Peak Oil News: 06/01/2008 - 07/01/2008

Monday, June 30, 2008

Human's Biggest Blunder

By Anonymous


The energy we consume cannot be stored and we guzzlers refuse to obviate our doomed. Nevertheless, there is no infinite supply of energy- least of all being fossil fuel. Even suns burn out, explode and are recycled to form more suns, more planets. Do humans really have preeminence over nature? Well, let us see.

If we totally convert to nuclear power, there is only so much uranium in the ground. Sun power will only work during daylight. Other methods being explored are contingent upon a limited amount of materials being produced from the soil. The very best we can do is conserve and hope like hell perpetual, alternate energy sources will be invented or found or brought down to us from the Gods. There is no mandate coming out of Washington, no high court decision, no Manhattan-style Project to solve this one.

President Jimmy Carter, in his infinite wisdom, warned us about our lavish, wasteful way with fuel and it cost him his day job. Well, conservation will only prolong the inevitable. We will run out! We are drinking all the wine (on a global level) and there is no way to grow more grapes. I personally believe no one wants to look realistically (some may say fatalistically) at our consumption habits and our inability to find perpetual energy sources. Here is a realistic thought. There may be none available! In our present cognitive and technological state we may lack the ability to develop a source for sustainable energy.

Who among us have the foresight to determine what to do before the last drop of oil drips? Yet, we grandstand and create pages of statistical nonsense as to which methods are best (solar, nuclear, bio…). All seem doomed to failure. Perhaps our total dependence on fossil fuel was a mistake. An economy dependent upon one product to sustain a way of life is subject to collapse. Without a doubt our dependence on the combustion engine (in the form of a car) as our primary method to transport one human was a mistake. Additionally, the type of vehicle one drives in America has always been directly related to a person social standing. For those who don't choose to drive a car but take the subway, ride a bike, the bus, in order to accommodate a life-style beyond the car, their names are carved lowest on the social totem poll. On the other hand, fuel conservation, alternative methods such as building up the infrastructural for public transportation has never been seriously contemplated.

As long as we continue to feed the automobile and waste precious resources, we expedite our own demise. Did we expect to enjoy cheap gas forever and not understand how oil is priced on the world market? Here is how the price of all commodities is driven upward. Most Americans are functionally illiterate as to how the process works although our hunger for oil persists. (close to 20 millions barrels a day- 25% of the world's total) and the supply is low. Before we actually run out of oil, the price will levitate and balance with the demand. Consider China and India for a moment. They are comparable to growing industrial babies and their desire for sweet crude (low sulphur) will become ferocious. But the world output for these little toddlers will not be able to satisfy their appetite. The cost of future crude is going to be enormous. (China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year- April 21, 2008 Bloomberg)

As for an appetizer- prices for corn, chicken, pork and soybeans are predicted to double within a year. This will happen because we choose to feed grain to our insatiable hunger for the combustion engine- that stupid, so-called sexy, automobile- another mistake in progress. We can refer to this as the Dinosaur AFF-ect whereby they could not foresee their approaching doom.

Remember the good old days before 1973 when gasoline was cheap? We could drive around town in our air polluting V8, run low on fuel, simple drive up to the pump and yell, "filler up". Then alone came Yom Kippur. You remember them- Sadat, Meir, The Sinai, The Golan and the OPEC oil embargo against the US and other western nations. We thought the shortage of oil was them-dammed Arabs holding out on us. Well, the oil embargo is 30 years behind us. Why has oil gone form a simple shortage in 1973 at $12.00 a barrel to $25.00 a barrel in 2003 trading at over $140.00 a barrel in 2008 and headed toward $200.00 a barrel in just 5 years? The answer is we have nearly exhausted the only developed energy resource.

Now there are some questions we might want to ponder. Can oil producing countries become self sufficient and never purchase oil form the world market? Would that not disrupt the market itself? Are we isolated from the ebb and flow of an ocean we are deeply entrenched? (Answers) Any statement from Washington declaring our desire to be free from OPEC is nothing but political grandstanding. As long as oil is traded America will purchase it.

Enter our existing president. In his finite wisdom (Mr. Bush) wants to ripe out the wilderness of Alaska and drill beneath the tundra in order to exploit more of that Texas tea. Bush urged congress to allow the pristine remoteness of the Alaskan wilderness to be exploited for the benefit of the American people. What benefit? So Americans can become free from Middle Eastern oil and return to the days of cheap gasoline? Those days are gone! Even if all world governments subsidized their oil it puts nothings back into the ground and does nothing to locate alternative sources. It would be a foolish and futile attempt to satisfy and addiction that borderlines suicide. This ancient tradition of wastefulness confirms our lack of dominion over the natural world. Because nature is not wasteful, it is circular. It comes back to the starting point renewed, fresh, and invigorated. Even a ragging forest fire only destroy trees, the forest is then transformed. Yet Bush is willing to exploit the last great American wilderness because the single developed energy resource is being depleted. He and his oil-invested cronies, unlike the dinosaurs, know the end is near. Its profit now or never.

So if present trends continue- and they most likely will- the last few billion barrels of oil will not be traded on the open market. They will become the property of a military victor. Under the pretext of national security we will fight throughout the Middle East, drill beneath the tundra- off the coast of California and the Gulf of Mexico or anywhere to secure that last barrel of Oil. Within the lair of oil Gods they will plan for war under the pretext of anything imaginable to position themselves for that last taste of crude. The die is already being caste- invading Iraq when it was not a threat and al Qaeda was never there before the war- forming a pretext to invade Iran to stop it from developing nuclear weapons- wanting to place military bases throughout the Middle East…

When the human species are gone it will be to a large degree our own arrogant, ignorant, self-centered doing- the complete mismanagement of our meager resources. And the combustion engine and our love affair with the horseless carriage will go down as human's biggest blunder. Good luck to you all and you have my deepest sympathy.


Sunday, June 29, 2008

Expert dispels myths surrounding world oil woes

The Herald Standard


By James Pletcher Jr.


America and the world will face dire consequences in the next several decades if they do not prepare for a predicted peak in global oil production.

"We really have to start thinking about what the alternatives are, what we are going to do and start acting on it. Our future isn't written. It's all about anticipating the change and doing something about it,'' Dr. Robert Kaufmann, Ph.D. of Boston University and an expert on gasoline prices and world oil supply, said.

Oil, he added, is the ideal fuel for transportation. "But, say right now, you have an alternative to motor gasoline. That means you will have to replace every car, gas station, retrain mechanics, all over the world. These are things that do not occur overnight.''

Kaufmann was the main speaker during a Foundation for American Communications (FACS) tele-seminar, "Pain at the Pump: What Comes Next in the Gas Price Crisis.''

Basing his observations on data available from the U.S. government, Kaufmann said oil is a finite resource laboring under increasing demand.

"This is why foresight is really important. We have to get technologies in place,'' he said.

Kaufmann explained there is a net energy supply, which is the difference between supply and demand. "If you plan early, the net reduction of energy supplies in the economy will be manageable. If you wait until production turns down, then the net energy is really squeezed and that will have incredibly disruptive affects.

"We have to plan for what is coming next and start to invest well before the peak in global oil production occurs or we are really going to be in a tough transition period,'' he said.

Kaufmann also said predictions are that new oil fields in the U.S. won't offer enough supply to cut a growing demand for imported oil.

Among the issues Kaufmann discussed were:

- What's really driving the current spikes and what's next?

- Is the world running out of oil? Can the United States insulate itself from world oil shocks?

- Is there a reasonable policy response to oil prices?

- What are the economic consequences of high gas prices?

- Are environmental regulations responsible for refinery shortages? Would a change in environmental policy help solve the problem?

Prices

"Where are oil prices now? Crude oil is traded in New York Mercantile Exchange daily. There has been this very rapid increase in oil prices. Since about 2003, oil prices have run up fairly rapidly. There was a brief lull, but now they are back up again. Why are oil prices so high? Demand has gone up,'' Kaufmann said.

This situation, he said, has occurred in the 30 developed countries belonging to the Organization for Economic Cooperation and Development (OECD). However, demand has also risen in non-OECD countries, including Mexico, China and Brazil.

"We would be hard pressed to say there has been a sudden, rapid acceleration in oil demand in OECD or non-OECD countries. We are not looking at some kind of demand shock. It is a supply-side issue. Non-OPEC production has gone down in recent years, causing OPEC production to drop, so that even now, OPEC is barely back in terms of production as it was in early 1970s. As long as non-OPEC countries were able to push into the market, they were able to weaken OPEC's influence. Now OPEC is back in the driver's seat and it is responsible for the rise in prices since 2004,'' he said.

"The only time in history when there was a competitive market in the U.S. for oil was during the early part of the last century. There was a tremendous boom and bust cycle. Neither producers nor consumers were really happy with that cycle, so they petitioned Congress to get rid of it. In 1936, Congress passed an act that allowed states to set up commissions and allow them to decide what fraction of operative capacity they were allowed to produce each month. The Texas Railroad Commission figured how much oil was needed from Texas to balance supply and demand. So the fluctuation disappeared from 1940s through early 1970s. That was created by a benevolent monopoly. But, after 1970, boom and bust returns and this is the period when OPEC takes control of the market.

"The bottom line is there really never was a competitive market for oil because most is found in really large fields, making it easier for producers to conspire and set prices.

"OPEC controlled oil at the margin and that is what gives them control or ability to influence oil prices. OPEC controls a large amount of the world's oil reserves today.''

"Why does it matter that oil prices are high? In the early 1960s, 6 to 7 percent of our income was spent on energy. That went up to almost 10 percent during the oil crisis. Then, we spent about 4 percent and now as we approach the end of the first decade of the 21st century, it's back up to 6 to 7 percent.

"Consumers are getting squeezed on all sides. Food prices are going up, energy prices are going up. What happens when consumers have less money to spend on everything else? They spend lots at gasoline stations, for food and health care, which means that all the other things - furniture, clothing, cars and personal items - they don't spend as much. What happens then is we get a recession,'' Kaufmann explained.

Another consequence of higher oil prices also is a weaker dollar, he added. But there is no evidence that as the dollar gets weaker, the price of oil goes up. "The causation goes from oil prices to the strength of the dollar, but not the other way around. So, there is no reason to believe if the U.S. did something to strengthen the dollar, oil prices would come down,'' he said.

Where will prices go? "In the short term, I think there is some room for oil prices to come back down. The belief is there is a significant speculative factor in oil prices. We would like to think that speculative bubble over time will burst and oil prices will come back down. But don't look for even $60 barrel oil anytime soon unless there is a real collapse in economic activity.

Oil supply

"Is the world running out of oil? You hear a lot about world oil production, that we are running out or it's about to peak. Today, we have produced about 1 trillion barrels of oil. If we predict the world has about another 1.5 trillion barrels, then we will never run out of oil.

"But, what if there are less than 1 trillion barrels left?'' he said. Kaufmann believes a peak in oil production will come in 2014 if there are less than a trillion barrels remaining to be pumped and the peak will come in 2035 if, as "optimists believe, there might be 3 trillion barrels left.

"If we believe these curves and follow the decline after the peak, and how quickly we need alternative supplies for oil, then we will need the equivalent of a new Saudi Arabia every decade,'' he said.

Kaufmann explained that from 1900 to 1970 the real price of oil was relatively flat, although production rose during those years. "You can raise oil prices like crazy, you can drill for oil but the production level continues to go down. There is nothing you can do that will reverse that peak in production so you will need those alternatives in a timely fashion.

"The bottom line is that people have to appreciate that oil is a wonderful fuel. It's liquid, easy to get at in the ground, and the last 150 years will be known in history as the petroleum age as much as history notes the bronze age or industrial age,'' he said.

However, Kaufmann added that there is no alternative at present that is as good as oil for fuel. "For the first time in history, we will be going from a good fuel to one that is not as good.''

Oil prices, Kaufmann added, are not going to collapse. "There are real supply-and-demand fundamentals that will keep oil prices high. One of the reasons oil prices collapsed in the mid-1980s is there was a huge drop in demand. The world reduced its oil consumption by 2.5 million gallons a day by generating electricity with coal and shutting down refineries.

"But, it's very hard to replace oil that we use for transportation. Then there are the non-energy uses to make plastics, fertilizer and other feed stocks and these uses are very difficult to substitute. Reducing oil demand now as we did in 1980s will be a much more drawn-out process.

"Demand is forecast to rise. In many regions outside OPEC, we have pretty much depleted the easily obtained oil. In the lower 48 states, oil production has been declining for about 35 years. In the North Sea, production has been declining, even though prices are skyrocketing. Production is going down, although prices are going up.''

U.S. oil independence

Kaufmann said data show world oil demand is 85.6 million barrels per day. "That means every day, the world burns this much. One barrel contains 42 gallons,'' he said.

