"G7 finance ministers agreed to send a delegation to oil producing countries in October in a bid to increase transparency in the oil market and get a better grip on supply-and-demand problems, officials said. 'This delegation will comprise French Finance Minister Thierry Breton and his British counterpart Gordon Brown, and probably an undersecretary from the US Treasury,' a European official said.... European Union economics minister Joaquin Almunia said the G7 needed better information on the real amount of reserves, the different kinds of oil that should be provided by producers and the true levels of strategic stocks.... The rapid rise in oil prices was discussed 'at great length' during the G7 meeting, a senior US Treasury official said on condition of anonymity. 'Everybody's concerned with energy and where we're going with energy. We approached it as a matter of serious concern,' he said... The G7 communique called for significant investment in exploration, production, energy infrastructure and refinery capacity."
Ministerial delegation to be sent to oil producers in Oct
AFX News, 24 September 2005

"The world is coming to terms with an oil shock as big as that in the 1970s."
Gordon Brown
Brown blames oil as he trims UK growth forecasts
Guardian, 24 September 2005

The Big Difference Between 1973 And 1979 And Now
Is That OPEC Then Had Spare Capacity Which It Chose To Withold Or Was Disrupted By Turmoil In The Middle East
Now OPEC Has No Further Spare Capacity Left To Give

"Oil prices have doubled since early 2004 and forward markets suggest that the trend will continue upwards... Earlier oil price explosions were triggered by the actions of Opec [during the 1973 Yom Kippur war] and the first Iraq war. This time oil production has come up against capacity constraints, evident even before Katrina. Oil producers have been finding difficulty in increasing output enough to meet increased demand from new economic players."
Samuel Brittan: Don't beg Opec cartel for more oil
Financial Times, 15 September 2005

"The Group of Seven rich countries can do little to reverse a surge in oil prices that risks slowing their economies, and analysts say the group should respond to the rise by trying to wean itself off oil products. World oil prices, which have risen some 50 percent so far this year, will be high on the agenda when G7 finance chiefs meet in Washington on Friday. Policy makers have been pressing for the group to take action at the meeting, with European Central Bank President Jean-Claude Trichet telling European newspapers in an interview on Wednesday that more transparency was required in oil markets. But surging world demand for oil and the G7's limited leverage over supply means any impact will be hard to achieve. 'I don't think the G7 meeting will have a sizeable and long-lasting effect on oil prices,' said Stephane Deo, head of European economic research at UBS. 'Fundamentally, in terms of short-term prices, there is no magic bullet,' added Deborah White, senior energy analyst at SG Commodities. The G7 -- the United States, Japan, Germany, Britain, Italy, France and Canada -- relies, as a group, on oil imports. Canada and Britain are net exporters, but Britain's dwindling reserves mean it is expected to become a net importer in 2009 or 2010. Chancellor Gordon Brown has pressed the Organisation of the Petroleum Exporting Countries (OPEC) to lift its output and he welcomed a decision by the 11-member cartel on Tuesday to offer up every last barrel of its spare production. Oil prices kept climbing despite the OPEC deal, with the market fearing a shortage of gasoline and fuel in the world's biggest consumer, the United States."
G7 faces slippery task in tackling oil price surge
Reuters, 21 September 2005

A Shortage Of Refinery Capacity
Or A Shortage Of Production?
Or Both?

Spare Capacity Or Spin?
"The continuing strength of the oil price in the face of rising stocks of crude is a puzzle for oil analysts."
Western refineries spurning sulphurous Saudi oil
London Times, 16 September 2005

If A Shortage Of Refinery Capacity Is The Only Problem Then Why Is The Price Of Crude So High?
If refiners can't process crude oil then crude demand and price should fall

"Chancellor Gordon Brown earlier this month put the blame on the Organisation of the Petroleum Exporting Countries for oil prices near record levels and urged it to produce more crude. But OPEC says there is already too much oil on the market and it has been struggling to find buyers for its more difficult to refine crudes.... OPEC argues today's high prices are caused by a lack of refining capacity and says governments should be doing more to encourage investment in refineries."
OPEC Sheikh invites Brown to buy his barrels
Reuters, 20 September 2005

Scraping The Bottom Of The Barrel - Sweet Saudi Crude Becoming Scarce
There Is Oil Out There - But Not Of The Type Markets Want

"Group of Seven finance ministers view the state of global oil markets with growing alarm, a member of the German delegation said Friday. With the price of a barrel of oil around $66, oil producers have been pumping as much as possible, say oil industry analysts. Only Saudi Arabia has significant spare capacity and most of that is a high-sulfur grade that is difficult to refine."
German Source: G7 Views Oil Prices With Growing Alarm
Dow Jones Newswires, 23 September 2005

"Around two-thirds of Saudi reserves are considered 'light' or 'extra light' grades of oil, with the rest either 'medium' or 'heavy.'"
Saudi Arabia, Country Brief
US Energy Information Administration, August 2005

