MGW 11 - Oli Disadvantage - MGW2011

MGW 2011 Oil Disadvantage
1/93Herndon/Petit/Tate/Quinn
Oli Disadvantage
Oli Disadvantage..........................................................................................................................................................................................1 Oil 1nc..........................................................................................................................................................................................................3 2nc impact calc russia ..............................................................................................................................................................................5 ***uniqueness***........................................................................................................................................................................................7 Prices high....................................................................................................................................................................................................8 Prices high trending up.............................................................................................................................................................................9 ussian ec!n high......................................................................................................................................................................................11 ***lin"s***................................................................................................................................................................................................12 #in" $P$.................................................................................................................................................................................................13 #in" %3...................................................................................................................................................................................................15 #in" %3 price dr!ps.............................................................................................................................................................................1& #in" %3 alt energ' ..............................................................................................................................................................................17 ***internal lin"s***...................................................................................................................................................................................17 (nternal #in" Percepti!n ........................................................................................................................................................................18 (nternal )$ spurs internati!nal acti!n.....................................................................................................................................................19 (nternal devel!pment l!*ers prices........................................................................................................................................................2+ *** ussia impact scenari!***...................................................................................................................................................................21 2nc impact ussia ,ar...........................................................................................................................................................................22 2nc russian internal ...................................................................................................................................................................................23 -2 russia ec!n resilient .............................................................................................................................................................................2. ***2nc impact scenari!s***......................................................................................................................................................................25 $audi 2nc....................................................................................................................................................................................................2& /entral asian energ' 2nc............................................................................................................................................................................27 (sreal relati!ns 2nc ....................................................................................................................................................................................29 ***-2 smart args***.................................................................................................................................................................................3+ -2 %igh prices cause clean tech ...............................................................................................................................................................31 -2 0ar $ands1Oil $hale.............................................................................................................................................................................32 ***-2 high !il 2ad***...............................................................................................................................................................................33 -2 !il sh!c"s .............................................................................................................................................................................................3. -2 sh!c"s crush )$ ec!n!m'...................................................................................................................................................................35 -2 sh!c"s predicti!ns *r!ng..................................................................................................................................................................3& -2 sh!c"s sel3 c!rrecting........................................................................................................................................................................37 -2 sh!c"s st!rage s!lves........................................................................................................................................................................38 -2 gl!2al ec!n!m'....................................................................................................................................................................................39 -2 ec!n!mic c!llapse.................................................................................................................................................................................+ -2 ec!n!m'................................................................................................................................................................................................1 -2 d!llar.....................................................................................................................................................................................................3 -2 decrease !il demand............................................................................................................................................................................... ***-2 3inite !il***.....................................................................................................................................................................................5 -2 pea" ......................................................................................................................................................................................................& 45tend 61 7! Pea"...................................................................................................................................................................................8 45tend 6213 0rilli!n 8arrels 45ist..........................................................................................................................................................5+ 45tend 63 7e* 0echn!l!g' $!lves........................................................................................................................................................51 45tend 6. /!untries D! 7!t )se -ll Oil 9ields.....................................................................................................................................53 45tend 65 Pea" 9la*ed...........................................................................................................................................................................5. 45tend 6& )nc!nventi!nal Oil ,ill 9ill (n.............................................................................................................................................55 ***-99( :-0(;4***.............................................................................................................................................................................57 ***uniqueness***......................................................................................................................................................................................58 Prices n!t sta2le.........................................................................................................................................................................................59 Prices decreasing........................................................................................................................................................................................&+ Prices l!* trending d!*n........................................................................................................................................................................&1 ***%igh !il 2ad )$ ec!n!m'***...........................................................................................................................................................&2 )$ 4c!n!m' l!* !il 2est.......................................................................................................................................................................&3 %igh !il 2ad )$ ec!n!m'.......................................................................................................................................................................&. %igh !il 2ad hegem!n' <1=.....................................................................................................................................................................&5 %igh !il 2ad hegem!n' <2=.....................................................................................................................................................................&& ***%igh !il 2ad ussia***.....................................................................................................................................................................&7

2/93Herndon/Petit/Tate/Quinn ussia 4c!n!m' <1=...................................................................................................................................................................................&8 ussia 4c!n!m' <2=...................................................................................................................................................................................&9 )ndermine ec!n!m'..................................................................................................................................................................................7+ )ndermine ec!n!m' dutch disease........................................................................................................................................................71 ***-2 high !il g!!d***............................................................................................................................................................................72 -2 high !il g!!d 3!r ec!n!m'...................................................................................................................................................................73 -2 high !il g!!d 3!r small ec!n!mies.......................................................................................................................................................7. -2 sh!c"s 2!unce 2ac"..............................................................................................................................................................................75 -2 $t!c"pile s!lves....................................................................................................................................................................................7& -2 >!!d 3!r rene*a2les............................................................................................................................................................................77 ***Oil is 9(7(04***.................................................................................................................................................................................78 9inite !il.....................................................................................................................................................................................................79 45tend 61 Pea" c!ming..........................................................................................................................................................................81 45tend 62 7e* 0echn!l!g' 7!t - 9i5..................................................................................................................................................8. 45tend 65? 8urning Oil 9ast......................................................................................................................................................................85 45tend 6&? )ndisc!vered 9ields................................................................................................................................................................8& -2 s!3t landing...........................................................................................................................................................................................87 -2 :ar"et ,ill Predict Pea".....................................................................................................................................................................88 -2 %igh Prices /ause 7e* (nvestment.....................................................................................................................................................89 -2 0ar $ands..............................................................................................................................................................................................9+ -2 $hale.....................................................................................................................................................................................................91 -2 saudi reserves.......................................................................................................................................................................................92

Oil 1nc
Oil prices ill re!ain "ig" # !iddle east insta$ilit% and s"a&% glo$al econo!% ill &eep "ig" prioces a'loat T"e Dail% ti!es (/2)111@ < 0he dail' times is a Pa"istani ne*s agenc'@ A /rude !il prices *itness a surge amid uprising in
:47-B. httpC11***.dail'times.c!m.p"1de3ault.aspDpageE2+11F+&F25Fst!r'G25?&?2+11Gpg5G7. &.25.2+11@ >!!gle. -,= ($#-:-8-DC -mid p!pular uprising in the :iddle 4ast and 7!rth -3rica <:47-= regi!n and tur2ulence in currenc' mar"ets@ crude !il prices remained !n the higher side in the !utg!ing 9H11. ,ith alm!st !ne *ee" remaining@ ,0( and -ra2 crude@ 2enchmar" 3!r Pa"istan@ !il prices during 9H11 have surged 2' 22I and 52I@ respectivel'@ sa's a press release issued here !n 9rida'. :!st imp!rtantl'@ a sharp
increase in -ra2 gul3 crude as c!mpared t! ,0( is indicative !3 changing demand pattern !3 internati!nal !il mar"ets. On the l!cal 3r!nt@ the rise in the internati!nal !il price unleashed the pricing Pand!ra *here g!vernment attempted vari!us measures including reducing Petr!leum #ev' <P#=@ 3i5ing O:/ margins and a2!lishing *har3age J incidental charges t! "eep the d!mestic !il prices in chec". Despite all the measures l!cal !il pr!ducts prices gre* 2' 28I?&+I *ith diesel
and petr!l prices t!uching all?time highs in :a' 2+11. (nternati!nal crude !il J pr!ducts mar"et in 9H11 !nce again *as mar"ed *ith high v!latilit' in the intenti!nal !il prices primaril' !n acc!unt !3 p!litical unrest in :iddle 4ast and uncertaint' surr!unding the gl!2al ec!n!mic rec!ver'. ,here@ ,0( crude prices Kumped 2' 22I !n cl!sing da' 2asis@ average prices st!!d at L89 per 2arrel <up 19I H!H=. On the !ther hand@ -ra2 light crude !il pricesMa 2enchmar" crude 3!r l!cal energ' c!mpanies@ r!se 2' a massive 52I during 9H11 *hereas average price st!!d at L91 per 2arrel <up 2.I H!H=. (t is e5pected that gl!2al !il mar"et *ill displa' high v!latilit' !n acc!unt !3 divergent vie*s regarding the gl!2al ec!n!mic health. %!*ever@ 2ased !n prevalent trends !il prices are e5pected t! remain 3irm ar!und
the levels !3 L9& per 2arrel in 9H11. Our l!ng?term !il prices assumpti!n remains L9+ per 2arrel. (n turn@ 3irm !il prices are e5pected t! 2!de *ell 3!r 4JP and re3iner' sect!r@ *hile 2eing a s!urce !3 invent!r' gains 3!r O:/s. ppi
***insert lin& + + + plan causes decrease reliance on oil or causes s"i't to rene /alt energ% ,ven a s!all c"ange in oil us"ered $% rene a$les could plu!!et prices -are% 2003 <N!hn@ 8usiness ,ee"@ Taming the Oil Beast, 9e2 2.=
Het reducing
!il use has t! 2e d!ne Kudici!usl'. - drastic !r a2rupt dr!p in demand c!uld even 2e c!unterpr!ductive. ,h'D 8ecause even a very small change in capacit' !r demand Acan 2ring 2ig s*ings in priceB e5plains aKeev Dha*an@ directi!n !3 the 4c!n!mic 9!recasting /enter at >e!rgia $tate )niversit'Os !2is!n /!llege !3 8usiness. 9!r instance@ the sl!*d!*n in -sia in the mid?199+s reduced demand !nl' 2' a2!ut 1.5 milli!n 22l. - da' 2ut it cause !il price t! plunge t! near L1+ a 2arrel. $! t!da'@ i3 the ).$. succeeded in a2ruptl' cur2ing demand 3!r !il prices *!uld plummet. %igher c!st pr!ducers such as ussia and the )$ *!uld either have t! s!il !il at a 2ig l!ss !r stand !n the sidelines. 0he e33ect *!uld 2e t! c!ncentrate p!*er '!u guessed it in the hands !3 :iddle 4astern nati!ns@ the l!*est? c!st pr!ducers and h!lders !3 t*! thirds !3 the "n!*n !il reserves. 0hatOs *h' 3la*ed energ' p!licies@ such as tr'ing t! !verride mar"et 3!rces 2' rushing t! e5pand supplies !r mandating 2ig 3uel e33icienc' gains@ c!uld d! harm.
.o er oil prices devastate t"e /ussian econo!%0 0he 1ational 2nterest@ $ummer 2003. A- l!*@ dish!nest decadence ? #etter 3r!m :!sc!*@B
httpC113indarticles.c!m1p1articles1miGm27511isG721aiG1+53&99+&1pgG1 . 0he impr!ved appearance !3 :!sc!* <alth!ugh n!t the rest !3 the c!untr'= is indisputa2le@ 2ut it is
mainl' a pr!duct !3 the high price !3 !il. 4ver' d!llar di33erence in the price !3 !il translates int! r!ughl' L1 2illi!n in 2udget revenueP a high price 3!r !il has there3!re 2ec!me the "e' t! the g!vernmentQs a2ilit' t! 2alance the 2udget@ pa' state empl!'ees and repa' ussiaQs 3!reign de2t. If the price should fall signi3icantl' and sta' relativel' l!*@ as it did in much !3 the 198+s and 199+s@ ussia *ill 2e plunged int! a severe ec!n!mic crisis.
/ussian econo!ic collapse causes a civil ar t"at escalates and goes nuclear $teven David@ p!litical scientist@ 9O 4(>7 -99-( $@ Nanuar'19e2ruar' 1999@ p. httpC11***.3!reigna33airs.!rg11999+1+13aessa'9551steven?r?
david1saving?america?3r!m?the?c!ming?civil?*ars.html
(3 internal *ar d!es stri"e ussia@ ec!n!mic deteri!rati!n *ill 2e a prime cause . 9r!m 1989 t! the present@ the >DP has 3allen 2' 5+ percent. (n a
s!ciet' *here@ ten 'ears ag!@ unempl!'ment scarcel' e5isted@ it reached 9.5 percent in 1997 *ith man' ec!n!mists declaring the true 3igure t! 2e much higher. 0*ent'? t*! percent !3 ussians live 2el!* the !33icial p!vert' line <earning less than L 7+ a m!nth=. :!dern ussia can neither c!llect ta5es <it gathers !nl' hal3 the revenue it is due= n!r signi3icantl' cut spending. e3!rmers t!ut privatiRati!n as the c!untr'Qs cure?all@ 2ut in a land *ith!ut *ell?de3ined pr!pert' rights !r c!ntract la* and *here su2sidies remain a *a' !3 li3e@ the pr!spects 3!r transiti!n t! an -merican?st'le capitalist ec!n!m' l!!" rem!te at 2est. -s the massive devaluati!n !3 the ru2le and the current p!litical crisis sh!*@ ussiaQs c!nditi!n is even *!rse than m!st anal'sts 3eared. (3 c!nditi!ns get *!rse@ even the st!ic ussian pe!ple *ill s!!n run !ut !3 patience. - 3uture c!n3lict *!uld quic"l' dra* in ussiaQs militar' . (n the $!viet da's civilian rule "ept the p!*er3ul armed 3!rces in chec". 8ut *ith the /!mmunist Part' !ut !3 !33ice@ *hat little civilian c!ntr!l remains relies !n an e5ceedingl' 3ragile 3!undati!n ?? pers!nal 3riendships 2et*een g!vernment leaders and militar' c!mmanders. :ean*hile@ the m!rale !3 ussian s!ldiers has 3allen t! a danger!us l!*. Drastic cuts in spending mean inadequate pa'@ h!using@ and medical care. - ne* emphasis !n d!mestic missi!ns has created an ide!l!gical split 2et*een the !ld and ne* guard in the militar' leadership@ increasing the ris" that disgruntled generals ma' enter the p!litical 3ra' and 3eeding the resentment !3 s!ldiers *h! disli"e 2eing used as a nati!nal p!lice 3!rce. 7e*l' enhanced ties 2et*een militar' units and l!cal auth!rities p!se an!ther danger. $!ldiers gr!* ever m!re dependent !n l!cal g!vernments 3!r h!using@ 3!!d@ and *ages. Dra3tees serve cl!ser t! h!me@ and ne* la*s have increased l!cal c!ntr!l !ver the armed 3!rces. ,ere a c!n3lict t! emerge 2et*een a regi!nal p!*er and :!sc!*@ it is n!t at all clear *hich side the militar' *!uld supp!rt. Divining the militar'Qs allegiance is crucial@ h!*ever@ since the structure !3 the ussian 9ederati!n ma"es it virtuall' certain that

regi!nal c!n3licts *ill c!ntinue t! erupt. ussiaQs 89 repu2lics@ "rais@ and !2lasts gr!* ever m!re independent in a s'stem that d!es little t! "eep them t!gether. -s the central g!vernment 3inds itsel3 una2le t! 3!rce its *ill 2e'!nd :!sc!* <i3 even that 3ar=@ p!*er dev!lves t! the peripher'. ,ith the ec!n!m' c!llapsing@ repu2lics 3eel less and less incentive t! pa' ta5es t! :!sc!* *hen the' receive s! little in return. 0hree?quarters !3 them alread' have their !*n c!nstituti!ns@ nearl' all !3 *hich ma"e s!me claim t! s!vereignt'. $tr!ng ethnic 2!nds pr!m!ted 2' sh!rtsighted $!viet p!licies ma' m!tivate n!n? ussians t! secede 3r!m the 9ederati!n. /hechn'aQs success3ul rev!lt against ussian c!ntr!l inspired similar m!vements 3!r aut!n!m' and independence thr!ugh!ut the c!untr'. (3 these re2elli!ns spread and :!sc!* resp!nds *ith 3!rce@ civil *ar is li"el'. $h!uld ussia succum2 t! internal *ar@ the c!nsequences 3!r the )nited $tates and 4ur!pe *ill 2e severe. - maK!r p!*er li"e ussia ?? even th!ugh in decline ?? d!es n!t su33er civil *ar quietl' !r al!ne. -n em2attled ussian 9ederati!n might pr!v!"e
!pp!rtunistic attac"s 3r!m enemies such as /hina. :assive 3l!*s !3 re3ugees *!uld p!ur int! central and *estern 4ur!pe. -rmed struggles in ussia c!uld easil' spill int! its neigh2!rs. Damage 3r!m the 3ighting@ particularl' attac"s !n nuclear plants@ *!uld p!is!n the envir!nment !3 much !3 4ur!pe and -sia. ,ithin ussia@ the c!nsequences *!uld 2e even *!rse. Nust as the sheer 2rutalit' !3 the last ussian civil *ar laid the 2asis 3!r the privati!ns !3 $!viet c!mmunism@ a sec!nd civil *ar might pr!duce an!ther h!rri3ic regime. :!st alarming is the real p!ssi2ilit' that the vi!lent disintegrati!n !3 ussia c!uld lead t! l!ss !3 c!ntr!l !ver its nuclear arsenal . 7! nuclear state has ever 3allen victim t! civil *ar@ 2ut even *ith!ut a clear precedent the grim
c!nsequences can 2e 3!reseen. ussia retains s!me 2+@+++ nuclear *eap!ns and the ra* material 3!r tens !3 th!usands m!re@ in sc!res !3 sites scattered thr!ugh!ut the c!untr'. $! 3ar@ the g!vernment has managed t! prevent the l!ss !3 an' *eap!ns !r much material. (3 *ar erupts@ h!*ever@ :!sc!*Qs alread' *ea" grip !n nuclear sites *ill slac"en@ ma"ing *eap!ns and supplies availa2le t! a *ide range !3 anti?-merican gr!ups and states. $uch dispersal !3 nuclear *eap!ns represents the
greatest ph'sical threat -merica n!* 3aces. -nd it is hard t! thin" !3 an'thing that *!uld increase this threat m!re than the cha!s
that *!uld 3!ll!* a ussian civil *ar.

)/93Herndon/Petit/Tate/Quinn
2nc impact calc russia

Oil price drops ill cause russian econo!ic collapse # 14 /ussia ill $e una$le to pa% its !ilitar% structure5 t"is !eans nuclear eapons can $e purc"ased 'or cas" and an aggressive c"ina ill sei6e t"e opportunit% to c"rus" a dis"eartened /ussian !ilitar%0 204 econo!ic decline ill induce sta$ilit% # 7nd5 insta$ilit% ris& nuclear ar Dimitri 8i!es@ $eni!r -ss!ciate@ /arnegie 4nd!*ment 3!r (nternati!nal Peace@ A0he eturn !3 ussian %ist!r'@B 9O 4(>7 -99-( $@ Nanuar'19e2ruar' 1993@ p. &7S@ #7.
9!r the )nited $tates@ neither HeltsinQs p!litical 3uture n!r even the 3uture !3 ussian dem!crac' sh!uld 2e ends in themselves. ,hat the )nited $tates needs m!st in its greatl' *ea"ened 2ut still p!tentiall' 3!rmida2le superp!*er rival is a c!m2inati!n !3 d!mestic sta2ilit' and a s'stem !3 chec"s and 2alances. $ta2ilit' is imp!rtant 3!r a nati!n *ith th!usands !3 nuclear *eap!ns and c!ntinuing territ!rial tensi!ns *ith its ne*l' independent neigh2!rs. 0!! much disunit' in ussia <as appealing as it is t! th!se *h! Tl!veT that c!untr' s! much that the' *!uld pre3er t! see several ussias= increases the likelihood of a civil war that could easily engulf m!st@ i3 n!t all@ !3 the p!st?$!viet states@ creating n!t !nl' nuclear and envir!nmental disasters 2ut a grave threat t! *!rld peace as *ell. 0hus@ it is in the ).$. interest t! have a g!vernment in :!sc!* that is str!ng and determined en!ugh t! dra* the line and t! prevent centri3ugal@ separatist trends 3r!m g!ing !ut !3 c!ntr!l.
T"is is !ost pro$a$le scenario 'or nuclear ar # ill engul' t"e 9nited 8tates $teven David@ Pr!3ess!r !3 P!litical $cience@ N!hns %!p"ins )niversit'@ A$aving -merica 9r!m the /!ming /ivil ,ars@B 9O 4(>7 -99-( $@ v 78 n 1@ Nan19e2 1999@ #7.
Onl' three c!untries@ in 3act@ meet 2!th criteriaC :e5ic!@ $audi -ra2ia@ and ussia. /ivil c!n3lict in :e5ic! would produce waves of disorder that would spill into the United States @ endangering the lives !3 hundreds !3 th!usands !3 -mericans@ destr!'ing a valua2le e5p!rt
mar"et@ and sending a t!rrent !3 re3ugees n!rth*ard. - re2elli!n in $audi -ra2ia c!uld destr!' its a2ilit' t! e5p!rt !il@ the !il !n *hich the industrialiRed *!rld depends. -nd internal *ar in ussia c!uld devastate 4ur!pe and trigger the use of nuclear weapons . O3 c!urse@ civil *ar in a cluster !3 !ther states c!uld seri!usl' harm -merican interests. 0hese c!untries include (nd!nesia@ ;eneRuela@ the Philippines@ 4g'pt@ 0ur"e'@ (srael@ and /hina. In none, however, are the stakes as high or the threat of war as imminent .
,rror negative # internal con'lict !a&es nuclear !iscalculation inevita$le # pre'er t"is evidence # cites 98 intelligence studies and accounts 'or !ilitar% polic% Pr% 99 <Peter ;incent@ 9!rmer )$ (ntelligence Operative@ ,ar $careC ).$.? ussia !n the 7uclear 8rin"@
ussian internal tr!u2lesMsuch as a leadership crisis@ c!up@ !r civil *arMc!uld aggravate ussiaOs 3ears !3 3!reign aggressi!n and lead t! a miscalculati!n !3 ).$. intenti!ns and to nuclear overreaction. ,hile this ma' s!und li"e a c!mplicated and impr!2a2le chain !3 events@ ussiaOs st!r' in the 199+s is !ne l!ng series !3 d!mestic crises that have all t!! !3ten 2een the s!urce !3 nuclear cl!se calls. 0he *ar scares !3 -ugust 1991 and Oct!2er 1993 ar!se !ut !3 c!up attempts. 0he civil *ar in /hechn'a caused a leadership crisis in :!sc!*@ *hich
c!ntri2uted t! the nuclear 3alse alarm during 7!r*a'Os launch !3 a mete!r!l!gical r!c"et in Nanuar' 1995. 7uclear *ar arising 3r!m ussian d!mestic crises is a threat the ,est did n!t 3ace@ !r at least 3aced t! a much lesser e5tent@ during the /!ld ,ar. 0he ussian militar'Os c!ntinued 3i5ati!n !n surprise?attac"
scenari!s int! the 199+s@ c!m2ined *ith ussiaOs deepening internal pr!2lems@ has created a situation in which the United States might find itself the victim of a preemptive strike for no other reason than a *ar scare 2!rn !3 Russian domestic troubles. -t least in nuclear c!n3r!ntati!ns !3 the 195+s197+sMduring the 8erlin crisis@ /u2an missile crisis@ and 1973 :iddle 4ast *arM2!th sides "ne* the' *ere !n the nuclear 2rin". 0here *as !pp!rtunit' t! av!id c!n3lict thr!ugh neg!tiati!n !r deescalati!n. 0he nuclear *ar scares !3 the 198+s and 199+s have 2een !ne?sided ussian a33airs@ with the West ign!rant that it *as in grave peril.
7nd5 declining econo!% ris& nuclear !eltdo ns # terror stri&es and !ac"iner% not ta&en care o' # ris& e:tinction %arve' ,asserman <$eni!r 4dit!r 9ree Press= $pring 2002 4arth (sland N!urnal@ ***.earthisland.!rg1eiK!urnal1ne*Garticles.c3mD
article(DE.57JK!urnal(DE&3= 0he intense radi!active heat *ithin t!da'Qs !perating react!rs is the h!ttest an'*here !n the planet . 8ecause (ndian P!int has !perated s! l!ng@ its accumulated radi!active 2urden 3ar e5ceeds that !3 /hern!2'l. 0he sa3et' s'stems are e5tremel' c!mple5 and virtuall' inde3ensi2le. One !r m!re c!uld 2e *iped !ut *ith a small aircra3t@ gr!und?2ased *eap!ns@ truc" 2!m2s !r even chemical12i!l!gical assaults aimed at the *!r" 3!rce. - terr!rist assault at (ndian P!int c!uld 'ield three in3ernal 3ire2alls !3 m!lten radi!active lava 2urning thr!ugh the earth and int! the aqui3er and the river. $tri"ing *ater@ the' *!uld 2last gigantic 2ill!*s !3 h!rri2l' radi!active steam int! the atm!sphere. 0h!usands !3 square miles *!uld 2e saturated *ith the m!st lethal cl!uds ever created@ dep!siting relentless genetic p!is!ns that *!uld "ill 3!rever. (n3ants and small children *!uld quic"l' die en masse. Pregnant *!men *!uld
sp!ntane!usl' a2!rt !r give 2irth t! h!rri2l' de3!rmed !33spring. >hastl' s!res@ rashes@ ulcerati!ns and 2urns *!uld a33lict the s"in !3 milli!ns. %eart attac"s@ str!"e and multiple !rgan 3ailure *!uld "ill th!usands !n the sp!t. 4mph'sema@ hair l!ss@ nausea@ ina2ilit' t! eat !r drin" !r s*all!*@ diarrhea and inc!ntinence@ sterilit' and imp!tence@ asthma and 2lindness *!uld a33lict hundreds !3 th!usands@ i3 n!t milli!ns. 0hen c!mes the *ave !3 cancers @ leu"emias@ l'mph!mas@ tum!rs and hellish diseases 3!r *hich ne* names *ill have t! 2e invented. 4vacuati!n *!uld 2e imp!ssi2le@ 2ut th!usands *!uld die tr'ing. -ttempts t! quench the 3ires

(/93Herndon/Petit/Tate/Quinn
*!uld 2e 3utile. :!re than 8++@+++ $!viet dra3tees 3!rced thr!ugh /hern!2'lQs seething remains in a 3utile attempt t! clean it up are still d'ing 3r!m their e5p!sure. -t (ndian P!int@ the m!lten c!res *!uld 2urn unc!ntr!lled 3!r da's@ *ee"s and 'ears. ,h! *!uld v!lunteer 3!r such an -merican tas" 3!rceD 0he immediate damage 3r!m an (ndian P!int attac" <!r a d!mestic accident= *!uld render all 3ive 2!r!ughs !3 7e* H!r" /it' an ap!cal'ptic *asteland. -s at 0hree :ile (sland@ *here th!usands !3 3arm and *ild animals died in heaps@ natural ec!s'stems *!uld 2e permanentl' and irrev!ca2l' destr!'ed. $pirituall'@ ps'ch!l!gicall'@ 3inanciall' and ec!l!gicall'@ !ur nati!n *!uld never rec!ver. 0his is *hat *e missed 2' a mere .+ miles !n $eptem2er 11. 7!* that *e are at *ar@ this is *hat c!uld 2e happening as '!u read this. 0here are 1+3 !3 these p!tential 8!m2s !3 the -p!cal'pse !perating in the )$. 0he' generate a mere 8 percent !3 !ur t!tal energ'. $ince its deregulati!n crisis@ /ali3!rnia cut its electric c!nsumpti!n 2' s!me 15 percent. ,ithin a 'ear@ the )$ c!uld cheapl' replace virtuall' all the react!rs *ith increased e33icienc'. Het@ as the terr!r escalates@ /!ngress is 3ast?trac"ing the e5tensi!n !3 the Price?-nders!n -ct@ a 3!rm !3 legal immunit' that pr!tects react!r !perat!rs 3r!m lia2ilit' in case !3 a meltd!*n !r terr!rist attac". D! *e ta"e this *ar seri!usl'D -re *e c!mmitted t! the survival !3 !ur nati!nD (3 s!@ the tic"ing react!r
2!m2s that c!uld obliterate the very core of our life and of all future generations must 2e shut d!*n.
/ussia+-"ina ar -le5ander 8"aravin <Direct!r !3 the P!litical and :ilitar' -nal'sis (nstitute= Oct!2er 1 2001@ ,hat 0he Papers $a' < ussia=@
7eRavisim!e ;!enn!e O2!Rrenie@ 7!. 28@ A0he 0hird 0hreat@B 0ranslated 2' -ndrei 'a2!ch"in
7!*@ a 3e* *!rds a2!ut the third t'pe !3 *ar. - real militar' threat t! ussia 3r!m /hina has n!t merel' 2een ign!redP it has 2een denied 2' ussiaOs leaders and nearl' all !3 the p!litical 3!rces. #etOs see s!me statistic 3igures at 3irst. 0he territ!r' !3 $i2eria and the ussian 9ar 4ast c!mprises 12@7&5@9++ square "il!meters <75I !3 ussiaOs entire area=@ *ith a p!pulati!n !3 .+@553@9++ pe!ple <28I !3 ussiaOs p!pulati!n=. 0he territ!r' !3 /hina is 9@597@+++ square "il!meters and its p!pulati!n is 1.2&5 2illi!n <*hich is 29 times greater than the p!pulati!n !3 $i2eria and the ussian 9ar 4ast=. /hinaOs ec!n!m' is am!ng the 3astest?gr!*ing ec!n!mies in the *!rld. (t remains s!cialistic in man' aspects@ i.e. e5tensive and highl' e5pensive@ demanding m!re and m!re natural res!urces. /hinaOs natural res!urces are rather limited@ *hereas the depths !3 $i2eria and the ussian 9ar 4ast are alm!st ine5hausti2le. /hinese pr!paganda has c!nstantl' 2een sh!*ing us s"'scrapers in 3ree trade R!nes in s!utheastern /hina. (t sh!uld n!t 2e 3!rg!tten@ h!*ever@ that s!me 25+ t! 3++ milli!n pe!ple live there@ i.e. at m!st a quarter !3 /hinaOs p!pulati!n. - 2illi!n /hinese pe!ple are still living in miser'. 9!r them@ even the living standards !3 a 2ac"*ater ussian t!*n
remain inaccessi2l' high. 0he' have a2s!lutel' n!thing t! l!se. 0here is ever' prerequisite 3!r Athe 3inal thr!* t! the n!rth.B 0he strength !3 the /hinese Pe!pleOs #i2erati!n -rm' </P#-= has 2een gr!*ing quic"er than the /hinese ec!n!m'. - decade ag! the /P#- *as equipped *ith in3eri!r c!pies !3 ussian arms 3r!m late 195+s t! the earl' 19&+s. %!*ever@ thr!ugh its !*n e33!rts ussia has nearl' managed t! liquidate its m!st signi3icant techn!l!gical advantage. 0han"s t! !ur Real@ 3r!m antique :i>?21 3ighters !3 the earliest m!di3icati!ns and $?75 air de3ense missile
s'stems the /hinese antiaircra3t de3ense 3!rces have ad!pted $u?27 3ighters and $?3++ air de3ense missile s'stems. /hinaOs air de3ense 3!rces have received 0!r s'stems instead !3 anti?aircra3t guns *hich c!uld have 2een used during ,!rld ,ar ((. 0he sh!c" air 3!rce !3 !ur Aeastern 2rethrenB *ill in the near 3uture replace antique 0u?1& and (l?28 airplanes *ith $u?3+ 3ighters@ *hich are n!t 'et availa2le t! the ussian -rmed 9!rcesU ussia ma' 3ace the A*!nder3ulB pr!spect
!3 c!m2ating the /hinese arm'@ *hich@ i3 3ull m!2iliRati!n is called@ is c!mpara2le in siRe *ith ussiaOs entire p!pulati!n@ *hich als! has nuclear *eap!ns <even tactical *eap!ns 2ec!me strategic i3 states have c!mm!n 2!rders= and *!uld 2e a2s!lutel' insensitive t! l!sses <even a l!ss !3 a 3e* milli!n !3 the servicemen *!uld 2e accepta2le 3!r /hina=. $uch a *ar *!uld 2e m!re h!rri2le than the ,!rld ,ar ((. (t *!uld require 3r!m !ur state ma5imal tensi!n@ universal m!2iliRati!n and c!mplete accumulati!n !3 the arm' militar' hard*are@ up t! the last tan" !r a plane@ in a single directi!n <*e *!uld have t! 3!rget such Atri3lesB li"e 0ale2s and 8asaev@ 2ut this d!es n!t guarantee success either=. :assive nuclear stri"es !n 2asic militar' 3!rces and cities !3 /hina *!uld 3inall' 2e the !nl' *a' !ut@ *hat *!uld e5haust ussiaOs armament c!mpletel'. ,e have n!t g!t an!ther set !3 interc!ntinental 2allistic missiles and su2marine?2ased missiles@ *hereas the general 3!rces *!uld 2e e5tremel' e5hausted in the 2!rder c!m2ats. (n the l!ng run@ even i3 the aggressi!n *!uld 2e st!pped a3ter the maK!rit' !3 the /hinese are "illed@ !ur c!untr' *!uld 2e a2s!lutel' unpr!tected against the A/hechenB and the A8al"anB variants 2!th@ and even against the first frost of a possible nuclear winter. -n a3!rementi!ned pr!spect is@ und!u2tedl'@ rather disagreea2le and *e
*!uld n!t li"e t! 2elieve it can 2e true. %!*ever@ it is a realistic pr!spect ? Kust li"e a *ar against 7-0O !r (slamic e5tremists.
Proli' $tuart Ta%lor Nr <7ati!nal N!urnal seni!r *riter@ c!ntri2uting edit!r at 7e*s*ee"= $eptem2er 1& 2002@ #egal 0imes@ A,!rr' a2!ut
(raqOs intenti!ns@ 2ut 3!cus !n the 2igger threatC nuclear *eap!ns c!ntr!lled 2' an' terr!rist !r r!gue state@B )nless *e get seri!us a2!ut st!pping pr!li3erati!n@ *e are headed 3!r Aa *!rld 3illed *ith nuclear?*eap!ns states@ *here ever' crisis threatens t! g! nuclear@B *here Athe survival !3 civiliRati!n trul' is in questi!n 3r!m da' t! da'@B and *here Ait *!uld 2e imp!ssi2le t! "eep these *eap!ns !ut !3 the hands !3 terr!rists@ religi!us cults@ and criminal !rganiRati!ns.B $! *rites -m2assad!r 0h!mas >raham Nr.@ a m!derate epu2lican *h! served as a career arms?c!ntr!ller under si5 presidents and led the success3ul /lint!n administrati!n e33!rt t! e5tend the 7uclear
7!npr!li3erati!n 0reat'.

;/93Herndon/Petit/Tate/Quinn
***uni<ueness***

=/93Herndon/Petit/Tate/Quinn
Prices high
Oil prices rising despite release o' reserves Hargreaves5 (/30 <$teve %argreaves@ sta33 *riter 3!r /77 :!ne'@ Nune 3+@ 2+11@ AOil Prices ising - ,ee" -3ter $P
eleaseB@ httpC11***.*p5i.c!m1aut!m!tive128.+&8281detail.html@ -DC 713111@ $#= Oil prices have surged in the last 3e* da's and are n!* less than a d!llar 3r!m *here the' *ere *hen President O2ama made the c!ntr!versial decisi!n t! tap the nati!nQs strategic reserve last 0hursda'. On 0hursda'@ ,est 0e5as (ntermediate crude edged l!*er t! L9..27 a 2arrel . 8ut thatQs still nearl' L5 higher than last *ee"@ *hen prices 3ell !ver .I 3!ll!*ing the !il release ann!uncement. OilQs stu22!rn re3usal t! trend l!*er since the )nited $tates and !ther industrialiRed nati!ns ann!unced the' *!uld 3l!!d the !il mar"et *ith &+ milli!n 2arrels !3 3uel !ver the ne5t 3+ da's is raising questi!ns !ver *hatQs driving the mar"et ?? 3undamentals !r pure speculati!nD
Oil prices rise in t"e long run>reserves are 'inite Mason and W"ite5 (/2( < !*ena :as!n and >arr' ,hite@ sta33 *riters 3!r 0he 0elegraph@ Nune 2&@ 2+11@ A0he (4- cann!t h!ld
2ac" the tide !3 higher !il pricesB@ httpC11***.telegraph.c!.u"13inance1c!mm!dities1859985+10he?(4-?cann!t?h!ld?2ac"?the?tide?!3? higher?!il?prices.html@ -DC 713111@ $#= /ar!line 8ain@ !3 the 4c!n!mist (ntelligence )nit@ sa'sC T-lth!ugh the immediate impact !3 the (4-Qs reserve release *ill 2e t! depress prices@ in the m!re medium term@ it c!uld actuall' 2e 2ullish 3!r prices. eserves are 3inite and cann!t 2e released 3!r ever. %elen %ent!n@ !3 $tandard /hartered@ agrees that the release !3 strategic st!c"s *ill *eigh !n prices near?term 2ut this e33ect ma' n!t 2e l!ng?lived. T(t is Kust a sh!rt?term measure designed t! 2ridge a gap in supplies@T she sa's in a rep!rt. T0he m!ve *ill li"el' undermine c!n3idence in OpecQs a2ilit' t! suppl' the mar"et in the l!nger term.T T8ut in alm!st ever' scenari! 3!r the ne5t 3ive 'ears@ limited gl!2al !il suppl' gr!*th *ill li"el' mean higher?3!r?l!nger prices. $! i3 #i2'a d!esnQt c!me 2ac" !n line s!!n@ the !il mar"et c!uld tighten sharpl' in 2+12.T
Oil prices rising in t"e long run>de!and rising Ta%lor5 ;/2

<9a2rice 0a'l!r@ s a*ard?*inning 3inancial K!urnalist and anal'st@ Nul' 2@ 2+11@ AP!litics aside@ e5pect !il prices t! riseB@ httpC11***.*innipeg3reepress.c!m1!pini!n1c!lumnists1p!litics?aside?e5pect?!il?prices?t!?rise?12.9+..19.html@ -DC 713111@ $#= P!litics is an !il' 2usiness. 8ut !il is a p!litical 2usiness. (3 '!uQre *!ndering *h' the (nternati!nal 4nerg' -genc' and the )nited $tates decided t! release &+ milli!n 2arrels !3 !il 3r!m their strategic reserves @ rest assured that p!litics has s!mething t! d! *ith it. (t *!r"ed@ 3!r a *ee". Oil prices tum2led@ and the shares !3 !il pr!ducers *ith them. 8ut !il prices are 2ac" *here the' *ere and li"el' t! g! up. 0he 3act is the *!rld c!nsumes a2!ut 85 milli!n 2arrels !3 the stu33 ever' da'@ s! releasing &+ milli!n 2arrels d!esnQt d! much t! tilt the suppl'?demand 2alance. Over time@ thereQs n!t much 2ureaucrats and p!liticians can d! t! st!p the rise !3 !il. 0he )nited $tates@ *hich is s! severel' sensitive
t! !il prices@ can and *ill li"el' intr!duce p!licies t! enc!urage !ther 3!rms !3 energ' use ?? electric cars and m!re natural gas use@ 3!r e5ample. (n 3act@ itQs d!ing that n!*. 8ut an' dr!p in ).$. demand *ill 2e ta"en up and then s!me 2' gr!*ing demand in -sia. Oil prices are n!t c!ming d!*n !ver time. Hes@ i3 *e have an!ther recessi!n the' *ill. 8ut !ther*ise the' can !nl' g! up. 0he pattern *ill 2e sa*?t!!thed@ !3 c!urse ?? sharp m!ves up 3!ll!*ed 2' equall' sharp !nes d!*n.
Oil prices rising in long run>rising glo$al de!and ?a"n5 (/23

</% ($ V-%7@ -P energ' *riter@ Nune 2.@ 2+11@ ADrivers catch a 2rea" as gas!line prices 3allB@ httpC11***.g!!gle.c!m1h!stedne*s1ap1article1-#eq:5KWi"inruv9 a2('035Km3h5%i7K-D d!c(dE3ac&cde221+2.a3&9e2a2323.c&d.371@ -DC 713111@ $#= 4nerg' ec!n!mists and ,all $treet investment 2an"ers cauti!n that !il is li"el' t! rise a2!ve L1++ again ne5t 'ear@ particularl' i3 !il pr!ducers struggle t! meet rising gl!2al demand. %urricanes in the >ul3 !3 :e5ic! !r 3urther unrest in the :iddle 4ast c!uld als! 2!!st prices. -gar*al e5pects gas!line prices *ill return t! a range !3 L3.5+ t! L3.75 per gall!n 2' the end !3 the 'ear. >!ldman $achs and !ther investment 2an"s predict !il *ill re2!und ne5t 'ear t! levels that *!uld push gas!line a2!ve L. 3!r the 3irst time since 2++8. T(3 '!uQre as"ing *hether gas!line c!uld 2e L3.5+ !r higher 3!rever@ the ans*er is 'es@T said !il anal'st -ndre* #ip!*. TPe!ple *ill have t! ma"e s!me adKustments.T
T"e Price o' Oil is increasing no 8c"erer@ @une 30 2+11 !n $cherer@ $ta33 *riter@ Oil prices g! up@ 2ut gas prices g! d!*n *hatOs g!ing !nD@
httpC11***.csm!nit!r.c!m18usiness12+111+&3+1Oil?prices?g!?up?2ut?gas?prices?g!?d!*n.?,hat?s?g!ing?!n@#:= One clear indicati!n !3 the strength !3 the !il mar"et sh!uld c!me sh!rtl' *hen the Department !3 4nerg' ann!unces *hich 2ids it *ill accept@ at *hat price@ 3!r 3+ milli!n 2arrels !3 !il the )$ share !3 the petr!leum?reserve release. <0he (nternati!nal 4nerg' -genc' is als! releasing 3+ milli!n 2arrels.= A,e ma' n!t need the !il n!*@B she sa's. A(3 the aucti!n is underper3!rming@ d! the' as" 3!r m!re 2ids in Nul'DB ,hile the price !3 !il has m!ved 2ac" up@ the price !3 gas!line has c!ntinued t! dr!p. (n the past *ee"@ the price at the pump has g!ne d!*n an!ther 7 cents a gall!n@ *ith the nati!nal average n!* a2!ut L3.5. a gall!n@ acc!rding t! ---@ the m!t!ristsO clu2. 0he price !3 gas is n!* a2!ut .. cents a gall!n l!*er than its pea" in :a'@ 2ut itOs still a2!ut 8+ cents a gall!n m!re e5pensive than last 'ear. 0hen again@ gas!line prices have alm!st 2!tt!med !ut
3!r the summer@ :r. Vildu33 sa's. A,e need crude !il 2el!* L9+ a 2arrel t! sustain these levels@B he sa's. On 0hursda'@ the price !3 crude *as a2!ut L95.&5 a 2arrel !n the 3utures mar"et. A0he dail' price declines at the pump *ill c!me t! a screeching halt@B he sa's.

