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Index....................................................................................................................................................................................................1 1NC Link.............................................................................................................................................................................................3 1NC Russia !.......................................................................................................................................................................................4 1NC Gradualism Turn (1 of 2)............................................................................................................................................................5 1NC Gradualism Turn (2 of 2)............................................................................................................................................................6 U- Prices..............................................................................................................................................................................................7 U- Transition (1 of 3)..........................................................................................................................................................................8 U- Transition (2 of 3)..........................................................................................................................................................................9 U- Transition (3 of 3)........................................................................................................................................................................10 U- Transition- SUVs Module............................................................................................................................................................11 L- Glut...............................................................................................................................................................................................12 L- Glut- Saudi Arabia........................................................................................................................................................................13 L- Boosters........................................................................................................................................................................................14 !- T/ Case (1 of 2)..............................................................................................................................................................................15 !- T/ Case (2 of 2)..............................................................................................................................................................................16 !- Econ...............................................................................................................................................................................................17 !- Hege...............................................................................................................................................................................................18 !- Iraqi Econ......................................................................................................................................................................................19 !- Mexico 2NC..................................................................................................................................................................................20 !- Mexico- Oil Key............................................................................................................................................................................21 !- Middle East Stability.....................................................................................................................................................................22 !- Poverty...........................................................................................................................................................................................23 !- Russia- Lashout 2NC.....................................................................................................................................................................24 !- Russia- Econ- Oil Key...................................................................................................................................................................25 !- Russia- Econ- Inflation IL.............................................................................................................................................................26 !- Russia- Trade Leverage.................................................................................................................................................................27 !- Saudi Arabia 2NC..........................................................................................................................................................................28 !- Saudi Arabia- IL- US Imports Key................................................................................................................................................29 !- Saudi Arabia- !- Econ....................................................................................................................................................................30 !- Saudi Arabia- !- Terror..................................................................................................................................................................31 !- Venezuela.......................................................................................................................................................................................32 Chinese Growth DA 1NC.................................................................................................................................................................33 Chinese Growth DA- L.....................................................................................................................................................................34 2NC AT Peak.....................................................................................................................................................................................35 Aff- U- Prices Won’t Stay High (1 of 2)...........................................................................................................................................36 Aff- U- Prices Won’t Stay High (2 of 2)...........................................................................................................................................37 Aff- U- High Prices Inev...................................................................................................................................................................38 Aff- U- AT High Prices S Case (1 of 2)............................................................................................................................................39 Aff- U- AT High Prices S Case (2 of 2)............................................................................................................................................40 Aff- U- AT Markets S........................................................................................................................................................................41 Aff- No L...........................................................................................................................................................................................42 Aff- !- Dollar.....................................................................................................................................................................................43 Aff- !- Econ (1 of 2)..........................................................................................................................................................................44 Aff- !- Econ (2 of 2)..........................................................................................................................................................................45 Aff- !- Food Prices............................................................................................................................................................................46 Aff- !- Free Trade (1 of 2).................................................................................................................................................................47 Aff- !- Free Trade (2 of 2).................................................................................................................................................................48 Aff- !- Manufacturing- U..................................................................................................................................................................49 Aff- !- Regional War.........................................................................................................................................................................50 Aff- !- Resource Wars (1 of 3)..........................................................................................................................................................51 Aff- !- Resource Wars (2 of 3)..........................................................................................................................................................52 Aff- !- Resource Wars (3 of 3)..........................................................................................................................................................53 Aff- !- Russia- Dem ! T/ (1 of 2).......................................................................................................................................................54 Aff- !- Russia- Dem ! T/ (2 of 2).......................................................................................................................................................55 Aff- !- Russia- U...............................................................................................................................................................................56 Aff- !- Russia- Prices Key.................................................................................................................................................................57 1
Aff- !- Russia- Econ- Resilient.........................................................................................................................................................58 Aff- !- Russia- Hege (1 of 2).............................................................................................................................................................59 Aff- !- Russia- Hege (2 of 2).............................................................................................................................................................60 Aff- !- Venezuela...............................................................................................................................................................................61
Oil prices are and will stay high
Clifford Krauss July 2, 2008 “Clifford Krauss has been a New York Times correspondent since 1990. He currently is a national business correspondent based in Houston. He covered the State Department, Congress and the New York City police department before serving as Buenos Aires bureau chief and Toronto bureau chief. He is author of "Inside Central America: Its People, Politics and History," (1991). He has published articles in Foreign Affairs, GQ and Wilson Quarterly, along with other publications. ““Oil Demand Will Grow, Despite Prices, Report Says” http://www.nytimes.com/2008/07/02/business/02oil.html?ref=business
World demand for oil should continue to climb, despite the doubling of oil prices and weakening economic growth, according to a report released Tuesday by the International Energy Agency. That should mean tightening supplies, decreasing the odds that drivers will get much relief at the gasoline pump. The Paris-based agency, which advises governments of the industrialized countries, predicted that oil consumption would decline slightly in the United States and other developed countries over the next couple of years. Americans, the report said, are beginning to drive more fuel-efficient vehicles and taking mass transit when it is available. But the small decline in oil demand in the industrialized countries will be more than offset by an estimated increase in demand of 3.7 percent a year from 2008 to 2013 in developing countries, particularly in Asia, the Middle East and Latin America.” said “The report is only further confirmation of the inability of global supply to catch up with rising demands,Chris Ruppel, an energy analyst at Execution, an institutional brokerage firm. “After five years of record increases in oil prices, producers are still
unable to sufficiently expand output. It means we are in for rough times.” The report said energy consumption was increasing in developing countries because of increased trade, growing internal markets and strong commodity prices. But subsidies that typically shield gasoline consumers in developing countries, the report said, are also important in sustaining strong demand, particularly in oil-producing countries. By 2013, oil demand in developing countries will account for nearly 49 percent of total global demand, the report said, compared with 36 percent as recently as 1996. Demand will rise the most in China, as it has since 2004. “China will account for almost a third of the world’s annual demand increase in the 2008-2013 period,” the report said. That projection is based on International Monetary Fund predictions of double-digit annual economic growth rates in China for the foreseeable future. The global picture for oil production is little better. The agency’s forecast for oil production capacity actually declined by about 3 percent for 2012 from what it forecast a year ago. High prices have stimulated exploration and field development, but the agency projects an increase in annual global production capacity of 1.5 million to 2.5 million barrels a day by 2010 from current levels, or roughly twice the current production in the Gulf of Mexico. After that, the agency expects annual growth below one million barrels a day from 2011 to 2013. Those modest increases result from project delays and exploding costs for many oil field projects around the world, declining production in major fields in Mexico and the North Sea, and political turbulence in Nigeria and other producing countries. There are some bright spots for supplies; at least 250 major new field or field expansion projects are expected to begin production in the next few years in non-OPEC countries alone. Spare capacity in OPEC countries is projected to rise from 2.5 million barrels a day in 2008 to more than 4 million barrels a day in 2010, although that will still be less than 5 percent of global demand. Production growth is robust in Brazil, Kazakhstan, Azerbaijan and Iraq. But the agency predicted that the tight markets would keep prices high. And it discounted the impact of speculation, which has been blamed by many politicians in the United States recently for the spike in prices. “Blaming speculation is an easy solution which avoids taking the necessary steps to improve supply-side access and investment or to implement measures to improve energy efficiency,” the report said
OPEC will increase supply in response to the plan and decrease the price
Southeast Farm Press ‘1
12/19 But just when it appears something will in fact be done toward increasing domestic energy supplies, getting serious about alternative sources, and making a long-term commitment toward reducing our dependence on foreign oil — well, miraculously, prices go down. OPEC magnanimously increases supply, refineries begin humming, and once again thoughts of a national energy policy fade like the Cheshire cat. Only the cat's grin is left. And the cat is OPEC and the energy industry. They've seen it all before. They know they have only to wait; that we in the United States have a short memory, and that as long as they toss us a sop of energy “bargains” from time to time, we'll moan and groan and pay their price the rest of the time.
1NC Russia !
Low prices devastate the Russian economy
Hudson Institute Study Group on U.S.-Russian Relations, U.S.-RUSSIAN RELATIONS: IS CONFLICT INEVITABLE?, Summer 2007, http://www.hudson.org/files/pdf_upload/Russia-Web%20(2).pdf The economy Putin is leaving to Russia looks impressive. Gross domestic product has risen during his presidency from $200 billion in 1999 to $920 billion in 2006 (in current dollars); the gold and currency reserves have risen from $12.7 billion in 1999 to $ 303.86 billion in February 2007. The reserves of the Stabilization Fund, into which oil revenues are deposited, have reached $70 billion. In 2006 the trade profit was over $120 billion, and the budget profit is 7.5 percent of gross domestic product. The Russian economy is now the twelfth largest in the world. Although since 2005 economic growth has been slowing down (from 10 percent in 2000 to 6.8 percent in 2006) it still looks fairly impressive. A boom is continuing not only in the extractive sectors of the economy but also in construction, trade, and the service and banking sectors. Russian business has shown it is able to organize large scale production, successfully competing against international corporations. Russia, which in the 1990s had humiliatingly to beg for loans, repaid her debt to the Paris Club ahead of time. The number of major businessmen in Russia is increasing more than twice as fast as in the U.S.: in 2005 the number of dollar millionaires in Russia grew by 17.4 percent as against 6 percent in the U.S. However, like everything else in Russia, the economy has a false bottom. The causes of the economy’s success give no grounds for optimism, mainly because it is associated with high oil prices and has partly been achieved by sectors protected from foreign competition. A collapse of the oil price could plunge the Russian economy into recession, and people remember what a fall in the oil price means. Yegor Gaidar has repeatedly reminded us that the sixfold decrease in the oil price in 1986 led to the collapse of the USSR, and the twofold fall in 1998 caused a financial crisis that almost finished off the barely breathing Russian economy.
The impact is nuclear war
Steven David, Professor of Political Science at The Johns Hopkins University, Foreign Affairs, Jan/Feb, 1999 Steven David, Prof. of political science at Johns Hopkins, 1999, Foreign Affairs If internal war does strike Russia, economic deterioration will be a prime cause. From 1989 to the present, the GDP has fallen by 50
percent. In a society where, ten years ago, unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to be much higher. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 a month). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the country's cure-all, but in a land without well-defined property rights or contract law and where subsidies remain a way of life, the prospects for transition to an American-style capitalist economy look remote at best. As the massive devaluation of the ruble and the current political crisis show, Russia's condition is
even worse than most analysts feared. If conditions get worse, even the stoic Russian people will soon run out of patience. A future conflict would quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with the Communist Party
out of office, what little civilian control remains relies on an exceedingly fragile foundation -- personal friendships between government leaders and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership, increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow ever more dependent on local governments for housing, food, and wages. Draftees serve closer to home, and new laws have increased local control over the armed forces. Were a conflict to emerge between a regional power and Moscow, it is not at all clear which side the military would support. Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does little to keep them together. As the central government finds itself unable to force its will beyond Moscow (if even that far), power devolves to the periphery. With the economy collapsing, republics feel less and less incentive to pay taxes to Moscow when they receive so little in return. Three-quarters of them already have their own constitutions, nearly all of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If these rebellions spread and Moscow responds with force, civil war is likely. Should Russia succumb to internal war, the consequences for the United States and Europe will be severe. A major
power like Russia -- even though in decline -- does not suffer civil war quietly or alone. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. Massive flows of refugees would pour into central and western Europe. Armed struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poison the environment of much of Europe and Asia. Within Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a second civil war might produce another horrific regime. Most alarming is the real possibility that the violent disintegration of Russia could lead to loss of control over its nuclear arsenal. No nuclear state has ever fallen victim to civil war, but even without a clear precedent the grim consequences can be foreseen. Russia retains some 20,000 nuclear weapons and the raw material for tens of thousands more, in scores of sites scattered throughout the country. So far, the government has managed to prevent the loss of any weapons or much material. If war erupts, however, Moscow's already weak grip on nuclear sites will slacken, making weapons and supplies available to a wide range of anti-American groups and states. Such dispersal of nuclear weapons represents the greatest physical threat America now faces. And it is hard to think of anything that would increase this threat more than the chaos that would follow a Russian civil war 4
1NC Gradualism Turn (1 of 2)
The market will ensure a smooth transition away from oil when the time is right- the plan’s attempt to force one now backfires and drops prices
Bob Williams, Aug 2003. Oil and Gas Journal
Even without subsidies, market share mandates, or carbon taxes, heightened concerns over climate change and air quality will prove a chink in oil's competitive armor, according to Sullivan.
climate change , , , I do not think
"Carbon capture and advanced emissions controls will drive up the effective cost of fossil fuel resources," she said. "Great progress is needed on these fronts, given the ready availability and high reliability of that resource, balanced against the challenge of global
we are about to drive traditional fossil fuels out of the picture by any means, but we are headed to a situation where renewables are a significant part of almost every energy supplier's balanced portfolio."
Making the transition
If the depletionists are right about global oil production peaking around the turn of the decade, then renewables won't need much in the way of subsidies or Kyoto mandates; skyrocketing costs of oil will help usher in a renewables era sooner than anyone currently predicts. But the resulting high energy costs for everyone will prove a
massive economic dislocation for the world, a grim scenario often outlined by the peak-oil theorists. Some have even painted alarming pictures of civilization crumbling as a result of this new oil shock. "No
technology breakthrough can come to alter the imminent oil peak; it would take much too long to put new technology in place to hope to dent oil and gas demand," said A.M. Samsam Bakhtiari, National Iranian Oil Co. senior expert. "Even if the two great hopes of solar and cold fusion would materialize, they could not be developed in time, as it takes decades (not years) to put in place the necessary infrastructures." But there is a prevailing view among most energy economists that an approaching peak and subsequent steep decline in global oil production will send early price signals that will crimp demand, spur development of nonconventional oil resources, and thus stave off the peak day. Another prominent peak-oil theorist, who declined to
be identified, acknowledged that "prices will rise, but they will send a signal that comes too late, given the long lead times to create new energy infrastructures. This will result in a reduction of demand but, unfortunately, the so-created room of maneuver will be shortlived because non-Middle East oil supply will continue to decline with little chance that new investments will be sufficient to compensate for both this decline and the potential [overall] rise of demand. "To this equation, one should add the negative impact on the GDP, as was the case during the last 30 years each time the price of oil went up. I believe that it won't be the end of the civilization, but it will certainly be a painful transition."
Some of the depletionists contend that the only answer is for governments to take steps now to boost
energy prices and thereby conserve what oil reserves remain.
contrarian on that score. But the unidentified peak-oil theorist is a
"The idea that planners, and especially state planners, could be smart enough to rise the prices progressively to avoid a shock is totally unrealistic," he told OGJ. "My preference is to leave things happen and ensure that governments will not intervene. A competitive industry is by far the best means to ensure a rapid and correct adaptation."
Rowley too sees increasing pressure on oil supplies within the next decade but offers a less apocalyptic vision. "[Natural] gas will act as a next phase after oil, but what we expect to see over the next decade is a realization that conventional
"The global economy has a wonderful way of coping, and transition away from conventional to renewables will occur. "The real pivotal impact of renewable energy will be within the period of 2010-20, where players will be making
energy costs can only go one way, up," he said.
significant choices between a maturing renewable sector and conventional [energy sources]." Noting that recent history is full of instances in which technical progress or volatility of primary energy sources has led to major changes in energy supply or energy consumption, Mogford voices the BP stance that "oil will remain in relatively abundant supply for at least the next 15 years, with gas being plentiful for several decades longer. "More than economics will drive the growth of alternative energy. Security of supply, minimization of environmental impacts, and technical advances will also be factors." But will the transition to renewables be an orderly one? Sullivan expressed her belief in an orderly transition: "We have seen occasional price spikes in traditional energy resources over the last 30 years, and I suspect we will continue to see those from time
governments will tailor their policies on emissions, renewable portfolio requirements, and technology funding to ensure that, except for the occasional, unusual price spikes, there is an orderly transition to an era in which renewables and non-conventional fossil fuel technologies are playing a major role in our energy supply picture."
to time, for various reasons. "But I also suspect that
Therefore, she reckons that
Oil DA it will be another 20-25 years before alternative energy sources play a dominant role
the world's energy mix. But orderly and rapid are not necessarily mutually exclusive in this outlook, says Namovicz.
1NC Gradualism Turn (2 of 2)
"If 'orderly' transition means 'gradual' transition, I think that history shows that transitions to a new form of energy can happen relatively quickly, over the course ofa decade or so, but are not necessarily disorderly," he said. "If, either through subsidy or natural market forces, one or more renewable technology becomes very economically attractive, there may be a boom period where lots of new capacity is built every year for a few years, just like lots of new gas combined-cycle capacity has been built over the past few years. But just because they're building lots of new combined-cycle units doesn't mean the coal units are suddenly disappearing. It shouldn't be too surprising to see a similar pattern if wind or bio-mass suddenly broke through some economic threshold, with lots of new annual capacity additions all of a sudden, but with the impact greatly dampened because the existing capital stock is so large, and they weren't necessarily being built to replace that [capital stock], but potentially to satisfy new demand."
Namovicz also cautions observers to remember the effect of market feedbacks in citing his expectation that it will be a long time before renewables can become the world's dominant energy source. "If wind becomes economic because natural gas is too expensive, then they will build lots of wind [projects]. But this will take market share from gas and lower the gas price. At the lower gas price, the new economics for wind may dampen its growth."
In addition to the existing-capital-stock issue, Human concerns
If in fact a permanent oil shock is looming on the near horizon, it would seem that an early effort to impose higher energy prices for that reason or to support an early transition to renewables would have its own severe economic consequences, especially for developing countries. In effect, this could accelerate the price shock. The likely deep recession that would ensue could hit not only the developing
countries directly but also squelch economic growth in the developed countries, upon which the former depend heavily for export markets and economic aid.
Turns the whole case
The Business Times Singapore 2008 [High oil price a good way to reduce global warming, June 13, lexis] COMING from a former diplomat, the call last weekend by Australian prime minister Kevin Rudd to G-8 energy ministers meeting in Japan to 'hold a blow-torch' to Opec and force the cartel to increase production could not have been less diplomatic, if not to say less egregious. A return to cheaper oil might boost economic growth in the short term but it would also set our already sick planet on a course towards destruction. A high oil price is the most effective form of 'carbon tax' and the only one likely to bring about what Japanese Prime Minister Yasuo Fukuda described this week as a needed 'carbon revolution'. It is the ultimate market solution and, as advocates of economic liberalism are so fond of telling us, markets operate more efficiently than governments in allocating resources. Consider what is happening already as a result of the de-facto tax imposed on energy consumption by the sharp rise in oil prices. Airlines are being forced to cut flight schedules, gas-guzzling SUVs are being abandoned in favour of smaller vehicles and, most importantly, the search for non-carbon or minimum carbon forms of power generation and transport has moved into high gear. Painful and costly though such a transition may be in the short to medium term, it is surely better that it be enforced through the price mechanism than through more complex forms of bureaucratically administered carbon taxes, through carbon trading mechanisms by which industrial firms can 'buy' the right to emit carbon in return for offsetting actions elsewhere, or through 'cap and trade systems' etc.
OIL PRICES WILL RISE INEVITABLY The International Herald Tribune 2008 [Oil price forecast: Up, then down, then up again, lexis] Flynn said he thought that oil prices were more likely to fall than rise, ''because I think the factors that drove us to today are unlikely to repeat in 2008.'' He added that he thinks the dollar will find a bottom in 2008 and that the problems in housing are already priced into the markets. But most experts say that if oil prices do go down, they will probably not go down very far or for very long. Richels said that consumers in Europe and Japan were not feeling the same pressure as Americans because their currencies have been strengthening and not weakening. ''There is still a lot of demand that is outside of the United States,'' Richels said. ''There is increasing oil consumption, particularly in the developing nations, and oil is getting more difficult to find.'' OIL PRICES WILL STAY HIGH The Gazette 2008 [Montreal, Surging oil prices threatening global growth, geopolitical balance; Spurring search for energy alternatives, by RICHARD VALDMANIS, June 3, https://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4067419295&format=GNBFI &sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4067419299&cisb=22_T4067419298&treeMax=true&treeWidth=0&c si=8355&docNo=5] Oil prices have doubled in a year to around $130 a barrel as rapid increases in consumption in China and other developing countries strain supplies, and some analysts have said crude could top $200 a barrel by 2010 as the market remains tight. While the boom has helped big oil-producer countries, particularly Russia and parts of the Middle East, there are signs the major consumers - the United States and parts of Europe and Asia - are starting to crack under the strain.
