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Politics & economics - May 10

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Many more articles are available through the Energy Bulletin homepage


Cuba Plans Offshore Wells Banned in U.S. Waters

Michael Janofsky, NY Times
WASHINGTON, May 8 — In 1977, the United States and Cuba signed a treaty that evenly divided the Florida Straits to preserve each country's economic rights. They included access to vast underwater oil and gas fields on both sides of the line.

Now, with energy costs soaring, plans are under way to drill this year — but all on the Cuban side.

With only modest energy needs and no ability of its own to drill, Cuba has negotiated lease agreements with China and other energy-hungry countries to extract resources for themselves and for Cuba.

Cuba's drilling plans have been in place for several years, but now that China, India and others are involved and fuel prices are unusually high, a growing number of lawmakers and business leaders in the United States are starting to complain. They argue that the United States' decades-old ban against drilling in coastal waters is driving up domestic energy costs and, in this case, is giving two of America's chief economic competitors access to energy at the United States' expense.

"This is the irony of ironies," Charles T. Drevna, executive vice president of the National Petrochemical and Refiners Association, said of Cuba's collaboration with China and India. "We have chosen to lock up our resources and stand by to be spectators while these two come in and benefit from things right in our own backyard."

The United States Geological Survey estimates that the energy field on Cuba's side alone may have 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas. That much energy is equivalent to just a few months of the United States' total energy consumption.
(9 May 2006)
Related from CNN Money: China, Cuba reported in Gulf oil partnership.


Bush on Arab oil and the gas tax

Jerome a Paris, Daily Kos
From Bush's interview on German TV (via jedinecny's earlier diary on this topic):

Q Let me ask you another question to the war on terrorism. How do you want, really, to fight terrorism when you are so dependent on Arabian oil?

THE PRESIDENT: That's an interesting question. I've never thought of it that way. The first thing we ought to do is get off oil.

Q That's what you said.

THE PRESIDENT: And I mean that. Yes, I know.

"Yes, I know" is also what I'm tempted to say to you when you're done reading that sentence. I've never thought of it that way.

But it gets more interesting.

Q Do you mean that, really?

THE PRESIDENT: Absolutely. Oil has become -- it's an economic risk for us. I mean, after all, if the oil -- if the demand for oil goes up in India or China, fast-growing economies, it affects the price of gasoline in the United States and in Germany. It's also a national security issue, obviously. Oil comes from unstable parts of the world. So I'm absolutely serious about getting off of oil.

These quotes are a gold mine that beg to be used when offering a serious energy plan.

"Oil is an economic risk for us"
"oil is a national security issue"
"I'm absolutely serious about getting off of oil"
(10 May 2006)


Stagflation?

Jeff Bail, A Theory of Power
Will rising oil prices bring stagflation? Stagflation is the combination of high inflation and high unemployment/recession, a phenomenon that Keynesian economists long thought to be impossible—until it happened in the UK and the US in the ‘60s and ‘70s. According to Wikipedia, it is caused by a shock to a nation’s aggregate supply curve—such as what happens when oil prices rise significantly, although in reality nothing in macroeconomics is quite that simple. It’s particularly problematic because central banks can only address either the inflation or the unemployment, and which ever they work to reduce, they must do so by exacerbating the other. Not pretty.

So will the current spike in oil prices bring about another bout of stagflation? It is certainly possible. First, we must answer two questions: is the current oil price rise inflationary, and is it a drain on our economy that will cause recession and the accompanying unemployment? If both answers are yes, then a continuing rise in oil will bring stagflation.
(8 May 2006)


The 'Exxon of Corn' taps an oil exec as CEO

Tom Philpott, Gristmill
Earlier this year, after Archer Daniels Midland reported surging profit for the fourth quarter of 2005 -- largely driven by its ethanol unit -- I dubbed the company the Exxon of Corn.

As if to prove my thesis, the grain-processing giant tapped an oil exec as its new CEO last week. And, like any respectable would-be oil company, it also reported another quarter of robust profit growth.

...In a country run by oil execs, why shouldn't the largest food-processing firm also be run by oil execs?

The move eloquently signals ADM's intention to continue its rush into the auto-fuel market. The company has made billions over the years extracting the Midwest's soil fertility and transforming it into crappy food products like high-fructose corn syrup, buoyed by government commodity policy and the sugar quota. Now it intends to do the same in service of the internal-combustion engine.

...The only good news here (unless you're an ADM shareholder) is that Brazil claims it will cut land devoted to soy by 5 percent this year, after years of exponential growth. That will hold off destruction of the Brazilan rainforest and savanna, and benefit most of the people and all of the animals who live there.

But the situation is not likely to last, as global demand for biofuel -- pushed on, too often, by greens -- as well as greater demand for factory-farmed meat in China and elsewhere boosts demand for soy.
(9 May 2006)
Related from The Oil Drum: The Limits of Biofuels.

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