"The Organization of Petroleum Exporting Countries is meeting to approve a plan to offer all of its spare oil production capacity to any customers that ask for additional supplies, the group's president said. The group can pump another 2 million barrels a day and will sell more oil as needed, should the decision be completed today as expected, said Sheikh Ahmad Fahd al-Sabah, the OPEC president... Any additional barrels will have to come from Saudi Arabia, OPEC's biggest producer, which is able to pump lower quality, sour crudes that few refineries are available to handle.... Saudi Arabia's oil minister, Ali al-Naimi, this weekend said he already has offered to produce 11 million barrels a day, its full capacity. The nation is pumping about 9.5 million a day now. He said he had 'no response' to the offer of more supply. Outside OPEC, consuming nations in the International Energy Agency this month organized their second release of emergency stockpiles in the group's existence in a bid to avert shortages of gasoline and related fuels.... Merrill Lynch & Co.'s senior energy strategist, Francisco Blanch, expects oil to average $65.50 next year because Hurricane Katrina 'has acted as a true supply shock to global energy markets.' Forecasts range as high as Canadian Imperial Bank of Commerce's chief economist, Jeffrey Rubin, who predicts an average $84..... OPEC members including Iraq have increased production for seven straight months, pumping 30.38 million barrels of crude a day in August, according to Bloomberg estimates, disregarding the quotas. That was the highest output since October, when members pumped 30.5 million barrels a day, the most since 1979."
OPEC Members Meeting to Approve Plan to Offer Additional Oil
Bloomberg, 20 September 2005

"OPEC ministers left Vienna on Wednesday powerless over oil prices, which kept climbing despite the cartel’s commitment to offer up every last barrel of its spare production to reassure consumers. 'We have done everything we can. This is the time for others to do what they can,' Libya’s Oil Minister Fathi Omar Bin Shatwan told Reuters ahead of his departure."
OPEC powerless as oil prices keep climbing
Daily Times (Pakistan), 22 September 2005

"In response to the surging oil price, the Organization of Petroleum Exporting Countries, the global cartel of Third World oil producing nations commonly known as OPEC, has stated that it is ready to make available to the market if requested all of its so-called spare production capacity. The key question is; can this offer give any appreciable relief to those businesses and private consumers under pressure from today’s oil prices? OPEC’s promise has been dismissed in many quarters as irrelevant, based upon a well-founded belief that much of the margin that the cartel is referring to, a margin that could be up to 2 million bpd but is probably somewhat less, is in the form of heavy, sour grades of oil. The problem with this is that these grades are unsuitable, given the technological state of the majority of current refining capacity, for producing the transportation fuels and other fractions for which the world economy is crying out and for supply of which it largely depends on oil. What is primarily required by refineries to produce products such as these is light, sweet crude, and there is a strong possibility that extra output of this is simply unavailable, driving headline oil prices, which refer to light, sweet grades, higher in price of late. Indeed, a chorus of opinion currently cites a lack of appropriate refining capacity for the heavier grades of oil which are more abundantly available on the world market than light grades, rather than a paucity of oil production in general as responsible for recent marked light crude price rises. In addition, estimates abound that OPEC is already supplying around 650,000 bpd more than its current formal production ceiling, which could mean that its pledge to make more capacity available is mostly symbolic, with actual output, in particular that of the important light grades, remaining largely unchanged.... What will be interesting to note in the near future is the extent to which, and for what reasons, OPEC’s offer of extra crude production is taken up. Given that this crude is most probably of less desirable heavy, sour grades, and that a lack of the right refining capacity seems to be acute, then take up could be modest and price impact very limited. Ultimately of course, lack of refining capacity is not the whole story. The unalterable dynamic of rising demand, particularly from East and South East Asia, versus declining global light crude reserves, coupled with geopolitical uncertainty, is most probably the prime mover in today’s oil market. This means that OPEC’s so-called spare capacity is very unlikely to be adequate to take the headline light crude price off the boil any time soon. "
Can OPEC's Offer Make a Difference?
Resource Investor, 22 September 2005

"In an interview with the Financial Sense Newshour, Matt Simmons, CEO of Simmons and Company International, a specialized energy investment banker, declared 'We've basically used up the vast majority of the world's high flow rate, high quality sweet oil ...now we're left with lots of oil. But it's heavy, gunky, dirty, sour, contaminated-with-various-things oil. It doesn't come out of the ground very fast, is very energy intensive to get out of the ground. And we're going to pay a fortune for it.' Bambrough suggested that it will require 18% in oil production growth just to maintain gasoline and Mid Dist. output. Meanwhile, non-OPEC light sweet crude has already dropped 3.26 million barrels a day from 2000 to 2004, or around 12%.... In an interview Monday with Mineweb, Bambrough suggested, 'we have sucked up all the easy stuff,' which now requires using more energy to produce energy. With a 12% drop in the production of light sweet crude over the past four years, he believes OPEC will be hard-pressed to maintain even present oil production."
Sprott's bullish on uranium as cheap, reliable energy source
Mineweb, 20 September 2005

"Sprott Asset Management Research Analyst Kevin Bambrough is bullish on uranium--not just because of soaring demand for nuclear energy--but also because the world may be forced to wean itself from its expensive addiction to oil.... Bambrough believes 'we have just started a long term uranium bull market that will end in a 'uranium mania' as utilities and countries drive uranium prices to unbelievable highs as they compete to secure supplies.'... Bambrough stated that 98% percent of global crude oil comes from 45 nations, of whom more than half may have peaked in oil production. It is believed that seven of the 11 OPEC nations may have also peaked in their production. Oil field discoveries have also declined since their heyday in the 1950s, according to Bambrough, while U.S. oil production is believed to have peaked in 1970. Meanwhile, the excess capacity held by OPEC nations has dwindled from an average of 30% excess capacity to about 1% of global demand.  For instance, existing oil fields in Iran are estimated to be declining at the rate of 8-13% annually, he added."
Sprott's bullish on uranium as cheap, reliable energy source
Mineweb, 20 September 2005