U- Transition (1 of 3)
High prices are spurring a slow transition that will solve the case now
[Rob, writer for the Smart Money magazine, Alternative-Energy Funds Could Offer High-Powered Returns, http://www.smartmoney.com/fundinsight/index.cfm?story=20070621&hpadref=1)] Wind power and other forms of alternative energy — solar, hydro, geothermal, biomass — are quickly coming into vogue across the globe thanks to record high oil prices, shrinking reserves and world-wide demand that is expected to increase 50% by 2030, according to the International Energy Agency. What has also given them some attention is that these sources are now at the heart of profitable businesses. That hasn't always been the case. Clean Edge, an industry research firm, anticipates biofuels, wind, solar and fuel cells will generate $217 billion in industrywide revenues by 2016, up from $56 billion in 2006. Even the typical American has changed his perception: A survey by Calvert, a socially-responsible investment firm, found that 85% of the 1,094 people that they polled thought putting money into alternative energy was a good way to protect the environment and make money, too. Add all that up and you have a decent investing opportunity. You could spend your time reading over analyst reports on alternativeenergy companies — what little there are on these thinly-traded firms — looking for a diamond in the rough. But a smarter option is to scoop up the shares of one of the growing number of mutual and exchange-traded funds that specialize in this field. As always, though, be prepared for sector funds like these to experience dramatic ups and downs. And we would suggest only building a 5% or smaller position in this niche. The concerns here are numerous. Many alternative-energy companies are small firms that are barely profitable. Lose a few customers or fail to make a piece of technology work and it could be lights out. Alternative-energy investors not only need to be aware of the price of a commodity like oil — the higher it goes the more attractive managing solar and wind farms becomes — but also others like corn, a chief ingredient in ethanol. There are political concerns, too. "Both Republicans and Democrats agree we need to be energy independent," says Todd Rustman, president of GR Capital Asset Management in Newport Beach, Calif. But that doesn't mean there aren't gripes. Locals, especially, complain that wind farms are eyesores and hurt property values. Those protests can lead to costly delays or even derail some potential money-making projects. HIGH OIL PRICES ARE FORCING INVESTMENT IN ALTERNATIVE ENERGIES The Gazette 2008 [Montreal, Surging oil prices threatening global growth, geopolitical balance; Spurring search for energy alternatives, by RICHARD VALDMANIS, June 3, https://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4067419295&format=GNBFI &sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4067419299&cisb=22_T4067419298&treeMax=true&treeWidth=0&c si=8355&docNo=5] A surge in the price of crude is threatening global growth for the first time in decades and spurring a desperate surge in interest in energy alternatives and new technology to keep conventional oil flowing. How companies and governments navigate the treacherous energy landscape - which some analysts liken to that of the 1970s and 1980s - will shape the future of the global economy and potentially tilt the geopolitical balance, experts said. "What happens 10 years down the road will be determined by the decisions made on energy today," said David Kirsch, analyst at PFC Energy in Washington. "Countries need to get serious about the underlying problem of demand for oil." High oil will encourage innovations Newsweek June 23, 2008 Learning From the Oil Shock; SECTION: ROBERT J. SAMUELSON; JUDGMENT CALLS; Pg. 39 Vol. 151 No. 25 ISSN Finally, we need to let high prices work. Aside from encouraging fuel-efficient vehicles and disciplining driving habits, they may also stimulate development of new biofuels from wood chips, food waste and switch grass. Production costs of these fuels may be in the range of $1 a gallon, says David Cole of the Center for Automotive Research. If true, that's well below today's wholesale gasoline prices. To assure new producers that they wouldn't be wiped out if oil prices plunged, we should set a floor price for oil of $50 to $80 a barrel, about 40 percent to 60 percent of today's levels, says Cole. It's a worthy idea and can be done with a standby tariff. It would activate only if prices hit the threshold. We know that oil prices are unpredictable, and should a price collapse occur, Americans wouldn't be deluded into thinking we've returned permanently to cheap energy. We've made that mistake before.
U- Transition (2 of 3)
Greener technologies wont make a difference in the short term
Newsweek June 9, 2008 The Coming Energy Wars; Rana Foroohar; With Barrett Sheridan in New York WORLD AFFAIRS; Pg. 0 Vol. 151 No. 23 ISSN: 0163-7053 And while higher prices are already driving down energy consumption in rich nations, that drop does not offset the booming demand in emerging markets. Meanwhile, though numerous green technologies hold plenty of promise, none of them are going to save the day any time soon. "It's a false god," says Robin West, chairman of PFC Energy. "There will be step changes in technology, but people forget the scale of the oil business. Ethanol production was 5 billion gallons last year, with huge subsidies to farmers and rising food prices. But that's the size of one production platform off the coast of West Africa." High oil prices cause gradual market innovations that will solve current problems Financial Times June 29, 2008, “The positive side of high oil price” http://www.gulfnews.com/business/Comment_and_Analysis/10224724.html
Peak oil or freak oil? The current oil shock, with Nymex crude touching $142 on Friday, has as much to do with bad luck as geology. And, as usual with luck, man has largely made his own. The central theme of this decade's bull market in crude is little different from previous oil shocks: a change in expectations about future supplies. In other words, many think we have enough oil today but might not tomorrow. A series of largely man-made disruptions has fed that fear. In countries such as Russia and Mexico, resource nationalism has stifled investment in supply. Violence in Nigeria and Iraq has shut down fields. The Energy Policy Research Foundation estimates the world's lost output of up to 4.5 million barrels a day is the equivalent of twice the world's effective spare capacity. Whether the
problems are below or above the ground, the result is the same: fewer barrels available. The distinction, however, is important - if only because humans, even politicians, can alter their behaviour. When oil prices are rising, producers have an incentive to keep markets tight. But, eventually, expensive oil encourages conservation, new investment and the search for alternatives. Meanwhile, protectionism breeds inefficiency. Russia and Mexico, for example, are taking steps to reduce oil taxes or attract foreign companies, respectively, to address stagnant or falling output. The same point extends to the demand side. In the US, high oil prices prompt drivers to buy more fuel-efficient cars. Meanwhile, even if Asia's drivers are becoming richer, they will never reach America's currently bloated per capita usage of oil. Governments across Asia are already cutting expensive fuel price subsidies. Shocks are occasionally necessary to change human behaviour. High prices are painful, but will ensure the world does not run out of oil. High prices cause more alternative energy innovation Caryle Murphy June 23, 2008 “Saudi Arabia to boost oil output. Will gas prices fall?” Correspondent of The Christian Science Monitor http://www.csmonitor.com/2008/0623/p06s02-wome.html If there is one word that has long described Saudi Arabia's oil policies, it is "stability." The Saudis have prided themselves on being a reliable source of oil. They like price rises, but they dislike the wild swings that bring market uncertainty. Only 10 years ago the Saudis were in dire economic straits. Oil was $10 a barrel and the kingdom's debts were the equivalent of 130 percent of its gross domestic product, mostly because it had financed the $60 billion-plus cost of the 1990-91 Gulf War to eject Saddam Hussein from Kuwait. Their greatest fear, say observers, is a severe drop in oil prices that would throw their ambitious development projects, including the building of six new megacities, into disarray. Despite the cash windfall, the Saudis fear high prices will sour political ties with important allies like the US and accelerate the development of alternative fuels. On Sunday, British
Prime Minister Gordon Brown called for a "global new deal" between consumers and oil producers based on "a shared interest in a more diversified range of nonoil energy sources." He said oil exporters should be able to "recycle" their windfall oil profits "into alternative energy investments in developed market economies." In turn, Britain should offer the producers "genuine openness and partnership in our investment markets." Cognizant of the hardship caused by high oil prices, the Saudi king called for an international initiative to help developing countries meet their energy needs, pledging $500 million in soft loans. He also suggested that OPEC contribute $1 billion.
HIGH PRICES FORCING ALTERNATIVE ENERGY INNOVATION NOW AP 2008 [Gas at $4 brings promises, pandering, By TOM RAUM – Jun 23, 2008, http://ap.google.com/article/ALeqM5isJU4OyzZglXxAWlzkvmnslNP3-wD91FUOI00] Both want to boost alternative energy technology, press for more fuel efficiency and promote more conservation. Both McCain and Obama favor expanding the electricity grid, implementing caps on carbon emissions to curb global warming, spend billions on clean-coal research and give nuclear energy a larger role. They differ on offshore drilling, but agree on keeping the ban on oil exploration in the Arctic National Wildlife Refuge. Despite the flurry of activity and rhetoric, major factors in the rise of gas prices — the weak dollar, soaring demand in China and India, market speculation, supply problems — are beyond U.S. policy-makers' direct control. 9
U- Transition (3 of 3)
HIGH OIL PRICES CAUSING A SHIFT TO RENEWABLES IN THE STATUS QUO The Deal 2008 [Fueling the alternatives, lexis] HIGHLIGHT: The increased demand for energy galvanizes interest in alternative sources at the government and private-sector level. Oil prices are reaching record levels, evidence is mounting on the degradation caused by carbon-based fuels, fossil fuel reserves are declining, green tax breaks are becoming more popular, and the U.S. Senate is working on legislation aimed at cutting U.S. emissions by 70% before 2050. This, combined with an increased demand for energy, is fueling interest in alternative energy sources at the government and private-sector level. In 2008 the reallocation of venture capital and private placements from coal and biofuel producers (including corn ethanol) to cane ethanol, wind and solar-energy-producing companies will continue to increase in order to meet increased demand. In February J.P. Morgan Chase & Co., Morgan Stanley and Citigroup Inc. partnered for the purpose of creating The Carbon Principles -- climate change guidelines for advisers and lenders to the U.S. power industry. The banks worked in conjunction with power companies and the Natural Resources Defense Council and Environmental Defense to create the guidelines and a framework for lenders to understand better and evaluate the potential carbon risks associated with coal-fired power plants. The Principles, which are expected to be implemented by the U.S. government in the next two years, will require federal caps on carbon dioxide and should lead to reductions in both the financing and building of coal-fired power plants. Some companies, noting the rising costs of energy production and anticipating the Carbon Principles and other federal regulations, are beginning to invest in more environmentally conscious alternative energy sources. HIGH PRICES INCENTIVIZES PEOPLE AWAY FROM OIL DEPENDENCE USA TODAY 2008 [It can be a gamble to invest in alternative energy; Consider companies that dabble in wind power, conservation, by John Waggoner, https://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4067427500&format=GNBFI &sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4067427503&cisb=22_T4067427502&treeMax=true&treeWidth=0&c si=8213&docNo=15] Nevertheless, as oil prices hover above $110 a barrel, it's a safe bet that people will be thinking much harder about how to replace the gas-powered engine, or at least how to make it use less fuel. Are there investment plays for that? Sure. But only with money you're willing to see go up in smoke. Although oil prices are down from their peak of nearly $120 just a few weeks ago, a barrel of light, sweet crude closed at $112.52 Thursday, up from $63.19 a year ago. The average price of a gallon of regular gasoline hit an all-time record high of $3.603 this week, according to the government. Back when gasoline was less than $1 a gallon, there was no real urgency to explore alternatives. But the prospect of $4-a-gallon gas has focused Wall Street's collective mind wonderfully on alternative energy. "When gas gets dear, it doesn't take long for people to say, 'What else is available?'" says Robert Wilder, CEO of WilderShares, which created the WilderHill Clean Energy index. HIGH OIL PRICES FORCING A TRANSITION NOW New Delhi 2008 [An alternative scenario for oil, by Akash Prakash, June 25, http://www.businessstandard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=326997] Secondly, there seems to be a serious mood change in the US towards energy security. The fact that John McCain has openly come out and suggested a revival of the US nuclear programme, and that the Governor of Florida has talked of re-examining the ban on offshore drilling, are just straws in the wind, pointing to a change in political mood. The US consumer is now feeling the pain of higher gas prices and the country will I think become more pragmatic in balancing environmental and energy security concerns. Who would have thought that the Americans can ever be weaned away from their gas-guzzling SUVs? But that is exactly what is happening. As consumers adapt to high petroleum prices, this adaptation will soon manifest in policy change as well. One cannot rule out tax changes designed to reduce the carbon intensity of the economy.
U- Transition- SUVs Module
A. HIGH PRICES ARE SPURING A SHIFT TO SMALLER MORE EFFICENT CARS NOW The Guardian 2008 [Ford shares sink to 23-year low as sales drop 28%, http://www.guardian.co.uk/business/2008/jul/02/ford.generalmotors] Oil price: Slump in motor sales raises fears for viability of Detroit's car industry High petrol prices have caused a collapse in demand for pick-up trucks and big cars. Ford revealed yesterday that monthly sales in its core domestic market had dived by 28% to 167,090 vehicles as cash-strapped consumers shunned its showrooms. Jim Farley, Ford's vice-president for marketing, said: "Consumer fundamentals and consumer confidence deteriorated as the first half unfolded." There was a sliver of relief for Detroit's dented pride as General Motors fought off Japan's Toyota to remain the largest seller of cars in the US. GM, which owns brands such as Chevrolet, Saab and Vauxhall, only suffered an 8.3% drop in sales as zero-interest financing offers proved popular. Toyota's figures were worse, with a fall of 10.3% in the number of vehicles sold. Mark LaNeve, GM's vice-president for North American sales, conceded that the pick-up truck market was suffering from high prices at the petrol pump but said: "Asian manufacturers do not have a monopoly on fuel-efficient vehicles." The news caused a sharp rise in GM's share price, which has fallen by 55% this year and was trading before the sales figures at a level last seen in the early 1950s. Analysts are becoming increasingly alarmed that Detroit's big three - Ford, GM and Chrysler - are losing money at an unsustainable level. The trio have already cut more than 100,000 jobs since a downturn began three years ago but none were prepared for the scale of the impact caused by the rising price of oil. B. THIS WILL CUT OIL DEPENDENCY IN HALF Time 2004 [Kicking the Big-Car Habit, By MICHAEL ELLIOTT, http://www.time.com/time/magazine/article/0,9171,699412,00.html] For all these reasons, it makes sense to dream of a world that is far, far less dependent on oil than it is now. Winning the Oil Endgame: American Innovation for Profits, Jobs and Security, written by a team led by Amory Lovins of the Rocky Mountain Institute in Snowmass, Colo., is one of the best analyses of energy policy yet produced. Lovins, who has been preaching the need for fuel efficiency for some 30 years, thinks big. His aim is to promote a set of policies that over the next two decades would save half the oil the U.S. uses, before moving to a hydrogen-based economy that dispenses with oil altogether (save for possible use as a fuel to produce hydrogen.) If that seems hopelessly Utopian, Lovins reminds us that we have done something very like it before. Spurred by the oil price shocks of the 1970s, the U.S. between 1977 and 1985 increased efficiency and cut oil consumption 17% (and net oil imports 50%) while the economy grew 27%. The key to that revolution was a huge increase in average miles-per-gallon of the U.S. automobile fleet. If we had continued to increase energy efficiency at the same rate, the stability of Iraq and Saudi Arabia would by now be of minor concern to U.S. policymakers. Instead, we bought SUVs and wasted two decades. Those SUVs are no joke. In the U.S., where 70% of oil is used for transportation, any energy policy is necessarily also an automobile policy. The single key insight of Lovins' report is to focus on the need to reduce the weight of cars (without sacrificing safety) by using advanced materials like carbon fiber and composites instead of heavy steel. When powered by hybrid technologies that combine electricity with the internal-combustion engine, such light vehicles will produce enormous oil savings. Lovins proposes a nifty scheme of "feebates," which would reduce the consumer price of such energy-efficient cars while increasing the price of gas guzzlers.
Oil glut saps motivation to develop renewables Time 11/7/94 The oil glut of the 1980s sapped any motivation to develop alternative energy sources. Solar moved to the fringes of public consciousness in the U.S. as the Reagan Administration eliminated most of the federal funding for research, and big oil companies dropped their development programs. Result: solar accounts for less than 0.5% of the power generated in the U.S. today, instead of the 2% to 5% envisioned in the late 1970s. OPEC will flood NYT 00
IF there was one thing America's scientists seemed sure of during the energy crisis of the 1970's, it was that new methods of generating energy from the wind, the sun, the ocean waves and other sources would soon free the country from its dependence on foreign oil. In particular, a form of nuclear energy called fusion promised clean, safe and inexhaustible energy. In an editorial in August 1975 that mirrored scientific optimism, The New York Times noted a recent ''major breakthrough in fusion research'' and predicted that a test reactor could be working ''as early as the mid1980's; commercial applications could become a reality a decade later.'' What happened? Why couldn't President Clinton flood power grids with wind, solar or fusion energy during the recent oil squeeze? ''In 1976, almost everybody said the price of oil would keep going up,'' said Dr. Steve Fetter, a professor of public policy at the University of Maryland. ''In fact, that's what drove a lot of the optimism about nonfossil technology.'' Instead, the Organization of Petroleum Exporting Countries -- the monopoly -- opened the spigots again, new reserves of fossil fuels were found, energy prices fell and financing for alternative energy research plummeted.
OPEC backlash at the plan Freeman, FNS, 9-17-2004
I was just going to comment because this is the Middle East Policy Council and we try to focus on the implications of things for U.S.-Arab relations. The major oil producers in the Persian Gulf - Saudi Arabia most notable among them - do not take kindly to the idea of raising prices through taxes if the taxes go to the governments that levy them, not to the producers of oil. This is, in fact, a major point of dispute between the Saudis and various European governments who have chosen to tax gasoline at the pump at very high levels, both in order to raise revenue for roads and mass transit systems and to reduce demand for energy, and thereby preserve a measure of independence from foreign supply, but also for other purposes, none of which are particularly congenial to the oil producers.
OPEC will flood with cheap oil – causing price collapse CJ Campbell, 3-20-2000 (oil and gas journal p.20)
Norway and Mexico offered to cut production to help support price. The OPEC countries themselves did everything possible to foster the notion that they could flood the world with cheap oil at the flick of a switch. It was a strategy aimed to inhibit investments in gas, non-conventional oil, renewable energy or energy saving that they feared might undermine the market for their oil, on which they utterly depend.
L- Glut- Saudi Arabia
saudi arabia will fight to keep alternative energy out of the market – once they start lowering the price it will be impossible to stop a price collapse business wire 7/17/2000
Surprisingly, Saudi Arabia's decision to increase oil production is not necessarily aimed at increasing profits in the near term; instead, it is designed to maintain the nation's franchise well into the future. According to the report, government officials in Saudi Arabia worry that if oil prices remain too high, oil dependent nations such as the United States will increase oil exploration and development of alternative energy sources. "Saudi Arabia plans on being in the oil game for many years to come," commented Leuffer. "They do not want to risk their future prosperity on present day greed." According to Leuffer, Saudi Arabia would like oil to fall to $25 dollars a barrel and he believes the Saudis will continue to produce oil until that is achieved. However, as other nations look to cash in before oil prices drop, production will increase beyond the desired levels. "It is difficult to engineer such a precise correction. Once oil prices start to fall, it will be hard to stop them," said the Bear Stearns analyst. Leuffer believes oil prices could eventually fall to $20 a barrel.
Saudi Arabia is willing to boost oil production Caryle Murphy June 23, 2008 “Saudi Arabia to boost oil output. Will gas prices fall?” Correspondent of The Christian Science Monitor http://www.csmonitor.com/2008/0623/p06s02-wome.html Jeddah, Saudi Arabia - Saudi Arabia will produce more oil – if customers need it – the kingdom's oil minister promised Sunday. For the remainder of the year "Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July," Oil Minister Ali al-Naimi said at a rare meeting of the world's top energy officials in this Red Sea port town. The unusual gathering was called by the Saudis to draw up a plan of action to address the unprecedented rise of oil prices and to defuse what Saudi officials see as an alarming political backlash against oil-exporting nations. Mr. Naimi also said Sunday that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure. "In addition, we have identified a series of future crude oil megaincrements totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development," he said. The world's biggest oil producer has already announced modest increases (300,000 barrels in June, and 200,000 in July) but those steps have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday. Politicians and financial analysts, however, say there is no quick fix for the coincidence of complex economic factors pushing oil prices up. "We [have] been 30 years digging ourselves into this hole, and this is not something we're going to be relieved of in any short term," US Energy Secretary Samuel Bodman told reporters here. Oil's soaring price has contributed to the spikes in food and transportation costs that have sparked angry street protests in places as diverse as Spain, Nepal, Indonesia, and Egypt. Americans are furious about $4-a-gallon gas, and airlines are abandoning low fares to cover higher fuel costs. Politicians in oil-consuming and oil-producing nations fear that rising prices could contribute to a global recession that would hurt all sides.
PRICE DECLINES SNOWBALL – LOWER PROFITS GIVE EACH MEMBER AN INCENTIVE TO CHEAT TO GRAB SCARCE REVENUES THE ECONOMIST 3/27/1999 The question is not whether there will be cheating, but how much. The recent deal was struck because OPEC producers had seen their oil income decline by more than $60 billion in 1998, compared with the previous year. They are desperately short of money. Yet, for the same reason, each now has more incentive than ever to raise revenues by failing to stick to promised production cuts. Members were ill-disciplined even when the price languished at around $11 last year, argues Fadhil Chalabi, a former OPEC official who now runs London's Centre for Global Energy Studies. They may well seize on today's prices to make extra money while they can. Mr Chalabi also points out that it was not the cartel that created this week's deal, but a smaller cabal of producers: a few Gulf countries, led by Saudi Arabia, as well as several non-OPEC producers, including Mexico and Norway. Stocks of oil are close to a record 400m barrels; that means that the recent price rise could quickly be reversed at the first hint of disunity. The new group will find unity elusive: it is too disparate to function as an effective new OPEC. OPEC itself has been plagued by divisions. Iran refused last year to acknowledge that it was producing more than its quota, insisting that it had secretly been given the right to produce an extra 300,000 barrels a day. Saudi Arabia, OPEC's linchpin, grudgingly gave ground. With such a precedent, the Iranians may be tempted to try again. In Venezuela, the Saudis pin their hopes on the newly elected president, Hugo Chavez. But Mr Chavez, a populist who was borne to office on a surge of popular disaffection, will find it just as hard to restrain output as did his predecessor. If the Venezuelan economy worsens, he will face increasing pressure to cheat. empirically proven – production increases by one country spill over collapsing opec unity business wire 7/17/2000 High gas prices have hurt customers all summer, but relief is now on the way and cash strapped drivers can thank Saudi Arabia, according to a new report by Bear Stearns senior managing director and oil analyst Fred Leuffer. According to the report, Saudi Arabia's unilateral pledge to increase production by 500,000 barrels a day will start a chain reaction among oil producing nations, which will cause oil prices to fall below the intended price. "The flood gates are now open," commented Leuffer. "Saudi Arabia's decision to produce more oil means OPEC unity is out the window. The race is on to see which countries can capitalize on these high oil prices while they last." Leuffer says compliance among OPEC countries has already been suspect; according to reports, every country except Nigeria has cheated on its production during the past two months. Saudi's Long Term Greed. Surprisingly, Saudi Arabia's decision to increase oil production is not necessarily aimed at increasing profits in the near term; instead, it is designed to maintain the nation's franchise well into the future. According to the report, government officials in Saudi Arabia worry that if oil prices remain too high, oil dependent nations such as the United States will increase oil exploration and development of alternative energy sources. "Saudi Arabia plans on being in the oil game for many years to come," commented Leuffer. "They do not want to risk their future prosperity on present day greed." According to Leuffer, Saudi Arabia would like oil to fall to $25 dollars a barrel and he believes the Saudis will continue to produce oil until that is achieved. However, as other nations look to cash in before oil prices drop, production will increase beyond the desired levels. "It is difficult to engineer such a precise correction. Once oil prices start to fall, it will be hard to stop them," said the Bear Stearns analyst. Leuffer believes oil prices could eventually fall to $20 a barrel.