OPEC produces 43 percent of the oil on the world market. Meanwhile, the U.S. consumes 20.6 millions barrels per day, or about one-quarter of the world production. Kaufmann said this figure isn't "really out of step since the U.S. produces about one-quarter of the world's economic activity.''

The U.S. imports 60 percent of its oil consumption. "How do we get rid of this and replace it with domestic sources of oil? You would have to come up with 12-13 million barrels per day (or an equivalent energy source) to make the U.S. independent of foreign oil sources,'' he said.

"Let's suppose the U.S. produces all of its oil domestically. Let's say there is a big shock in the markets and the price goes up to $146 a barrel? Would oil companies sell oil to U.S. consumers for one penny less than they could get for it on the world market? The answer is no. Consumers in the U.S. would have to pay the same world price as everyone else.'' Another issue, he said, is should the U.S. seek to reduce its reliance on unreliable suppliers?

"That's really a giant myth because there is nothing the U.S. can do to insulate itself. The world has one big pool of oil so whatever happens on one side of the market ripples clear to the other side.

"What if the U.S. gets all its oil from Iran and they decide they are not going to sell it to the U.S. anymore? The U.S. would have to find other sources of oil to buy. But Iran would also have to find other customers to buy its oil. On the net, nothing would really happen in the world oil market, other than the price of oil might go up a little bit because by rearranging the lines of supply, the cost to transport oil around the world would increase. The downside to reducing the U.S. reliance on imported oil is that, ultimately, it is more expensive to produce oil here than to import it,'' Kaufmann said.

"If you try to produce it here you will be devoting more effort to producing a good or service that you could get someplace else more efficiently.''

Kaufmann said that happened in the 1970s and 1980s oil crises. "It was the express U.S. policy at that time to reduce dependence on imported oil and the government offered all kinds of incentives for domestic drilling. But we see that the U.S. in doing that squandered a huge chunk of capital by drilling a lot of dry holes that never produced,'' he said.

"What about opening the Arctic National Wildlife Refuge for exploration? Even if you found the stuff it wouldn't come on line for five to 10 years. If we started producing now, the best-case scenario is that in about a decade we would produce about 1 million barrels of oil a day. But now we are using more than 20 million barrels a day. Would such production make any difference to the world supply-and-demand balance? The answer is no. It would not really lower U.S. imports or the world price significantly.

"If we can't get oil from the U.S., where will it come from? The big supplies are in OPEC countries. Over the next 10-20 years, the U.S. and world in general will become increasing reliant on OPEC for oil and, geologically, there really is nothing that will change that.

"That's important, because in order to balance supply and demand, OPEC will have to embark on an incredibly ambitious plan to expand its capacity from a low of million barrels it is now producing per day to 50 million per day, according to the U.S. government.''

"So, one of the issues is can OPEC really influence prices when it is responsible for producing less than half the world's supply of oil? And, should OPEC increase its capacity? Is it in OPEC's best interest to expand its ability to produce oil? As OPEC increases capacity, it will put downward pressure on prices, and as prices drop the demand goes up and non-OPEC countries will reduce their production because prices are down.

"If you do the math, it is not really in OPEC's interest to expand production significantly because oil prices drop faster than OPEC production increases. We are basically saying that OPEC it needs to expand its capacity and let its revenues decline so the U.S. and the rest of the world can have less expensive oil.''

Gasoline prices

"What about the idea that motor fuel prices rise very quickly when oil prices rise and yet fall very slowly when oil prices come down, thus allowing the oil companies to make huge profits?

Oil and gasoline prices, he said, "are rising together at a fairly rapid rate. And, consumers are pretty smart. Myself and others have done some pretty sophisticated analyses of the data and it's true that in some states gasoline prices to not fall as rapidly when oil prices come down,'' he said.

Those studies show one of the states is Pennsylvania. The others are Texas, Michigan, Florida, Illinois, Minnesota, Ohio, Louisiana and Idaho.

"We can explain that behavior is based on stocks and the way refineries speed up and slow down production of gasoline. What happens is that when crude oil prices rise, the only way to cut demand is to have gas prices rise with it. However, when crude prices fall, refiners slow down the rate at which they refine motor gasoline and sell what they have from their inventories,'' which slows down the drop in gasoline prices. Then, as demand rises, refinery capacity limits supplies.

Regulations

There is a myth that environmental and government regulations have hurt refinery development, Kaufmann said.

"Oil refineries are very capital intensive and the only way to make money is to run them 24 hours a day, 365 days a year. When demand dropped off in 1970s, a lot of companies closed refineries. They are reluctant to expand refinery capacity until they are sure that demand would be there. There really is little evidence that I can find that environmental regulations are responsible for a drop in refining capacity.''

James Pletcher Jr. is Herald-Standard business editor. He can be reached at 724-439-7571 or by e-mail at jpletcher@heraldstandard.com.


The challenges of peak oi

Chron.com


We may not be doomed, but we also may not be ready for all of its effects

By Steve Yetiv


Americans are feeling serious pain at the gasoline pump, and scratching their heads as to why. Part of the answer may be that we are approaching peak oil sooner than many people would have guessed.

Peak oil refers to a key turning point when global oil production peaks, signaling a future of slowly decreasing world oil production. No one can say when peak oil will arrive, but one fact at least suggests that it may come sooner rather than later: Until recently, the Organization for Petroleum Exporting Countries barely tried to stem the rise of oil prices from $50 dollars per barrel in February 2007 to more than $130 per barrel today.

In the past, OPEC, and especially Saudi Arabia, have often increased oil production to try to prevent prices from rising high enough to trigger alternative energy exploration; a Western political backlash; and the ire of the gendarme of the Persian Gulf — the United States. In fact, when I visited OPEC headquarters in May 2003, OPEC researchers underscored how OPEC was keeping the price of the OPEC oil basket at around $22-28 per barrel (roughly $25-31 on the New York Mercantile Exchange). And, OPEC did succeed in doing so more than 80 percent of the days from June 2001 to June 2003.

Recently, the Saudis announced that they will boost daily oil production by 200,000 barrels per day by the end of July, though most of this oil will probably not be sweet crude, which the world most needs. Moreover, Saudi Arabia reiterated that it has a $50 billion plan to increase production by another 30 percent in the coming years. But, even so, how can we explain the lack of any action until now, as prices have spiked dramatically?

The answer is multipronged, but peak oil may be a factor. OPEC behavior may be a signal that OPEC cannot easily meet long-run global oil demand, on demand. Even if the Saudis reach 12.5 million barrels per day, that would still be well short of meeting such demand, unless they can boost production further.

For its part, the International Energy Agency recently underscored its concern that future global oil demand will outstrip oil supply. And the U.S. Energy Information Administration significantly scaled back how many barrels of oil it expected the Saudis to produce in 2010.

In 2000, its forecast for Saudi production in 2010 was 14.7 million barrels per day. But last year, it dropped that figure to just 11.4 million barrels per day. That is no small change. A growing number of oil industry executives, including the CEOs of ConocoPhillips and TOTAL, believe peak global oil production will hit at 100 million barrels per day. We're at 85 million barrels per day already.

If peak oil is creeping up slowly, does this mean we're doomed? Well, no. But, depending on when oil does peak, it may produce some effects for which we are not prepared. Oil prices could spike possibly to more than $200 per barrel, triggering economic dislocation. Such prices will increasingly spur work on affordable alternatives to oil, as we are already seeing today in nascent form, but it will take a long time for such alternatives to penetrate the market. Our infrastructure is designed for oil. We can't switch overnight.

In addition, Middle East oil will become even more important. The region now accounts for about one-third of global oil production, but holds two-thirds of the world's oil reserves. These will be the last left as the rest of the world's production declines, from Africa to Russia and the United States. Threats to the free flow of Persian Gulf oil have been largely exaggerated by oil markets in the past decade (there have been few serious disruptions, despite all the angst) but disruptions can occur at any time, and will certainly have far more serious consequences as Middle East oil production becomes even more vital.

Fears about peak oil could also exacerbate tensions among great powers. For example, note China's obsessive concern about energy and Washington's growing concern about China's rising power. Imagine how tense Sino-American relations could become against the backdrop of dwindling oil supplies or even the rising perception of such dwindling supplies. Or consider that Russia is already using energy to coerce countries such as Ukraine. What will the future hold?

The upshot is that we need to hedge better against the effects of the oil era, including the peak oil issue. The United States clearly needs a far more serious energy plan, coordinated with the other major global powers. And such a plan must target transportation, where much global oil is used, while not wrecking the U.S. and global economy.

Yetiv is author of "Crude Awakenings" (Cornell, 2004) and the Pulitzer Prize-nominated book, "The Absence of Grand Strategy," (Johns Hopkins, 2008). He is a professor of political science at Old Dominion University in Virginia. He can be e-mailed at syetiv@odu.edu.


End of cheap oil: Growing prices, demand raise uncomfortable questions

news-record.com


By Morgan Josey Glover

High fuel costs in the Triad caused a discount airline to fail, school buses to drain county coffers and companies to switch to four-day work weeks.

All this before the average price of unleaded gasoline hit $4 a gallon.

So what would Guilford County residents experience if fuel hit $8 a gallon? Or $10?

Picture more bicycles on Greensboro's Battleground Avenue than cars. A dearth — for once — of "Made in China" wares on store shelves. Weeds and "For Sale" signs in desolate subdivisions.

The world's thirst for oil might soon outstrip its capacity to produce it — if it hasn't already — and the consequences could be devastating.

A growing number of energy experts, investors and concerned citizens worry about the country's lack of preparation for "peak oil," the point at which the amount of petroleum that is economically feasible to extract and refine goes into decline. Peak oil does not mean running out of oil. It signifies the end of the cheap-fuel era.

"I don't think there is the commitment to make the transition in time for there not to be maximum economic hardship," said Luddy Hayden, a Greensboro resident who worked in the oil industry for more than 30 years. "I'm afraid that we are going to hit a bump that people will look back upon as the most difficult economic time we've had."

Peak oil uncertainty

Americans depend heavily on petroleum to power their cars, grow their food and heat their homes. Price spikes in the past coincided with economic recessions, and record prices this spring led to worldwide protests and economic pressures in the United States.

Many think the country should kick its oil addiction and switch to alternative fuels in an era of increased global competition for declining supplies, an initiative already under way. But Americans must prepare 20 years ahead of the peak to avoid fuel scarcity, according to a 2005 report commissioned by the U.S. Department of Energy.

Some peak oil analysts believe it's already too late, that the decline in production has begun. Optimists believe the peak is decades away.

"The peak moment, I think, is going to come, and I don't think many people are going to be prepared for it," said Megan Quinn Bachman, outreach director for The Community Solution, a group in Yellow Springs, Ohio, that educates people about fossil fuel depletion. "For some reason, it's a very difficult issue to get across."

The end of cheap oil?

For some Americans, the light bulb flickered in August 2005, when Hurricane Katrina damaged refineries on the Gulf Coast and temporarily cut off supplies in some parts of the country. North Carolina, which imports 90 percent of its fuel from the Gulf Coast, saw supplies dry up for five days.

Hill Oil Co. of Lexington and Winston-Salem saw its fuel supply cut by 80 percent during the two months of market rationing that came after hurricanes Katrina and Rita. Walter Hill, who started working for the family-owned company in 1985, recalls being unnerved by the ordeal and motivated to research the peak oil concept further.

"They pretty much booted the energy industry into the 21st century," Hill said about the hurricanes. "It was a real eye-opener for a lot of people."

With oil prices setting records almost daily over the past two months, Hill and his brother, Mayne, spend much of their workdays in a wood-paneled office in Midway watching the televised wholesale price of fuel fluctuate. These days, the price per gallon of gasoline can rise and fall several cents within hours.

"Gas prices wouldn't move 14 to 15 cents in a month (10 years ago)," said Hill, who talks with a twang and wears a khaki hat with "Soy Biodiesel" written across the front. "Markets didn't move to the point where your whole retail (profit) margin could vanish within an hour."

The Hills don't pretend to know how to navigate rising fuel costs over the long term. The brothers cut back on recreational driving, and they figure the company will need to consolidate its 15 stores to save on operating costs and increase their percentage of biofuel sales.

Walter is desperately seeking an old diesel Volkswagen truck for his horse-riding teenage daughter because of its efficient engine. Mayne of Davie County has cut out family trips to nearby Clemmons for ice cream.

He recalled driving down N.C. 801 one Sunday afternoon and seeing no traffic — a sign of the times.

North Carolinians must make changes, the brothers say.

"Being mad is all right," Walter Hill said. "But in order to solve this deal, the general public is going to have to figure out who to be mad at. It's getting up in the morning and saying, 'I have seen the problem, and it is me.'"

