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Not much oil at risk from Turkey/Iraq tension

Simon Webb, Reuters
Only a fraction of global oil supply could be immediately threatened by a Turkish incursion into northern Iraq, but crude prices have surged on concern any conflict may escalate and disrupt the flow from the Middle East.

U.S. crude futures hit a record high of $87.97 a barrel on Tuesday, a day after the Turkish government asked its parliament for permission to launch attacks on Kurdish separatists in northern Iraq.

The effect of the dispute was magnified in oil markets as it came against a backdrop of tightening supply, said Paul Horsnell, head of commodities research at Barclays Capital.
(16 October 2007)

We’re Doing All We Can: OPEC Chief

K.S. Ramkumar, Arab News
Organization of the Petroleum Exporting Countries (OPEC) chief Abdalla Salem El-Badri said yesterday that the organization was “concerned” at the recent surge in oil prices and was convinced that the current record high prices were not justified by the fundamentals.

“OPEC is doing all it can and is carefully watching developments in the oil market and has observed with concern the recent escalation in oil prices,” El-Badri said from Vienna. Yesterday, world oil prices hurtled to fresh record highs, striking over $88 per barrel in New York amid fears over tensions between Turkey and Kurdish rebels in crude producer Iraq.

Oil thundered more than $2 to a new peak above $88 a barrel yesterday, extending a $9 rally since last week on tight supplies, strong demand and growing tensions in northern Iraq.

At 1620 GMT, US crude was up $1.71 at $87.84 a barrel after rising as high as $88.20. London Brent was up $1.60 at $84.35 a barrel.

There is no fundamental justification for a price run-up that has lifted oil from below $70 in mid-August, say officials from the group that pumps more than a third of the world’s oil.

“OPEC cannot do much now,” Libya’s top oil official Shokri Ghanem told a news agency. “OPEC did all that it can.”
(17 October 2007)
Contributor Rick Dworsky writes:
The future is getting more unfamiliar every day.

Consumption of Venezuelan crude oil and petroleum products rising sharply

Jeremy Morgan, Caracas Daily Journal via VHeadline
Consumption of crude oil and petroleum products is rising sharply on the back of a growing economy and improving standards of living — not to mention some of the cheapest gasoline in the world.

At the same time, the state oil corporation, Petroleos de Venezuela (PDVSA), has been able to cut back export shipments without apparently doing serious damage to the balance sheet.

* The reason for that, of course, is sky-high world oil export prices, even with demand down in the United States.

According to a study by a petroleum economist, Ramon Espinasa, cited in in the newspaper, El Nacional, consumption in Venezuela of all types of oil products including crude averaged 780,000 barrels per day (bpd) in the third quarter of this year.

That was 56% above the average of around half a million bpd recorded five years ago. PDVSA reckons domestic consumption now accounts for the equivalent of around 33% of national output — more than twice the 16% seen five years ago.
(16 October 2007)
Suggested by Jeffrey J. Brown who writes “ELM (Export Land Model) in action”.

‘Many in the US Military Think Bush and Cheney Are Out of Control’

Staff, Der Spiegel (Germany)
In an interview with SPIEGEL ONLINE, the Amsterdam-based military historian Gabriel Kolko talks about the prospect of war with Iran and argues that many in the US military now view the White House as being ‘out of control.’

…SPIEGEL ONLINE: Mr. Kolko, editorials in US papers like the Wall Street Journal, the Weekly Standard and the National Review are pushing for military action against Iran. How does the leadership in the US military view such a conflict?

Gabriel Kolko: The American military is stretched to the limit. They are losing both wars in Iraq and Afghanistan. Everything is being sacrificed for these wars: money, equipment in Asia, American military power globally, etc. Where and how can they fight yet another? The Pentagon is short of money for procurement, and that is what so many people in the military bureaucracy live for. The situation will be far worse in the event of a war with Iran.

Many in the American military have learned the fundamental dilemma of modern warfare: More money and better weapons don’t mean that you win. IEDs, which cost so little to make, are defeating a military which spends billions of dollars per month. IEDS are so adaptable that each new strategy developed by the United States to counter them is answered by the Iraqi insurgents. The Israelis were also never quite able to counter IEDs.

…SPIEGEL ONLINE: Do you think that conflict with Iran is likely?

Kolko: All the significant economic journals (Financial Times, Wall Street Journal, etc.) recognize that the American and European economies are now in a crisis, and it may be protracted. The dollar is falling; Gulf States and others may abandon it (as an investment currency). A war with Iran would produce economic chaos because oil would be scarce. There are states which the United States wishes to isolate, like Russia and Venezuela, who can develop great influence through their ability to sell oil in such a crisis. The balance of world economic power is involved, and that is a great issue.

SPIEGEL ONLINE: But aren’t the Gulf States interested in seeing Iran weakened through a conflict with the United States?

Kolko: The Gulf States do not like Shia Iran, but they export oil, which makes them rich. They are dependent on peace, not war.

SPIEGEL ONLINE: How would Iran react to a provocation by the United States, say, on the border? Could the Iranian military in any way be a match for the United States?

Kolko: Iran fought Iraq for about a decade and lost hundreds of thousands of men. Perhaps they will roll over, but it is not likely. There are a number of tiny islands in the gulf they have had years to fortify. Can 90 percent of their weapons be knocked out? Even if this United States could achieve this, the remainder would be sufficient to sink many boats and tankers. The amount of oil exported through the gulf would thereby be reduced, perhaps cease altogether. This would only strengthen American rivals like Russia and Venezuela.
(15 October 2007)

Ecuador Oil: More Trouble Ahead

Latin Business Chronicle
President Correa’s oil policies will result in more disputes with foreign companies and reduced oil production, experts predict.

Ecuadorian president Rafael Correa, inspired by policies in Venezuela, is aggressively attacking foreign oil companies in a gamble that likely will lead to further falls in oil output from Latin America’s fifth-largest oil producing country. Foreign oil companies account for half of Ecuador’s oil production, while state oil company Petroecuador continues to be plagued by mismanagement and a heavy debt burden.

“The changes implemented by the Correa administration will constrain the ability of Ecuador to lure foreign investors into the country,” Bear Stearns analyst Alberto Bernal said in commentary Friday.
(16 October 2007)
Article expresses the viewpoint of investors and oil companies. From the left: Promised Social Change in Ecuador.