Bottom Line
Brown Doesn't Just Want More Refineries; He Wants More Production

"As the world's finance ministers gathered for the annual meetings of the IMF and the World Bank today and tomorrow, Mr Brown said there was growing support for Britain's five-point plan to bring down oil prices and help those countries badly affected by dearer energy costs. Britain is looking for agreement on measures to increase oil production, increase investment in new refining and production capacity... "
Brown blames oil as he trims UK growth forecasts
Guardian, 24 September 2005

Much Worse To Come Soon?
Iranian Nuclear Row Escalates
Tehran Threatens To Retaliate By Switching Oil Supplies To China

"Iran has recently in no uncertain terms threatened European oil majors with the invalidation of their energy contracts with the country if Iranian relations with the British, French and German governments deteriorate further amid their efforts to curb Iran’s nuclear programme, negotiations to which end have not long broken down. An imbroglio such as the current one with Iran would in fact be a much simpler matter, were the country not in possession of some of the world’s largest and easiest to extract oil & natural gas resources. As it is, Iran is the second largest oil producer within the Third World oil cartel OPEC, after Saudi Arabia, and is also estimated to have the world’s second largest natural gas reserves, after Russia.... Rhetoric emanating from Iran on this matter has begun to sound more and more radical, including comments that came to light last week from one hard line legislator espousing the view Iran should leave OPEC and possibly pursue measures to inflate further the global oil price.  Iran may also feel more encouraged to eject European companies from its oil & gas sector now that Chinese oil & gas companies are emerging as players on the world stage and putting themselves forward as sources of the finance, expertise and technology that nations such as Iran need if they are to benefit from their natural endowments of hydrocarbon resources. The Chinese government may also be less concerned for the time being about the purposes of Iran’s nuclear activities. At the end of the day, the governments of the European big three are in a difficult position, trapped between concerns for their oil & gas firms on one side and a desire to prevent nuclear proliferation on the other. Nevertheless, the situation is currently developing quickly, and we could now be at the outset of a very interesting chain of events, particularly if Iran is indeed referred to the U.N. Security Council or if contemplation begins to take root in the U.S., Europe or Israel of a more forceful solution to the problem of Iran’s nuclear ambitions. What is certain though is that continuing tension between the West and Iran and the resulting fears of supply disruptions will do nothing to cool today’s soaring oil price."
Iranian Oil & Gas Deals in Jeopardy?
Resource Investor, 24 September 2005

"The head of Iran's powerful Revolutionary Guards warned that the imposition of sanctions on the Islamic republic over its nuclear programme could push the price of oil to 100 usd a barrel.  'Any sanction against Iran can make the oil price reach 100 dollars a barrel,' General Yahya Rahim Safavi said in a speech to worshippers attending Friday prayers in Tehran.  Iran is OPEC's second producer. 'Any economic and political pressure on Iran from any power ... will result in a harsh reaction from Iran,' he added."
Iran says sanctions could push oil to 100 usd/barrel
AFX News Limited, 23 September 2005

"Initially the U.S. position was that Iran should not be allowed even peaceful nuclear technology under any circumstances. Subsequently, and having left the big stick we usually carry somewhere in Baghdad, the U.S. has admitted that Iran indeed has the right to nuclear power, but that it still shouldn't be allowed to make its own fuel (which could one day be used also for weapon manufacture). Iran's position that it refuses to be beholden to the West for nuclear fuel (in the same way that the West is beholden to the Middle East for oil) is a popular one amongst the developing nations who also wish to someday be free of dependence on foreign sources of energy, and Iran's proposal to share its nuclear technology with some of those nations (at least the Muslim ones) at the U.N. last week no doubt won it some new friends."
Iran's Latest Score
Persian Journal, 23 September 2005

"...the role of Russia and China will be vital on the Security Council itself. Both have interests in good relations with Iran - Russia is building a nuclear power station there and China imports Iranian oil. And both have vetoes on the Security Council. So the pressure on Iran from the Council will be subject to their approval. And they have both opposed sanctions so far. The basis for the referral to the council is that Iran was found to have breached its inspection agreement with the IAEA by hiding nuclear fuel research for nearly 20 years. A report by the IAEA in November 2004 listed a number of breaches, including a failure to declare two fuel enrichment plants. Under IAEA rules, a country has the right to make its own fuel - though many do not and import it from others - but it has to be under inspection."
Pressure begins to build on Iran
BBC, 24 September 2005

"[US Secretary of State] Ms. Rice warned during the panel discussion that as countries like China and others in Asia face pressures to continue to grow their economies at breakneck speed, it would be impossible for Europe and America to demand that they ration their fuel consumption. And she suggested that nuclear power would inevitably grow much more important, despite worries about military proliferation."
Clinton: Why High Oil Prices Are Good Thing
Independent, 18 September 2005

"...the awkward reality is broader - and it is this: the very economic life blood (oil) of one civilisation ('the west'), is an asset largely held by another civilisation (the Islamic world, which covers all three of these crucial regions). The former has been very successful at deeply alienating the latter just at the very time when a third major competing player (Asia, particularly China and India) is arriving over the horizon as a potential alternative customer for this basic natural resource."
What Is Needed Most Urgently Is Not A Counter-Terrorism Policy; But An Alternative Energy Policy
Energy Update, August 2005