Larry Shirley, director of the N.C. State Energy Office, said the state needs to find alternatives to oil to prosper economically. Shirley described peak oil in a 2006 presentation as a "potential economic, political and social crisis."

"(Gasoline has) been priced below bottled water up until this point, and we've taken it for granted," Shirley said. "Now we've got to stretch it as much as we can."

It happened before

America has faced its own peak in both oil discovery and production, lending credibility to predictions of a worldwide event. Geologist M. King Hubbert predicted in 1956 that production in the lower 48 states would peak by 1970.

The accuracy of his prediction is downright eerie. Federal energy data show the United States produced the most oil in one year — at 3.5 billion barrels — in 1970. The country produced almost 1.9 billion barrels in 2007, according to the Energy Information Administration.

Global oil supply swelled in the 1980s after companies stepped up production in the North Sea and other areas, but it has since flattened to about 85 million barrels a day. Companies produced 36,000 fewer barrels per day in 2007 than in 2005, according to the Energy Information Administration, despite a 2.2 percent increase in consumption in the same time frame.

Energy consultant Mike Lynch attributes the current plateau to technical challenges and dismisses the peak oil theory as a faulty interpretation of oil supply data and production cycles.

In five years, people will laugh about the "end of oil" predictions, said Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. Within 10 years, prices should drop to $40 per barrel once new oil supplies become available, he said.

The Energy Information Administration forecast in March that crude oil would cost $68 per barrel in 2016 and $113 per barrel in 2030, based on new oil supplies and reduced domestic demand.

"It's kind of like people who see a recession or stock market bubble, and they think it will last forever," Lynch said.

A call to action

But with crude oil prices setting records and regular, unleaded gasoline averaging $4.08 a gallon last week, the number of public voices extending the era of cheap oil dwindles.

Hayden, who worked in governmental affairs for Chevron Corp. before retiring last year, said he doubts future discoveries will be enough to offset production declines elsewhere. Even Shell Oil, which forecasts a gradual decline in oil supplies, says many Americans are out of touch.

A February company report said Shell found an "overwhelming disconnect between the perceptions of many consumers and the hard realities of the energy picture. This is the crux of our dilemma as a country in determining an energy path forward — the belief that there are easy answers that are readily available, when in reality the choices we have to make will not come easily or swiftly."

Meanwhile, an undercurrent of discomfort flows in North Carolina. Pricey Harrison, a state legislator from Guilford County, expressed frustration at the lack of discussion occurring in the General Assembly and the focus on expanding highways over public transit.

"It's not something that's on people's radar, and a lot of the times, when it is, the answer is drilling in the Arctic National Wildlife Refuge," she said.

Others are speaking out: At an April energy conference, Daniel Douglas, director of the Raleigh Urban Design Center, listed peak oil as a reason to build pedestrian- and bicycle-friendly housing and commercial developments.

The Pittsboro-based Carolina Farm Stewardship Association educates conventional farmers about the concept to motivate them to switch from petroleum-based to organic agricultural practices.

Roland McReynolds, the executive director, said farmers feel the impact of more expensive animal feed, fertilizers and pesticides.

"Something is happening," he said. "We can see it on the commodity exchange right now."

Bachman, of The Community Solution, spent almost a week in Greensboro in February educating people about peak oil. Her group promotes steps such as home gardening, retrofitting houses for energy efficiency and car sharing.

"I think we are going to be living a lot more cooperatively at the local level and not have a lot of these isolated, single-family existences," she said.

Bachman expressed hope to a group of 40 people at the Presbyterian Church of the Covenant that the city could become a model of sustainability in a post-peak-oil world.

"We need to recognize that if we don't choose a different path, then the choices will be made for us," she said.

Jason Hardin contributed to this story.


Civilization's golden era is teetering on collapse

Print Story - canada.com network


New millennium has brought a turning point in history, yet we ignore meltdown

By Hans Tammemagi

The period from 1950 to 2000 will be remembered as the Golden Era of modern civilization, the pinnacle reached by humans after a million years of evolution. This brilliant half-century was sponsored largely by fossil fuels, especially oil, which brought unprecedented economic growth, plentiful transportation and a rich and diverse lifestyle.

But the new millennium has brought the end of cheap oil, and civilization is suddenly teetering on the edge of collapse. Even if we manage to scrape through (and it would require heroic efforts), life will change. We're at one of the most important turning points in history, yet we persistently ignore the coming meltdown and just want to party on. Nero would be proud.

So, why is civilization teetering?

First, peak oil has arrived. There is no better signal than the price of oil, which has skyrocketed past $130 and shows no sign of slowing. Some shrug and claim there's still a lot left, technology will find it and extract it. Others, as represented by the editors of Maclean's magazine, feel that we have grappled with costly oil before and by applying determined conservation and new efficiencies, we will cope.

Wrong! Wrong! Wrong! Peak oil, this two-syllable piece of jargon, is another way of saying we are on the threshold of a major crisis. From now on the supply of oil will diminish each year, but population and demand will continue to grow. This is truly frightening because our modern industrial society is built on and totally dependent on this versatile fuel. It is the foundation for transportation, industry, agriculture, fishing and much more. As the gap between what economies and nations need and what they can get widens, bidding wars will erupt (they already have) and then shooting wars (one already has).

The globe is in for tough times because renewables like wind and solar simply can't be supplied in enough quantity to fill the enormous demand. As an aside, environmental organizations are doing an enormous disservice by promoting the fantasy of a feasible renewable energy and hydrogen economy.

Second, the world is facing a major food shortage. It took two centuries but the Malthusian Devil is finally banging on the door. For seven of the past eight years global production of cereal grains has not met consumption. The price of cereal crops such as rice, corn and wheat has doubled in the past year. Poor countries are hardest hit and food riots have broken out in more than 10 countries including Egypt, Cameroon, Morocco and Indonesia.

The United Nations recently announced that large segments of the world face immediate hunger now, and global food production must be doubled in the next 30 years.

But how is this possible? There are no empty lands to cultivate and agriculture is highly dependent on oil and gas to power machinery, to make pesticides and fertilizers and for shipping. Food prices are rising in lock-step with the price of oil. And now another body blow: the mad rush to harvest cereal grains like corn to make biofuels for cars rather than food for people.

The world's food situation is deadly grim, and it can only get worse, since we are adding 70 million more people to the planet every year.

As though the oil and food crises weren't enough, we're also staring down the throat of global warming, the most insidious threat ever faced by humans. Yet our efforts to curb carbon emissions are laughable and pathetic. It's an interesting insight into our human psyche that we can ignore such a serious problem.

Space doesn't permit me to discuss cool, clean water, another vital resource whose supply is becoming painfully short.

THE FUTURE

Major changes are in the wind. At the very least it will mean paring back our lifestyles including, for example, less flying and driving, which will drive a stake into the heart of tourism, one of the world's largest industries. Tourism-dependent places such as Phoenix that are located in a desert with obscenely sprawling suburbs are particularly vulnerable, and violence and societal breakdown are likely.

James Kunstler, in his book, The Long Emergency, predicts that the United States will degenerate into a set of autonomous regions, with major urban centers replaced by numerous villages.

Societal breakdown won't happen quickly nor everywhere, but be sure of this: Change is coming and although poor nations will be hardest hit, North America will not be spared.

We clearly need to think smaller eco-footprint with hybrid cars, smaller homes, diets with less meat, more bicycling and better recycling. If we all pitch in, these changes will buy us time-but only a little.

While oil brought good times, it also allowed human numbers to soar well beyond the carrying capacity of the planet. We cannot continue to ignore this basic underlying problem. It will yield not one millimeter of progress if we decrease our environmental footprint by, say, 20 per cent but the population increases by 20 per cent over the same period.

The crisis situation is unsolvable unless we also address the population problem. It's elementary logic, a no-brainer.

Curtailing human population, however, is a daunting challenge. I hope we're up to it, for the alternative is decidedly unpleasant.


Friday, June 27, 2008

Speculating about speculators

Grist


By Jon Rynn


There seems to be a disturbing tendency in the progressive community to blame speculators for most, if not all, of the increase in oil prices. In its most extreme form, the implication seems to be that the supply of oil is virtually limitless, and that only financial manipulation is to blame. Ironically, this mirrors the views of many mainstream economists, who have what is sometimes called a cornucopian view of the world. Julian Simon was the ultimate spokesperson for the idea that technological innovation and unlimited resources would allow for virtually any level of population and consumption.

For instance, writing in Counterpunch, Mike Whitney, who has been one of the best researchers explaining what is really going on in the financial meltdown, declares:

There is no oil shortage, not yet at least. The reason oil has skyrocketed to nearly $140 per barrel is because of rampant speculation. The peak oil doom-sayers are simply confusing the issue. This is not about shortages or scarcity; it's about gaming the system to fatten the bottom line.

(The progressive talk show host Randi Rhodes has been making similar arguments).

Whitney quotes various ministers of oil who echo his argument; meanwhile, oil company spokespersons have been giving mixed messages, and Bush's Secretary of Energy blames supply and demand. Whom to listen to? None of them. Like a group of vultures circling the carcass of the global economy, they each have their own nefarious reasons for saying what they are saying. The next time you hear something about how the increase in the price of oil is caused by speculation, consider several counter-arguments:

First, up until now, every time there has been an oil spike in the past, the oil producers have turned on the spigot in an effort to push the price of oil down. Why would they want to do that, even though a higher price would increase their profits? Because they learned from the experiences of the 1970s when oil became scarce: People became serious about alternative energy and oil-free lifestyles. "Never again!" was their cry; like drug dealers keeping the price of their product low in order to make it easy for their clients to become addicted, the oil producers were careful to make everybody "happy." Thus we have the phenomenon of the SUV and the exurb. And now that the U.S. is completely addicted, a doubling and quadrupling of gas prices has led to only a few percentage points of lower gasoline consumption.

Second, as opposed to cornucopianism, in the real world there are limits to growth, as the title of the book put it. This is because we live in an ecosystem; the economy is embedded within several ecosystems. All ecosystems have limits on their resources. That's why the end of the era of cheap oil, or peak oil, is an ecological problem, just as much as pollution and global warming are ecological problems -- which oil obviously affects as well. Oil was a bad idea to begin with, and it's a bad idea now -- basing an economy on any nonrenewable resource is long-term folly.

Third, we simply don't know how much speculation has to do with the run-up in price. On the other hand, there is plenty of data that show that we have a severe supply problem -- check out the articles on The Oil Drum and Energy Bulletin, or the writings or videos of Matt Simmons or Richard Heinberg. The proponents of the speculation theory never explain why this behavior is happening now. The financial system is in the process of self-destructing as a result of the housing meltdown, so it's hard to see how they could be driving this problem. Many people in the peak oil community have had to explain, for years now, why their prediction of expensive oil was not coming true -- now that it finally is, maybe they should be given some credence.

Third, people should not be concentrating on the short-term reasons for the increase in oil; in the long-term, it is clear that we need to transform the society so that it is oil-free. A post-petroleum society is a positive progressive goal. Sure, it would help if American oil companies were nationalized, so that the country as a whole, like the other oil producing nations, would get back some of the expense of using oil; but in general oil has been used and is now used to prop up repressive regimes and avoid the hard task of industrializing a country, and our nonnationalized companies work hard to prevent sustainable environmental policies from being enacted.

Speculation and various factors such as war and disaster certainly have something to do with the rise in the price of oil. But the main reason, and the important one in the long-term, is that the world can no longer pump more and more oil out of the Earth. In order to save our economies and our climate, we need to pursue the long-term goal of a fossil-fuel free society.


Wednesday, June 25, 2008

Demand Destruction: A Natural Cure For Peak Oil

nbbusinessjournal.com


By Rick Buckingham

Marine Atlantic recently announced that they are tripling the price for the fuel surcharge for all vehicles bound to and from Newfoundland. The surcharge will increase on July 1, 2008 from 9.9% to a hefty 27.7%. Increased rates and fuel surcharges have been the norm on a month over month basis for the better part of one year.

From a manufacturers perspective and eventually the consumers, affordability has to becoming into play. When does it become uneconomic to ship to Newfoundland? This also begs the question for shipping anywhere involving long distances where freight charges start to affect the economics of shipping.

Air Canada announced on June 7 that they were eliminating 2000 jobs or eight per cent of its workforce and eliminating seven per cent of its capacity. On the American side of the border it has been discussed at length that most airlines domiciled in that country can't make money with the price of crude over $100 per barrel at today's ticket prices, even with the fuel charges they have implemented.

The resultant effect of this will be higher air travel costs, as the carriers in the U.S. cut back on routes and employees to try to break even by way of financial performance. One would logically surmise that in order to offset these higher input costs all you have to do is raise rates. The flaw in this thinking is that they can't because consumers won't pay for the cost pass through.