Prices high trending up

Oil prices "ig"er+ trending to A1)0 ,pstein@ Nul' 2@ 2011 X>ene@A>et ead' 3!r L15+ OilB@
httpC11!nline.2arr!ns.c!m1article1$85+++1.2.+531119+3&172+.57&.1179159++55&.&.htmlD m!dE0,:Gpastediti!nG16article0a2sGpanelGarticleI3D1@ :DY 0he ).$. ec!n!m' is never c!mpletel' read' 3!r higher !il prices@ *hich is !ne reas!n the' ta"e a nast' ec!n!mic t!ll *hen the' arrive. 8ut readiness can 2e enhanced 2' a*areness !3 the li"el' !utl!!" 3!r petr!leum pricesand the !utl!!" t!da' is relativel' grim@ alth!ugh pr!2a2l' n!t disastr!us. Despite the recent 2+I decline 3r!m -pril highs@ ne* highs !n crude@ heating !il@ diesel 3uel@ Ket 3uel and gas!line seem
li"el' !ver the ne5t 12 m!nths. 9!ll!*ing s!me 3urther easing !ver the summer@ the sec!nd leg !3 the l!ng?term 2ull mar"et in petr!leumthe 3irst !ccurred in 2++7? +8pr!2a2l' *ill 2egin this 3all. -s !il pr!ducersQ spare capacit' graduall' declines t! *!rris!me levels@ the average m!nthl' price c!uld
reach a rec!rd L15+ per 2arrel 2' ne5t spring@ *ith spi"es t! L1&5 !r L17+. ,ith this@ L..5+?a?gall!n gas!line *ill 2ec!me the n!rm. 0hat *ill put a huge dent in c!nsumer *allets@ *hile ramping up the desira2ilit' !3 3uel?e33icient cars. ;ie* 9ull (mage -nn 4lli!tt /utting 3!r 8arr!nQs 0he c!ntinued sh!rt?term easing !3 !il prices sh!uld 2ene3it the ec!n!m' !ver the summer@ !nl' t! e5act a much larger pa'2ac" later. 0he pr!Kected !il sh!c" !3 spring 2+12 *ill hurt the ec!n!mic e5pansi!n@ 2ut n!t "ill it@ pruning a2!ut 1.5 percentage p!ints 3r!m quarterl' gr!*th in real gr!ss d!mestic pr!duct. ,hile pain3ul@ this 3!recast isnQt quite as e5treme as it might appear. $h!rt?lived price spi"es and tr!ughs ma"e 3!r 3renRied headlines in ne*spapers and !n the (nternet as *ell as 3!r h'sterical tal"ing heads !n radi! and 0;@ 2ut *hat matters 3!r the ec!n!m' are average prices !ver at least a 3e* m!nths. 8arr!nQs estimates that the e33ective price !3 crude *as a2!ut L11+ in this 'earQs sec!nd quarter@ *hich Kust ended. $! a pr!Kected increase t! L15+ 2' the sec!nd quarter !3 ne5t 'ear assumes a rise !3 L.+. Oil is li"el' t! sta' at L15+ 3!r several m!nths@ 2e3!re the pr!mise !3 greater suppl' 2rings a gradual easing. 0he L11+ price estimate c!mes 3r!m ta"ing the
midp!int 2et*een the mar"et price !n ,est 0e5as (ntermediate !il traded !n the 7e* H!r" :ercantile 45change in 7e* H!r" and !n 8rent crude traded !n the (nterc!ntinental 45change in #!nd!n. ,hile the recent unusual 1+I?15I premium !3 8rent !ver ,0(@ *hich actuall' is !3 higher qualit'@ has puRRled man' anal'sts@ th!se 8arr!nQs p!lled agree that the l!*er price !n ,0( is p!tentiall' misleading. -cc!rding t! /redit?$uisse energ' anal'st N!achim -Rria@ the ).$. is mainl' pa'ing the ,est 0e5as (ntermediate price@ 2ut the c!st !3 gas!line and diesel and Ket 3uel re3lects the higher 8rent price. Names %amilt!n@ an ec!n!mics pr!3ess!r at the )niversit' !3 $an Dieg!@ has studied the e33ect !3 !il sh!c"s !n the ec!n!m'. %e suggests using a midp!int 2et*een 8rent and ,0( t! capture the e33ective price. 0hatQs *hat *eQve d!ne. $till@ even a L.+ rise@ t! L15+@ 2' ne5t spring di33ers 2' several c!untr' miles 3r!m the !il mar"etQs !*n implied price !utl!!". #ast *ee"@ 3utures c!ntracts 3!r Nune 2+12 deliver' !3 ,0( crude *ere trading ar!und L99@ *hile 8rent crude 3!r Nune 2+12 deliver' *as c!mmanding Kust L112. $teve 8riese@ pu2lisher !3 the 8ullish evie* !3 /!mm!dit' (nsiders ne*sletter and ,e2site@ sa's that c!mmercial hedgers*h! deal in the underl'ing c!mm!dit' and thus have l!ts !3 pr!3essi!nal e5perience in these matters ?? are T!ver*helmingl' 2earishT and are putting their m!ne' *here their c!nvicti!ns are. 0he' currentl' have a rec!rd net sh!rt p!siti!n !n the 7'me5 3utures and !pti!ns mar"et. 8ecause hist!r' sh!*s that the hedgers !3ten have 2een right@ 8riese c!ncludes that the Tsh!rt pr!3it p!tential is en!rm!us.T ;ie* 9ull (mage ,hile 8arr!nQs sees s!me sh!rt?selling p!tential this summer@ itQs n!t Ten!rm!us.T -nd *ith all due respect t! the e5pertise !3 the c!mmercial hedgers@ even pr!s can 2e *r!ng. ,e thin" this is a great 2u'ing !pp!rtunit' 3!r 2ulls !n petr!leum. /!rnerst!ne -nal'tics !il anal'st :ichael !thman@ *ith m!re than 25 'earsQ e5perience calling the mar"et@ 3!resees an e5tended price plateau !3 L17+. (n supp!rt !3 his vie*@ !thman cites a c!mment made 2' 7!2u! 0ana"a@ e5ecutive direct!r !3 the (nternati!nal 4nerg' -genc'@ the Paris?2ased !rganiRati!n that represents !il?c!nsuming nati!ns. 0ana"a sp!"e !n Nune 23@ *hen the (4- helped cause a sell!33 in the petr!leum mar"et 2' ann!uncing that &+ milli!n 2arrels *ere 2eing released 3r!m strategic reserves held 2' the ).$. and 27 !ther c!untries. <9!r m!re !n the e33ects !3 this m!ve@ see /!mm!dities /!rner c!lumn.= 0he mar"ets seemed quite impressed 2' this in3usi!n@ even th!ugh it am!unted t! Kust a little !ver t*!?thirds !3 the nearl' 9+ milli!n 2arrels the *!rld c!nsumes each da'. -t that rate !3 dail' !33?ta"e@ the t!tal emergenc' st!c"s held *!rld?*ide@ 1.& 2illi!n 2arrels@ c!me t! !nl' a2!ut 18 da's !3 suppl'. 9ar m!re imp!rtant is the a2ilit' !3 pr!ducing nati!ns t! meet needs@ m!nth a3ter m!nth. 0he !stensi2le reas!n 3!r releasing the &+ milli!n 2arrels *as t! help replace the l!ss !3 pr!ducti!n 3r!m *ar?t!rn #i2'a. 8ut 0ana"a@ *h! n!t surprisingl' said that he had 2een in Tcl!se c!nsultati!nT *ith TmaK!r pr!ducing c!untries@T als! lin"ed the decisi!n t! c!ncern a2!ut spare capacit' *ithin the OrganiRati!n !3 Petr!leum 45p!rting /!untries@ and especiall' 3r!m its largest pr!ducer@ $audi -ra2ia. ,hile *elc!ming increased pr!ducti!n 3r!m this s!urce@ he cauti!ned that it T*ill ta"e timeT t! c!me !n line. /!mments !thmanC T ead 2et*een the lines. 0his raises the specter that the $audis might have a pr!2lem raising their !utput.T 0he 8arr!nQs pr!Kecti!n assumes that the $audis *ill ramp up !utput this m!nth@ and that prices *ill c!ntinue t! ease as a result. -n!ther !il 2ull@ :!rgan $tanle'Qs c!mm!dit' research head %ussein -llidina@ sees this !nl' 3urthering the decline !3 OP4/Qs spare capacit' t! Tuntena2le levels@T and especiall' in the land that -llidina du2s the T"ingd!m !3 spare capacit'T ?? $audi -ra2ia. ,hile -llidina is m!re cauti!us than !thman ?? his m!st 2ullish scenari! pr!Kects a 8rent average price !3 a2!ut L1.+ thr!ugh ne5t 'ear ?? their 2r!ad c!ncerns are similar. -uth!r !3 a $eptem2er 2++9 rep!rt called T/rude?Oil 8alances t! 0ighten -gain 2' 2+12@T -llidina 3!resa* the pr!cess 2' *hich unused capacit' *!uld eventuall' 2e reduced t! pun' levels@ spar"ing higher prices. 0%4 4 - 4 9O) :-(7 P#-H4 $ in the gl!2al !il drama. On the demand side are the nati!ns !3 the OrganiRati!n 3!r 4c!n!mic /!!perati!n and Devel!pment@ *hich includes the ).$.@ /anada@ Napan@ -ustralia@ 7e* Zealand and m!st !3 4ur!pe. -nd there are the n!n?O4/D nati!ns@ *hich include (ndia and /hina@ currentl' in a phase !3 rapid ec!n!mic gr!*th. On the suppl' side is OP4/@ *hich includes #i2'a@ (raq and $audi -ra2ia@ and n!n?OP4/ nati!ns@ including 7!r*a'@ :e5ic! and the 3!rmer $!viet )ni!n. 0he d'namics !3 2!th the 3irst <2++7?+8= leg !3 the 2ull mar"et and the sec!nd leg@ li"el' t! 2egin this 'ear@ are essentiall' the same. 0he thirst 3!r !il 2' n!n?O4/D nati!ns puts pressure !n suppl'@ and the increase in !utput 3r!m n!n?OP4/ pr!ducers is inadequate t! quench this demand. $ince 2+++ ?? despite the p!st?9111 ec!n!mic d!*nturn@ the gl!2al st!c"?mar"et s*!!n !3 the earl' 2+++s@ the 2++8 3inancial crisis and the 2++8?2++9 >reat ecessi!n ?? gl!2al !il c!nsumpti!n has advanced 2' a 'earl' average !3 1.1 milli!n 2arrels per da'@ *hile n!n?OP4/ !utput has risen 2' a 'earl' average !3 less than +.& milli!n per da'. (n 2+++@ n!n?O4/D demand am!unted t! 37.7I@ !r a little !ver a third@ !3 the *!rldQs c!nsumpti!nP n!*@ it am!unts t! .8.5I@ !r nearl' hal3. ;ie* 9ull (mage 0he ups*ing in demand is adding urgenc' t! c!ncern a2!ut the availa2ilit'@ !r lac" there!3@ !3 spare capacit'@ technicall' de3ined as crude that can 2e pr!duced !n a sustained 2asis *ithin 3+ t! .5 da's. Perhaps the m!st imp!rtant thing t! "n!* a2!ut spare capacit' is that !nl' the OP4/ pr!ducers have an'. 0he n!n?OP4/ gang is pr!2a2l' alread' pumping !ut all it can. 0he 2++7?+8 2ull mar"et in !il pea"ed *ith an average m!nthl' price !3 a rec!rd L133..+@ reached in Nul' 2++8@ *ith a sh!rt?lived spi"e@ t! L1.7@ !n Nul' 11. ,hile that !il sh!c" certainl' *!rsened the >reat ecessi!n@ *hich struc" earl' in 2++8@ the ec!n!mic c!ntracti!n *!uld have happened an'*a'@ since its main cause *as the 2ursting !3 the h!using 2u22le. 0he causalit' als! *ent the !ther *a'@ h!*ever. 0he recessi!ns in the O4/D c!untries@ including the ).$.@ >erman' and Napan@ meant *ea"ened demand 3!r !il that placed s!me drag !n the uptrend and eventuall' helped sin" the price !3 petr!leum. 0he c!ming sec!nd leg !3 the 2ull mar"et@ in c!ntrast@ *ill 2e sustained 2' stead'@ i3 m!dest@ ec!n!mic gr!*th in the O4/D *!rld. 0he c!nsensus estimate 3r!m the ec!n!mists surve'ed 3!r the 8lue /hip 4c!n!mic (ndicat!rs is 3!r real gr!ss d!mestic pr!duct gr!*th !3 3I in the ).$. !ver the ne5t 3!ur quarters@ m!derate gr!*th in >erman' and the ).V. and a resumpti!n !3 gr!*th in earthqua"e?ravaged Napan 2' ne5t 'ear. 4ven i3 /hinese ec!n!mic e5pansi!n sl!*sa 3!cus !3 s!me disagreement am!ng pr!gn!sticat!rs ?? n!n?O4/D demand sh!uld c!ntinue t! e5pand 3aster than demand 3r!m O4/D c!untries. esultC 0he squeeRe !n spare capacit' *ill 2e greater than ever 2e3!re. ,O (4$ O;4 $P- 4 /-P-/(0H have 2een e5acer2ated 2' the civil *ar in #i2'a@ *hich has ta"en 1.5 milli!n 2arrels a da' !ut !3 the suppl' stream. On the !ther hand@ the OP4/ meeting that 2r!"e up earl' last m!nth *ith n! 3!rmal deal t! increase qu!tas *as !3 n! great c!ncern in itsel3@ 2ecause OP4/ mem2ers had 2een !penl' e5ceeding qu!tas alread'. :!re imp!rtantl'@ the $audis signaled their *illingness t! 2!!st !utput 3r!m nine milli!n 2arrels a da' t! m!re than 1+ milli!n this summer. -ssuming that the $audis can meet their c!mmitment !n a timel' 2asis@ OP4/Qs spare capacit' *ill

10/93 Herndon/Petit/Tate/Quinn
still c!ntinue t! decline. esultC higher !il prices. One reas!n the ).$. is less suscepti2le t! an !il sh!c" than it used t! 2e is that@ 3!r ever' d!llar !3 n!minal >DP@ it c!nsumes less !il than it !nce did. 0he t!p chart !n this page ?? in *hich the 2+11?12 data are an average !3 ,0( and 8rent ?? sh!*s that the pr!Kected m!nthl' average !3 L15+ per 2arrel *!uld 2e a rec!rd high@ even th!ugh all hist!rical prices are adKusted t! 2+11 d!llars. 9!r e5ample@ the actual m!nthl' high !3 L39.5+ thr!ugh -pril?Nune 198+ c!mes t! L93.5+ in t!da'Qs d!llars@ as the chart sh!*s. 8ut the L15+ price pea" *ill n!t mean pea" c!nsumpti!n in the ).$.@ *hen measured as a percentage !3 gr!ss d!mestic pr!duct. -s the 2!tt!m chart sh!*s@ spending !n crude acc!unted 3!r 9.5I !3 n!minal >DP 3!r a 3e* m!nths in 198+. 0hatQs su2stantiall' higher than the estimated 7I i3 !il hits L15+@ as *e e5pect it t!. ,h' *ill the t!ll 2e l!*erD One 2ig 3act!rC $ince 198+@ an even larger share !3 -mericaQs gr!ss d!mestic pr!duct c!mes 3r!m services rather than g!!ds. Pr!ducing m!re services generall' requires less energ' than ma"ing m!re *idgets d!es. -ls!@ the use !3 !il in heating and in electricit'?generati!n has greatl' declined. (n 198+@ 5&I !3 all crude purchased in this c!untr' p!*ered vehicles <planes@ cars@ truc"s@ 2uses@ 3arm equipment=@ *hile t!da'@ 7+I is used 3!r that purp!se@ acc!rding t! the ).$. 4nerg' (n3!rmati!n -dministrati!n. (n additi!n@ the 3uel e33icienc' !3 the ).$. gr!und 3leet@ measured in t!tal vehicle?miles per gall!n@ is much higher n!* than it *as 31 'ears ag!. %!*ever@ given -mericansQ appetite 3!r $);s and 3!r cars *ith si5? and eight?c'linder engines@ 3uel e33icienc' leveled !33 in the late 199+s@ and has made n! pr!gress since then. )nderl'ing this splurge has 2een c!mplacenc' !ver !il prices. -s the price chart !n this page sh!*s@ apart 3r!m the 2rie3 spi"e in 1991@ p!st?198+ !il prices *ere prett' sta2le 3!r m!re than 2+ 'ears@ until the 3irst leg !3 the 2ull mar"et 2egan in 2++7. Price punishment !3 the s!rt *e anticipate ne5t spring c!uld restart seri!us pr!gress in 3uel e33icienc'. 8ut *ith ne* aut! sales running at a2!ut an 11 milli!n annual rate and the -merican light?vehicle 3leet n!* num2ering a2!ut 25+ milli!n@ signi3icant impr!vement *ill ta"e a*hile. 0he assumed 1.5 p!int drag !n gr!*th 3r!m the L.+ price hi"e 2alances vari!us 3act!rs. 0he main impact *!uld 2e !n the c!nsumer. 8ecause gas!line is a necessit' 3!r man' pe!ple ?? the' have n! alternative t! driving t! *!r" ?? and since itQs t!ugh t! quic"l' reduce the am!unt c!nsumed 2' ver' much@ 3unds all!cated t! it must c!me 3r!m s!me*here else. -nd that s!me*here else c!uld 2e savings !r m!ne' that !ther*ise *!uld 2e spent !n cl!thes@ restaurant meals@ m!vies !r iPads. 4stimating the c!nsumpti!n e33ect@ 8an" !3 -merica :errill #'nch ec!n!mist 7eil Dutta calculates that ever' L1+ price rise n!rmall' trims >DP gr!*th 2' +.25 !3 a percentage p!int@ *hich means L.+ l!ps !33 a 3ull p!int. <O3 c!urse@ the d'namic als! g!es the !ther *a' *hen prices 3all@ as *ill happen this summer@ 2ene3iting c!nsumer spending and gr!*th.= Oil at L15+ a 2arrel *!uld@ !3 c!urse@ hurt 2usinesses@ t!!. -s the c!st !3 Ket 3uel s!ars@ airlines
*ill 2!!st 3ares. 0hat c!uld reduce passenger tra33ic@ leading the c!mpanies t! cut 3lights@ reducing ec!n!mic activit'. -nd@ as $an Dieg!Qs %amilt!n n!tes@ there is the added ris" that c!mpanies@ anticipating sh!rt3alls in c!nsumer spending@ *ill reduce hiring@ causing a multiplier e33ect that c!uld *!rsen a 2ad situati!n. :!rgan $tanle' !il 2ull -llidina 2elieves the 2+12 8rent price that *ill rati!n demand is
a2!ut L13+ 3!r his 2aseline 3!recast. Oil anal'st :ichael !thman sees a t*!?tiered mar"etC L13+ *!uld rati!n demand in O4/D c!untries@ 2ut n!thing less than L17+ is required 3!r Tdemand destructi!nT in n!n?O4/D nati!ns. -nd L17+@ as n!ted earlier@ is !thmanQs price target. 8arr!nQs 2elieves that n!n?O4/D demand c!uld 2e m!re price?sensitive than !thman assumes. 9!r !ne thing@ a L15+ price c!uld m!tivate g!vernments t! dela' pr!Kects li"e the 2uilding
!3 ne* r!ads@ *hich require a l!t !3 !il. 9!r an!ther@ there is the star" 3act that n!n?O4/D c!untries are p!!rer than O4/D c!untries. ,hile it ma"es s!me sense that their hunger 3!r T2lac" g!ldT *ill m!tivate them t! pa' even m!re 3!r it than their richer c!unterparts@ the lash !3 L15+ crude *ill decrease their *illingness t! pa'. ;ie* 9ull (mage ($ 0%4 ,O #D )77(7> O)0 O9 O(#D Pr!2a2l'
n!t. #i2'a can eventuall' 2ring 1.5 milli!n 2arrels 2ac" !n stream. 0here is huge p!tential 3r!m (raq@ even greater p!tential 3r!m $audi -ra2ia itsel3 ?? and cl!ser t! h!me@ m!re suppl' c!uld c!me 3r!m ending the de 3act! m!rat!rium !n drilling in the >ul3@ and 3r!m tapping -las"aQs *ildli3e reserve. /rude at L15+ *ill li"el' enc!urage these and !ther s!urces !3 suppl'@ 2ringing a gradual pull2ac". 8ut n!ne !3 this is li"e t! help much 2' spring 2+12. >et read' 3!r higher !il prices.

Russian econ high

/ussian econo!% is re$ounding 2BW 11 <9reight and #!gistics 7e*s $ervice@ A9!r*arders slam ussian p!rtsB@ httpC11***.i3*?
net.c!m13reightpu2s1i3*1inde513!r*arders?slam?russian?p!rts12++17877777.htm@ 8?Nune@= 0he ussian ec!n!m' is 3!recast t! gr!* at !ver .I this 'ear. 0rade v!lumes *ith ,estern 4ur!pe are am!ng the 3astest gr!*ing in 4ur!pe@ 2ut 3!r*arders c!ntacted 2' IFW said m!re investment in pr!cesses and 3acilities *as required t! 3acilitate increased trade. #isa %emmings@ :anager !3
9$ :ac"enRie (nternati!nalOs ussian1/($ Department@ said !ut?dated cust!ms pr!cedures at p!rts *ere driving up !perating c!sts *ith regulati!ns var'ing 2' l!cati!n and 2' carg!. $te3an Varlen@ -rea :anager 8lac" J /aspian $ea at Panalpina@ said ussian gate*a's *ere generall' m!re e5pensive than p!rts in m!st !3 the rest !3 4ur!pe 2!th !n terminal handling and demurrage charges. A$ervice levels at di33erent p!rts di33er 3r!m shipping line t! shipping line@B he added. A/l!se@ regular m!nit!ring !3 entr' p!rts is necessar' in case un3!reseen events such as natural disasters !r c!ngesti!n negativel' impact the !perati!n and thus service and timing.B %emmings agreed it *as imp!rtant t! have sta33 !n the gr!und at "e' l!cati!ns t! deal *ith l!cal di33iculties. A(t is param!unt t! have an !33ice in $t Peters2urg@B she said. A0hr!ugh !ur !*n !33ice there *e are a2le t! *!r" *ith the p!rt cl!sel' and have !ur sta33 availa2le t! g! t! the p!rt t! res!lve an' p!tential pr!2lems that ma' arise.B #eine*e2er said the str!ng drive t!*ards c!ntainerisati!n *!uld sl!*l' impr!ve e33icienc'@ h!*ever@ and *ith increased c!ntainer handling capacit' ussiaOs "e' p!rts at $t Peters2urg@ ;ladiv!st!" and 7!v!r!ssi's" *!uld eventuall' 2ec!me m!re c!mpetitive.
/ussian ecno!o!% re$ounding 'ro! 2010 losses -27 2011 <A0he ,!rld 9act2!!"B@ httpsC11***.cia.g!v1li2rar'1pu2licati!ns1the?*!rld?3act2!!"1ge!s1rs.html@ +9?Nune=
ussia has underg!ne signi3icant changes since the c!llapse !3 the $!viet )ni!n@ m!ving 3r!m a gl!2all'?is!lated@ centrall'?planned ec!n!m' t! a m!re mar"et?2ased and gl!2all'?integrated ec!n!m'. 4c!n!mic re3!rms in the 199+s privatiRed m!st industr'@ *ith n!ta2le e5cepti!ns in the energ' and de3ense?related sect!rs. 0he pr!tecti!n !3 pr!pert' rights is still *ea" and the private sect!r remains su2Kect t! heav' state inter3erence. ussian industr' is primaril' split 2et*een gl!2all'?c!mpetitive c!mm!dit' pr!ducers ? in 2++9 ussia *as the *!rldQs largest e5p!rter !3 natural gas@ the sec!nd largest e5p!rter !3 !il@ and the third largest e5p!rter !3 steel and primar' aluminum ? and !ther less c!mpetitive heav' industries that remain dependent !n the ussian d!mestic mar"et. 0his reliance !n c!mm!dit' e5p!rts ma"es ussia vulnera2le t! 2!!m and 2ust c'cles that 3!ll!* the highl' v!latile s*ings in gl!2al c!mm!dit' prices. 0he g!vernment since 2++7 has em2ar"ed !n an am2iti!us pr!gram t! reduce this dependenc' and 2uild up the c!untr'Qs high techn!l!g' sect!rs@ 2ut *ith 3e* results s! 3ar. 0he ec!n!m' had averaged 7I gr!*th since the 1998 ussian 3inancial crisis@ resulting in a d!u2ling !3 real disp!sa2le inc!mes and the emergence !3 a middle class. 0he ussian ec!n!m'@ h!*ever@ *as !ne !3 the hardest hit 2' the 2++8?+9 gl!2al ec!n!mic crisis as !il prices plummeted and the 3!reign credits that ussian 2an"s and 3irms relied !n dried up. 0he /entral 8an" !3 ussia spent !ne?third !3 its L&++ 2illi!n internati!nal reserves@ the *!rldQs third largest@ in late 2++8 t! sl!* the devaluati!n !3 the ru2le. 0he g!vernment als! dev!ted L2++ 2illi!n in a rescue plan t! increase liquidit' in the 2an"ing sect!r and aid ussian 3irms una2le t! r!ll !ver large 3!reign de2ts c!ming due. 0he ec!n!mic decline 2!tt!med !ut in mid?2++9 and the ec!n!m' 2egan t! gr!* in the 3irst quarter !3 2+1+. %!*ever@ a severe dr!ught and 3ires in central ussia reduced agricultural !utput@ pr!mpting a 2an !n grain e5p!rts 3!r part !3 the 'ear@ and sl!*ed gr!*th in !ther sect!rs such as manu3acturing and retail trade. %igh !il prices 2u!'ed ussian gr!*th in the 3irst quarter !3 2+11 and c!uld help ussia reduce the 2udget de3icit inherited 3r!m the lean 'ears !3 2++8?+9@ 2ut in3lati!n and increased g!vernment e5penditures ma' limit the p!sitive impact !3 these revenues. ussiaQs l!ng?term challenges include a shrin"ing *!r"3!rce@ a high level !3 c!rrupti!n@ di33icult' in accessing capital 3!r smaller@ n!n?energ' c!mpanies@ and p!!r in3rastructure in need !3 large investments.

***lin&s***

Link SPS
8olar Po ered 8atellites spur alternative energ% ,d!onton @ournal (/13 <&113111 T$!lar $atellitesC 0he Ve' t! >reen 4nerg'T -ccessedC 713111
httpC11***.edm!nt!nK!urnal.c!m1techn!l!g'1$!larSsatellitesSgreenSenerg'1.9332511st!r'.html > =
,ith gas prices !n the rise@ the race is !n 3!r cheap alternative 3uel s!urces@ including s!lar p!*er @ 2ut amid a *ash !3 criticism@ the s!lar
industr' ma' n!t even 2e in the running. 0he maK!r criticisms against s!larp!*er 3acilities@ such as *ind 3arms@ are unrelia2ilit' and ine33icienc'. $!lar p!*er depends !n envir!nmental 3act!rs 2e'!nd human c!ntr!l and that ma"es invest!rs an5i!us. 0hese 3acilities als! require areas *ith high am!unts !3 sunlight@ usuall' hundreds i3 n!t th!usands !3 acres !3 valua2le 3armland and all 3!r relativel' little p!*er pr!ducti!n. 0his is *h'@ in the 19&+s@ scientists pr!p!sed s!lar?p!*ered satellites <$P$s=. $P$s have a2!ut the m!st 3av!ura2le c!nditi!ns imagina2le 3!r s!lar energ' pr!ducti!n@ sh!rt !3 a plat3!rm !n the
sun. 4arthOs !r2it sees 1.. per cent !3 the ma5imum s!lar energ' 3!und !n the planetOs sur3ace and ta"es up ne5t t! n! space in c!mparis!n t! land?2ased 3acilities. $atellites *!uld 2e a2le t! gather energ' 2. h!urs a da'@ rather than the tenu!us 12?h!ur ma5imum that land?2ased plants have@ and direct the transmitted energ' t! di33erent l!cati!ns@ depending !n *here p!*er *as needed m!st.
8P8 t"reatens t"e 'uture o' oil alph %. 1ansen@ $!lar $pace (ndustries@ Nanuar' 199( ,ireless P!*er 0ransmissi!nC 0he Ve' 0! $!lar P!*er $atellites (444
-4$ $'stems :agaRine httpC11electricalandelectr!nics.!rg1*p?c!ntent1upl!ads12++811+1++.8.1.8G2.pd3 <date accessed 713111= <!tt=
0he c!ncept !3 the $!lar P!*er $atellite energ' s'stem is t! place giant satellites@ c!vered *ith vast arra's !3 s!lar cells@ in ge!s'nchr!n!us !r2it 22@3++ miles a2!ve the 4arthQs equat!r. 4ach satellite *ill 2e illuminated 2' sunlight 2. h!urs a da' 3!r m!st !3 the 'ear. 8ecause !3 the 23T tilt !3 the energ' e33!rts. /!ns!lidati!n !3 resp!nsi2ilit' *as c!mpleted *hen the Department !3 4nerg' *as 3!rmed in 1977. 0 h e Department !3 4nerg' devel!ped a c!mprehensive pr!gram that c!ncentrated !n 3!ur areasC 1= technical 3easi2ilit'P 2= envir!nmental impactP 3 = s!cietal impactP and .= c!st c!mparis!n. 7-$- *as resp!nsi2le 3!r the technical studies and DO4 retained resp!nsi2ilit' 3!r the !thers as *ell as !verall pr!gram management. 9unding 3!r 3 'ears *as L19.5 milli!n. -t the end !3 three 'ears !3 studies all participating !rganiRati!ns ? the maK!r aer!space c!mpanies and their su2c!ntract!r teams@ the 4nvir!nmental Pr!tecti!n -genc' and their research scientists 3r!m universities and research institutes@ c!ncerned citiRen gr!ups representing !rganiRati!ns 2!th supp!rting and !pp!sing the c!ncept@ research scientists 3r!m techn!l!g' devel!pment c!mpanies@ and ec!n!mists ? assem2led in #inc!ln@ 7e2ras"a@ in -pril !3 198+ t! rep!rt !n their 3indings. 0he c!nclusi!n !3 the
c!n3erence *as that there *as n! technical reas!n *h' the satellite s'stem sh!uld n!t 2e devel!ped and that the p!tential 2ene3its *ere ver' pr!mising. %!*ever@ 2' 198+ the !il crisis !3 1973?7. appeared t! 2e !ver and nearl' 3!rg!tten. /!ncerns !ver the siRe and c!st !3 the pr!gram@ !pp!siti!n t! the c!ncept 3r!m the esta2lished energ' industr' *h! sa* it as a threat t! their 3uture@ and !pp!siti!n !3 the /arter administrati!n t! large pr!grams@ resulted in the !rder t! st!p all 3urther *!r" in the summer !3 198+ . $ince that time there has 2een n! signi3icant !rganiRed s'stem devel!pment *!r" !n the c!ncept in the )nited $tates. 0he pu2lic has 3!rg!tten that there is an energ' s'stem that c!uld replace !il@ c!al@ and nuclear p!*erP an energ' s'stem that *!uld have unlimited capacit'@ 2e envir!nmentall' clean@ and@ in
time@ *!uld result in energ' c!sts much 2el!* th!se !3 3!ssil 3uels ! r nuclear. ,ith $!lar P!*er $atellites@ the c!st !3 electricit' 2' the 'ear 2+5+ *!uld 2e 2et*een 15 and 7+ times less than *ith 3!ssil 3uels !r nuclear. Devel!pment !3 ena2ling techn!l!gies@ such as s!lar cells and *ireless energ' transmissi!n@ has c!ntinued 3!r !ther applicati!ns@ ma"ing the c!ncept even m!re technicall' and 3inanciall' s!und t!da'. -ls! during this time s'stem de3initi!n and design has 2een initiated in 3!reign c!untries. Napan is n!* c!mmitted t! the devel!pment !3 $!lar P!*er $atellites *ith the ultimate g!al !3 pr!ducing 3+I !3 gl!2al energ' needs 2' 2+.+@ m!st !3 it 3!r e5p!rt.
8P8 ill replace oil as pri!ar% energ% source alph %. 1ansen@ $!lar $pace (ndustries@ Nanuar' 199( ,ireless P!*er 0ransmissi!nC 0he Ve' 0! $!lar P!*er $atellites (444
-4$ $'stems :agaRine httpC11electricalandelectr!nics.!rg1*p?c!ntent1upl!ads12++811+1++.8.1.8G2.pd3 <date accessed 713111= <!tt= 0 h e s!luti!n t! the pr!2lems *ill require a ne* energ' s!urce t! replace !il and c!al and 2ec!me the primar' energ' s!urce 3!r the 3uture. ( t cann!t 2 e a s!luti!n !nl' 3!r -merica@ 2ut must 2e a2le t! s!lve gl!2al pr!2lems als!. 0 ! acc!mplish this the ne5t energ' s!urce must satis3' s!me ver'
2asic criteria. 9irst@ it must 2e n!ndepleta2le@ s! it *ill n!t have t! 2e relplaced 2' the ne5t generati!n. $ec!nd@ it must 2e l!* c!st@ !r it *ill n!t 2 e devel!ped t! pr!duce large quantities !3 energ'. 0hird@ it must 2e envir!nmentall' clean@ s! the 4arth is n!1 destr!'ed a s *e devel!p. 9!urth@ it must 2ec!me availa2le t! ever'!ne !n 4arth i3 *ar is t! 2e av!ided. 9i3th@ i t must 2e in a use3ul 3!rm s! i t can supp!rt the devel!ping s!cieties a s the' emerge as *ell as the devel!ped nati!ns. 0hese 3 ive criteria are simple 2ut challenging t! satis3'C 7!ndepleta2le #!* c!st 4nvir!nmentall' clean -vaila2le t! ever'!ne (n a usa2le 3!rm 0 h e s!luti!n t! the pr!2lems descri2ed a2!ve can 2e acc!mplished 2' the devel!pment !3 $!lar P!*er $atellites. 0he $!lar P!*er $atellite s'stem is the !nl'
energ' s!urce *ith "n!*n techn!l!g' that can meet the criteria 3!r a via2le maK!r ne* energ' s!urce and m!ve the *!rld int! the 3!urth era !3 energ'. 0here are t*! primar' paths that can 2e 3!ll!*ed t! devel!p $!lar P!*er $atellites. One is a g!vernment pr!gram and the !ther is c!mmercial devel!pment *ith s!me g!vernment supp!rt. (n 198+ the !nl' c!nceiva2le !pti!n *a s a massive
g!vernment sp!ns!red and 3unded pr!gram. 0hi s *as !ne !3 the primar' reas!ns the pr!gram *as st!pped. 0!da' that is n! l!nger the case. -dvances in the ena2ling techri!l!gies al!ng *ith signi3icant in3rastructure devel!pment n!* ma"e p!ssi2le c!mmercial devel!pment !3 the pr!gram *ith s!me g!vernment supp!rt.
2ncreased 8P8 de!and &ills 'ossil 'uel Nimm' ,ri&sson@ Pr!3essi!nal 3reelancer in >reen 0echn!l!g' and $cienti3ic Devel!pment. 4ducati!nal 2ac"gr!und in the 3ield !3 %uman es!urces :anagement@ 3/2;11+ Overvie* !3 $pace $!lar 4nerg'@
httpC11***.rene*a2lep!*erne*s.c!m1archives1117+ <date accessed 713111= <!tt= 0he demand 3!r s!lar p!*er satellites is e5pected t! 2ec!me m!re c!mm!n in the 3uture. $!me pe!ple estimate that 2' 2+5+ there *ill 2e ar!und 1+ 2illi!n pe!ple *here 85 percent *ill 2e in devel!ped c!untries. 0he 3uture might leave t'pical 3!ssil 3uel 2ehind. 0he challenges !3

13/93 Herndon/Petit/Tate/Quinn climate change are giving p!lluting s!urces !3 energ' a ver' dread3ul c!nn!tati!n. 0he greatest pressure 3!r ne* s!urces !3 energ' is the e5hausti2ilit' !3 c!nventi!nal s!urces such as natural gas@ !il and c!al.
8C8P ill reduce dependence on oil0 !' -"oud"ur%5 ;Q 7ishi@ <9reelance *riter@ *ent t! )niversit' !3 /alcutta =@ T $pace?8ased $!lar P!*er can reduce !il
dependence and car2!n 3!!tprintsT Oct!2er 15@ 2++7@ httpC11***.ec!3riend.c!m1entr'1space?2ased?s!lar?p!*er?can?reduce?!il? dependence?and?car2!n?3!!tprint?sa's?rep!rt1. 713111. ND. P!st?9111 !il prices have Kumped 3r!m L1512arrel t! n!* L8+12arrel in less than a decade. -cc!rding t! a rep!rt c!mmissi!ned 2' the Pentag!n $pace?8ased $!lar P!*er <$8$P= can help t! sl!* d!*n climate change and als! reduce !ur dependence !n 3!ssil 3uels. 0his $8$P *as 3irst invented in the )nited $tates alm!st .+ 'ears ag!. 4ssentiall' the central idea !3 $8$P is ver' simple <place ver' large s!lar arra's int! c!ntinu!usl' and intensel' sunlit 4arth !r2it <1@3&& *atts1m2=@ c!llect giga*atts !3 electrical energ'@ electr!magneticall' 2eam it t! 4arth@ and receive it !n the sur3ace 3!r use either as 2asel!ad p!*er via direct c!nnecti!n t! the e5isting electrical grid@ c!nversi!n int! manu3actured s'nthetic h'dr!car2!n 3uels@ !r as l!*?intensit' 2r!adcast p!*er 2eamed directl' t! c!nsumers=. D! '!u "n!* a single "il!meter?*ide 2and !3 ge!s'nchr!n!us earth !r2it e5periences en!ugh s!lar 3lu5 in !ne 'ear t! alm!st equal the am!unt !3 energ' present *ithin all "n!*n rec!vera2le c!nventi!nal !il reserves !n 4arth t!da'D -maRing isnOt itD 0his am!unt !3 energ' 3r!m $8$P means that there is a huge p!tential 3!r reducing gl!2al *arming 3!r th!se nati!ns *h! c!nstruct and p!ssess a $8$P capa2ilit'. 8ut@ un3!rtunatel' it is n!t as simple as it l!!"s. ,h'D 0his is 2ecause it is e5tremel' e5pensive t! get the s!lar p!*er unit int! space <it is an'*here 2et*een L5++@+++ and L1 2illi!n=. %!pe3ull'@ *ith time these $8$P units *ill 2ec!me m!re ec!n!micall' via2le@ and thus help in reducing !ur dependence !n 3!ssil 3uels.