Venezuela Considering The Same For Different Reasons

"Venezuelan President Hugo Chavez is not just bluffing when he threatens to cut off the huge volume of oil his country sells the United States, the Bush administration's nominee to be top U.S. diplomat for Latin America said Wednesday. Although it would be difficult for Venezuela to halt the flow soon, Chavez does want an alternative market so he will not be subject to adverse decisions by the U.S. government, with which he is increasingly at odds, Thomas A. Shannon said at his Senate confirmation hearing....Venezuela is the fourth-largest oil supplier to the United States, and a cutoff of the 1.4 million barrels it supplies per day could sharply raise prices and would also be a setback for U.S. efforts to reduce dependence on oil from the Middle East. Venezuela sells about two-thirds of its crude oil to the United States, shipping it to Venezuelan-owned refineries in the U.S. and then selling it through the Citgo gas station chain, a subsidiary of its state-owned oil company."
Bush Nominee Says Chavez Serious About Oil Cutoff
Los Angeles Times, 22 September 2005

“A new power configuration across the world is being silently fashioned to counter, or at least limit, American supremacy… In the struggle for global dominance, oil is the central currency. Its indispensability for industry, agriculture, transport and military capability, along with the near-certainty that oil production will peak around 2010-2015, is refashioning conventional power rivalries. A new regional and superpower coalition of China, Russia, India and Brazil is emerging, and attracting the close interest of major oil producers, such as Iran and Venezuela, as a counterweight to American power…. It is oil, not ideas of freedom or democracy, that will increasingly determine the direction of events….. The rhetoric about democracy may suit Bush's domestic audience. But the British government will make serious errors over the next four years if it takes what he and other members of his administration say at face value.”
Michael Meacher, former Blair Minister
Now for an even newer world order
New Statesman, 9 May 2005

"The presidents of two leading oil producing nations, Venezuela and Iran, are due to meet to discuss closer economic co-operation. Hugo Chavez and Mohammad Khatami are expected to sign a number of energy deals during President Khatami's three-day visit to Caracas. Both countries have strained relations with Washington.... Mr Khatami's visit will be his third to Venezuela. Mr Chavez visited his Iranian counterpart in Tehran in November last year. Venezuela is one of the leading suppliers of petroleum to the US, but recently it has been seeking alternative energy partners such as Russia, China and India."
Chavez seeks Iran economic ties
BBC News, 10 March 2005

"Latin America is becoming a rich destination for China in its global quest for energy, with the Chinese quickly signing accords with Venezuela, investing in largely untapped markets like Peru and exploring possibilities in Bolivia and Colombia. China's sights are focused mostly on Venezuela, which ships more than 60 percent of its crude oil to the United States. With the largest oil reserves outside the Middle East, and a president who says that his country needs to diversify its energy business beyond the United States, Venezuela has emerged as an obvious contender for Beijing's attention.The Venezuelan leader, Hugo Chávez, accompanied by a delegation of 125 officials and businessmen, and Vice President Zeng Qinghong of China signed 19 cooperation agreements in Caracas late in January. They included long-range plans for Chinese stakes in oil and gas fields, most of them now considered marginal but which could become valuable with big investments. Mr. Chávez has been engaged in a war of words with the Bush administration since the White House gave tacit support to a 2002 coup that briefly ousted him. Still, Venezuela is a major source for American oil companies, one of four main providers of imported crude oil to the United States, inexorably linking the two countries' interests......'The Chinese are entering without political expectations or demands,' said Roger Tissot, an analyst who evaluates political and economic risks in leading oil-producing countries for the PFC Energy Group in Washington. 'They just say, 'I'm coming here to invest,' and they can invest billions of dollars. And obviously, as a country with billions to invest, they are taken very seriously.' China's entry is worrisome to some American energy officials, especially because the United States is becoming more dependent on foreign oil at a time when foreign reserves remain tight. It was the limited supplies that pushed a barrel of oil to $55 in October, driving up retail prices and hurting economies. On Monday, crude oil for April delivery settled at $51.75 in New York, up 26 cents. The Senate Foreign Relations Committee, headed by Richard G. Lugar, Republican of Indiana, recently asked the Government Accountability Office to examine contingency plans should Venezuelan oil stop flowing. ...... To be sure, China, the world's second-largest consumer of oil, has emerged as a leading competitor to the United States in its search for oil, gas and minerals throughout the world - notably Central Asia, the Middle East and Africa. China has accounted for 40 percent of global growth in oil demand in the last four years, according to the Energy Department, and its consumption in 20 years is projected to rise to 12.8 million barrels a day from 5.56 million barrels now. Most of that oil will need to be imported. The United States now uses 20.4 million barrels a day, nearly 12 million of it imported.Aggressively seeking out potential deals, China tries to out-muscle the big international oil companies, always beholden to shareholders. Chinese companies, which have substantial government help, can dispense government aid to secure deals, take advantage of lower costs in China and draw on hefty credit lines from the government and Chinese financial institutions.......Venezuela, with a view to exports to China, says it is exploring plans to rebuild a Panamanian pipeline to pump crude oil to the Pacific, where it would be loaded onto supertankers that are too big to use the Panama Canal.Another proposal, with neighboring Colombia, would lead to the construction of a pipeline across Colombia to carry Venezuelan hydrocarbons, which would then be shipped to Asia from Colombia's Pacific ports.Mr. Chávez has promoted these plans in three visits to China. In the most recent, in December, he unveiled a statue of Simón Bolívar in Beijing. Trade between the two countries could rise to $3 billion this year from $1.2 billion, Mr. Chávez said, celebrating their links as a way for Venezuela to break free of dependence on the American market. 'We have been producing and exporting oil for more than 100 years,' Mr. Chávez told Chinese businessmen in December. 'But these have been 100 years of domination by the United States. Now we are free, and place this oil at the disposal of the great Chinese fatherland.' China, though, is not just interested in Venezuela. Much of Latin America has become crucial to China's need for raw materials and markets, with trade at $32.85 billion in the first 10 months of 2004, about 50 percent more than in 2003. Mining, analysts say, is among China's priorities, whether it is oil in Venezuela, tin in Chile or gas in Bolivia. Chinese involvement in Latin America is 'growing by leaps and bounds,' said Eduardo Gamarra, director of the Latin America and Caribbean Center at Florida International University, adding, 'It's driven by the need for privileged access to raw material and privileged access to hydrocarbons.' "
China's Oil Diplomacy in Latin America
New York Times, 1 March  2005