Minute variations in the oil industry is disastrous for economies.
Roberts 04 [Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 93]
The obsessive focus on oil is hardly surprising, given the stakes. In the fast-moving world of oil politics, oil is not simply a source of world power, but a medium for that power as well, a substance whose huge importance enmeshes companies, communities, and entire nations in a taut global web that is sensitive to the smallest of vibrations. A single oil “event” — a pipeline explosion in Iraq, political unrest in Venezuela, a bellicose exchange between the Russian and Saudi oil ministers — sends shockwaves through the world energy order, pushes prices up or down, and sets off tectonic shifts in global wealth and power. Each day that the Saudi-Russian spat kept oil supplies high and prices low, the big oil exporters were losing hundreds of millions of dollars and, perhaps, moving closer to financial and political disaster — while the big consuming nations enjoyed what amounted to a massive tax break. Yet in the volatile world of oil, the tide could quickly turn. A few months later, as anxieties over a second Iraq war drove prices up to forty dollars, the oil tide abruptly changed
directions, transferring tens of billions of dollars from the economies of the United States, Japan, and Europe to the national banks in Riyadh, Caracas, Kuwait City, and Baghdad, and threatening to strangle whatever was left of the global economic recovery.
!- T/ Case (1 of 2)
Low prices encourage consumption worsening pollution Peter coy, 11-3-97 (clean air in an era of cheap oil) The expensive oil of the 1970s and early 1980s had one virtue: By discouraging consumption, it lessened the pollution caused by the burning of gasoline, diesel, and other petroleum products. Environmentalists hoped rising oil prices would promote a switch to cleaner energy sources, such as solar power. If oil instead remains cheap for decades to come, the harm to the environment from sulfur dioxide, carbon monoxide, particulates, and other poisons could be enormous. Combustion of oil, coal, and other carbon-based fuels may also overheat the planet by creating an insulating layer of carbon dioxide. Indeed, cheap oil is bound to complicate efforts to achieve a treaty on global warming in Kyoto, Japan, this December (page 158). PRICE TAGS. Luckily, there's growing support for a new pollution-fighting approach that harnesses market forces instead of fighting them. The concept--embraced by economists and market-savvy environmentalists--is to charge polluters for each unit of pollution they emit. A few polluters that can't easily cut emissions will pay a hefty cost, but many others that have the technology to cheaply cut emissions will be motivated to reduce them far more than they would have under traditional regulation. The result: Profit-seeking behavior leads to bigger reductions at lower costs than might have seemed possible. CHEAP OIL RESULTS IN INCREASED FOSSIL FUEL DEPENDENCE The New Zealand Herald 2007 [Upside to rising price of the black stuff, By Mathew Dearnaley, http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10469826 "Yes, it causes hardship for some people as the price goes up, but I think we've been cursed with cheap oil," he told the Herald in Auckland, en route to the third national Ecoshow held in Taupo at the weekend. "It has lulled us into complacency about using this non-renewable resource at ever-increasing rates and we simply can't continue to do that - if it takes high prices to change our behaviour then so be it.
"For the last couple of centuries we've been doing something incredibly stupid - developing economies on the ever-increasing consumption of non-renewable resources." Mr Heinberg is revered as a leading educator on the concept of Peak Oil, the point at which world production begins a slippery slide from an all-time high, sparking what its proponents warn will be shortages and widespread conflict between or even within nations unless the international community can agree on quotas for curbing demand. For him, that landmark is already in his rear-view mirror. He says production from oil wells peaked in 2005 at 74.2 million barrels a day and supplies extracted from all sources have declined since July last year. Oil has meanwhile hit a record price above US$83 ($107) a barrel - more than three times higher than in 2004 - and he predicts an escalation to between US$100 and US$120 by this time next year and "on and up from there".
The black stuff will continue to be discovered but in ever-smaller amounts in increasingly inaccessible parts of the world, such as the Arctic Circle, where extraction will be more likely to damage fragile ecosystems.
Although Mr Heinberg and his books, such as The Party's Over, have been attacked by oil giant Exxon-Mobil as unfounded scare-mongering, even the International Energy Agency predicts a supply "crunch" by 2012, followed by an inability to satisfy unabated demand fuelled by tiger economies such as China and India. Mr Heinberg acknowledges climate change as a problem of "much greater consequence" for the world. "But I would say oil depletion is a problem of much greater urgency, because the consequences to human societies will come faster and thicker." He believes an "oil depletion protocol" by which communities and countries could take greater control over their futures by reducing consumption by about 2.6 per cent a year - equal to his estimate of the depletion rate of world oil reserves - would be easier for the public to grasp than the Kyoto Protocol against climate change.
"It is simpler because everyone is in the same boat. The only way you can reduce vulnerability to supply shocks is to reduce your dependence on oil." LOW COST MEANS THE PLAN CAN’T SOLVE BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Cheap crude will short-circuit the push for renewable energy. We've seen this before. The surge in oil prices that occurred after the 1973 oil embargo didn't last. As prices softened, so, too, did the interest in solar power, wind power and other technologies. The best hope for the renewable energy sector is a sustained period of high prices for fossil fuels of all types, from coal to natural gas.
!- T/ Case (2 of 2)
Renewables cannot remain cost-competitive with low priced oil Michael renneris, 2-6-3 (UPI) Sustained low prices would critically undermine the fledgling efforts to build wind, solar, and hydrogen industries, kick away the economic incentive to use energy more prudently, and effectively destroy the Kyoto protocol. Wind power in particular has come a long way, growing by more than 30 percent annually in recent years and now cost-competitive with most conventional sources of energy. Such advances could fall victim to artificially cheap oil -- a fuel whose considerable ecological and security costs are not properly accounted for. This is by no means an inevitable scenario. Just as it is possible that weapons inspections and determined global opposition to warmongering, can yet avert an invasion of Iraq, there is no reason why the United States cannot face up to its oil addiction. Neither is likely to happen in the absence of an informed, vocal public that demands an alternative approach to matters of war and peace and the environment. LOW COST RESULTS IN LESS EFFICIENCY BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Cheap crude would short-circuit the push for greater automotive fuel efficiency. American motorists who've become accustomed to $3 per-gallon gasoline have, of late, been buying more fuel-efficient vehicles. If crude (and therefore, gasoline) prices continue to fall, they will happily return to their Hummers, big pickups, and SUVs. And that will, once again, set up a scenario that will allow foreign automakers like Toyota, Nissan and Honda to capture even larger shares of the auto industry when gasoline prices rise again, and they will. LOW COST MEANS THE PLAN CAN’T SOLVE BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Cheap crude will short-circuit the push for renewable energy. We've seen this before. The surge in oil prices that occurred after the 1973 oil embargo didn't last. As prices softened, so, too, did the interest in solar power, wind power and other technologies. The best hope for the renewable energy sector is a sustained period of high prices for fossil fuels of all types, from coal to natural gas. LOW COST LEADS TO GLOBAL WARMING BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Low-cost oil would increase emissions of greenhouse gases. One can argue all day about what's causing global warming. But if policymakers want to embrace Kyoto or other anti-warming initiatives, cheap oil is the last thing they should want. A collapse in oil prices would mean a collapse in America's domestic oil production. We've seen this movie before, too. In the early 1980s, Dallas and Houston were in a frenzy fueled by high-priced oil and a river of cheap money provided by crooked savings and loan operators. Everyone was convinced that high prices were here to stay. That illusion ended with the oil price crash of 1986 , which, by the way, was largely precipitated by unrestricted production from Saudi Arabia. The crash resulted in bankruptcies from Midland to Tulsa. Idle drilling rigs were cut up and sold for scrap. Skilled oilfield workers left the industry for good. Cheap oil increases America's reliance on foreign oil. Back in 1985, when America's domestic oil production was on the upswing, OPEC countries supplied 41 percent of America's imported oil. By 1990, with domestic production decimated, OPEC's share had climbed to 60 percent. If a stint of low crude prices persists, the U.S. domestic oil industry will, once again, fall on hard times. That will mean foreign producers, who generally have lower production costs, will be able to gain market share at the expense of domestic producers.
High oil prices are key to manufacturing Newsweek June 23, 2008 Learning From the Oil Shock; SECTION: ROBERT J. SAMUELSON; JUDGMENT CALLS; Pg. 39 Vol. 151 No. 25 ISSN We all know that gasoline is at $4 a gallon and oil is at $135 a barrel. But if you think that's the end of the story, don't talk to economist Jeffrey Rubin of CIBC World Markets. By Rubin's reckoning, we've barely passed the halfway point on a steady march upward that will take gasoline to $7 a gallon and oil to $225 by 2012. Though there will be fluctuations, the underlying rise in prices, he says, will have pervasive and often surprising side effects. Among them: • U.S. manufacturers benefit, because rising ocean-freight costs--reflecting fuel prices--make imports more expensive. Some production returns to the United States, and some shifts from Asia to closer exporters (Mexico over China). Since 2000, estimates Rubin, the cost of shipping a 40-foot container from East Asia has gone from $3,000 to $8,000. With oil at $200 a barrel, the shipping cost would be $15,000. Already, he says, China's steel exports to the United States are falling while U.S. production is rising. HIGHER PRICES DON’T HURT THE ECONOMY The Independent 2008 [OIL: THE POWER TO SHOCK, lexis] For now, most analysts remain relatively sanguine. They argue that the global economy is in a much better position to deal with the rising costs because it is being driven by strong growth rather than a dramatic constriction of supply. Julian Lee, senior energy analyst at the Centre for Global Energy Studies, said: "In the shocks in the 70s, we had very dramatic rises in oil prices in very short periods of time, largely due to the supply disruption and the panic response of consumers. It's much more slow and steady now. We have had changes over three to four years when similar movements happened in a matter of weeks or months [in the 1970s]." The market has already begun to respond. As the price has risen, global demand growth has decreased drastically in recent years, from 3 per cent in 2004 to 1.5 per cent in 2005 to an expected 0.8 per cent this year. Countries are also less dependent on petroleum than they once were after having invested heavily in alternatives energies such as nuclear and natural gas in the wake of the 1970s' crises. Large corporations, meanwhile, have done their best to absorb the hit by reducing costs elsewhere - principally employee salaries. Brandishing the threat of outsourcing and cheaper immigrant workers, companies have also managed to browbeat workers into being more productive and working more. Janet Henry, an economist at HSBC, said: "Corporates have dealt with it so far by keeping a lid on some of their other costs. Wage growth has remained very low in an era of phenomenal corporate sector profitability. There is a danger, though, that this will now be passed through."
High Oil prices key to global economic growth.
Andrew McKillop, April 19, 2004, Oil and Gas Journal “http://www.gasandoil.com/goc/features/fex42297.htm” These gigantic investment needs are very obviously dependent on strong and sustained economic growth. Without much higher and firmer oil prices, it is unlikely that global economic growth can be significantly increased from current low average annual rates for many key economies.
Energy independence kills hege BRYCE 2008 [ROBERT, an Austin writer and managing editor of Energy Tribune, ‘Gusher of Lies’, republished in the New York Times, http://www.nytimes.com/2008/03/07/books/chapters/first-chapter-gusher-of-lies.html?_r=1&ref=books&pagewanted=all] America’s future when it comes to energy — as well its future in politics, trade, and the environment — lies in accepting the reality of an increasingly interdependent world. Obtaining the energy that the U.S. will need in future decades requires American politicians, diplomats, and businesspeople to be actively engaged with the energy-producing countries of the world, particularly the Arab and Islamic producers. Obtaining the country’s future energy supplies means that the U.S. must embrace the global market while also acknowledging the practical limits on the ability of wind power and solar power to displace large amounts of the electricity that’s now generated by fossil fuels and nuclear reactors. The rhetoric about the need for energy independence continues largely because the American public is woefully ignorant about the fundamentals of energy and the energy business. It appears that voters respond to the phrase, in part, because it has become a type of code that stands for foreign policy isolationism — the idea being that if only the U.S. didn’t buy oil from the Arab and Islamic countries, then all would be better. The rhetoric of energy independence provides political cover for protectionist trade policies, which have inevitably led to ever larger subsidies for politically connected domestic energy producers, the corn ethanol industry being the most obvious example. But going it alone with regard to energy will not provide energy security or any other type of security. Energy independence, at its root, means protectionism and isolationism, both of which are in direct opposition to America’s long-term interests in the Persian Gulf and globally.
!- Iraqi Econ
LOW PRICES KILL IRAQ’S ECONOMY BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Lower prices would further damage Iraq's economy. Amid the torrent of bad news in Iraq, higher oil prices have been among the few positive news developments, allowing the country to amass sizable funds for the rebuilding effort. Iraq's oil output has plummeted since Bush and the neocons rushed to invade the country in March 2003. But that falling output has been offset, at least partially, by higher prices. And given that Iraq will for good or ill be America's colonial possession in the Persian Gulf for the foreseeable future, higher oil prices are far better than lower prices.
!- Mexico 2NC
High prices boost the Mexican economy
Mike Moffat, About, June 5, 2007 (from article Will High Oil Prices Slow Down Globalization and International Trade) "Instead of finding cheap labour halfway around the world, the key will be to find the cheapest labour force within reasonable shipping distance to your market," according to Rubin.
In that type of world, Mexico's proximity to the rest of North America, combined with its labor costs, will give it a second chance to compete with Pacific Rim production, according to Rubin, who predicts that when oil prices reach US$200 a barrel, it will cost three times as much to ship the same container from China than from Mexico. The related increase in oil prices and decline in the U.S. dollar is changing trade patterns, and this change is showing up in international shipping data. Justin Fox explains:
In 2007 Long Beach imported 3,704,593 loaded twenty-foot equivalent units (TEUs), shipped out 1,574,241 loaded TEUs, and handled 2,033,631 empties--almost all of which were outbound. So "loaded mainly with empty containers" is correct with respect to last year. Starting early this year, though, things changed. Loaded outbound containers outnumbered empties in February, March, and April, the first such three-month run, Wong says, since the spring of 2000. The totals so far in 2008 are 1,033,655 loaded inbound, 595,232 loaded outbound, and 476,853 empties. And while in 2000 the balance swung back to mostly empties for the full year, I get the feeling that won't be the case this year.
Mexican economic collapse spreads worldwide
(Enrique-, Monterrey Bureau, Nov. 28, Dallas Morning News, “Pressure on the Peso; Mexico’s Economic Crisis carries global implications”, Lexis) With the exception of 1982 - when Mexico defaulted on its foreign debt and a handful of giant New York banks worried they would lose billions of dollars in loans - few people abroad ever cared about a weak peso. But now it's different, experts say. This time, the world is keeping a close eye on Mexico's unfolding financial crisis for one simple reason:
Mexico is a major international player. If its economy were to collapse, it would drag down a few other countries and thousands of foreign investors. If recovery is prolonged, the world economy will feel the slowdown. "It took a peso devaluation so that other countries could notice the key role that Mexico plays in today's global economy," said economist Victor Lpez Villafane of the Monterrey Institute of Technology. "I hate to say it, but if Mexico were to default on its debts, that would trigger an international financial collapse" not seen since the Great Depression, said Dr. Lpez, who has conducted comparative studies of the Mexican
economy and the economies of some Asian and Latin American countries. Chris H. Lewis in his book "The Coming Age of Scarcity" p. 56 1998 Most critics would argue, probably correctly, that instead of allowing underdeveloped countries to withdraw from the global economy and undermine the economies of the developed world, the United States, Europe, and Japan and others will fight neocolonial wars to force these countries to remain within this collapsing global economy. These neocolonial wars will result in mass death, suffering, and even regional nuclear wars. If first world countries choose military confrontation and political repression to maintain the global economy, then we may see mass death and genocide on a global scale that will make the deaths of World War II pale in comparison. However, these neocolonial wars, fought to maintain the developed nations' economic and political hegemony, will cause the final collapse of our global industrial civilization. These wars will so damage the complex economic and trading networks and squander material, biological and energy resources that they will undermine the global economy and its ability to support the earth's 6 to 8 billion people. This would be the worst case scenario for the collapse of global civilization
!- Mexico- Oil Key
High prices key to the Mexican economy
Article published by: Heather Scoffield Globe and Updated May 27, 2008 http://www.supplychainnetwork.com/?p=330 (Writer for Globe Magazine, from article Will High Oil Prices Reverse Globalization?) Oil prices now account for about half of total freight costs, and for the past three years, for every $1 increase in world oil, there has been a corresponding one per cent increase in transport costs.“Unless that container is chock full of diamonds, its shipping costs have suddenly inflated the cost of whatever is inside,” Mr. Rubin said. “And those inflated costs get passed onto the Consumer Price Index when you buy that good at your local retailer. As oil prices keep rising, pretty soon those transport costs start cancelling out the East Asian wage advantage.”Persistently high oil prices will also cause many commuters to consider moving to the city, reversing the allure of the suburbs, he said. And it could also force a change in eating habits, as foreign food becomes too expensive to ship.“It means forget about that 50-mile commute from Cooksville to Toronto, and also forget about that avocado salad in January.”More fundamentally, the soaring oil price will prompt a major rethinking of how production is organized, Mr. Rubin argues, and could even lead to a revival of North American manufacturing.Already, U.S. imports of Chinese steel are declining dramatically, while domestic production is rising at rates not seen for years, they say.China’s steel exports to the United States are falling at a 20-per-cent annual pace, while U.S. domestic production has risen by 10 per cent in the past year. That makes sense, the economists say, because Chinese steel producers need to import iron ore from the likes of Australia and Brazil, then turn it into steel and then pay huge and rising freight costs to send the hot-rolled steel to the United States.Regional trade looks much cheaper in comparison, they say.As oil prices continue to climb, shipments of furniture, footwear and machinery and equipment are likely to meet the same fate, the economists say.“In a world of triple-digit oil prices, distance costs money,” they say in a paper released Tuesday. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”At first glance, such developments may seem to favour a renaissance of the moribund steel mills and boarded up furniture plants of Canada. But high oil prices won’t eliminate importers’ search for cheap labour. Instead, they’re eyeing Mexico.(Continued)“Instead of finding cheap labour half-way around the world, the key will be to find the cheapest labour force within reasonable shipping distance to your market,” CIBC says.“In that type of world, look for Mexico’s maquiladora plants to get another chance at bat when it comes to supplying the North American market. In a world where oil will soon cost over $200 per barrel, Mexico’s proximity to the rest of North America gives its costs a huge advantage.”While high oil prices will require major reorganization of global supply chains, the bigger danger comes in the form of inflationary pressure, Mr. Rubin warns.“If you’re a steel buyer, your costs are going up regardless of whether you are sourcing it from China or Pittsburgh,” he says, saying the same dynamic applies to Hamilton.Soon, the United Steelworkers of America will want a piece of that higher price, and wages that have been kept flat for years because of labor competition from Asia will begin to rise.He doesn’t necessarily see a return to the doubledigit inflation of the early 1980s, but figures the central banks in the United States and eventually Canada will have to begin raising rates dramatically in order to confront inflation running at around 3.5 or 4 per cent annual pace. Canada’s target is two per cent a year.
!- Middle East Stability
CHEAPER OIL RESULTS IN MIDDLE EAST INSTABILITY BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] A long period of cheap petroleum could result in instability in key countries in the Middle East. This runs directly counter to the neocon gospel. If the U.S. could, magically, be energy independent, Friedman and his fellow travelers claim that global crude prices will collapse. That will mean, according to Friedman, that the rulers of repressive oil-rich countries would be forced to "open up their economies and their schools and liberate their women." He might be right. Or he could be disastrously wrong. And if that instability does occur, A.F. Alhajji, an energy economist and professor of economics at Ohio Northern University, says "the West cannot turn a blind eye to such conflicts." Indeed, the U.S. could not stay on the sidelines if a key ally like Saudi Arabia or Kuwait were to get embroiled in a nasty internal conflict due to an economic crisis caused by low prices.