1)/93 Herndon/Petit/Tate/Quinn
Link H3
Heliu! 3 tec"nolog% creates alternative energ% !ar&ets 2C Ti!es (/29 <$ta33 ep!rter &129111 T :ining :!!n 3!r %elium?3C 9uture Per3ect P!*er $!urceDT -ccessedC 713111
httpC11m.i2times.c!m1lunar?rec!nnaissance?!r2iter?nasa?m!!n?ap!ll!?missi!n?sur3ace?171239.html > = (3 mined and 2r!ught 2ac" t! 4arth@ helium?3 can help pr!duce a2!ut L. 2illi!n per t!nne *!rth energ'. /!nsidering the sh!rtage !3 p!*er !n 4arth and the dire need 3!r an alternate s!urce !3 p!*er@ helium?3 3its the 2ill per3ectl'. A0here is 1+ times m!re energ' in %elium?3 !n the m!!n as c!mpared t! the natural res!urces !n 4arth@B adds >.#. Vulcins"i@ Pr!3ess!r !3 9usi!n 0echn!l!g' (nstitute. (t als! stands
as a great s!urce !3 3usi!n p!*er 2ecause !3 its unique at!mic structure. 8ut e5tracting it 3r!m the m!!n is g!ing t! 2e a gigantic tas". 7evertheless@ this rare is!t!pe !3 helium has man' applicati!ns in h!meland securit'@ nati!nal securit'@ medicine and science. :!re!ver@ it c!mes *ith!ut an' radi!active e33ects and it
is n!n?t!5ic.
H3 ill replace oil 8ou6a5 Otalvario D 8ing" 0( X:arsha@ Diana@ Deep@ 2?17?2++& %- ;4$0(7> %4#():?3 9 O: 0%4 :OO7@
Dissertati!n@ ,O /4$04 PO#H04/%7(/ (7$0(0)04@ -ccessedC 713111@ httpC11***.*pi.edu1Pu2s14?pr!Kect1-vaila2le14? pr!Kect?+313+&?122&2&1unrestricted1(WP.pd3 > Y
0he energ' scenari! t!da' is g!verned 2' uncertaint' and 3ear. 4nerg' demand is e5pected t! increase eight 3!ld 2' 2+2+ due t! an increase in p!pulati!n and energ' requirements@ especiall' !n the part !3 /hina and (ndia. -l!ngside an increase in energ' demand@ !il pr!ducti!n is e5pected t! pea" *ithin the ne5t decade and@ acc!rding t! c!nservative estimates@ ma' 2e e5hausted 2' the middle !3 the 21 st centur'. -gainst this realit'@ alternative energ' s!urces are n!t !nl' an Aalternative@B 2ut rather a necessit'. (t is *ith this necessit' in mind that e5pl!rati!n !3 %e?3 3usi!n as a p!tential energ' su2stitute !r a c!mplement t! !ther energ' s!urces is 2eing investigated. %e?3 is a heav' is!t!pe !3 n!2le gas helium and is present ever'*here in the universe in var'ing am!unts. 0he 4arthOs suppl' !3 %e?3 is negligi2le@ 2ut the mineral *as 3!und in a2undant quantities in s!il samples ta"en 3r!m the lunar reg!lith in 1972 in the e5pl!rat!r' missi!n@ -p!ll! 17@ led 2' 7-$-. $ince then@ there has 2een c!nsidera2le interest am!ng ph'sicists@ ge!l!gists@ s!cial scientists and ec!n!mists in e5tracting and using the %e?3 availa2le in the :!!n. 0he maK!r arguments 3!r the e5pl!rati!n !3 %e?3 are as 3!ll!*sC 3irstl'@ it has a high energ' densit' *hen c!m2ined *ith deuterium in a 3usi!n reacti!n@ hence !nl' small am!unts !3 %e?3 are required t! suppl' the same am!unt !3 energ' as large v!lumes !3 !il. $ec!ndl'@ the l!* radi!active *aste emissi!n and the sa3et' !3 a %e?3 3usi!n reacti!n are ver' attractive attri2utes *hen c!mpared t! the high sa3et' ris"s inherent in 3issi!n react!rs used in nuclear p!*er plants t!da'. 9urtherm!re@ %e?3 pr!vides us *ith the !pp!rtunit' !3 e5pl!ring and settling a permanent 2ase !n the :!!n@ *hich *!uld give us a s!lid 2ase 3!r 3urther space e5pl!rati!n .
He3 ?ills 98 dependence on 'ossil 'uels Popular Mec"anics 2&3<Decem2er 7@ A:ining 0he :!!nB@ science magaRine@
httpC11***.p!pularmechanics.c!m1science1space1m!!n?mars11283+5& 4#=
$mall quantities !3 helium?3 previ!usl' disc!vered !n 4arth intrigued the scienti3ic c!mmunit' .
0he unique at!mic structure !3 helium?3 pr!mised t! ma"e it p!ssi2le t! use it as 3uel 3!r nuclear 3usi!n@ the pr!cess that p!*ers the sun@ t! generate vast am!unts !3 electrical p!*er *ith!ut creating the tr!u2les!me radi!active 2'pr!ducts pr!duced in c!nventi!nal nuclear react!rs . 45tracting helium?3 3r!m the m!!n and returning it t! 4arth *!uld@ !3 c!urse@ 2e di33icult@ 2ut the p!tential re*ards *!uld 2e staggering 3!r th!se *h! em2ar"ed up!n this venture. %elium?3 c!uld help 3ree the )nited $tatesMand the *!rldM3r!m dependence !n 3!ssil 3uels.
He3 solves 98 oil dependence DE8ou6a 0(E <:arsha@ degree !3 8achel!r ,!rcester P!l'technic (nstitute science A%- ;4$0(7> %4#():?3 9 O: 0%4
:OO7B httpC11***.*pi.edu1Pu2s14?pr!Kect1-vaila2le14?pr!Kect?+313+&?122&2&1unrestricted1(WP.pd3 accessed 71312+11 4#= 4nerg' is the m!st imp!rtant driving 3!rce 3!r p!*ering industrial nati!ns. (n 3act@ a measure !3 a c!untr'Os industrialiRati!n is its annual energ' c!nsumpti!n. 9!ssil 3uels li"e c!al@ petr!leum and natural gas are the chie3 means 2' *hich m!st nati!ns get their energ'. 8ecause !3 the
*!rldOs increasing standards !3 living and its increased dependence !n !il@ 3!ssil 3uel am!unts might n!t last l!nger than a 3e* decades. -ls! *ith the *!rldOs p!pulati!n e5panding t! alm!st 12 2illi!n 2' the 'ear 2+5+@ !ur !il demand *ill als! increase drasticall'. Oil has 2ec!me a "e' issue in the p!litical
and ec!n!mic a33airs !3 man' nati!ns especiall' a3ter the )nited $tates sec!nd *ar *ith (raq. (n such cases !3 crisis@ the devel!pment !3 %e?3 *ill alleviate the dependenc' !n crude !il. 9!ssil 3uels als! release a l!t !3 harm3ul greenh!use gases int! the atm!sphere that have detrimental e33ects !n the atm!sphere@ *hereas the usage !3 %e?3 3usi!n techn!l!g' *ill 2e a great su2stitute t! the 3!ssil 3uels as it d!esnOt release an' harm3ul 2'pr!ducts. (n additi!n t! the n!n? p!lluting pr!perties !3 %e?3 3usi!n !n 4arth@ the mining !3 %e?3 3r!m the :!!n *ill n!t c!ntaminate the :!!n as the gases that are released during the e5tracti!n pr!cess <*ater and !5'gen= arenOt harm3ul@ and instead c!uld 2e used 3!r sustaining a lunar c!l!n' as !utlined in the technical secti!n.

1(/93 Herndon/Petit/Tate/Quinn
Link H3 price drops

.unar !ining ill drive do n oil prices0 8ou6a5 Otalvario D 8ing"5 ( ? Pr!3ess!r@ ,!rcester P!l'technic (nstitute X:arsha@ Diana@ Deep@ %- ;4$0(7> %4#():?3
9 O: 0%4 :OO7@ Dissertati!n@ ,O /4$04 PO#H04/%7(/ (7$0(0)04@ 2?17?2++&@ httpC11***.*pi.edu1Pu2s14? pr!Kect1-vaila2le14?pr!Kect?+313+&?122&2&1unrestricted1(WP.pd3Y - m!re li"el' scenari! 3r!m a technical standp!int@ h!*ever@ is t! 2ring %e?3 3r!m the :!!n t! 4arth t! 2e reacted in the plasma react!rs.
0his *!uld all!* use !3 the e5isting gridlines 3!r delivering electricit' and *!uld eliminate the pr!ducti!n !3 %2 as an intermediate agent. 0his scenari! presupp!ses that the %e?3?Deuterium react!r is 3ull' devel!ped@ *hich even acc!rding t! e5perts in the 3ield <see intervie* *ith Dr. Vulcins"i= is a l!ng term venture. 8ecause the react!r is m!st highl' devel!ped in the )nited $tates@ it *!uld seem this c!untr' has an initial advantage. (3 *e supp!se that %e? 3 *!uld 2ec!me the primar' energ' s!urce t! p!*er the )nited $tates and that it *!uld 2ec!me s! 2e3!re the end !3 the 3uel era@ this *!uld impl' that the 3!ssil 3uel prices *!uld plummet since the primar' c!nsumer *!uld 2e !ut !3 the game. 0his *!uld all!* devel!ping nati!ns t! purchase larger am!unts !3 !il *hich c!uld lead t! their 3aster devel!pment. )nder this scenari! (ndia and /hina *!uld again 2e the d!minating ec!n!mies *ithin the devel!ping c!untries@ since the' have the res!urces t! purchase the largest am!unts in a 3uel mar"et g!verned entirel' 2' demand and suppl' d'namics. 0hese nati!ns als! have the greatest pr!Kected need 3!r 3uel. On the !ther hand@ i3 /hina and (ndia devel!p their !*n %e? 3?Deuterium react!rs@ the' *!uld enter in direct c!mpetiti!n *ith the )$ 3!r %e?3. (n *hat manner this c!mpetiti!n *ill 2e carried !ut depends largel' !n h!* cl!sel' these c!untries a2ide t! internati!nal treaties and !n h!* much the' are *illing t! c!!perate *ith !ne an!ther .

1;/93 Herndon/Petit/Tate/Quinn
Link H3 alt energy

He3 researc" spino''s are !assive + $iotec"5 energ% all co!petitive in t"e s"ort ter!0 8ou6a5 Otalvario D 8ing"5 ( ? Pr!3ess!r@ ,!rcester P!l'technic (nstitute
X:arsha@ Diana@ Deep@ %- ;4$0(7> %4#():?3 9 O: 0%4 :OO7@ Dissertati!n@ ,O /4$04 PO#H04/%7(/ (7$0(0)04@ 2?17?2++&@ httpC11***.*pi.edu1Pu2s14?pr!Kect1-vaila2le14?pr!Kect?+313+&?122&2&1unrestricted1(WP.pd3Y 0he )nited $tates leads the research in %e?3. (n 2++.@ President 8ush released his ne* visi!n !3 space e5pl!rati!n. %e *ants t! c!mplete the
(nternati!nal $pace $tati!n 2' the 'ear 2+1+. 0he c!mpleti!n !3 this pr!Kect *ill greatl' increase the *!r"ing research !n the lunar mining !3 %e?3 as the astr!nauts can e5periment !n di33erent techniques t! e5tract %e?3 3r!m the :!!nOs reg!lith. 0he (nternati!nal $pace stati!ns c!uld 2e used a trade center 3!r the distri2uti!n !3 %e?3 3!r *!rld *ide distri2uti!n. -n!ther g!al !3 the current ,hite %!use administrati!n is that 7-$- returns t! the :!!n 2' 2+15 and t! have a permanent living settlement 3!r astr!nauts 2' 2+2+. President 8ush has all!cated 12 milli!n d!llars t! the :!!n Devel!pment (nitiative. 0his initiative *!uld help tremend!usl' in the pr!gress in the %e?3 research i3 a permanent c!l!n' is esta2lished !n the :!!n <%urtac"@ 2++.=. 0he devel!ped *!rld *!uld n! l!nger have t! depend !n the :iddle 4ast @ *here the m!st !3 the *!rldOs 3!ssil 3uel reserves are l!cated@ 3!r its energ' suppl'.
-merican scientists have alread' declared that the :!!n c!uld 2e the Persian >ul3 !3 the present centur'. 0*! liters !3 %e?3 *!uld d! the *!r" !3 m!re than 1@+++ t!ns !3 c!al </h!*dhuri@ 2++.=. %e?3 als! has l!ng term and sh!rt term 2ene3its 3!r s!ciet'. (n the near term applicati!ns@ it can help in medical research. - use3ul pr!duct !3 %e?3 3usi!n reacti!ns is the pr!ducti!n !3 is!t!pes that are ver' use3ul in the 2i!medical 3ield. P!sitr!n 4missi!n 0!m!graph' <P40= is !ne such 3ield. 0his pr!cess uses the is!t!pes 3r!m %e?3 3usi!n reacti!n li"e %e?. in its *!r"ing. %e?. has a much l!nger hal3?li3e and it can 2e st!red 3!r a much l!nger peri!ds !3 time c!mpared t! !ther is!t!pes. 8' using %e?3 is!t!pes *e can reduce the radi!active e5p!sure t! patients c!mpared t! the regular is!t!pes that are used in P40 that emit radi!active *aves <%urtac"@ 2++.=. (t can als! 2e used 3!r envir!nmental rest!rati!n @ detecti!n !3 chemical and radi!active *astes@ cancer therap' and de3ense. 9!r intermediate term applicati!ns@ it can 2e used 3!r the destructi!n !3 t!5ic 3issile materials@ t! harness space p!*er and t! suppl' energ' t! rem!te energ' stati!ns. (n the l!ng term it can have applicati!ns in pr!pulsi!n techn!l!g'@ h'dr!gen pr!ducti!n@ s'nthetic 3uel applicati!ns@ 2ase l!ad electrical p!*er plants and small electrical p!*er plants <Vulcins"i@ 2++1=. 0he advantage !3 initiall' using %e?3 3usi!n 3!r n!n?energ' applicati!ns is that the c!st 2ase is di33erent 3!r specialiRed applicati!ns and %e?3 can 2e c!mpetitive in the sh!rt run.
0his *!uld then !pen the gr!und 3!r 3urther c!st reducti!n and prepare %e?3 3usi!n t! enter the energ' mar"etplace at c!mpetitive prices.
***internal lin&s***

1=/93 Herndon/Petit/Tate/Quinn
nternal Link Perception

7n% s"i't in prices triggers t"e i!pacts+ perception o' oil !ar&ets is t"e &e% internal lin& Paul /o$erts@ energ' e5pert and *riter 3!r %arpers@2003@ 0he 4nd !3 Oil@ pg. 95
,ithin the !il *!rld@ n!
decisi!n !3 an' signi3icance is made *ith!ut re3erence t! the ).$. mar"et@ n!r is an'thing le3t t! chance. (ndeed@ the *!rldOs !il pla'ers *atch the -merican !il mar"et as attentivel' as palace ph'sicians !nce attended the r!'al 2!*elsC ever' h!ur !3 ever' da'@ ever' !il state and c!mpan' in the *!rld "eeps an un2lin"ing *atch !n the )nited $tates and strains t! 3ind a sign !3 an'thing M 3r!m a shi3t in energ' p!lic' t! a trend t!*ard smaller cars t! an unusuall' mild *inter Mthat might a33ect the c!l!ssal ).$. c!nsumpti!n. 9!r this reas!n@
the m!st imp!rtant da' !3 the *ee" 3!r !il traders an'*here in the *!rld is ,ednesda'@ *hen the ).$. Department !3 4nerg' releases its *ee"l' 3igures !n -merican !il use@ and *hen@ as !ne anal'st puts it@ Athe mar"et ma"es up its mind *hether t! 2e 2earish !r 2ullish.B
Perception !atters Paul /o$erts@ energ' e5pert and *riter 3!r %arpers@2003@ 0he 4nd !3 Oil@ pg. 93?.
$! em2edded has !il 2ec!me in t!da'Os p!litical and ec!n!mic spheres that the 2ig industrial g!vernments n!* *atch the !il mar"ets as cl!sel' as the' !nce *atched the spread !3 c!mmunism M and *ith g!!d reas!nC si5 !3 the last seven gl!2al recessi!ns have 2een preceded 2' spi"es in the price !3 !il@ and 3ear is gr!*ing am!ng ec!n!mists and p!lic'ma"ers that@ in t!da'Os gr!*th?dependent@ energ'?intensive gl!2al ec!n!m'@ !il price v!latilit' itsel3 ma' eventuall' p!se m!re ris" t! pr!sperit' and sta2ilit' and simple survival than terr!rism !r even *ar. (n this 2lea" c!nte5t@ it 2ec!mes easier t! understand *h' nati!ns as p!*er3ul and techn!l!gicall' advanced as Napan@ 8ritain@ and the )nited $tates have such a2'smal rec!rds *hen it c!mes t! l!ng?term energ' planning !r alternative energ'. (ndeed@ *hen the maK!r nati!ns spea" !3 energ' p!lic' t!da'@ a2!ut energ' 3!r the 3uture@ !r a2!ut the much?t!uted energ' securit'@B the' are n!t tal"ing a2!ut depleti!n curves@ !r 3uel cells@ !r a h'dr!gen ec!n!m'. 0he' are n!t tal"ing a2!ut 3uel e33icienc'@ !r s!lar p!*er@ !r an' !3 the p!tentiall' signi3icant 2ut speculative s!urces !3 energ'. ather@ *hen nati!ns discuss energ' securit' t!da'@ *hat the' are reall' tal"ing a2!ut is the ge!p!litics !3 energ' M and speci3icall'@ the acti!ns@ m!ne'@ and alliances necessar' t! "eep !il 3l!*ing steadil' and cheapl' thr!ugh the ne5t 3iscal quarter.

nternal !S spurs international action

98 action spurs international action 1/,. F= X7ati!nal ene*a2le 4nerg' #a2!rat!r'@ $trengthening ).$. #eadership !3 (nternati!nal /lean 4nerg' /!!perati!n@
Decem2er 2++8@ httpC11***.nrel.g!v1internati!nal1pd3s1..2&1.pd3Y 0he )nited $tates has an unparalleled !pp!rtunit' t! lead a gl!2al clean energ' mar"et trans3!rmati!n that *ill 'ield vital ec!n!mic@ energ' securit'@ envir!nmental@ and devel!pment 2ene3its 3!r the )nited $tates and the *!rld as a *h!le. /!ncerted ).$. acti!n@ t!gether *ith !ther partners@ c!uld generate up t! L.+ 2illi!n1'r. in ne* clean energ' e5p!rts and 75+@+++ ne* K!2s 2' 2+2+@ al!ng *ith L1+ t! 5+ 2illi!n1'r. in additi!nal savings 3r!m reduced !il prices and !ther critical ec!n!mic and energ' securit' 2ene3its. $uch a gl!2al clean energ' mar"et trans3!rmati!n is a necessar' critical step in reducing *!rld*ide greenh!use gas emissi!ns 2' 5+?8+I 2' 2+5+@ *hich is necessar' t! prevent danger!us climate change impacts. (t als! *ill 3!ster revitaliRed ec!n!mic gr!*th and sustaina2le devel!pment in all regi!ns !3 the *!rld and ensure that all citiRens *!rld*ide have access t! m!dern energ' services. (ndustr' and 7>O sta"eh!lders have identi3ied a p!rt3!li! !3
high?level strategies and acti!ns that *ill ena2le the )nited $tates t! spearhead internati!nal clean energ' c!!perati!n and capture these 2ene3its. 0his e33!rt includes 3!undati!nal measures t! esta2lish a c!hesive g!vernment?*ide acti!n plan and reassert ).$. leadership in "e' internati!nal 3!rums and three "e' implementing strategiesC 1= revitaliRed ).$. clean energ' investment?3acilitati!n pr!gramsP 2= accelerated rene*a2le energ' and energ' e33icienc' techn!l!g' c!!perati!nP and 3= partnerships *ith maK!r devel!ping c!untries and !thers t! trans3!rm clean energ' mar"ets. 0he )nited $tates *ill n!t succeed in implementing these acti!ns al!ne and must activel' engage devel!ped and devel!ping c!untr' partners and internati!nal instituti!ns. 9urtherm!re@ the )nited $tates cann!t a33!rd t! *aitM it must seiRe the !pp!rtunit' n!* t! spar" a *!rld*ide transiti!n t! a 2righter clean energ' 3uture .

nternal development lo"ers prices

Develop!ent o' alternative energ% causes prices to drop De-iantis E0= <Devin@ :arch 25@ :asters candidate in Pu2lic P!lic' at %arvardOs N9V $ch!!l !3 >!vernment@ specialiRing in
devel!pment ec!n!mics and internati!nal trade@ httpC11***.3reed!m2..!rg1rati!nalp!st12++81+31251speculati!ns?!n?a?25?!il?tari331= (n the mid?term@ as industries and generat!rs 2egin t! shi3t a*a' 3r!m higher?c!st imp!rted !il@ d!mestic !il pr!ducers might 2egin 2uilding !ut untapped -rctic capacit' and utilities might 2egin diversi3'ing their energ' p!rt3!li!s int! l!*er?c!st 3!ssil 3uels and alternative energ' techn!l!gies. 0!gether@ these pr!cesses sh!uld cause a m!re su2stantial decline in imp!rt v!lumes. (n the l!ng?run@ a m!re 3undamental shi3t a*a' 3r!m a high? car2!n@ high?c!st@ !il?dependent ec!n!m' is li"el' t! un3!ld@ at *hich p!int !il imp!rts *!uld 2egin t! decline m!re precipit!usl' as demand 3!r energ' is alm!st c!mpletel' replaced *ith l!*er?c!st su2stitutes. 0his pr!gressi!n is an e5ample !3 a t'pical AadKustment lagB. 2. 0he *!rld price !3
!ilD -gain@ in the ver' sh!rt?term *e might e5pect a m!dest decline@ partiall' !33setting the c!st !3 the tari33. >iven that -merica is !ne !3 the *!rldOs largest energ' imp!rters <imp!rting r!ughl' 213rds !3 its annual c!nsumpti!n=@ it *!uld still need t! s!urce !il e5ternall' !r ris" seiRing up its industrial capacit'. 0hus@ aggregate imp!rt demand *!uld remain relativel' sta2le and prices *!uld li"el' settle s!me*here 2et*een L75 and L1++. Over the mid?t!?l!ng?term@ maK!r OP4/ suppliers *!uld have r!!m t! l!*er prices given their l!*er relative c!st !3 pr!ducti!n@ *hile gr!*ing demand 3r!m /hina and (ndia *!uld partiall' !33set declining -merican demand. 9inall'@ as the ).$. 2egins t! su2stitute a*a' 3r!m !il as a "e' energ' input in the l!ng?run@ gl!2al aggregate demand 3!r !il *ill inevita2l' decrease@ assuming that emerging mar"et demand d!esnOt c!ntinue t! gr!* at its current pace in perpetuit'. 0his *ill put c!nsidera2le d!*n*ard pressure
!n prices !ver time as !il e5p!rters adKust t! a situati!n !3 e5tended e5cess suppl'?at least *hile t!tal gl!2al !il reserves remain relativel' plenti3ul.

***/ussia i!pact scenario***

2nc impact Russia #ar

War involving /ussia out eig"sG 2tEs t"e onl% e:istential nuclear ar 7ic" Costro! <PhD Phil!s!ph' O53!rd )= 2002 45istential is"s@ httpC11***.nic"2!str!m.c!m1e5istential1ris"s.html=
- much greater e5istential ris" emerged *ith the 2uild?up !3 nuclear arsenals in the )$ and the )$$ . -n all?!ut nuclear *ar *as a p!ssi2ilit' *ith 2!th a su2stantial pr!2a2ilit' and *ith c!nsequences that might have 2een persistent en!ugh t! quali3' as gl!2al and terminal. 0here *as a real *!rr' am!ng th!se 2est acquainted *ith the in3!rmati!n availa2le at the time that a nuclear -rmagedd!n *!uld !ccur and that it might annihilate !ur species !r permanentl' destr!' human civiliRati!n.X.Y ussia and the )$ retain large nuclear arsenals that c!uld 2e used in a 3uture c!n3r!ntati!n@ either accidentall' !r deli2eratel'. 0here is als! a ris" that !ther states ma' !ne da' 2uild up large nuclear arsenals. 7!te h!*ever that a smaller nuclear e5change@ 2et*een (ndia and Pa"istan 3!r instance@ is n!t an e5istential ris"@ since it *!uld n!t destr!' !r th*art human"indOs p!tential permanentl'. $uch a *ar might h!*ever 2e a l!cal terminal ris" 3!r the cities m!st li"el' t! 2e targeted. )n3!rtunatel'@ *e shall see that
nuclear -rmagedd!n and c!met !r aster!id stri"es are mere preludes t! the e5istential ris"s that *e *ill enc!unter in the 21st centur'.
2tEs t"e !ost pro$a$le scenario

$tephen 8lan" <Pr!3 esearch $trategic $tudies (nstitute@ )$ -rm' ,ar /!llege= 2000 A).$. :ilitar' 4ngagement *ith 0ranscaucasia and /entral -siaB@ ***.strategicstudiesinstitute.arm'.mil1pd33iles1pu2113.pd3=
,ashingt!nOs 2urge!ning militar'?p!litical?ec!n!mic inv!lvement see"s@ inter alia@ t! dem!nstrate the ).$. a2ilit' t! pr!Kect militar' p!*er even int! this regi!n !r 3!r that matter@ int! )"raine *here 7-0O recentl' held e5ercises that clearl' !riginated as an anti? ussian scenari!. $ecretar' !3 De3ense ,illiam /!hen has discussed strengthening ).$.?-Rer2aiKani militar' c!!perati!n and even training the -Rer2aiKani arm'@ certainl' alarming -rmenia and ussia. &9 -nd ,ashingt!n is als! training >e!rgiaOs ne* /!ast >uard. 7+ %!*ever@ ,ashingt!nOs *ell?"n!*n am2ivalence a2!ut c!mmitting 3!rce t! 0hird ,!rld ethn!p!litical c!n3licts suggests that ).$. militar' p!*er *ill n!t 2e easil' c!mmitted t! saving its ec!n!mic investment. 8ut this am2ivalence a2!ut c!mmitting 3!rces and the danger!us situati!n@ *here 0ur"e' is allied t! -Rer2aiKan and -rmenia is 2!und t! ussia@ create the p!tential 3!r *ider and m!re pr!tracted regi!nal c!n3licts am!ng l!cal 3!rces. (n that c!nnecti!n@ -Rer2aiKan and >e!rgiaOs gr!*ing e33!rts t! secure 7-0OOs lasting inv!lvement in the regi!n@ c!upled *ith ussiaOs determinati!n t! e5clude !ther rivals@ 3!ster a p!lariRati!n al!ng ver' traditi!nal lines. 71 (n 1993 :!sc!* even threatened ,!rld ,ar ((( t! deter 0ur"ish interventi!n !n 2ehal3 !3 -Rer2aiKan. Het the ne* uss!?-rmenian 0reat' and -Reri?0ur"ish treat' suggest that ussia and 0ur"e' c!uld 2e dragged int! a c!n3r!ntati!n t! rescue their allies 3r!m de3eat. 72 0hus man' !3 the c!nditi!ns 3!r c!nventi!nal *ar !r pr!tracted ethnic c!n3lict in *hich third parties intervene are present in the 0ranscaucasus. 9!r e5ample@ man' 0hird ,!rld c!n3licts generated 2' l!cal structural 3act!rs have a great p!tential 3!r unintended escalati!n. 8ig p!*ers !3ten 3eel !2liged t! rescue their lesser pr!teges and pr!5ies. One !r an!ther 2ig p!*er ma' 3ail t! grasp the !ther sideOs sta"es since interests here are n!t as clear as in 4ur!pe. %ence c!mmitments inv!lving the use !3 nuclear *eap!ns t! prevent a clientOs de3eat are n!t as *ell esta2lished !r apparent. /larit' a2!ut the nature !3 the threat c!uld prevent the "ind !3 rapid and alm!st unc!ntr!lled escalati!n *e sa* in 1993 *hen 0ur"ish n!ises a2!ut intervening !n 2ehal3 !3 -Rer2aiKan led ussian leaders t! threaten a nuclear *ar in that case. 73 Precisel' 2ecause 0ur"e' is a 7-0O all'@ ussian nuclear threats c!uld trigger a p!tential nuclear 2l!* <n!t a small p!ssi2ilit' given the erratic nature !3 ussiaOs declared nuclear strategies=. 0he real threat !3 a ussian nuclear stri"e against 0ur"e' t! de3end :!sc!*Os interests and 3!rces in the 0ranscaucasus ma"es the danger !3 maK!r *ar there higher than alm!st ever'*here else. -s ichard 8etts has !2served@ 0he greatest danger lies in areas *here <1= the p!tential 3!r seri!us insta2ilit' is highP <2= 2!th superp!*ers perceive vital interestsP <3= neither rec!gniRes that the !therOs perceived interest !r c!mmitment is as great as its !*nP <.= 2!th have the capa2ilit' t! inKect c!nventi!nal 3!rcesP and@ <5= neither has *illing pr!5ies capa2le !3 settling the situati!n.
7nd5 even a lo ris& out eig"s !2ert 7rt <Pr!3 ( 8randeis )= 2003 - >rand $trateg' 3!r -merica@ p. 212?3=
9!urth and 3inall'@ great?p!*er *ars are highl' destructive@ n!t !nl' t! the participants and their immediate neigh2!rs@ 2ut als! t! *!rld !rder and sta2ilit'. 0!da'@ the' ma' 2e l!*?pr!2a2ilit' events@ 2ut their c!sts ma' 2e e5tremel' high. (n this regard@ *e sh!uld treat 4urasian great?p!*er *ars the same *a' *e d! 78/ terr!rism@ and the same *a' *e treated the p!ssi2ilit' !3 a general nuclear *ar 2et*een the )nited $tates and the $!viet )ni!n during the /!ld ,arC *e sh!uld ta"e multiple measures t! prevent them and t! limite them i3 the' sh!uld 2rea" !ut. >reat?p!*er *ars are p!tentiall' t!! destructive n!t t! d! ever'thing p!ssi2le t! avert themP great?p!*er peace sh!uld 2e !ver?determined@ n!t le3t t! chance.

2nc russian internal

Hig" oil prices &e% to /ussian econo!% # eac" 1 dollar drop causes a ) $illion dollar loss0 >a*dat Ca"gat </entre 3!r :iddle 4astern $tudies@ Dept P!litical $cience@ (ndiana ) !3 Penn.= 2003 OP4/ evie* A ussiaQs !il
p!tentialC pr!spects and implicati!nsB v28 i2 p. 133 $ince the c!llapse !3 the $!viet )ni!n@ the ussian ec!n!m' has 2een in a state !3 transiti!n@ 3r!m a state?run ec!n!m' t! a 3ree?mar"et !ne. - delicate pr!cess !3 restructuring and diversi3icati!n is under*a'. $till@ the ussian ec!n!m' is heavil' dependent !n !il revenue. 0his revenue represents a su2stantial pr!p!rti!n !3 the c!untr'Qs gr!ss d!mestic pr!duct e5p!rt earningsP in 2++2@ energ' acc!unted 3!r alm!st 2+ percent !3 russiaQs gdp and 55 percent !3 e5p!rt revenue. 0hese 3igures indicate ussiaQs ec!n!m' is e5tremel' sensitive t! gl!2al energ' price 3luctuati!ns. 0he sensitivit' implies a !ne d!llar rise <dr!p= in the price !3 a 2arrel !3 ussiaQs urals 2lend 2enchmar" leads t! an increase <decline= in real >DP gr!*th !3 a2!ut .5 percentage p!ints and c!ntri2utes t! an estimated )$ L5 2illi!n in e5tra earnings <l!sses=. 0he relativel' high and sta2le !il prices since 1999 2r!ught a *ind3all in !il e5p!rt revenue t! the ussian ec!n!m'@ spurred str!ng gr!*th in >DP and c!ntri2uted t! the !verall ec!n!mic rec!ver'. Put di33erentl'@ ussiaQs real >DP gr!*th since 1999 has 2een an impressive &.& per cent per 'ear. 0his str!ng rec!ver' a3ter the 1998 crisis can 2e e5plained 2' 3av!ura2le e5ternal c!nditi!ns in the 3!rm !3 high !il prices@ as *ell as the e33ects !3 the sharp 1998?99 r!u2le devaluati!n1 7!t suprisingl'@ in :a' 2++3@ 0he ussian g!vernment released its energ' strateg' t! 2+2+@ *hich designates the energ' sect!r as the engine !3 ec!n!mic gr!*th.
Drop in prices crus"es t"e /ussian econo!% CC- ,!rld*ide :!nit!ring@ T ussian 3inance minister *arns !3 e33ects !3 p!ssi2le !il price 3allT -pril 12@ 200= le5is
[ resenter! - 3all in the !il price c!uld in3lict a seri!us 2l!* !n the ussian ec!n!m'@ 9inance :inister "leksey Vudrin has said during a visit t! ,ashingt!n. %e said that at the m!ment the c!untr'Qs ec!n!m' is seri!usl' dependent !n the !il price@ and that in the case !3 a 3all in the price a crisis *ill a33ect 2!th the state and private sect!rs .

$2 russia econ resilient

7ll o' t"is evidence assu!es a orld in "ic" oil "elp re$ound t"e /ussian econo!%0 ,ver% e:a!ple t"e a'' points to a$out past declines in /ussia and even t"e collapse o' t"e 988/ ere all saved $% oil0 Wit"out oil pro'its /ussia cannot re$ound0 ,ven a te!porar% end to t"e oil $oo! ould dr% up t"e /ussian econo!% # $est ne studies Paav! 8uni <anal'st 3!r the esearch institute !3 the 9innish 4c!n!m'= 200; AOil Prices and the ussian 4c!n!m'C $!me
$imulati!n $tudies *ith 7i>4:@B 4lin"ein!el[m[n 0ut"imuslait!s discussi!n papers@ pd3 d!*nl!aded 3r!m httpC11ideas.repec.!rg1p1ri31dpaper11+88.html 0he temp!rar' end !3 the current c!mm!dit' 2!!m *!uld cause seri!us di33iculties in the ussian ec!n!mic devel!pment as the fuel for the engine would dry. 0he m!re r!2ust gr!*th *!uld necessitate drastic changes in the ec!n!mic structure 3r!m res!urce 2ased ec!n!m' t!*ards m!re n!rmal ec!n!mic structure. 0here is a danger that *hile energ' e33ects d!minate the ussian ec!n!mic devel!pment @ the need t! create 3ruit3ul circumstances 3!r the gr!*th !3 the n!n?!il sect!r is seri!usl' underestimated as the sh!rt term gains 3r!m higher energ' prices are s! large. %ere@ m!re !penness in the ec!n!m' and the use !3 !il 3und *!uld serve as an imp!rtant impetus t! raise the pr!ductivit' and the
c!mpetitiveness !3 the pr!ducti!n !utside the energ' sect!r in the l!ngrun. Openness !3 the ec!n!m' *!uld pr!vide the necessar' c!mpetiti!n t! chec" the price structures and give c!rrect price signals t! the n!n?res!urce ec!n!m' 3!r its devel!pment. 0he recent success in ,0O mem2ership neg!tiati!ns is a g!!d signal in this directi!n. %!*ever@ recent ussian p!licies t! supp!rt the m!n!p!listic nature !3 the energ' sect!r as *ell as e5p!rt duties raises the vulnerability of the economy to decline in the raw material prices and especiall' th!se !3 the energ' ma' undermine the gr!und 2ehind n!rmalisati!n !3 the ec!n!m'.
Hig" oil prices !ust $e sustained # loss ill rec& t"e econo!% Paav! 8uni <anal'st 3!r the esearch institute !3 the 9innish 4c!n!m'= 200; AOil Prices and the ussian 4c!n!m'C $!me
$imulati!n $tudies *ith 7i>4:@B 4lin"ein!el[m[n 0ut"imuslait!s discussi!n papers@ pd3 d!*nl!aded 3r!m httpC11ideas.repec.!rg1p1ri31dpaper11+88.html -cc!rding t! the results@ the sudden and permanent p!sitive !il price sh!c" *ill raise ussiaOs d!mestic demand and >DP rapidl' 3!r the 3irst three 'ears
up until 2++9. -t that p!int the level !3 d!mestic demand *ill 2e 8 per cent and that !3 >DP alm!st 5 per cent higher than in the 2aseline scenari!. 0herea3ter the di33erence *ith respect t! the 2aseline scenari! starts t! decline@ 2ut it *ill n!t vanish c!mpletel' during the 2+?'ear simulati!n peri!d. 433ects are driven 2' changes in e5p!rt inc!me@ risen net 3!reign assets and 2' the e33ects !3 the change in prices !n la2!ur mar"et equili2rium. (n the l!ng?run !utput is higher@ and the scale !3 the e33ect depends !n the imp!rtance !3 c!mm!dities in !utput and the siRe !3 the increase in prices. -ls! as a result !3 higher !il prices@ the current acc!unt 2alance *ill naturall' impr!ve pr!n!uncedl' in 2++7 2ut the e33ect *ill start t! diminish rather quic"l' as higher d!mestic demand *ill increase imp!rts and the value !3 >DP *ill gr!*. 0he current?acc!unt surplus *ill still remain large r than *ith!ut the !il price sh!c". 0here is als! a hi"e in c!nsumer price in3lati!n@ *hich als! *ill s!!n start t! diminish. (n a l!nger term@ the de3lat!r *ill 2e unchanged *ith respect t! the 2aseline 2' 2+12. 0hese results indicate that an' !il price increases *ill 3ade relativel' quic"l' i3 there are n! 3urther price increases . 0he current?acc!unt?surplus?t!? >DP rati! *ill als! start t! decline rapidl' a3ter a Kump. #hus the economy is vulnerable to a possible decline in oil prices as the process functions@ in principle@ als! the other way around. ,e chec"ed the e33ects als! using 3!r*ard e5pectati!ns. )sing 3!r*ard e5pectati!ns did n!t change the !verall picture. 0he siRe !3 the e33ects *ere 3airl' similar *ith s!me di33erences in timing@ *hich can 2e seen e.g. in the 9igure 12.
Oil accounts 'or too !uc" o' t"e econo!% +# itEs a 'ull 30H o' GDP # /ussia cannot $ounce $ac& 'ro! t"at Paav! 8uni <anal'st 3!r the esearch institute !3 the 9innish 4c!n!m'= 200; AOil Prices and the ussian 4c!n!m'C $!me
$imulati!n $tudies *ith 7i>4:@B 4lin"ein!el[m[n 0ut"imuslait!s discussi!n papers@ pd3 d!*nl!aded 3r!m httpC11ideas.repec.!rg1p1ri31dpaper11+88.html 0he share !3 !il and !ther energ' pr!ducti!n in ussiaOs t!tal >DP is di33icult t! estimate. 0he !33icial statistics tend to underestimate the share. -cc!rding t! ussian statistics@ the share !3 the 3uel industr'3 is s!me 5.5 per cent !3 ussiaOs >DP. -cc!rding t! the >0-P
data2ase@ 3uel industr' <i.e. c!al@ !il@ gas and !ther minerals= acc!unted 3!r 19 per cent !3 ussiaOs >DP at 2asic prices in 2++1 *hen measured as a share in 3act!r inc!me 2' sect!rs. -cc!rding t! ,!rld 8an" <2++.@ 2++5=@ the share !3 !il and gas in ussiaOs >DP in 2++2 *as 25 per cent. -cc!rding t! the ussian g!vernment@ as qu!ted 2' Nuuri""ala and Ollus <2++&=@ the energy sector accounted for $% per cent of the Russian &' in (%%) . <$ee als! Vaitila and $uni@ 2++7@ 3!r a discussi!n !3 this issue.=

***2nc i!pact scenarios***

Saudi 2nc
Hig" prices give 8audi 7ra$ia t"e econo!ic po er to sta$ili6e t"e Middle ,ast and re+esta$lis" strong relations it" t"e 980 >e!rge Bried!an@ 5127/200=. PhD@ 9!under and /4O !3 $trat3!r. A0he >e!p!litics !3 L13+ Oil@B $trat3!r >e!p!litical
(ntelligence ep!rt@ httpC11***.strat3!r.c!m1*ee"l'1ge!p!liticsG13+G!il. -s *e have alread' said@ the 2iggest *inners are the c!untries !3 the -ra2ian Peninsula. -lth!ugh s!me*hat strained@ these c!untries never reall' su33ered during the peri!d !3 l!* !il prices. 0he' have n!* m!re than re2alanced their 3inancial s'stem and are ma"ing the m!st !3 it. 0his is a time *hen the' a2s!lutel' d! n!t *ant an'thing disrupting the 3l!* !3 !il 3r!m their regi!n . /l!sing the $trait !3 %!rmuR@ 3!r e5ample@ *!uld 2e disastr!us t! them. ,e there3!re see the $audis@ in particular@ ta"ing steps t! sta2iliRe the regi!n. 0his includes supp!rting
(sraeli?$'rian peace tal"s@ using in3luence *ith $unnis in (raq t! c!n3r!nt al Waeda@ ma"ing certain that $hiites in $audi -ra2ia pr!3it 3r!m the 2!!m. <Other >ul3 c!untries are d!ing the same *ith their $hiites. 0his is designed t! rem!ve !ne !3 (ranOs levers in the regi!nC a rising !3 $hiites in the -ra2ian Peninsula.= (n additi!n@ the $audis are using their ec!n!mic p!*er t! re?esta2lish the relati!nship the' had *ith the )nited $tates 2e3!re 9111. ,ith the 3inancial instituti!ns in the )nited $tates in disarra'@ the -ra2ian Peninsula can 2e ver' help3ul.
98+8audi relations &e% to prevent Middle ,ast con'licts 'ro! escalating0 Names /ussel@ 91312002. $eni!r #ecturer 3!r the Department !3 7ati!nal $ecurit' -33airs. TDec!nstructing the ).$.?$audi
PartnershipDT $trategic (nsights@ /enter 3!r /!ntemp!rar' /!n3lict. relati!nship *ith i'adh and the %!use !3 -l $aud has 2een a 3!undati!n !3 sta2ilit' amidst the regi!nQs currents !3 insta2ilit'. %!*ever 2ad things ma' have 2een in the -ra2?(sraeli c!n3lict@ (raq@ s!uthern #e2an!n !r an' num2er !3 !ther situati!ns@ the ).$.?$audi relati!nship pr!vided all c!ncerned *ith a degree !3 assurance that events *!uld n!t spin c!mpletel' !ut !3 c!ntr!l . 8ut this relati!nship is n!* under m!re pressure than at an' time
-s a l'nchpin !3 ).$. securit' strateg' and p!lic' in the Persian >ul3 3!r !ver 5+ 'ears@ ,ashingt!nQs in recent mem!r'. ;ari!us c!mmentat!rs have suggested that the partnership sh!uld 2e restructured t! re3lect *hat is descri2ed as a 3undamentall' adversarial relati!nship.X1Y 0he in3erence 3r!m such arguments is that a str!ng ).$.?$audi relati!nship n! l!nger serves ).$. strategic interests. :uch !3 the c!mmentar' !n the ).$.?$audi relati!nship 3!cuses !n supp!sed 2r!ad p!lic' inc!ngruence 2et*een the t*! c!untries. 0he t*! c!untries are said t! di33er in their appr!ach t! terr!rism@ religi!n@ pluralism@ human rights@ the -ra2?(sraeli c!n3lict@ p!ssi2le militar' acti!n against (raq@ and $audi -ra2iaQs r!le and imp!rtance in *!rld !il mar"ets. O3ten le3t !ut 3r!m this c!mmentar' are the !ng!ing activities 2et*een the t*! c!untries that helped preserve regi!nal securit' and sta2ilit' !ver the decades@ *hich stemmed in part 3r!m a shared strategic visi!n. ,hile the term has 2ec!me de rigueur !3 late@ the )nited $tates c!uld n!t have pursued its p!lic' !3 Tdual c!ntainmentT during the 199+s *ith!ut $audi supp!rt. ,hile man' critics have emphasiRed that the p!lic' had negligi2le impact !n (ran@ the p!lic' !3 c!ntainment helped prevent $addam %ussein 3r!m seri!usl' disrupting regi!nal peace and securit' during the 199+s. 0he (raqi militar' remains hamstrung 2' a decade !3 sancti!ns@ and ,:D 2rea"!ut *as certainl' made m!re di33icult during the )7$/O: era. $uggesti!ns that the ).$.?$audi relati!nship needs t! 2e altered !3ten ign!re the !rganiRati!ns that have 2een created t! manage this partnership ? !rganiRati!ns that re3lect a depth and c!mple5it' in $audi?-merican relati!ns that is generall' unappreciated. (n and !3 themselves@ these entities and their activities d! n!t Kusti3' preserving the status qu!@ 2ut the' d! suggest that the
).$.?$audi securit' partnership c!uld 2e dec!nstructed !nl' *ith great di33icult' and *ith dramatic and un3!reseen c!nsequences 3!r regi!nal securit'.

