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Step forward for Iranian Bourse; analysts skeptical

Associated Press via Business Week
Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.

Iranian state-run television said the country’s oil ministry granted a license for the euro-denominated market, an idea first floated back in 2004, though just who would trade on it remains unclear.

If the market were to succeed — or if Iran simply demanded payment for its oil in euros — commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar’s value.
(5 May 2006)
Other online articles about the recent step forward for the Iranian Bourse

Chávez plays oil card in Nicaragua

Tim Rogers, Christian Science Monitor
MANAGUA, NICARAGUA – Venezuela’s populist president Hugo Chávez has been accused of using his country’s oil wealth to help elect like-minded leaders in Bolivia, Peru, Mexico, and Nicaragua. But there’s been little evidence, until now.

A cooperation agreement signed last week between Nicaragua’s Sandinista leader – and longtime US nemesis – Daniel Ortega and Mr. Chávez is being touted by many here as an initiative to sell oil to Nicaragua on credit, allowing the country to invest more in poverty-fighting projects. Critics call it a blatant attempt to buy the Nov. 5 presidential election for Mr. Ortega.

“Central America is important for Chávez because the rest of his influence is concentrated in the Andean countries [of South America],” says Michael Shifter, vice president for the Washington-based Inter-American Dialogue. Mr. Shifter says Chávez is clearly on a mission to challenge US influence in the region, but that he also appears genuinely concerned with helping the poor – two traits that don’t necessarily contradict one another. “This shows a larger ambition, and he is focusing his resources on Nicaragua and calculating that Ortega has a chance to win [elections in November].”

In the past few years, Chávez has made high-profile deals to sell discounted oil to Central American and Caribbean nations, and even to poor citizens in US states such as New York and Massachusetts.

But the deal struck between Chávez and Ortega comes during a grinding energy crisis, and before a pivotal election that could see another leftist leader come to power in the region. In the past year, energy shortages here have led to power-rationing blackouts and transportation strikes.
(5 May 2006)

Why a gas tax is good for you (energy economist Verleger)

Marianne Lavelle, US News & World Report
Twenty months ago, when plenty of folks were reeling at $48-per-barrel oil, energy economist Philip Verleger predicted that the price was headed for $60. A prolific author, Verleger served in the Treasury Department under President Carter. … [US N&WP editor]

You focus on mundane topics like refining rather than the big debate over whether world oil supply has peaked. Why?

Peak oil is an interesting abstract subject. But neither you nor I will find out if we are peaking in our lifetime. My focus is on how prices get determined. And peak oil has nothing to do with it. What’s pulling the price up is gasoline. It’s the [Environmental Protection Agency]. It’s the [Federal Trade Commission]. And Detroit.

If Intel comes up with a new faster chip, they work hand in glove with Microsoft and Dell so that the whole thing works seamlessly. That’s been the great innovation. If the computer industry had developed the way the auto industry and the oil industry developed together, you’d still be using a typewriter.

You frequently advocate a gasoline tax, while acknowledging it’s a political nonstarter. What good would it do?

First—global warming. We’re burning too much. I think everybody but George Bush and Dick Cheney understands the problem. You have to find a way to force people to use less. Second, were we to adopt a gasoline tax of say $2 or $3 a gallon, offset by a reduction in Social Security [payroll taxes] and some other things to minimize the effects [on working Americans], our consumption would be significantly lower. World oil prices would be significantly lower. And the income that’s flowing to [Iranian President] Mahmoud Ahmadinejad, [Russian President] Vladimir Putin, [Venezuelan President] Hugo Chavez, and a lot of the other people we don’t like would be drastically reduced. Right now, we’re paying twice—first for the oil that flows into the hands of our enemies, and then we pay the cost of fighting a war in Iraq. It’s important for the nation as a whole to do something like this.
(4 May 2006)
I don’t understand why a constraint in supply (peak oil) would not affect the price. More by Verleger. -BA

The fix for high gas prices that Congress won’t touch

Massimo Calabresi, Time magazine
Analysis: Conservation is one of the few things that would actually help drive down prices at the pump. Too bad most politicians are scared to utter the word

Members of Congress have been scrambling lately to tell Americans that there are no quick and easy fixes to high gas prices. “There is not a panacea of short-term solutions to the [gasoline] price situation today because it’s a demand-driven price,” said House Energy Committee chairman Joe Barton, Republican from Texas, at a news conference Wednesday. …

In fact, there’s one obvious thing Congress and the President could do. But around Capitol Hill only a few lonely voices are willing to talk about it — most of them not for attribution. “You have to encourage people to conserve,” says one Republican staffer.

Gasp. Tell Americans to drive less? Though a fractional reduction in driving across the country would dramatically reduce demand and prices, few things are more frightening to public officials, especially six months before an election, than telling Americans to conserve.
(4 May 2006)

Why you should worry about Big Oil

Business Week
Beyond the fat profits, the giants are surprisingly vulnerable worldwide. That’s bad news for business — and consumers
You’d think the Apr. 26 oil summit in Qatar would have been an occasion for the industry to celebrate. The world’s top energy executives were there, and they could all point to record profits and record demand. But rejoice? John Browne, CEO of London giant BP PLC, (BP ) says instead that the atmosphere was strangely glum. “There wasn’t anyone smiling,” he says. “They were worrying that the price was too high.”

Browne’s comments underscore a surprising point. Big Oil, that clutch of oil and gas giants in the U.S. and Europe, has big problems. Yes, we know it sounds ridiculous. Exxon Mobil Corp. (XOM ) has been reporting the lushest earnings in the history of the business, notching up $8.4 billion in its latest quarterly report. …

Well, you don’t have to love the big oil companies to worry about their ability to provide us with the energy we need. That job is getting difficult, thanks to huge technical challenges, competition from national oil companies, and demanding, even hostile foreign governments. Just look at events in Bolivia on May 1, when the government abruptly nationalized the nation’s gas fields.
(15 May 2006 issue)