High Oil prices key to solving poverty.
McKillop 04 Andrew McKillop, April 19, 2004, Oil and Gas Journal “http://www.gasandoil.com/goc/features/fex42297.htm” Conversely, low oil and energy prices entraining low real resource prices, combined with rising population numbers, surely aggravate the cycle of poverty in low-income commodity exporter countries. Deprived of sufficient revenues, such countries can become "basket case" indebted countries, subjected to draconian conditions by the Club of Paris, World Bank, and International Monetary Fund for debt refinancing and restructuring. The ability and capacity for investing huge amounts of capital into oil, gas, and other energy production infrastructures by low-income, indebted countries is realistically very low or zero. Yet estimates for world investment needs of the oil and gas industry through the next 10- 15 years extend into the range of several thousand billion dollars. Without strong economic growth, it is unrealistic to expect that any "energy transition" can occur, for example, as predicated by the Kyoto Treaty on climate change. More critically, it also is unrealistic to expect that world oil supply can be increased at the rates required or as deemed feasible in such publications as the IEA's World Energy Outlook -- that is a net average increase of about 2.25 million b/d/year during 2003-20 (raising capacity to about 115 million b/d), over and above replacement of capacity lost through depletion.
Worse than nuclear war
ABU JAMAL ‘98
(mumia) www1.minn.net/~meis/quietdv.htm We live, equally immersed, and to a deeper degree, in a nation that condones and ignores wide-ranging "structural" violence, of a kind that destroys human life with a breathtaking ruthlessness. Former Massachusetts prison official and writer, Dr. James Gilligan observes;
"By `structural violence' I mean the increased rates of death and disability suffered by those who occupy the bottom rungs of society, as contrasted by those who are above them. Those excess deaths (or at least a demonstrably large proportion of them) are a function of the class structure; and
that structure is itself a product of society's collective human choices, concerning how to distribute the collective wealth of the society.
These are not acts of God. I am contrasting `structural' with `behavioral violence' by which I mean the non-natural deaths and injuries that are caused by specific behavioral actions of individuals against individuals, such as the deaths we attribute to homicide, suicide, soldiers in warfare, capital punishment, and so on." -(Gilligan, J., MD, Violence: Reflections On a National Epidemic (New York: Vintage, 1996), 192.)
This form of violence, not covered by any of the majoritarian, corporate, ruling-class protected media, is invisible to us and because of its invisibility, all the more insidious. How dangerous is it -- really? Gilligan notes: "[E]very fifteen years, on the average, as many people die because of relative poverty as would be killed in a nuclear war that caused 232 million deaths; and every single year, two to three times as many people die from poverty throughout the world as were killed by the Nazi genocide of the Jews over a six-year period. This is, in effect, the equivalent of an ongoing, unending, in fact accelerating, thermonuclear war, or genocide on the weak and poor every year of every decade, throughout the world." [Gilligan, p. 196]
< continues> This vicious, circular, and invisible violence, unacknowledged by the corporate media, uncriticized in substandard educational systems, and un-understood by the very folks who suffer in its grips, feeds on the spectacular and more common forms of violence that the system makes damn sure -- that we can recognize and must react to it.
This fatal and systematic violence may be called The War on the Poor.
!- Russia- Lashout 2NC
Price drops cause Russia to lashout regionally to secure increased energy supplies
Martin Hutchinson Jun 25, 2008 “A new model for nastiness” author of Great Conservatives http://www.atimes.com/atimes/Global_Economy/JF25Dj04.html If China and to a lesser extent India suffer severe downturns, then oil demand must drop off correspondingly and it becomes unlikely that the 1970s pattern of continuing high oil prices even in a recession will be repeated. If oil prices drop sharply, the political effect on oil producing countries will be considerable, and not necessarily pleasant. The Shah of Iran basically fell because of the 1973 oil price rise. He was already overspending in 1972-3, supported largely by bank loans, then he spent with total abandon in 1974 as higher revenues had appeared to make Iran's oil wealth inexhaustible. Needless to say, he then ran out of money, as the international banking system would not provide him with sufficient funds to complete the projects he'd initiated in the bubble year. 1976 and 1977 were thus years of relative austerity in Iran, much to the fury of the Iranian people who had come to expect a bonanza. It should thus have been no surprise that revolution occurred in 1979, although robust US support for the shah might have enabled him to overcome it. This time around, the overspending oil producers are obvious: Venezuela and Russia. Venezuela will undoubtedly get into severe difficulty once the oil price collapses. This is on balance likely to favor US interests (and those of the Venezuelan people) provided that the crisis can be leveraged to remove Hugo Chavez from the country's leadership. If he remains, Venezuela will become another Cuba, with deep repression and a suffering and impoverished populace but forming no real threat to the United States. Russia is a much more dangerous story, being both economically and militarily more powerful. The parallels with Germany of the 1930s are disquieting, although the move to aggression in an economic downturn would presumably take the form of an assumption of further authoritarian powers by Vladimir Putin, rather than his replacement by an even more sinister figure. However a downturn in the oil price might well cause an aggressive Russia to intervene militarily in its neighbors, use the weapon of Gazprom's gas pipelines disruptively against Western Europe and devote 25% of output to the military, as did the Soviet Union in its most aggressive periods. Should that happen, Russia would become a considerably more dangerous threat to the world than al-Qaeda could ever dream of; it is to be hoped that western leaders, particularly in Europe, recognize the danger early and effectively. The balance of probability must thus be for a global downturn which combines the inflation of the 1970s with the severe recession and geopolitical danger of the 1930s. Not an appealing prospect.
Ariel Cohen, Ph.D.January 25, 1996 The New "Great Game": Oil Politics in the Caucasus and Central Asia http://www.heritage.org/Research/RussiaandEurasia/BG1065.cfm Much is at stake in Eurasia for the U.S. and its allies. Attempts to restore its empire will doom Russia's transition to a democracy and free-market economy. The ongoing war in Chechnya alone has cost Russia $6 billion to date (equal to Russia's IMF and World Bank loans for 1995). Moreover, it has extracted a tremendous price from Russian society. The wars which would be required to restore the Russian empire would prove much more costly not just for Russia and the region, but for peace, world stability, and security. As the former Soviet arsenals are spread throughout the NIS, these conflicts may escalate to include the use of weapons of mass destruction. Scenarios including unauthorized missile launches are especially threatening. Moreover, if successful, a reconstituted Russian empire would become a major destabilizing influence both in Eurasia and throughout the world. It would endanger not only Russia's neighbors, but also the U.S. and its allies in Europe and the Middle East. And, of course, a neo-imperialist Russia could imperil the oil reserves of the Persian Gulf.15 Domination of the Caucasus would bring Russia closer to the Balkans, the Mediterranean Sea, and the Middle East. Russian imperialists, such as radical nationalist Vladimir Zhirinovsky, have resurrected the old dream of obtaining a warm port on the Indian Ocean. If Russia succeeds in establishing its domination in the south, the threat to Ukraine, Turkey, Iran, and Afganistan will increase. The independence of pro-Western Georgia and Azerbaijan already has been undermined by pressures from the Russian armed forces and covert actions by the intelligence and security services, in addition to which Russian hegemony would make Western political and economic efforts to stave off Islamic militancy more difficult. Eurasian oil resources are pivotal to economic development in the early 21st century. The supply of Middle Eastern oil would become precarious if Saudi Arabia became unstable, or if Iran or Iraq provoked another military conflict in the area. Eurasian oil is also key to the economic development of the southern NIS. Only with oil revenues can these countries sever their dependence on Moscow and develop modern market economies and free societies. Moreover, if these vast oil reserves were tapped and developed, tens of thousands of U.S. and Western jobs would be created. The U.S. should ensure free access to these reserves for the benefit of both Western and local economies. 24
!- Russia- Econ- Oil Key
Russia’s economy relies solely on energy exports Clifford G. Gaddy and Barry W. Ickes, Brookings Institution Press June 1 2008 economist specializing in Russia, is writing books on the political economy of Russian oil and gas and on the country’s long-term growth prospects. His earlier books include Russia’s Virtual Economy and The Siberian Curse “Russia's Addiction The Political Economy of Resource Dependence” http://www.brookings.edu/press/Books/2008/russiasaddiction.aspx For nearly 40 years, the political economy of Russia has been shaped by its heavy reliance on oil and gas wealth. Through alternating periods of boom and bust, Russia’s fortunes and the legacies of its leaders have been dependent on the fluctuating value of its oil and natural gas. Resource dependence played a crucial role in both the development and the demise of the Soviet economy. Resource abundance
did not merely mask the flaws in the Soviet system; it led to a transformation of the economy’s physical and institutional structure. The result was addiction to oil and gas wealth. When oil prices collapsed in the early 1980s, Soviet leaders struggled to cope in much the same way as an addict faced with a cutoff in the supply of a narcotic. Their panicky reactions weakened the system fatally.
Although record high oil prices have once again led to a boom, Russia’s current prosperity may be a bubble. As Clifford G. Gaddy and Barry W. Ickes explain, Russia’s addiction persists, and its political-economic system is still driven by the imperatives of distributing the wealth from oil and gas.
High oil prices is what keeps Russia’s economy going, keeping it out of a recession.
FreshPlaza 07 FreshPlaza News, Netherlands, Associated Content, July 20, 2007 https://www.usrbc.org/aboutus/usrbcinnews/article/1323/ Lawson emphasized that Russia's money from oil revenues has at last "trickled down", and Russian consumers are ready to buy plenty of foreign goods and services, while Russian investors have plenty of cash that they would love to sink into Western businesses. Russia's economy was so bad less than a decade ago that it was no longer considered to be a "superpower" and its future looked utterly grim. Many Russian citizens who had rallied behind the bloodless revolution of 1991, when the Soviet government finally collapsed in line with the fall of the Soviet-backed communist government of East Germany in 1989, were clamoring for at least a partial return to the old ways. Record-low prices for oil-Russia's greatest exportable commodity-and a financial crisis in 1998 when the Ruble lost 70% of its value against the U.S. dollar in only six months of currency trading and behind-the-scenes corruption flourished almost without limits in the broken pieces of the former government and economy made Russia an economic wasteland, arguably worse off than before the revolution. But since then, most things about the economy have gone in the opposite direction for Russia. Now, according to the World Bank, the steeply rising price of oil is set to continue bringing new money into the exploding Russian economy. In fact, the influx of foreign investment and oil profits is so strong now that it could hinder government attempts to keep a cap on inflation. Oil prices are key to stability within Russia David Satter, 2003 "A low, dishonest Decadence” http://findarticles.com/p/articles/mi_m2751/is_72/ai_105369906/pg_7?tag=artBody;col1 THE PROBLEMS of lawlessness, lack of respect for human life and moral disorientation shadow the visible changes in Moscow that have led many to describe Russia as a political and economic success. The improved appearance of Moscow is indisputable, but it is mainly a product of the high price of oil. Every dollar difference in the price of oil translates into roughly $1 billion in budget revenue; a high price for oil has therefore become the key to the government's ability to balance the budget, pay state employees and repay Russia's foreign debt. If the price should fall significantly and stay relatively low, as it did in much of the 1980s and 1990s, Russia will be plunged into a severe economic crisis. At that point, the invisible moral factors in Russia's situation will be become critical to its stability.
Oil price drop collapses political stability in Russia
Derek Mitchell, senior fellow for Asia in the CSIS International Security Program. Previously, he was special assistant for Asian and Pacific affairs in the Office of the Secretary of Defense, November 2007, GLOBAL TRENDS, www.csis.org, http://www.csis.org/component/option,com_csis_pubs/task,view/id,4209/type,1/
While it is obviously difficult to predict major discontinuity in Russia or elsewhere, the next administration will need to keep in mind that Russia for much of its history has shown a remarkable proclivity toward discontinuity and unpredictability.
The current economic recovery and apparent political stabilization sit on a fairly fragile foundation. A crash in the price of oil will upset the current stability just as it was a precursor to major change and then collapse in the Soviet Union 20 years 25
ago. There is no question that Putin and his team see themselves presiding over a stable authoritarian modernization of Russia for the next two to three decades. But history is replete with nations pursuing authoritarian modernization plans that have gone awry.
!- Russia- Econ- Inflation IL
Controlling inflation key to Russia’s success Moscow News 06/06/2008 “Russia’s Roaring Economy not out of the Forest” http://www.mnweekly.ru/business/20080606/55331949.html Russia - in just eight years - has firmly established itself as a thriving and rapidly developing economy. Total output has grown by 67 percent, and Prime Minister Vladimir Putin has said that he expects this figure to overtake that of the UK by the end of this year. Moreover, since 1999, stock market capitalization has increased 22-fold and foreign trade turnover five-fold. These positive trends appear set to continue, with the IMF forecasting another 33 percent increase in GDP by 2013. Yes, the Russian economy is red-hot. But there remain some lingering doubts about the economy's long term success and stability. Russia's biggest task is to balance economic growth while keeping inflation low. During the 1990s, inflation sometimes soared to over 10 percent a month, wiping out people's savings and triggering mild panic in the economy. Although the inflation dragon has been tamed, it continues to be stuck at over 10 percent annually. This year the inflation target has been revised up to 10 percent after price increases at the beginning of the year. Meanwhile, the IMF predicts that inflation will finish at 11.4 percent for the year. The major factor causing inflation is the massive increase in oil prices since 2002. In the last six years there has been an increase from approximately $20 a barrel to $125. Furthermore, there has been speculation that oil prices will continue to rise and according to Goldman Sachs and the Iranian oil minister, they could hit $200 a barrel in two years. Russia's economy is highly dependent on natural resources, with 28 percent of exports to the U.S. last year being oil and gas products. The high oil prices have helped the Russian economy to grow, while even permitting for the creation of a massive stabilization fund. The downside is that the influx of petrodollars contributes to inflationary pressure. Another serious concern are rising world food prices. Although very little can be done to prevent this shock to the Russian economy, it will predominantly affect those who are already struggling with poverty. The government is aware that there is a trade off between growth and inflation and therefore most of the stabilization fund won't be spent immediately, despite some sectors needing heavy investment. Putin will play a prominent role in the economy in his new post of Prime Minister, and perhaps there is no other person better qualified for the task of bringing inflation down to single digits, since this was one of Putin's stated goals as president. Investors are often discouraged by high inflation as the instability it causes makes future profits insecure, so taming inflation is job one. In St. Petersburg, two conferences will be held on inflation ("New challenges on the world food market" and "Energy - Global players and arbiters"). This shows the government's priorities in these sectors, which are the primary causes of inflation in Russia.
!- Russia- Trade Leverage
High oil key to Russia being able to negotiate Chris Weafer, 4.12.2007 “$100 Oil and Russia. Sinking or Swimming in a Sea of Cash” Chief Strategist at Uralsib Financial Corp. http://www.oilandgaseurasia.com/news/p/3/press/33/ The Kremlin has a competitive advantage. Higher oil gives the Kremlin a competitive advantage in its trade talks with the EU and other potential partners, such as China. The prospect of high and continuing oil prices and considerable uncertainty over the future of energy encourages energydependent economies towards prudent actions and conservation of resources. But those measures take time, and in the meantime, the priority is to ensure energy security. As the owner of the world’s biggest gas reserves, this plays into Russia’s hands. The likelihood is that current reserves will be increased in the Arctic region and in the water off Sakhalin. Offering access to those reserves and to the products extracted gives the Kremlin considerable leverage in its trade, investment and political negotiations with neighbouring energy-hungry countries. More deals expected. In recent months, progress has been made in restructuring the Shtokman JV, in reaching a price agreement with China for gas exports, and with Italy on the South Stream pipeline. Further deals covering Kovykta and the Yamal Peninsula developments are expected over the next few months. Russia expects reciprocal favourable trade and investment deals as part of the barter. But only so long as oil is high. Those favourable deals will be possible only so long as the price of oil and the general uncertainty about energy security remain high. If oil prices fall, then Russia’s leverage in these barter deals will also be lower.
!- Saudi Arabia 2NC
High prices key to Saudi stability
Leonardo Maugeri, senior fellow at the World Economic Laboratory at MIT, senior fellow at the Foreign Policy Association, Oil and Gas Journal, December 15, 2003 This policy has few alternatives, particularly for the great Persian Gulf producers, since their economics remain heavily oil-based while their demography has dramatically changed. Countries such as Saudi Arabia have doubled their population in 12 years. Sixty percent of the gulf countries' population is less than 21 years old. This demographic explosion has created expectations and frustrations to which stagnant and monocultural economies cannot give a credible answer. Only sustained oil revenues allow these countries to temper social unrest by preserving huge social assistance programs. Gulf countries' oil revenues are already much lower today than 20 years ago, and cheap oil prices mean a dramatic dip in per capita oil income. Therefore, frustration and violent revolt may erupt whenever the minimum needs for living are endangered by decreasing oil prices, particularly among people who already live in poverty and cannot permit themselves the luxury of hoping for a different future. Clearly, fundamentalism today -- like socialist pan-Arabism of yesterday -- is finding fertile ground in these hopeless people. Indeed, this is the cause of its strength and its diffusion. Saudi collapse destroys the global economy Robert Baer, former CIA field officer in the Middle East, Sleeping With the Devil, 2003 Not all the wishing and hoping in the world will change the basic reality of the situation, which is as follows: • The industrial world is dependent on the oil reserves of the Islamic world and will be for decades to come, whether it’s the already developed reserves of the largely Arab states or the soon to be developed reserves of Central Asia. • Of the Islamic oil states, none is more critical than Saudi Arabia, because (a) it sits on top of the largest proven reserves; (b) it serves as the market regulator for the entire global petroleum industry; and (c) it has the money, the political will, and the religious zeal to pursue control of the Arab Peninsula and Central Asia. • Of all the oil-consuming states, none consumes more than the United States, none enjoys anything like the most-favored-nation status that the U.S. enjoys with the Saudis, and thus none is more dependent on Saudi oil to fulfill its appetite and to keep doing so at a compliments-of-the-house rate. • If Saudi Arabia tanks, and takes along the other four dysfunctional families in the region who collectively own 60 percent of the world’s proven oil reserves, the industrial economies are going down with it, including the economy of the United States of America Nuclear war and collapse of civilization Chris H. Lewis in his book "The Coming Age of Scarcity" p. 56 1998 Most critics would argue, probably correctly, that instead of allowing underdeveloped countries to withdraw from the global economy and undermine the economies of the developed world, the United States, Europe, and Japan and others will fight neocolonial wars to force these countries to remain within this collapsing global economy. These neocolonial wars will result in mass death, suffering, and even regional nuclear wars. If first world countries choose military confrontation and political repression to maintain the global economy, then we may see mass death and genocide on a global scale that will make the deaths of World War II pale in comparison. However, these neocolonial wars, fought to maintain the developed nations' economic and political hegemony, will cause the final collapse of our global industrial civilization. These wars will so damage the complex economic and trading networks and squander material, biological and energy resources that they will undermine the global economy and its ability to support the earth's 6 to 8 billion people. This would be the worst case scenario for the collapse of global civilization
!- Saudi Arabia- IL- US Imports Key
US imports are crucial to Saudi Arabia Edward Morse, Executive Adviser at Hess Energy Trading Company and Deputy Assistant Secretary of State for Intl Energy Policy, and James Richard, portfolio manager at Firebird Management, Foreign Affairs, March/April, 2002
One of the hidden aspects of the relationship is the Saudi dependence on the United States for providing an expanding market. Although Asian demand for oil is expected to grow dramatically in coming decades, no other economy rivals that of the United States for the growth of its oil imports. Over the past decade, the increase in the U.S. share of the oil market, in terms of trade, was higher than the total oil consumption in any other country, save Japan and China. The U.S. increase in imports accounts for more than a third of the total increase in oil trade and more than half of the total increase in OPEC's production during the 1990s. This fact, together with the fall in U.S. oil production, means that the United States will remain the single most important force in the oil market. The hope of Saudi Arabia and OPEC for an increased market and for greater market share is uniquely dependent on growth in U.S. demand. Hence it is not for security alone that Riyadh depends on the United States but for the very economic basis of the Saudi regime, which relies almost entirely on oil for revenue.
!- Saudi Arabia- !- Econ
Turmoil in Saudi Arabia would collapse the world economy and ensure Middle East war Paul Roberts, Harper's Magazine, Finalist for the National Magazine Award, The End of Oil: A Perilous New World, 2004 Experts say the struggle, even if not violent, could easily slow or halt Saudi export operations and cut world production by nearly 12 percent. In such dire circumstances world leaders, especially in the United States, would be forced into a series of tough choices that could alter the course of the energy future. If such a disruption occurred today, analysts say, given how critical oil is to the global economy, and given the current political environment in the United States, there would be extraordinary pressure for military intervention — particularly if Saudi Arabia appeared to be tilting toward fundamentalism. As one foreign policy analyst who works closely with the CIA told me, “there is simply no way the United States would allow an Osama bin Laden to control the world’s largest oil reserves.” That would be a grim dilemma indeed. If America launched a second military action, it might restore world oil supplies, at least temporarily, but the move would surely fuel Islamic rage, further destabilizing the Middle East and almost guaranteeing future supply disruptions. Yet if America declined to strike — if, for example, domestic political opposition halted a second Middle Eastern venture — and if Saudi oil were not immediately restored, importing nations would face an equally stark prospect — and none more so than the United States. Because it has made so little progress toward diversifying away from oil, a Saudi-centered disruption would be economically devastating. The closest precedent we have is the Iranian revolution, which took five million barrels out of production and sent prices up to forty dollars a barrel, or a hundred current dollars. Losing the Saudis’ ten million barrels of daily production, though world emergency reserves would initially soften the blow, would be easily as destructive. Fuel-sensitive businesses, like airlines and trucking companies, would be affected immediately and drastically. Layoffs would ripple through the economy, sowing panic and causing companies to delay investments and expansions, and leading to more layoffs. And because energy costs affect the costs of producing goods and services but also hurt consumer buying power, higher oil prices would lead to the recession-inflation mix known as stagflation. A civil war in Saudi Arabia would collapse the world economy and spread WMD Steven David, professor of political science at Johns Hopkins, Foreign Affairs, Jan/Feb, 1999
THE END OF THE WORLD (AS WE KNOW IT) CONFLICTS FOUGHT within the borders of a single state send shock waves far beyond their frontiers. To begin with, internal wars risk destroying assets the United States needs. Were the Persian Gulf oil fields destroyed in a Saudi civil war, the American economy (and those of the rest of the developed world) would suffer severely. Internal wars can also unleash threats that stable governments formerly held in check. As central governments weaken and fall, weapons of mass destruction may fall into the hands of rogue leaders or anti-American factions.