"Demand destruction" is a term widely used in literature referencing peak oil hypothesis and the impact of rising oil and gasoline prices on consumption. Basically in lay terms, demand destruction is the reduction of demand for oil and oil derivatives. In other words at a certain price level for oil, or any other product for that matter, people will start parking cars, turning off air conditioners and cutting back on air travel. They will curtail their spending around everything affected by high oil prices and buy essentials.

Arjun Murti, an energy analyst with Goldman Sachs, recently stated that gas at the pumps in the United States may have to hit $5.75 per gallon before consumption cools off enough to take the heat off of oil prices. Although, there is evidence North American consumers are being effected negatively. In his vies oil supply growth is being constrained and conversely global growth has gone on unabated. He also stated there was a distinct possibility the world could see $150 to $200 per barrel oil over the next six to 24 months.

On the supply side Mr. Murti stated there are no apparent issues as Saudi Arabia, Iraq, Iran, Venezuela, and Russia all have large recoverable oil supplies but aren't on track to grow them significantly because there is no monetary reason to do so. The rationale from their perspective is that they don't need incremental revenues by way of volume and they don't need western capital to build infrastructure to build out more reserves. In other words they are happy with the present scenario in which they have never made more money.

Consumer behaviour will be the catalyst to change the demand for oil products. If current behaviour deems that the status quo is acceptable then nothing changes if consumption patterns are sustainable. The problem is that this line of thinking isn't practical. All we have to do is look at the plant closings at General Motors to validate this. People are going from SUVs to smaller more fuel efficient cars. Discretionary income is the most important aspect or driver in this thesis. After consumers pay for all their essentials what's left over is what they can afford. It is at this point that consumers vote on what they will pay for with their wallet. Consumers have choices and we are now at the point where something has to give.

Rick Buckingham is president and CEO of Canadian 2 for 1 Pizza Inc. based in Fredericton. He can be reached by e-mail at rbuckingham@nb.aibn.com. His column appears Tuesdays.


Skeptics doubt Saudi Arabia can boost oil supply

Dallas Morning News


By Jim Landers


The Saudis have had their big show on the Red Sea. Now the oil markets will test the peak oil theory.

A growing number of oil traders believe the kingdom has reached the peak of its oil production capacity and won't be able to fill your tank in the future. They are buying and selling contracts dating all the way out to 2016, and their expectations are pulling prices toward $140 a barrel.

On Monday, the day after an emergency meeting of oil producers and consuming nations here, oil futures continued their climb, rising $1.38 a barrel to settle at $136.74.

The Saudis say they will sell whatever the market wants for the rest of this year. Production will be at 9.7 million barrels a day in July, up 200,000 barrels from where it is now. If the market wants 10 million barrels a day, that's available.

The Saudis say they're spending $60 billion over the next five years to maintain and expand production capacity – first to 12.5 million barrels a day by the end of 2009 and then to 15 million barrels a day if the demand is there.
Also Online

Saudis show off $10 billion Khurais mega-project to ease doubts

There are many skeptics. Bruce Bullock of the Maguire Energy Institute at Southern Methodist University says the Saudis are struggling to hit 10 million barrels a day, even though they say they have the ability to produce well above that.

Other analysts say the Saudis are making the market even more precarious by cutting into their spare capacity – the cushion between what they can produce over expected demand.

This lack of confidence in the kingdom stems from a theory that predicts world oil supply has peaked and will decline in the future even as demand increases. The only way to get supply and demand in balance again is by raising the price, and there's been plenty of that this year.

The Saudis did not help their cause by decreasing production in 2006 and 2007. The drop pushed oil companies to use their inventories to balance the market and raised doubts about what was happening in Saudi oil fields.

Most of the world's oil comes from a handful of giant oil fields. After a while, every field reaches its peak and starts to decline. Mexico's Cantarell field in the Gulf of Mexico was one of the most prolific in the world, but production started to fall two years ago. Alaska's Prudhoe Bay oil field peaked years ago, and the North Sea fields of Britain and Norway are down by 1.45 million barrels a day from where they were in 2003.

Peak oil theorists argue that Saudi Arabia's Ghawar field – the largest in the world – is about to fall as well. Ghawar has been in production for 50 years. It produces 5 million barrels a day of oil, almost as much as all the oil fields of the United States.

Houston energy banker Matt Simmons studied hundreds of petroleum engineering papers written over the years about Saudi Arabia's fields and wrote a book called Twilight in the Desert that argues Ghawar and other Saudi fields are going down.

Senior engineers with Saudi Aramco, the national oil company, debated Mr. Simmons at the Center for Strategic and International Studies two years ago. The Saudis argued that sophisticated technologies such as horizontal drilling of wells branching like trees and three-dimensional seismic imaging have extended the life of older oil fields.

Amin Ali Nasser, senior vice president for production with Saudi Aramco, said Monday that Ghawar has a long life ahead of it yet.

Companies pump water into many older fields to build up pressure that pushes the remaining oil to the surface. The amount of water that comes back out through the well is called the "water cut."

Mr. Nasser said Ghawar's water cut is 28 percent, while many fields in other parts of the world have a water cut as high as 80 percent. He also said Ghawar's water cut is falling rather than getting worse.

Mr. Nasser said the world hasn't seen Saudi Arabia reach anything close to peak oil – or, for that matter, peak production.

"Every well has a choke valve on it to keep it at a lower flow rate," he said. "If we want more oil, we open the valves across all the fields. And none of them is wide open."

If the Saudis really want to make their point, they could turn up the valves and turn down the price. Discounts might annoy other OPEC countries, but they would certainly get the attention of oil traders.


Tuesday, June 24, 2008

Peak Oil and the New Administration

opednews.com


By Michael Payne

There is a distinct uneasiness in America today. The confidence of the people in our nation has been shaken by a series of serious problems that seem to have descended upon our society at the same time. The housing bubble, sub-prime mortgages, foreclosures, massive Wall Street financial problems, the threat of recession and, at the same time, inflation. But the problem with the greatest possibility of lasting damage to our society and our economy is the specter of Peak Oil looming over us.

America is now becoming more aware that we are all caught up in an unexpected nightmare called Peak Oil, the point at which the demand for oil on the world market overwhelms world production capacity and this condition becomes irreversible. Currently world petroleum production is remaining relatively stable at about 87 million barrels per day while world demand is expected to grow to almost 88 mbpd in 2008. The price of a barrel of oil reached as high as $139.89 on June 16, 2008 and there are dire predictions of further escalation. Before long, many analysts expect demand to overwhelm production in an irreversible trend, and when that happens, every nation will experience extreme shock to their economies. But no nation will experience the shock that will impact America, for no economy in the world is so overly dependent upon petroleum than this nation.


Whether we call this condition Peak Oil or something else matters little. Various analysts argue that OPEC (the Organization of Petroleum Exporting Countries) is manipulating supply to jack up prices; that American oil companies have formed some sort of cartel that is conspiring to limit production and fix prices. Others say that Wall Street speculators of all types are manipulating the process. And some say that it is simply a short-term bubble that will blow over before long and everything will revert back to the status quo, but that is just not going to happen.

That speculation is based upon wishful thinking, that these so-called manipulators will somehow be brought under control to alleviate this nightmare so we can once again just return to our wasteful habits in the reckless and selfish use of this precious, non-renewable source of energy. Congress has on several occasions held public congressional hearings where oil industry executives, under oath, have not even blinked an eye or taken any responsibility for the mess we are in, saying "sorry, but we are not the problem". Congress would like to reinstate an excess profits tax on the oil companies but can't reach accord on it yet. In short, all the blustery talk, veiled threats and speculation about who the real culprits are has done nothing whatsoever to remedy the situation. And that is because Congress is simply not addressing, nor do they comprehend the underlying causes of this petroleum emergency.

What are the root problems, the underlying causes? Who exactly is primarily responsible? We can answer this question by making an honest assessment of the lifestyles that we have been maintaining. In our hearts we really should realize that the major underlying cause of this predicament is the American lifestyle, our excessive, wasteful habits. While the entire world also contributes to these problems, America continues to be the outright leader when it comes to overindulgence, as evidenced by the fact that this nation, having 5% of the world's population consumes about 25% of world oil production or 22 million barrels per day. We currently import 60% of this total.

We in America must stop procrastinating, admit we are primarily responsible for the dangerous conditions that we are facing, and get serious about coming up with solutions to this real problem. It is simply not going to go away. It is here to stay and we must face up to it or the future of America will be very bleak indeed. A problem cannot be solved unless it is directly faced and addressed. So far we have not begun to address it. However, we are in the beginning stages of experiencing a significant motivating factor that will finally get this process underway.

The motivating factor of which I speak is PAIN. We Americans seem to have a habit of letting certain problems or conditions continue to grow and fester, to a point that the impact upon us becomes unbearable; only then do we rise to the occasion and take corrective action. While I could cite numerous examples of this, one of great significance was the Vietnam War that went on and on, causing immense pain and destruction, until America could stand no more pain and finally said, "enough is enough". We are currently experiencing a similar scenario with the Iraq War, where America is involved in a massive national struggle between opposing factions that can't agree on how to exit that quagmire. But when the pain becomes unbearable, we will find a way.

America is already experiencing sharp pains at the gas pump where prices have now shot up to more than $4.20 gal. for regular and $4.90 and more for diesel fuel. This pain is spreading to all facets of our lives and our economy. Independent truckers are finding it impossible to make ends meet; many have declared bankruptcy, others are near. The airline industry is besieged by massive cost increases for jet fuel that are sending their operating costs out of sight. They are now taking corrective action by passing much of this burden to their customers through increased fares, reducing schedules to smaller cities, and even charging extra for baggage handling. Spokespersons for the industry say that reaching $130 barrel was a tipping point and that operations cannot be sustained under such escalation.

I am no fan of SUV's because I thought they were a bad idea from their inception. They are a major contributing factor to our gasoline supply problems, an example of the excessive habits that I have referred to. While they may be absolutely necessary for very large families and businesses, we have become a nation that is glutted with these overly large, gas-guzzling vehicles that are totally unnecessary for the typical American family. Now the pain of owning an SUV is causing great distress to many families that cannot afford to own them because of their miserable gas mileage. There has been a rush by many Americans to trade them in for standard autos. Dealers who sold hundreds of thousands and millions of SUV's do not want to take them for trade since they would just sit on their lots. They are offering owners ridiculously low trade-ins that people cannot accept, so they are stuck. In the worst cases many Americans now owe more on their SUV's than they are worth, a situation so similar to homeowners who got caught in the sub-prime mortgage problems.

The continuing failure to bring this situation under control affects every facet of our lives and economy. Our inaction, if we continue to fail to address these problems, will put us on a course that will change our lifestyles very radically. We are running out of time but we can still begin the critical process of arriving at solutions. The Bush administration is so involved with the oil industry that there is no chance that they will make any attempt to promote alternatives to petroleum energy. Therefore, it will be up to the incoming President and a new Congress to turn America in a completely new direction. The Dept. of Energy must become a major force in any new administration. The new President must think deeply and appoint a person with the knowledge and intense passion about developing energy alternatives, one who will initiate a massive program akin to the birth of our space exploration program of the 60's; one who enlist the best minds in America to develop new energy sources and end our severe addiction to petroleum.

In the very near future Americans will see a dramatic increase in smaller vehicles on our highways, as is commonplace all over Europe. While SUV's and recreational pick-ups are beginning to disappear, bicycles, scooters, and motorcycles will abound. We will watch suburban sprawl come to a halt as massive commutes to work will become prohibitive. Mass transit will rapidly grow in popularity as commuters begin to realize that it's a terrific alternative to bumper-to-bumper gridlock. Solar panels will begin to appear on our roofs. The railroads, having lost much of their freight hauling to interstate trucking in years past, will once again experience rapid growth and will once again prosper.

We won't take as many vacations and, when we do, the distance we travel will be much less than we normally have done. Air fares and schedules will present problems for the traveler and so the entire airline industry will be scaled back. World business travel, as well as vacations abroad, will also see sizable declines. The current rapid move to globalization and increased world trade will not be sustainable because of energy costs and availability. I believe America will experience a great reversal of the outsourcing of jobs as this nation will be forced to drastically give up its reliance on imports and return largely to domestic production.

All of these events will actually be positive moves for the future good of this nation. Yes, there will be pain, discomfort and necessary changes to all of our lifestyles. But it will be very good for our future welfare because we will not be subjected to the disastrous impacts to our economy and our daily lives that we would face if we did nothing. Best of all, these changes to our lifestyles will contribute directly to offset our escalating energy problems and buy us some time to begin the ongoing development of alternative energy sources.

While many in America may have feelings of dread and fear as they continue to personally experience the increasing impact of these serious problems, they should not; for the future of America will be better assured as we face up to these problems and seriously address the great challenge of Peak Oil.

