$100 OIL WOULD HAVE A BIG POLITICAL IMPACT

[shan]

By Gideon Rachman
Friday, November 09, 2007

People facing alarming birthdays often say things like: “Forty is just a number.” You could say the same about “$100 oil”. But such benchmarks concentrate minds. As the oil price threatens to break through $100, politicians all over the world will think hard about the strategic consequences.

The biggest single effect is obvious. Oil producers become richer and more powerful. The biggest oil consumers – the US, China and the European Union – become increasingly anxious. Beneath that big trend, there are smaller effects that could change the course of some of the most delicate and dangerous international issues – Iraq, Iran, China's foreign policy and the resurgence of Russia.

The effects of a rising oil price on the economies of the producing countries are dramatic. The Organisation of the Petroleum Exporting Countries made $650bn from oil sales in 2006, compared with $110bn in 1998. Russian oil and gas revenues have quadrupled over the same period.

 
When bad governments make good money, they become more relaxed at home and more assertive abroad.

Two of the Bush administration's least loved leaders – Hugo Chávez of Venezuela and Mahmoud Ahmadi- Nejad of Iran – will have more money to chuck around. Venezuelan money already subsidises everything from housing in Nicaragua to cheaper bus fares for the poor in London. (A policy that Boris Johnson, the Conservative mayoral candidate in London, has denounced as “completely Caracas”.) Iran will have more money to fund its nuclear programme and to support foreign surrogates such as Hamas in Gaza and Hizbollah in Lebanon.

The Russian government will find it easier to buy off impoverished pensioners and to take tough positions on a range of international issues, from the future of Kosovo to America's plans for missile defence in Europe.

Tyrannical governments sitting on oilfields will be more likely to find protection from powerful oil-consuming countries. China, for example, will be even less likely to support bringing pressure to bear on the governments of Burma and Sudan.

A higher oil price also has a direct impact on the two trickiest foreign policy issues facing the US – Iraq and Iran. In both cases, the policy implications are ambiguous. If expensive energy further slows the US economy, then spending billions in Iraq every month will seem even more painful. But retreating from a country with huge oil reserves also becomes a less attractive prospect. When the three leading Democratic candidates for the presidency were recently invited to promise that all US troops would be out of Iraq by 2013, they all refused to make any such pledge.

A higher oil price also probably makes it less likely that the US will bomb Iranian nuclear facilities. New riches might tempt an over-confident Iran to take dangerous risks. But if the US is already struggling with the economic consequences of $100 oil, then the Bush administration may be loath to risk an attack that could drive oil prices to $150 or more.

More expensive oil also has dramatic implications for China, which will become the world's largest consumer of energy within three years. The search for oil has already led the Chinese to cut a series of deals with dubious African governments – including Sudan, Chad and Zimbabwe. New oil finds between Uganda and the Democratic Republic of Congo will provoke interest in Beijing.

High oil prices will only increase the EU's anxiety to mould a common policy towards Russia. But that is easier said than done. Some countries such as Germany and the Netherlands seem intent on building as close an energy relationship as possible with the Russians. Others – in particular, Poland and the Baltic states – will continue to argue for EU investment in new gas pipeline routes that bypass Russia, and for tougher restrictions on Russian energy investment in Europe.

Oil importers everywhere will redouble their interest in “alternative” energy. The US's new love affair with biofuels is likely to intensify. President George W. Bush vowed a couple of years ago to end his country's “addiction to oil”. As with many addicts, the words have proved rather more impressive than the follow-up actions.

But everything from climate change to the politics of the Middle East now points to the need to invest heavily in new sources of energy. If $100 oil finally persuades western governments to act with real determination, some good may come of it, after all.

[The Smoking Man]

WTF?

How much is it compared to the Euro?

The reason for dumping the 'petrodollar' is that it gives a false positive.

The "increase" in the price of oil vs. the petrodollar is not about the increase in the value of oil. It is about the tanking of the US currency due to unsound fiscal policies and years of credit.

[The Statutory Ape]

There was a funny guy on Coast to Coast the other night saying that peak oil is a myth perpetuated by the oil industry and big government to drive up the price of oil.  supposedly the US has enough oil right here to drop the price of petrol as low as $1.50 a gallon.  I'm pretty sure the guy is a nut job though I wouldn't put it past the oil companies to do such a thing.

[The Smoking Man]

There was a funny guy on Coast to Coast the other night saying that peak oil is a myth perpetuated by the oil industry and big government to drive up the price of oil.  supposedly the US has enough oil right here to drop the price of petrol as low as $1.50 a gallon.  I'm pretty sure the guy is a nut job though I wouldn't put it past the oil companies to do such a thing.

Holy shit!!!

The APE!!!

Welcome back!!!!

[Art]

Hi SA, thought you'd dropped off the face of the planet 

IMO Peak Oil is like GW there is some truth to it but the truth is lost under layers of alarmism and hidden agendae as interest groups misuse data to push their own personal world view.

The peak oil debate continues to rage without any obvious progress. But, upon examination, the peak oil theory falls down because of serious flaws in logic and application. CERA's view, based on two decades of research, is highly unpopular in peakist circles. However, ours is not a view of unlimited resource. A plateau will occur-but not tomorrow, and supply will not "run dry" soon thereafter. We hold that aboveground factors will play the major role in dictating the end of the age of oil.

* Based on a detailed bottom-up approach, CERA sees no evidence of a peak before 2030. Moreover, global production will eventually follow an undulating plateau for one or more decades before declining slowly. Global resources, including both conventional and unconventional oils, are adequate to support strong production growth and a period on an undulating plateau.
* Despite his valuable contribution, M. King Hubbert's methodology falls down because it does not consider likely resource growth, application of new technology, basic commercial factors, or the impact of geopolitics on production. His approach does not work in all cases-including on the United States itself-and cannot reliably model a global production outlook. Put more simply, the case for the imminent peak is flawed. As it is, production in 2005 in the Lower 48 in the United States was 66 percent higher than Hubbert projected.
* The debate should now move toward a better understanding of the key drivers of production, including the scale of global resources and the likely production outlook, which form the core of current disagreements and confusion.

At the same time, there is a need to identify the signposts that will herald the onset of the inevitable slowdown of production growth and ensure that policymakers outside the energy community have a clear understanding of possible outcomes and risks.

[The Statutory Ape]

This guy was saying that oil wells renew themselves and that there are vast hidden resources we aren't told about.  Supposedly once the ppb hits $150 the oil companies plan to suddenly discover more resources.
this may have a kernel of truth in that I understand there really are vast oil deposits out there that are just to difficult and expensive to utilize and possibly the oil companies are sitting on developments that would make it feasable to exploit these resources until it would be more profitable.