!- Saudi Arabia- !- Terror
Poor economic conditions encourage Saudis to resort to terrorism Robert Looney, Professor in National Security Affairs, Center for Contemporary Conflict, Strategic Insights, Volume III, Issue 1, January 2004, http://www.ccc.nps.navy.mil/si/2004/jan/looneyJan04.asp
For an increasing number of its citizens, the Saudi Arabia of the heady years following the 1973-1974 oil price revolution is a land of fable and memory. Yet to many outside the Kingdom, the country's economic statistics may come as a shock. Population growth (about 3.3 percent per year) has exceeded Gross Domestic Product (GDP) growth for several decades. The result has been a decline in per capita GDP from more than U.S. $15,000 in 1980 to about U.S. $9,000 in 2003 (adjusted for inflation). There is high unemployment (20 to 30 percent by some measures), while up to 20-30 percent of the population falls below the poverty line. Translating these figures into more tangible signs of trouble for the Saudi Government, Kim Murphy has observed: The dozen years since the Persian Gulf War have seen slums grow up on the outskirts of Jeddah and Riyadh, the capital. Beggars hawk bottles of water at intersections. Penniless women huddle in strips of shade outside their crumbling mud-brick houses, begging for money. Many families in the capital are so poor they can't afford electricity. Raw sewage runs through parts of Jeddah… The increasingly perilous economic situation that all in Saudi Arabia but the royalty face today may be a big factor in recruiting young Saudis to terrorist groups such as Al Qaeda. Chronic joblessness, diminished incomes and difficulty in collecting enough money to marry and start families are all issues that can evoke anger.
US Oil market is key to Venezuelan Econ
Cesar J. Alvarez, Stephanie Hanson, June 27, 2008
Though Venezuela has repeatedly threatened to cut off its oil exports to the United States, analysts say the two countries are mutually dependent. Venezuela supplies about 1.5 million barrels of crude oil and refined petroleum products to the U.S. market every day, according to the EIA. Venezuelan oil comprises about 11 percent of U.S. crude oil imports, which amounts to 60 percent of Venezuela’s total exports. PDVSA also wholly owns five refineries in the United States and partly owns four refineries, either through partnerships with U.S. companies or through PDVSA’s U.S. subsidiary, CITGO. A U.S. Government Accountability Office (GAO) report (PDF) says Venezuela’s exports of crude oil and refined petroleum products to the United States have been relatively stable with the exception of the strike period.
Venezuelan is dependent on U.S. imports
Cesar J. Alvarez, Stephanie Hanson, June 27, 2008
The World Bank's Frepes-Cibils says “Venezuela will continue to be a key player in the U.S. market.” He argues that in the short term it will be very difficult for Venezuela to make a significant shift in supply from the United States. Nevertheless, Chavez has increasingly made efforts to diversify his oil clients in order to lessen the country’s dependence on the United States. The GAO report says the sudden loss of Venezuelan oil in the world market would raise world oil prices and slow the economic growth of the United States.
Chinese Growth DA 1NC
Any reduction in US oil use will be offset by China to rapidly expand its economy LA TIMES, Stanley, 11/13/04 Signs of an accelerating global economy, propelled by torrid growth in China, has led the International Energy Agency -- a watchdog for the world's biggest oil-importing countries -- to boost estimates for crude demand for this year and 2004. In its influential monthly oil market report, the IEA said Thursday that it has increased its forecast for average daily demand growth in 2003 by 170,000 barrels, arguing now that demand will grow this year by 1.28 million barrels a day. The Paris-based agency expects daily oil demand to average 78.6 million barrels in 2003. The IEA also raised its estimate of demand growth in 2004 by 20,000 barrels a day to 1.08 million barrels, for an average daily world demand of 79.6 million barrels. Although global oil demand should increase by a robust 1.7 percent in 2003, growth will ease somewhat to 1.4 percent in 2004, the IEA said. It attributed this likely slowdown to nonrecurring, one-time factors that have contributed to oil demand this year, including high prices for natural gas -- a substitute fuel for oil -- and unusually cold weather in Europe and Japan. Chinese oil demand is set to rise by 9 percent this year. At this rate, China will overtake Japan as an oil consumer in the second half of 2003, the agency said. "At this juncture, China is the engine of oil demand growth with significant room for further expansion in the industrial and transportation sectors," the report said. Despite some concerns that the Chinese economy may overheat, the IEA expressed confidence in the country's continued strong demand for crude in 2004. China alone should account for nearly 30 percent of global growth next year, after contributing roughly 35 percent in 2003, the report said. Together with China's standout performance, a surge in U.S. growth in the third quarter and gathering momentum in Japan and parts of Europe are helping to offset lingering economic uncertainties such as international terrorism and high levels of household debt. "Overall, it's a better picture being painted than we saw a month or two ago," said Rob Laughlin, managing director of Londonbased brokerage GNI Man Financial. A "feel-good factor" has already started to affect the oil market's outlook for demand growth for the three months starting in December, he said. Laughlin even sounded a note of caution about China, which for much of the year has served as "a dustbin for oil that couldn't find a home" anywhere else. If China's economy continues to sizzle, it could eventually squeeze supplies required by Western countries as they regain their own appetites for crude, he said. CONTINUED MASSIVE GROWTH RATES IN CHINA CAUSES US/CHINA WAR Mearsheimer – prof at university of Chicago – 9/20/04 (federal news service, john) The question at hand is simple and profound: Can China rise peacefully? My answer is no. If China continues its impressive economic growth over the next few decades, the United States and China are likely to engage in an intense security competition with considerable potential for war. Most of China's neighbors, to include India, Japan, Singapore, South Korea, Russia and Vietnam, would join with the United States to contain China's power. War with China causes global nuclear holocaust The Nation 5-14-2001 China is another matter. No sane figure in the Pentagon wants a war with China, and all serious US militarists know that China’s minuscule nuclear capacity is not offensive but a deterrent against the overwhelming US power arrayed against it (twenty archaic Chinese warheads versus more than 7,000 US warheads). Taiwan, whose status constitutes the still incomplete last act of the Chinese civil war, remains the most dangerous place on earth. Much as the 1914 assassination of the Austrian crown prince in Sarajevo led to a war that no wanted, a misstep in Taiwan by any side could bring the United States and China into a conflict that neither wants. Such a war would bankrupt the United States, deeply divide Japan and probably end in a Chinese victory, given that China is the world’s most populous country and would be defending itself against a foreign aggressor. More seriously, it could easily escalate into a nuclear holocaust. However, given the nationalistic challenge to China’s sovereignty of any Taiwanese attempt to declare its independence formally, forward-deployed US forces on China’s borders have virtually no deterrent effect.
Chinese Growth DA- L
CHEAPER OIL RESULTS FUELS CHINA’S RISE TO POWER BRYCE 2006 [ROBERT, an Austin writer and managing editor of Energy Tribune, Opinion Forum: viewpoints on issues in energy, geopolitics and civilization, http://www.petroleumworld.com/SF07012801.htm] Cheaper oil will mean higher consumption in developing countries like China and India. The Chinese government has repeatedly increased the price of gasoline in an effort to slow that country's insatiable thirst for oil. Cheaper crude would reduce China's oil import bills and thereby allow greater consumption with little cost. If they Chinese decide to allow the yuan to float against the dollar, then their oil becomes even cheaper. And that would allow the Chinese economy to grow even faster growth that will further fuel China's rise as a global power.
2NC AT Peak
Peak oil is a myth Asia Times 2007 By F William Engdahl author of A Century of War: Anglo-American Oil Politics and the New World Order “Russia is far from oil's peak” http://www.atimes.com/atimes/Central_Asia/II27Ag02.html Peak Oil theory is based on a 1956 paper by the late Marion King Hubbert, a Texas geologist working for Shell Oil. He argued that oil wells produced in a bell-curve manner, and once their "peak" was hit, inevitable decline followed. He predicted that US oil production would peak in 1970. A modest man, he named the production curve he invented Hubbert's Curve, and the peak as Hubbert's Peak. When US oil output began to decline in about 1970, Hubbert gained a certain fame. The only problem was, it peaked not because of resource depletion in the US fields. It "peaked" because Shell, Mobil, Texaco and the other partners of Saudi Aramco were flooding the US market with dirt-cheap imports from the Middle East, tariff-free, at prices so low California and many Texas domestic producers could not compete and were forced to shut their wells. While the US oil multinationals were busy controlling the easily accessible large fields of Saudi Arabia, Kuwait, Iran and other areas of cheap, abundant oil during the 1960s, the Russians were busy testing their alternative theory. They began drilling in a supposedly barren region of Siberia. There they developed 11 major oilfields and one giant field based on their deep abiotic geological estimates. They drilled into crystalline basement rock and hit black gold of a scale comparable to the Alaska North Slope. They then went to Vietnam in the 1980s and offered to finance drilling costs to show that their new geological theory worked. Russian company Petrosov drilled in Vietnam's White Tiger oilfield offshore into basalt rock some 5,000 meters down and extracted 6,000 barrels a day of oil to feed the energy-starved Vietnam economy. In the USSR, abiotic-trained Russian geologists perfected their knowledge and the Soviet Union emerged as the world's largest oil producer by the mid-1980s. Few in the West understood why, or bothered to ask. Dr J F Kenney is one of the only Western geophysicists who has taught and worked in Russia, studying under Vladilen Krayushkin, who developed the huge Dnieper-Donets Basin. Kenney told me in a recent interview that "alone to have produced the amount of oil to date that [Saudi Arabia's] Ghawar field has produced would have required a cube of fossilized dinosaur detritus, assuming 100% conversion efficiency, measuring 19 miles [30.5 kilometers] deep, wide and high." In short, an absurdity. Western geologists do not bother to offer hard scientific proof of fossil origins. They merely assert their belief as a holy truth. The Russians have produced volumes of scientific papers, most in Russian. The dominant Western journals have no interest in publishing such a revolutionary view. Careers, entire academic professions are at stake, after all.
The 2003 arrest of Russian Mikhail Khodorkovsky, of Yukos Oil, took place just before he could sell a dominant stake in Yukos to ExxonMobil after a private meeting with Cheney. Had Exxon gotten the stake, it would have had control of the world's largest resource of geologists and engineers trained in the abiotic techniques of deep drilling. Since 2003, Russian scientific sharing of knowledge has markedly lessened. Offers in the early 1990s to share knowledge with US and other oil geophysicists were met with cold rejection, according to American geophysicists involved. Why then the high-risk war to control Iraq? For a century, US and allied Western oil giants have controlled world oil via control of Saudi Arabia or Kuwait or Nigeria. Today, as many giant fields are declining, the companies see the state-controlled oilfields of Iraq and Iran as the largest remaining base of cheap, easy oil. With the huge demand for oil from China and now India, it becomes a geopolitical imperative for the United States to take direct military control of those Middle East reserves as fast as possible. Cheney came to the job of vice president from Halliburton Corp, the world's largest oil-geophysical-services company. The only potential threat to that US control of oil just happens to lie inside Russia and with the now-state-controlled Russian energy giants. According to Kenney, Russian geophysicists used the theories of brilliant German scientist Alfred Wegener fully 30 years before Western geologists "discovered" Wegener in the 1960s. In 1915, Wegener published the seminal text The Origin of Continents and Oceans, which suggested an original unified landmass or Pangaea more than 200 million years ago that separated into present continents by what he called continental drift. Up to the 1960s, supposed US scientists such as Dr Frank Press, the White House science adviser, referred to Wegener as "lunatic". Geologists at the end of the 1960s were forced to eat their words as Wegener offered the only interpretation that allowed them to discover the vast oil resources of the North Sea.
Perhaps in some decades Western geologists will rethink their mythology of fossil origins and realize what the Russians have known since the 1950s. In the meantime, Moscow holds a massive energy trump card.
Aff- U- Prices Won’t Stay High (1 of 2)
PRICES DECREASING NOW AP 2008 [Gas at $4 brings promises, pandering, By TOM RAUM – Jun 23, 2008, http://ap.google.com/article/ALeqM5isJU4OyzZglXxAWlzkvmnslNP3-wD91FUOI00] WASHINGTON (AP) — Like two rival filling-station owners across the highway in long-bygone price wars, Democratic Sen. Barack Obama and Republican Sen. John McCain keep putting up flashy signs and offering new incentives in hopes of attracting customers battered by $4 gas prices. McCain is offering a summer break from the 18.4-cent federal gasoline tax, and holding out the promise of more offshore drilling to help you drive more cheaply to the beach. He wants to build 45 new nuclear reactors to generate electricity. On Monday, he proposed a $300 million government prize to anyone who can develop a superior battery to power cars of the future. He may even wash your windows. If you pull into the Obama station, he'll promise you cash back from the windfall-profits tax he plans to slap on Big Oil. Check the tires? How about promises to go after oil-market speculators who help drive up prices as well as big subsidies for solar, wind, ethanol and other alternative-energy projects? The Illinois senator likens his energy package to the Kennedy-era space program. Oil and gas prices that have doubled in the past year have squeezed aside the war in Iraq as the No. 1 issue this election year and both parties are blaming each other for the price spike — and for apparent congressional paralysis. Obama and McCain have made high gas prices a top issue in their campaigns and have offered dueling remedies aimed at easing them. Their positions are being echoed daily by their surrogates on Capitol Hill. And both make it sound as if only their proposals would chart the path to lower fuel prices and a final cure for what President Bush once labeled the nation's addiction to foreign oil. CAN’T PREDICT SHORT TERM CHANGES IN OIL PRICE Goffman 2005 [Ethan, freelance writer and editor, Global Oil Supply and United States Energy Policy, http://www.csa.com/discoveryguides/ern/05jun/overview.php] After years of inexpensive oil, America suffered a case of deja vu harking back to the 1970s when, in late 2004, crude oil prices surged above $50 a barrel. At the start of 2005, prices relaxed briefly before returning to their new high. Will we again see the long gas lines and economic stagnation that followed the original oil crisis? In the short term the answer is almost certainly no. Both the causes and impact of the price shocks differ from 1973. Prior to 1999, oil prices had spent a quarter century either stable or shrinking, and, adjusted for inflation, prices remain lower than their 1981 high, according to Congressional Research Service (CRS) Issue Brief for Congress RL31849 - Energy: Useful Facts and Numbers. The triggers of this price rise also seem more short-term than those of the 1970s; then, a small group of countries that controlled much of global oil production colluded to increase prices. Today's rise is caused by an amorphous collection of events, including declining U.S. refinery capacity, instability in the Middle East and other oil-producing countries such as Venezuela and Russia; speculation in the oil markets; and increased global demand. Some volatility is a fact of life in the oil industry, although long-term trends have been more predictable. According to RL31720 Energy Policy: Historical Overview, following "the time of the Arab oil embargo and first oil price shock in 1973" we have had a 30-year period "of general price and supply stability that is periodically broken by shorter episodes of supply disruption and price volatility." We cannot know, then, the short-term course of oil prices, which may swing tremendously, may return to their previous lows, or may settle in to relative stability at their current price. In the very long term, certainly, current patterns are not tenable, as everincreasing global demand will eventually run into the reality of a finite oil supply. "The very long term," however, can mean many different things, over which there is little agreement.
Aff- U- Prices Won’t Stay High (2 of 2)
IT IS IMPOSSIBLE TO PREDICT FUTURE OIL PRICES The International Herald Tribune 2008 [Oil price forecast: Up, then down, then up again, lexis] Now that the price of crude oil has crossed the psychologically important $100-a-barrel threshold, and then retreated, what direction will it take now? Many experts say it will go up, then down, and then maybe up again. That, anyway, has been the pattern of the past several years of volatile prices. The arguments for even higher oil prices are well known. The economies of China and India are booming and hungry for energy. Oil fields in Mexico and the United States are drying up, tightening world supplies. President Hugo Chávez of Venezuela is using oil as a political weapon. Rebels in Nigeria are creating havoc in some of Africa's most productive oil fields. The war in Iraq rages on. The dollar is weakening, causing hedge funds and traders to flee to oil and other commodities as a haven. But all those factors were in play last summer when the price fell to about $60 a barrel, before it rallied at the end of the year. The price touched $100 on Wednesday and surpassed that briefly Thursday before retreating after the government reported higher-thanexpected supplies of heating oil and gasoline. Crude oil futures for February delivery fell $1.53 to $97.65 a barrel Friday in afternoon trading on the New York Mercantile Exchange. ‘'Predicting oil prices continually demonstrates the perils of prophecy, because oil prices are the derivative of what happens in the global economy and global geopolitics,'' said Daniel Yergin, chairman of Cambridge Energy Research Associates. Yergin said he could foresee oil prices soaring as high as $150 in the next few years or falling as low as $40. John Richels, president of Devon Energy, an international oil and gas company based in Oklahoma City, said $150 a barrel was possible, but so was $55. ''We have to make investments based on our outlook over a long period of time,'' he said. ''It is tough.''
Aff- U- High Prices Inev
OIL PRICES HIGH INEVITABLY New Delhi 2008 [An alternative scenario for oil, by Akash Prakash, June 25] Apart from hiking prices to curb demand, you can expect moves to curb speculators. Just about everybody has now thrown in the towel on oil prices. Despite many observers believing that we are in the midst of an oil bubble, oil prices refuse to come down on a sustained basis. Prices seem Teflon-coated, and despite global economic weaknesses, chances of rising interest rates, attempts to talk up the dollar, etc. oil prices refuse to cool down. The bull case is very clear — constrained supplies, strong demand from the large emerging markets and geo-political tensions. The bears are equally clear that this is another price bubble, and will end as all such financial market spikes ultimately do. Whatever be the arguments, the bulls are clearly winning. Most market participants accept that we are in a new era for oil prices and it is very unlikely that prices will come down anywhere near the pre-2005 levels. As is the norm, just when everyone capitulates, the seeds of a reversal get sown. In the case of oil, there are steps being taken and they will cool down this red-hot commodity, but they are being ignored by the markets. First, all the major Asian consumers of oil have now hiked retail prices. India, Indonesia, Malaysia, Taiwan and now even China have hiked retail prices by 12-40 per cent. This is a major break in pattern as these governments have now seemingly accepted the unsustainability of continuing to subsidise consumption. Having bitten the bullet, all now have plans to reduce oil subsidies further in the coming months. Once prices are hiked in these countries, they will not be reduced, independent of oil price movements, and thus consumers in these countries will now have to adjust to permanently higher fuel prices. Given the income profile in these countries, the impact on consumption should be far steeper than price hikes in the OECD economies. Already demand for petroleum products is shrinking in the OECD, with gas demand in the US dropping by 6 per cent year-on-year. Demand growth in the Asian countries should begin to stall as price hikes cascade through the system. Today's high oil prices are justified not on the basis of current shortages, but on the expected sustained growth in future demand. If the major Asian consuming nations, which account for all the incremental demand growth today, are on a clear path to remove subsidies and force energy efficiency, this has to have an impact on the trend incremental demand. As consumers accept that they will have to ultimately pay near global prices, demand and behaviour will adjust.