Michael Payne resides in the Chicago area. He considers himself an activist. His writings deal mainly with political issues, American foreign policy and climate change. His articles have appeared on the websites, Online Journal, Information Clearing House, Foreign Policy, Peak Oil and others.


Monday, June 23, 2008

Oil an easy target, but imagine the outrage if supply falls short

reportonbusiness.com


By Gwyn Morgan

The audience was a diverse group of promising and intelligent Canadians a decade or so into careers in the public, private and non-profit sectors. My talk focused on a favourite topic - values based leadership. Halfway through the Q&A session came the question ... how could I credibly espouse ethical values given my career in the oil and gas industry? It seemed as though the questioner expected me to admit that retirement has brought repentance for this great sin. I wondered how the many thousands of creative, dedicated and proud employees I had once led would expect me to answer this attack on EnCana's Mission of "Energy for People." The same week brought news that the husband of Quebec's environment minister owned shares in companies involved in oil sands and liquefied natural gas (LNG) terminals. A spokesman for a Quebec-based NGO responded: "It's like having a justice minister who was a full-fledged member of the Hell's Angels."

When did an industry whose products Canadians depend upon for essentially every aspect of their daily lives become a pariah? And what sense does it make that, while consumers express outrage over high energy prices, environmental groups say the "cost of carbon" is too low? And what to make of the goings-on in Ottawa, where some MPs want to haul oil industry leaders before a parliamentary committee to explain why prices are so high, while all of the opposition parties devise plans that would make prices even higher?

The oil and gas industry is an easy target ... from high prices to apocalyptic articles about the environmental impact of oil sands development. It seems few support the activities needed to produce oil and gas, but I wonder what the public's reaction would be if motor fuel failed to reach service stations, or if natural gas supplies fell short on a cold winter day?

Questions, so many questions, all easier to ask than answer. I don't intend to try in this short column, but intelligent debate needs to be founded in realism. Here is a dose of reality.

Almost 80 per cent of Canada's greenhouse gas emissions are created by end-users, i.e. businesses, agriculture and individual consumers, and another 10 per cent arises from the production and transportation of those same hydrocarbons. The balance comes from the production and export of oil and gas to the United States.

Asian demand growth, primarily Chinese, is the primary driver of high oil prices as well as the skyrocketing prices of coal, copper and nickel. In fact, OECD demand for these commodities has decreased.

When OPEC's unutilized capacity grew to over 10 million barrels a day in the 1980s, oil prices fell. Today, excess capacity is only 2 million barrels a day out of world demand of over 85 million. This precarious cushion fuels fears of supply shortfall, driving market reaction to news such as political or social conflict in countries such as Venezuela, Nigeria and Iran.

Recent weeks have brought allegations of speculative futures trading as a root cause of rising oil prices. While these activities can have a temporary and modest effect, it's real world data and events that ultimately drive oil prices. Recent data showing falling crude inventories, falling spare production capacity, along with reports of Nigerian unrest and potential Middle East conflict, are what's driving up prices.

In the 1960s, 85 per cent of global oil and gas reserves were available to private sector firms for exploration and development. Reserve depletion in the West, combined with resource nationalism in Latin America and the Middle East, have reduced reserves available to what some like to call "big oil" to a meagre 7 per cent, leaving oil firms with few places to offset falling production.

In 1783, fur trader and explorer Peter Pond reported using bitumen tar flowing from natural seeps on the banks of the Athabasca River to repair his expedition's canoes. Today, we know the source to be a massive deposit of bitumen-soaked sands. Canada's oil sands are the most important source of production growth in a stable, developed country. The resulting scale and geographical concentration of oil sands projects have drawn environmental concern. As usual, perspective is important. While technically complex, oil sands development basically involves digging up the gooey sands, separating the oil, and returning the cleaned sand back where it came from. Like any mining project, it looks pretty messy along the way, but a visit to the two longest-running projects operated by Suncor and Syncrude reveals a very high standard of reclamation.

World oil supplies are being stretched ever tighter, and a higher and higher portion comes from areas subject to instability such as the Middle East and Africa, ideologically hostile regimes such as Venezuela or countries thirsting for geopolitical dominance, such as Russia. Through good fortune of resource endowment and the technological ingenuity and professionalism of its people, our country does not have to rely upon these vulnerable sources for our supplies.

Food and fuel are two things that no one can do without. Denigrating the thousands of Canadians from coast to coast who ensure that oil and gas is available when and where it's needed makes as little sense as would vilifying our farmers over rising world food prices.

Gwyn Morgan is the retired founding CEO of EnCana Corp.


Is 'Peak Oil' Already Affecting the Stock Market?

Seeking Alpha


By Jim Kingsdale


If I were asked to recommend an energy advisory team for the next President I’d start with Robert Hirsch. Hirsch is a defense planning expert who has headed up major consulting assignments for the Defense Department among other clients and in 2005 he published a major study of the impacts and potential mitigation of Peak Oil. It famously forecast that a successful transition from oil dependency would need to start 20 years before oil production peaked.

In an interview published on a web site operated by Allianz, the German financial giant, Hirsch outlines the problems of Peak Oil as he sees them today. He believes the crisis will be upon us within a few years, which is consistent with the predictions by other experts such as Simmons, Skrebowski, and Maxwell as I have previously reported, all of whom believe oil production will begin declining within a few years.

What Hirsch adds uniquely is a more nuanced vision of the limits to our economy’s ability to cope with peak oil. Hirsch’s discussion of the economic constriction and great weakness in financial markets that he expects will constrain our normal capacity for remediation of the problems is particularly sobering because of his expertise in evaluating exactly such macroeconomic questions. He adds that voluntary reduced oil production (hoarding) by some oil exporting countries will exacerbate the scarcity of oil itself. His essential point is that the dimensions of the global economy’s dependence on oil are so huge that its scarcity will be crippling and will preclude any easy solution.

I think Hirsch is essentially correct. But I am more optimistic that electrical transportation solutions to the oil shortage can be substituted in OECD countries at a faster pace than Hirsch seems to think is possible, thus perhaps limiting the most extreme economic difficulty to a period of only five to ten years rather than twenty. After all, if the U.S. could go from a standing start in 1940 to substantial war production just a couple of years later, we could accomplish a similar transformation of our transportation systems in a shorter period than might be able to be forecasted. The technologies for making cars that get 100 mpg or even more are already in development. The question rests on whether we will have the same political will that was demonstrated by Roosevelt to deal with the oil shortage crisis. Some countries - Israel and Denmark - have already begun down this path.

The Saudi Vision

Contrasting with Hirsch’s longer term view of peak oil is the Saudi’s belief, shared by many others, that currently high oil prices are mostly a function of financial market speculation and secondarily of lack of refining capacity. On the second point the Saudis are undoubtedly correct in that a great deal of high-sulfer heavy crude is available but cannot be used because the refinery capacity for such inputs is insufficient. After all, Iran reportedly has 25 tankers of such oil floating offshore that are unable to unload due to lack of appropriate refining capacity.

Over the next few years a good deal more refining capacity in a number of developing countries for heavy sour crude will come on stream and will no doubt help alleviate the supply problem. The Chinese recently started up one such facility. On the other hand, that won’t have much impact in the next year or two and by the time it comes the decline in conventional oil production after 2010 will probably make supply constraints so much more acute than they are now that the net result will still be much higher oil prices.

The more immediate vision of relief that will apparently be offered by the Saudis Monday, according the The Wall Street Journal Sunday, is an end to financial speculation - if the OECD countries take appropriate action. In other words, the Saudis are suggesting that current supplies are sufficient (the same tune they’ve been singing for the past year) but speculators are hoarding supplies. This is a theory the truth of which is hotly debated by experts above my pay grade. I take no sides (but color me skeptical), but I do hope that Congress and/or the S.E.C. and/or other agencies will take measures to find out if the theory is true.

I have no problem with the idea of banning hedge funds or other large speculators from the oil pits. Clearly the potential understanding of the reality of high oil prices that would come out of such actions would be a far greater benefit to society than the loss of a bit of freedom for hedge funds. Whether speculators have anything to do with currently high oil prices is an important question that we must put to rest. Of course, whether the Saudis in fact have the oil reserves they claim and whether Ghawar is at near term risk of declining is another bit of knowledge to which the world should have access. Somehow, it seems doubtful that the Saudis will offer this important insight this weekend.

What seems clear to me, however, is that if the Journal’s report is correct and the extent of the new short term oil production offered this weekend is fairly limited, the likely result will be higher oil prices in the near term. If that is the upshot, I suspect the Saudi meeting will be seen as a disaster and an indication that there are no real near term solutions for tight oil supplies.

Are We There Yet?

We know that Hirsch is right; there will come a time when oil scarcity will hobble the economy so severely that the stock market will crash and it will not be profitable to own any stocks, even energy stocks. As I finished reading this interview, I asked myself a question that I find is recurring more frequently. Has that time come already?

Friday’s market seemed like a foreshadowing of that time. The market averages were down nearly 2% partly in reaction to higher oil and gas prices. The EIS portfolio made up almost entirely of companies that benefit from higher oil and gas prices was down about .5%. Losing money is not the objective of any investor, so the fact that I lost less than some other portfolios is really not comforting to me.

Maybe the current weakness is primarily a function of the continued implosion of the housing and financial sectors. But clearly these sectors’ problems are seeping into the general economy and starting to destroy consumer demand. My concern is that if oil prices keep rising on the trajectory that has been in place for the past fifteen months, the economy may simply not be able to make a normal recovery.

In other words, oil prices are rising rapidly even though oil production may not yet have actually peaked. If oil supply continues to be very tight, the oil price may simply continue its rise, anticipating the advent of peak oil, regardless of whether production has yet peaked. If that is the way that 2008 and 2009 play out, then the impact on stocks that I anticipate will happen in a few years could be starting to take place already.

The end point of this exercise will be a portfolio made up of high quality bonds, ETF’s that mimic the price of oil and gas (USO), (OIL), and (UNG), and perhaps some very high quality long term oil and gas assets like (SU) and (COSWF) and perhaps (DVN), (APA), (XTO), and (CHK) that will ultimately be bought out for cash by the oil majors. Even the oil service companies may be too risky to own when everyone is cashing out of the stock market in a panic.

For the past year such stocks are lagging the commodities, indicating that they still represent excellent value. But the early stages of a market decline driven by fears of oil shortages is likely to bring a concentration of funds allocated to the oil and gas sector resulting in fairly good gains in most stocks in the EIS portfolio. Oil and gas stocks, including the service and drilling companies to a lesser extent, will probably behave like the Nifty Fifty of the 1970’s. When that happens, when values in these stocks have discounted higher future oil prices instead of lagging behind current oil and gas prices, it will be time to sell them and go to the portfolio of high quality bonds and oil and gas ETF’s.


The 'Peak Oil' Myth: New Oil Is Plentiful

Seeking Alpha


By Jason Schwarz

The data is becoming conclusive that peak oil is a myth. High oil prices (USO) (OIL) are doing their job as oil exploration is flush with new finds:

1. An offshore find by Brazilian state oil company Petrobras (PBR) in partnership with BG Group (BRGYY.PK) and Repsol-YPF may be the world's biggest discovery in 30 years, the head of the National Petroleum Agency said. A deep-water exploration area could contain as much as 33 billion barrels of oil, an amount that would nearly triple Brazil's reserves and make the offshore bloc the world's third-largest known oil reserve. "This would lay to rest some of the peak oil pronouncements that we were out of oil, that we weren't going to find any more and that we have to change our way of life," said Roger Read, an energy analyst and managing director at New York-based investment bank Natixis Bleichroeder Inc.

2. A trio of oil companies led by Chevron Corp. (CVX) has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost U.S. reserves by more than 50 percent. A test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago. Chevron estimated the 300-square-mile region where its test well sits could hold up to 15 billion barrels of oil and natural gas

3. Kosmos Energy says its oil field at West Cape Three Points is the largest discovery in deep water West Africa and potentially the largest single field discovery in the region.

4. A new oil discovery has been made by Statoil (STO) in the Ragnarrock prospect near the Sleipner area in the North Sea. "It is encouraging that Statoil has made an oil discovery in a little-explored exploration model that is close to our North Sea infrastructure," says Frode Fasteland, acting exploration manager for the North Sea.

5. Shell (RDS.A) is currently analyzing and evaluating the well data of their own find in the Gulf of mexico to determine next steps. This find is rumored to be capable of producing 100 billion barrels. Operating in ultra-deep waters of the Gulf of Mexico, the Perdido spar will float on the surface in nearly 8,000 ft of water and is capable of producing as much as 130,000 barrels of oil equivalent per day.

6. In Iraq, excavators have struck three oil fields with reserves estimated at about 2 billion barrels, Kurdish region's Oil Minister Ashti Horami said.