"On November 10, Russia took the lead role in coalition with China, India and Brazil to challenge the super-power supremacy of the US. Brazil and Venezuela are very open to the coalition concept where these large countries support each other in terms of trade, economics, international politics and defense. ..... Iran is about to join the coalition due to their US$200 billion energy deal with China.... With the oil and gas deals between China and Iran and Venezuela, these two countries have come under the protection of China".
The biggest mistake in the history of American foreign policy
VHeadline.com, 30 December 2004

"After Iraq it is oil rich Venezuela led by Hugo Chavez that has become the center for confrontation between America and the Euro Zone. Chavez is dead against America and Euro Zone needs him to keep the oil balance -- the power symbol in 2005. But this time the equation is a little different. A new regional and super power coalition of India, China, Russia and Brazil is making a huge difference. Russian President is in the zone to pull Brazil in the coalition and influence on Chavez for mutual support......Venezuelan President Hugo Chavez is leveraging his country's oil resources to build new geopolitical relationships with key regional powers like Russia, China, India and Brazil..... According to think tanks, it is not Iran but Venezuela will be the next epicenter of confrontation for oil supremacy. But this time both Euro zone and America will face a real formidable super power coalition -- the combined resources of India, China, Russia and Brazil."
After Iraq it is Venezuela
India Daily, 27 November 2004

Clinton: Why High Oil Prices Are Good Thing
By David Usborne
The Independent UK

Sunday 18 September 2005

Bill Clinton revealed new 'greener-than-thou' environmentalist credentials last week, privately suggesting to heads of government and industry leaders at his world forum in New York that they should celebrate the recent spike in oil prices as the best opportunity to begin weaning their nations from fossil-fuel dependency.

Such is his interest in alternative energy, Mr. Clinton told The Independent on Sunday, that he intends asking local government officials in Westchester, New York, where he lives with his wife Hillary, to investigate supplementing the local grid with solar-generated power. His new presidential library in Little Rock, Arkansas, has enough solar panels to provide one-third of its power needs.

The environment was a key area of discussion at the former president's three-day forum on world affairs, held at a Manhattan hotel and dubbed the 'Clinton Global Initiative'. He also raised the issue of oil prices during the meeting's opening session on Thursday, during which he and the Prime Minister, Tony Blair, engaged in a panel discussion about the world's immediate challenges.

Teasing his guests on stage, who also included the US Secretary of State, Condoleezza Rice, and King Abdullah of Jordan, Mr. Clinton said he knew he could not ask the question directly, but perhaps they were not unhappy that oil prices had risen so sharply. The price of crude oil has doubled in two years. The rhetorical inquiry drew a broad smile from Mr. Blair, who looked ready to blurt agreement. 'A sitting politician can't answer that question, of course,' Mr. Clinton explained in conversation with the IoS. 'But I think it is a good thing because, believe me, this is going to concentrate minds all around the world. It is quite clear that we are too dependent on hydrocarbons.'

The three-day meeting - attendees ranged from heads of state to Barbra Streisand and Rupert Murdoch - was only the latest manifestation of Mr. Clinton's quest to maintain influence on world affairs, even five years after leaving office. The Clinton Global Initiative expects to raise hundreds of millions of dollars for sustainable development projects worldwide and to help fight Aids.

Ms. Rice warned during the panel discussion that as countries like China and others in Asia face pressures to continue to grow their economies at breakneck speed, it would be impossible for Europe and America to demand that they ration their fuel consumption. And she suggested that nuclear power would inevitably grow much more important, despite worries about military proliferation.

'Global Warming Turbo'
Blair Hints At Abandoning Kyoto Philosophy Under International Pressure To Protect 'Growth'
Tar Sands And Oil Shale Exploitation Cannot Co-Exist With Kyoto
Green Movement Needs To Be Alert To Potential Disastrous
Environmental Consequences Of Impending Peak In Conventional Oil Production

ENVIRONMENTALISTS MUST FACE THIS NEW REALITY.

HOWEVER, IF HANDLED ASTUTELY,  THE SIMULTANEOUS ONSET OF  'PEAK OIL' MAY BE THE BEST OPPORTUNITY TO MITIGATE CLIMATE CHANGE BY CREATING THE NECESSARY ECONOMIC PRESSURE FOR THE INTRODUCTION OF NEW TECHNOLOGY.  BUT NOT IF WE MAKE THE WRONG TECHNOLOGY CHOICES.

THE GREEN MOVEMENT MUST COME FORWARD WITH A COMPREHENSIVE AND COHERENT TECHNOLOGY PROGRAMME IF IT WANTS TO STOP 'GLOBAL WARMING TURBO'.  IT MUST GET ORGANISED FAST.

PEAK OIL IS PUSHING 'UNCONVENTIONAL OILS' UP THE AGENDA,  AND SOME OF THESE ARE MASSIVE CO2 GENERATORS COMPARED WITH EXISTING OIL SOURCES.