%entral asian energy 2nc

Hig" oil prices are &e% to pipelines t"at stop /ussian do!ination o' -entral 7sian energ% $ 9redric" 8tarr <chairman !3 the /entral -sia?/aucasus (nstitute and a research pr!3ess!r at N!hns %!p"ins= and $vante -ornell <research direct!r !3 /-/( and assistant research pr!3ess!r at N!hns %!p"ins= ,inter 200) A0he P!litics !3 PipelinesC 8ringing
/aspian 4nerg' t! :ar"ets@B Paul %. 7itRe $ch!!l !3 -dvanced (nternati!nal $tudies@ httpC11***.sais? Khu.edu1pu2a33airs1pu2licati!ns1saisphere1*inter+51starr?c!rnell.html 0he !il and gas dep!sits !3 the /aspian 2asin c!nstitute less than a t*entieth !3 the *!rldOs reserves@ 2ut the' are signi3icant n!netheless. 0he' are am!ng the largest ne* reserves t! 2e e5pl!ited in recent 'ears@ and hence are imp!rtant t! the highl' 3ungi2le *!rld !il mar"et. -nd 2ecause h'dr!car2!ns are 2' 3ar the 2iggest s!urce !3 *ealth in three !3 the ne*l' independent c!untries <-Rer2aiKan@ VaRa"hstan and 0ur"menistan=@ a maK!r 3act!r in a 3!urth <)R2e"istan= and can pr!vide decisivel' imp!rtant transit 3ees and duties t! t*! !ther*ise imp!verished c!untries <-3ghanistan and >e!rgia=@ earnings 3r!m !il and gas *ill decisivel' a33ect the ec!n!mies@ and the s!vereignties@ !3 at least 3ive ge!p!liticall' imp!rtant states. "s oil prices roar upwards of *+% per barrel@ the tas" !3 e5tracting and 2ringing t! mar"et !il and gas res!urces 3r!m distant areas 2ec!mes a pressing c!ncern !3 ever' c!nsumer c!untr'. 0his !nce again puts the spotlight on the ,aspian basin. %ere are signi3icant reserves@ 2ut reserves that are l!cated at great distance 3r!m all their p!tential c!nsumers in ,estern 4ur!pe and 4astern -sia. :!re!ver@ the !nl' *a' these res!urces can reach th!se mar"ets is 2' traversing vast territ!ries !verland 2' means !3 pipelines@ a 3ar less e33icient means !3 transp!rting energ' than sea tan"ers. ,!rse@ the pipelines must !3ten pass thr!ugh t!p!graphicall' challenging and p!liticall' c!mple5 territ!ries @ 3urther adding t! their c!st. -dded t! the ge!graphical pr!2lem is the political legacy of the U.S.S.R.@ *hich 2equeathed t! the ne* states a A!ne?hu2B energ' transmissi!n s'stem that sent all Bc!l!nial energ'B t! the center and n!ne directl' a2r!ad. $!meh!*@ the producer states must break out of this straight-acket. 0hese t*! lia2ilities l!ng impeded the devel!pment !3 these res!urces. )nder such circumstances@ it is n! *!nder
that each !3 the man' pipeline r!utes and pr!Kects pr!p!sed !ver the past decade presents its !*n technical and 3inancial challenges@ and each inv!lves the m!st intricate c!m2inati!ns !3 c!rp!rate and state interests. 7!r is it an' *!nder that all this has led !3ten t! a state !3 c!n3usi!n@ in *hich practical schemes have 2een dismissed as un*!r"a2le and in *hich grandl' impractical schemes are deemed s!meh!* practical. 0al" !3 a pipeline t! 2ring ussian gas t! (ndia via 0i2et is !nl' the m!st 3la22ergasting !3 man' e5amples !3 the 3anci3ul directi!n such speculati!n has ta"en. #he fundamental change in the fate of ,aspian oil has been the rise in world prices. 0han"s t! this@ man' pr!Kects that !nce seemed laugha2le n!* merit seri!us attenti!n. %ence@ 2uilding pipelines 3r!m /entral -sian states thr!ugh -3ghanistan t! Pa"istan !r even 2e'!nd t! (ndia is n!* 2eing c!nsidered@ *hile c!ncrete plans are 2eing made 3!r a pipeline c!nnecting VaRa"hstanOs !il 3ields *ith /hina. - maK!r pr!Kect that *as c!nsidered all 2ut dead 3ive 'ears ag! has n!* 2een c!mpletedC the 8a"u?02ilisi?/e'han <80/= pipeline 2ringing -Rer2aiKani /aspian !il t! the 0ur"ish :editerranean c!ast. -lth!ugh this remar"a2le achievement ma"es ,est /aspian !il availa2le t! *!rld mar"ets in seri!us quantities@ the same is n!t true 3!r the 4ast /aspian and !nsh!re /entral -sian res!urces@ *hich c!ntinue t! 2e e5p!rted mainl' t! ussia at prices that are un3av!ra2le c!nditi!ns 3!r pr!ducers. 4ven this@ h!*ever@ may be about to change. During the last decades !3 the ).$.$. .@ its ussian leaders 3!cused their energ' investments !n ,est $i2eria@ *hich the' sa* as sa3el' A ussian@B t! the neglect !3 e5isting !il 3ields in -Rer2aiKan and undevel!ped 3ields in VaRa"hstan@ *hich the' 3eared *ere danger!usl' su2Kect t! in3luence 2' the l!cal 0ur"ic pe!ples. $uch 3ears *ere driven 2' census data that sh!*ed high 2irth rates am!ng the 0ur"ic pe!ples !3 the /aspian 2asin and l!* rates 3!r ussians and $lavs. $imilar 3ears als! assured that all pipelines 3r!m the /aspian 2asin *!uld head directl' t! ussia and its centraliRed grid.
/ussian control o' -entral 7sian energ% leads to glo$al WMD con'lict -riel -o"en <PhD and $eni!r P!lic' -nal'st at %eritage= 199( %eritage 9!undati!n ep!rts@
:uch is at sta"e in 4urasia 3!r the ).$. and its allies. -ttempts t! rest!re its empire *ill d!!m ussiaQs transiti!n t! a dem!crac' and 3ree?mar"et ec!n!m'. 0he !ng!ing *ar in /hechn'a al!ne has c!st ussia L & 2illi!n t! date <equal t! ussiaQs (:9 and ,!rld 8an" l!ans 3!r 1995=. :!re!ver@ it has e5tracted a tremend!us price 3r!m ussian s!ciet'. 0he *ars *hich *!uld 2e required t! rest!re the ussian empire *!uld pr!ve much m!re c!stl' n!t Kust 3!r ussia and the regi!n@ 2ut 3!r peace@ *!rld sta2ilit'@ and securit'. -s the 3!rmer $!viet arsenals are spread thr!ugh!ut the 7($@ these c!n3licts may escalate to include the use !3 *eap!ns !3 mass destructi!n. $cenari!s including unauth!riRed missile launches are especiall' threatening. :!re!ver@ i3 success3ul@ a rec!nstituted ussian empire *!uld 2ec!me a maK!r desta2iliRing in3luence 2!th in 4urasia and thr!ugh!ut the *!rld. (t *!uld endanger n!t !nl' ussiaQs neigh2!rs@ 2ut als! the ).$. and its allies in 4ur!pe and the :iddle 4ast. -nd@ !3 c!urse@ a ne!?imperialist ussia c!uld imperil the !il reserves !3 the Persian >ul3. n15 n15 ;ladimir Zhirin!vs"'@ m!uthpiece 3!r the m!st irredentist elements in the ussian securit' and militar' services@ c!nstantl' articulates this threat. D!minati!n !3 the /aucasus *!uld 2ring ussia cl!ser t! the 8al"ans@ the :editerranean $ea@ and the :iddle 4ast. ussian imperialists@ such as radical nati!nalist ;ladimir Zhirin!vs"'@ have resurrected the !ld dream !3 !2taining a *arm p!rt !n the (ndian Ocean. (3 ussia succeeds in esta2lishing its d!minati!n in the s!uth@ the threat t! )"raine@ 0ur"e'@ (ran@ and -3ganistan *ill increase. 0he independence !3 pr!?,estern >e!rgia and -Rer2aiKan alread' has 2een undermined 2' pressures 3r!m the ussian armed 3!rces and c!vert acti!ns 2' the intelligence and securit' services@ in additi!n t! *hich ussian hegem!n' *!uld ma"e ,estern p!litical and ec!n!mic e33!rts t! stave !33 (slamic militanc' m!re di33icult. 4urasian !il res!urces are piv!tal t! ec!n!mic devel!pment in the earl' 21 st centur'. 0he suppl' !3 :iddle 4astern !il *!uld 2ec!me precari!us i3 $audi -ra2ia 2ecame unsta2le@ !r i3 (ran !r (raq pr!v!"ed an!ther militar' c!n3lict in the area. 4urasian !il is als! "e' t! the ec!n!mic devel!pment !3 the s!uthern 7($. Onl' *ith !il revenues can these c!untries sever their dependence !n :!sc!* and devel!p m!dem mar"et ec!n!mies and 3ree s!cieties. :!re!ver@ i3 these vast !il reserves *ere tapped and devel!ped@ tens !3 th!usands !3 ).$. and ,estern K!2s *!uld 2e created. 0he ).$. sh!uld ensure 3ree access t! these reserves 3!r the 2ene3it !3 2!th ,estern and l!cal ec!n!mies. (n !rder t! pr!tect ).$. and ,estern interests in 4urasia and ensure 3ree and 3air access t! the !il reserves !3 the regi!n@ the )nited $tates sh!uldC * $trive t! preserve the independence and ec!n!mic via2ilit' !3 the 7e* (ndependent $tates in the regi!n. (n c!!perati!n *ith 8ritain@ >erman'@ and 9rance@ the ).$. sh!uld prevent the rec!nstituti!n !3 :!sc!*Qs sphere !3 in3luence in the s!uthern /($. 0he ,est sh!uld n!t grant :!sc!* carte blanche in the Tnear a2r!adT in e5change 3!r c!!perati!n in 8!snia. 0he ).$. sh!uld lead !ther ,estern c!untries in implementing pr!grams that supp!rt independent stateh!!d@ 3ree? mar"et devel!pment@ and the rule !3 la* in -Rer2aiKan@ >e!rgia@ and the /entral -sian states. 0raining 3!r the civil and securit' services !3 these c!untries sh!uld 2e stepped up@ and ec!n!mic re3!rms@ including privatiRati!n !3 industries and agriculture@ sh!uld 2e c!ntinued. :!re!ver@ sancti!ns !n technical and humanitarian assistance t! -Rer2aiKan@ imp!sed at the height !3 the Vara2a"h c!n3lict@ sh!uld 2e li3ted t! increase ,ashingt!nQs leverage in settling the c!n3lict there. * 4nsure

2=/93 Herndon/Petit/Tate/Quinn that ussia is n!t a d!minant@ 2ut rather an equal partner in devel!ping the !il res!urces !3 the /aucasus and /entral -sia.
ussian !il c!mpanies sh!uld 2e assured !3 equita2le access t! the devel!pment !3 !il res!urces and pipeline pr!Kects. 0he strategic g!al !3 the ,est sh!uld 2e the creati!n !3 a level pla'ing 3ield that all!*s ussian and ,estern c!rp!rati!ns t! participate in the devel!pment !3 4urasian energ' res!urces !n an equal 3!!ting.

sreal relations 2nc

Oil dependenc% &e% to sta$ili6e 98+2srael relations !ss Gel$span@ edit!r and rep!rter at 0he 8!st!n >l!2e and 0he ,ashingt!n P!st and pr!3ess!r at the /!lum2ia )niversit' $ch!!l !3 N!urnalism @ 0he %eat is On@ 199;@ p. 191
(t *!uld require a K!lt !3 stand?up s!cial c!urage 3r!m us all. 9!r !ne thing@ this underta"ing *ill have c!sts. 0he m!st !2vi!us c!sts *ill 2e 3elt 2' the nati!ns and c!mpanies that m!st depend !n 3!ssil 3uels 3!r their ec!n!mic *ealth. -ustralia *!uld l!se a l!t !3 m!ne' 3r!m the c!al it e5p!rts. $audi -ra2ia@ Vu*ait@ and the !ther !il?pr!ducing nati!ns *!uld 2ec!me p!!rer relative t! !ther c!untries. 0he' c!uld rec!ver s!me measure !3 their l!ss 2' c!nstructing vast s!lar 3arms. 8ut their !il *ealth ma' *ell pr!ve t! have 2een a 3ragile hist!rical 2u22le@ a 3i3t'?'ear *ind3all 3!r the :iddle 4ast. < 0he plan might als! cause unease in (srael. -s the strategic imp!rtance !3 :iddle 4astern !il declines@ the ).$. c!mmitment t! that c!untr' might decline as *ell.=
T"is leads to a violent las"out -rlene Hoag <Ps'ch!l!g' ) !3 /ali3!rnia at $anta /ruR= 0he /!mmunist 0hreat. $urvival@ Disaster Preparedness@ 9!!d $t!rage and $helters. 199= httpC11***.n!d!!m.c!m1chapter13t!1..html
7uclear *eap!ns and techn!l!g' are rapidl' 2eing pr!li3erated thr!ugh!ut the third *!rld c!untries. :an' !3 these ne* mem2ers t! the
nuclear clu2 are n!t 3riendl' t! the ).$. 7!rth V!rea@ (ran@ #i2'a and (raq are several e5amples. (n 3act@ ).$. intelligence agencies sa' that 7!rth V!rea has devel!ped a nuclear *eap!n and an (/8: deliver' s'stem. 0hese r!c"ets include the 1@3++?"il!meter range 7!d!ng?( (/8:@ *hich is n!* !perati!nal@ the 2@5++? "il!meter range 7!d!ng?(( and the 5@+++S "il!meter range 7!d!ng?(((. 0he 5@+++S "il!meter range 7!d!ng ((( c!uld reach the )nited $tates *ith a nuclear pa'l!ad. - 1995 /(- rep!rt t! /!ngress revealed that (ran !2tained 3!ur 2allistic missile launchers 3r!m 7!rth V!rea . Despite ).$. pr!tests@ ussia is still g!ing ahead *ith its sale !3 a nuclear react!r t! (ran. ).$. intelligence e5perts suggest that (ran c!uld have nuclear missile capa2ilit' 2' !r 2e3!re the 'ear 2+++.
0he p!tential rami3icati!ns !3 this situati!n in relati!n t! (srael are dire@ and hist!r' has sh!*n that i3 (srael 3eels threatened@ its inclinati!n is t! ma"e a preemptive stri"e. 4ven m!re !min!us is the 3act that the last maK!r -ra2?(sraeli c!n3lict 2r!ught the )nited $tates and the $!viet )ni!n t! the ver' 2rin" !3 *!rld *ar.
1uclear War
N!hn $tein2ach. A(sraeli 7uclear ,eap!nsC - 0hreat t! Piece.B 3 :ar. 2002. httpC11***.c!nverge.!rg.nR1pma1mat++3&.htm :ean*hile@ the e5istence !3 an arsenal !3 mass destructi!n in such an unsta2le regi!n in turn has seri!us implicati!ns 3!r 3uture arms c!ntr!l and disarmament neg!tiati!ns@ and even the threat !3 nuclear *ar. $e'm!ur %ersh *arns@ T$h!uld *ar 2rea" !ut in the :iddle 4ast again@... !r sh!uld an' -ra2 nati!n 3ire missiles against (srael@ as the (raqis did@ a nuclear escalati!n@ !nce unthin"a2le e5cept as a last res!rt@ *!uld n!* 2e a str!ng pr!2a2ilit'.T<.1= and 4Rar ,eissman@ (sraelQs current President said T0he nuclear issue is gaining m!mentum <and the= ne5t *ar *ill n!t 2e c!nventi!nal.T<.2= ussia and 2e3!re it the $!viet )ni!n has l!ng 2een a maK!r <i3 n!t the maK!r= target !3 (sraeli nu"es. (t is *idel' rep!rted that the principal purp!se !3 N!nathan P!llardQs sp'ing 3!r (srael *as t! 3urnish satellite images !3 $!viet targets and !ther super sensitive data relating t! ).$. nuclear targeting strateg'. <.3= <$ince launching its !*n satellite in 1988@ (srael n! l!nger needs ).$. sp' secrets.= (sraeli nu"es aimed at the ussian heartland seri!usl' c!mplicate disarmament and arms c!ntr!l neg!tiati!ns and@ at the ver' least@ the unilateral p!ssessi!n !3 nuclear *eap!ns 2' (srael is en!rm!usl' desta2iliRing@ and dramaticall' l!*ers the thresh!ld 3!r their actual use@ i3 n!t 3!r all !ut nuclear *ar. (n the *!rds !3 :ar" >a33ne'@ T... i3 the 3amilar pattern<(srael re3ining its *eap!ns !3 mass destructi!n *ith ).$. c!mplicit'= is n!t reversed s!!n? 3!r *hatever reas!n? the deepening :iddle 4ast c!n3lict c!uld trigger a *!rld c!n3lagrati!n.T

***72 s!art args***

$2 High prices cause clean tech

8"i't 'ro! Oil is inevita$le $ut "as a long ti!e'ra!e # t"e onl% <uestion is "et"er prices re!ain sta$le 'or t"e ne:t decade # t"e alternative is price spi&es "ic" prevent invest!ent 'ro! succeeding 8!2 Willia!s@ -ug 2003. Oil and >as N!urnal
4ven *ith!ut su2sidies@ mar"et share mandates@ !r car2!n ta5es@ heightened c!ncerns !ver climate change and air qualit' *ill pr!ve a chin" in !ilQs c!mpetitive arm!r@ acc!rding t! $ullivan. T/ar2!n capture and advanced emissi!ns c!ntr!ls *ill drive up the e33ective c!st !3 3!ssil 3uel
res!urces@T she said. T>reat pr!gress is needed !n these 3r!nts@ given the read' availa2ilit' and high relia2ilit' !3 that res!urce@ 2alanced against the challenge !3 gl!2al climate change @ @ @ ( d! n!t thin" *e are a2!ut t! drive traditi!nal 3!ssil 3uels !ut !3 the picture 2' an' means@ 2ut *e are headed t! situati!n *here rene*a2les are a signi3icant part !3 alm!st ever' energ' supplierQs 2alanced p!rt3!li !.T :a"ing the transiti!n (3 the
depleti!nists are right a2!ut gl!2al !il pr!ducti!n pea"ing ar!und the turn !3 the decade@ then rene*a2les *!nQt need much in the *a' !3 su2sidies !r V'!t! mandatesP s"'r!c"eting c!sts !3 !il *ill help usher in a rene*a2les era s!!ner than an'!ne currentl' predicts .
8ut the resulting high energ' c!sts 3!r ever'!ne *ill pr!ve a massive ec!n!mic disl!cati!n 3!r the *!rld@ a grim scenari! !3ten !utlined 2' the pea"?!il the!rists. $!me have even painted alarming pictures !3 civiliRati!n crum2ling as a result !3 this ne* !il sh!c". T 7! techn!l!g' 2rea"thr!ugh can c!me t! alter the imminent !il pea"P it *!uld ta"e much t!! l!ng t! put ne* techn!l!g' in place t! h!pe t! dent !il and gas demand@T said -.:. $amsam 8a"htiari@ 7ati!nal (ranian Oil /!. seni!r e5pert. T4ven i3 the t*! great h!pes !3 s!lar and c!ld 3usi!n *!uld materialiRe@ the' c!uld n!t 2e
devel!ped in time@ as it ta"es decades <n!t 'ears= t! put in place the necessar' in3rastructures.T 8ut there is a prevailing vie* am!ng m!st energ' ec!n!mists that an appr!aching pea" and su2sequent steep decline in gl!2al !il pr!ducti!n *ill send earl' price signals that *ill crimp demand@ spur devel!pment !3 n!nc!nventi!nal !il res!urces@ and thus stave !33 the pea" da' . -n!ther pr!minent pea"?!il
the!rist@ *h! declined t! 2e identi3ied@ ac"n!*ledged that Tprices *ill rise@ 2ut the' *ill send a signal that c!mes t!! late@ given the l!ng lead times t! create ne* energ' in3rastructures. 0his *ill result in a reducti!n !3 demand 2ut@ un3!rtunatel'@ the s!?created r!!m !3 maneuver *ill 2e sh!rtlived 2ecause n!n?:iddle 4ast !il suppl' *ill c!ntinue t! decline *ith little chance that ne* investments *ill 2e su33icient t! c!mpensate 3!r 2!th this decline and the p!tential X!verallY rise !3 demand. T0! this equati!n@ !ne sh!uld add the negative impact !n the >DP@ as *as the case during the last 3+ 'ears each time the price !3 !il *ent up. ( 2elieve that it *!nQt 2e the end !3 the civiliRati!n@ 2ut it *ill certainl' 2e a pain3ul transiti!n.T $!me !3 the depleti!nists c!ntend that the !nl' ans*er is 3!r g!vernments t! ta"e steps n!* t! 2!!st energ' prices and there2' c!nserve *hat !il reserves remain. 8ut the unidenti3ied pea"?!il the!rist is a c!ntrarian !n that sc!re. T0he idea that planners@ and especiall' state planners@ c!uld 2e smart en!ugh t! rise the prices pr!gressivel' t! av!id a sh!c" is t!tall' unrealistic@T he t!ld O>N. T:' pre3erence is t! leave things happen and ensure that g!vernments *ill n!t intervene. - c!mpetitive industr' is 2' 3ar the 2est means t! ensure a rapid and c!rrect adaptati!n.T !*le' t!! sees increasing pressure !n !il supplies *ithin the ne5t decade 2ut !33ers a less ap!cal'ptic visi!n. TX7aturalY gas *ill act as a ne5t phase a3ter !il@ 2ut *hat *e e5pect t! see !ver the ne5t decade is a realiRati!n that c!nventi!nal energ' c!sts can !nl' g! !ne *a'@ up@T he said. T 0he gl!2al ec!n!m' has a *!nder3ul *a' !3 c!ping@ and transiti!n a*a' 3r!m c!nventi!nal t! rene*a2les *ill !ccur. T0he real piv!tal impact !3 rene*a2le energ' *ill 2e *ithin the peri!d !3 2+1+?2+@ *here pla'ers *ill 2e ma"ing signi3icant ch!ices 2et*een a maturing rene*a2le sect!r and c!nventi!nal Xenerg' s!urcesY.T 7!ting that recent hist!r' is 3ull !3 instances in *hich technical pr!gress !r v!latilit' !3 primar' energ' s!urces has led t! maK!r changes in energ' suppl' !r energ' c!nsumpti!n@ :!g3!rd v!ices the 8P stance that T!il *ill remain in relativel' a2undant suppl' 3!r at least the ne5t 15 'ears@ *ith gas 2eing plenti3ul 3!r several decades l!nger. T:!re than ec!n!mics *ill drive the gr!*th !3 alternative energ'. $ecurit' !3 suppl'@ minimiRati!n !3 envir!nmental impacts@ and technical advances *ill als! 2e 3act!rs.T 8ut *ill the transiti!n t! rene*a2les 2e an !rderl' !neD $ullivan e5pressed her 2elie3 in an !rderl' transiti!nC T,e have seen !ccasi!nal price spi"es in traditi!nal energ' res!urces !ver the last 3+ 'ears@ and ( suspect *e *ill c!ntinue t! see th!se 3r!m time t! time@ 3!r vari!us reas!ns. T8ut ( als! suspect that g!vernments *ill tail!r their p!licies !n emissi!ns@ rene*a2le p!rt3!li! requirements@ and techn!l!g' 3unding t! ensure that@ e5cept 3!r the !ccasi!nal@ unusual price spi"es@ there is an !rderl' transiti!n t! an era in *hich rene*a2les and n!n?c!nventi!nal 3!ssil 3uel techn!l!gies are pla'ing a maK!r r!le in !ur energ' suppl' picture.T 0here3!re@ she rec"!ns that it *ill 2e an!ther 2+?25 'ears 2e3!re alternative energ' s!urces pla' a d!minant r!le the *!rldQs energ' mi5. 8ut !rderl' and rapid are n!t necessaril' mutuall' e5clusive in this !utl!!"@ sa's 7am!vicR. T(3 Q!rderl'Q transiti!n means QgradualQ transiti!n@ ( thin" that hist!r' sh!*s that transiti!ns t! a ne* 3!rm !3 energ' can happen relativel' quic"l'@ !ver the c!urse !3a decade !r s!@ 2ut are n!t necessaril' dis!rderl'@T he said. T(3@ either thr!ugh su2sid' !r natural mar"et 3!rces@ !ne !r m!re rene*a2le techn!l!g' 2ec!mes ver' ec!n!micall' attractive@ there ma' 2e a 2!!m peri!d *here l!ts !3 ne* capacit' is 2uilt ever' 'ear 3!r a 3e* 'ears@ Kust li"e l!ts !3 ne* gas c!m2ined?c'cle capacit' has 2een 2uilt !ver the past 3e* 'ears. 8ut Kust 2ecause the'Qre 2uilding l!ts !3 ne* c!m2ined?c'cle units d!esnQt mean the c!al units are suddenl' disappearing. (t sh!uldnQt 2e t!! surprising t! see a similar pattern i3 *ind !r 2i!?mass suddenl' 2r!"e thr!ugh s!me ec!n!mic thresh!ld@ *ith l!ts !3 ne* annual capacit' additi!ns all !3 a sudden@ 2ut *ith the impact greatl' dampened 2ecause the e5isting capital st!c" is s! large@ and the' *erenQt necessaril' 2eing 2uilt t! replace that Xcapital st!c"Y@ 2ut p!tentiall' t! satis3' ne* demand.T (n additi!n t! the e5isting?capital?st!c" issue@ 7am!vicR als! cauti!ns !2servers t! remem2er the e33ect !3 mar"et 3eed2ac"s in citing his e5pectati!n that it *ill 2e a l!ng time 2e3!re rene*a2les can 2ec!me the *!rldQs d!minant energ' s!urce. T(3 *ind 2ec!mes ec!n!mic 2ecause natural gas is t!! e5pensive@ then the' *ill 2uild l!ts !3 *ind Xpr!KectsY. 8ut this *ill ta"e mar"et share 3r!m gas and l!*er the gas price. -t the l!*er gas price@ the ne* ec!n!mics 3!r *ind ma' dampen its gr!*th.T %uman c!ncerns (3 in 3act a permanent !il sh!c" is l!!ming !n the near h!riR!n@ it *!uld seem that an earl' e33!rt t! imp!se higher energ' prices 3!r that reas!n !r t! supp!rt an earl' transiti!n t! rene*a2les *!uld have its !*n severe ec!n!mic c!nsequences@ especiall' 3!r devel!ping c!untries . (n e33ect@ this c!uld accelerate the price sh!c". 0he li"el' deep recessi!n that *!uld ensue c!uld hit n!t !nl' the devel!ping c!untries directl' 2ut als! squelch ec!n!mic gr!*th in the devel!ped c!untries@ up!n *hich the 3!rmer depend heavil' 3!r e5p!rt mar"ets and ec!n!mic aid.

$2 &ar Sands'Oil Shale

Price volatilit% &ills invest!ent in IOil 8"ale/Tar 8andsJ # unconventional sources are too e:pensive to ris& MKc&li5 Hul$ert5 Ma"adevan and Dier5 2010 <Daniel@ $eni!r esearch 9ell!* at the /enter !3 $ecurit' $tudies and head
!3 its $trategic 0rends -nal'sis unitP :atthe*@ $eni!r esearch 9ell!* at the /enter 3!r $ecurit' $tudies *!r"ing !n energ' and p!litical ris"P Prem@ $eni!r esearcher at the /enter 3!r $ecurit' $tudiesP $eni!r esearch 9ell!* at the /enter 3!r $ecurit' $tudies and D!ct!rate in P!litics and (nternati!nal elati!ns 3r!m O53!rdP A$trategic 0rends 2+1+B@ -nnual anal'sis !3 maK!r devel!pments in *!rld a33airs@ *ith a primar' 3!cus !n internati!nal securit'@ /enter 3!r $trategic $tudies@ 9e2ruar'= Price and p!litics a pr!2lem. 0urning t! price 3irst@ (O/s have 2ec!me increasingl' cauti!us *hen c!mmitting t! l!ng?term pr!Kects. (n light !3 price v!latilit' and credit c!nstraints@ the (nternati!nal 4nerg' -genc' <(4-= thin"s investment *ill decline 2' ar!und 15?2+ per cent in 2++9@ *hich c!uld "n!c" !ut !ver hal3 !3 the e5pected gr!*th in !il pr!ducti!n capacit' !ver the ne5t 3ive 'ears thr!ugh de3erment !r cancellati!n. :!re e5pensive n!n?c!nventi!nal pr!ducti!n@ such as tar sands and deep?*ater pr!Kects@ are li"el' t! 2e the m!st !2vi!us casualties@ *hile *ea" investment in maintenance !3 e5isting sites c!uld als! see depleti!n rates speed up. (n e33ect@ crucial investment has 2een and *ill 2e l!st.
Oil 8"ale 'ails # onEt produce enoug" oil and e use !ore energ% to get it t"an e ould gain Ga%5 200( <#ance@ ep!rter at $cripps?%!*ard 7e*s $ervice@ A45perts d!u2t !il shale ans*er t! energ' crisisB@ $%7$@ :a' 2nd@
httpC11***.sitne*s.us1+5+&ne*s1+5+2+&1+5+2+&GshnsG!ilshale.html= ,ith !il hitting rec!rd prices !n the *!rld mar"et@ pr!Kects !nce shelved as imp!ssi2l' unec!n!mical *hen !il *as L3+ a 2arrel are n!* getting a sec!nd l!!". 8ut ,alter H!ungquist@ a retired )niversit' !3 Oreg!n ge!l!g' pr!3ess!r@ sa's heQs c!nsidered *a's !3 e5pl!iting -mericaQs untapped !il shale res!urces 3!r .+ 'ears and c!ncludes that e5tracting c!mmercial am!unts is li"e a mirageC ever' time it is appr!ached@ it Kust "eeps retreating int! the distance. H!ungquist said it ta"es m!re energ' t! e5tract a 2arrel !3 !il than the am!unt !3 energ' rec!vered. (tQs n!t Kust the issue !3 c!mmitting energ' t! the pr!Kect@ 2ut the am!unts !3 !il that can 2e pr!duced 3r!m !il shale arenQt g!ing t! 2e an immediate s!luti!n t! -mericaQs pr!2lems@ H!ungquist argues . 4nvir!nmental c!nsequences are als! signi3icant@ he said. T(Qm n!t ver' enthusiastic a2!ut the pr!spect@QQ said H!ungquist. A,hen '!u l!!" at alternative energ' s!urces@ thereQs n! c!mprehensive su2stitute 3!r !il.T
Hig" Oil Prices onEt cause a s"i't to Oil 8"ale # too costl% and t"e ris& is too "ig" Ga%5 200( <#ance@ ep!rter at $cripps?%!*ard 7e*s $ervice@ A45perts d!u2t !il shale ans*er t! energ' crisisB@ $%7$@ :a' 2nd@
httpC11***.sitne*s.us1+5+&ne*s1+5+2+&1+5+2+&GshnsG!ilshale.html= 0he /!ngressi!nal esearch $ervice als! is cauti!us. T%igh prices ma' n!t 2e en!ugh !3 an incentive 3!r ris"' devel!pments in c!nventi!nal !il@ let al!ne !il shale@T sa's / $ industr' anal'st -nth!n' -ndre*s. -ndre*s cited studies estimating e5tracti!n and re3iner' 3acilities c!uld c!st up t! L7 2illi!n and require c!mpleti!n !3 a2!ut 8++ g!vernment permits. -nd the petr!leum pr!duct that *!uld result 3r!m !il shale *!uld m!re li"el' 2e used 3!r diesel 3uel rather than gas!line in cars . ,ith!ut s!me l!ng?term c!mmitment@
he said use !3 !il shale T*ill remain questi!na2le.T

***72 "ig" oil $ad***

$2 oil shocks
8"oc&s "ave 6ero e''ect on t"e econo!% # e Lust "ad one5 and all econo!ists agree no i!pact Nerr' Ta%lor and Peter Man Doren <seni!r 3ell!*s at the /at! (nstitute= Oct!2er 17 200; A7! need t! 3ear !il sh!c"s@B 7ati!nal
P!st -lth!ugh !il prices hit )$L8+@ the in3lati!n@ unempl!'ment and recessi!n that supp!sedl' 3!ll!* !il?price sh!c"s are n!*here !n the macr!ec!n!mic radar screen. (3 the ec!n!m' g!es int! a tailspin@ it *ill 2e in resp!nse t! 2ad ne*s in the h!using mar"et@ n!t the !il mar"et. 0he less!n t! 2e derived 3r!m this is prett' clearC ,hile !il?price spirals are certainl' n!thing 3!r c!nsumers t! cele2rate@ the health of the economy is not held hostage to oil markets. 0he !rth!d!5 vie* that g!verned !ur understanding !3 !il?price sh!c"s until recentl' *as that the ec!n!mic damage ass!ciated *ith th!se sh!c"s *as n!t the result !3 !il?price increases per se. %igher !il prices@ a3ter all@ simpl' ma"e !il pr!ducers richer@ and ever'!ne else p!!rer. Over the l!ng run@ m!re m!ne' spent !n !il equals less m!ne' spent !n ever'thing else. 0his reduces the demand 3!r@ and thus the price !3@ ever'thing <including la2!urU= save 3!r !il. -s l!ng as !il pr!ducers are spending and1!r investing their increased pr!3its@ the net effect of all this ?? 3r!m a macr!ec!n!mic perspective??is .ero. -ll !3 this *ill eventuall' happen@ 2ut the length !3 time required t! get !il c!nsumers t!
adKust their 2ehavi!ur in resp!nse t! a price sh!c" is *hat *as th!ught t! trigger the ec!n!mic d!*nside ass!ciated *ith an !il crisis. (3 *ages and c!nsumpti!n rates !utside the !il sect!r 3ail t! g! d!*n@ either unempl!'ment *ill 3!ll!* !r in3lati!n *ill result@ 2ecause thereQs !nl' s! much m!ne' t! g! ar!und@ unless the 9ederal eserve acc!mm!dates ever'!neQs demand 3!r m!ne'. 0he main dissenting vie* *as m!st str!ngl' 3!r*arded 2' then Princet!n )niversit' ec!n!mist and n!* 9ederal eserve 8!ard chairman 8en 8ernan"e and his c!lleagues. 0he' argued that di33erent <T2etterT= m!netar' p!lic' ?? m!re speci3icall'@ !ne that maintains the 3ederal 3unds rate at a c!nstant level@ rather than raising it in the 3ace !3 an !il sh!c" ?? c!uld reduce !r even eliminate the recessi!nar' e33ect !3 !il sh!c"s. 4c!n!mists Names %amilt!n and -nna %errera@ h!*ever@ *ere s"eptical !3 that pr!p!siti!n. 0he' argued that the T2etterT m!netar' p!lic' adv!cated 2' 8ernan"e et al. e33ectivel' calls 3!r massive declines in the 3ederal 3unds rate !ver the entire c!urse !3 an !il sh!c"@ s!mething that is pr!2a2l' n!t p!ssi2le in the real *!rld. :!re!ver@ the 9ederal eserve *!uld have t! "eep the 3unds rate 2el!* levels anticipated 2' mar"et act!rs 3!r 3& m!nths in a r!*@ *hich is@ !3 c!urse@ an unli"el' pr!p!siti!n. (nterestingl' en!ugh@ the 9ederal eserve@ n!* chaired 2' 8en 8ernan"e@ is n!t pursuing the p!licies adv!cated 2' its chairman *hen the chairman *as in the academ'. 0hat *as the state !3 the de2ate until the m!st recent price sh!c". 0he ec!n!m'Qs 3ailure t! resp!nd t! !ne !3 the steepest !il?price increases in hist!r' *ith a recessi!n@ h!*ever@ sent ec!n!mists 2ac" t! the the!retical dra*ing 2!ard. "ll the new analyses agree that the m!re 3le5i2le ec!n!m' that *e have n!* all!*s us t! cope more easily with oilprice shocks. (t undersc!res the danger !3 the price?c!ntr!l regimes !3 the 197+s@ s!mething that p!liticians are increasingl' 3lirting *ith as energ' prices c!ntinue t! clim2 and put int! questi!n a pan!pl' !3 g!vernment pr!grams.
Oil Prices ould "ave to rise to 200 dollars a $arrel to "urt t"e econo!% 8unda% Ti!es 8115/03@ \Oil s!ars again@ 2ut n! need t! panic Kust 'et #17]
0he 8an" als! p!inted !ut that all advanced ec!n!mies have 2ec!me less sensitive t! !il@ 8ritain particularl' s!. 0he decline !3 heav'@ energ'?intensive manu3acturing means that O4/D c!untries use Kust !ver hal3 as much !il 3!r a given level !3 gr!ss d!mestic pr!duct <>DP= as in 197+. (n 8ritain the decline has 2een even m!re pr!n!unced ?the !il intensit' !3 >DP is !nl' .+I !3 *hat it *as three decades ag!. Nust t! 2e clear@ this d!es n!t mean *e use less !il n!*P it means that !il c!nsumpti!n has risen much m!re sl!*l' !ver time than >DP. -dding these t*! 2its !3 in3!rmati!n t!gether pr!duces an interesting result. 9!r high !il prices t! have the same e33ect !n the ec!n!m' as in the 197+s *e need t! adKust 2!th 3!r the 3act that real !il prices *ere higher in the past and that ec!n!mies *ere m!re !il?sensitive . ( calculate that it *!uld need an !il price !3 Kust !ver L 2++ <^11+= t! pr!duce the same "ind !3 in3lati!nar' and recessi!nar' sh!c"s as in the past. 0hat *!uld 2e uncharted territ!r' and is n!t rem!tel' !n the agenda. -cc!rding t! /$98@ the highest?ever !il price@ in t!da'Qs prices@ *as L 95 a 2arrel in
the late 19th centur'.
Diversit% cus"ions s"oc&s 2nternational Oil Dail% Nune 1+ 2003

%4-D#(74C Diversit' !3 Oil :ar"et %elps /ushi!n -gainst Price $h!c"sC 8P ,!rld !il suppl' is 2ec!ming Tm!re diverse@T *hile gl!2al pr!ducti!n capacit' Tc!m3!rta2l' e5ceedsT demand@ 8PQs chie3 ec!n!mist@ Peter Davies@ said 0uesda' in #!nd!n@ at the launch !3 the 8P $tatistical evie* !3 ,!rld 4nerg' 2++3.0he underl'ing 3act!rs 3!r the trend include a signi3icant 1..5 milli!n 2arrel per da' increase in n!n?Opec !il !utput last 'ear@ c!upled *ith largel' 3lat demand gr!*th. 0he e5cepti!n *as /hina@ *hich acc!unted 3!r all !3 the increase in !il demand last 'ear@ and &8.5I !3 the rise in gl!2al primar' energ' c!nsumpti!n. -s a result@ Davies said !il mar"ets pr!ved resilient and 3le5i2le@ *ith current structures a2le t! maintain !il supplies *ith!ut e5cessive price spi"es during the (raq*ar and une5pected disrupti!ns. TPr!ducers *ere a2le t! meet the needs !3 !il c!nsumers during the (raq*ar and during unplanned suppl' disrupti!ns in ;eneRuelaand 7igeria. /!nsuming nati!ns *ere n!t required t! tap their emergenc' reserves@T he said.

