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Oil producers reach for more power

Jim Jubak, MSN Money
Consuming nations are struggling to find valid energy strategies, but oil-producing nations have a plan. They’ll control the price of refined petroleum, just as they control the price of crude
Well, at least somebody in the world has an energy strategy in place.

Unfortunately, for those of us who live in net oil-consuming countries, it’s the oil-producing countries that have the plan.

It will give oil producers more control over the world’s oil supplies. And it will put them in a position to control the price of refined petroleum products, just as they now control the price of crude oil.

And, quite frankly, I don’t see any reason why the oil producer’s energy strategy shouldn’t succeed. No government in any oil-consuming country has come up with a strategy for fighting back.

In today’s column, I’ll explain the oil-producing countries’ energy strategy. It’s pretty depressing reading.

… the energy strategy set out by the world’s net oil exporters is a model of clear thinking and simplicity. It, too, has two parts.

First, seize greater effective control of all the oil inside the national borders of the oil producers in the name of national oil companies.

Second, build new refineries in Saudi Arabia and the rest of the Persian Gulf to become the main global exporter of finished petroleum products such as gasoline, heating oil and jet fuel.
(3 March 2006)
We don’t usually run investment articles, but this is a comprehensive article in a mainstream publication. Follow-up article by Jubak:
10 stocks that win with $60 oil
(“The price isn’t just a number. It’s shorthand for permanently high costs and soaring global demand. That means big opportunities for companies that can develop new resources efficiently.”).

The Middle East after the oil: evolve or die

Michelle Daly, 7 Days
…The question on everyone’s lips for the past number of years, is what is going to happen in the Middle East when the oil reserves deplete? What will happen to the GCC countries when oil revenues become a thing of the past ?

One man with an answer is Sam Hamdan, founder and chairman of Global Leadership Team, who is charged with organising the World Summit on Innovation and Enterprise, in Muscat, Oman on April 1, 2 and 3.

Enterprise and innovation are something usually associated with emerging economies however Hamdan suggests the Arab world could learn a lot from other, less wealthy parts of the world.

…Most countries in the Middle East like Kuwait are dependent on oil revenues to fire their economy. Hamdan believes that opening discussion on critical use of oil revenues now could lead to a diversified economy and the Middle East still being an energy hub even when the oil stocks are depleted.

“The Arab world can now leverage its considerable wealth and oil revenues to reinvest in multiple sectors including the development of Hydrogen power,” says Hamdan.

“As in Qatar, the Middle East can be a centre for research and development for sustainable, environmentally friendly energy sources as well as technology developments.

The oil curse mentality has impacted the way that Middle Eastern Arabs like to think about the world around them, says Hamdan.
(6 March 2006)

Alaska rural-to-urban trend may be linked to high fuel prices

Alex deMarban, AP via Alaska Daily News
ANCHORAGE, Alaska – Val Warzewick never thought she would leave rural Alaska, but rising prices forced her out. She and her family moved last fall from Bethel to Wasilla.

…[She is] among a growing number of Alaskans leaving villages and rural hubs such as Bethel for the state’s more populated urban areas.

The trend goes back at least to the 1990s when the timber and salmon fishing industries crashed, leading many rural residents to search elsewhere for jobs.

But many people think the trend has accelerated in recent months, in large part because the high cost of gas and heating fuel – more than $6 a gallon in some villages – is pushing up the price of all goods.
(28 February 2006)

Oil exporters can help trade balance-Treasury paper
Mike Dolan, Reuters
Soaring world oil prices have had a significant impact on rising global imbalances in international trade, and oil exporters now need to play a role in unwinding those gaps, a U.S. Treasury paper said on Friday.

Highlighting the scale to which a trebling of world crude prices since early 2002 has boosted the current account surpluses of the big oil-exporting nations and exaggerated U.S. deficits, the paper said there were many areas for oil-rich countries to aid world rebalancing.

“To the extent that oil exporters’ revenues accumulate, global imbalances will be higher than otherwise and oil exporters will need to be part of the adjustment process, just as emerging Asia, the United States, Japan and Europe need to play a role,” the paper said.

If oil price rises are sustained, it said these countries should be expected to boost imports — through higher government spending on long-term social investments if necessary — and also consider more flexible exchange rate regimes to help boost local spending power on imported goods.
(3 Mar 2006)
We’re facing an energy crisis, and the logic of economics says that part of the solution is to increase international trade… Not the most holistic approach! -AF

The India Bush didn’t see
Mike McPhate, SF Chronicle
The nation’s liberated economy — portrayed by globalization forces as an antidote to poverty — has done little for nearly 300 million poor people, the most of any country

Among India’s poor, survival is still won by acts of despair and cunning. It’s a daily quest whose reward is a plate of rice or a simple medication.

Farmers in Maharasthra hang banners offering their kidneys for sale; overworked medics in Gorakhpur fashion tubes from paper to deliver oxygen to the diseased; hungry parents in the barren fields of Orissa sell their children for the price of a bag of grain.

Millions roam the country in pursuit of work, trading the want of the village for the indignity of bonded labor. At outdoor kilns dotting the scorched terrain of Andhra Pradesh, parents and children toil side by side mixing and molding bricks from dawn till midnight. By doing this, a family of six earns about $5.50 per week, enough for one evening meal of unripe tomatoes and broken rice, reject kernels used normally as chicken feed.

The workers bathe in the stagnant mud pits used to mix the bricks and sleep in mattress-size hovels no taller than a man’s belly button, which contain their entire estate: some tattered clothes, a hand broom, a few dinged-up pots.
(5 Mar 2006)
A sobering look at the conditions for millions in a pre-peak society. -AF

Venezuela Boosts Oil Rigs, Not Enough to Raise Output
Venezuela, which wants to double oil output by 2012, has boosted the number of exploratory drilling rigs by 12 percent since last year. The increase isn’t enough to increase output, analysts said.

The South American country, the world’s fifth-largest oil exporter, had 75 drilling rigs as of January, up from 67 a year earlier, according to data compiled by Baker Hughes Inc. That’s below the 82 rigs needed to maintain output, Luis Vierma, vice president for exploration and production at state oil company Petroleos de Venezuela SA, said in an interview last year.

“They just don’t have enough rigs to keep output steady, let alone increase it,” said Juan Carlos Sosa, president of Grupo Petroleo YV, a Caracas based energy consultant.

Venezuela needs to boost its number of rigs to fulfill President Hugo Chavez’s pledge to increase the country’s oil output to 5.2 million barrels a day by 2012 in a $56 billion expansion. Current output is about 2.58 million barrels a day, according to Bloomberg data.
(3 Mar 2006)