7. Iran has discovered an oil field within its southwest Jofeir oilfield that is expected to boost Jofeir's oil output to 33,000 barrels per day. Iran's new discovery is estimated to have reserves of 750 million barrels, according to Iran's Oil Minister, Gholamhossein Nozari.

8. The United States holds significant oil shale resources underlying a total area of 16,000 square miles. This represents the largest known concentration of oil shale in the world and holds an estimated 1.5 trillion barrels of oil with 800 billion recoverable barrells – enough to meet U.S. demand for oil at current levels for 110 years. More than 70 percent of American oil shale is on Federal land, primarily in Colorado, Utah, and Wyoming. In Utah, a developer says his company already has the technology to produce 4,000 barrels a day using a furnace that can heat up rock using its own fuel. ``This is not a science project,'' said Daniel G. Elcan, managing director of Oil Shale Exploration Corp. ``For many years, the high cost of extracting oil from shale exceeded the benefit. But today the calculus is changing,'' President George Bush said. Sen. Orrin Hatch, R-Utah, said the country has to do everything it can to boost energy production. ``We have as much oil in oil shale in Utah, Wyoming and Colorado as the rest of the world combined,'' he said.

9. In western North Dakota there is a formation known as the Bakken Shale. The formation extends into Montana and Canada. Geologists have estimated the area holds hundreds of billions of barrels of oil. In an interview provided by USGS, scientist Brenda Pierce put the North Dakota oil in context. "Of the current USGS estimates, this is the largest oil accumulation in the lower 48," Pierce says. "It is also the largest continuous type of oil accumulation that we have ever assessed." The USGS study says with todays technology, about 4 billion barrels of oil can be pumped from the Bakken formation. By comparison, the 4 billion barrels in North Dakota represent less than half the oil in the Arctic National Wildlife refuge which has an estimated 10 billion barrels of recoverable oil.

The peak oil theory is a money making scam put out by the speculators looking for high commodity returns in a challenging market environment. Most of the above mentioned finds have occurred in the last two years alone. I didn't even mention the untapped Alaskan oil fields or the recent Danish and Australian finds. In the long term, crude prices will find stability at historic norms because there is no supply problem. How much longer will investors ignore these new oil finds? Probably until they can find other investment alternatives which won't happen in the broad market until financials (XLF) stop hemorrhaging. Respect the trend but understand that this is a bubble preparing to burst. When oil hit it's high of $139 it represented more than a 600% increase in crude since the bull market began, returns eerily similar to the dot.com craze.

There are many theories that sound good but just aren't true. Take Al Gore's global warming crusade. It sounded great, it made perfect sense but there was just one problem, the facts didn't support it. It seems that the masses who were loudly calling for a global warming crisis have shifted their energies to oil. We are bombarded on a daily basis by those who tell us that we should be fearful. They spin good news into bad. The latest absurdity had Goldman Sachs telling investors that China's 18% price increase will actually increase demand! That's a new one. Just like global warming, the rationale for peak oil sounds great, it makes sense, but there is just one small problem, the facts don't support it.


Sunday, June 22, 2008

Surviving peak oil will require rethinking our transportation policies

Salt Lake Tribune


By A. Robert Thurman

There should have been banner headlines in every newspaper in the country. It should have been the lead story on every newscast. On June 7 U.S. Energy Secretary Samuel Bodman announced that the world had reached peak oil output and that demand was outracing supply.


Instead, Bodman's pronouncement in Japan, before the energy chiefs of eight industrialized countries, drew virtually no notice. Bodman did not use the term "peak oil," but the situation he described, flat global oil production dating back to 2005, coupled with ever-increasing demand, including hefty increases in demand from China and India, precisely fits the paradigm of peak oil.


The theory of peak oil, first promulgated by Shell Oil geophysicist M. King Hubbard in the 1950s, holds that for any petroleum source, dating from discovery, production will increase until approximately half the oil has been recovered, which represents an absolute limit on production.


Once the peak has been attained, production will slowly decline until the residue cannot be produced economically. Hubbard predicted that for the United States as a whole, the peak would be reached in the early 1970s. He was close to spot on. There have been relatively small discoveries since, but the trend has been inexorably downward.


Current estimates of the timing for global peak oil range from right now to 2030. But given the situation Bodman described, it would appear that peak oil is upon us, or very near, and the current record run-up in the price of oil and oil products is hardly surprising. Economics 101 says a scarce product coupled with strong demand must result in rising prices.


The implications of peak oil are unnerving, to put it mildly. One of the most far-reaching implications is the decline and eventual end of the use of the individual automobile. With gasoline at $4-plus per gallon, we are already seeing the beginning of the decline. Behemoth SUVs are rapidly becoming unmarketable, and, according to a June 10 Washington Post story, car owners are starting to curtail their driving.


With the problematic future of the automobile in mind, perhaps it's time to reconsider transportation policy for the Wasatch Front. New highways may not be what we need. In fact, they may not even be economically feasible.


According to a June 6 USA Today story, oil-based asphalt prices have increased more than 25 percent over the past year, leading some communities to defer and even cancel imperative road maintenance.


When one adds the enhanced cost of fuel for heavy machinery and even tires (prices have doubled in a year for some equipment) prospects for the proposed west-side highway do not look favorable, particularly when a decelerating economy will lead to tax revenue shortfalls.


Nor does financing via tolls make a great deal of sense. Fewer miles driven by fewer vehicles does not augur well for recouping an investment in any reasonable time.


Instead of new highways, we need more mass transit, and we are likely to need it soon. Transportation monies should be spent on mass transit projects to tie together the sprawling Wasatch Front communities, not on highway projects that are all too likely to become virtually useless white elephants.

A. ROBERT THURMAN is a retired administrative law judge for the Utah Public Service Commission. He taught commercial law at Utah State University and was in private law practice with a natural resources law firm.


Thursday, June 19, 2008

Are They Really Oil Wars?

Middle East Online


Social upheavals and political convulsions in the Middle East are more likely to be the result, not the cause, of US foreign policy in the region, notes Ismael Hossein-zadeh.


By Ismael Hossein-zadeh

A most widely-cited factor behind the recent US wars of choice is said to be oil. “No Blood for Oil” has been a rallying cry for most of the opponents of the war. While some of these opponents argue that the war is driven by the US desire for cheap oil, others claim that it is prompted by big oil’s wish for high oil prices and profits. Interestingly, most antiwar forces use both claims interchangeably without paying attention to the fact that they are diametrically-opposed assertions.

Not only do the two arguments contradict each other, but each argument is also wanting and unconvincing on its own grounds; not because the US does not wish for cheap oil, or because Big Oil does not desire higher oil prices, but because war is no longer the way to control or gain access to energy resources. Colonial-type occupation or direct control of energy resources is no longer efficient or economical and has, therefore, been abandoned for more than four decades.

The view that recent US military adventures in the Middle East and the broader Central Asia are driven by energy considerations is further reinforced by the dubious theory of Peak Oil, which maintains that, having peaked, world oil resources are now dwindling and that, therefore, war power and military strength are key to access or control of the shrinking energy resources.

In this study I will first argue that the Peak Oil theory is unscientific, unrealistic, and perhaps even fraudulent. I will then show that war and military force are no longer the necessary or appropriate means to gain access to sources of energy, and that resorting to military measures can, indeed, lead to costly, not cheap, oil. Next, I will demonstrate that, despite the lucrative spoils of war resulting from high oil prices and profits, Big Oil prefers peace and stability, not war and geopolitical turbulence, in global energy markets. Finally, I will argue a case that behind the drive to war and military adventures in the Middle East lie some powerful special interests (vested in war, militarism, and geopolitical concerns of Israel) that use oil as an issue of “national interest”—as a façade or pretext—in order to justify military adventures to derive high dividends, both economic and geopolitical, from war.

Has Oil Really Peaked—and Is Running Out?

Peak oil thesis, as noted above, maintains that world oil reserves, having reached their maximum capacity, are now dwindling—with grave consequences of oil shortage and high energy prices. While this has led many to call for more vigorous conservation, it has led others to argue in favor of unrestrained exploration and extraction of oil reserves, especially those located in the Alaskan Wildlife regions.

Significant policy and/or political implications follow from the view that oil is running out. For one thing, this view provides fodder for the cannons of war profiteering militarists who are constantly on the look out to invent new enemies and find new pretexts for continued war and escalation of military spending. For another, it tends to disarm many antiwar forces that accept this thesis and, therefore, “internalize responsibility for US foreign policy every time they fill their gas tank. Thus they own the wars.”[1]

The Peak Oil thesis serves as a powerful trap and a clever manipulation in that it lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby) “off the hook; it is a fabulous redirection. All evils are blamed on a commodity upon which we are all utterly dependent.”[2]

The fact, however, is that there is no hard evidence that oil has peaked, or that global oil reserves are shrinking, or that the current skyrocketing price of oil is due to a supply shortage. (As shown below, there is actually an oil surplus, no shortage.)

Peak Oil theory is not altogether new. It was originally floated around in the 1940s, arguing that world oil reserves would be exhausted within the next two decades or so. It then resurfaced in the 1970s and early 1980s in reaction to the oil price hikes of those years—which were, incidentally, precipitated not by oil shortages but by international political convulsions, revolutions and wars. But it died down once the price of oil fell back to pre-crises levels.

As recent geopolitical convulsions in the Middle East (especially the US war on Iraq, and the resultant booming speculation in oil markets) have triggered a new round of oil price hikes, Peak Oil theory has once again become fashionable. The theory is being promoted not only by war profiteers and proponents of an unbridled domestic oil exploration and extraction, especially in Alaska, but also by some apparently antiwar liberals such as Michael T. Klare and James H. Kunstler.[3]

Peak Oil theory is based on a number of assumptions and omissions that make it less than reliable. To begin with, it discounts or disregards the fact that energy-saving technologies have drastically improved (and will continue to further improve) the efficiency of oil consumption. Evidence shows that, for example, “over a period of five years (1994-99), US GDP expanded over 20 percent while oil usage rose by only nine percent. Before the 1973 oil shock, the ratio was about one to one.”[4]

Second, Peak Oil theory pays scant attention to the drastically enabling new technologies that have made (and will continue to make) possible discovery and extraction of oil reserves that were inaccessible only a short time ago. One of the results of the more efficient means of research and development has been a far higher success rate in finding new oil fields. The success rate has risen in twenty years from less than 70 percent to over 80 percent. Computers have helped to reduce the number of dry holes. Horizontal drilling has boosted extraction. Another important development has been deep-water offshore drilling, which the new technologies now permit. Good examples are the North Sea, the Gulf of Mexico, and more recently, the promising offshore oil fields of West Africa.[5]

Third, Peak Oil theory also pays short shrift to what is sometimes called non-conventional oil. These include Canada's giant reserves of extra-heavy bitumen that can be processed to produce conventional oil. Although this was originally considered cost inefficient, experts working in this area now claim that they have brought down the cost from over $20 a barrel to $8 per barrel. Similar developments are taking place in Venezuela. It is thanks to developments like these that since 1970, world oil reserves have more than doubled, despite the extraction of hundreds of millions of barrels.[6]

Fourth, Peak Oil thesis pays insufficient attention to energy sources other than oil. These include solar, wind, non-food bio-fuel, and nuclear energies. They also include natural gas. Gas is now about 25 percent of energy demand worldwide. It is estimated that by 2050 it will be the main source of energy in the world. A number of American, European, and Japanese firms have and are investing heavily in developing fuel cells for cars and other vehicles that would significantly reduce gasoline consumption.[7]

Fifth, proponents of Peak Oil tend to exaggerate the impact of the increased oil demand coming from China and India on both the amount and the price of oil in global markets. The alleged disparity between supply and demand is said to be due to the rapidly growing demand coming from China and India. But that rapid growth in demand is largely offset by a number of counterbalancing factors. These include slower growth in US demand due to its slower economic growth, efficient energy utilization in industrially advanced countries, and increases in oil production by OPEC, Russia, and other oil producing countries.

Finally, and perhaps more importantly, claims of “peaked and dwindling” oil are refuted by the available facts and figures on global oil supply. Statistical evidence shows that there is absolutely no supply-demand imbalance in global oil markets. Contrary to the claims of the proponents of Peak Oil and champions of war and militarism, the current oil price shocks are a direct consequence of the destabilizing wars and geopolitical insecurity in the Middle East, not oil shortages. These include not only the raging wars in Iraq and Afghanistan, but also the threat of a looming war against Iran. The record of soaring oil prices shows that anytime there is a renewed US military threat against Iran, fuel prices move up several notches.

The war also contributes to the escalation of fuel prices in indirect ways—for example, by plunging the US ever deeper into debt and depreciating the dollar, or by creating favorable grounds for speculation. As oil is priced largely in US dollars, oil exporting countries ask for more dollars per barrel of oil as the dollar loses value. Perhaps more importantly, an atmosphere of war and geopolitical instability in global oil markets serves as an auspicious ground for hoarding and speculation in commodity markets, especially oil, which is heavily contributing to the recently soaring oil prices.