Aff- U- AT High Prices S Case (1 of 2)
HIGH GAS PRICES ARE NOT FORCING ALTERNATIVE ENERGY INNOVATION – THEY ARE FORCING MORE OIL PRODUCTION Silva 2008 [Mark, White House Correspondent for the Chicago, June 19, Bush calls for offshore drilling, citing gasoline prices Relief won't come until Congress lifts the ban, the president says, acknowledging it would take years for his proposals to bear fruit, http://www.latimes.com/news/politics/la-na-bush19-2008jun19,0,2224764.story] WASHINGTON -- President Bush, seeking to put political pressure on the Democratic-run Congress in an election year plagued by soaring gasoline prices, called Wednesday for lifting federal bans on offshore oil drilling and other measures to boost oil production. "For many Americans, there is no more pressing concern than the price of gasoline," Bush said. HIGH PRICES ARE NOT CREATING ALTERNATIVE ENERGY INCENTIVES, THEY ARE SIMPLY MOTIVATING DRILLING FOR OIL Silva 2008 [Mark, White House Correspondent for the Chicago, June 19, Bush calls for offshore drilling, citing gasoline prices Relief won't come until Congress lifts the ban, the president says, acknowledging it would take years for his proposals to bear fruit, http://www.latimes.com/news/politics/la-na-bush19-2008jun19,0,2224764.story] And last year, the White House said, Congress added to a spending bill a ban on the leasing of federal lands for oil-shale exploration -- a ban, Bush said, that Congress can just as easily lift. For some time, Bush has also been pressing for alternative energy sources as a solution to America's "addiction to oil," which he highlighted in a State of the Union address. "The president says we are addicted to oil, and yet all he and McCain offer is a bigger needle," said Warner Chabot, vice president of the Ocean Conservancy in San Francisco. "They are focused on supply when they should be focused on reducing demand." The Energy Information Administration said that opening access to undersea oil fields "in the Pacific, Atlantic and eastern Gulf regions would not have a significant impact on crude oil and natural gas production or prices before 2030." Drilling in domestic waters off all the coasts except Alaska's would increase annual production from 2.2 million barrels a day to 2.4 million barrels a day, the agency estimates. The four-point plan proposed by Bush would: * Increase access to the outer continental shelf, which has been off-limits since 1981. With the advent of technology that can make drilling less risky to the environment, Bush says, the moratorium is "outdated and counterproductive." If Congress lifts the moratorium, he says, he will lift an executive prohibition. * Encourage the extraction of oil from shale in the West -- which holds as much potential for oil, 18 billion barrels, as the offshore drilling proposal. This amounts to nearly three decades of oil imports from Saudi Arabia, the White House says. * Permit drilling in the Arctic National Wildlife Refuge, which President Clinton vetoed and Democratic leaders oppose. This could offer 10 billion barrels of oil, equal to two decades of Saudi imports, according to the White House. * Expand oil refineries in the U.S., where a refinery has not been built for three decades. Bush proposes regulatory reforms that could remove barriers to refinery construction -- namely public opposition. He proposes that any appeal of a federal permit for refinery expansion must be filed in federal court within 60 days. NO TRANSITION NOW – CONGRESS FAILED TO FORCE OIL COMPANIES INTO INVESTING IN ALTERNATIVE ENERGIES USA TODAY 2008 [Big oil resists investing 10% of earnings in research; Criticism flies on alternative energy, lexis] The head of a congressional committee failed Tuesday to get executives from the five biggest U.S. oil companies to promise they will invest 10% of their earnings in alternative energy development.
Aff- U- AT High Prices S Case (2 of 2)
TRANSITION IS INEVITABLE REGARDLESS OF OIL PRICES The International Herald Tribune 2008 [Searching for clean energy: It's no fad, lexis] The oil shocks of the 1970s produced a flurry of attention to alternative sources of energy, but it faded once prices dropped in the mid-1980s. With oil prices high again and climate change moving up the list of public concerns, interest in alternative energy is once again at fever pitch. Is history about to repeat itself? Not likely, according to a leading energy consulting firm. In a report released Tuesday, the firm, Cambridge Energy Research Associates, concludes that multiple factors will continue pushing the world toward greater use of alternative energy sources like sun and wind power, regardless of what happens to oil prices. ''The focus today on clean energy is not a bubble or passing phenomenon,'' the report says. ''Unconventional clean energy is now poised to cross the divide and move from the fringes of the energy sector to the mainstream.'' What makes today different from the 1970s is growing apprehension about global warming as a threat to political security and the environment, according to the report. That is pushing governments to demand, and subsidize, greater use of alternative energy. “Climate change and putting a price on carbon will change the dynamics of the energy marketplace,'' said Daniel Yergin, chairman of Cambridge Energy Research Associates and a leading historian on the oil industry. He noted that with the Chinese and Indian economies growing rapidly, ''You need renewables as part of the solution to meet this astonishing demand growth.'' HIGH PRICES ARE FORCING A MOVE TO NONCONVENTIONAL PETROLEUM SOURCES The Gazette 2008 [Montreal, Surging oil prices threatening global growth, geopolitical balance; Spurring search for energy alternatives, by RICHARD VALDMANIS, June 3, https://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4067419295&format=GNBFI &sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4067419299&cisb=22_T4067419298&treeMax=true&treeWidth=0&c si=8355&docNo=5] Rising prices and the scarcity of conventional supplies have triggered an inflow of cash into development of nonconventional petroleum sources - like the Alberta oilsands, gas shale in Colorado and technology to turn coal into motor fuel - that could be harmful to the environment. Companies have already poured $100 billion into the Alberta oilsands and hope to triple production by 2015. HIGH PRICES ARE FORCING MAJOR OIL COMPANIES TO MOVE TO OTHER OIL-BASED PRODUCTS The Independent 2008 [London, ExxonMobil fights off call to invest in oil alternatives; Rockefeller-led shareholders urge world's biggest oil company to develop fossil fuel alternatives, https://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4067427500&format=GNBFI &sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4067427503&cisb=22_T4067427502&treeMax=true&treeWidth=0&c si=8200&docNo=19] Exxon's case is that throwing money at alternative energy is a foolish way to deal with the immediate threat of climate change. Instead, it is focusing on reducing greenhouse gas emissions from its own operations, and from developing new oil-based products that reduce the environmental impact of consumers' energy use. The company highlighted its Mobil 1 synthetic motor oil that improves vehicle fuel economy, lighter weight plastics, and next-generation tyre-liners. If all the vehicles in the US incorporated these products, Mr Tillerson said, it would be "like taking 8 million cars off US roads".
Aff- U- AT Markets S
Energy should not be left to the markets to solve something must be done W Joseph Stroupe Nov 22, 2006 Russia tips the balance THE NEW WORLD OIL ORDER, Part 2 author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events http://www.atimes.com/atimes/central_asia/hk22ag01.html Goldwyn stated: "The United States is more energy-insecure today than it has been in nearly 30 years. We are insecure because the global oil market is more fragile, more competitive and more volatile than it has been in decades." Goldwyn referred to the fact that "the growing [energy] dependence of rising powers such as China and India is rapidly eroding US global power and influence around the world" as those rising powers increasingly enter bilateral long-term contracts with suppliers, ever greater numbers of which do not allow free market access by the West's oil majors to production and exploration acreage and which are creating a strategically tight market for the rest of the world. Goldwyn observed: "This 'tight' market is undermining the fluidity and fairness of the market for available oil supplies and exploration acreage. New competitors like China and India are trying to negotiate long-term supply contracts (at market prices) to ensure that they have supplies in the event of a crisis or supply disruption ... the trend is counter to the market system that operates so efficiently ... the trend of long-term contracts runs counter to the modern liquid global market which operates efficiently in rapidly moving supplies to meet market demand ... China has not yet developed faith in these market mechanisms." While Goldwyn presented such concerns in the context of a rising but not yet imminent threat to the current order, in testimony before the US Senate Committee on Foreign Relations nearly a year earlier, on July 26, 2005, Mikkal Herberg of the National Bureau of Asian Research in Seattle, Senator Richard Lugar, the committee chairman, heard the following facts: For China and India both, as well as the other Asian powers, energy is becoming a matter of "high politics" of national security and no longer just the "low politics" of domestic energy policy. Governments in both countries have decided that energy security is too important to be left entirely to the [US-led liberal] markets as their economic prosperity increasingly is exposed to the risks of global supply disruptions, chronic instability in energy exporting regions, and the vagaries of global energy geopolitics. Markets wont shift on their own too much money is needed Michael T Klare Apr 17, 2008 The rise of the new energy world order http://www.atimes.com/atimes/Global_Economy/JD17Dj04.html According to the DoE, renewable fuels, including wind, solar and hydropower (along with "traditional" fuels like firewood and dung), supplied but 7.4% of global energy in 2004; biofuels added another 0.3%. Meanwhile, fossil fuels - oil, coal and natural gas - supplied 86% of world energy, nuclear power another 6%. Based on current rates of development and investment, the DoE offers the following dismal projection: In 2030, fossil fuels will still account for exactly the same share of world energy as in 2004. The expected increase in renewables and biofuels is so slight - a mere 8.1% - as to be virtually meaningless. In global warming terms, the implications are nothing short of catastrophic: Rising reliance on coal (especially in China, India and the United States) means that global emissions of carbon dioxide are projected to rise by 59% over the next quarter-century, from 26.9 billion metric tons to 42.9 billion tons. The meaning of this is simple. If these figures hold, there is no hope of averting the worst effects of climate change. When it comes to global energy supplies, the implications are nearly as dire. To meet soaring energy demand, we would need a massive influx of alternative fuels, which would mean equally massive investment - in the trillions of dollars - to ensure that the newest possibilities move rapidly from laboratory to full-scale commercial production; but that, sad to say, is not in the cards.
Aff- No L
Demand will increase even with wealthy nations reducing consumption Newsweek June 23, 2008 Learning From the Oil Shock; SECTION: ROBERT J. SAMUELSON; JUDGMENT CALLS; Pg. 39 Vol. 151 No. 25 ISSN But higher demand from developing countries and oil producers is offsetting the lower demand of wealthy countries. Consumption in these countries will rise 3 percent in 2008, or 1.2 million barrels a day, projects the International Energy Agency. Many of these countries subsidize fuel so that final customers are insulated from price increases. Gasoline is about 25 cents a gallon in Venezuela and about 60 cents in Saudi Arabia, Kuwait and Iran, notes Rubin. China also subsidizes fuel. ALTERNATE FUELS WON’T LOWER PRICES – FINDING AN ALTERNATIVE IS ESSENTIAL TO SOLVE THE OIL CRUNCH Business World 2008 [No end in sight to high fuel prices, lexis] While the government has stressed that indigenous and alternative fuels would ease market pressure from imported fuel, Energy department director Mario C. Marasigan yesterday admitted "They will not necessarily lower oil prices." "It's primarily to find alternatives to our [shrinking] supply. But cheaper alternatives can balance high prices of imported oil," he said. For today's launch, Mr. Marasigan said "The important thing here is that CNG is indigenous, it's our gas. There's no foreign exchange cost."
Aff- !- Dollar
High oil prices kill the value of the US dollar, killing US’s geopolitical dominance W Joseph Stroupe Nov 22, 2006 Russia tips the balance THE NEW WORLD OIL ORDER, Part 2 author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events http://www.atimes.com/atimes/central_asia/hk22ag01.html The dollar will begin to weaken as its international support and devotion wanes, or even sinks. As the dollar weakens, the price in dollars for everything the US imports will skyrocket, adding a powerful inflationary hit to the US economy. Along with the impending US recession, that will further weaken the dollar and likely its decline, or outright collapse, will feed on itself. As the dollar weakens and energy price volatility increases on the New York-London exchanges, producers will have further powerful incentive to switch their product offering to the non-dollar-denominated exchanges, where there will be greater stability and where they will not be forced to take payment for their products in the increasingly undesirable weakened dollar. The profound risks to the West as respects its ability then to secure access to sufficient energy resources should be self-evident. Left with a severely shrunken dollar-denominated pool of oil and gas, a pool that virtually only the West draws from, the viability of a potential targeted embargo will have increased exponentially. The globe's producers will be fully able to "throttle" the economies of the West by virtue of controlling how much of their oil and gas they sell into the dollar-denominated pool. This represents the nightmare scenario for the US. Perhaps the most disturbing aspect of this analysis is the fact that it is not based on any hypothetical conspiracy theory, but rather on solid economic and market principles and the increasingly ominous warnings of experts and informed leaders. Additionally, the key developments that are already pushing the world order to the eventuality described here, that of a full exploitation of the West's Achilles' heel by Russia and its global partners leading to a loss of the US global position of economic and geopolitical dominance, are already well established. Russia, in conceiving the new model of "international" energy security and a new global energy order, and in winning increasing numbers of key converts and adherents to its model, thereby defines and draws the circle of international energy security. Those inside the circle will achieve Russia's definition of "energy security", but those left outside will be left with little if any energy security by any definition.
Aff- !- Econ (1 of 2)
High oil prices collapse the economy Jennifer Yousfi Wednesday, June 25th, 2008 “Declining Russian Oil Production Could Lead to $200 Oil and “Global Recession,” Says Deutsche Bank” Managing Editor http://www.moneymorning.com/2008/06/25/declining-russian-oil-production-could-leadto-200-oil-and-global-recession-says-deutsche-bank/ Higher oil could lead to a worldwide economic collapse, according to a top analyst at Germany’s largest bank. "Two-hundred dollar oil would break the back of the global economy," Adam Sieminski, chief energy economist at Deutsche Bank AG (DB), told Bloomberg News in an interview yesterday (Wednesday) in Tokyo. "Next step after $200 would be global recession and bad news for everybody."Just a little over a year ago, $200 oil seemed out of the question. But the Deutsche Bank prediction of oilfueled global recession follows a Goldman Sachs Group Inc. (GS) forecast that oil might climb as high as $200 per barrel in two years. Keith Fitz-Gerald, Money Morning’s Investment Director - and one of the first global financial gurus to predict tripledigit oil prices - recently boosted his target price for crude oil from $187 to $225. "The math is really simple here," Fitz-Gerald said back in May, when oil futures were trading around $123 a barrel. "We are burning through supplies at a rate that’s four times to five times faster than we’re discovering new reserves," he said. "Throw in a few [surprises]… perhaps a terrorist event… and add in the accelerating use of oil and gasoline in Third World countries, and we have the recipe for far higher prices."Since the time of Fitz-Gerald’s prediction, oil has gone on to several new highs, nearly breaking through the $140 barrier on June 16, earlier this month. Russia’s Bubbling Oil Troubles Exacerbating the high oil prices are production problems in Russia, the world’s second largest oil exporter. Aging oil fields and a lack of infrastructure investment has led to the country’s first annual production decline in 10 years. Output fell 0.9% to 9.76 million barrels a day in the first five months 2008, Bloomberg
reported. "Growth last quarter fell on a year-on-year basis, and this has to do with the policies implemented over the prior year to raise taxes on oil industries," Deutsche Bank’s Sieminski said, speaking of Russia’s oil difficulties. "This made it difficult for foreign capital to come in." But "if Russia could reverse some of these policies and get their own oil industry back on, this will help very much" with supply concerns, he added. Fear of government corruption and takeover of assets has dissuaded some firms from seeking investment in Russia.
HIGH OIL PRICES WOULD TIP THE UNITED STATES INTO A RECESSION AND SLOW GLOBAL TRADE The International Herald Tribune 2008 [Oil price forecast: Up, then down, then up again, lexis] But with oil prices rising at an increasingly rapid rate over the past few months in conjunction with the U.S. housing market slump and credit squeeze, many economists wonder whether oil prices could tip the economy into a recession. A recession, of course, would curb oil demand. That would push oil prices right back down again, or so the theory goes, as fewer consumers drive to the mall, companies produce and ship less and world trade slows. ''If we are slowing down, we will not be buying as much goods from China and services from India,'' said Addison Armstrong, director for market research at Tradition Energy, an energy broker that deals with banks and hedge funds. ''My forecast for 2008 is that crude prices will average $75 a barrel, and that is based on a scenario of a slowing economy in the United States.'' HIGH OIL PRICES KILL THE ECONOMY New Delhi 2008 [An alternative scenario for oil, by Akash Prakash, June 25, http://www.businessstandard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=326997] Oil prices have now become the single-biggest issue facing the global economy. The long-term negative impact of the sharp surge in oil prices far exceeds any effects of the sub-prime crisis. High oil prices affect the poor disproportionately, and will increase global poverty. Unlike the credit crisis, it is not investment bankers but the man on the street who will feel the pinch. The rise in prices from $70 to near $140 a barrel will alone transfer in excess of $2 trillion from oil consumers to producers. Countries and politicians can no longer wait for or afford the luxury of markets finding their own equilibrium. We will see action of the type outlined above and more as policymakers are forced to try and engineer a reduction in oil prices. Current prices are causing too much political and economic damage across too many countries and the beginnings of action to reverse this rise are now visible. I think we have crossed the limits and the world will act through all the policy levers at its command, both obvious and unconventional. HIGH OIL PRICES KILL THE ECONOMY The International Herald Tribune 2008 [Scrambling for answers to oil shock; Decisions today will play out in 10 years; June 2, lexis] While the boom has helped major oil producing countries, particularly Russia and parts of the Middle East, there are signs that the major consumers - the economies of the United States and parts of Europe and Asia - are starting to crack under the strain. High prices are hitting motorists at the pumps, hobbling energy-intensive industries like airlines, freight and fishing and feeding broader inflation - alongside higher food prices - sparking protests and even riots around the world. ''The oil price is unsustainable,'' said James Hamilton, a professor of economics at the University of California at San Diego. ''I think we've reached the point now where we're starting to see significant responses from consumers.'' 44
Aff- !- Econ (2 of 2)
Economic collapse unlikely but continued inflation due to oil is bad for the global economy Times Anatole Kaletsky July 02, 2008 Oil prices key to economic recovery http://www.theaustralian.news.com.au/story/0,25197,23954826-30538,00.html The possibility of a serious US recession, which has dominated most media and market comment since the credit crunch began in America, is in my view the least plausible of these threats. Statistics suggest that the US economic slowdown is already at or near its low point and the risks of a serious recession are rapidly diminishing. GDP, consumption, industrial activity and employment have all been consistent with a fairly typical mid-cycle slowdown and none have fallen sufficiently to signal even a mild recession. Of course it is possible that the US economy will deteriorate in the months ahead, but this seems unlikely, given the huge tax cuts and interest rate reductions to which US consumers are likely to start responding in the second half of this year. But if a global recession is likely to be avoided, why are investors in such a funk? The answer is that most now see inflation as a much greater threat than recession. This makes sense, but only up to a point. The bad news is that inflation is much harder to cure than weak growth or unemployment because the remedies required -- higher interest rates and cuts in government spending -are painful to implement. The good news is that inflationary pressures in the US, Britain and the eurozone are still fairly weak -- and will get weaker in the year ahead, as house prices keep falling, consumption growth slows and unemployment drifts up. I suspect what really worries investors in the US and Europe is not really the likelihood of high inflation, but the risk that central banks will overreact to inflation fears. If central banks are paralysed by fears of igniting inflationary expectations they may stop supporting financial institutions through the credit crunch. This seems to be behind the panic selling of financial stocks. In addition, there is a growing worry that developing countries, including China, will be overwhelmed by inflation, like Italy and Britain in the 1970s, instead of learning to tame it as did Germany and Japan. A long period of disappointing performance from the developing countries would be a big shock to the world economy, since global growth depends increasingly on emerging markets. US consumption growth, while it is not collapsing, is bound to be much weaker in the next decade than it was in the last. What is ailing the world economy is now quite simple: it is $US140 oil. If investors come back to their senses, the oil price will fall back below $US100 after the northern summer and the second half of this year will prove less traumatic than the first. But in the unlikely event that oil is still trading above $US140 by the year-end, all bets are off on world economic prosperity.
Aff- !- Food Prices
High oil has spiked food prices and is causing instability that risks a global recession Caryle Murphy June 23, 2008 “Saudi Arabia to boost oil output. Will gas prices fall?” Correspondent of The Christian Science Monitor http://www.csmonitor.com/2008/0623/p06s02-wome.html Jeddah, Saudi Arabia - Saudi Arabia will produce more oil – if customers need it – the kingdom's oil minister promised Sunday. For the remainder of the year "Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July," Oil Minister Ali al-Naimi said at a rare meeting of the world's top energy officials in this Red Sea port town. The unusual gathering was called by the Saudis to draw up a plan of action to address the unprecedented rise of oil prices and to defuse what Saudi officials see as an alarming political backlash against oilexporting nations. Mr. Naimi also said Sunday that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure. "In addition, we have identified a series of future crude oil megaincrements totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development," he said. The world's biggest oil producer has already announced modest increases (300,000 barrels in June, and 200,000 in July) but those steps have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday. Politicians and financial analysts, however, say there is no quick fix for the coincidence of complex economic factors pushing oil prices up. "We [have] been 30 years digging ourselves into this hole, and this is not something we're going to be relieved of in any short term," US Energy Secretary Samuel Bodman told reporters here. Oil's soaring price has contributed to the spikes in food and transportation costs that have sparked angry street protests in places as diverse as Spain, Nepal, Indonesia, and Egypt. Americans are furious about $4-a-gallon gas, and airlines are abandoning low fares to cover higher fuel costs. Politicians in oil-consuming and oil-producing nations fear that rising prices could contribute to a global recession that would hurt all sides.
