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High oil prices push giant shifts in wealth, power

Steven Mufson, Washington Post
Top oil exporters flex their muscles as rest of the world struggles to adapt

High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just five years ago, pumping more than $2 trillion into the coffers of oil companies and oil-producing nations this year alone.

The consequences are evident in minds and mortar: anger at Chinese motor-fuel pumps and inflated confidence in the Kremlin; new weapons in Chad and new petrochemical plants in Saudi Arabia; no-driving campaigns in South Korea and bigger sales for Toyota hybrid cars; a fiscal burden in Senegal and a bonanza in Brazil.

In the United States, the rising bill for imported petroleum lowers already anemic consumer savings rates, adds to inflation, worsens the trade deficit, undermines the dollar, and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth.
(10 November 2007)
Also at Houston Chronicle.

Indian ties with Russia to reach ‘great heights’: PM

PTI, The Hindu
Underscoring Russia’s “special and unique” place in India’s foreign relations, Prime Minister Manmohan Singh has hoped that bilateral cooperation in the fields of defence and energy security will continue to grow in future.

“India and Russia have enjoyed close ties of friendship and partnership over the last sixty years. Russia occupies a special and unique place in India’s foreign relations. Our time-tested relationship is based on deep mutual trust and understanding,” Singh, who will leave for Moscow on Sunday on a two-day visit, said in an interview to government agency RIA Novosti.

… “With India growing at over 8-9 per cent per annum, our energy requirements are increasing rapidly. President Putin has defined energy security as not just security of supply but also security of demand. India can be a major guarantor for energy demand,” Singh said.

… “The rapid growth of our economies will create new opportunities for mutual cooperation, particularly in the area of energy security. Apart from this, the traditional pillars of our strategic partnership can be expected to see a further deepening,” he said
(10 November 2007)

Rebuttal to NY Times Venezuela article

ow, Oil Wars
An interesting dichotomy has developed with respect to Venezuela. With a highly popular president and a booming economy the place has become, at least for the moment, downright boring. On the other hand, some in the international media seem to think that Venezuela’s economy is near collapse, its president virtually a dictator, its society is facing social convulsion, and its people can’t find enough food to eat.

Fortunately for Venezuela there really isn’t much more to this dichotomy than some pretty poor reporting. Case in point is “The perils of Petrocracy” in today’s New [York] Times.

The first problem with the article is it is a fairly large bait and switch. It starts off as if it is going to be about the economic problems that countries with lots of oil run into and whether or not oil is a help or hindrance for their economic development. That is certainly an important topic. Yet the article gets side tracked into a discussion of the current state of the Venezuelan oil industry and never gets back to the subject of oil and development. But more on that later.

Unfortunately even though the article is mainly about the Venezuelan oil industry it doesn’t even prove very informative about that as the author, Tina Rosenberg, clearly failed to do her homework. She doesn’t bother to familiarize herself with all the readily available information on the subject and when she talks to the former overlords of the Venezuelan oil industry – who just maybe have an axe to grind – she doesn’t even know enough to ask the right questions or bring up key facts which might cast doubt on their assertions.

For starters there is this complete misunderstanding of what the dispute over the oil industry is really all about:
(4 November 2007)
The Oil Wars site devotes itself to “Ongoing analysis of events in Venezuela and Iraq”

Your Turn: The means don’t justify the end over oil

Rolf E. Westgard, St. Cloud Times
American consumers cringe as they notice oil approaching $100 a barrel, and the resulting prices for gasoline and heating oil rise daily. Our leaders respond by asking OPEC to produce more oil.

Washington apparently didn’t note the recent statements of Saudi oil executive Sadad Al-Husseini: “There has been a paradigm shift in the energy world whereby oil producers are no longer inclined to rapidly exhaust their resource for the sake of accelerating the misuse of a precious and finite commodity. This sentiment prevails inside and outside of OPEC countries, but has yet to be appreciated among the major energy-consuming countries of the world.”

In addition, al-Husseini said, “The major oil-producing nations are inflating their oil reserves by as much as 300 billion barrels. Global oil and gas capacity is constrained by mature reservoirs and is facing a 15-year production plateau.”

Consider the options

We could undertake a major conservation effort bolstered by carbon taxes. Because the U.S. Senate just rejected a mere 5 cent gas tax for bridge projects, there is little U.S. appetite for serious conservation measures.

We could plead for a substantial share of available oil and gas, but we will be in a long line of nations.

Finally, we can continue to use our military muscle to obtain a lion’s share.

Paul Wolfowitz was geologically correct when he said, “Iraq floats on a sea of oil.” Iraq is one big, mostly unexplored, sedimentary basin which could contain oil reserves equaling Saudi Arabia. This fact was not lost on our leaders as we went to war. As former Federal Reserve Chairman Greenspan put it in his “Age of Turbulence,” “I am saddened,” he said, “that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.”

The military option is usually attributed to modern Republican neocons and their Project for a New American Century. But it really began with FDR and his 1945 “oil for protection” deal with King Ibn Saud of Saudi Arabia.

Rolf E. Westgard is a professional member of the Geological Society of America and a member of the American Association of Petroleum Geologists.
(13 November 2007)

Venezuela Proposes OPEC Change Oil Pricing Method -Chavez

Raul Gallegos, Dow Jones
Venezuela will make a series of proposals during the upcoming meeting of OPEC heads of state this month, including a new way to gauge the price of oil and a formula to shield poor countries from escalating oil prices, Venezuela’s president said Tuesday.

“We’ve proposed that we change the method to measure oil prices,” President Hugo Chavez said during a televised press conference. “The WTI (West Texas Intermediate oil price) doesn’t reflect the reality of the market, because WTI is a very small proportion of overall oil production.”

Members of the Organization of Petroleum Exporting Countries are set to meet this month in Saudi Arabia to discuss a number of issues, among them a proposal to replace the U.S. dollar with a basket of currencies to price crude production. Chavez didn’t offer any more details on the pricing issue.
(13 ? November 2007)