As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. . . . Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the ‘tail that wags the dog.’[8]

Wall Street financial giants that created the Third World debt crisis in the late 1970s and early 1980s, the tech bubble in the 1990s, and the housing bubble in the 2000s are now hard at work creating the oil bubble. By purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $115 per barrel, if the futures price is even higher.[9]

This has led to a steady rise in crude oil inventories over the last two years, “resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices. . . . In fact, during this period global supplies have exceeded demand, according to the US Department of Energy.”[10]

The fact that the skyrocketing oil prices of late have been accompanied by a surplus in global oil markets was also brought to the attention of President George W. Bush by Saudi officials when he asked them during a recent trip to the kingdom to increase production in order to stem the rising prices. Saudi officials reminded the President that “there is plenty of oil on the market. Iran has put some 30 million barrels of oil that it can't sell into floating storage. ‘If we produced more oil, it wouldn't find buyers,’ says the Saudi source. It wouldn't affect the price at all."[11]

And why producing more oil “wouldn’t affect the price at all”? Well, because what is driving the soaring oil prices is not shortage but speculation: “with so much investment money sloshing around in the commodities markets, the Saudis calculate they have no hope of controlling short-term price fluctuations. They blame the recent price run-ups on speculation and fear of shortages [not real shortages], factors they say are beyond their control.”[12]

War for Cheap Oil?

The widely-shared view that the US desire for access to abundant and cheap oil lurks behind the Bush administration’s drive to war in the Middle East rests on the implicit but dubious assumption that access to energy resources requires direct control of oil fields and/or oil producing countries. There are at least three problems with this postulation.

First, if control of or influence over oil producing countries in the Middle East is a requirement for access to cheap oil, the United States already enjoys significant influence over some of the major oil producers in the region—Saudi Arabia, Kuwait, and a number of other smaller producers. Why, then, would the US want to bring about war and political turmoil in the region that might undermine that long and firmly-established influence?

Let us assume for a moment that the neoconservative militarists are sincere in their alleged desire to bring about democratic rule and representational government in the Middle East. Let us further assume that they succeed in realizing this purported objective. Would, then, the thus-emerging democratic governments, representing the wishes of the majority of their citizens, be as accommodating to US economic and geopolitical objectives, including its oil needs, as are its currently friendly rulers in the region? Most probably not.

Secondly, and more importantly, access to oil no longer requires control of oil fields or oil producers—as was the case in times past. For more than a century, that is, from the early days of oil extraction in the United States in the 1870s until the mid-1970s, the price of oil was determined administratively, that is, by independent producers operating in different parts of the world without having to compete with each other. Under those circumstances, colonial or imperial wars of conquest and occupation were crucial to the control of oil (and other) resources.

Beginning with the 1950s, however, that pattern of local, non-competitive price determination began to gradually change in favor of regional and/or international markets. By the mid 1970s, an internationally competitive oil market emerged that effectively ended the century-old pattern of local, administrative pricing. Today, oil prices (like most other commodity prices) are determined largely by the forces of supply and demand in competitive global energy markets; and any country or company can have as much oil as they wish if they pay the going market (or spot) price.[13]

To the extent that competitive oil markets and/or prices are occasionally manipulated, such subversions of competitive market forces are often brought about not so much by OPEC or other oil producing countries as by manipulative speculations of financial giants in New York and London. As was discussed earlier, gigantic Wall Street financial institutions have accomplished this feat through “innovative” financial instruments such as establishment of energy hedge funds and speculative oil futures markets in New York and London.[14]

It is true that collective supply decisions of oil producing countries can, and sometimes does, affect the competitively determined market price. But a number of important issues need to be considered here.

To begin with, although such supply manipulations obviously affect or influence market-determined prices, they do not determine those prices. In other words, competitive international oil markets determine its price with or without oil producers’ supply manipulations. Such supply managements are, however, designed not to create volatility in energy markets, or chronic oil price hikes. Instead, they are designed to stabilize global oil prices because oil exporting countries prefer stability, predictability and long-term planning for their economic development and industrialization projects. Here is how Cyrus Bina and Minh Vo describe this relationship:

As a result, we conclude that the global oil market is the prime mover [i.e., prime determinant of oil price] and OPEC indeed follows its trajectory accordingly and consistently. . . . When market price (both spot and futures) is falling, OPEC decreases its output; when market price is rising, OPEC attempts to increase its output; and when market price is steady, OPEC keeps its output unchanged. . . . And, this is a kind of oil market we have experienced after the dust settled following the crisis of de-cartelization and globalization of oil industry in the 1970s.[15]

Producers’ policy to sometimes curtail or limit the supply of oil, the so-called “limited flow” policy, is designed to raise the actual trading price above the market-determined price in order to keep high-cost US producers in business while leaving low-cost Middle East producers with an above average, or “super,” profit. While for low-cost producers this limited flow policy is largely a matter of making more or less profits, for high-cost US producers it is a matter of survival, of being able to stay in or go out of business—an important but rarely mentioned or acknowledged fact.

A hypothetical numerical example might be helpful here. Suppose that the market-determined, or free-flow, price of oil is $30 per barrel. Further, suppose this price entails an average rate of profit of 10 percent, or $3 per barrel. The word “average” in this context refers to average conditions of production, that is, producers who produce under average conditions of production in terms of productivity and cost of production. This means that producers who produce under better-than-average conditions, that is, low-cost, high productivity producers, will make a profit higher than $3 per barrel while high-cost, low efficiency producers will end up making less than $3 per barrel. This also means that some of the high-cost producers may end up going out of business altogether. Now, if the limited flow policy raises the actual trading price to $35 per barrel, it will raise the profits of all producers accordingly, thereby also keeping in business some high-cost producers that might otherwise have gone out of business.

Furthermore, supply manipulation (in pursuit of price manipulation) is not limited to the oil industry. In today’s economic environment of giant corporations and big businesses, many of the major industries try, and often succeed in controlling supply in order to control price. Take, for example, the automobile industry. Theoretically, automobile producers could flood the market with a huge supply of cars. But that would not be good business as it would lower prices and profits. So, they control supply, just as do oil producers, in order to manipulate price. During the past several decades, the price of automobiles, in real terms, has been going up every year, at least to the tune of inflation. During this period, the industry (and the economy in general) has enjoyed a many-fold increase in labor productivity. Increased labor productivity is supposed to translate into lower costs and, therefore, lower prices. Yet, that has not materialized in the case of this industry—as it has in the case of, for example, pocket calculators or computers.

Another example of price control through supply manipulation is the case of US grain producers. The so-called “set aside” policy that pays farmers not to cultivate part of their land in order to curtail supply and prop up price is not different—nay, it is worse— than OPEC’s policy of supply and/or price manipulation.

It is also necessary to keep in mind that OPEC’s desire to sometimes limit the supply of oil in order to shore up its price is limited by a number of factors. For one thing, the share, and hence the influence, of Middle Eastern oil producers as a percentage of world oil production has steadily declined over time, from almost 40 percent when OPEC was established to about 30 percent today.[16] For another, OPEC members are not unmindful of the fact that inordinately high oil prices can hurt their own long-term interests as this might prompt oil importers to economize on oil consumption and search for alternative sources of energy, thereby limiting producers’ export markets.

OPEC members also know that inordinately high oil prices could precipitate economic recessions in oil importing countries that would, once again, lower demand for their oil. In addition, high oil prices tend to raise the cost of oil producers’ imports of manufactured products as high energy costs are bound to affect production costs of those manufactured products.

War for Expensive Oil?

Now let us consider the widely-shared view that attributes the Bush administration’s drive to war to the influence of big oil companies in pursuit of higher oil prices and profits. As noted, this is obviously the opposite of the “war for cheap oil” argument, as it claims that Big Oil tends to instigate war and political tension in the Middle East in order to cause an oil price hike and increase its profits. Like the “war for cheap oil” theory, this claim is not supported by facts. Although the claim has an element of a prima facie reasonableness, that apparently facile credibility rests more on precedent and perception than reality. Part of the perception is due to the exaggerated notion that both President Bush and Vice President Cheney were “oil men” before coming to the White House. But the fact is that George W. Bush was never more than an unsuccessful petty oil prospector and Dick Cheney headed a company, the notorious Halliburton, that sold (and still sells) services to oil companies and the Pentagon.

The larger part of the perception, however, stems from the fact that oil companies do benefit from oil price hikes that result from war and political turbulence in the Middle East. Such benefits are, however, largely incidental. Surely, American oil companies would welcome the spoils of the war (that result from oil price hikes) in Iraq or anywhere else in the world. From the largely incidental oil price hikes that follow war and political convulsion, some observers automatically conclude that, therefore, Big Oil must have been behind the war.[17] But there is no evidence that, at least in the case of the current invasion of Iraq, oil companies pushed for or supported the war.

On the contrary, there is strong evidence that, in fact, oil companies did not welcome the war because they prefer stability and predictability to periodic oil spikes that follow war and political convulsion: “Looking back over the last 20 years, there is plenty of evidence showing the industry’s push for stability and cooperation with Middle Eastern countries and leaders, and the US government’s drive for hegemony works against the oil industry.”[18] As Thierry Desmarest, Chairman and Chief Executive Officer of France’s giant oil company, TotalFinaElf, put it, “A few months of cash generation is not a big deal. Stable, not volatile, prices and a $25 price (per barrel) would be convenient for everyone.”[19]

It is true that for a long time, from the beginning of Middle Eastern oil exploration and discovery in the early twentieth century until the mid-1970s, colonial and/or imperial powers controlled oil either directly or through control of oil producing countries—at times, even by military force. But that pattern of colonial or imperialist exploitation of global markets and resources has changed now. Most of the current theories of imperialism and hegemony that continue invoking that old pattern of Big Oil behavior tend to suffer from an ahistorical perspective. Today, as discussed earlier, even physically occupying and controlling another country’s oil fields will not necessarily be beneficial to oil interests. Not only will military adventures place the operations of current energy projects at jeopardy, but they will also make the future plans precarious and unpredictable. Big Oil interests, of course, know this; and that’s why they did not countenance the war on Iraq: "The big oil companies were not enthusiastic about the Iraqi war," says Fareed Mohamedi of PFC Energy, an energy consultancy firm based in Washington D.C. that advises petroleum firms. "Corporations like Exxon-Mobil and Chevron-Texaco want stability, and this is not what Bush is providing in Iraq and the Gulf region," adds Mohamedi.[20]

Big Oil interests also know that not only is war no longer the way to gain access to oil, it is in fact an obstacle to gaining that access. Exclusion of US oil companies from vast oil resources in countries such as Russia, Iran, Venezuela, and a number of central Asian countries due to militaristic US foreign policy is a clear testament to this fact. Many of these countries (including, yes, Iran) would be glad to have major US oil companies invest, explore and extract oil from their rich reserves. Needless to say that US oil companies would be delighted to have access to those oil resources. But US champions of war and militarism have successfully torpedoed such opportunities through their unilateral wars of aggression and their penchant for a Cold War-like international atmosphere.

When Vladimir Putin first became president of Russia he was willing to allow American energy companies to continue with the one-sided contracts they had drawn up during Boris Yeltsin’s presidency. Putin built a seemingly trusting relationship with George Bush who looked into Putin’s soul and liked what he saw. The two leaders grew even closer in the aftermath of the 9/11 attacks on World Trade Centre and the Pentagon—when Russia provided “help for America’s invasion of Afghanistan.” Soon after this generous cooperation, however, “Bush repudiated the anti-ballistic missile treaty in the belief that America could develop the technology for winning a nuclear war. This posed a huge strategic threat to Russia.”[21]

Describing the heavy-handed, imperial US policy toward Russia, Stephen F. Cohen writes: “The real US policy has been very different—a relentless, winner-take-all exploitation of Russia's post-1991 weakness. Accompanied by broken American promises, condescending lectures and demands for unilateral concessions, it has been even more aggressive and uncompromising than was Washington's approach to Soviet Communist Russia.”[22]

Bush’s withdrawal from the ABM treaty not merely posed an existential threat to Russia but was almost a betrayal of the trust that Putin had put in him. This led to Putin’s disenchantment with America. “Eventually he seems to have decided that every time America transgressed against Russian interests he would retaliate by stopping another American company from exploiting Russian resources.”[23]

During the past few decades, major oil companies have consistently opposed US policies and military threats against countries like Iran, Iraq, and Libya. They have, indeed, time and again, lobbied US foreign policy makers for the establishment of peaceful relations and diplomatic rapprochement with those countries. The Iran-Libya Sanction Act of 1996 (ILSA) is a strong testament to the fact that oil companies nowadays view wars, economic sanctions, and international political tensions as harmful to their long-term business interests and, accordingly, strive for peace, not war, in international relations.