Aff- !- Free Trade (1 of 2)
High oil prices kill free trade Newsweek June 9, 2008 The Coming Energy Wars; Rana Foroohar; With Barrett Sheridan in New York WORLD AFFAIRS; Pg. 0 Vol. 151 No. 23 ISSN: 0163-7053 The threat has yet to be officially tallied; major financial institutions like Morgan Stanley have only just begun to seriously discuss the potential downgrades to the global economy should $200 oil become a reality. But already, it's clear that oil is catalyzing the threat of inflation in rich countries as well as poor. Inflation looks likely to be about 5 percent in the United States this summer, and about 3 percent in Europe. But in emerging economies, double-digit inflation could become the norm. "In America, it will feel like the opposite of the 1990s," says Morgan Stanley chief U.S. economist Richard Berner. "But if you think things won't be pleasant for industrial nations, think about developing economies, where people spend 50 percent of their income on food and fuel." Indeed, there's concern that as higher oil prices force many Asian economies to reduce or even cut their generous fuel subsidies, growth will slow sharply, and there could be social unrest as the world's poorest become more desperate. The political ramifications of this (which already include moves away from free trade), combined with the ever-rising costs of doing business as usual, could force a retrenchment from globalization. "It's a harbinger of the reversal of globalization," says Jeff Rubin, chief economist for CIBC World Markets. "At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, so that while Japan may continue to ship in goods from China, the United States will increasingly import from Latin America. "If you look at the period from 1973 to 1979 [when oil spiked] you'll find the same thing happened," he notes. "The share of imports to the U.S. from Latin America and the Caribbean rose by 6 percentage points. That was all about freight costs." Regionalism won't stop at trade. There will be new financial and service hubs in energy-rich areas like Russia, Latin America and the Gulf. Sovereign Wealth Funds will continue to buy up big chunks of Western banks and blue-chip companies, as well as investing more broadly in a new range of countries and currencies (which is likely to make forex movements stronger and more unpredictable). High prices reverse globalization by encouraging shifts towards regional trade Newsweek June 9, 2008 The Coming Energy Wars; Rana Foroohar; With Barrett Sheridan in New York WORLD AFFAIRS; Pg. 0 Vol. 151 No. 23 ISSN: 0163-7053 Oil drives so much of the global economy, it's almost impossible to fully imagine the world of $200 oil. No question, the shock will force nations to go greener much faster than now, particularly by conserving energy and developing and adopting new non-fossil fuels. But none of this can happen full stop in six to 24 months. So the predictions tend to be gloomy: some analysts see a shift toward regional trade, and even a major reversal of globalization itself, as rising transport costs make it too expensive to ship many kinds of goods long distances. A major acceleration in the transfer of wealth that has, in the past five years, shifted trillions of petrodollars from oil consumers to producers would alter the world balance of power--including a boost for the troublesome oil autocrats of Iran, Venezuela and Russia. At $200 a barrel the proven oil reserves of the six Gulf nations alone would rise in value to $95 trillion, about twice the size of public equity markets, according to Morgan Stanley managing director Stephen Jen. That would make the Sovereign Wealth Funds of oil states market kingmakers. Western efforts to press more openness on these funds, many controlled by royal courts, would surely grow. While some optimists believe the windfall could bring the Middle East into the modern world if it's smartly invested, that's a big if. Already many small states are struggling to wisely invest their oil windfall to date, and the corrupting curse of oil wealth is well known. Michael L. Ross, associate professor of political science at UCLA, notes that the percentage of the world's wars that take place in oil states is growing. The number of oil states is also rising--with Cambodia, East Timor and others joining the ranks--with more likely to follow as prices climb. Many of these newcomers are small, and ill equipped to cope with the corruption that often wastes the windfall.
Aff- !- Free Trade (2 of 2)
High Prices crush global trade Article published by: Heather Scoffield Globe and Updated May 27, 2008 http://www.supplychainnetwork.com/?p=330 (Writer for Globe Magazine, from article Will High Oil Prices Reverse Globalization?)
The rising price of oil is making international trade of heavy cargo prohibitively expensive, and acting as an incentive for importers to find products such as steel closer to home, new research by CIBC World Markets shows.
For heavy products, rising shipping costs are eroding the low-wage advantage of China over North America, say chief economist Jeff Rubin and senior economist Benjamin Tal. If oil prices continue to rise, the soaring cost of global transport will act like a major tariff barrier and lead to a substantial slow down in international trade, they argue. “Globalization
is reversible,” they state.
Oil passed $133 (U.S.) a barrel on Monday, and Mr. Rubin forecasts the price will average $106 this year, $130 next year, $150 in 2010 and $225 by 2012.
the cost of oil is the equivalent of imposing a tariff rate of about nine per cent on goods coming into the United States. At $150 a barrel, transport costs act like a tariff of 11 per cent. And at $200, all the trade liberalization efforts of the past 30 years are reversed, Mr. Rubin said.
Aff- !- Manufacturing- U
MANUFACTURING SECTION IS DOING POORLY American Machinist 2008 [05/08/, No growth in manufacturing sector while overall economy grows, http://www.americanmachinist.com/304/News/Article/False/80210/] Manufacturing failed to grow for the third consecutive month in April as the PMI registered 48.6 percent, the same as in March. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting at this time. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (49.1 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for April (48.6 percent) is annualized, it corresponds to a 2.4 percent increase in real GDP annually."
Aff- !- Regional War
High prices fuel hezbullah, neocolonial actions, regional wars, environmental problems and nationalization Newsweek June 9, 2008 The Coming Energy Wars; Rana Foroohar; With Barrett Sheridan in New York WORLD AFFAIRS; Pg. 0 Vol. 151 No. 23 ISSN: 0163-7053 The rise of the Sovereign Wealth Funds has already triggered a protectionist backlash, including U.S. moves to step up the vetting of foreign investors in American firms. Worse conflicts are possible. "As areas like the Mideast and Africa, Russia and Venezuela continue to rise, you're going to see increasing energy greed, aggressive behaviors and neocolonial actions on the part of various countries," predicts Scott Nyquist, the head of McKinsey's energy practice. As Iran gets richer, Hizbullah might get stronger. China will clearly wield more might in Africa. Western ideas about civil society, the environment and women's rights could be displaced with new sets of values. More blood will almost certainly be spilled. Oil wealth tends to wreak havoc on a nation's economy and politics, discouraging diversity, aggravating ethnic grievances and making it easier to fund insurgencies. Oil countries now host about a third of the world's civil wars, up from one fifth in 1992. "There's a vicious cycle, which you can see played out in places like Iraq and Nigeria, where conflict fuels higher prices, and higher prices in turn fuel conflict," says UCLA's Ross. The lack of any spare capacity in the global pipeline makes it difficult to solve such situations with sanctions; taking any oil off the market would, at this point, merely ignite an already explosive situation. The megatrends fueling the global supply shortage tend to feed on one another. Higher prices fuel the growing tendency of oil states like Russia and Venezuela to re-nationalize fields. That often leads to lower output, due to the inefficiency of most state oil companies, notes Sanford Bernstein analyst Ben Dell. The publicly traded companies have to go where they can. As fields in peaceful places (Alaska, the North Sea) are tapped out, the hunt for new oil has moved into conflict zones (Nigeria and Angola) or geologically extreme territory (Siberia, the deep sea).
Aff- !- Resource Wars (1 of 3)
Oil will run short by 2015 and massive conflicts will arise because of this Michael Meacher guardian.co.uk, Sunday June 29, 2008 “The era of oil wars Growing competition for oil may escalate to something as hot and dangerous as nuclear proliferation” http://www.guardian.co.uk/commentisfree/2008/jun/29/oil.oilandgascompanies
Gordon Brown meeting Britain's oil chiefs to discuss higher North Sea output to bring down prices is prompted by oil prices hitting a record high of $135 a barrel, twice as high as a year ago and a staggering 12 times higher than a decade ago. The well-sourced website petrolprices.com is now predicting that petrol will reach £1.50 a litre by September, just 4 months away. Jeff Rubin of CIBC World Markets is forecasting "oil prices almost doubling over the next five years". That would mean $270 a barrel by 2013. It perhaps explains why the government is now strongly backing BP to get a big new slice of the oil drilling licences soon to be issued in Iraq, and – astonishingly – has now also made clear it intends to annex a third of a million square miles of the seabed off Antarctica to pre-empt any rights to the oil it may contain. The fight for oil has begun in earnest. But is there the oil to go round? The
authoritative International Energy Agency foresees an oil supply crunch within 5 years forcing up prices to unprecedented levels and greatly increasing western dependence on Opec. And the oil industry itself in its own report Facing the Hard Truths about Energy, produced by 175 authorities including all the heads of the world's big oil companies, for the first time predicted that oil and gas may run short by 2015. The geopolitical implications of this gathering crisis for world oil supply 2010-15 are immense. The risk of further military interventions and conflicts in the Middle East is clearly high. Total world oil reserves are estimated at 2.5-2.9 trillion barrels, of which half has now been already consumed, while half of the 51 oilproducing countries reported output declines in 2006. Non-Opec production is expected to peak and decline within the next five years, driven mainly by burgeoning demand from China and the US, together with restricted output from Iraq. Then in the following five years Opec's diminishing spare capacity will probably become increasingly unable to accommodate shortterm fluctuations, depending on how fast world demand grows and how extensively Opec invests in new capacity. The latter may well not raise production capacity high enough or quickly enough, whether for political reasons or because internal decision-making is too slow or the security environment too hostile. There are of course exits from this doom-stricken scenario, though none is
at all credible. First, discovery of major new oilfields could alter the picture. However, though billions have been spent on the search for new fields, discovery peaked in the mid-1960s and the last big ones were found in the 1970s. Only Iraq has undeveloped super-giant oilfields – at West Qurna, Athabascan tar sands (from Alberta, Canada), extra-heavy oil (from the Orinoco belt in Venezuela), oil shale, and mature source rocks. But the almost insurmountable problem is recoverability, whether poor quality oil (extra-heavy oil), poor quality reservoirs (oil from source rocks), or both (oil shale). Worse, production may be uneconomic because of a very low net energy gain, ie it requires almost as much energy to extract the oil as is made available for subsequent use. And the enormous hike in greenhouse gases generated could produce a turbo climate change effect that would wipe out any benefit from a global post-Kyoto agreement. But even if supply constraints are ineluctable as the explosion of Chinese growth coincides with falling non-Opec oil production and the beginnings of a slow but remorseless slippage in Opec capacity.
Oil shortages will create escalating resource wars Michael Meacher guardian.co.uk, Sunday June 29, 2008 “The era of oil wars Growing competition for oil may escalate to something as hot and dangerous as nuclear proliferation” http://www.guardian.co.uk/commentisfree/2008/jun/29/oil.oilandgascompanies What is most disturbing of all is that the big powers, so far from seeking major adjustments of their energy policies on either the supply or demand fronts or making a major switch into renewables, are actually massively intensifying their competitive struggle short-term for the limited oil reserves left. Despite an unwinnable war in Iraq, the US is still constructing at least five large permanent military bases there in order, according to evidence given to a US Congressional Committee, to control access to Gulf oil, including in Saudi and Iran. As one neocon recently put it, "one of the reasons we had no exit plan from Iraq is that we didn't intend to leave". The US is also trying to force through a new Iraqi oil law that would give western, primarily American, oil multinationals control of Iraqi oilfields for the next 30 years. The US maintains 737 military bases in 130 countries under cover of the "war on terror" to defend American economic interests, particularly access to oil. The principal objective for the continued existence and expansion of Nato post-cold war is the encirclement of Russia and the pre-emption of China dominating access to oil and gas in the Caspian Sea and Middle East regions. It is only the beginning of the unannounced titanic global resource struggle between the US and China, the world's largest importers of oil (China overtook Japan in 2003). Islam
has been dragged into this tussle because it is in the Islamic world where most of these resources lie, but Islam is only a secondary player. In the case of Russia, the recent pronounced stepping up of western attacks on Putin and claims he is undermining democracy are ultimately aimed at securing a pro-western government there, and access to Russian oil and gas when Russia has more of these two hydrocarbons together than any other country in the world. The struggle has also spilled over into West Africa, reckoned to hold some 66 billion barrels of oil typically low in sulphur and thus ideal for refining. In 2005 the US imported more oil from the Gulf of Guinea than from Saudi and Kuwait combined, and is expected over the next 10 years to import more oil from Africa than from the Middle East. In step with this, the Pentagon is setting up a new unified military command for the continent named Africom. Conversely, Angola is now China's main supplier of crude oil, overtaking Saudi Arabia last year. There is no doubt that Africom, which will greatly increase the US military presence in Africa, is aimed at the growing conflict with China over oil supplies. As Joe Lieberman, former US presidential candidate, put it, efforts by the US and China to use imports to
meet growing demand "may escalate competition for oil to something as hot and dangerous as the nuclear arms race between the US and the Soviet Union". 51
Aff- !- Resource Wars (2 of 3)
Energy reliance escalates into regional conflicts, arms wars and draw in larger powers Michael T Klare Apr 17, 2008 The rise of the new energy world order http://www.atimes.com/atimes/Global_Economy/JD17Dj04.html A growing risk of conflict. Throughout history, major shifts in power have normally been accompanied by violence - in some cases, protracted violent upheavals. Either states at the pinnacle of power have struggled to prevent the loss of their privileged status, or challengers have fought to topple those at the top of the heap. Will that happen now? Will energy-deficit states launch campaigns to wrest the oil and gas reserves of surplus states from their control - the George W Bush administration's war in Iraq might already be thought of as one such attempt or to eliminate competitors among their deficit-state rivals? The high costs and risks of modern warfare are well known and there is a widespread perception that energy problems can best be solved through economic means, not military ones. Nevertheless, the major powers are employing military means in their efforts to gain advantage in the global struggle for energy, and no one should be deluded on the subject. These endeavors could easily enough lead to unintended escalation and conflict. One conspicuous use of military means in the pursuit of energy is obviously the regular transfer of arms and militarysupport services by the major energy-importing states to their principal suppliers. Both the United States and China, for example, have stepped up their deliveries of arms and equipment to oil-producing states like Angola, Nigeria and Sudan in Africa and, in the Caspian Sea basin, Azerbaijan, Kazakhstan and Kyrgyzstan. The United States has placed particular emphasis on suppressing the armed insurgency in the vital Niger Delta region of Nigeria, where most of the country's oil is produced; Beijing has emphasized arms aid to Sudan, where Chinese-led oil operations are threatened by insurgencies in both the South and Darfur. Russia is also using arms transfers as an instrument in its efforts to gain influence in the major oil- and gas-producing regions of the Caspian Sea basin and the Persian Gulf. Its urge is not to procure energy for its own use, but to dominate the flow of energy to others. In particular, Moscow seeks a monopoly on the transportation of Central Asian gas to Europe via Gazprom's vast pipeline network; it also wants to tap into Iran's mammoth gas fields, further cementing Russia's control over the trade in natural gas. The danger, of course, is that such endeavors, multiplied over time, will provoke regional arms races, exacerbate regional tensions and increase the danger of great-power involvement in any local conflicts that erupt. History has all too many examples of such miscalculations leading to wars that spiral out of control. Think of the years leading up to World War I. In fact, Central Asia and the Caspian today, with their multiple ethnic disorders and great-power rivalries, bear more than a glancing resemblance to the Balkans in the years leading up to 1914. What this adds up to is simple and sobering: the end of the world as you've known it. In the new, energy-centric world we have all now entered, the price of oil will dominate our lives and power will reside in the hands of those who control its global distribution. Supply is not growing as fast as demand which creates fierce competition between buyers Michael T Klare Apr 17, 2008 The rise of the new energy world order http://www.atimes.com/atimes/Global_Economy/JD17Dj04.html An increase of this sort would not be a matter of deep anxiety if the world's primary energy suppliers were capable of producing the needed additional fuels. Instead, we face a frightening reality: a marked slowdown in the expansion of global energy supplies just as demand rises precipitously. These supplies are not exactly disappearing - though that will occur sooner or later - but they are not growing fast enough to satisfy soaring global demand. The combination of rising demand, the emergence of powerful new energy consumers, and the contraction of the global energy supply is demolishing the energy-abundant world we are familiar with and creating in its place a new world order. Think of it as rising powers/shrinking planet. This new world order will be characterized by fierce international competition for dwindling stocks of oil, natural gas, coal and uranium, as well as by a tidal shift in power and wealth from energy-deficit states like China, Japan and the United States to energy-surplus states like Russia, Saudi Arabia and Venezuela. In the process, the lives of everyone will be affected in one way or another - with poor and middle-class consumers in the energy-deficit states experiencing the harshest effects. That's most of us and our children, in case you hadn't quite taken it in.
Aff- !- Resource Wars (3 of 3)
Oil will begin to decline within the decade Michael T Klare Apr 17, 2008 The rise of the new energy world order http://www.atimes.com/atimes/Global_Economy/JD17Dj04.html The insufficiency of primary energy supplies. The capacity of the global energy industry to satisfy demand is shrinking. By all accounts, the global supply of oil will expand for perhaps another half decade before reaching a peak and beginning to decline, while supplies of natural gas, coal and uranium will probably grow for another decade or two before peaking and commencing their own inevitable declines. In the meantime, global supplies of these existing fuels will prove incapable of reaching the elevated levels demanded. Take oil. The US DoE claims that world oil demand, expected to reach 117.6 million barrels per day in 2030, will be matched by a supply that - miracle of miracles - will hit exactly 117.7 million barrels (including petroleum liquids derived from allied substances like natural gas and Canadian tar sands) at the same time. Most energy professionals, however, consider this estimate highly unrealistic. "One hundred million barrels is now in my view an optimistic case," the chief executive officer of Total, Christophe de Margerie, typically told a London oil conference in October 2007. "It is not my view; it is the industry view, or the view of those who like to speak clearly, honestly, and [are] not just trying to please people." Similarly, the authors of the Medium-Term Oil Market Report, published in July 2007 by the International Energy Agency, an affiliate of the Organization for Economic Cooperation and Development, concluded that world oil output might hit 96 million barrels per day by 2012, but was unlikely to go much beyond that as a dearth of new discoveries made future growth impossible. Oil nationalization is exacerbating the conflicts of the energy crisis W Joseph Stroupe Nov 22, 2006 Russia tips the balance THE NEW WORLD OIL ORDER, Part 2 author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events http://www.atimes.com/atimes/central_asia/hk22ag01.html Professor Peter Odell, quoted in Part 1 of this report, alluded to this danger when he warned that Russia's oil grab presented an impending threat to the energy supplies of the West. The issue here is control of the production of oil and gas fields, and therefore where and to whom that production will be offered - within the open, liberal US-led model or within the rival, more rigid and private Russian-led one. The global production and profits of the West's international oil majors are still very high. However, behind that facade of apparent market control and dominance lurks the specter of an impending, perhaps precipitous, collapse of the role and leverage of those oil majors the West relies on for its energy security. In The Observer of London on October 29, in an article titled "Big oil may have to get even bigger to survive", the author notes that the West's international oil majors are in real trouble as regards the collapsing of their control over global energy reserves and face a global wave of nationalization, forced renegotiation of existing agreements, inability to get access to new exploration and production acreage and rising taxes. It is a caustic mix that is dissolving the glue that holds together the US-backed oil order. As the oil majors produce oil for the market, they must replace their reserves. In 1997 they were able to replace 140% of their reserves, but in 2005 they were able to replace far less - only 75%. Consequently, they are rapidly shrinking while the state-owned companies around the globe are rapidly expanding as respects market dominance as measured by the crucial parameter of control of reserves. Furthermore, the mounting global wave of oil-sector nationalization that is pushing international oil majors on to the sidelines as respects control of reserves could easily and quickly take an even more ominous turn - cutting significantly into the current production capabilities of the oil majors and placing the energy security of the US in acute jeopardy. Assumptions that such a scenario deserves little worry and attention are not valid or safe in the environment of ever more nationalistic leanings on the part of the oil-producing regimes around the globe and the specter of forced renegotiations of PSAs (production sharing agreements) and cancellations of operating licenses. What applies to production acreage also applies to exploration acreage, and access to and control over both are being massively forfeited by the West and its oil majors. Foreign investment in energy-producing enterprises and acreage is being severely restricted as a result, and this ensures strategically tight global supply, further exacerbating the mounting energy security misfortunes of the West. This is because in the absence of abundant global supply the West has no viable means to counteract the locking up of increasing amounts of the global supply by Russia's new model.
Aff- !- Russia- Dem ! T/ (1 of 2)
Medvedev is moving away from authoritarianism AP Press July 4 2008 G-8 summit gives chance to gauge Medvedev's power By STEVE GUTTERMAN – 1 day ago http://ap.google.com/article/ALeqM5gl8RfrQ_n1ITvpKwM7nq2G87tJ7AD91N676G0 In an interview with journalists from G-8 countries published Thursday, he suggested that he — not Putin — is the man in charge. Medvedev paid tribute to Putin as an "experienced person, a very popular politician" to whom he can go for advice. "But in the end you have to make the decision yourself," Medvedev said. "And if it's the wrong decision, you'll answer for it yourself." Dmitry Trenin, a senior associate at the Carnegie Moscow Center, said Medvedev "clearly sees foreign policy as his fiefdom, and Putin is actually playing ball with him on that." Medvedev's emphasis on the sanctity of freedom and the rule of law has led to Western expectations that he will be more sympathetic to democracy and easier to deal with than the tough-talking Putin. Lowering oil prices key to Russian democracy Ivan Krastev 13 - 06 - 2006 “The energy route to Russia democracy” chair of the Centre for Liberal Strategies in Sofia, Bulgaria, executive director of the International Commission on the Balkans http://www.opendemocracy.net/globalizationinstitutions_government/democracy_energy_3637.jsp If the American vice-president reads the democracy ranking in the Nations in Transit 2006 survey he will learn that in Kazakhstan there is even less freedom than in Russia. But what senior members of the American administration are reading these days is not reports of human-rights organisations but reports on the US's energy-resource balance. The result is a policy that is at the same time morally appalling and strategically wrong. So, the "second law of petropolitics" (pace Thomas Friedman) is that the price of oil and the will of democratic governments to promote democracy in energy-rich states always move in opposite directions. Now, it is clear that the democratisation of Russia is preconditioned on the fall of the price of gas and oil and the demonopolisation of the Russian energy sector. The success of the west in overcoming its oil and gas dependency and moving towards renewable-energy sources will be the one and only indicator of the success of Europe's democracy-promotion policies. Talking democracy without fighting high oil prices does not make sense any longer. The European Union's democracy-promotion effort will have results only if it is combined with a common EU energy policy. A coalition composed of old cold warriors, western-funded NGOs and freedom-loving youth is no longer capable of bringing democracy to Russia; a new, effective coalition needs to be more of an eclectic mixture of environmentalists, business leaders and innovative scientists. In this context, Vladimir Putin is absolutely right to believe that the only real challenge that he faces is not from within Russian society but from outside. Where Putin is wrong is in fearing the spectre of an "orange revolution" that could be exported to Russia. What he should be afraid of is a green revolution in the west. Only when the price of oil falls in the west will freedom rise in Russia. So, if you want to see Russia free and democratic, stop signing anti-Putin petitions and voting for hardline anti-communists. This will change nothing. What you should do is to turn down the lights when you leave your apartment, sell your American car and start using public transport. The fight for democracy today is a fight against the tyrannical price of oil. A Democratic Russia is the only way to stop regional wars and deter proliferation Michael McFaul 2001“Pull Russia West” the Peter and Helen Bing Senior Fellow at the Hoover Institution. He is also a professor of political
science at Stanford. An expert on international relations, Russian politics, political and economic reform in post-communist countries, and U.S. foreign policy, he is director of the Center on Democracy, Development, and Rule of Law at the Freeman Spogli Institute, where he also serves as deputy director. http://www.hoover.org/publications/digest/3475486.html
Since coming to office, President Bush has made real progress in challenging some of the lingering legacies of the Cold War. He has advanced a vision of defending U.S. national security interests that is not constrained by Cold War logic and agreements. Mr. Bush’s new approach to international security issues has yielded real results—including most notably President Putin’s agreement in July to rethink Russia’s categorical rejection of missile defense systems.