$2 shocks crush !S economy

98 econo!% is resilient to s"oc&s :alc!lm Gillis <pr!3ess!r !3 ec!n!mics at ice )niversit'= :a' 8 2002 A4ngines !3 the ,!rld 4c!n!m'@B O33sh!re 0echn!l!g'
/!n3erence@ httpC11***.pr!3ess!r.rice.edu1pr!3ess!r1+5+82++2.aspD$n(DE2 (((. 0he ).$. 4c!n!mic 4ngineC esilienc' in Diversit' 45cept 3!r :!rgan $tanle'@ m!st 3!recasters are seeing T;Ts@ n!t T,Ts in !ur ec!n!mic 3uture@ *ith the ec!n!m' gr!*ing at an annual rate !3 3.+ percent t! 3.5 percent !ver the ne5t t*elve m!nths. 0he implicit assumpti!n underl'ing this r!s' scenari! must 2e that there *ill 2e n! severe ec!n!mic sh!c"s 3r!m an' ge!?p!litical distur2ances . 0he recent recessi!n *as !ne !3 the mildest and sh!rtest !n rec!rd . 8e3!re 19.+@ recessi!ns averaged a2!ut a 'ear and a hal3 in length. $ince 19&+@ their
average length has 2een eleven m!nths. 0he d!*nturn !3 2++1 lasted !nl' nine m!nths. $everal 3act!rs *ere resp!nsi2le 3!r the apparent shall!*ness !3 the recessi!n. /!nsumer spending held up surprisingl' *ell@ aided 2' a 2ig li3t 3r!m m!t!r vehicle sales and a h!using mar"et vi2rant en!ugh t! !33set much !3 the decline in h!useh!ld *ealth 3r!m a *ea" st!c" mar"et. $tr!ng c!nsumer spending *as needed t! c!unter the drag in spending c!ming 3r!m 2usiness@ e5acer2ated 2' a ver' sharp increase in liquidati!n !3 2usiness invent!ries. (n the /!nan D!'leQs T$ilver 8laRe@T %!lmes s!lved the case 2' 3inding a d!g that did n!t 2ar". (n !ur tenth p!st*ar recessi!n@ the !il price *as the d!g that did n!t 2ar". %igher !il prices have 3igured in ever' recessi!n since 197+@ e5cept the current !ne. 7!minal !il prices remained relativel' sta2le@ 2el!* L2+ 22l. until earl' this 'ear. Per 2arrel prices r!se a2!ve L21 !nl' a3ter the rec!ver' *as under*a'. Oil price spi"es matter much less in t!da'Qs L1+ trilli!n ec!n!m' than in the smaller and less diversi3ied ).$. ec!n!m' !3 1973@ !r even 1978. -nd@ surprising t! s!me@ the real in3lati!n?adKusted price !3 !il in 9e2ruar' 2++2 *as !nl' .+ percent !3 its level in 198+. -nd even at !il prices !3 :a' 1@ the real price *as less than hal3 its 198+ level. (n 3act@ relative prices !3 !il appear rather pun' *hen c!ntrasted *ith the prices !3 !ther li3e?supp!rting liquids. (n late -pril@ the price !3 !ne imp!rtant re3ined petr!leum pr!duct@ gas!line@ *as !nl' a2!ut L1.5+ per gall!n@ including gas!line ta5es. Other 3luids prices spi"ed much higher. Orange Kuice *as m!re than L5.++ a gall!n@ and in late -pril@ Perrier and !ther high?end *ater *as running a2!ut L&.5+ t! L7.++ per gall!n. 0here *ere !ther reas!ns 3!r the relative mildness !3 the recessi!n !3 2++1. 0*! 3act!rs under?girded c!nsumer spending and s!!thed invest!r e5pectati!ns during the recessi!nC 1= m!netar' p!lic'@ 2= 3iscal p!lic' . 7ever 2e3!re in !ur nati!nQs hist!r' has the 9ederal eserve depl!'ed such aggressive m!netar' p!lic' against recessi!nC 8' the end !3 calendar 'ear 2++1@ the 3ederal 3unds rate had 2een reduced t! less than !ne?third its level !n 7e* HearQs Da'@ in an unprecedented series !3 t*elve reducti!ns in eleven m!nths. 9iscal p!lic' rein3!rced the t!nic e33ect !3 adr!it and timel' m!netar' p!lic'C *hile the ta5 cut enacted in Nune *as n!t planned as an anti?recessi!nar' device@ it served that purp!se admira2l'@ largel' 2ecause it *as enacted Kust a3ter the recessi!n 2egan.
98 can it"stand disruptions >al .u't <e5ecutive direct!r !3 the (nstitute 3!r the -nal'sis !3 >l!2al $ecurit'= Nul' 5 200; A(ranOs Oil (ndustr'C - %!use !3
/ardsD@B in9!cus@ httpC11***.iags.!rg1n+5+7+7.htm
/!nsidering the l!ng?term ris"s ass!ciated *ith a nuclear (ran@ higher prices at the gas pump sh!uld n!t drive an' ,estern c!untr'Qs (ran p!lic'. 7! d!u2t@ i3 (ranQs pr!ducti!n 3alls@ due t! invest!rsQ departure !r a calculated decisi!n 2' (ran t! use the !il *eap!n and cut its pr!ducti!n@ there *ill 2e ec!n!mic 3all!ut. %!*ever@ (ran *ill 2e the main casualt' !3 an' disrupti!n. -dditi!nall'@ in recent 'ears@ the ).$. ec!n!m' has sh!*n remar"a2le resilienc' in the 3ace !3 m!unting !il prices and can *ithstand even higher prices. 0here is als! a sa3et' net in place. :!st maK!r !il c!nsuming c!untries maintain massive strategic petr!leum reserves in the event !3 a dr!p in suppl'. 0he ).$. al!ne has s!me 7++ milli!n 2arrels !3 !il in reserve t*! 'ears *!rth !3 (ranian e5p!rts. 0! insulate the ).$. 3urther@ President 8ush see"s t! d!u2le the siRe !3 the -merican !il reserve in
the c!ming 'ears. 0he President als! see"s t! reduce -mericaQs !il dependence thr!ugh increased e33icienc' and t! shi3t t! alternative 3uels. -pplied in unis!n@ these tactics advance the strategic g!als !3 reducing gl!2al energ' prices@ pr!tecting the ,est against suppl' disrupti!ns@ and limiting the 3l!* !3 petr!d!llars t! 0ehran. 0his increased pressure !n the (ranian regime c!uld@ !ver time@ generate a much desired regime
change. (3 ,ashingt!n e5ecutes this strateg' *ith e5pedienc' and determinati!n@ this !utc!me c!uld 2e achieved 2e3!re (ran 2ec!mes a nuclear p!*er.
.o oil prices cause scarcit% $% under!ining additions to e:isting reserves #e!nard! Maugeri@ 47( $P-Qs seni!r vice?president !3 c!rp!rate strategies and internati!nal relati!ns@ seni!r 3ell!* at the ,!rld
4c!n!mic #a2!rat!r' at :(0@ a seni!r 3ell!* at the 9!reign P!lic' -ss!ciati!n@ and a mem2er !3 the e5ecutive c!uncil !3 the /enter 3!r $!cial (nvestment $tudies@ degree in petr!leum ec!n!mics and a PhD in internati!nal p!litical ec!n!m'@@ 121151 2003@ Oil J >as N!urnal >iven current !il c!nsumpti!n levels@ ever' additi!nal percentage p!int !3 rec!ver' means 2 m!re 'ears in terms !3 the li3e?inde5 !3 e5isting reserves. Overall@ c!st and price are the piv!tal varia2les 3!r increasing reserves. /heap !il <i.e.@ !il *ith a price that d!es n!t signi3icantl' e5ceed the 2rea"even c!st !3 pr!ducing and mar"eting !il in the l!ng term= leads t! a reducti!n !3 investment in 2!th ne* e5pl!rati!n and techn!l!g'@ thus undermining 3uture additi!ns t! e5isting reserves.

$2 shocks predictions "rong

Predictions o' oil s"oc&s are propagandistic doo!sa%ing $tephen Moore@ direct!r !3 3iscal p!lic' studies at the /at! (nstitute@ :arch 17@ 1999@ A#!* Oil PricesC - 9ill )p !3 >!!d 7e*s@B
httpC11***.cat!.!rg1dail's1+3?17?99.html 9irst@ ap!cal'ptic predicti!ns 3r!m academics@ g!vernment !33icials and the media sh!uld al*a's 2e treated *ith a health' d!se !3 s"epticism. :an' !3 the d!!msa'ers *h! predicted L1++ a 2arrel !il in 2+++ are the same pe!ple *h! 3alsel' predicted nuclear *inter@ massive 3amine acr!ss the gl!2e@ cities s! p!lluted that gas mas"s *!uld 2e required and !ther crises !3 2i2lical pr!p!rti!ns. -nd these are the same pessimists *h! s!meh!* have c!ncluded that l!* !il prices are the pr!2lem. Nust remem2er these /hic"en #ittles have a per3ect rec!rdC the' have 2een *r!ng ever' time.

$2 shocks sel( correcting

Oil s"oc&s "eal t"e!selves it"out govern!ent inter'erence Nerr' Ta%lor@ direct!r !3 natural res!urce studies at the /at! (nstitute and adKunct sch!lar at the (nstitute 3!r 4nerg' esearch@ and Peter ManDoren@ edit!r !3 egulati!n magaRine@ N!urnal !3 (nternati!nal -33airs@ 9all 1999@ p. 21&
0he 199+ (raqi !il sh!c" illustrates h!* !il mar"ets 2ehave i3 the g!vernment d!es n!thing. -3ter the (raqi invasi!n !3 Vu*ait in -ugust 199+@ the *!rld mar"et su33ered a sh!rt3all !3 a2!ut ..5 milli!n 2arrels a da' <2id= !ut !3 a t!tal *!rld suppl' !3 crude !il !3 appr!5imatel' &1 milli!n 21d. Prices Kumped 3r!m L1& per 2arrel in Nune 199+ t! L3+ in $eptem2er. 0he sh!rt3all in suppl' in this case *as a2!ut 7.. percent. ,hile prices increased 2' 85 percent@ 2' the ne5t 'ear prices had returned t! pre?sh!c" levels. 0he >ul3 ,ar !il sh!c" *as n!t *ith!ut ec!n!mic c!nsequences@ 2ut the e33ects *ere much less than the e33ects !3 the sh!c"s !3 the l97+s. 0his is particularl' stri"ing since the sh!rt3all generated in 199+ *as larger than th!se generated in 1973 !r 1979 <3 percent and & percent respectivel'=.22 0he main di33erence *as that the ).$. g!vernment did n!t create an ela2!rate price?c!ntr!l s'stem t! ta"e a*a' the pr!3its that came 3r!m the sudden increase in value !3 invent!ries. Once !*ners realiRed that the price?c!ntr!l p!licies !3 the 197+s *!uld n!t 2e reenacted@ the' s!ld invent!r' t! the
mar"et and made m!ne' 3r!m the 85 percent price hi"e. 0he mar"etplace *!r"ed e33icientl' and 2!th pr!ducers and c!nsumers *ere thus 2etter !33 than the' had 2een *hen g!vernment encum2ered the 3!rces !3 suppl' and demand in the 197+s.

$2 shocks storage solves

Oil storage prevents crisis it" une:pected !ove!ents in suppl% or de!and Prepared $tatement !3 ,. David Montgo!er% ;ice President@ /harles iver -ss!ciates (nc.@ 8e3!re the $u2c!mmittee !n 4nerg' P!lic'@ 7atural es!urces and egulat!r' -33airs@ .123@ 2002
7!* t! the g!!d ne*s. Oil
can 2e st!red@ and !il invent!ries pr!vide an e5tremel' valua2le and e33ective c!unter2alance t! une5pected m!vements in suppl' !r demand. $!metimes invent!r' 2uilding can put up*ard pressure !n prices@ as *e have seen recentl'@ *ith 3ears !3 3uture price increases stimulating precauti!nar' accumulati!n !3 invent!ries. 0his 2uilding !3 invent!ries *ill 2u33er an' 3uture disrupti!n !3 supplies. (n additi!n@
an!ther !33set t! 3uture suppl' disrupti!ns is n!* availa2leC the reducti!ns in !utput 2' OP4/ <and c!untries li"e 7!r*a' and ussia= have created su2stantial e5cess capacit' in the *!rld that can c!mpensate 3!r l!st supplies 3r!m ;eneRuela !r (raq.
8torage and surge capacit% prevent oil disruptions Names :. ?endell5 7ati!nal 4nerg' (n3!rmati!n /enter@ 7122@ 199=@ httpC11***.eia.d!e.g!v1!ia31archive1issues981!imp!rt.html
8' 199+ the )nited $tates and !ther g!vernments had created emergenc' st!c"piles !3 !il as a 2u33er against disrupti!n. 0he invasi!n !3 Vu*ait sh!*ed that the )nited $tates and !ther g!vernments *ere *illing t! use their st!c"piles. - n!nc!mmercial measure@ ADa's !3 7et Petr!leum (mp!rts in the $trategic Petr!leum eserve@B is pu2lished in the -nnual 4nerg' evie*. (t sh!*s that the ).$. $trategic Petr!leum eserve <$P = pea"ed at 115 da's !3 suppl' in 1985 and has n!* declined t! &3 da's. -ssuming that the $P d!es n!t e5pand !r c!ntract@ c!verage *ill decline t! 35 da's in 2+2+ as c!nsumpti!n gr!*s. /!m2ining n!nc!mmercial and c!mmercial st!c"s pr!vides a s!me*hat 2r!ader measure !3 the a2ilit' !3 invent!ries t! resp!nd t! suppl' disrupti!ns. $ince 1985@ availa2le c!mmercial st!c"s in the OrganiRati!n 3!r 4c!n!mic /!!perati!n and Devel!pment <O4/D= c!untries have 3luctuated 2et*een 25 and 3+ da's !3 suppl'. -ssuming that c!mmercial pressures "eep st!c"piles 3r!m e5panding@ *hile c!nsumpti!n c!ntinues t! gr!*@ the suppl' *!uld slip t! 2+ da's in 2+2+. 8 8esides st!c"piles@ surge capacit' !r e5cess *!rld pr!ducti!n capacit' is an!ther s!urce !3 suppl'. %ist!ricall'@ e5cess capacit' has resp!nded primaril' t! prices@ 2uilding up during peri!ds !3 high prices and declining during peri!ds !3 l!* prices. - 2uildup !ccurs during a high?price peri!d such as the earl' 198+s@ as c!nsumers c!nserve and pr!ducers rush t! 3ind m!re !il and cash in !n high prices. (3 !il prices remain at their current m!derate levels thr!ugh 2+2+@ e5cess capacit' can 2e e5pected t! decline 3r!m 3.. t! 2.. milli!n 2arrels per da' in 2+13@ 2e3!re rising t! 3.2 milli!n 2arrels per da' in 2+2+ 9 <9igure .=.
T"e 98 !aintains a ro$ust 8P/ to "edge against volatilit% N!e Carnes@ research 3ell!* at the 8a"er (nstitute 3!r Pu2lic P!lice at ice@ -m' @a''e@ 9ell!* 3!r 4nerg' $tudies at the 8a"er (nstitute@ and. 4d*ard #. Morse@ 45ecutive -dviser at %ess 4nerg' 0rading /!mpan' and *as Deput' -ssistant $ecretar' !3 $tate 3!r (nternati!nal 4nerg' P!lic' in 197981@ ,inter 2++312003@ !riginall' printed in 7ati!nal (nterest@ httpC11***.saudi?us?
relati!ns.!rg1ne*sletter2++.1saudi?relati!ns?interest?+1?+&.html
7! !ne is satis3ied *ith the current energ' p!lic' status qu!P 2ut 3e* seem *illing t! ma"e the hard decisi!ns and unc!m3!rta2le c!mpr!mises necessar' t! d! an'thing a2!ut it. -nd n! part' has s!le !*nership !3 the status qu!. (t represents a c!ntinuati!n !3 the p!lic' !3 successive administrati!ns in ,ashingt!n !ver the past quarter centur' in enc!uraging diversit' !3 gl!2al !il pr!ducti!n@ c!!perati!n *ith maK!r !il pr!ducers ?? especiall' $audi -ra2ia ?? t! ensure sta2le mar"ets@ research in alternative 3uels as a hedge against l!ng?term price increases and reliance !n a r!2ust strategic petr!leum reserve 3!r use in cases !3
e5treme mar"et v!latilit'.

$2 glo)al economy
Our oil prices sustaina$le uni<ueness disproves t"e turn>e!erging !ar&ets ill survive "ig" prices and &eep t"e glo$al econo!% a'loat0 Hig" prices i!prove glo$al gro t">e:porting countries re+invest t"eir revenues in glo$al !anu'acturing and service sectors>t"is is co!parativel% stronger t"an t"e price e''ect on industrial producers0 -ndre* Mc?illop@ .11912003. 4nerg' ec!n!mist and c!nsultant. A- c!unterintuitive n!ti!nC ec!n!mic gr!*th 2!lstered 2' high
!il prices@ str!ng !il demand@B Oil and >as N!urnal@ #e5is. 0he real impact !3 higher !il prices@ certainl' up t! the range !3 a2!ut L &+122l@ is t! increase ec!n!mic gr!*th at the c!mp!site *!rld*ide level. 0his is the main reas!n *h' dem!graphic !il demand during 1975@ *ith !il prices at L .+?&5122l in 2++3 d!llars@ *as signi3icantl' higher than it is t!da'. (t
sh!uld 2e clearl' underst!!d that i3 the dem!graphic demand rate in 2++3 *as the same as in 1979@ then *!rld !il demand in 2++3 *!uld have 2een 95.. milli!n 21d. elative t! real t!tal *!rld !il demand at this time <a2!ut 78 milli!n 21d=@ the additi!nal capacit' needed *!uld 2e cl!se t! t*! times $audi e5p!rts@ m!re than three times ussiaQs e5p!rt !33er@ !r *ell a2!ve 3ive times ;eneRuelaQs current e5p!rt capacit'. 0here is n! certaint' at all that *!rld !il suppl' *!uld !r c!uld have 2een a2le t! meet this demand. %igher !il prices !perate t! stimulate 3irst the *!rld ec!n!m'@ !utside the mem2er c!untries !3 the OrganiRati!n 3!r 4c!n!mic /!!perati!n and Devel!pment@ and then lead t! increased gr!*th inside the O4/D. 0his is thr!ugh the inc!me@ !r revenue@ e33ect !n !il e5p!rter c!untries@ and then !n metals@ minerals@ and agr!c!mm!dit' e5p!rter c!untries @ m!st !3 them l!* inc!me <per capita gr!ss nati!nal pr!duct 2el!* L .++1'ear=. -lm!st all such c!untries have ver' high marginal pr!pensit' t! c!nsume. 0hat is t! sa' that an'
increase in revenues@ due t! prices !3 their e5p!rt pr!ducts increasing in line *ith the !il price@ is ver' rapidl' spent !n purchasing manu3actured g!!ds and services !3 all "inds. During 1973?81@ in *hich !il price rises 2e3!re in3lati!n *ere .+5I@ the 7e* (ndustrial /!untries <7(/s= !3 that peri!d ?? n!ta2l' the s!?called T-sian 0igersT 0ai*an@ $!uth V!rea@ and $ingap!re ?? e5perienced ver' large and rapid increases in s!lvent demand 3!r their e5p!rt g!!ds. (n easil' descri2ed macr!ec!n!mic terms@ the revenue e33ect !3 higher !il prices Tgreasing ec!n!mic gr!*thT *as and is much str!nger than the price e33ect !n industrial pr!ducers . 7(/s as a gr!up !r 2l!c !3 ec!n!mies
rapidl' e5panded their !il imp!rts and increased their !il c!nsumpti!n as prices increased in 197.?81@ 2ecause demand 3!r their e5p!rt g!!ds had increased@ due t! the gl!2al ec!n!mic impacts !3 higher !il and Treal res!urceT prices. 0his has ver' str!ng implicati!ns 3!r !il demand !3 t!da'Qs emerging and giant 7(/s *ith large p!pulati!ns and immense internal mar"etsC /hina@ (ndia@ 8raRil@ Pa"istan@ and (ran. 9!r the much smaller 7(/s !3 1975?85@ their !il imp!rt trends during 197.?81 sh!* dramatic gr!*th !nl' slightl' impacted 2' the maK!r price rises !3 the peri!d. (n general terms@ the 7(/s 0ai*an@ $!uth V!rea@ and $ingap!re increased their !il demand 2' a2!ut &+?8+I in v!lume terms in this peri!d !3 a .+5I increase in n!minal prices <0a2le 2= .
Hig" prices increase glo$al gro t">trends prove0 -ndre* Mc?illop@ .11912003. 4nerg' ec!n!mist and c!nsultant. A- c!unterintuitive n!ti!nC ec!n!mic gr!*th 2!lstered 2' high
!il prices@ str!ng !il demand@B Oil and >as N!urnal@ #e5is. 0he standard c!mment that Thigh !il prices hurt ec!n!mic gr!*thT is t!tall' undermined 2' real?*!rld and real?ec!n!m' trends. /!mparing !il and natural gas price averages in the )$ in late 1998 *ith price averages in late 2++3@ *e 3ind that crude !il imp!rt prices and 2ul" gas suppl' prices have risen m!re than 2++I. :ean*hile@ claimed ec!n!mic gr!*th !3 the )$ ec!n!m' *as running at m!re than 7I !n an annual 2asis in late 2++3. (t is there3!re n!t di33icult t! argue that sharpl' rising !il and gas prices in 3act increase ec!n!mic gr!*th rates@ n!t the reverse.

$2 economic collapse
1o i!pact to econo!ic collapse>lac& o' resources prevents !ilitar% co!petition0 D. $c!tt Cennett and 0im!th' 1ordstro!@ 9e2ruar' 2000. Department !3 P!litical $cience Pr!3ess!rs at Penns'lvania $tate.
A9!reign P!lic' $u2stituta2ilit' and (nternal 4c!n!mic Pr!2lems in 4nduring ivalries@B N!urnal !3 /!n3lict es!luti!n@ 42sc!. (n this anal'sis@ *e 3!cus !n using ec!n!mic c!nditi!ns t! understand *hen rivalries are li"el' t! escalate !r end . ivalries are an appr!priate
set !3 cases t! use *hen e5amining su2stituta2ilit' 2!th 2ecause leaders in rival states have clearl' su2stituta2le ch!ices and 2ecause rivalries are a set !3 cases in *hich e5ternaliRati!n is a particularl' plausi2le p!lic' !pti!n.7 (n particular@ *hen c!n3r!nted *ith d!mestic pr!2lems@ leaders in a rivalr' have the clear alternatives !3 escalating the c!n3lict *ith the rival t! divert attenti!n !r t! *!r" t! settle the rivalr' as a means !3 3reeing up a su2stantial am!unt !3 res!urces that can 2e directed t!*ard s!lving internal pr!2lems. (n the case !3 the diversi!n !pti!n@ rivals pr!vide l!gical@ 2elieva2le act!rs 3!r leaders t! targetP the presence !3 a clear rival ma' !33er unsta2le elites a particularl' inviting target 3!r h!stile statements !r actual c!n3lict as necessar'. 0he pu2lic and relevant elites alread' c!nsider the rival a threat !r else the rivalr' *!uld n!t have c!ntinued 3!r an e5tended peri!dP the presence !3 disputed issues als! pr!vides a casus 2elli *ith the rival that is al*a's present. ivals als! ma' pr!vide a target *here the p!ssi2le c!sts and ris"s !3 e5ternaliRati!n are relativel' c!ntr!lled. (3 the g!al is diversi!n@ leaders *ill*ant t! divert attenti!n *ith!ut pr!v!"ing an actual <and e5pensive=*ar. Over the c!urse !3 man' c!n3r!ntati!ns@ rival states ma' learn t! anticipate resp!nse patterns@ leading t! sa3er disputes !r at least t! leaders 2elieving that the' can c!ntr!l the ris"s !3 c!n3lict *hen the' initiate a ne* c!n3r!ntati!n. (n sum@ rivals pr!vide g!!d targets 3!r d!mesticall' challenged p!litical leaders. 0his leads t! !ur 3irst h'p!thesis@ *hich is as 3!ll!*sC Hypothesis 1C P!!r ec!n!mic c!nditi!ns lead t! diversi!nar' acti!ns against the rival. /!n3lict settlement is als! a distinct r!ute t! dealing *ith internal pr!2lems that leaders in rivalries ma' pursue *hen 3aced *ith internal pr!2lems. :ilitar' c!mpetiti!n 2et*een states requires large am!unts !3 res!urces@ and rivals require even m!re attenti!n. #eaders ma' ch!!se t! neg!tiate a settlement that ends a rivalr' t! 3ree up imp!rtant res!urces that ma' 2e reall!cated t! the d!mestic ec!n!m'. (n a Aguns versus 2utterB *!rld !3 ec!n!mic trade?!33s@ when a state can no
longer afford to pay the e/penses associated with competition in a rivalry, it is 0uite rational for leaders to reduce costs by ending a rivalry. 0his gain <a peace dividend= c!uld 2e achieved at an' time 2' ending a rivalr'. %!*ever@ such a gain is li"el' t! 2e m!st imp!rtant and attractive t! leaders *hen internal c!nditi!ns are 2ad and the leader is see"ing *a's t! alleviate active pr!2lems. $upp!rt 3!r p!lic' change a*a' 3r!m c!ntinued rivalr' is m!re li"el' t! devel!p when the economic situation sours and elites and masses are l!!"ing 3!r *a's t! impr!ve a *!rsening situati!n. (t is at these times that the pressure t! cut militar' investment *ill 2e greatest and that state leaders *ill 2e 3!rced t! rec!gniRe the di33icult' !3 c!ntinuing t! pa' 3!r a rivalr'. -m!ng !ther things@ this argument als! enc!mpasses the vie* that the c!ld *ar ended 2ecause the )ni!n !3 $!viet $!cialist epu2lics c!uld n! l!nger c!mpete ec!n!micall' *ith the )nited $tates. Hypothesis 2C P!!r ec!n!mic c!nditi!ns increase the pr!2a2ilit' !3 rivalr' terminati!n. %'p!theses 1 and 2 p!sit !pp!site 2ehavi!rs in resp!nse t! a single cause <internal ec!n!mic pr!2lems=. -s such@ the' demand a research design that can acc!unt 3!r su2stituta2ilit' 2et*een them.
,ven i' diversionar% con'licts occur t"e% onEt escalate0 D. $c!tt Cennett and 0im!th' 1ordstro!@ 9e2ruar' 2000. Department !3 P!litical $cience Pr!3ess!rs at Penns'lvania $tate.
A9!reign P!lic' $u2stituta2ilit' and (nternal 4c!n!mic Pr!2lems in 4nduring ivalries@B N!urnal !3 /!n3lict es!luti!n@ 42sc!. ,hen engaging in diversi!nar' acti!ns in resp!nse t! ec!n!mic pr!2lems@ leaders *ill 2e m!st interested in a cheap@ quic" vict!r' that gives them the 2ene3it !3 a rall' e33ect *ith!ut su33ering the l!ng?term c!sts <in 2!th ec!n!mic and p!pularit' terms= !3 an e5tended c!n3r!ntati!n !r *ar. 0his ma"es *ea" states particularl' inviting targets 3!r diversi!nar' acti!n since the' ma' 2e less li"el' t! resp!nd than str!ng states and 2ecause an' resp!nse the' ma"e *ill 2e less c!stl' t! the initiat!r . 9!ll!*ing 8laine' <1973=@a state 3acing
p!!r ec!n!mic c!nditi!ns ma' in 3act 2e the target !3 an attac" rather than the initiat!r. 0his ma' 2e even m!re li"el' in the c!nte5t !3 a rivalr' 2ecause rival states are li"el' t! 2e l!!"ing 3!r an' advantage !ver their rivais. #eaders ma' h!pe t! catch an ec!n!micall' challenged rival l!!"ing in*ard in resp!nse t! a sl!*ing ec!n!m'. 9!ll!*ing the strategic applicati!n !3 diversi!nar' c!n3lict the!r' and statesQ desire t! engage in !nl' cheap c!n3licts 3!r diversi!nar' purp!ses@ states sh!uld av!id c!n3lict initiati!n against target states e5periencing ec!n!mic pr!2lems .

$2 economy
2ncreased e''icienc% !eans no i!pact to e:pensive oil
>r'n2aum@ 3inance *riter 3!r the 7e* H!r" 0imes@ Oct!2er & 2++7 <:ichael@ A).$. ec!n!m' 3ull !3 uncertainties 3!r *!rld !il mar"et@B (nternati!nal %erald 0ri2une@ le5is= On $ept. 2+@ crude !il 3!r ne5t?m!nth deliver' settled at a rec!rd price !3 L83.32 a 2arrel and has sta'ed a2!ve L8+ m!st da's since@ ending 0hursda' at L81...@ up L1.5+ 3r!m ,ednesda'. -dKusted 3!r in3lati!n@ the rec!rd high 3!r !il *as nearl' L1+2 a 2arrel earl' in 198+@ a3ter the (ranian rev!luti!n@ 2ut that price level did n!t last l!ng. Part !3 the reas!n that c!stl' !il has n!t d!ne t!! much damage@ it seems clear@ is that the economy has become less sensitive to energy prices than it *as in the 197+s. 0*! imp!rtant trends rein3!rced each !ther@ ec!n!mists said. Driven 2' higher prices@ man' industries 2ecame m!re e33icient in their use !3 3uel. -nd services@ *hich require less energ' than manu3acturing@ 2ecame a 3ar 2igger share !3 the ec!n!m'. Overall@ the amount of energy needed to produce *1 of economic output has been cut nearly in half since 198+@ ).$. 4nerg' Department 3igures sh!*. $!me ec!n!mists d! sa' that high?price !il has 2een a strain !n the ec!n!m' in the last 3e* 'ears. 8ut the e33ect ma' have 2een t! shave a 2it !33 an !ther*ise health' gr!*th rate@ s! the impact@ the' sa'@ has 2een hard t! see.
-"eap retail goods o''set t"e costs o' A100 oil

9ritsch and 4vans@ c!rresp!ndents 3!r the ,all $treet N!urnal@ $eptem2er 29 2++7 <A%!* 4c!n!m' /!uld $urvive Oil -t L1++ - 8arrel@B 0he ,all $treet N!urnal@ Pr!Wuest@ accessed Oct!2er 19 2++7= 0he *!rld ec!n!m' has managed@ *ith s!me indigesti!n@ t! s*all!* the rise !3 !il prices past L8+ a 2arrel. 2ow well could it survive *1%% a barrel3 #he answer is 0uite well ?? s! l!ng as several c!nditi!ns still h!ld true. 0he price rise *!uld pr!2a2l' have t! 2e
gradual. (n3lati!n c!uldnQt get s! 2ad as t! 3!rce 2ig interest?rate hi"es. Oil?rich nati!ns *!uld need t! pump their pr!3its 2ac" int! ).$. and 4ur!pean ec!n!mies. -ll !3 this has happened s! 3ar. 0he happ' c!n3luence ma' c!ntinue@ th!ugh 3ears remain str!ng that high energ' prices *ill tip the ).$. int! recessi!n. IDart!out"Es card $eginsJ - h!st !3 3act!rs@ including tight !il supplies and a *ea" ).$. d!llar@ suggest that !il prices have 3urther t! rise. $!me anal'sts c!ntinue t! 2elieve that !il is destined t! reach an all?time high@ as measured in t!da'Qs d!llars@ !3 m!re than L1+1 a 2arrel. 0he rec!rd *as set in 198+. On 9rida' in 7e* H!r"@ the 2enchmar" crude?!il 3utures price cl!sed d!*n L1.22@ !r 1.5I@ t! 3inish at L81.&&@ a little m!re than L2 !33 the all?time high@ n!t adKusting 3!r in3lati!n. %igh !il prices c!uld lead t! ugl' c!nsequences i3 the' hit c!nsumersQ p!c"et2!!"s ?? especiall' in the ).$.@ *here the h!using slump is alread' hurting the ec!n!m'. /!nsumer spending has 2een the primar' engine !3 gr!*th in the ).$. in recent 'ears. 0arget /!rp. *as am!ng the maK!r retailers in the last *ee" cutting sales 3!recasts. 0arget e5pects $eptem2er sales at st!res !pen at least a 'ear t! rise Kust 1.5I t! 2.5I@ d!*n 3r!m an earlier e5pectati!n !3 .I t! &I gr!*th. IDart!out"Es card endsJ 9!r all the c!ncern@ the world today is better e0uipped to swallow e/pensive oil than it *as *hen Nimm' /arter *as installing s!lar panels and a *!!d?2urning st!ve in the ,hite %!use. 0he main reas!n has t! d! *ith *hat s!me call the ,al?:art e33ect.
9!r ever' e5tra d!llar ta"en 3r!m driversQ p!c"ets at the pump in the 3!rm !3 higher prices in recent 'ears@ l!*?c!st e5p!rters 3r!m /hina and else*here have put r!ughl' L1.5+ 2ac" in the 3!rm !3 cheaper retail g!!ds. 4ven at t!da'Qs near?rec!rd prices@ ).$. h!useh!lds t!da' spend less than .I !3 their disp!sa2le inc!me at the pump@ vs. !ver &I in 198+.
-"inese gro t"5 resource reinvest!ent5 and econo!ic consensus prove no i!pact to "ig" prices
9ritsch and 4vans@ c!rresp!ndents 3!r the ,all $treet N!urnal@ $eptem2er 29 2++7 A%!* 4c!n!m' /!uld $urvive Oil -t L1++ 8arrel@B 0he ,all $treet N!urnal@ Pr!Wuest $tr!ng gr!*th in places li"e /hina helps ta"e s!me !3 the edge !33 the !il?price 2l!* 3!r ).$. and 4ur!pe an c!mpanies such as Detr!itQs 8ig 0hree aut! ma"ers. :an' emerging mar"ets are hitting a Tta"e!33T stage@ *here per?capita inc!me reaches a level that spar"s seri!us aut! demand@ sa's 4llen %ughes?/r!m*ic"@ 9!rd :!t!r /!.Qs chie3 ec!n!mist. >r!*th in emerging mar"ets is a Tstructural devel!pmentT that is Tless sensitive t! !il?price changes@T she sa's. T0hereQs a m!re rela5ed attitude n!*@T said Daniel Hergin@ a n!ted !il hist!rian and chairman !3 /am2ridge 4nerg' esearch
-ss!ciates. -t a recent event pr!m!ting -lan >reenspanQs ne* mem!ir@ :r. Hergin as"ed the 3!rmer 9ed chie3 !n stage i3 L8+ !il *as a c!ncern. T%e 2asicall' shrugged and said@ Q7!t s! 3ar@QT :r. Hergin recalls. 4c!n!mists see gl!2al gr!*th sl!*ing 2ut still chugging al!ng at a relativel' health' 3I this 'ear and ne5t.
2igh oil prices also mean more money for oil4producing nations such as Russia and Saudi "rabia to invest globally. T(3 res!urce !*ners are n!* getting a 2igger piece !3 the pie t! spend and invest@ then L1++ !il sh!uldnQt 2e a pr!2lemT in the a2sence !3 a ).$. recessi!n@ sa's independent energ' ec!n!mist Philip ;erleger Nr. T-nd that investment is happening.T $uch sanguine vie*s@ *hile the' are 3ar 3r!m universal@ re3lect a fundamental shift in economists5 understanding !3 h!* energ' prices a33ect the ec!n!m'. %ist!ricall'@ !il prices have d!u2led !r tre2led in a matter !3 *ee"s 2ecause !3 sudden and sharp suppl' disrupti!ns@ such as th!se in 198+
3!ll!*ing the (ranian rev!luti!n and the !ut2rea" !3 the (ran? (raq *ar. 0hat pr!mpted the 9ed t! raise interest rates sharpl' in an e33!rt t! head !33 a spiral !3 in3lati!n. /urrent 9ed chairman 8en 8ernan"e has spent a l!t !3 time tr'ing t! understand such sh!c"s. (n 1997@ he anal'Red the e33ects !3 sharp rise in prices during the !il sh!c"s !3 1973?75@ 198+?1982 and 199+?91 in the 8r!!"ings Papers !n 4c!n!mic -ctivit'. %is surprising c!nclusi!nC 0he 9edQs cure 3!r high !il prices *as *!rse than the disease. T0he maK!rit' !3 the impact !3 an !il price sh!c" !n the real ec!n!m' is attri2uta2le t! the central 2an"Qs resp!nse t! the in3lati!nar' pressures engendered 2' the sh!c"@T he *r!te. 0!da'@ that view is fairly mainstream among central bankers. :r. 8ernan"eQs 9ed recentl' resp!nded t! the su2prime m!rtgage crisis 2' cutting 2enchmar" interest rates 3!r the 3irst time in 3!ur 'ears. 8' implicati!n@ the 9ed *as sa'ing it *as m!re *!rried a2!ut the 3all!ut 3r!m credit?mar"et gl!!m than a2!ut the ris" !3 in3lati!n. -t a time !3 rec!rd energ' prices@ thatQs a ris"' 2ut educated 2et. >r!*ing 3uel e33icienc' c!uld als! 2lunt the 2l!* !3 higher prices . Names 8arnes@ a )ni!n Paci3ic /!rp. sp!"esman@ sa's the railr!ad has 2!ught m!re 3uel?e33icient l!c!m!tives and trained engineers t! !perate trains in *a's that c!nserve 3uel. T9r!m a macr! level@ *e *!uld anticipate that rising !il c!sts *ill ma"e us m!re c!mpetitive X*ith truc"sY and p!tentiall' drive m!re 2usiness !ur *a'@T :r. 8arnes sa's. (n /hina@ the engine !3 gr!*th !n *hich man' are c!unting@ !ther energ' s!urces can ma"e up 3!r !il. /hina uses !il 3!r !nl' 21I !3 its energ' needs@ *ith m!st !3 the rest c!ming 3r!m c!al. )nli"e in the ).$.@ *here imp!rted !il g!es t! 3ill pe!pleQs gas!line tan"s@ /hina mainl' uses !il in industrial settings@ *here

c!al ma' 2e an alternative. >reater c!al use@ h!*ever@ *!uld als! e5acer2ate /hinaQs alread' seri!us p!lluti!n pr!2lem and speed up emissi!ns !3 gases that c!ntri2ute t! gl!2al *arming.
8tud% s"o s no recession or "ig" in'lation 'ro! price increases0 2nvest!ent 7dviser 9inancial 0imes 8usiness #imited@ 9?13?2003
- stud' 2' the (nternati!nal 4nerg' -genc'@ al!ng *ith the Organisati!n 3!r 4c!n!mic /!?Operati!n and Devel!pment and the (nternati!nal :!netar' 9und@ 3!und that a sustained L1+ a 2arrel rise in the !il price *!uld result in the O4/D l!sing +.. per cent !3 >DP in the 3irst and sec!nd 'ears and in3lati!n rising 2' hal3 a percentage p!int. 0hese are signi3icant e33ects@ 2ut insu33icient t! drive an ec!n!m' int! recessi!n@ !r t! herald the return !3 high in3lati!n.