On March 15, 1995 President Clinton issued Executive Order 12957 which banned all US contributions to the development of Iran’s petroleum resources, a crushing blow to the oil industry, especially to the Conoco oil company that had just signed a $1 billion contract to develop fields in Iran. The deal marked a strong indication that Iran was willing to improve its relationship with the United States, only to have President Clinton effectively nullify it. Two months later, sighting “an extraordinary threat to the national security, foreign policy and economy of the US,” President Clinton issued another order, 1259, that expanded the sanctions to become a total trade and investment embargo against Iran. Then a year later came ILSA which extended the sanctions imposed on Iran to Libya as well.

It is no secret that the major force behind the Iran-Libya Sanction Act was the America Israel Public Affairs Committee (AIPAC), the main Zionist lobby in Washington. The success of AIPAC in passing ILSA through both the Congress and the White House over the opposition of the major US oil companies is testament to the fact that, in the context of US policy in the Middle East, even the influence of the oil industry pales vis-à-vis the influence of the Zionist lobby.[24]

ILSA was originally to be imposed on both US and foreign companies. However, in the end it was the US companies that suffered the most due to waivers that were given to European companies after pressure from the European Union. In 1996 the EU pursued its distaste of ILSA by lodging complaints with the World Trade Organization (WTO) against the US and through adopting “blocking legislation” that would prevent EU companies from complying with ILSA. Meanwhile, the contract that Iran had originally signed with Conoco was awarded to TotalFinaElf of France for $760 million; the deal also left the door open for Total to sign an additional contract with Iran for $2 billion in 1997 with their partners Gazprom and Petronas.

In May of 1997 major US oil companies such as Conoco, Exxon, Atlantic Richfield, and Occidental Petroleum joined other (non-military) US companies to create an anti-sanction coalition. Earlier that same year Conoco’s Chief Executive Archie Dunham publicly took a stance against unilateral US sanctions by stating that “US companies, not rogue regimes, are the ones that suffer when the United States imposes economic sanctions.” Texaco officials have also argued that the US can be more effective in bringing about change in other countries by allowing US companies to do business with those countries instead of imposing economic sanctions that tend to be counterproductive.

Alas, Washington’s perverse, misguided and ineffectual policy of economic sanctions for political purposes—often in compliance with the wishes of some powerful special interests—continues unabated. “Even with the increased pro-trade lobbying efforts of the oil industry and groups like USAEngage, whose membership ranges from farmers and small business owners to Wall Street executives and oilmen, the lack of support from Washington and the Bush administration could not allow them [major oil companies and other non-military transnational companies] to overtake or counteract the already rolling momentum of AIPAC’s influence on Middle East policy or the renewal of ISLA.”[25]

Despite the fact that oil companies nowadays view war and political turmoil in the Middle East as detrimental to their long-term interests and, therefore, do not support policies that are conducive to war and militarism, and despite the fact that war is no longer the way to gain access to oil, the widespread perception that every US military engagement in the region, including the current invasion of Iraq, is prompted by oil considerations continues. The question is why?

Behind the Myth of War for Oil

The widely-shared but erroneous view that recent US wars of choice are driven by oil concerns is partly due to precedence: the fact that for a long time military force was key to colonial or imperialist control and exploitation of foreign markets and resources, including oil. It is also partly due to perception: the exaggerated notion that both President Bush and Vice President Cheney were “oil men” before coming to the White House. But, as noted earlier, George W. Bush was never more than an ineffective minor oil prospector and Dick Cheney was never really an oil man; he headed the notorious Halliburton company that sold (and still sells) services to oil companies and the Pentagon.

But the major reason for the persistence of this pervasive myth seems to stem from certain deliberate efforts that are designed to perpetuate the legend in order to camouflage some real economic and geopolitical special interests that drive US military adventures in the Middle East. There is evidence that both the military-industrial complex and hard-line Zionist proponents of “greater Israel” disingenuously use oil (as an issue of national interest) in order to disguise their own nefarious special interests and objectives: justification of continued expansion of military spending, extension of sales markets for military hardware, and recasting the geopolitical map of the Middle East in favor of Israel.

There is also evidence that for every dollar’s worth of oil imported from the Persian Gulf region the Pentagon takes five dollars out of the Federal budget to “secure” the flow of that oil! This is a clear indication that the claim that the US military presence in the Middle East is due to oil consideration is a fraud .[26]

While anecdotal, an example of how partisans of war and militarism use oil as a pretext to cover up the real forces behind war and militarism can be instructive. In the early stages of the invasion of Iraq, when the anti-occupation resistance in Iraq had not yet taken shape and the invasion seemed to be proceeding smoothly, two of the leading champions of the invasion, Secretary of Defense Donald Rumsfeld and his deputy Paul Wolfowitz, often boasting of the apparent or pre-mature success of the invasion at those early stages, gave frequent news conferences and press reports. During one of those press reports (at the end of an address to delegates at an Asian security summit in Singapore in early June 2003), Wolfowitz was asked why North Korea was being treated differently from Iraq, where hardly any weapons of mass destruction had been found. Wolfowitz’s response was: "Let's look at it simply. The most important difference between North Korea and Iraq is that economically, we just had no choice in Iraq. The country swims on a sea of oil."[27]

Many opponents of the war jumped on this statement, so to speak, as corroboration of what they had been saying or suspecting all along: that the war on Iraq was prompted by oil interests. Yet, there is strong evidence—some of which presented in the preceding pages—that for the last several decades oil interests have not favored war and turbulence in the Middle East, including the current invasion of Iraq. Nor is war any longer the way to gain access to oil. Major oil companies, along with many other non-military transnational corporations, have lobbied both the Clinton and Bush administrations in support of changing the aggressive, militaristic US policy toward countries like Iran, Iraq and Libya in favor of establishing normal, non-confrontational trade and diplomatic relations. Such efforts at normalization of trade and diplomatic relations, however, have failed time and again precisely because Wolfowitz and his cohorts, working through AIPAC and other war-mongering think tanks such as the American Enterprise Institute (AEI), Project for the New American Century (PNAC), and Jewish Institute for National Security Affairs (JINSA) oppose them.

These think tanks, in collaboration with a whole host of similar militaristic lobbying entities like Center for Security Affairs (CSA) and National Institute for Public Policy (NIPP), working largely as institutional façades to serve the defacto alliance of the military-industrial complex and the pro-Israel lobby, have repeatedly thwarted efforts at peace and reconciliation in the Middle East—often over the objections and frustrations of major US oil companies. It is a well established fact that Wolfowitz has been a devoted champion of these jingoistic think tanks and their aggressive unilateral policies in the Middle East. In light of his professional record and political loyalties, his claim that he championed the war on Iraq because of oil considerations can be characterized only as demagogic: it contradicts his political record and defies the policies he has been advocating for the last several decades; it is designed to divert attention from the main forces behind the war, the armaments lobby and the pro-Israel lobby.

These powerful interests are careful not to draw attention to the fact that they are the prime instigators of war and militarism in the Middle East. Therefore, they tend to deliberately perpetuate the popular perception that oil is the driving force behind the war in the region. They even do not mind having their aggressive foreign policies labeled as imperialistic as long as imperialism implies some vague or general connotations of hegemony and domination, that is, as long as it thus camouflages the real, special interests behind the war and political turbulence in the Middle East.

The oil and other non-military transnational corporations’ aversion to war and military adventures in the Middle East stem, of course, from the logical behavior of global or transnational capital in the era of integrated world markets, which tends to be loath to war and international political convulsions. Considering the fact that both importers and exporters of oil prefer peace and stability to war and militarism, why would, then, the flow of oil be in jeopardy if the powerful beneficiaries of war and political tension in the Middle East stopped their aggressive policies in the region?

Partisans of war in the Middle East tend to portray US military operations in the region as reactions to terrorism and political turbulence in order to “safeguard the interests of the United States and its allies.” Yet, a close scrutiny of action-reaction or cause-effect relationship between US military adventures and socio-political turbulence in the region reveals that perhaps the causality is the other way around. That is, social upheavals and political convulsions in the Middle East are more likely to be the result, not the cause, of US foreign policy in the region, especially its one-sided, prejudicial Israeli-Palestinian policy. The US policy of war and militarism in the region seems to resemble the behavior of a corrupt cop, or a mafia godfather, who would instigate fights and frictions in the neighborhood or community in order to, then, portray his parasitic role as necessary for the safety and security of the community and, in the process, fill out his deep pockets.

No matter how crucial oil is to the world economy, the fact remains that it is, after all, a commodity. As such, international trade in oil is as important to its importers as it is to its exporters. There is absolutely no reason that, in a world free of the influence of the beneficiaries of war and militarism and their powerful lobbies (the armaments and the pro-Israel lobbies), the flow of oil could not be guaranteed by international trade conventions and commercial treaties.

Ismael Hossein-zadeh, author of the recently published The Political Economy of US Militarism (Palgrave-Macmillan 2007), teaches economics at Drake University, Des Moines, Iowa.

References:

[1] Ron Andreas, reporter/researcher, e-mail correspondence with the author.

[2] Ibid.

[3] Michael T. Klare, Resource Wars: The New Landscape of Global Conflict (New York: Holt paperbacks 2002); James Howard Kunstler, The Long Emergency: Surviving the Converging Catastrophes of the Twenty-first Century (Grove/Atlantic, 2005).

[4] Eliyahu Kanovsky, “Oil: Who's Really Over a Barrel?” Middle East Quarterly (Spring 2003), http://www.meforum.org/article/527

[5] Ibid.

[6] The Wall Street Journal (17 May 2001); cited in Eliyahu Kantovsky, Ibid.

[7] The Wall Street Journal (10 March 1998); cited in Eliyahu Kantovsky, Ibid.

[8] F. William Engdahl, “Perhaps 60% of Today’s Oil Price Is Pure Speculation,” financialsense.com (2 May 2008), http://www.financialsense.com/editorials/engdahl/2008/0502.html

[9] Ibid.

[10] Ibid.

[11] Stanley Reed, “Help from the House of Saud: Why the leading oil producer wants to cool off the market,” Business Week (29 May 2008), http://www.businessweek.com/print/magazine/content/08_23/b4087030945015.htm

[12] Ibid.

[13] Cyrus Bina and Minh Vo, “OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices,” Global Economy Journal, Vol. 7, Issue 1 (2007); for a discussion of the theory and history of oil price determination see also, Cyrus Bina, “The Rhetoric of Oil and the Dilemma of War and American Hegemony,” Arab Studies Quarterly 15, no. 3 (Summer 1993); also Cyrus Bina, “Limits of OPEC Pricing: OPEC Profits and the Nature of Global Oil Accumulation,” OPEC Review 14, no. 1 (Spring 1990).

[14] F. William Engdahl, “Perhaps 60% of Today’s Oil Price Is Pure Speculation,” financialsense.com (2 May 2008), http://www.financialsense.com/editorials/engdahl/2008/0502.html

[15] Cyrus Bina and Minh Vo, “OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices,” Global Economy Journal, Vol. 7, Issue 1 (2007).

[16] Gary S. Becker, “Why War with Iraq Is Not about Oil,” Business Week (17 March 2003): 30.

[17] Johnathan Nitzan and Shimshon Bichler. The Global Political Economy of Israel (London and Sterling, Virginia: Pluto Press, 2002).

[18] Melinda K. Ruby, “Is Oil the Driving Force to War?” unpublished Senior thesis, Dept. of Economics and Finance, Drake University, Des Moines, Iowa (spring 2004), 10.

[19] As quoted in Ruby, Ibid., P. 13.

[20] As cited by Roger Burbach, “Bush Ideologues vs. Big Oil: The Iraq Game Gets Even Stranger,” .

[21] Israel Shamir, The Writings of Israel Shamir, Contributor 45, http://www.israelshamir.net/Contributors/Contributor45.htm

[22] Stephen F. Cohen “The New American Cold War,” The Nation (10 July 2006), http://www.thenation.com/doc/20060710/cohen; as quoted in Shamir, Ibid.

[23] Shamir, Ibid.

[24] Ruby, “Is Oil the Driving Force to War?” pp. 14-15; see also Herman Franssen and Elaine Morton, “A Review of US Unilateral Sanctions Against Iran,” Middle East Economic Survey 45, no. 34 (26 August 2002), pp. D1-D5 (D section contains op eds. as opposed to staff-written articles).

[25] Ruby, “Is Oil the Driving Force to War?” pp. 16-17; see also David Ivanovich, “Conoco’s Chief Blasts Sanctions,” Houston Chronicle (12 February 1997).

[27] The statement was widely reported by many news papers and other media outlets. See, for example, The Guardian (4 June 2003):