"Among the top candidates to replace conventional oil are [tar sands, oil shale and coal]...All these alternatives to conventional petroleum have serious problems. The hydrocarbons in extra heavy oil and tar sands have been compared to what is left of crude oil after the valuable elements like gasoline and diesel fuel are removed. Heavy oils and tar sands are thought to have once been conventional oils from which the lighter, more valuable elements either evaporated or were washed away by water. Heavy hydrocarbons are thick, black, and full of contaminants. To make them usable as transportation fuels, they must be cleaned (by removing sulfur, heavy metals, and carbon) and enriched with inputs of hydrogen from another source, such as natural gas. Yet after processing, they make a quality product. All these alternative hydrocarbons also have a problem with excessive carbon content. Considerable federal research is under way to keep the carbon, which becomes CO2 after it is burned, from reaching the atmosphere."
Among the top candidates to replace conventional oil are
Christian Science Monitor, 22 September 2005

"At present there appears to be only one major oil consultancy which is heartily insisting that we won't have a near to mid-term oil supply problem (if there are others then they are keeping a remarkably low profile). That consultancy is Cambridge Energy Research Associates of Massachusetts lead by Daniel Yergin, author of the Pulitzer Prize winning book: "The Prize: the Epic Quest for Oil, Money and Power". However, look a little closer at where Cambridge say future supplies will increasingly be coming from and it is clear that even they recognise that conventional oil is no longer able to do the job: "The share of 'unconventional oil' -- Canadian oil sands, ultra-deep-water developments, 'natural gas liquids' -- will rise from 10 percent of total capacity in 1990 to 30 percent by 2010. The 'unconventional' will cease being frontier and will instead become 'conventional.' " (Washington Post, 31 July 2005). Whether such alternative supplies (which also include the Orinoco bitumen heavy oils in Venezuela and the oil shales of the US) can deliver on time and in sufficient quantity is open to significant doubt. Just as importantly some of these sources would potentially involve major adverse implications for global warming if they were to be brought on stream. There needs to be much more attention paid to this. At the moment, however, these resources are getting the wrong kind of attention. Last month US Treasury Secretary John Snow paid a visit to Canada's oil sands belt in Alberta. Next month Vice President Dick Cheney (presumably struggling to develop an energy 'plan B' after his strategic 'miscalculation' over Iraq and the Persian Gulf) is taking a trip there too - about as ominous a sign as it's possible to get. Assuming that these supplies really can be delivered on time and in sufficient quantities (a very large assumption) then a new nightmare scenario is likely to unfold unless there are substantial breakthroughs in technology. As currently executed the extraction and processing of much of these 'unconventional' oil resources require large energy inputs resulting in heavy CO2 emissions even before the product is burnt by the end user. As presently constituted this represents the perfect recipe for creating the even bigger environmental monster of 'Global Warming Turbo'. And it is not just a case of considering heavy oil deposits in north and south America. India has also begun talking about potential exploitation of oil shale resources at home. In such circumstances climate change mitigation initiatives like Kyoto are likely to become almost totally futile. Describing the potential for the exploitation of tar sands Charles Mattenet, strategy director at Total, told The Business, 1 August: "You need technology to do it and it's quite expensive, you need adequate manpower and also the whole production system provides a lot of CO2. Until you can solve that, I don't think it's possible." As a developing country India may be underestimating the nature of such challenges, but the one thing it does have in abundance is 'manpower'."
What Is Needed Most Urgently Is Not A Counter-Terrorism Policy; But An Alternative Energy Policy
Energy Update, August 2005

"[Canadian Finance Minister Jim] Goodale, who met with U.S. Treasury Secretary John Snow for about an hour before attending the G7 talks, said the two discussed the softwood lumber dispute, oil investment projects and the fallout from hurricanes Katrina and Rita, which was expected to hit the Texas coast Saturday. He and Snow continued discussions about investments planned for Alberta's tar sands, said Goodale. Snow took his first tour of the area in July."
Finance officials tackle energy prices, debt relief at annual meeting
CBC News, 24 September 2004

THE BATTLE IS NOW ON BETWEEN THESE DISASTROUS OPTIONS
AND MORE A MORE COHERENT APPROACH

"Canada, the largest supplier of crude oil to the U.S., may increase output from Alberta's oil sands sixfold in the next 25 years as record oil prices spur investment in the province, a government energy adviser said. Alberta may increase output from the oil sands to 6 million barrels a day in 2030 from about 1 million barrels a day at present, said Claude Drzymala, a senior energy adviser at the Canadian Department of Industry....A 15-year-long decline in oil reserves and crude-oil prices of more than $70 a barrel are pushing companies such as Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp. to spend $76 billion in the next decade to boost supplies of oil from tar sands and diesel fuel from Qatari natural gas....Output at the Alberta fields, which cover an area about the size of Belgium, will probably approach 1.6 million barrels a day in 2012 and 2.8 million barrels by 2016, Drzymala said. Production costs will fall to about $7 a barrel from $11 in the next five years because of new technological developments, he said. Companies including Exxon Mobil Corp., Royal Dutch Shell Plc and Suncor Energy Inc. are forecast to spend C$45 billion ($37.9 billion) between this year and 2010 to expand oil sands output, according to the Canadian Association of Petroleum Producers, which represents companies that account for more than 95 percent of Canada's daily oil and natural gas output. Oil executives say they have no choice but to try alternatives to drilling because little crude remains to be found in their existing fields...Canada's exports of crude oil to the U.S. averaged 1.61 million barrels a day in the first half of this year, ahead of Mexico's 1.57 million and Saudi Arabia's 1.53 million, according to U.S. Energy Department data."
Canada Oil Sands Output May Increase Sixfold by 2030
Bloomberg, 2 September 2005