$2 dollar
7n% decline in t"e dollar is s!all and sel'+correcting0 0rev!r Willia!s@ 11151200=. #l!'ds 0$8 9inancial :ar"ets. A:acr!ec!n!mic themes 3!r 2++8C an!ther str!ng per3!rmance 2'
emerging ec!n!mies@B 9_ $treet 4c!n!mics ,ee"l'@ httpC11***.35street.c!m13undamental1anal'sis?rep!rts1ec!n!mics?*ee"l'12++8? +1?15.html. 4c!n!mic gr!*th t! 2e str!ng !nce again` Despite the d!u2ling !3 !il prices and the credit crisis@ gl!2al ec!n!mic gr!*th last 'ear *as a2!ve the l!ng run average 3!r a 3i3th 'ear in successi!n. (t *as als! clear that th!ugh gr!*th in the main ec!n!mies held up ver' *ell@ this str!ng !utc!me *as primaril' due t! the emerging mar"ets@ in particular /hina@ (ndia and ussia. 8ut gr!*th *as als! str!ng in all !3 the maK!r !il e5p!rters and c!mm!dit' e5p!rters !3 metals and minerals. 0here are 3e* signs 3r!m these ec!n!mies in recent m!nths that the pace !3 gr!*th is 'et slac"ening. Oil prices remain high and demand 3!r c!mm!dities 3r!m the emerging mar"et giants <in terms !3 p!pulati!n= !3 /hina and (ndia is
still str!ng. %!*ever@ *e pr!Kect that higher interest rates in man' !3 the emerging mar"et ec!n!mies and currenc' appreciati!n !ver the past 'ear ? and li"el' t! persist int! this 'ear ? *ill sl!* d!*n gr!*th in 2++8 c!mpared *ith 2++7. ...led 2' emerging mar"ets... 8ut *ith !il prices still high and c!mm!dit' prices in general still str!ng@ emerging mar"et gr!*th *ill remain 2r!ad 2ased and n!t c!n3ined t! the largest devel!ping ec!n!mies. ,ontinued growth in the emerging economies will also help growth in the developed economies t! sta2ilise at !r near trend rates this 'ear. 0his means gr!*th 3!r the )V !3 2.3I and 3!r the eur!R!ne 2I. 9!r the )$@ gr!*th is li"el' t! remain 2el!* trend@ at s!me 2I@ as a result !3 the 3all!ut 3r!m an e5tremel' !vervalued h!using mar"et sl!*ing d!*n and the 2ursting !3 the credit mar"et 2u22le. #his should be
seen as good news in the medium term as the )$ has 2een c!nsuming t!! much and saving t!! little in recent 'ears@ *hich meant that it *as running an ever larger e5ternal de3icit that threatened the sta2ilit' !3 the gl!2al ec!n!m' . " weaker currency will help to rebalance the global economy and make growth more sustainable in the 'earsQ ahead. ,ith c!ntinued *ea"ness in the )$ d!llar li"el' this 'ear@ *e l!!" 3!r 3aster e5p!rt gr!*th and sharpl' l!*er interest rates t! spur ec!n!mic rec!ver' in the sec!nd hal3 !3 2++8. %!*ever@ !nce gr!*th starts t! rec!ver@ and it is clear that interest rates have pea"ed@ the US* could well reverse some of its decline.
Wea& dollar doesnEt give t"e! an internal lin& to t"e glo$al econo!%>"ig" prices still "elp ot"er countries0 Cloo!$erg@ 91211200;. ***.2l!!m2er2.c!m1apps1ne*sDpidE2+&+1+39Jre3erEc!lumnist GsesitJsidEa.e.e)3;s10:.
aOil
e5p!rtersQ pr!pensit' t! imp!rt 3r!m the ).$. has declined in recent 'ears@ *hile their tendenc' t! imp!rt 3r!m 4ur!pe and -sia has risen steadil'@QQ sa's $tephen Nen@ gl!2al head !3 currenc' research 3!r :!rgan $tanle' in #!nd!n. OP4/ nati!ns currentl' 2u' m!re than three times as much 3r!m the 4ur!pean )ni!n as 3r!m the ).$.@ he sa's. 0! the e5tent that !il e5p!rters "eep 2u'ing 4ur!pean@ 4ur!peQs ec!n!m' ma' 2e less a33ected 2' higher !il prices than the ).$. ec!n!m'@ pr!mpting invest!rs t! 3av!r 4ur!pean investments. -nd since !il imp!rts acc!unt 3!r a2!ut a third
!3 the ).$. trade de3icit@ aahigh and rising !il prices ma' 2e particularl' 2ad 3!r the d!llar@QQ Nen sa's.
Wea& dollar is sel'+correcting0 7. >reg!r' Man&i @ 121231200;. Pr!3ess!r !3 ec!n!mics at %arvard@ and he *r!te m' ec!n te5t2!!" last semester. A%!* t!
-v!id ecessi!nD #et the 9ed ,!r"@B 7e* H!r" 0imes@ httpC11***.n'times.c!m12++711212312usiness123vie*.htmlDre3E2usiness. 8' ma"ing )nited $tates 2!nds less attractive t! *!rld invest!rs@ l!*er interest rates 3r!m a m!netar' e5pansi!n als! *ea"en the d!llar in currenc' mar"ets. depreciati!n !3 the currenc' is n!t in itsel3 t! 2e 3eared. 0reasur' secretaries !3ten repeat the mantra !3 3av!ring a str!ng d!llar@ 2ut these pr!n!uncements are 2ased m!re !n pu2lic relati!ns than hard?headed anal'sis. - *ea" currenc' is a pr!2lem i3 it results 3r!m invest!rs l!sing c!n3idence in an ec!n!m'. 0he m!st damaging cases are the epis!des !3 sudden capital 3light@ as !ccurred in :e5ic! in 199. and several -sian c!untries in 1997. 0his !utc!me is unli"el' 3!r the 3undamentall' s!und -merican ec!n!m'@ 2ut 3ear !3 it is
!ne reas!n that 0reasur' secretaries maintain pu2lic 3ealt' t! a str!ng d!llar. 8ut i3 a *ea"ened currenc' c!mes a2!ut 2ecause the central 2an" is tr'ing t! stimulate a lac"luster ec!n!m'@ the st!r' is ver' di33erent. (n that case@ depreciati!n is n!t a malad' 2ut Kust *hat the d!ct!r !rdered. " weaker currency makes domestic goods more competitive in world markets, promoting e/ports and bolstering the economy . 0he
d!llarOs 3alling value is !ne reas!n e5p!rts !3 g!!ds and services have gr!*n m!re than 1+ percent in the past 'ear.

$2 decrease oil demand

T"is argu!ent is sill% # de!and 'or oil is "ig"l% inelastic
:urra'@ 9-/$740 :anaging 4dit!r@ 7! Date >iven AOil and ec!n!micsC /utting thr!ugh the spin@B httpC11***.3acsnet.!rg1t!!ls1energ'1Rupan.php=
4c!n!mists sa' demand 3!r cigarettes is Ainelastic.B On a graph@ a per3ectl' inelastic demand curve is vertical. On the !ther e5treme@ s!me pr!ducts are h'persensitive t! price changes. (n this t'pe !3 mar"et@ 3!r e5ample@ raising the c!st !3 a ne*spaper 3r!m 5+ cents t! &+ cents might anger pe!ple t! cancel their su2scripti!n and get their ne*s 3r!m the (nternet. 4c!n!mists call this t'pe !3 mar"et situati!n highl' elastic. - per3ectl' elastic demand curve is h!riR!ntal raise the price 1 cent@ and all demand st!ps. A0his is a 2ad t'pe !3 mar"et t! 2e in i3 '!u are a supplier. 0his is a per3ectl' c!mpetitive mar"et@B Zupan said. Demand 3!r !il@ li"e cigarettes and t! a lesser e5tent medical care@ is inelastic in the sh!rt run. /!nsumers are sl!* t! react t! changes in energ' c!sts.
0he price !3 gas at the pump c!uld d!u2le@ 2ut pe!ple *!uld c!ntinue 3illing their tan"s 2ecause the' have t! c!ntinue driving t! *!r"@ ta"ing their children t! sch!!l@ etc.

***72 'inite oil***

$2 peak
104 1o pea& oil5 especiall% in t"e s"ort ter! # 2010 'igures prove $tuart Ha!pton@ sta33 *riter c!ncerning !il and gas@ A,hat pea" !ilD )$ !il and gas reserves gre* in 2+1+B@ Nune 17th@ 2011@
httpC11***.2iRm!l!g'.c!m12+111+&1171*hat?pea"?!il?us?!il?and?gas?reserves?gre*?in?2+1+1@ accessed !n Nul' 3@ 2+11@ /NN -cc!rding t! 4rnst J H!ungOs .th annual )$ e5pl!rati!n and pr!ducti!n 2enchmar" stud'@ !il reserves gre* 2' 11I t! 17.8 2illi!n 2arrels in 2+1+ and natural gas 2' 12I t! 17..3 trilli!n cu. 3t.@ the str!ngest !il and gas reserve gr!*th in the last 3ive 'ears. 0he rep!rt e5amined the )$ e5pl!rati!n and
pr!ducti!n results !3 the 5+ largest !il and gas c!mpanies@ as a *a' t! ta"e a measure !3 the )$ !il and gas landscape. 9ueled 2' high c!mm!dit' prices@ !il and gas c!mpanies m!re than d!u2led their capital e5penditures <primaril' pr!pert' acquisiti!ns= in 2+1+@ gr!*ing 3r!m L72.8 2illi!n in 2++9 t! L177.9 2illi!n in 2+1+ . (mpr!ved techn!l!g' *as als! a "e' 3act!r. (mpr!ved h'draulic 3racturing <3rac"ing= and h!riR!ntal drilling techn!l!g' has increased shale !il and gas devel!pment and made 3!r a maK!r gr!*th in reserve and1!r pr!ducti!n replacement rates. (n 2+1+ the !il pr!ducti!n replacement rate 3r!m
disc!veries@ e5tensi!ns@ impr!ved rec!ver'@ revisi!ns@ purchases@ and sales !3 pr!ved reserves *as 23.IP the natural gas pr!ducti!n replacement rate@ 252I. 8P led the pac" in 2+1+ *ith 2.9 2illi!n 2arrels !3 !il reserves in the )$@ 3!ll!*ed 2' 455!n :!2il@ /!n!c!Phillips@ Occidental
Petr!leum@ and /hevr!n. 455!n :!2il <*ith alm!st 2& trilli!n cu. 3t.= t!pped the list !3 c!mpanies *ith maK!r )$ natural gas reserves@ 3!ll!*ed 2' /hesapea"e 4nerg'@ 8P@ -nadar"! Petr!leum@ and /!n!c!Phillips. ,hile the sudden gr!*th d!es n!t mean that gl!2al !il and gas reserves are n!t in a l!ng term decline <the Pea" Oil the!r'=@ the activities !3 2+1+ d! sh!* that high c!mm!dit' prices and impr!ved techn!l!g' can ena2le *ell?capitaliRed maK!r
!il and gas pla'ers t! identi3' and access m!re reserves in the sh!rt term.
204 Hig"er prices "ave !ade ne develop!ent !ore econo!ical and usgs reports indicate 3 trillion $arrels e:ist underground M81C- 91912003 httpC11msn2c.msn.c!m1id159.5&781
0here are s"eptics t! the pr!ducti!n pea" the!r'. :!rr' -delman@ an :(0 ec!n!mics pr!3ess!r@ sa's there is plent' !3 !il ar!und as l!ng c!nsumers are *illing t! pa' the price t! pr!duce it. T0here are a l!t !3 pr!spects that *ere n!t *!rth devel!ping 2e3!re *hich are *!rth devel!ping n!*. -nd there are a *h!le l!t !3 pr!spects *hich *ere n!t 3!und 2e3!re *hich are *!rth l!!"ing 3!r and *!rth devel!ping t!da'.B - l!t depends@ !3 c!urse@ !n Kust h!* much !il remains undergr!und. :an' !3 th!se *h! 3ear a pr!ducti!n pea" is imminent 2ase their 3!recast !n estimates !3 *hat ge!l!gists call the Aultimate rec!vera2le res!urceB !3 a2!ut 2 trilli!n 2arrels !3 !il. 8ut thereOs disagreement am!ng ge!l!gists !n that num2er. - c!mprehensive stud' 2' the ).$. >e!l!gical $urve' in 2+++ estimated that s!me 3 trilli!n 2arrels !3 !il *ill ultimatel' 2e pr!duced. -delman argues that the am!unt !3 !il le3t t! 2e pr!duced is Aun"n!*a2le.B
304 1e tec"nolog% is t"e $o!$ G 3d visuali6ation5 deep sea e:ploration and "ori6ontal drilling increase oil 'inds M81C- 91912003 httpC11msn2c.msn.c!m1id159.5&781
:ean*hile@ techn!l!g'
is e5panding the industr'Os a2ilit' t! 3ind and e5tract !il in s!me cases 3inding ne* 3ields !nce th!ught t! 2e 3ull' e5pl!ited. %!riR!ntal drilling has pr!vided access t! p!c"ets !3 petr!leum !ther*ise una33!rda2le !r unreacha2l e. $!?called 3D visualiRati!n@ in *idespread use 3!r the past 3ive 'ears all!*s ge!l!gists t! AseeB undergr!und 3!rmati!ns *ith a degree !3 clarit' and detail unimagina2le a decade ag!. -dvances in rem!tel' !perated vehicles < O;s= are e5tending the reach !3 deep?*ater e5pl!rati!n and pr!ducti!n 3urther and 3urther !33sh!re. A0hereOs n! such thing as limitless@ 2ut the limits "eep 2eing e5panded all the time@B said -delman. A0here are man' !33sh!re places that in the 3ullness !3 time *ill get e5pl!red. 8ut ( d!nOt "n!* <h!* much !il= there is there@ and in 3act
n!2!d' d!es. 0hatOs the "ind !3 3r!ntier '!u have. (tOs dis!rderl'.B
304 8audi 7ra$ia and 2ra< are onl% using ) out o' t"eir )0 large oil 'ields no + Dr. #e!nard! Magueri <$eni!r ;ice President 4ni $pa= 512112003 $cience :agaRine
httpC11***.sciencemag.!rg1cgi1c!ntent13ull13+.15&7.1111.6a33iliati!n /ritics c!uld n!te that ne* !il disc!veries are !nl' replacing !ne?3!urth !3 *hat the *!rld c!nsumes ever' 'ear <3!ll!*ing a declining trend that 2egan in the mid?19&+s=@ and that increases in reserves largel' derive 3r!m up*ard revisi!ns !3 e5isting st!c". %!*ever@ the real issue is that neither maK!r pr!ducing c!untries n!r pu2licl' traded !il c!mpanies are "een t! invest m!ne' in su2stantial e5pl!rati!n campaigns. 0he c!untries richest in !il have minimiRed their !il investments during the last 2+ 'ears@ mainl' 3!r 3ear !3 creating a permanent e5cess capacit' such as that *hich pr!v!"ed the crisis in 198& <*hen !il prices plummeted t! 2el!* L1+122l=. (n 3act@ c!untries such as $audi -ra2ia !r (raq <*hich t!gether h!ld a2!ut 35I !3 the *!rldQs pr!ven reserves !3 !il= pr!duce petr!leum !nl' 3r!m a 3e* !ld 3ields@ alth!ugh the' have disc!vered 2ut n!t devel!ped m!re than 5+ ne* 3ields each. :!re!ver@ in c!untries cl!sed t! 3!reign investments@ the techn!l!gies and techniques used are@ in m!st cases@
!2s!lete.
$04 Heav% crude is a$undant ,.- <4nvir!nmental #iterac' /!uncil= 2003 httpC11***.envir!literac'.!rg1su2categ!r'.php1252.html
%eav' crude is high visc!sit' crude !il that results 3r!m the degradati!n !3 c!nventi!nal !il in shall!* reserves. 4stimates !3 heav' crude res!urces are a2!ut 35+ gigat!nnes. -lm!st hal3 are 3!und in ;eneRuelaP heav' crude !il is als! 3!und in ussia@ Vu*ait@ (raq@ :e5ic!@ and /hina. -2!ut 8 percent !3 gl!2al !il pr!ducti!n c!mes 3r!m heav' crude.

)04 T"e s"ape o' t"e oil curve is indeter!inate+ pea&s are not i!portant5 di''erent non oil related issues could cause pea&s World Oil @ournal 712003 A#ies@ damn lies and har2!r spiesB@ 42sc!
9inall'??and this g!es t! the c!re !3 Tpea" scienceT??the
pea" itsel3 is n!t 3undamentall' imp!rtant. 0here is n!thing in the!r' !r in practice that precludes an' shape !3 the *!rld pr!ducti!n curve@ n!r gives t! it an' imp!rtance *hats!ever. 4ven %u22ert himsel3@ *h! eventuall'@ came t! 2elieve that he "ne* the t!tal *!rld end!*ment and@ thus@ the area under his 3am!us 2ell curve@ !riginall' said that he c!uld n!t predict the shape !3 the curve. 8ut that is a gr!ss understatement. >iven the n!rmal uncertainties !3 3uture prices@ disc!veries <including elephant 3ields@ inventi!ns@ 2rea"thr!ughs@ un"n!*n energ' pr!cesses 1s!urces=@ *ars@ gr!*th@ demand and g!vernment investment@ the *!rld pr!ducti!n curve c!uld have !ne pea"@ a pea"?and?a hal3 !r a pr!l!nged plateau. (t is even p!ssi2le t! have a situati!n *here !il pr!ducti!n has pea"ed n!t 2ecause !3 e5hausti!n !3 the res!urce 2ut due t! a c!m2inati!n !3 prices@ the gr!*th rate !3 *!rld ec!n!mies and impr!ving energ' intensit'@ 3!ll!*ed 2' an incredi2l' sl!* decline@ as alternatives@ perhaps even P!*er _@ c!me !nline. Did an'!ne predict nuclear 3issi!n@ !r the relativel' sh!rt time t! 3issi!n?p!*ered electrical generati!nD Put an!ther *a'@ itQs p!ssi2le@ even li"el'@ that serendipit' *ill pla' the greatest r!le !3 all.
(04 9nconventional resources li&e s"ale ill 'ill in+ 299 gigatons o' oil s"ale e:ists ,.- <4nvir!nmental #iterac' /!uncil= 2003 httpC11***.envir!literac'.!rg1su2categ!r'.php1252.html
4c!n!mists argue that l!ng 2e3!re the ph'sical suppl' !3 c!nventi!nal !il is e5hausted@ an increase in prices *ill spur inn!vati!n and devel!pment !3 su2stitutes 3!r !il. /urrentl' the l!* c!st !3 !il has deterred e33!rts t! devel!p alternative energ' techn!l!gies and has sl!*ed e5pl!rati!n 3!r ne* s!urces . (n additi!n t!
pr!ven reserves !3 c!nventi!nal !il@ there are vast res!urces !3 unc!nventi!nal s!urces !3 !il@ including tar sands@ !il shale@ and heav' crude !ils. Oil shales are sedimentar' r!c"s that are rich in !rganic matter *ith a2!ut 1+ percent "er!gen. Oil e5tracted 3r!m these r!c"s can 2e used directl' as 3uel !r used t! pr!duce s'nthetic petr!leum. 0he ,!rld 4nerg' /!uncil estimates that there are 299 gigat!nnes !3 !il shale. 0he m!st signi3icant res!urces are 3!und in /hina@ 4st!nia@ the ).$.@ -ustralia@ and N!rdan. 4st!nia is the !nl' c!untr' that is currentl'
using !il shale t! generate electricit'.
;04 Maintained "ig"er prices ill lead to a 10H increase in recovera$le oil World Oil @ournal 712003 A#ies@ damn lies and har2!r spiesB@ 42sc!
-re paper 2arrels an' less realD O3 c!urse n!t. (t d!esnQt matter *hether reserve additi!ns derive 3r!m ne* *ildcats@ 3ield e5tensi!ns@ ne* c!mpartments *ithin e5isting 3ields@ previ!usl' unec!n!mic satellites that n!* have supp!rting in3rastructure@ prices !r increased rec!ver' 3act!rs@ 2ecause all !3 these result in real@ additi!nal !il 2r!ught t! the sur3ace that *as previ!usl' un"n!*n !r th!ught unpr!3ita2le. ( have n! idea *h' s! man' elements !3 reserves gr!*th are ign!red !r denied 2' the Pea"ersP perhaps itQs 2ecause it Kust d!esnQt 3it their impending d!!m scenari! . O3 these@ t*! interrelated 3act!rs still have a l!ng *a' t! g!C prices and rec!ver' 3act!rs. 0he r!ughl' 1+I increase in rec!ver' during the past t*! decades has resulted in a2!ut !ne?third !3 in situ !il 2eing rec!vered. 8ut this is n!*here near irreduci2le !il saturati!n. (n !ther *!rds@ there is ever' reas!n t! 2elieve that@ in time@ *ith advanced meth!ds and higher !il prices@ rec!ver' 3act!rs@ !n average@ c!uld g! up an!ther 1+I@ pr!2a2l' m!re . 0he truth
0he derisive term Tpaper 2arrelsT that he and !thers use is a diversi!n. is@ thereQs a l!t m!re rec!vera2le !il at L5+ than there is at L2+. 8ut c!uld the *!rld *ithstand such high pricesD )nd!u2tedl'. -nd the attendant demand destructi!n@ t!gether *ith the upsurge in alternatives@ *!uld 3urther dela' e5hausti!n !3 the res!urce.
.arge a!ounts o' oil e:ist in deep aters li&e t"e artic and a'rica Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p.5&
0hird@ c!mpanies are much smarter at "n!*ing *here t! l!!" 3!r !il. 7e* ge!l!gical understandings M 3!r e5ample@ that !il can 3!rm an'*here *ithin d!Rens !3 miles !3 a river delta@ even in superdeep *aters M have led t! a *elter !3 ne* disc!veries in une5pected places@ li"e
the deep *aters !33 the c!ast !3 ,est -3rica. Deep?*ater !il is t!uted as the real 3r!ntier !3 the 3uture and is the place *here m!st !il c!mpanies and man' anal'sts e5pect t! 3ind the 2ul" !3 the undisc!vered !il. 45citement is particularl' "een !ver AdeltaicB pr!spects in the deep?*ater >ul3 !3 :e5ic!@ !33 the c!ast !3 -3rica and 8raRil@ as *ell as in the -rctic pr!vinces !3 /anada and >reenland@ 7!nva'@ and $i2eria@ *here seismic surve's reveal su2terranean structures identical t! th!se 2eneath the !il?rich 7!rth $ea@ 2ut 3ar larger. A0he -rctic is g!ing t! 2e the ne5t 2ig pla'CO pr!mises t!rn -hl2randt@ the direct!r !3 the )$>$ *!rld assessment pr!Kect and a pr!minent !il !ptimist. A,e 3eel that m!re than hal3 !3 all undisc!vered res!urces are in the deep !33sh!re@ !3 *hich hal3 are in the -rctic. -nd *eOve l!!"ed at !nl' seven -rctic pr!vincesP there are t*ent'?eight m!re *e peed t! l!!" at. ,e havenOt even 2egun t! disc!ver all the !il that is !ut thereDB

*+tend ,1 -o Peak
,:tend t"e 1nc Ha!pton ,vidence+ Pea& proponents are rong+ glo$al oil supplies are strong and gro ing5 t"e earliest a pea& could co!e is )0 %ears 'ro! no 0 7nd5 Pea& oil onEt "appen 'or decades5 tar sands and ot"er 'ossil 'uels !ean no i!pact 0ina -ase% c!ntri2uting *riter 3!r /lean0echnica@ A /(- Predicted Pea" Oil :!re than 3+ Hears -g!B@ Nune 9th@ 2011@
httpC11***.triplepundit.c!m12+111+&1prepare?pea"?!il1@ accessed !n Nul' 3@ 2+11@ /NN 0he /!nsensus !n Pea" Oil %ic"s puts the current general c!nsensus !n the time le3t until pea" !il at a2!ut 35?.+ 'ears @ *hich *!uld
ma"e 7ehringOs predicti!n right !n the m!ne'. 4nerg' J 9uels@ a pu2licati!n !3 the -merican /hemical $!ciet'@ *as s!me*hat less !ptimistic in a predicti!n pu2lished last 'ear. 0he' put the pea" !3 c!nventi!nal crude pr!ducti!n at 2+1.. #!ng 0erm Oil $h!rtages a P!ssi2ilit' (n a 2++5 rep!rt@ the
Department !3 4nerg' als! indicated that pea" !il c!uld 2e ar!und the c!rner. (n a reversal !3 its usual r!s' !ptimism@ D!4 stated that the start !3 gl!2al !il pr!ducti!n decline c!uld n!t 2e "n!*n *ith certaint'@ and that 3ailure t! prepare a Acrash mitigati!n pr!gramB *!uld result in decades?l!ng chr!nic sh!rtages. -n -lternative $cenari! 3!r Oil 7ehringOs predicti!n *as 2ased !n the l!* pr!2a2ilit' that gigantic ne* !il 3ields *!uld 2e disc!vered in !ur time. %!*ever@ ne* avenues have !pened since his anal'sis. 8et*een tar sands@ shale and deep !cean drilling@ the !il industr' is devel!ping signi3icant ne* s!urces. /!m2ined *ith drilling 3!r natural gas in shale 3!rmati!ns such as the :arcellus and *ith alternative energ'@ it is p!ssi2le t! envisi!n a As!3t landingB 3!r pea" !il. (n this scenari!@ declining !il pr!ducti!n 3r!m c!nventi!nal 3ields is at least partl'@ !r even 3ull'@ 2alanced 2' unc!nventi!nal s!urces @ *ith the
devel!pment !3 !ther 3!ssil 3uels and alternative energ' r!unding !ut the picture. (n 3act@ it s!unds ver' much li"e !ur current situati!n.
1o pea& oil co!ing # current levels not aning and ne reserves o' natural gas are $eing 'ound Hiserodt 0(/0= <4d %iser!dt is an aer!space engineer and has 2een president !3 /!ntr!ls J P!*er@ (nc. since 1983. :r. %iser!dt is
an e5pert in p!*er generati!n techn!l!g'P Nune 8@ 2+11P 0he 7e* -mericanC A7atural >as the /!ming $hale >aleB httpC11***.thene*american.c!m1tech?mainmenu?3+1energ'17789?natural?gas?the?c!ming?shale?gale=
O3 c!urse@ the President *h! said this *as n!t 8arac" O2ama. </!uld '!u imagine O2ama calling 3!r a transiti!n t! c!alD= 0he President *as Nimm' /arter M !n -pril 18@ 1977. (n the same speech@ /arter als! said that Ain spite !3 increased e33!rt@ d!mestic pr!ducti!n has 2een dr!pping steadil' at a2!ut si5 percent a 'ear.B egarding !il in particular@ he *arned that i3 c!nsumpti!n c!ntinued t! rise at the same 3ive percent annual
rate it had in the past@ A*e c!uld use up all the pr!ven reserves !3 !il in the entire *!rld 2' the end !3 the ne5t decadeB M that is@ 2' the end !3 the 198+s. 6ot only have we not run out of either oil or natural gas, but in the case of natural gas, "merica7s 8proved reserves9 have actually risen significantly since 1:++. -cc!rding t! the 4nerg' (n3!rmati!n -dministrati!n <4(-@ a part !3 the ).$. Department !3 4nerg'=@ the )nited $tates p!ssessed 2+7 trilli!n cu2ic 3eet !3 <dr'= natural gas in 1977@ as c!mpared t! 272 trilli!n cu2ic 3eet in 2++9. %!* c!uld the nati!nOs pr!ved reserves g! up instead !3 d!*n@ despite all !3 the natural gas that has 2een c!nsumed since 1977D Part !3 the ans*er is the disc!ver' !3 ne* 3ields. 8ut an!ther part !3 the ans*er is changing ec!n!mic and techn!l!gical c!nditi!ns that have made it pr!3ita2le and practical t! rec!ver natural gas that !ther*ise *!uld have 2een le3t in the gr!und. 0he Apr!ved reservesB 3igures rep!rted 2' the 4nerg' (n3!rmati!n -genc' are a relativel' small part !3 -mericaOs natural?gas res!urce 2ase@ *hich has increased dramaticall' in recent 'ears. On -pril 27 !3 this 'ear@ the n!npr!3it P!tential >as /!mmittee @ *hich is c!mprised !3 a gr!up !3 e5perts in the 3ield@ estimated the U.S. future gas supply at (,1+% trillion cubic feet ; enough natural gas to satisfy "merica7s consumption for 1%% years, and a huge <( percent increase over the committee7s assessment -ust four years earlier. Dr. N!hn 8. /urtis@ the P!tential >as /!mmitteeOs sp!"esman as *ell as pr!3ess!r !3 ge!l!g' and ge!l!gical engineering at the /!l!rad! $ch!!l !3 :ines@ n!ted that the assessment Area33irms the /!mmitteeOs c!nvicti!n that a2undant@ rec!vera2le natural gas res!urces e5ist *ithin !ur 2!rders ` and in all t'pes !3 reserv!irs M 3r!m c!nventi!nal@ btightO and shales@ t! c!als.B Shale4gas resources, in particular, have skyrocketed and are n!* 2eing tapped c!mmerciall'. #his emerging natural4gas gale is being powered by rapidly developing technologies of drilling and methods to convert the underground resources into economic and efficient forms of fuel. (t is imp!ssi2le t! predict a limit t! this energ' 2!!n@ *hich is n!* Kust several 'ears in the ma"ing. 0he techn!l!gical 2rea"thr!ugh spar"ing this energ' rev!luti!n is the c!m2inati!n !3 h!riR!ntal drilling and h'draulic
3racturing "n!*n as A3racingB <pr!n!unced 9 cV?ing=. 8!rn in the 8arnett $hale !3 7!rth /entral 0e5as in 2++3@ it has spread acr!ss the )nited $tates and is n!* the n!rm in m!st natural gas?pr!ducing areas !3 the *!rld. (t is used t! 3!rce large am!unts !3 methane M 85 percent !3 *hat is re3erred t! generall' as natural gas M !ut !3 tight shale 3!rmati!ns that *ere hithert! c!nsidered ec!n!micall' unvia2le.
1o pea& oil # econo!ics prove 0im Worstall@ 2l!gger@ 3reelance K!urn! ec!n!mist@ and 9ell!* at the -dam $mtih (nstitute@ A:isunderstanding Pea" OilB@ Nune 15th@ 2011@ httpC112l!gs.3!r2es.c!m1tim*!rstall12+111+&1151misunderstanding?pea"?!il1@ accessed !n Nul' 3rd@ 2+11@ /NN
(tOs there in that sec!nd paragraph. $peci3icall' A*hen pr!ducti!n might 3ail t! meet suppl'B`.actuall'@ l!!"ing at that in detail the'Ove managed t! get that c!mpletel' the *r!ng *a' ar!und an'*a'@ *ell d!ne t! 0he >uardianU 0he' mean A*hen pr!ducti!n *ill 3ail t! meet demandB. 7!t realising that this is an imp!ssi2ilit'. 9!r !ne !3 the m!re 2asic things a2!ut ec!n!mics is that there is n! such thing as Asuppl'B !r AdemandB. 0here is !nl'
Asuppl' at a priceB and Ademand at a priceB. $!@ i3 suppl' d!es 3all then price *ill rise. 0hat price change *ill reduce demand and thus suppl' and demand *ill 2alance. Hes@ certainl'@ i3 !il prices m!ve 3r!m L1++ a 2arrel t! L2++ a 2arrel then there *ill 2e an a*3ul l!t !3 pe!ple still demanding L1++ a 2arrel !il. 8ut s! *hatD 0he price is n!* L2++ *hich is *here suppl' and demand 2alance. -3ter all@ there are an a*3ul l!t !3 pe!ple <li"e an'!ne still stuc" *ith a %ummer= *h! *!uld li"e L1+ !il. 8ut *e d!nOt sa'

39/93 Herndon/Petit/Tate/Quinn that suppl' and demand d!nOt 2alance 2ecause s!me *!uld li"e t! have L1+ !il. ,e Kust sa' that itOs L1++ n!* 2ecause thatOs the price *here suppl' and demand 2alance. 0his isnOt t! sa' that !il suddenl' 2!uncing up t! L3++ !r L5++ *!uldnOt 2e s!mething !3 a trauma. 8ut it Kust cann!t 2e true <in the a2sence !3 p!liticians d!ing s!mething stupid li"e enacting price c!ntr!ls= that suppl' n!t meet demand. 9!r it is prices *hich change t! ma"e sure that the' d!.
Pea& oil is overstated+ doesnEt put into account oil %et to $e discovered Oil Price 10 <!il mar"et pu2licati!n@ADe2un"ing the :'th !3 Pea" Oil ? ,h' the -ge !3 /heap Oil is 9ar 9r!m Over <Part 1=B@
httpC11!ilprice.c!m14nerg'1/rude?Oil1De2un"ing?the?:'th?!3?Pea"?Oil?,h'?the?-ge?!3?/heap?Oil?is?9ar?9r!m?Over?Part?1.html@ 17 :arch 2+1+@ accessed 713111= N4 Over the past 33 'ears man"ind has c!nsumed m!re than three times the *!rldOs "n!*n !il reserves in 197& and t!da' pr!ven !il reserves are nearl' d!u2le *hat the' *ere 2e3!re *e started. 0he st!r' *ith natural gas is even 2etter here and ar!und the *!rld en!rm!us am!unts !3 natural gas have 2een 3!und. :!re *ill 2e 3!und. 8ut i3 '!u had as"ed in 197& *hat the suppl' !3 !il *!uld 2e li"e given the demand !3 2+1+@ '!u *!uld have c!me up *ith the APea" OilB the!r' then@ and *e *!uld have supp!sedl' run !ut !3 !il decades ag!P an !ng!ing impending crisis. ( thin" the "e' t! the argument !3 Pea" Oil@ is that it n!t !nl' ign!res the huge am!unts !3 !il 'et t! 2e 3!und@ 2ut !ther
h'dr!car2!n 3uels as *ell. 4ven i3 the Athe!r'B h!lds *ater@ *hich ( argue !n its 3ace <!r in '!ur 3ace@ as s!me s! delightedl' p!inted !ut=@ *e *ill n!t 2e !ut !3 h'dr!car2!ns and !ur cars stranded !n the side !3 the r!ad during this centur'. 0his is the perceived AcrisisB !3 Pea" Oil that tells us that declining pr!ducti!n and increasing demand *ill cause a disrupti!n in suppl'.
7nd5 oil ill not run out in t"e near 'uture Dr.#e!nard! Magueri <$eni!r ;ice President 4ni $pa= 2003 Nul'1-ug@ 9!reign -33airs
0he truth is that !il supplies are neither running !ut n!r 2ec!ming insecure. 0!da'@ the average *!rld rec!ver' rate 3r!m e5isting !il reserves is 35 percent@ as c!mpared t! a2!ut 22 percent in 198+. >iven current !il c!nsumpti!n levels@ ever' additi!nal percentage !3 rec!ver' means t*! m!re 'ears !3 e5isting reserves. 0his
Dire predicti!ns !3 scarcit' g! hand in hand *ith 3ears a2!ut !il securit'. ev!luti!n als! partl' e5plains *h' the li3e inde5 !3 e5isting reserves is still gr!*ing even th!ugh the *!rld is replacing !nl' 25 percent !3 *hat it c!nsumes ever' 'ear *ith ne* disc!veries and maK!r ne* !il disc!veries have decreased since the 19&+s. 0!da'Qs rati! !3 pr!ven !il reserves t! current pr!ducti!n
indicates a remaining li3e !3 .3 'ears 3!r e5isting reserves@ c!mpared t! 35 'ears in 1972 and 2+ 'ears in 19.8. -dvances in techn!l!g' e5plain the apparent c!ntradicti!n 2et*een 3e*er disc!veries and m!re !il. ,hereas an !il 3ield d!es n!t change@ "n!*ledge a2!ut it d!es@ s!metimes dramaticall'.
,ven at current consu!ption rates5 e ill "ave oil 'or over 30 %ears 2ris" 2ndependent &12512003
Oil *ill@ !3 c!urse@ run !ut eventuall'@ as '!u might e5pect *ith a 3inite res!urce that the *!rld is 2urning at the rate !3 7&m 2arrels a da'. 8ut itQs g!ing t! ta"e a *hile. 4ven at 2++2Qs rate !3 c!nsumpti!n@ c!nventi!nal !il reserves *ill last m!re than 3+ 'ears.

)0/93 Herndon/Petit/Tate/Quinn
*+tend ,2'3 &rillion .arrels *+ist

,:tend t"e 1nc M81C- ,vidence+ M2T Pro'essors and t"e 98 Geological 8urve% $ot" deter!ined t"at e are no "ere near a pea& in oil production T"e 2000 98G8 8urve% concluded t"at over 3 trillion $arrels o' oil re!ain toda%5 and %ou s"ould pre'er our evidence over t"eirs and star t"is argu!ent+ t"e usgs surve% as t"e !ost e:tensive anal%sis o' oil suppl% ever done+ and included t"e !ost geological e:perts N!hn Wood <4nerg' -nal'st 3!r Department !3 4nerg'= 811812003
httpC11***.eia.d!e.g!v1pu21!ilGgas1petr!leum13eatureGarticles12++.1*!rld!ilsuppl'1!ilsuppl'+..html (n -pril 2+++ the )nited $tates >e!l!gical $urve' <)$>$= released results !3 the m!st th!r!ugh and meth!d!l!gicall' m!dern assessment !3 *!rld crude !il and natural gas res!urces ever attempted. 0his 5?'ear stud' *as underta"en Tt! pr!vide impartial@ scienti3icall' 2ased@ s!cietall' relevant petr!leum res!urce in3!rmati!n essential t! the ec!n!mic and strategic securit' !3 the )nited $tates.T (t *as c!nducted 2' .+ ge!scientists <man' *ith industr' 2ac"gr!unds= and *as revie*ed stage?2'?stage 2' ge!scientists empl!'ed 2' man' petr!leum industr' 3irms including several !3 the multinati!nal maK!rs.
7nd5 ne evidence s"o s t"e usgsEs report as too conservative a$out avalia$le oil !ore e:ists N!hn Wood <4nerg' -nal'st 3!r Department !3 4nerg'= 811812003
httpC11***.eia.d!e.g!v1pu21!ilGgas1petr!leum13eatureGarticles12++.1*!rld!ilsuppl'1!ilsuppl'+..html (n 3act@ *e 2elieve that the )$>$ estimates are c!nservative 3!r a variet' !3 reas!ns@ chie3 am!ng *hich are that the )$>$ assessment did n!t enc!mpass all ge!l!gicall' c!nceiva2le small s!urces !3 c!nventi!nall' resev!ired crude !il and *as limited t! the assessment !3 reserves that *!uld 2e added *ithin a 3+ 'ear time 3rame 2ecause@ in part@ T... techn!l!gical changes 2e'!nd 3+ 'ears are di33icult@ i3 n!t imp!ssi2le@ t! c!nceptualiRe and quanti3'.T 0he latter limitati!n has clear implicati!ns 3!r such matters as e5pectati!ns regarding 3ield disc!vera2ilit' and pr!duci2ilit'@ n!t t! menti!n rec!ver' 3act!r impr!vement.
72G 98G8 2s Caised+ 104 T"e% "ave no incentive to $e5 t"e% predicted t"e de!ise o' t"e 98 Oil industr% in t"e 19;0s5 t"e% "ave no reason to lie a$out oil supplies 204 30 geoscientists ould not endorse t"e stud% i' it as+ t"ese are respected e:perts in t"e 'ield "o ould not s!ear t"eir na!es in lies 304 8tudies since t"en "ave $ac&ed it up5 including t"ose done $% t"e DO, T"e 98G8 surve% as t"e $est surve% ever done "en it co!es to re!aining oil suppl%s CO7 <8ulletin !3 -t!mic $cientists= Nan19e2 2003 httpC11***.the2ulletin.!rg1issues12++.1K3+.1K3+.cavall!.html
advances in ge!l!g' and engineering that have pr!vided c!nsumers *ith seemingl' limitless petr!leum als! all!* much 2etter estimates t! 2e made !3 h!* much !il ma' ultimatel' 2e rec!vered. -3ter a 3ive?'ear c!lla2!rati!n *ith representatives 3r!m the petr!leum industr' and !ther ).$. g!vernment agencies@ the ).$. >e!l!gical $urve' <)$>$= c!mpleted a c!mprehensive stud' !3 !il res!urces. 0he T)$>$ ,!rld Petr!leum -ssessment 2+++T is the 3irst stud' t! use m!dern science t! estimate ultimate !il res!urces. X1Y 0he imp!rtance !3 this assessment is di33icult t! !verstate. Previ!us *!rld !il res!urce evaluati!ns have ranged 3r!m crude T2ac"?!3?the?envel!peT calculati!ns t! estimates 2ased !n pr!prietar' data2ases@ and have !3ten lac"ed en!ugh detail t! all!* a c!mparis!n 2et*een pr!ducti!n and estimated reserves. ,e n!* have credi2le@ easil' accessi2le l!ng?term pr!ducti!n rec!rds and science?2ased res!urce estimates 3!r all !3 the imp!rtant !il pr!ducing regi!ns in the *!rld??crucial 3!r understanding h!* !il pr!ducti!n might ev!lve !ver
Het the same time.