But to end the Cold War totally will require Bush to advance new thinking on the other major legacy of that era—the divide between rich and poor, democratic and autocratic, NATO and non-NATO—that still separates Europe into East and West. This final remnant of the Cold War will disappear only when
Russia becomes a democracy, fully integrated into Western institutions. Unfortunately, the promotion of Russian democracy has taken a back seat to arms control. In the long run, this is a bad trade for American security interests.
Bush is our first truly post–Cold War president. Before becoming president, even Bill Clinton worried about multiple warheads on Soviet ICBMs, pondered communist expansion in Asia, and was curious enough about the Soviet Union to travel there. Bush was doing other things during the Cold War. My guess is that he never met a "Soviet" citizen. Unlike most of his foreign-policy advisers, who made their careers fighting the Cold War, Bush’s thinking is unencumbered by a past era.
Aff- !- Russia- Dem ! T/ (2 of 2)
For many, this lack of experience is frightening. Yet Bush’s lack of baggage also presents opportunities. Twelve years after the fall of the Berlin Wall, and 10 years after the Soviet Union broke up, it is striking how many Cold War practices continue. Tens of thousands of U.S. troops remain in Germany, Pentagon war plans still aim to destroy with nuclear missiles Russian military plants (many of which are long out of business), and U.S. and Russian heads of state still meet to discuss arms control.
"The best defense against a hostile Russia in the future? Promoting Russian democracy and integration into the West now."
Bush’s willingness to think beyond the Cold War must be applauded. Already, he has compelled everyone to rethink the strategic equation between offensive and defensive weapons systems. Although still unwilling to discuss concrete numbers, Bush has reiterated his campaign promise to reduce—unilaterally, if necessary—the number of nuclear warheads in the U.S. arsenal. In agreeing with Putin this past July to link the discussion of these reductions with consultations about defense systems, Bush has moved closer to convincing the Russians that his plans for missile defense need not threaten their security. But getting Russian acquiescence on this new equation is the easy part of dismantling Cold War legacies. After all, Presidents Yeltsin and Clinton agreed years ago that nuclear arsenals should be reduced far below levels agreed to in Start II. And despite all the posturing, Putin and his security officials don’t really believe that the Anti-Ballistic Missile Treaty is the "cornerstone" of strategic stability between the United States and Russia. They rightly have calculated that even the most robust U.S. missile defense system will not make nuclear deterrence obsolete. Most important, Russian government officials know that a U.S. missile defense system is a tool of limited utility in most foreign and security policy issues. And that’s the problem with Bush’s current policy toward Russia. By focusing almost exclusively on securing Russian acquiescence to missile defense and U.S. withdrawal from the ABM treaty, Bush has devoted almost no attention to the most important issue in U.S.-Russian relations— Russian democracy and Russian integration into the West.
If Russia becomes a full-blown dictatorship in the next 10 years, a U.S. missile defense system will be a rather useless weapon in the arsenal for dealing with an enemy Russia. If, in this worst-case scenario, autocratic Russia decides to invade NATO member Latvia, destabilize the Georgian government, or trade nuclear weapons with Iran, Iraq, or China, our missile defense system will do little to deter these hostile acts against U.S. national interests. "If Bush can nudge Putin in a more democratic direction, then he will be remembered as the president who dispelled the last lingering elements of the Cold War." The best defense against these potential hostile acts is to promote Russian democracy and integration into the West now. If Russia becomes a full-blown democracy in the next 10 years, then the prospects for conflict between the United States and Russia, be it over the Latvian border or the balance of nuclear weapons, will be reduced dramatically. A democratic Russia moving toward entry into the European Union and even NATO will also make possible the unification of Europe and the final disappearance of East-West walls (be it through visa regimes or military alliances) that still divide Europe.
Aff- !- Russia- U
Russia’s new president is moving towards democracy AP Press July 6 2008 Vogel: We must respect Russia, engage China
The Yomiuri Shimbunhttp://www.yomiuri.co.jp/dy/world/20080706TDY08002.htm
Currently, Russia has an unprecedented dual power structure--Vladimir Putin as prime minister and Dmitry Medvedev as president. Do you think democratization will begin in the near future, or will the trend toward a police state and oppression of mass media that started in Putin's period continue? It is difficult to say that Mr. Putin promotes full-fledged democracy, but we have to acknowledge that it is Mr. Putin who has brought Russia back to a more stabilized and better governed state than before. How the relationship between Mr. Putin and Mr. Medvedev will develop is very difficult to foresee. But if it is true that the new Russian president wants to realize more freedom of the press, more democracy and more independence of the judiciary, the other democracies should support him.
Russian political system brittle – could collapse
Andrew Kuchins, senior fellow and director of the CSIS Russia and Eurasia Program, December 2007, Alternative Futures for Russia to 2017, http://www.csis.org/media/csis/pubs/071214-russia_2017-web.pdf After a brief period of weakly institutionalized and highly kleptocratic democracy, the Russian political system has reverted to a more familiar type, brilliantly described by the historian Richard Pipes as patrimonial authoritarianism. In its current incarnation under Vladimir Putin, all political institutions outside the Kremlin’s centralized authority are weak: weak parliament, weak political parties, weak legal system, weak regional governments, weak civil society, etc. When the Kremlin’s coffers are full, as they are today, it is able to buy and/or intimidate all other potential competitors and appear strong, just as Putin’s government does now. But such systems are inherently unstable and vulnerable to internal and external shocks. Less than three years ago after a terrible succession of terrorist acts, a foreign policy fiasco in Ukraine, and a bungled social welfare reform effort, the Kremlin appeared weak and on the defensive. While the image projected today is far stronger, the reality is that the system remains brittle and top heavy.
Aff- !- Russia- Prices Key
High oil causes authoritarianism and destroys democracy Ivan Krastev 13 - 06 - 2006 “The energy route to Russia democracy” chair of the Centre for Liberal Strategies in Sofia, Bulgaria, executive director of the International Commission on the Balkans http://www.opendemocracy.net/globalizationinstitutions_government/democracy_energy_3637.jsp In an attempt to explain the Russian revolution to Lady Ottoline Morrell, Bertrand Russell once remarked that, appalling though Bolshevik despotism was, it seemed the right sort of government for Russia: "If you ask yourself how Fyodor Dostoevsky's characters should be governed, you will understand". In explaining the recent resurgence of authoritarianism in Russia one does not need to reread Dostoevsky or draw on the Bolshevik legacy. It is enough to take into account the rise of the price of oil. At least this is what one might think when reading the new Freedom House study Nations in Transit 2006 (released on 13 June 2006 in Berlin) that rates the democratic performance in twenty-seven countries in the European Union and its eastern neighbourhood. The study shows that the skyrocketing of oil prices in the last year has led to deteriorating governance standards, restrictions on media and the judiciary, and rising corruption in all four energy-rich countries of the former Soviet Union – Russia, Turkmenistan, Kazakhstan and Azerbaijan. The study is a powerful illustration of Thomas Friedman's "first law of petropolitics" formulated in Foreign Policy magazine (March/April 2006 [subscription only]). According to this law "the price of oil and the pace of freedom always move in the opposite direction in oil-rich petrolist states". It follows that the worst enemy of Russian democracy is not the Kremlin or oligarchs but the high price of oil. The soaring price of oil has made the energy-rich post-Soviet states more powerful, less democratic and more corrupt. The oil money that has floated the state budget dramatically decreases Russian state dependence both on foreign funding and on the taxes collected from its citizens. Russia's reliance on western credits has turned into Europe's reliance on Russian oil and gas. The result is that Russia does not want to be lectured any more; she wants to lecture. High oil prices increase nationalism Ivan Krastev 13 - 06 - 2006 “The energy route to Russia democracy” chair of the Centre for Liberal Strategies in Sofia, Bulgaria, executive director of the International Commission on the Balkans http://www.opendemocracy.net/globalizationinstitutions_government/democracy_energy_3637.jsp Now when the Russian government has more money than it knows how to spend, the Russian government has lost interest in improving the quality of its governance, and concentrates instead on deciding whom to buy and whom to leave in the cold. More money means larger and better client networks. But even more important – the high price of oil has given birth to a new state ideology – oil nationalism. "We, the people" has been transformed into "We, the people who have oil". The country's oil is at the core of the new Russian state identity. Oil, not history or culture, is at the heart of Russia's claim to great-power status. It is oil that makes Russians feel powerful, special and privileged. Any criticism of the government is simply dismissed as an attempt by foreigners to put their hands on Russian oil. The combination of the "orange" fears of the elites and the new price of oil has produced a real regime change in Russia. In less than two decades Russia has been transformed from a communist one-party state into an oligarchic one-pipeline state. The monopoly of power is now fixed not in any article of the constitution but in the legislation regulating the use of the energy infrastructure. When at the most recent European Union-Russia summit, at Sochi in May 2006, Gazprom rejected EU demands for Russia to open its pipeline network to access by independent producers and other countries, this was a declaration of the new Russian philosophy of power. The western response to the rise of Russia as a non-democratic energy superpower is a mixture of indignation, fear and double-standard politics. The visit in May of the United States vice-president Dick Cheney in Lithuania is a disturbing illustration of this new reality. Cheney went to Vilnius where he ferociously attacked Russia's democratic record; the next day he flew to Kazakhstan and praised Nursultan Nazarbayev for stabilising his country
Aff- !- Russia- Econ- Resilient
Russia can stand price drops as low as 50$ a barrel Russian News & Information Agency 01/ 04/ 2008 “High oil prices bring Russia extra $475 bln in past 8 years” http://en.rian.ru/russia/20080401/102669349.html Russia received an additional $475 billion in revenue as a result of high global oil prices between 2000 and 2007, the finance minister said on Tuesday. Alexei Kudrin said that in 2000, the Russian government predicted average world oil prices at just $20 per barrel based on figures over the past decade. "Since then, oil price growth enabled Russia to receive an extra $475 billion in revenue from 2000 to 2007, of which $340 billion or 72% was paid to the budget," Kudrin said. Global oil prices are currently hovering at just over $100 per barrel. The Russian economy can withstand an oil price plunge to $50 per barrel, VicePremier Alexander Zhukov said. Naturally, a sharp decline in world oil prices would negatively affect the Russian economy and the country's economic growth but nothing disastrous would happen, Zhukov said, adding that the macro-economic situation in Russia was stable enough. "Russia currently has Europe's lowest ratio between foreign debt and international reserves, which have reached half a trillion U.S. dollars," Zhukov said.
Aff- !- Russia- Hege (1 of 2)
Russia uses high oil to undermine US hegemony W Joseph Stroupe Nov 22, 2006 Russia attacks the West's Achilles' heel THE NEW WORLD OIL ORDER, author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events Magazine Part 1 http://www.atimes.com/atimes/central_asia/hk22ag01.html Russia has found the Achilles' heel of the US colossus. In concert with its oil-producing partners and the rising powerhouse economies of the East, Russia is altering the foundations of the current US-led liberal global oil-market order, insidiously working to undermine its US-centric nature and slanting it toward serving first and foremost the energy-security needs and the geopolitical aspirations of the rising East.
All this is at the impending incalculable expense of the West. What is increasingly at stake is secure US access to global energy resources - strategic US energy security - because the West's traditional control respecting those global resources is seriously faltering in the face of the compelling strategies undertaken by Russia and its global partners. The US giant is increasingly at risk as it faces what is gradually but now more widely being recognized as Russia's clever exploitation of US foreign energy dependency and the hemorrhaging of its all-important economic-geopolitical capital: its traditional global energy leadership and dominance via its onetime virtually all-pervasive oil majors.
US Senator Richard Lugar, who recently labeled Russia an "adversarial regime" that increasingly uses its growing energy dominance as a powerful geopolitical weapon, has warned of economic "catastrophe" for the United States, notwithstanding its status as a superpower. Consequently, informed and reasoned leaders such as Lugar increasingly see the US in energy-based jeopardy. Such leaders clearly do not put blind trust in the conventional wisdom that keeps insisting the US giant has no Achilles' heel and is virtually immune to the efforts on the part of comparatively smaller powers such as Russia and its partners to undermine the current US global position of supremacy.
Backing up the mounting concerns of such leaders as Lugar, as reported on October 1 by The Guardian Unlimited, widely respected energy economist Professor Peter Odell, who was an adviser to Tony Benn, the British energy minister in the late 1970s, and who has since worked for a host of different foreign governments, said he was not being alarmist or controversial when he recently warned that the West was at imminent risk of losing access to global energy
resources as a result of Russia's global oil grab. High oil prices allow Russia to change the economic system threatening the West’s very survival W Joseph Stroupe Nov 22, 2006 Russia attacks the West's Achilles' heel THE NEW WORLD OIL ORDER, author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events Magazine Part 1 http://www.atimes.com/atimes/central_asia/hk22ag01.html Under the new market arrangement, nearly all oil became highly visible and instantly accessible because the traditional long-term supply contracts became the minor factor while the spot markets and highly liquid oil-futures contracts became the major factors. In effect, this radically raised the visibility, accessibility and fungibility of global oil supplies to unheard-of heights and made it possible for oil lost for some reason in one part of the market to be easily, naturally and almost instantly replaced by oil from another part of the market.
In effect, the new exchanges facilitated the creation of one virtual global pool of oil denominated in US dollars into which nearly all exporters sell their oil and out of which nearly all importers purchase oil, all on a daily basis. A discrete global pool of oil does not physically exist anywhere on the planet, of course. But it does exist in a virtual sense, powerfully mimicking a literal global pool of oil, because the structure and presence of the new exchanges and the global adherence and devotion to them ensures that oil is bought, sold and delivered largely as if such a pool literally exists. And the global dominance of the West's oil majors, whose task it has been to capture global oil
supplies for full incorporation into the new US-led liberal global oil-market order, has been the key factor perpetuating the global dominance of that order.
As long as the Western oil majors hold global sway and the US-backed liberal order is globally adhered to, therefore, any attempt to target the US with an oil embargo, as by the efforts of an exporter or group of exporters refusing to sell to the US, would fail miserably because the US would merely draw oil elsewhere from the global pool to suffice its needs. Importantly, the US and Britain accomplished two goals of profound importance and value with the creation of their new liberalized global oil-market order. First, they prevented the enacting of any targeted oil embargo, and they greatly enhanced the leverage of the West's oil majors, their de facto state sponsors and the West's financial institutions in the new market arrangement while simultaneously fundamentally undermining the leverage of producers, thus powerfully bolstering the strategic energy security of the West.
Second, they consolidated and powerfully solidified the role of the US dollar as the unquestioned international currency, since the one virtual global pool of oil created and maintained by the new liberalized market order is denominated in US dollars alone. But it is crucial to understand that the West's immunity from a targeted embargo is assured only as long as the current liberal, highly liquid US-led global oil market is unwaveringly adhered to. Once the movers and shakers (now Russia and its producing and consuming partners) begin again to revert to the rigid bilateral long-term supply contracts conducted privately between producers and consumers, thereby incrementally altering the foundations of the global oil-market order by decreasing its level of liquidity, then the real potential for a revoking of a significant measure of oil's fungibility exists. This means that the ability to enact an effective targeted embargo is once again incrementally revived. A meaningful loss of fungibility of oil would spell potential economic-geopolitical doom for the West. This is the Achilles' heel of the West. As we shall see, it is that very Achilles' heel Russia and its partners have found and are already energetically exploiting in a bid to shift the US colossus out of its current position of global dominance. Swiftly mounting anxiety on the part of increasing numbers of the globe's key energy-hungry economies in the East as respects energy security is already fueling incremental abandonment and circumvention of the US-dominated liberal global oil market. 59
Aff- !- Russia- Hege (2 of 2)
Russia will use high oil prices to undermine US dominance W Joseph Stroupe Nov 22, 2006 Russia tips the balance THE NEW WORLD OIL ORDER, Part 2 author of the new book Russian Rubicon: Impending Checkmate of the West and editor of Global Events http://www.atimes.com/atimes/central_asia/hk22ag01.html Russia's strategic resources have been brought firmly under de facto Kremlin control in direct opposition to the West's loudly proclaimed liberal democratic principles of private ownership and control. Russia's example and success in such endeavors have instigated a global wave of nationalization and consolidation of state control over energy resources, with an accompanying loss of leverage and control by the West's oil majors. That wave is accelerating. The rise of a powerful and wealthy resources-based corporate state in Russia ("sovereign democracy"), its rapidly expanding control over global strategic resources, and the resultant loss of leadership and control of the global oil market by the West's oil majors are developments that move directly against the very foundations of the US-led oil-market order and the wider US-centric global economic order. This is because Russia is quite literally fueling the rise of the powerhouse economies of the East and helping to achieve a new global center of economic power in the East. It was also Russia that fundamentally led, along with its key partner China, the opposition to the US invasion of Iraq in 2003. It has been Russia first and foremost that has taken leadership among its strategic partners since then to continue to stand firm inside and outside the United Nations in a hugely successful strategy to force the full and mounting geopolitical, economic and military burdens of Iraq on to US and British shoulders alone. Thereby, Russia has taken the lead in proving that the US-dominated geopolitical order can be successfully opposed. Consequently, it has clearly been primarily under Russia's leadership that the US-dominated global oil-market, global economic and geopolitical orders are being transformed, circumvented and opposed by growing numbers of the world's nations. Against this backdrop, an impending, forcible shift of the US colossus out of its position of global dominance can be clearly seen, less as merely random and uncoordinated events, and more as a progressive coalescing of a coherent global strategy.
Aff- !- Venezuela
Low oil prices oust Chavez Martin Hutchinson Jun 25, 2008 “A new model for nastiness” author of Great Conservatives http://www.atimes.com/atimes/Global_Economy/JF25Dj04.html If China and to a lesser extent India suffer severe downturns, then oil demand must drop off correspondingly and it becomes unlikely that the 1970s pattern of continuing high oil prices even in a recession will be repeated. If oil prices drop sharply, the political effect on oil producing countries will be considerable, and not necessarily pleasant. The Shah of Iran basically fell because of the 1973 oil price rise. He was already overspending in 1972-3, supported largely by bank loans, then he spent with total abandon in 1974 as higher revenues had appeared to make Iran's oil wealth inexhaustible. Needless to say, he then ran out of money, as the international banking system would not provide him with sufficient funds to complete the projects he'd initiated in the bubble year. 1976 and 1977 were thus years of relative austerity in Iran, much to the fury of the Iranian people who had come to expect a bonanza. It should thus have been no surprise that revolution occurred in 1979, although robust US support for the shah might have enabled him to overcome it. This time around, the overspending oil producers are obvious: Venezuela and Russia. Venezuela will undoubtedly get into severe difficulty once the oil price collapses. This is on balance likely to favor US interests (and those of the Venezuelan people) provided that the crisis can be leveraged to remove Hugo Chavez from the country's leadership. If he remains, Venezuela will become another Cuba, with deep repression and a suffering and impoverished populace but forming no real threat to the United States. Russia is a much more dangerous story, being both economically and militarily more powerful. The parallels with Germany of the 1930s are disquieting, although the move to aggression in an economic downturn would presumably take the form of an assumption of further authoritarian powers by Vladimir Putin, rather than his replacement by an even more sinister figure. However a downturn in the oil price might well cause an aggressive Russia to intervene militarily in its neighbors, use the weapon of Gazprom's gas pipelines disruptively against Western Europe and devote 25% of output to the military, as did the Soviet Union in its most aggressive periods. Should that happen, Russia would become a considerably more dangerous threat to the world than al-Qaeda could ever dream of; it is to be hoped that western leaders, particularly in Europe, recognize the danger early and effectively. The balance of probability must thus be for a global downturn which combines the inflation of the 1970s with the severe recession and geopolitical danger of the 1930s. Not an appealing prospect.
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