the website of this US based organisation "dedicated to the development, growth and enhancement of small local communities... that are sustainable, diverse and culturally sophisticated." The Community Solution have organised two recent grassroots Peak Oil conferences, and have developed a case study of Cuba, a country which has relatively successfully adapted to an artificial oil peak.
www.communitysolution.org

Permaculture: Permaculture is a 'design science' which can allow us to live in relative abundance with minimal resource use. Permaculture principles can be used to functionally redesign social systems, built environments, ecological and agricultural practices for energy descent. David Holmgren's recent book, Permaculture: Principles and Pathways Beyond Sustainability, deals explicitly with the global oil peak and proposes permaculture as the best set of strategies for dealing with 'energy descent'.
www.permaculture.org.au
www.holmgren.com.au

Local Energy Descent Action plans: Several communities around the world have begun their own preparations for Peak Oil, and are documenting the process. The Kinsale Energy Descent Action Plan out of rural Ireland is the world's first local action plan for Peak Oil, dealing with many issues including health, education, tourism and youth issues. Local organisers within the town of Willits, Califonia have begun work on the Willits Economic LocaLization Project in response to Peak Oil.
www.transitionculture.org - Kinsale EDAP editor Rob Hopkins' blog
www.willitseconomiclocalization.org

Oil Awareness Meet Ups is a grass roots awareness raising network helping people meet up and discuss peak oil. Join or start a meet-up in your neighborhood.
oilawareness.meetup.com

Local Currencies and Steady State Economics:
Local Currencies: Richard Douthwaite, a 'recovering economist', has proposed a number of alternative monetary systems to deal with energy decline and the associated monetary crises which might arise post-peak. Local currencies like LETS are in operation around the planet already (although LETS itself may be somewhat problematic). Experiment now with local currencies to help survive economic crises.
The Foundation for the Economics of Sustainability (FEASTA) has some of Richard Douthwaite's publications available for free online, including entire books as well as masses of other excellent research and articles by other writers, relating not just to economics and local currencies, but to various aspects of sustainability. See also: www.communitycurrency.org/resources.html Steady State Economics: The Center for the Advancement of the Steady State Economy (CASSE) promote alternatives to the ecological insanity of growth based economics. Read their position paper here:
www.steadystate.org/PositiononEG.html

Intentional Communities: Intentional Community (IC) is an inclusive term for ecovillages, cohousing, residential land trusts, communes, student co-ops, urban housing cooperatives and other related projects and dreams... ICs represent one of the sanest ways of dealing with energy peak.
www.ic.org
gen.ecovillage.org
www.cohousing.org

Surviving Peak Oil: A good collection of essays edited by Dale Allen Pfieffer on "what measures can people of limited means undertake to ease their transition into a post-petroleum world."
www.survivingpeakoil.com

The Depletion Protocol: (previously refered to as the Uppsala or Rimini Protocol) is an ethical global political framework for sharing the world's remaining oil reserves more equitably than free market forces would allow, to avoid resource wars and profiteering. Help promote it:
Introduction to the Depletion Protocol by Colin Campbell (Word .doc format) How to avoid oil wars, terrorism, and economic collapse by Richard Heinberg

Tradable Energy Quotas (TEQs) are a system for rationing fuel which includes everyone – individuals, industry and the Government – and which enables users to sell any rations they do not use.
www.teqs.net

Lobbying: Lobby governments to spend now on renewable energy and improving agricultural practices. Many facts are summarized in the following 'convince sheet' by Bruce Thomson: greatchange.org/ov-thomson,convince_sheet.html

Online Discussions:
Got questions? Want to talk with like-minded people? See these links:
www.peakoil.com - online news and forum
www.peakoilaction.org - meet people on and offline
groups.yahoo.com/group/RunningOnEmpty3 - a group for Peak Oil beginers
groups.yahoo.com/group/EnergyResources - original peak oil focused email list
groups.yahoo.com/group/RunningOnEmpty2 - a more solutions, self-sufficiency focused list
groups.yahoo.com/group/EnergyRoundTable - a group emphasizing discussion and politics
There are numerous local mailing lists too, many on yahoo can be found at this link:
groups.yahoo.com/search?query=peak%20oil&ss=1

Other links

Where can I get more information?

Several articles already published on this site provide good introductions to this topic: The coming global energy crunch. A great introductory article by Aaron Naparstek Plan War and the Hubbert Oil Curve, an interview with Richard Heinberg The Petroleum Plateau by Richard Heinberg on the current plateau in world oil production. Debunking the mainstream media's lies about oil by Dale Allen Pfeiffer The oil we eat by Richard Manning looks at modern agricultures' dependence on fossil fuels

There are some great introductory websites like:
Wolf at the Door: A Beginner's Guide to Oil Depletion - available in French, Polish and English.
Life After The Oil Crash – a question and answer style introduction.
Peak Oil Center - a very concise introduction.

Some excellent original media about peak oil is being generated at:
Global Public Media - many excellent interviews in multiple formats
From The Wilderness Publications - passionate site with a geopolitical and conspiracy themes

Research and reference articles can be found at:
ASPO - original research from The Association for the Study of Peak Oil & Gas
ASPO Ireland - The Irish branch of ASPO through which Colin Campbell now publishes the ASPO monthly newsletter
DieOff.com - an alarming but scholarly collection of research. The original Peak Oil website.

More energy news:
Crisis Energética - in Spanish

More links, and books to read: An excellent list of links is maintained here: www.dynamiclist.com/?worldview/peakoil

Posted by Hugo Albert Orwell at 03:31 PM | Permalink

Source - NewScientist magazine, July 15-21, 2006

It appears that neither biodiesel nor ethanol are truly viable alternatives to the hydrocarbon molecule and it's unfortunate that the current 'hype' in both are leading to a false panacea in the minds of American citizens.

In the battle of the biofuels, biodiesel turns out to be greener than ethanol. Sadly, neither will go very far to replace petrol and deisel in our vehicles, however.

David Tilman at the University of Minnesota in St. Paul and his colleagues have worked out the environmental costs of producing ethanol from maize and biodiesel from soybeans. Their caluculations include the fuel needed to make and run farm machinery, and make pesticides and fertilizers.

Tilman and colleagues found that using ethanol would only reduce greenhouse gas emissions by 12 per cent compared with petrol, while biodiesel reduces emissions by 41 per cent against diesel (Proceedings of the National Academy of Sciences, DOI: 10.1073/pnas.06046000103).

They caluculate that even if the US turned all its corn and soybeans into biofuel, this would cover less than 5 per cent of current needs.

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