*+tend ,3 -e" &echnology Solves

,:tend t"e 8econd M8C- ,vidence+ an arra% o' ne tec"nolog% "as increased oil supplies 104 3D visuali6ation "as !ade e:ploration real eas% 204 Hori6ontal drilling "as increased access to oil poc&ets 304 Deep 8ea Drilling "as e:panded suppl% in'initel% 1e tec"nolog% "as !ade e:traction in current reserves easier and econo!ical ,.- <4nvir!nmental #iterac' /!uncil= 2003 <httpC11***.envir!literac'.!rg1su2categ!r'.php1252.html=
Despite the c!ntinued gr!*th in gl!2al c!nsumpti!n !3 petr!leum@ pr!ven !il
reserves have increased steadil' !ver the past t*ent' 'ears@ in large part 2ecause !il c!mpanies have revised their estimates !3 reserves in "n!*n 3ields. -cc!rding t! the Oil J >as N!urnalOs pr!ducti!n estimates@ during the peri!d !3 197+ t! 2+++@ &8+ >2 !3 !il *as pr!duced@ 2ut 98+ >2 !3 reserves *ere added. )nder !ld techn!l!gies@ !il c!mpanies c!uld !nl' retrieve a2!ut 35 percent !3 the !il in placeP *ith enhanced techn!l!gies@ including directi!nal drilling@ c!mpanies have increased that am!unt and *ith ne* techn!l!gies@ it is 2elieved that it is p!ssi2le t! e5tract up t! &5 percent !3 the !il in the 3ield . :!re!ver@ three and 3!ur dimensi!nal seismic e5pl!rati!n techn!l!g' has led t! revised estimates !3 !il that can 2e ec!n!micall' e5tracted.
eserves are de3ined 2' ec!n!mic as *ell as ge!l!gical c!nsiderati!nsP !ne reas!n that reserves increase is that c!mpanies d! n!t invest 3unding in e5pl!rati!n and enhanced rec!ver' until there is a demand and the prices !3 !il *arrants the e5penditure. (n c!nstant d!llars@ the c!st !3 gas!line is less than it *as a centur' ag!P currentl' !il c!mpanies lac" the incentive t! invest signi3icant am!unts in ris"' !il e5pl!rati!n activities.
3 trillion $arrels o' oil e:ists+ ne tec"nolog% "as increased reserves Dr. #e!nard! Magueri <$eni!r ;ice President 4ni $pa= 512112003 $cience :agaRine
httpC11***.sciencemag.!rg1cgi1c!ntent13ull13+.15&7.1111.6a33iliati!n 0han"s t! ne* e5pl!rati!n@ drilling@ and rec!ver' techn!l!g'@ the *!rld*ide 3inding and devel!pment c!st per 2arrel !3 !il equivalent <2!e= has dramaticall' declined !ver the last 2+ 'ears@ 3r!m an average !3 a2!ut L21 in 1979?81 t! under L& in 1997?99 <in 2++1 d!llars= <9=. -t
the same time@ the rec!ver' rate 3r!m *!rld !il 3ields has increased 3r!m a2!ut 22I in 198+ t! 35I t!da'. -ll these 3act!rs partl' e5plain *h' the li3e?inde5 !3 *!rld reserves <gauged as the rati! 2et*een pr!ven !il reserves and current pr!ducti!n= has c!nstantl' impr!ved@ passing 3r!m 2+ 'ears in 19.8 t! 35 'ears in 1972 and reaching a2!ut .+ 'ears in 2++3. 0!da'@ all maK!r s!urces estimate that pr!ven *!rld !il reserves e5ceed 1 trilli!n <1+12= 2arrels@ *hile 'earl' c!nsumpti!n is a2!ut 28 2illi!n 2arrels <1+?13=. Overall@ the *!rld retains m!re than 3 trilli!n 2arrels !3 rec!vera2le !il res!urces <1.=.
2!proved tec"nolog% can "old o'' Pea& Oil+ 98 proves Ha!pton (/1;111 <$tuart@edit!rial veteran !3 !il mar"ets@ A,hat Pea" OilD M )$ !il and gas reserves gre* in 2+1+B@
httpC11***.2iRm!l!g'.c!m12+111+&1171*hat?pea"?!il?us?!il?and?gas?reserves?gre*?in?2+1+1@ &117111@ accessed 713111= N4 -cc!rding t! 4rnst J H!ungOs .th annual )$ e5pl!rati!n and pr!ducti!n 2enchmar" stud'@ !il reserves gre* 2' 11I t! 17.8 2illi!n 2arrels in 2+1+ and natural gas 2' 12I t! 17..3 trilli!n cu. 3t.@ the str!ngest !il and gas reserve gr!*th in the last 3ive 'ears. 0he rep!rt e5amined the )$ e5pl!rati!n and pr!ducti!n results !3 the 5+ largest !il and gas c!mpanies@ as a *a' t! ta"e a measure !3 the )$ !il and gas landscape. 9ueled 2' high c!mm!dit' prices@ !il and gas c!mpanies m!re than d!u2led their capital e5penditures <primaril' pr!pert' acquisiti!ns= in 2+1+@ gr!*ing 3r!m L72.8 2illi!n in 2++9 t! L177.9 2illi!n in 2+1+. (mpr!ved techn!l!g' *as als! a "e' 3act!r . (mpr!ved h'draulic 3racturing <3rac"ing= and h!riR!ntal drilling techn!l!g' has increased shale !il and gas devel!pment and made 3!r a maK!r gr!*th in reserve and1!r pr!ducti!n replacement rates. (n 2+1+ the !il pr!ducti!n replacement rate 3r!m disc!veries@ e5tensi!ns@ impr!ved rec!ver'@ revisi!ns@ purchases@ and sales !3 pr!ved
reserves *as 23.IP the natural gas pr!ducti!n replacement rate@ 252I. 8P led the pac" in 2+1+ *ith 2.9 2illi!n 2arrels !3 !il reserves in the )$@ 3!ll!*ed 2' 455!n :!2il@ /!n!c!Phillips@ Occidental Petr!leum@ and /hevr!n. 455!n :!2il <*ith alm!st 2& trilli!n cu. 3t.= t!pped the list !3 c!mpanies *ith maK!r )$ natural gas reserves@ 3!ll!*ed 2' /hesapea"e 4nerg'@ 8P@ -nadar"! Petr!leum@ and /!n!c!Phillips. ,hile the sudden gr!*th d!es n!t mean that gl!2al !il and gas reserves are n!t in a l!ng term decline <the Pea" Oil the!r'=@ the activities !3 2+1+ d! sh!* that high c!mm!dit' prices and
impr!ved techn!l!g' can ena2le *ell?capitaliRed maK!r !il and gas pla'ers t! identi3' and access m!re reserves in the sh!rt term.
Pea& Oil passed $%+ production ill 'i: it ?urc6% 10 <$tephen@ $ta33 *riter@ A(nternati!nal 4nerg' -genc' sa's Qpea" !ilQ has hit. /risis avertedDB
httpC11***.csm!nit!r.c!m1,!rld1>l!2al?(ssues12+1+111111(nternati!nal?4nerg'?-genc'?sa's?pea"?!il?has?hit.?/risis?averted@ 7!vem2er 11@ 2+1+@ accessed 713111= N4 >l!2al crude !il pr!ducti!n@ th!ugh@ has alread' pea"ed@ acc!rding t! the (4-. 0he di33erence 2et*een suppl' and demand *ill 2e made up 3r!m rising pr!ducti!n !3 natural gas liquids and unc!nventi!nal !il@ n!ta2l' /anadian !il sands . /rude !il !utput *ill plateau at a2!ut &9 m2d 2' 2+15@ acc!rding t! the (4-@ marginall' 2el!* the all?time pea" !3 7+ m2d reached in 2++&. 0!tal !il pr!ducti!n@ *hich
includes the !il sands and liquid gas@ *ill n!t pea" 2e3!re 2+35.
1e tec"nolog% and data allo 'or e:pansion o' e:isting reserves Dr. #e!nard! Magueri <$eni!r ;ice President 4ni $pa= 512112003 $cience :agaRine
httpC11***.sciencemag.!rg1cgi1c!ntent13ull13+.15&7.1111.6a33iliati!n

)2/93 Herndon/Petit/Tate/Quinn Vern iver 3ield *as disc!vered in /ali3!rnia in 1899. /alculati!ns in 19.2 suggested that 5. milli!n 2arrels remained. %!*ever@ in 19.2 T...a3ter X.3Y 'ears !3 depleti!n@ QremainingQ reserves *ere 5. milli!n 2arrels. 8ut in the ne5t X..Y 'ears@ it pr!duced n!t 5. 2ut 73& milli!n 2arrels@ and it had an!ther 97+ milli!n 2arrels QremainingQ in 198&. 0he 3ield had n!t changed@ 2ut "n!*ledge had....T <7=. 0his is 2ut !ne !3 hundreds !3 cases rep!rted in !il?related literature that undersc!re the inherentl' d'namic nature !3 !il reserves. -s Vlett and $chm!"er have recentl' dem!nstrated@ 3r!m 1981 t! 199& the estimated v!lume !3 !il in 18& *ell?"n!*n giant 3ields in the *!rld X]+.5 2illi!n <1+9= 2arrels <82l= !3 !il@ disc!vered 2e3!re 1981Y increased 3r!m &17 t! 777 82l *ith!ut ne* disc!veries <8=. (ndeed@ man' studies have pr!ved the phen!men!n !3 Treserve gr!*thT??i.e.@ that Tadditi!ns t! pr!ven rec!vera2le v!lumes are usuall' greater than su2tracti!nsT <8=. 0his !ccurs 2ecause !3 3!ur 3undamental elementsC techn!l!g'@ price@ p!litical decisi!ns@ and 2etter "n!*ledge !3 e5isting 3ields??the last !3 these 2eing p!ssi2le !nl' thr!ugh e33ective and intensive drilling.
9!r e5ample@ the
Tec"nolog% ill allo 'or deep sea oil and s"ale develop!ent 9P2 712.12003
- recent stud' 2' :.-. -delman@ !3 the :assachusetts (nstitute !3 0echn!l!g'@ sh!*s the di33icult' !3 predicting 3uture v!lume. (n 1971@ the stud' said@ nati!ns that *ere n!t mem2ers !3 the OrganiRati!n !3 Petr!leum 45p!rting /!untries had tested reserves !3 2+ 2illi!n 2arrels. 0hirt' 'ears later@ the stud' said@ th!se c!untries have pr!duced .& 2illi!n 2arrels and have 2+.9 2illi!n 2arrels in reserves. %igher petr!leum prices are driving the e5pl!rati!n and disc!ver' !3
ne* !il 3ields and the devel!pment !3 th!se !ld !nes that had previ!usl' 2een deemed une5pl!ita2le@ *here ne* techn!l!gies ma' ma"e !il e5tracti!n p!ssi2le. Drills have alread' penetrated int! *ells at the 2!tt!m !3 the >ul3 !3 :e5ic! @ a c!uple !3 miles 2el!* the sur3ace !3 the *ater@ !il 3ields *hich acc!rding t! s!me estimates ma' c!ntain 2.5 2illi!n 2arrels !3 !il. 0echn!l!gical advances ma' als! result in 3acilitating e5tracti!n 3r!m !il?rich s!ils 3!und in -l2erta@ /anada. (n an article pu2lished in Nune in 7ati!nal >e!graphic@ 0im -ppenReller said that -l2erta-Qs sands@ s!a"ed *ith heav' crude !il@ Tc!ntain the equivalent !3 1.& trilli!n 2arrels !3 !il@ a quantit' *hich c!uld 2e greater than all !3 the *!rld !il reserves c!m2ined.T
1e e:traction !et"ods e:pand !iddle east suppl% vastl% Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p.55?&
,!rld*ide@ acc!rding t! the )$>$@ enhanced rec!ver' techn!l!gies *ill add an!ther seven hundred 2illi!n 2arrels !3 !il t! the *!rldOs tall' !3 remaining !il M and dela' 2' 'ears the pea" in pr!ducti!n. Dan 8utler@ an anal'st at the 4nerg' (n3!rmati!n -genc'@ the ver' !ptimistic 3!recasting arm !3 the ).$. 4nerg' Department@ sa's s!me !3 the 2iggest p!tential 3!r impr!ving rec!ver' is in the :iddle 4ast. A0he $audis have ver' primitive !perati!ns@B sa's 8utler. A0he' Kust let the !il gush !ut. 8ut i3 '!u c!uld get an!ther 5 percent !ut !3 $audi -ra2ia and the rest !3 the :iddle 4ast@ '!u *!uld up '!ur reserve 2ase 2' at least a hundred 2illi!n 2arrels.
1e tec"nolog% "as "elped 'ind 'ast ne oil supplies Oil and Gas @ournal 8%!posiu! 711.12003
-hl2randt claimed that techn!l!gical inn!vati!ns in the !il and gas industr' Tare mani3ested in increased success rates ?? in spite !3 less drilling ?? and the en!rm!us c!ntri2uti!n 3r!m reserve gr!*th. T,e have d!cumented detailed reserve gr!*th in the *!rld and have pu2lished detailed reserve gr!*th studies in the ,est $i2erian 2asin@ the ;!lga?)rals@ :iddle 4ast@ and@ m!st recentl'@ presented reserve gr!*th studies 3!r the 7!rth $ea @ @ @ 0he 7!rth $ea e5ample dem!nstrates the phen!mena in a signi3icant@ techn!l!gicall' advanced pr!vince @ @ @T 0hat vie* res!nates in the picture the )$>$ painted !3 p!tential *!rld petr!leum res!urces in 2+++ <0a2le 2=. 0hat assessment pegged the am!unt !3 3uture technicall' rec!vera2le !il !utside the )$ at 2.12 trilli!n 22l and an ultimate mean gl!2al ) !3 3 trilli!n 22l. 0hat c!mpares *ith s!me pea"?!il adv!catesQ estimates !3 the entire gl!2al c!nventi!nal !il end!*ment@ including cumulative pr!ducti!n t!
date@ at 2 trilli!n 22l ?? !3 *hich hal3 has 2een pr!duced.
1e tec"nolog% prevents pea& oil0 Dears 3/1=111@ < D!nn Dears is a >4 energ' e5pert@ APea" !il discreditedB. httpC11dddusmma.*!rdpress.c!m12+111+31181pea"?!il?
discredited1. 71+3111. >!!gle@ -,=
One !3 the m!st respected 3!recasting !rganiRati!ns@ /4 - </am2ridge 4nerg' esearch -ss!ciates=@ pu2lished a paper at the end !3 2++9 stating that@ at least until 2+3+@ Athere *as n! evidence !3 pea" suppl'B. 0he' *ent !n t! sa'@ a3ter 2+3+ the' 3!resee Aan undulating plateau@ rather than a dramatic pea" B. /4 -
3!recasts *!rld*ide pr!ducti!n !3 115 milli!n 2arrels per da' 2' 2+3+@ *hich c!mpares t! !ur current *!rld*ide pr!ducti!n !3 appr!5imatel' 85 milli!n 2arrels per da'. ,hile *e *ill eventuall' run !ut !3 all minerals and !il@ thereOs n! reas!n t! 2ase energ' decisi!ns !n an imminent c!llapse in the availa2ilit' !3 !il. (n additi!n@ there *ill 2e ne* advances in techn!l!g'@ s!me that c!uld unl!c" the 2illi!ns !3 2arrels !3 !il l!c"ed in shale in the ,'!ming@ )tah and /!l!rad! area thatOs currentl' t!! tightl' l!c"ed in the shale 3!r e5isting 3rac"ing techn!l!gies t! reach. 0hereOs n! reas!n t! 2elieve *e canOt pr!duce signi3icantl' m!re !il in the )$@ 3!r decades t! c!me.
9ear !3 pea" !il is an!ther reas!n 2eing used 2' th!se *h! !pp!se drilling@ t! prevent m!re drilling in the )$. ,e have the !il@ and the s!!ner *e em2ar" !n a seri!us campaign t! pr!duce m!re !il@ the s!!ner *e can mitigate disrupti!ns in pr!ducti!n in 3!reign c!untries.
1e drilling tec"nolog% prevents pea& oil # increases econo!ic 'easi$ilit%0 -sh Cennington 211+111@ < 8enningt!n is a sta33 *riter 3!r 3!r cn2c.c!m@ A massive ne* )$ !il suppl' Pea" !il 3ears
!ver2l!*nDB. httpC11***.cn2c.c!m1id1.151.973. 71+3111. >!!gle@ -,= 7e* drilling techniques ma' !pen up "vast fields of previously out-of-reach oil" in the )nited $tatesMand cut !ur dependence !n 3!reign !il in hal3 *ithin a decade. Ed Morse, the head !3 c!mm!dities research at /redit $uisse@ predicts that !il imp!rts c!uld

)3/93 Herndon/Petit/Tate/Quinn 2e cut 2' &+ percentdriven by the kind of news announced todayincluding the disc!ver !3 additi!nal supplies and impr!ved e5tracti!n techniques. :!re speci3icall'@ ( *r!te a2!ut h!* mar"et 3!rces drive ne* !il devel!pmentMa2!ut h!* reserves that *ere previ!usl' in3easi2le t! access can later c!me !nlineC T-nd rec!vera2le reserves are 2ased !n the ec!n!mic 3easi2ilit' !3 e5tracti!n. ,hich means that the suppl' curve 2uilds in a sel3?c!rrecting mechanismC *hen prices rise it 2ec!mes ec!n!micall' 3easi2le t! g! a3ter !il that is m!re e5pensive t! rec!ver. -nd ne* techn!l!g' is?and *ill c!ntinue in the 3uture?t! increase !ur a2ilit' t! e5tract !il in m!re c!st e33ective *a's."
-O2 conversion prevents pea& oil # leads to !ore tec"nolog%0 $c!tt Wolle% .1+&111@ < ,!lle' is a sta33 *riter 3!r /77 m!ne'@ A -n audaci!us ne* the!r' t! c!mpete *ith pea" !ilC
%'dr!car2!ns 3!reverB. httpC11tech.3!rtune.cnn.c!m12+111+.1+&1an?audaci!us?ne*?the!r'?t!?c!mpete?*ith?pea"?!il?h'dr!car2!ns? 3!rever1. 713111. >!!gle@ -,=
9O 0)74 ?? ,hat i3 scientists c!uld trans3!rm c!al?3ired p!*er plants 3r!m giant car2!n di!5ide emitters int! giant car2!n sin"sD $!me sa' that the' can@ and *ill. >raciela /hichilnis"'@ a 3!under !3 >l!2al 0herm!stat@ admits itQs hard t! 2elieveC T0he m!re energ' the less the emissi!nsMitQs mind 2!ggling.T>l!2al
0herm!stat and at least t*! c!mpetit!rs sa' the' can pull car2!n di!5ide straight 3r!m the air@ p!tentiall' at c!sts l!* en!ugh t! s!lve gl!2al *arming and pr!vide an in3inite s!urce !3 gas 2' using the /O2 t! 3eed algae. /hichilnis"' summariRes her c!mpan'Qs 2usiness
m!del this *a'C T0a"e /O2 3r!m the air and turn it int! cash.T-s a technical matter the idea is clearl' p!ssi2le. 45pensive machines used in su2marines and space cra3t have 2een pulling /O2 !ut !3 the air 3!r generati!ns. 0he tric" is ma"ing suc"ing /O2 !ut !3 the air ec!n!micall' 3easi2le. (n practice that means
2eating the c!st !3 car2!n capture and sequestrati!n@ *hich t'picall' run L5+ per t!n. 0he !ther 2ig 2usiness !pp!rtunit' 3!r the ne* car2!n capture techn!l!g' is t! use it t! enhance the pr!ductivit' !3 e5isting !il 3ields. Pumping /O2 int! *ells can dramaticall' 2!!st pr!ducti!n@ p!tentiall' 'ielding hundred !3 2illi!ns !3 d!llars in e5tra !il. 0hatQs n!t a cl!sed l!!p@ and *!uld still raise /O2 levels. 8ut the c!mpanies sa' that in the sh!rt?term using car2!n capture t! pump m!re !il *!uld all!* them t! 3und maK!r impr!vements in their techn!l!g'. David sa's that the techn!l!g' alread' *!r"s s! *ell as a s!urce !3 /O2 3!r his 3uel?ma"ing algae that the reducti!n in atm!spheric car2!n c!mes as a
2!nus ?? a 2ig 2!nus. T4ver'thing *eQre d!ing at the c!mpan' *eQd 2e d!ing even i3 /O2 emissi!ns *asnQt a pr!2lem at all.T
1e drilling tec"nolog% solves pea& oil0 :ar" N Perr% 111131105 < Perr' is a pr!3ess!r !3 3inance and ec!n!mics at the univ. !3 :ichigan@ A$uccess3ul 8a""en Drilling
0echn!l!g' :a' $tart t! >! >l!2alC 0hatQs ,h' TPea" OilT is TPea" (di!c'T@ httpC11mKperr'.2l!gsp!t.c!m12+1+1111*h'?pea"?!il?is? pea"?idi!c'.html. 713111. >!!gle@ -,= Vn!*?h!* gained 3r!m 7!rth Da"!taQs !nce?perple5ing 8a""en shale 3!rmati!n is 2eing used t! e5pl!it !ther !ner!us !il pla's acr!ss the gl!2e .
Oil c!mpanies and c!untries a *!rld a*a' have ta"en n!tice !3 7!rth Da"!taQs success@ said #'nn %elms@ direct!r !3 the state Department !3 :ineral es!urces.
/!mpanies sa' the' are aiming t! appl' techn!l!g' learned 3r!m the 8a""en t! ge!l!gicall' similar shales in /hina@ 9rance@ P!land@ /anada and in s!me ).$. states@ including ,'!ming@ )tah and /!l!rad!. /!mpanies alread' have used 8a""en techn!l!g' t! success3ull' tap the rich 0hree 9!r"s?$anish 3!rmati!n@ directl' 2el!* the 8a""en.T :PC 7e*@ advanced techniques 3!r drilling !il have rev!luti!niRed the d!mestic !il industr' in 7!rth Da"!ta in *a's that c!uldnQt have even 2een predicted Kust a 3e* 'ears ag!@ and *ill li"el' als! !pen up ne* !il pr!ducti!n in !ther parts !3 the *!rld in the near 3uture <li"e the -l2erta 8a""en in /anada= that als! *!uld have 2een unimagina2le 2e3!re this 'ear. 0hatQs !ne reas!n that Tpea" !ilT is pea" idi!c'C it al*a's underestimates the ultimate res!urce ? human capital <i.e. human ingenuit' and the resulting inn!vati!n@ advances@ ne* techn!l!g'= ? *hich is endless and 2!undless@ and *ill never pea".
*+tend ,/ %ountries Do -ot !se $ll Oil 0ields

,:tend t"e 1nc Magueri ,vidence+ 8audi 7ra$ia and ot"er large Oil Producing countries are not producing at 'ull capacit%0 ,vidence 2ndicates t"at t"e% are onl% using ) out o' t"eir "uge a!ount o' oil 'ields0 8audia 7ra$ia onl% uses 9 out o' its =0 'ields and ne e:traction !et"ods !a&es 'ield usage longer Dr. #e!nard! Magueri <$eni!r ;ice President 4ni $pa= 2003@ Nul'1-ug@ 9!reign -33airs
Oil a2undance@ rather than scarcit'@ has 2een recurring since N!hn D. !c"e3ellerQs era. 8arring une5pected disrupti!ns@ it sh!uld c!ntinue t! 2e the n!rm@ given that the average gr!*th rate !3 *!rld !il demand is e5pected t! remain at less than t*! percent annuall' !ver the ne5t 15 'ears. :aK!r pr!ducing c!untries have ta"en steps t! av!id repeating past e5cess?capacit' c'cles. 7!netheless@ their e5pansi!n p!tential is huge. $audi Oil :inister -li 7aimi has n!ted that $audi -ra2ia is pr!ducing !il 3r!m !nl' 9 t! 1+ !3 the c!untr'Qs 8+?plus !il 3ields@ and 8 !3 these *ere disc!vered m!re than .+ !r 5+ 'ears ag!
72G 8Q Proves suppl% is tig"t

1.= 0his (s )niquness 3!r us? as suppl' decreases !r d!esnOt c!ver current demand@ c!untries *ill devel!p their additi!nal res!urces t! c!ntinue t! ma"e pr!3its? the' *ill never let their !il *aste a*a'

*+tend ,1 Peak 0la"ed

,:tend t"e 1nc World Oil ,vidence+ T"e Oil curve isnEt "at e sa in ,con 1010 T"e appearance o' t"e Oil curve is not deter!ina$le+ even Hu$$ert ad!itted t"is0 T"is !eans t"at oil !ig"t not "ave 1 pea& and decline5 it could pea& and plateau or pea& N t o di''erent ti!es0 Our evidence even indicates t"at suppl% is t"e lo est concern "en it co!es to "en oil ill pea&5 issues suc" as prices5 de!and and energ% consu!ption o/ s0 7nd %ou s"ould pre'er t"is evidence+ t"ose "o $elieve in Hu$$ertEs pea& are or&ing it" a 19)0Es approac" to a current da% issue5 or evidence is !ore predictive o' t"e current oil environ!ent 7nd5 "u$ert !odel is 'la ed+ recent %ears prove t"at oil 'ields de'% draconian $ell curved !at" Oil and Gas @ournal 8%!posiu! 711.12003 p.#7
0h!mas -hl2randt@
*!rld energ' pr!Kect chie3 *ith the )$ >e!l!gical $urve' in Denver@ !2Kects t! the c!ncept underl'ing the %u22ert curve. T(s there an imminent !il pea"D 0he sh!rt ans*er is n!@T he said. T( 2elieve in the plateau c!ncept@ *hich rec!nciles the need 3!r additi!nal res!urces *ithin the c!nstraints !3 in3rastructure and capital investment. T0he s'mmetric rise and 3all !3 !il pr!ducti!n is n!t technicall' supp!rta2le@ as %u22ert@ #aherrere@ and !thers have pu2lished@ alth!ugh generall' n!t rec!gniRed 2' </!lin= /amp2ell@ <Venneth= De33e'es@
and !thers *h! have 2een ma"ing drac!nian end?!3?civiliRati!n claims since 1989 and ever' 'ear since @ @ @ ,h' is there n! acc!unta2ilit' 3!r these 3ailed 3!recasts either 2' %u22ert !r disciples such as /amp2ell@ #aherrere@ etc.DT (nstead@ -hl2randt and !thers p!int t! even mature areas such as the )V 7!rth $ea@ *hich in the past 2+ 'ears has repeatedl' de3ied 3!recasts !3 a 2ell?curve?st'le decline <9igs. &?7=. -nd pea"?!il critics als! n!ted the surge in disc!veries in areas deemed critical 3!r 3uture suppl'@ such as the deep*ater >ul3 !3 :e5ic! <9ig. 8=. $arah 4mers!n@ managing direct!r@ 4nerg' $ecurit' -nal'sis (nc.@ ,a"e3ield@ :ass.@ is !ne !3 man' energ' ec!n!mists *h! c!ntend that the %u22ert m!delers disregard the
r!les !3 !il suppl'@ demand@ and prices as *ell p!litical and regulat!r' impacts. T( d! n!t 2elieve the pea" in gl!2al !il pr!ducti!n is imminent@T she t!ld O>N. T@ @ @ 0he ge!l!gists *h! present the res!urce scarcit' argument tend t! ign!re changes in the ec!n!mic c!nte5t. 9!r e5ample@ 3!reign investment la*s can change in c!untries *ith large reserves and limited access t! capital !r techn!l!g'. 0his means places *here *e never e5pected devel!pment <!r e5pected sl!* devel!pment= suddenl' !pen up. - list !3 the c!untries *h! have !pened up t! 3!reign investment is an impressive *h!Qs *h! !3 pr!ducersC ussia@ -Rer2aiKan@ VaRa"hstan@ ;eneRuela@ n!* (raq@ and ma'2e even s!meda' Vu*ait and $audi -ra2ia. 7e*?3!und access t! capital and techn!l!g' requires a t!tal reappraisal !3 res!urce devel!pment.T

))/93 Herndon/Petit/Tate/Quinn
*+tend ,2 !nconventional Oil #ill 0ill n

,:tend t"e ,nviron!ental .iterac% -ouncil evidence ,ven i' t"e% in t"at conventional oil ill pea& soon5 t"at doesnEt deal it" 9nconventional supplies0 /esources suc" as 8"ale5 tar sands and "eav% crude oil are not counted in glo$al suppl% esti!ates0 T"e% are H9G, supplies o' oil t"at "ave $eco!e !ore econo!ical to develop and are t"e 'uture o' t"e Oil 2ndustr%0 8"ale oil solves 'or pea& oil # Queensland ,nerg% /esources proves 8%vert 10 XPaul $'vret@ Nul' 1+@ 2+1+@ 7e*s 4dit!r and 9eature /!lumnist@ 0he /!urier?:ail@ 0he /!urier :ail <-ustralia=C
AOiling the *heels@B #e5is7e5is@ #$Y 0echn!l!g' is availa2le t! all!* Wueensland t! ta"e a leading r!le in reversing -ustraliaQs !il imp!rt reliance @ *rites Paul $'vret Q0he
pr!2lem is m!re than Kust ec!n!mics@ th!ugh. (t is ultimatel' a questi!n !3 energ' securit'Q O(#$@ as the sl!gan *ent@ ainQt !ils. -nd in the -ustralian c!nte5t@ the pr!2lem c!n3r!nting p!lic'?ma"ers t!da' is that *e d!nQt have en!ugh said !ils. Nust a decade ag! -ustralia *as a net e5p!rter !3 crude !il@ pr!ducing m!re than *e needed 3!r d!mestic c!nsumpti!n. 0!da' *e pr!duce Kust !ver 5+ per cent !3 !ur requirements@ and that is 3!recast <acc!rding t! energ' industr' advis!r' 3irm 4nerg'Wuest= t! decline t! a2!ut 2+ per cent 2' 2+3+. 9r!m a purel' ec!n!mic perspective this has the p!tential t! d! seri!us damage t! -ustraliaQs 2alance !3 trade. /urrentl' *e imp!rt a2!ut L12 2illi!n t! L13 2illi!n !3 !il a 'ear. 4c!n!mic 3!recaster -/(# 0asman e5pects this 3igure t! clim2 ten3!ld ? t! as high as L128 2illi!n a 'ear 2' 2+3+. (magine *hat s!rt !3 impact that might have !n the current acc!unt de3icit. (n ra* terms that is Kust sh' !3 an !il sh!rt3all !3 a2!ut 33+ milli!n 2arrels a 'ear@ !r 53 2illi!n litres !3 !il that *e *ill need t! imp!rt unless ne* pr!ducti!n is 2r!ught !n stream t! replace ageing 3ields such as 8ass $trait. 0he pr!2lem is m!re than Kust ec!n!mics@ th!ugh. (t is ultimatel' a questi!n !3 energ' securit'. 0he rest !3 the *!rld is als! increasingl' hungr' 3!r !il imp!rts ?
particularl' 3ast?gr!*ing emerging ec!n!mies such as /hina ? and c!mpetiti!n 3!r *hat is a ver' 3inite res!urce *ill !nl' gr!* m!re intense. -lread' industr' !2servers 3ear the *!rld is cl!se t! reaching *hat is descri2ed as aaPea" OilQQC that p!int *here *e cann!t ph'sicall' pump an' m!re !3 the stu33 !ut !3 the gr!und and re3ine it int! 3uel. 0hat is n!t t! sa' the *!rld is a2!ut t! run !ut !3 !il@ 2ut rather that it has reached the p!int *here pr!ducti!n can n! l!nger meet demand. 9!r -ustralia ? even Kust 3r!m an energ' securit' perspective ? an!ther
challenge is h!* d! *e maintain a str!ng and via2le d!mestic re3ining capacit' *hen in 'ears t! c!me the ec!n!mics !3 imp!rting re3ined 3uels 3r!m the li"es !3 $ingap!re ma' 2e m!re attractive than imp!rting ra* crude and re3ining it hereD $! -ustralia is heading 3!r a scenari! *here *e *ill 2e up t! 8+ per cent dependent !n imp!rts@ !3ten 3r!m nati!ns in p!liticall' unsta2le parts !3 the *!rld 3r!m *hich c!ntinuit' !3 suppl' ma' 2e 3ar 3r!m assured. (n the un"n!*n ge!p!litical landscape !3 t*! decades hence that c!uld 2e as much a threat t! nati!nal securit' as energ' securit'. 7!r is there much real pr!spect !3 replacing !ur
demand 3!r !il *ith alternative energ' an' time s!!n. :uch e33!rt has 2een put int! alternative transp!rt energ' s!urces such as electricit'@ 2ut the 2!tt!m line is that at current levels !3 techn!l!g' '!u canQt use 2atter' p!*er t! run rail 3reight services !r r!ad trainsP !r t! p!*er tract!rs@ heav' machiner' and aircra3t. 0hat requires @ li"e it !r n!t@ 3!ssil 3uels. ,hile c!nventi!nal s!urces !3 d!mestic !il suppl' <!n?sh!re and !33sh!re *ells= ma' 2e rapidl' depleting@ the *!rld d!es have an a2undant suppl' !3 *hat are called aaunc!nven ti!nalQQ !il res!urces in the 3!rm !3 shale !il. ,!rld shale !il reserves are estimated at up t! 2.9 trilli!n 2arrels. 0! put this int! c!nte5t@ these dep!sits c!uld pr!duce m!re !il in the ne5t 1++ 'ears than has 2een c!nsumed in the past 15+. (n t!tal@ -ustralia has
identi3ied reserves !3 a2!ut 25 2illi!n 2arrels !3 shale !il. -t !ur current c!nsumpti!n levels that is equivalent t! a2!ut 7+ 'ears !3 suppl'. 0he 2ul" !3 these reserves are in Wueensland@ *ith the li!nQs share n!* held 2' Wueensland 4nerg' es!urces@ !*ned 2' 7e* H!r" 2illi!naires the Zi33 2r!thers. -3ter decades !3 3alse starts and dashed dreams@ m!ves are again under *a' t! tr' t! esta2lish a Wueensland shale !il industr'. W4 is currentl' spending *ell in e5cess !3 L1++ milli!n t! 2uild a 7e* 9uels Devel!pment /entre at Har*un@ n!rth*est !3 >ladst!ne@ the centrepiece !3 *hich *ill 2e a dem!nstra ti!n plant 3!r its sec!nd generati!n pr!cessing techn!l!g'. 0he industr' sp!rts a chequered hist!r' <!r *hat the c!mpan' privatel' descri2es as aaseri!us legac' issuesQQ= in Wueensland@ h!*ever. 9!r decades W4 Qs predecess!r@ $!uthern Paci3ic Petr!leum@ esta2lished 2' the late $ir (an :c9arlane@ t!iled t! c!22le t!gether 2!th the techn!l!g' and the vast 3inancing required t! get a c!mmercial pr!Kect !33 the gr!und. 0he c!mpan' c!mmissi!ned a pil!t plant at 0arginnie <n!rth !3 Har*un= in 2+++@ 2ut the plant *as d!gged *ith technical and envir!nmental pr!2lemsP angered residents and 2ecame a magnet 3!r increasingl' 3lam2!'ant >reenpeace pr!tests. (nevita2l' it all turned s!ur as 3inancing dried up@ and $!uthern Paci3ic *as placed in receivership in late 2++3@ man' 'ears and man' hundreds !3 milli!ns !3 d!llars a3ter :c9arlane 3irst attempted t! realise his dream. $till@ !ver the c!urse !3 its !perating li3e the $tuart plant did pr!duce m!re than a milli!n 2arrels !3 !il. 4ven a3ter W4 gained c!ntr!l !3 the pr!Kect@ c!ntr!vers' *as never 3ar a*a'@ and 3ierce !pp!siti!n t! plans t! mine the :c9arlane shale dep!sit near Pr!serpine <*hich *!uld have inv!lved a partial rel!cati!n !3 the airp!rt= sa* mining !3 the dep!sit su2Kected t! a 2+?'ear m!rat!rium 2' the Wueensland >!vernment. 0his time th!ugh@ W4 claims the equitati!n is di33erent. (ts $tuart dep!sit at >ladst!ne is c!vered 2' an e5isting mining lease@ the techn!l!g' used t! pr!cess the shale is di33erent@ and the Zi33 2r!thers <the 3amil' made their 2illi!ns !ut !3 pu2lishing c!mputer magaRines= have ver'@ ver' deep p!c"ets. -nd Kust as imp!rtantl'@ !il prices ? currentl' ar!und L)$75 a 2arrel ? are at a level *hich *!uld ma"e the 2illi!ns !3 d!llars !3 investment needed t! devel!p a 3ull plant a c!mmerciall' via2le pr!p!siti!n. (t is techn!l!g' that *ill 2e the "e' t! an' devel!pment !3 a c!mmercial scale shale !il industr' in Wueensland th!ugh. -nd here *e need t! g! t! i3le@ /!l!rad!@ *here nestled in the 3!lds !3 the !c"' :!untains@ !il pr!duced 3r!m Wueensland shale 3l!*s steadil' 3r!m the 2usiness end !3 research and techn!l!g' c!mpan' $hale 0echQs <als! 3unded 2' the Zi33s= dem!nstrati!n plant. $!me 1+@+++ t!nnes !3 Wueensland shale have 2een shipped !ver t! the plant in the past c!uple !3 'ears t! test and retest the via2ilit' !3 transplanting the /!l!rad! techn!l!g' t! central Wueensland. (t d!es *!r"@ and W4 is adamant the gravit' 3eed s'stem 3!r the ret!rt is cleaner@ m!re energ'?e33icient and 3ar m!re relia2le than the r!tar' "iln that $PP had 2uilt near 0arginnie. /ertainl' *hen 0he /!urier?:ail visited the i3le plant even a length' p!*er !utage caused 2' a st!rm the night 2e3!re seemed t! cause little pr!2lem in terms !3 3iring up the pr!cessing !perati!n again the ne5t da'. 8' night3all dust' gre' lumps !3 crushed shale *ere g!ing in !ne end !n a c!nve'!r 2elt and thic"@ dar" visc!us !il *as 3l!*ing 3r!m the !ther.
T"ere are ot"er oil sources5 t"e% Lust cost !ore .lo%d 10 XPhilip #l!'d@ 2+1+1+1113@ (ndustrial J Petr!chemical /!nsultants@ %!n!rar' esearch 9ell!*@ 4nerg' esearch /entre
at )niversit' !3 /ape 0!*n@ APea" !il is a chimera@B httpC11***.2usinessda'.c!.Ra1articles1/!ntent.asp5DidE91129@ #$Y

)(/93 Herndon/Petit/Tate/Quinn (n 19.5@ d!!msa'ers li"e #e Page n!ted that *e had !nl' 25 'ears !3 reserves. %!*ever@ 25 'ears later in 197+@ *hen all the 19.5 !il had 2een used@ *e had 3+ 'ears !3 reserves. 0hirt' 'ears later in 2+++@ all the 197+ !il had 2een c!nsumed@ 2ut *e had .+ 'ears !3 reserves. 0en 'ears later and *e still have .+ 'ears !3 reserves. %!* this apparent an!mal' !ccurs is "e' t! understanding *h' Apea" !ilB is a
chimera. 8ac" there in 19.5@ !il c!st less than 112arrel. 8' 197+@ the price *as !ver 2 and rising M all the 112arrel !il had g!ne. 8' 2+++@ !il *as 2+12arrel and rising M? and there *as n! m!re 2 !il. $! the reserves depend !n h!* much *e are prepared t! pa' 3!r !ur !il@ n!t h!* much there is in the earth.
,hat *ill eventuall' happen is that the price *ill rise s! 3ar that alternatives *ill 2e 3!und. (ndeed@ the' are alread' here. Oil 3r!m c!al 2ec!mes ec!n!mic at ar!und .+12arrel . Oil 3r!m natural gas 2ec!mes ec!n!mic at an even l!*er !il price@ 2ut gas has a higher value than c!al@ s! it is reall' !nl' ec!n!mic *hen the !il price is !ver 5+12arrel. Oil 3r!m tar sands <and the /anadians have as much p!tentiall' availa2le as $audi -ra2ia has !il= is ec!n!mic at a2!ut .+. Oil 3r!m !il shales "ic"s in at a2!ut &512arrel@ and there is a l!t !3 that. 9urther @ the techn!l!g' !3 *inning !il impr!ves. (n the )$@ there is a gr!*ing industr' in re*!r"ing !ld *ells that *ere a2and!ned *hen the' had 'ielded a2!ut 25I !3 their c!ntent. 0!da' the' can 2e c!a5ed int! 'ielding an!ther 2+I !r m!re. $! the pessimists are *r!ng M ver' *r!ng. %!pes 3!r all the !ther alternative energ' s!urces M s!lar@ *ind and *ave M *ill !nl' start t! 2ec!me realised *hen the !il price is c!nsistentl' !ver a2!ut 15+12arrel M and that da' is presentl' 3ar !33.
Oil suppl% is increasing+ tar and "eav% oil e:traction is occuring no N!hn Wood <4nerg' -nal'st DO4= 811812003
httpC11***.eia.d!e.g!v1pu21!ilGgas1petr!leum13eatureGarticles12++.1*!rld!ilsuppl'1!ilsuppl'+..html ,hen *ill *!rld*ide pr!ducti!n !3 c!nventi!nall' reserv!ired crude !il pea"D 0hat *ill in part depend !n the rate !3 demand gr!*th@ *hich is
,ill the *!rld ever ph'sicall' run !ut !3 crude !ilD 7!@ 2ut !nl' 2ecause it *ill eventuall' 2ec!me ver' e5pensive in a2sence !3 l!*er?c!st alternatives. su2Kect t! reducti!n via 2!th techn!l!gical advancements in petr!leum pr!duct usage such as h'2rid?p!*ered aut!m!2iles and the su2stituti!n !3 ne* energ' s!urce techn!l!gies such as h'dr!gen?3ed 3uel cells *here the h'dr!gen is !2tained@ 3!r e5ample@ 3r!m natural gas@ !ther h'dr!gen?rich !rganic c!mp!unds@ !r electr!l'sis !3 *ater. (t *ill als! depend in part !n the rate at *hich techn!l!gical advancement@ !perating in c!ncert *ith *!rld !il mar"et
ec!n!mics@ accelerates large?scale devel!pment !3 unc!nventi!nal s!urces !3 crude such as tar sands and ver' heav' !ils. Pr!ducti!n 3r!m s!me !3 the /anadian tar sands and ;eneRuelan heav' !il dep!sits is alread' ec!n!mic and gr!*ing.
1o oil crisis+ and s"ale oil ill 'ill in petrolu! depletion 8unda% Telegrap" &1&12003
:an' pe!ple 2elieve that 2e3!re t!! l!ng *e *ill simpl' run !ut !3 !il@ pr!mpting ec!n!mic disaster. $uch thin"ing c!ntinues a l!ng ? and err!ne!us ? traditi!n. (n the mid?19th centur'@ the then cele2rated ec!n!mist Nev!ns predicted the end !3 industrial pr!gress 2ecause the *!rld *!uld run !ut !3 c!al. (n 1939@ !33icial 2!dies predicted that !il *!uld last !nl' 13 m!re 'ears. -s Pr!3ess!r 9ran" 7!terstein said in his later 'earsC T,eQve 2een running !ut !3 !il ever since ( *as a 2!'.T 0here is n! practical pr!spect !3 !il running !ut and there2' 2ringing !n a c!llapse !3 the *!rld ec!n!m'. (ndeed@ the *!rld is a*ash *ith the stu33. (t is all a matter !3 precisel' *here the !il is and the c!st !3 getting h!ld !3 it. 9urtherm!re@ there is an ample alternative s!urce !3 !il@ namel' shale !il. (t is estimated that the *!rld has s!mething li"e 2.+ times m!re shale !il than it has reserves !3 petr!leum .
($ 0%($ much t!! sanguineD
-urrent proLections donEt include sands or "eav% oils "ic" are a$undant Dr. #e!nard! Magueri <$eni!r ;ice President 4ni $pa= 512112003 $cience :agaRine
httpC11***.sciencemag.!rg1cgi1c!ntent13ull13+.15&7.1111.6a33iliati!n 8e3!re l!!"ing at the real?*!rld situati!n in m!re depth@ it is necessar' t! clear up s!me p!ints@ 2eginning *ith the distincti!n 2et*een Tres!urceT and Treserve.T 0he 3!rmer indicates the !verall st!c" !3 a mineral in ph'sical terms@ *ith!ut an' ass!ciated ec!n!mic value and1!r
estimati!n !3 its li"elih!!d !3 2eing e5tracted. (n !ther *!rds@ there ma' 2e large quantities that can never 2e used 2ecause !3 the high c!st !r the imp!ssi2ilit' !3 rec!ver'@ as in the case !3 the g!ld dispersed in the !ceans. 0he c!ncept !3 TreservesT??li"e that !3 Trec!vera2le res!urcesT??inv!lves an ec!n!mic assessment !3 the p!ssi2ilit' !3 pr!ducing a part !3 the !verall res!urces. (n the !il sect!r@ there are additi!nal de3initi!ns??the m!st imp!rtant 2eing that !3 Tpr!ven reserves@T *hich include !nl' th!se that can 2e ec!n!micall' pr!duced and mar"eted at the present time acc!rding t! e5isting techn!l!gies and demand. 7earl' all !3 the
estimates !3 the *!rldQs !il ) @ including th!se 2' !il d!!msters@ d! n!t ta"e int! acc!unt the s!?called Tn!nc!nventi!nal !ilsT?? such as /anadian tar?sands and ;eneRuelan and ussian heav' !ils??even th!ugh the availa2ilit' !3 these res!urces is huge and the c!sts !3 e5tracti!n 3alling.
-urrent oil esti!ated donEt include s"ale N!hn Wood <4nerg' -nal'st DO4= 811812003
httpC11***.eia.d!e.g!v1pu21!ilGgas1petr!leum13eatureGarticles12++.1*!rld!ilsuppl'1!ilsuppl'+..html /!nventi!nall' reserv!ired crude !il res!urces c!mprise all crude !il that is technicall' pr!duci2le 3r!m reserv!irs thr!ugh a *ell 2!re using an' primar'@ sec!ndar'@ impr!ved@ enhanced@ !r tertiar' meth!d. 7!t included are liquids 3r!m mined dep!sits <tar sandsP !il shales= !r created liquids <gas?t!?liquidsP c!al !il=. 4arthQs end!*ment !3 c!nventi!nall' reserv!ired crude !il is a large 2ut 3inite v!lume. Pr!ducti!n 3r!m it ma' *ell pea" *ithin
this centur'. -ll !r ver' nearl' all !3 4arthQs pr!li3ic petr!leum 2asins are 2elieved identi3ied and m!st are partiall' t! near?3ull' e5pl!red. -ll !r nearl' all !3 the largest !il 3ields in them have alread' 2een disc!vered and are 2eing pr!duced. Pr!ducti!n is indeed clearl' past its pea" in s!me !3 the m!st pr!li3ic 2asins.