"'These unconventional sources of fuels are difficult and energy-intensive because they involve either trying to fast-forward or reverse geological processes,' says Robert Skinner, director of the Oxford Institute for Energy Studies: 'Those processes involved heat and pressure; in other words, energy. So these fuels take energy, and in that respect they can turn out to be a treadmill... Environmental issues occur as greenhouse gas emissions are an issue with most unconventional oil projects."
The Future Of Oil And Gas (p10)
London Times Focus Report (print edition), 20 September 2005

"Shell Nederland president Rein Willems said that oil production costs may rise five-fold in the near future. He said that for Shell, the higher costs will mainly be the result of more difficult resource-gathering and refining methods as the company moves to retrieve oil from sources other than the conventional oil wells. In an interview with Dutch engineering magazine 'De Ingenieur', Willems said that the higher production costs will likely lead to a stronger focus on alternative sources of energy as opposed to raw fossile fuels such as oil."
Shell Nederland president sees five-fold rise in oil production costs
AFX, 22 September 2005

How Committed Are We To Introducing New Technology?

"The [British] Government is facing a battle with leading car manufacturers over the car of the future after deciding that fossil fuels will not be phased out for at least another 50 years. Ministers have rejected a proposal to convert Britain’s cars to hydrogen by 2025, and called on manufacturers to develop more efficient models powered by petrol or diesel. However, several manufacturers, including BMW, have invested hundreds of millions of pounds in developing emission-free cars that run on hydrogen.... The Carbon Trust, a government-funded body that promotes low-carbon technology, has advised ministers that to meet this target they should ensure that hydrogen is widely used to power cars by 2025.... Prototypes of BMW’s hydrogen powered 7-series have driven 100,000 miles during development without problems. The engine can run on both hydrogen and petrol, meaning that cars could be driven before a network of hydrogen filling stations was established. "
Minister is set for collision on move to hydrogen cars
London Times, 22 April 2002

Preparing For The Future, Or Not?
A Tale Of Two Fishing Fleets

Britain
"Deep-seafishermen have sent a mayday to the Government as increases in the price of marine diesel threaten to put them out of business. The cost of diesel has trebled since the start of last year, wiping out any profits made from the sale of catches. Hardest hit are the large beam trawlers, most of which are based in the South West. Owners said yesterday that all 60 beam trawlers based in Devon and Cornwall could be tied up for good within four weeks as a result of the price increases that followed Hurricane Katrina.... Graham Perkes, a skipper who runs the family firm Seafield Emile Trawlers out of Brixham, Devon, said: 'Every fishing boat in Brixham has a bank account and every one is overdrawn. I am paying crews out of my own pocket. We’ll be tying up any day now. The effects here will be drastic. For every one fisherman, six people onshore are financially dependent, from net makers to chandlers.' Mr Perkes said that the last seven-day trip of his boat The Sasha cost him £8,400 in fuel. After running costs, the total takings for the boat amounted to £3,000, which is not enough to repay the loan on the vessel."
Cost of fuel could sink deep-sea fishing fleet
Times, 20 September 2005

(Note: Red diesel in Britain is largely untaxed and permitted for use in the farming, marine, and certain other sectors)

Iceland
"As world leaders head for the earth summit in Johannesburg, Iceland is embarking on a radical plan to abolish the burning of fossil fuels altogether - by transforming itself into the world's first 'hydrogen economy'. It aims to run all its transport and even its huge fishing fleet on hydrogen produced in Iceland itself.... Iceland's fishing fleet is the country's biggest consumer of fossil fuel. Fish is its biggest export. Converting the fleet to hydrogen had seemed decades away. But the whole project is riding on such a big wave of interest from foreign companies, that the money's there to pay for the first hydrogen-powered vessel. "
Hydrogen Economy
BBC Newsnight, 21 August 2002

"Iceland has already gone further than any other country in exploiting its abundant sources of renewable energy. Virtually all of its electricity and heating comes from hydroelectric power and the geo-thermal water reserves tapped from the hot rock layers lying just beneath the surface of this extraordinary island. But with no fossil fuel resources of its own, the country relies on imported oil to power all its cars, buses and fishing trawlers, which provide 70% of its income. Despite its natural advantages, the small population (around 270,000 people) produces more greenhouse gas emissions per head than any other country. So Iceland's next energy revolution will be based on converting its own renewable energy into a form that can power its own transport system, slashing those emissions and ending its dependence on fossil fuels completely. The key to this change is the technology of fuel cells, in which electricity to power an engine can be generated by hydrogen and oxygen, with vehicle exhausts emitting only the most innocuous substance imaginable - water.  But producing the hydrogen economically without creating more pollution in the process is one of the stumbling blocks in turning fuel cells into a genuinely clean alternative, and this is where Iceland believes it has a head start.... The idea at the heart of the project is that Iceland can use its pollution-free, cheap electricity to 'split' water into its component parts of hydrogen and oxygen through the process of electrolysis, something it has already been doing for nearly 50 years at a plant producing ammonia for fertilisers. 'Many experts say that in 20 or 30 years, solar energy could be harnessed in an economic way and turned into electric energy,' Professor Arnason said. 'In Iceland we don't have to wait for solar energy to become economic because we have this cheap hydropower and geothermal energy. We can start now.' With the creation of a hydrogen economy now official government policy, the first concrete step will be the arrival of the first emission-free fuel cell buses on Reykjavik's streets. The idea is eventually to replace the capital's entire 80-strong fleet. They will be fuelled at a new filling station being built on the outskirts of the city by Shell, one of three major corporations putting money into the project. The hydrogen to power the buses will be produced on site, using clean electricity from the grid to split water.  Iceland's experts are also looking at the practicality of switching the huge trawlers that tie up at Reykjavik's fishing harbour to hydrogen power.... Professpr Arnason believes the third revolution is within sight. 'People my age will see the first steps towards the hydrogen economy. My children will watch the whole transformation,' he predicted. 'My grandchildren, when they are grown, will live in this new economy where Iceland will be totally independent of imported energy, and where all the energy in the country comes from clean renewables."
Iceland launches energy revolution
BBC Online, 24 December 2001

