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Geopolitics - Nov 3

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Many more articles are available through the Energy Bulletin homepage

Ex-U.S. officials play out mock oil spike crisis

Chris Baltimore, Reuters
The future-world simulation was billed as make-believe but the details rang true to the present day: Instability in an overseas oil producer sent crude prices soaring above $100 a barrel and the U.S. economy teetered on the edge of ruin.

In a scene seemingly ripped from the pages of a Tom Clancy thriller, top White House advisers hunkered down in the situation room to respond to an oil pipeline outage in Azerbaijan.

Despite eerie parallels to current record oil prices above $96 a barrel, this was not the White House situation room but the basement of the Ritz-Carlton hotel in Georgetown.

The simulation called "Oil Shockwave," set in a fictional world of 2009, was organized by two energy policy groups - Securing America's Future Energy (SAFE), and the Bipartisan Policy Center.

Former top officials from the White House, Pentagon and State Department, such as former Treasury Secretary Robert Rubin, played roles of government officials of the future.
(1 November 2007)
A War Game Supposes Scarce and Risky Oil (New York Times) - good article
Oil crisis exercise bares US 'impotence' (AFP)

Analysis: U.S. OK's Saddam law oil deals

Ben Lando, UPI
The U.S. State Department says an oil law implemented under Saddam Hussein is good enough for Iraq’s national government to sign oil deals, though it would prefer a new national law -- mired in controversy and far from approved -- to be used instead.

The new position is a shift for the U.S. government, or at least a nuance in its stance, which has pressed hard for a new hydrocarbons legal regime and condemned deals signed between a regional government and private firms -- especially when it’s an American company.
(31 October 2007)

Russian, China and Iran look ahead to post-hydrocarbon world

Original: Analysis: Russia dangles nuclear carrot
John C.K. Daly, UPI
As Russia and China quietly maneuver for control of the Caspian region's vast energy reserves, both are looking ahead to a post-hydrocarbon world and beginning to cooperate on nuclear power.

...The impasse in U.S.-Iranian relations is worsening largely because of Iran's efforts to finish its first nuclear reactor. Russian companies are building the 915 megawatt VVER-1000 PWR at Bushehr at an estimated cost of $1 billion to $2 billion. The Bush administration argues that a country awash in oil has a covert agenda to develop nuclear weapons, which Tehran denies, maintaining that instead it is looking past a period when its "peak oil" exports decline.
(2 November 2007)

Retired Army general says conflicts in Middle East could keep U.S. there for 50 years

Associated Press
It might take as long as half a century before U.S. troops can leave the volatile Middle East, according to retired Army Gen. John Abizaid.

"Over time, we will have to shift the burden of the military fight from our forces directly to regional forces, and we will have to play an indirect role, but we shouldn't assume for even a minute that in the next 25 to 50 years the American military might be able to come home, relax and take it easy, because the strategic situation in the region doesn't seem to show that as being possible," Abizaid said Wednesday at Carnegie Mellon University.

...The rise of Sunni extremism, burgeoning Shiite extremism, the Arab-Israeli conflict and the world economy's dependency on Mideast oil will keep Americans in the Middle East for a long time, he said.

"I'm not saying this is a war for oil, but I am saying that oil fuels an awful lot of geopolitical moves that political powers may have there," Abizaid said. "And it is absolutely essential that we in the United States of America figure out how, in the long run, to lessen our dependency on foreign energy."
(1 November 2007)

Pricing the Marginal Barrel of Oil

Peter McKenzie-Brown, Language Matters
Five of the world’s large oil exporters have two things besides big oil reserves in common. First, their economies are largely dependent on revenues from energy production - they don’t produce much else. Second, their people or their governments (or both) are hostile to the West.

The chart shows the relative positions of five of the world’s large producers - Venezuela, Russia, Iran, Nigeria and Saudi Arabia. Consider the context: the planet consumes about 85 million barrels a day. Together, these five countries produce more than one third of world supply.

Except for post-Soviet Russia, which is new to the game, each of these countries long ago found ways to maximize government revenue from petroleum. Perversely, in the long run this will serve them well by making less production available. As prices rise, their economies will boom long after their production has gone into decline. As the world nears its petroleum peak, the economic reality of a seller’s market will have strange, unintended consequences.

...The world is hooked on oil, which is not good. However, as long as we are hooked, we must find ways to keep those supplies of oil coming while we look for solutions. Increased government take makes it more difficult to develop supply. Increased take by countries whose governments or people are openly hostile to the West is a danger we cannot resolve, but it is also a danger we must not ignore.
(1 November 2007)
An alternate interpretation is that reducing the supply of oil is a good thing - the higher prices are a warning signal of what is to come, and oil left in the ground will be much more valuable later than now. -BA

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