"A business planning to develop the world's first water-powered car will launch in the UK later this week. Commercial trials of the cheap, clean-fuel technology, which separates hydrogen from water, could begin in a year's time. Some larger vehicles such as buses are already powered by hydrogen, but it is expensive and dangerous to distribute large amounts of hydrogen as fuel.  The 'Electro Hydrogen Generator' is being developed by OM Energy and, once fitted inside a car, would extract the hydrogen from water and mix it with petrol. Should the new technology, the first of its kind, prove successful, vehicles would use water as the main fuel supply and need only a small amount of petrol. The generator works by spinning the water very quickly, creating an electro-magnetic field which splits the hydrogen from the oxygen. Current methods of separating hydrogen, using fossil fuels or electrolysis, release harmful emissions into the environment. The technology also has other applications, such as powering ships. Dr Fulcieri Maltini, an independent consultant who has reviewed the technology, said: 'It's a completely novel way to produce hydrogen.' Car manufacturers are trying to develop new technologies, such as fuel cells or 'hybrid' cars with batteries, which are more efficient and environmentally friendly than petrol or diesel. But manufacturers are divided over which works best. OM Energy is a Russian venture but UK Trade & Investment (UKTI), an arm of the Government, has persuaded it to domicile in the UK by attracting funding from international institutional investors and individuals. UKTI runs the Global Entrepreneurs Programme to attract overseas investment to the UK."
UK plays host to firm behind the first water-powered car
Independent, 18 September 2005

"The peak in global oil production goes beyond paying a few dollars extra to fill the gas tank... the peak isn't just an economic problem, it is one of the biggest social and political challenges for this century....The totality of impacts may force policy makers to rely heavily on the precautionary principle, which compares the costs of being correct to those of being incorrect. We know that oil production will peak within our lifetime, we think market prices may not anticipate this peak and we know that not having alternatives in place at the time of the peak will have tremendous economic and social consequences. So, if society does too much now, as opposed to later, there will be some loss of efficiency. But if society does too little now, as opposed to later, the effects could be disastrous. Under these conditions, doing too little now in the name of efficiency will appear in hindsight as rearranging deck chairs on the Titanic."
Drilling for Broke? Experts Debate 'Peak Oil'
Wall St Journal Online, 3 August 2005

Energy Newsbites

'Peak Oil' Conferences

"'....one thing is clear: the era of easy oil is over.... Many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract-physically, technically, economically, and politically. When growing demand meets tighter supplies, the result is more competition for the same resources. We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions...We call upon scientists and educators, politicians and policymakers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy.'"
Chevron Double Page Adverts
Which Appeared In The Economist And TIME Magazine In July 2005

"Our industry can certainly be proud of its past achievements. Yet the challenges we will face in the coming years will be every bit as great as those encountered in the past, due in part to ever-increasing global energy use. For example, we estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today."
John Thompson, President of ExxonMobil, the world's largest oil company
The Lamp (published for ExxonMobil shareholders), 2003, Vol. 85 No.1


Graph from ExxonMobil report 4 February 2004, p4 (2004 marker added for illustration)
'A Report on Energy Trends, Greenhouse Gas Emissions, and Alternative Energy

"The energy crisis we are in today is entirely different from the temporary problems we experienced in 1973-74, 1979-86, 1990-91 and 2000..... There was always sufficient worldwide geological capacity to produce additional barrels of crude oil to meet the world's needs. No longer. In the next major energy crisis, that capacity will likely be eroded. So the crisis should have a severe impact, be global in scope, and be difficult to solve. Plainly, it will be unprecedented.... Over the next 25 years, a new world energy economy will arrive in three waves. We are near the top of the first and smallest one, a warning wave. A second more powerful wave likely will hit in the 2009-2010 period when the non-OPEC world may reach its all-time highest output of crude oil, subsequently declining to become ever more dependent on OPEC for incremental barrels of production. The final wave should break around 2020, or earlier, as even OPEC's vast reserves are tapped at a maximum rate of production. After that, oil volume should head down and keep falling, never to revive..... An international economic disturbance of this magnitude will create potential conflicts between nations and civil competition within societies. These could be a trial for us and for our children, made worse in the early years by our lack of preparation and our failure to understand what is already happening to us."
 The Gathering Storm
Energy Bulletin, 15 November 2004

"Dwindling supplies, increasing demand and an imminent ‘peak oil’ deficit mean that within 10 years the world will be facing an energy crisis.... We must address the basis of the way the world demands and consumes energy, and do it now, not in the long term. Major change in society is usually problematical and can be politically unpopular. Issues such as an impending energy crisis are not well suited to being addressed through the political arena, where time horizons tend to stretch only as far as the next election. Few votes are won by taking difficult decisions that political competitors might choose to postpone. But the longer the issue is put off, the greater the crisis when it comes....."
The Energy Timebomb
RICS Business, January 2005

'PEAK OIL'
GLOBAL ENERGY CRISIS LOOMING
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