);/93 Herndon/Petit/Tate/Quinn
***7BB2/M7T2M,***

)=/93 Herndon/Petit/Tate/Quinn
***uni<ueness***

Prices not sta)le

Oil Prices unsta$le no /euters5 @ul% 2 2+11@ <- #!!" 8ehind )nsta2le >as Prices J -ttempts t! 9i5 0hem@
httpC11***.reuters.c!m1article12+111+71+21id)$&&13+9832+11+7+2@ #:=
ep. 4d :ar"e'@ <D?:-= sa's the m!ve is a signal t! OP4/ that the )nited $tates *ill n!t 2e held h!stage t! high !il prices. %!*ever@ ep. 9red )pt!n < ? :(=@ chairman !3 the %!use 4nerg' and /!mmerce /!mmittee@ sa's the m!ve 2' the president !nl' pr!ves that the c!untr' needs t! increase d!mestic pr!ducti!n. %e 2elieves the same results *!uld c!me 3r!m appr!ving stalled permits 3!r drilling in the >ul3 !3 :e5ic!@ *ith!ut tapping int! reserves he 2elieves *ere meant 3!r a true emergenc'. 0hen@ *hatQs 2ehind the timing !3 the presidentQs m!veD 0halia tal"s *ith !2 $!2hani@ president !3 /aspian 4nerg' /!nsulting@ t! as" *h' p!lic'ma"ers released !il 3r!m the $P n!*@ instead !3 *hen prices *ere higher@ and i3 :iddle 4ast turm!il is en!ugh t! Kusti3' it. $!2hani sa's the release is n!t a l!ng?term 3i5 3!r high !il prices@ and the ).$. needs t! devel!p p!litical s!luti!ns that *ill have lasting e33ects !n !il mar"ets. On this *ee"Qs :i5@ d!mestic gas!line prices have 2een rising and 3alling 3!r 'ears@ 2ut in the l!ng?term@ the' al*a's seem t! get higher . $! *hatQs driving the ups and d!*nsD (s the main cause !3 v!latile prices high d!mestic demand@ !r unsta2le 3!reign s!urces !3 !il t! suppl' -merican mar"etsD 0halia intervie*s /!ngressman 4arl 8lumenauer <D?O =@ and /!ngressman :ichael 8urgess < ?0_=@ t! discuss the causes !3 high gas!line prices in the ).$. and p!tential *a's t! the drive them d!*n.
Oil Prices are unpredicta$le Mu'son5 @ul% 15 2+11@ <0he unpredicta2le 3!rces 2ehind !il prices@ $teven :u3s!n@ httpC11***.*ashingt!np!st.c!m1!pini!ns1the?
unpredicta2le?3!rces?2ehind?!il?prices12+111+&13+1->3e27t%Gst!r'.html@ #:= On that 0hursda' al!ne@ the price !3 !il 3ell !33 a cli33@ tum2ling m!re than L1+ a 2arrel. Het the ph'sical am!unt !3 !il in the mar"et didnOt change that *ee". #i2'aOs !il e5p!rts had 2een !33line 3!r m!re than t*! m!nths. (n the !il *!rld@ the sur3ace *as relativel' calm. 8ut a c!uple !3 signs !3 ec!n!mic *ea"ness sp!!"ed traders@ *h! suddenl' *!rried that demand *!uld 2e less than the' had e5pected. >!ldman $achs@ a 2eliever in rising crude !il prices@ predicted a temp!rar' pull2ac". P!!3U :!re than a tenth !3 the value !3 a 2arrel !3 !il disappeared. 9!r c!nsumers@ !il prices are li"e a 2ad case !3 malaria M 3everish !ne m!nth and t!lera2le an!ther. $uch *ild 3luctuati!n ma"es it nearl' imp!ssi2le t! discernC ,hat is the right price 3!r !ilD 0!da'Os crude !il prices are nearl' 1+ times as high as the' *ere in 1998@ and t*ice as high as in 2++5. 0he' hit a rec!rd !3 L1.7 a 2arrel in Nul' 2++8@ !nl' t! sin" t! less than L.+ a 2arrel 2' the end !3 that 'ear. (n :arch@ amid intense 3ighting in #i2'a@ President O2ama said that there *asnOt a seri!us suppl' sh!rtage and that rising !il prices *erenOt reas!n en!ugh t! tap the nati!nOs $trategic Petr!leum eserve. 0hen !n Nune 23@ he suddenl' said that turm!il in #i2'a Kusti3ied the largest?ever release !3 reserves. (t *as m!re !3 an ec!n!mic stimulus than a nati!nal securit' measure.8ecause !il prices 3luctuate s! much@ h!*ever@ it *ill 2e imp!ssi2le t! measure O2amaOs success !r 3ailure. (3 prices c!ntinue t! dr!p@ as the' *ere d!ing 2e3!re his m!ve@ *ill he deserve creditD (3 the' rise@ *ill he deserve 2lameD (3 it *!r"s@ *ill *e *ant him t! d! it againD

(0/93 Herndon/Petit/Tate/Quinn
Prices decreasing
Oil prices trending do n ard>adLusting to .i$%a Po er and Trac%5 (/23
<$04P%47 PO,4 -nd 0477(##4 0 -/H@ sta33 *riters 3!r the ,all $treet N!urnal@ Nune 2.@ 2+11@ A%igher >as Prices Drive Oil Decisi!nB@ httpC11!nline.*sK.c!m1article1$81+++1.2.+527+23+33399+.57&.+383+137&75..2.htmlDm!dEg!!glene*sG*sK@ -DC 713111@ $#=
0he decisi!n 2' the ).$. and !ther nati!ns t! tap petr!leum st!c"piles t! attac" high !il prices highlights the pressure President 8arac" O2ama 3aces !ver gas!line prices and d!mestic drilling p!lic'. Oil pr!ducers and re3iners said the m!ve 2' the ).$. made little sense given current trends in the !il mar"ets. T /rude and gas!line invent!ries are a2!ve average@ and crude and gas!line prices have 2een trending d!*n 3!r *ee"s@ despite the l!ss !3 #i2'an !il@ *hich mar"ets have alread' adKusted t!@T said -merican Petr!leum (nstitute sp!"esman 8ill 8ush.
Oil prices declining>$enc"!ar& steadil% declining W"ite5 (/2; < !nald ,hite@ sta33 *riter 3!r #- 0imes@ Nune 27@ 2+11@ A>as!line prices sh!uld 3all 3urther as crude c!ntinues t!
slideB@ httpC11latimes2l!gs.latimes.c!m1m!ne'Gc!12+111+&1retail?gas!line?prices?ma'?decline?sharpl'?s!!n.html@ -DC 713111@ $#= /rude !il prices are !n such a slide that the' c!uld dr!p 2ac" int! the l!* L8+s a 2arrel @ ,all $treet anal'sts said@ adding that this c!uld reduce retail gas!line prices t! a2!ut L3 a gall!n nati!nall' and t! a2!ut L3..+ t! L3.5+ a gall!n in /ali3!rnia. OilQs slide *as c!ntinuing :!nda' !n a v!latile trading da'. ,est 0e5as (ntermediate crude@ the ).$. 2enchmar"@ *as d!*n an additi!nal 5& cents t! L9+.&1 a 2arrel a3ter 3alling as l!* as L89.&1 a 2arrel !n the 7e* H!r" :ercantile 45change. 0he ).$. 2enchmar" has 3allen 15I in the sec!nd quarter. (n !ther energ'
ne*s@ the 28?mem2er (nternati!nal 4nerg' -genc' ann!unced a nati!n?2'?nati!n 2rea"d!*n !3 h!* much !il and re3ined pr!ducts *ere g!ing t! 2e released 3r!m strategic reserves. 0he Paris?2ased (4-@ *hich includes the ).$.@ ann!unced last *ee" that g!vernment reserves *!uld 2e tapped in a 2id t!
reduce crude prices@ ma"e up 3!r the l!ss !3 #i2'an !il !n *!rld mar"ets and pr!vide a 2!!st t! struggling ec!n!mies.
Oil prices dropping>release o' oil reserves Pod&ul5 (/23 </eRar' P!d"ul@ sta33 *riter 3!r ,ashingt!n P!st@ Nune 23@ 2+11@ AOil prices plunge a3ter ).$.@ allies ann!unce
release !3 reservesB@ httpC11***.*ashingt!np!st.c!m12usiness1ec!n!m'1!il?prices?plunge?a3ter?us?allies?ann!unce?release?!3? reserves12+111+&1231->s-7Hh%Gst!r'.html@ -DC 713111@ $#= Oil prices tum2led t! their l!*est level in 3!ur m!nths 0hursda' a3ter the )nited $tates and 27 allies ann!unced that the' *!uld release &+ milli!n 2arrels !3 crude !il 3r!m reserves t! !33set the disrupti!n !3 !il supplies 3r!m #i2'a. Oil prices had alread' 2egun t! ease in recent *ee"s a3ter sh!!ting up*ard in mid?9e2ruar' *hen the #i2'an c!n3lict intensi3ied@ causing 3ears !3 a suppl' disrupti!n. -3ter cl!sing !ver L95 a 2arrel !n ,ednesda'@ crude !il prices plunged 2' m!re than L. a 2arrel 0hursda'@ sending them t! levels last seen in 9e2ruar'.
Oil prices declining overall>c"asing out speculators and !ore reserve releases in t"e 'uture 8c"oen5 (/23 <N!hn ,. $ch!en@ sta33 *riter@ Nune 23@ 2+11@ A$urprise !il release targets speculat!rsB@
httpC11t!da'.msn2c.msn.c!m1id1.351+17+1ns12usiness?g!ingGgreen1@ -DC713111@ $#= 0hursda'Os surprise release !3 &+ milli!n 2arrels !3 crude reserves is n!t a2!ut "eeping !il c!nsumers *ell supplied. (tOs a2!ut chasing !il speculat!rs !ut !3 the mar"et. -nd it seems t! 2e *!r"ing. A0his is the stra* that 2rea"s the camelOs 2ac" M this is the tipping p!int@B said 9adel >heit@ !il anal'st 3!r Oppenheimer@ a leading investment 2an". A0he speculat!rs *ill have t! change their p!siti!ns. (nstead !3 2etting !n higher prices the' have t! 2et !n l!*er prices.T 7e*s !3 the !il release sent gas!line tum2ling 1. cents a gall!n in the 3utures mar"ets . 0hatOs the
equivalent !3 a2!ut L5& milli!n a da' in savings at the gas pump M !r a2!ut L2+ 2illi!n a 'ear@ acc!rding t! Peter 8eutel@ and !il anal'st a /amer!n %an!ver. (n 7e* H!r" trading crude !il *as d!*n L..+1 t! L91..+ a 2arrel@ m!re than 2+ percent 2el!* pea" levels !3 L11. hit in earl' :a'. $! an'!ne 2etting !n a c!ntinued rise in !il prices runs the ris" that 0hursda'Os release is Kust the 3irst !3 man' aimed at l!*ering prices. em!ving th!se speculat!rs 3r!m the mar"et *!uld eliminate the premium paid t! c!ver the pr!3its generated 2' invest!rs@ said >heit.

Prices lo" trending do"n

Oil prices lo er+ sliding do n .7 Ti!es@ Nune 27@ 2011 Xaccessed Nul' 3@ 2+11@ httpC11latimes2l!gs.latimes.c!m1m!ne'Gc!12+111+&1retail?gas!line?prices?ma'?
decline?sharpl'?s!!n.html@ :DY /rude !il prices are !n such a slide that the' c!uld dr!p 2ac" int! the l!* L8+s a 2arrel@ ,all $treet anal'sts said@ adding that this c!uld reduce retail gas!line prices t! a2!ut L3 a gall!n nati!nall' and t! a2!ut L3..+ t! L3.5+ a gall!n in /ali3!rnia. OilQs slide *as c!ntinuing :!nda' !n a v!latile trading da'. ,est 0e5as (ntermediate crude@ the ).$. 2enchmar"@ *as d!*n an additi!nal 5& cents t! L9+.&1 a 2arrel a3ter 3alling as l!* as L89.&1 a 2arrel !n the 7e* H!r" :ercantile 45change. 0he ).$. 2enchmar" has 3allen 15I in the sec!nd quarter. 8rent
crude@ the 4ur!pean 2enchmar"@ *as !33 17 cents t! L1+..95 a 2arrel@ having dr!pped as l!* as L1+2.28 a 2arrel !n the (/4 9utures 45change in #!nd!n. /!ntinuing c!ncerns a2!ut the strength !3 the gl!2al rec!ver' and angst !ver 4ur!pean de2t levels@ particularl' that !3 >reece@ *ere seen as the 2iggest 3act!rs. T0here are real *!rries !ver *hether the deal t! 2ail !ut >reece *ill h!ld t!gether. -nd last *ee"Qs ann!uncement a2!ut the release !3 !il 3r!m strategic nati!nal reserves is de3initel' having an impact@T said N!hn Vildu33@ a partner and energ' anal'st 3!r -gain /apital in 7e* H!r". T0he l!* L8+s 3!r !il are a de3inite p!ssi2ilit' and that c!uld "n!c" an!ther .+ cents t! 5+ cents !33 the price !3 a gall!n !3 gas!line.T /urrentl'@ the average price !3 a gall!n !3 gas!line in /ali3!rnia is L3.837 a gall!n@ d!*n 3r!m L3.9+3 a *ee" ag!. 0hatQs als! d!*n 3r!m a high !3 L..25 a gall!n in :a'@ 2ut still signi3icantl' higher than the 'ear?ag! average !3 L3.135 a gall!n. 0he retail gas!line 3igures are 3r!m the --- 9uel >auge ep!rt@ *hich m!nit!rs prices c!llected 2' the Oil Price (n3!rmati!n $ervice and ,right 45press at m!re than 1++@+++ service stati!ns acr!ss the nati!n. 7ati!nall'@ the average 3ell t! L3.5&5 a gall!n@ d!*n 3r!m L3.98 a gall!n in earl' :a'. - 'ear ag!@ the average price 3!r a gall!n !3 regular in the ).$. *as L2.755. (n !ther energ' ne*s@ the 28?mem2er (nternati!nal 4nerg' -genc' ann!unced a nati!n?2'?nati!n 2rea"d!*n !3 h!* much !il and re3ined pr!ducts *ere g!ing t! 2e released 3r!m strategic reserves. 0he Paris?2ased (4-@ *hich includes the ).$.@ ann!unced last *ee" that g!vernment reserves *!uld 2e tapped in a 2id t! reduce crude prices@ ma"e up 3!r the l!ss !3 #i2'an !il !n *!rld mar"ets and pr!vide a 2!!st t! struggling ec!n!mies. 0he ).$. *ill release 3+ milli!n 2arrels !3 crude@ the (4- said. Napan and $!uth V!rea are releasing 7.. milli!n 2arrels !3 crude and 3.9& milli!n 2arrels !3 re3ined !il pr!ducts@ the (4- added@ and 4ur!pean nati!ns *ill release ..2 milli!n 2arrels !3 crude and 15 milli!n 2arrels !3 pr!ducts
Oil prices lo er+ Greece -11@ Nune 15@ 2011 Xaccessed Nul' 3@ 2+11@ Oil hits l!*est level since 9e2ruar'@
httpC11m!ne'.cnn.c!m12+111+&1151mar"ets1!ilGprices1inde5.htm@ :DY 74, HO V </77:!ne'= ?? Oil prices plunged m!re than .I ,ednesda' t! their l!*est level in nearl' 3!ur m!nths@ as 3ears !ver >reeceQs de2t issues pushed 2!th st!c" and c!mm!dit' prices 2r!adl' l!*er. Oil prices cl!sed d!*n L..5&@ !r ..&I@ t! L9..81 a 2arrel@ its l!*est cl!se since 9e2. 18. /rude prices t!!" their cue 3r!m the st!c" mar"et@ *here ,ednesda'Qs sell?!33 sent the D!* d!*n m!re than 2++ p!ints.. T0he speculat!rs are running 3!r the d!!r@T said Names /!rdier@ president !3 #i2ert' 0rading >r!up. 5 reas!ns t! 2e 2earish !n !il st!c"s Oil has 2een in s!me*hat stead' decline 3!r *ee"s n!* a3ter hitting m!re than L11+ a 2arrel earlier this 'ear. /!rdier said that as l!ng there c!ntinue t! 2e signs that the ).$. ec!n!m' is sl!*ing d!*n@ and large !il c!nsuming nati!ns such as (ndia and /hina are ta"ing measures t! stem in3lati!n@ prices sh!uld c!ntinue t! trend l!*er. T0he c!mm!dit' 2u22le 2urst 3+ da's ag!@T /!rdier said. T,eQre are l!!"ing at L8+ t! L85 a 2arrel !il a3ter driving seas!n ends Xa3ter #a2!r Da'Y i3 these trends c!ntinue.T

***Hig" oil $ad # 98 econo!%***

!S *conomy lo" oil )est

.o oil prices ould Lu!pstart t"e 98 econo!% # stoc&s5 consu!er spending5 in'lation and transportation industr% Nim @u$a&@ seni!r mar"ets edit!r 3!r :$7 :!ne'. Previ!usl'@ he served as seni!r 3inancial edit!r at ,!rth magaRine and as edit!r !3 ;enture magaRine@ 91121200(
0he last m!nth has given invest!rs a l!t !3 evidence !3 h!* a m!dest pull2ac" in !il prices can 3uel a st!c" mar"et rall' . 9!r e5ample@ !n $ept. 8@ the L1.+7 dr!p in the price !3 a 2arrel !3 !il <3!r Oct!2er deliver'= t! L&&.25 *as en!ugh t! reverse a t*!?da' sell?!33 and push the D!* N!nes (ndustrial -verage <L(7D)= up 31 p!ints. -nd the decline in !il 3r!m L77 !n -ug. 8 t! recent levels *as en!ugh t! pr!pel the $JP 5++ $t!c" (nde5 <L(7_= t! a 3I gain 3!r the m!nth and t! sustain the mar"etQs rall' int! the hist!ricall' *ea" last t*! *ee"s !3 -ugust. 0he $JP 5++ <L(7_= clim2ed 1I during that peri!d. #!*er !il prices *!uld have d!min! e33ect >r!ss D!mestic Pr!duct <>DP= num2ers d!nQt react that quic"l' t! sh!rt?term changes in energ' prices@ 2ut L&. a 2arrel !il in Nune 2++7 *!uld 2e en!ugh t! give the ec!n!m' a 2ig 2!!st !ver the c!urse !3 a 'ear. /!nsumers *!uld have m!re t! spend ?? !r at least n!t less ?? than"s t! l!*er !r stead' prices at the pump. #!*er 3uel prices *!uld ta"e the pressure !33 pr!3its at c!mpanies 3r!m airlines t! truc"ers t! railr!ads t! retailers such as ,al?:art $t!res <,:0@ ne*s@ msgs=. 0he 9ederal eserve *!uld 2reathe a sigh !3 relie3@ t!!@ i3 energ' c!sts st!pped pushing prices up*ard@ and 8en 8ernan"e and c!mpan' at the 9ed *!uld 2e m!re li"el' t! "eep their 3ingers !33 the rate?increase trigger. $*eet scenari!@ n!D #!*er !il prices "eep ec!n!mic gr!*th higher than e5pected@ "eep the 9ederal eserve !n the sidelines@ and push up st!c" prices in 2++7.
T"e 98 is &e% to glo$al econo!% ,alter ussell Mead@ Vissinger $eni!r 9ell!* at the /!uncil !3 9!reign elati!ns@ 9!reign P!lic'. 3111 03
$imilarl'@ in the last &+ 'ears@ as 3!reigners have acquired a greater value in the )nited $tates??g!vernment and private 2!nds@ direct and p!rt3!li! private investments??m!re and m!re !3 them have acquired an interest in maintaining the strength !3 the ).$.?led s'stem. - c!llapse !3 the ).$. ec!n!m' and the ruin !3 the d!llar *!uld d! m!re than dent the pr!sperit' !3 the )nited $tates. ,ith!ut their 2est cust!mer@ c!untries including /hina and Napan *!uld 3all int! depressi!ns. 0he 3inancial strength !3 ever' c!untr' *!uld 2e severel' sha"en sh!uld the )nited $tates c!llapse. )nder th!se circumstances@ de2t 2ec!mes a strength@ n!t a *ea"ness@ and !ther c!untries 3ear t! 2rea" *ith the )nited $tates 2ecause the' need its mar"et and !*n its securities. O3 c!urse@ pressed t!! 3ar@ a large nati!nal de2t can turn 3r!m a s!urce !3 strength t! a crippling lia2ilit'@ and the )nited $tates must c!ntinue t! Kusti3' !ther c!untriesQ 3aith 2' maintaining its l!ng?term rec!rd !3 meeting its 3inancial !2ligati!ns. 8ut@ li"e $ams!n in the temple !3 the Philistines@ a c!llapsing ).$. ec!n!m' *!uld in3lict en!rm!us@ unaccepta2le damage !n the rest !3 the *!rld. 0hat is stic"' p!*er *ith a vengeance.

High oil )ad !S economy

"ig" oil prices t"reaten !ultiple sectors o' t"e u0s0 econo!% T"e 8out"ern 8tates ,nerg% Coard@ -:4 (/-7 474 >H $4/) (0HC 8)(#D(7> - 8 (D>4 0O 474 >H (7D4P47D47/4 -7D 0O - $)$0-(7-8#4 9)0) 4@ Nul' 2+0(@ p. 2?3.
-mericans are nearl' unanim!us in the 2elie3 that dependence !n imp!rted !il is a ver' seri!us pr!2lem. 9ull' 92I 0he latest !il price surge is unique. )nli"e the high prices that resulted 3r!m the 1973 !il em2arg! and the (ranian rev!luti!n !3 1979@ there have 2een n! recent maK!r !il suppl' disrupti!ns. 4ither !il pr!ducers ar!und the *!rld simpl' cann!t meet rapidl' increasing gl!2al demand@ !r OP4/ mem2ers <and p!ssi2l' !thers= are manipulating !il supplies and prices 3!r ma5imum pr!3it <and perhaps t! retaliate ec!n!micall' against ).$. p!licies !n terr!rism and dem!crac'=. (n either case@ rapidl'. rising !il prices have distur2ing implicati!ns 3!r the ).$. ec!n!m' and 3!r ).$. energ' securit' Oil and natural gas price increases in recent 'ears have had a pr!3!und impact !n ).$. 2usinesses. (ncreased energ' prices have required c!mpanies t! pass al!ng price increases t! c!nsumers@ change capital investment@ alter the *a' 2usinesses are run@ !r@ in the e5treme@ g! !ut !3 2usiness. 0he sect!rs m!st at ris" includeC * 0he aviati!n industr'@ 2!th c!mmercial airlines and carg! airlines@ including air transp!rtati!n industr' manu3acturers and suppliers * 0he agriculture industr'@ including pesticide and 3ertiliRer manu3acturers d 0he aut!m!2ile industr'@ including the supp!rting parts manu3acturers and the sales in3rastructure d 0ruc"ing c!mpanies@ landscapers@ laundr' and dr'?cleaning 3irms@ restaurants@ deliver' 2usinesses@ ta5i and lim!usine services@ 3l!rists@ and numer!us !ther energ'?dependent 2usinesses
7 surge in oil prices ould cause an in'lationar% spiral5 "urting t"e 98 econo!%
N!nathan 0epperman@ seni!r edit!r at 9!reign -33airs@ 51112++.@ /harlest!n Dail' :ail - surge in !il prices *!uld hurt ever'!neC c!nsumers@ 2' ma"ing transp!rtati!n and heating 3ar m!re e5pensiveP and pr!ducers@ 2' increasing the c!st !3 their energ' and !ther ra* materials. 0his *!uld raise the price !3 3inished g!!ds@ decreasing sales and hitting c!nsumers 'et again. ,!rse@ as *e sa* in the 197+s@ a sudden Kump in !il prices c!uld als! cause interest rates t! s" 'r!c"et@ setting !33 a danger!us in3lati!nar' spiral.
Hig" oil prices cause in'lation CusinessWorld <Philippines=@ 512.12003

>!vernment !33icials are als! c!ncerned a2!ut having t! change in3lati!n targets in line *ith the increase in !il prices. On their part@ *!r"ers are see"ing a *age hi"e in light !3 the spiraling e33ect !3 the increase in !il prices !n the c!st !3 c!mm!dities.

()/93 Herndon/Petit/Tate/Quinn
High oil )ad hegemony 314

surging oil prices/dependence are destro%ing t"e u0s0Es superpo er status :ichael 0. ?lare@ Pr!3ess!r@ Peace and ,!rld $ecurit' $tudies@ %ampshire /!llege@ AP!rtrait !3 an Oil?-ddicted 9r!mer $uperp!*er@B 0O:D($P-0/%./O:@ 5?9?0=@ ***.c!mm!ndreams.!rg1archive12++81+51+9188321@
7ineteen 'ears ag!@ the 3all !3 the 8erlin ,all e33ectivel' eliminated the $!viet )ni!n as the *!rldOs !ther superp!*er. Hes@ the )$$ as a p!litical entit' stum2led !n 3!r an!ther t*! 'ears@ 2ut it *as clearl' an e5?superp!*er 3r!m the m!ment it l!st c!ntr!l !ver its satellites in 4astern 4ur!pe. #ess than a m!nth ag!@ the )nited $tates similarl' l!st its claim t! superp!*er status *hen a 2arrel crude !il r!ared past L11+ !n the internati!nal mar"et @ gas!line prices cr!ssed the L3.5+ thresh!ld at -merican pumps@ and diesel 3uel t!pped L..++. -s *as true !3 the )$$ 3!ll!*ing the dismantling !3 the
8erlin ,all@ the )$- *ill n! d!u2t c!ntinue t! stum2le !n li"e the superp!*er it !nce *asP 2ut as the nati!nOs ec!n!m' c!ntinues t! 2e eviscerated t! pa' 3!r its dail' !il 3i5@ it@ t!!@ *ill 2e seen 2' increasing num2ers !3 savv' !2servers as an e5?superp!*er?in? the?ma"ing. 0hat the 3all !3 the 8erlin ,all spelled the erasure !3 the $!viet )ni!nOs superp!*er status *as !2vi!us t! internati!nal !2servers at the time. -3ter
all@ the )$$ visi2l' ceased t! e5ercise d!mini!n !ver an empire <and an ass!ciated militar'?industrial c!mple5= enc!mpassing nearl' hal3 !3 4ur!pe and much !3 /entral -sia. 0he relati!nship 2et*een rising !il prices and the !2literati!n !3 -mericaOs superp!*er status is@ h!*ever@ hardl' as sel3? evident. $! letOs c!nsider the c!nnecti!n. Dr' %!le $uperp!*er 0he 3act is@ -mericaOs *ealth and p!*er has l!ng rested !n the a2undance !3
cheap petr!leum. 0he )nited $tates *as@ 3!r a l!ng time@ the *!rldOs leading pr!ducer !3 !il@ suppl'ing its !*n needs *hile generating a health' surplus 3!r e5p!rt.
"ig" oil prices gut "ege!on%>trade de'icits5 enric" our ene!ies :ichael 0. ?lare@ Pr!3ess!r@ Peace and ,!rld $ecurit' $tudies@ %ampshire /!llege@ A8ad Oil 7e*s %ere t! $ta'@B -$(- 0(:4$ 3? 13?0=@ ***.atimes.c!m1atimes1>l!2alG4c!n!m'1N/13DK+3.html@
9inall'@ there are the implicati!ns 3!r the )nited $tates as a *h!le. 8ecause the )$ relies !n petr!leum 3!r appr!5imatel' .+I !3 its t!tal energ' suppl'@ and 2ecause nearl' t*!?thirds !3 its crude !il must 2e imp!rted@ this c!untr' *ill 2e 3!rced t! dev!te an ever?increasing share !3 its nati!nal *ealth t! energ' imp!rts. (3 !il remains at !r a2!ve the L1++ per 2arrel mar" in 2++8@ and@ as e5pected@ the )nited $tates imp!rts s!me ..75 2illi!n 2arrels !3 the stu33@ the net !ut3l!* !3 d!llars is li"el' t! 2e in the range !3 L.75 2illi!n. 0his *ill c!nstitute the largest single c!ntri2uti!n t! -mericaQs 2alance?!3?pa'ments de3icit and *ill surel' pr!ve a maK!r 3act!r in the c!ntinuing er!si!n !3 the d!llar. 0he principal recipients !3 petr!?d!llars ? the maK!r !il?pr!ducing states !3 the Persian >ul3@ the
3!rmer $!viet )ni!n and #atin -merica ? *ill und!u2tedl' use their accumulating *ealth t! purchase 2ig chun"s !3 prime -merican assets !r@ as in the case !3 %ug! /haveR !3 ;eneRuela !r the $audi princes@ pursue p!litical aims inc!nsistent *ith -merican 3!reign p!lic' !2Kectives. -mericaQs vaunted status as the *!rldQs s!le superp!*er *ill pr!ve increasingl' ephemeral as ne* petr!? superp!*ers ? a term c!ined 2' $enat!r ichard #ugar !3 (ndiana ? c!me t! d!minate the ge!p!litical landscape. $!@ *hile :arch 3 ma'
have !nl' 2rie3l' made the headlines here@ it ma' *ell 2e remem2ered as the true T2lac" :!nda'T !3 !ur ne* centur'@ the m!ment *hen energ' c!sts 2ecame the decisive 3act!r in the 2alance !3 gl!2al ec!n!mic p!*er.
9080 !ilitar% po er depends upon access to c"eap oil :ichael 0. ?lare@ Pr!3ess!r@ Peace and ,!rld $ecurit' $tudies@ %ampshire /!llege@ AP!rtrait !3 an Oil?-ddicted 9r!mer $uperp!*er@B 0O:D($P-0/%./O:@ 5?9?0=@ ***.c!mm!ndreams.!rg1archive12++81+51+9188321@
7! less imp!rtant *as the r!le !3 a2undant petr!leum in 3ueling the gl!2al reach !3 ).$. militar' p!*er. 9!r all the tal" !3 -mericaOs gr!*ing reliance !n c!mputers@ advanced sens!rs@ and stealth techn!l!g' t! prevail in *ar3are@ it has 2een !il a2!ve all that gave the ).$. militar' its capacit' t! Apr!Kect p!*erB !nt! distant 2attle3ields li"e (raq and -3ghanistan. 4ver' %umvee@ tan"@ helic!pter@ and Ket 3ighter requires its dail' rati!n !3 petr!leum@ *ith!ut *hich -mericaOs techn!l!g'?driven militar' *!uld 2e 3!rced t! a2and!n the 2attle3ield. 7! surprise@ then@ that the ).$. Department !3 De3ense is the *!rldOs single 2iggest c!nsumer !3 petr!leum@ using m!re !3 it ever' da' than the entire nati!n !3 $*eden.

((/93 Herndon/Petit/Tate/Quinn
High oil )ad hegemony 324

O2. D,P,1D,1-, 87P8 O9/ ,-O1OMO TO P7O BO/ 2T5 G9TT21G 9080 POW,/ :ichael 0. ?lare@ Pr!3ess!r@ Peace and ,!rld $ecurit' $tudies@ %ampshire /!llege@ AP!rtrait !3 an Oil?-ddicted 9r!mer $uperp!*er@B 0O:D($P-0/%./O:@ 5?9?0=@ ***.c!mm!ndreams.!rg1archive12++81+51+9188321@
0h!ugh 3e* 3ull' realiRed it@ this represented a signi3icant er!si!n !3 s!vereign independence even 2e3!re the price !3 a 2arrel !3 crude s!ared a2!ve L11+. 8'
n!*@ *e are trans3erring such staggering sums 'earl' t! 3!reign !il pr!ducers@ *h! are using it t! g!22le up valua2le -merican assets@ that@ *hether *e "n!* it !r n!t@ *e have essentiall' a2and!ned !ur claim t! superp!*erd!m. -cc!rding t! the latest data 3r!m the ).$. Department !3 4nerg'@ the )nited $tates is imp!rting 12?1. milli!n 2arrels !3 !il per da'. -t a current price !3 a2!ut L115 per 2arrel@ thatOs L1.5 2illi!n per da'@ !r L5.8 2illi!n per 'ear. 0his represents the single largest c!ntri2uti!n t! -mericaOs 2alance?!3?pa'ments de3icit@ and is a leading cause 3!r the d!llarOs !ng!ing dr!p in value. (3 !il prices rise an' higher M in resp!nse@ perhaps@ t! a ne* crisis in the :iddle 4ast <as might 2e !ccasi!ned 2' ).$. air stri"es !n (ran= M !ur annual imp!rt 2ill c!uld quic"l' appr!ach three?quarters !3 a trilli!n d!llars !r m!re per 'ear. ,hile !ur ec!n!m' is 2eing depleted !3 these 3unds@ at a m!ment *hen credit is scarce and ec!n!mic gr!*th has screeched t! a halt@ the !il regimes !n *hich *e depend 3!r !ur dail' 3i5 are dep!siting their m!untains !3 accumulating petr!d!llars in As!vereign *ealth 3undsB <$,9s= M state?c!ntr!lled investment acc!unts that 2u' up priRed 3!reign assets in !rder t! secure n!n?!il?
dependent s!urces !3 *ealth. -t present@ these 3unds are alread' 2elieved t! h!ld in e5cess !3 several trilli!n d!llarsP the richest@ the -2u Dha2i (nvestment -uth!rit' <-D(-=@ al!ne h!lds L875 2illi!n. 0he -D(- 3irst made headlines in 7!vem2er 2++7 *hen it acquired a L7.5 2illi!n sta"e in /itigr!up@ -mericaOs largest 2an" h!lding c!mpan'. 0he 3und has als! made su2stantial investments in -dvanced :icr! $'stems@ a maK!r chip ma"er@ and the /arl'le >r!up@ the private equit' giant. -n!ther 2ig $,9@ the Vu*ait (nvestment -uth!rit'@ als! acquired a multi2illi!n?d!llar sta"e in /itigr!up@ al!ng *ith a L&.& 2illi!n chun" !3 :errill #'nch. -nd these are 2ut the 3irst !3 a series !3 maK!r $,9 m!ves that *ill 2e aimed at acquiring sta"es in t!p -merican 2an"s and c!rp!rati!ns. 0he managers !3 these 3unds naturall' insist that the' have n! intenti!n !3 using their !*nership !3 prime -merican pr!perties t! in3luence ).$. p!lic'. (n time@ h!*ever@ a trans3er !3 ec!n!mic p!*er !3 this magnitude cann!t help 2ut translate int! a trans3er !3 p!litical p!*er as *ell . (ndeed@ this pr!spect has alread' stirred deep misgivings in /!ngress. A(n the sh!rt run@ that the' Xthe :iddle 4astern $,9sY are investing here is g!!d@B $enat!r 4van 8a'h <D?(ndiana= recentl' !2served. A8ut in the l!ng run it is unsustaina2le. Our p!*er and auth!rit' is er!ding 2ecause !3 the am!unts *e are sending a2r!ad 3!r energ'`.B
H2GH O2. -O8T8/D,P,1D,1-, G9T O9/ H7/D POW,/5 D,8T/OO21G H,G,MO1O :ichael 0. ?lare@ Pr!3ess!r@ Peace and ,!rld $ecurit' $tudies@ %ampshire /!llege@ AP!rtrait !3 an Oil?-ddicted 9r!mer $uperp!*er@B 0O:D($P-0/%./O:@ 5?9?0=@ ***.c!mm!ndreams.!rg1archive12++81+51+9188321@
,!rse 'et@ the ).$. militar' *ill need even m!re !il 3!r the 3uture *ars !n *hich the Pentag!n is n!* d!ing the planning. (n this *a'@ the ).$. e5perience in (raq has especiall' *!rris!me implicati!ns. )nder the militar' Atrans3!rmati!nB initiated 2' $ecretar' !3 De3ense D!nald ums3eld in 2++1@ the 3uture ).$. *ar machine *ill rel' less !n A2!!ts !n the gr!undB and ever m!re !n techn!l!g'. 8ut techn!l!g' entails an ever? greater requirement 3!r !il@ as the ne*er *eap!ns s!ught 2' ums3eld <and n!* $ecretar' !3 De3ense !2ert >ates= all c!nsume man' times m!re 3uel than th!se the' *ill replace . 0! put this in perspectiveC 0he average >.( in (raq n!* uses a2!ut seven times as much !il per da' as >.(.s did in the 3irst >ul3 ,ar less than t*! decades ag!. -nd ever' sign indicates that the same rati! !3 increase *ill appl' t! c!ming c!n3lictsP that the dail' c!st !3 3ighting *ill s"'r!c"etP and that the Pentag!nOs capacit' t! sh!ulder multiple 3!reign militar' 2urdens *ill unravel. 0hus are superp!*ers und!ne.

(;/93 Herndon/Petit/Tate/Quinn
***Hig" oil $ad # /ussia***

(=/93 Herndon/Petit/Tate/Quinn
Russia *conomy 314

Hig" Oil Prices under!ine t"e /ussian econo!% and under!ine re'or! e''orts "ic" are &e% to econo!ic gro t" Pri!e+Tass 4nglish?language Cusiness 1e s ire Oct!2er 13@ 2+0)
Oil prices ma' 2e at all time highs@ 2ut ussiaQs >DP gr!*th in 2++5 is e5pected t! decline 3r!m its 2++. level even as !il m!ne' is p!uring int! g!vernment c!33ers. -lth!ugh it is !3ten said that the ussian ec!n!m' is 2!!ming than"s t! the high !il price this is n!t the current realit'. ,hat is *!rse@ s!me ec!n!mists argue@ even higher !il prices ma' damage ussian ec!n!mic re3!rms and increase the g!vernmentQs c!ntr!l !ver the ec!n!m'. ussiaQs >DP@ r!se 5.8I in Nanuar'?-ugust@ acc!rding t! the 4c!n!mic Devel!pment and 0rade :inistr'. >DP
*as up 7.3I in Nanuar'?-ugust last 'ear. Q- m!re accurate statement is that ussia is maintaining a high gr!*th rate than"s t! a high !il price@Q 7atal'a Orl!va@ ec!n!mist at -l3a 8an"@ said. Q0he pr!2lem is that the gr!*th rate is n!t accelerating. ussiaQs >DP gr!*th *as 7.1I in 2++. and *ill 3all t! Kust under &I in 2++5. $h!uld !il prices dr!p@ the gr!*th rate c!uld 3all t! 3I !r .I@Q she added. 8ut the 3inancial situati!n !3 the ussian g!vernment has signi3icantl' impr!ved than"s t! high !il prices@ ec!n!mists said. Q:!st !3 the gains 3r!m <high !il prices= are simpl' g!ing t! radicall' impr!ve the stateQs internati!nal 2alance sheet@Q -l 8reach@ chie3 ec!n!mist at 8runs*ic" )8$@ said in a $eptem2er rep!rt. Q0here are c!nsidera2le sec!nd?!rder e33ects !3 this impr!vement@ 2ut it is n!t the !il m!ne'
directl' that is 3uelling the rapid d!mestic demand gr!*th.Q Q0he clear 2ene3iciaries !3 the high <!il= prices are the 2udget and $ta2iliRati!n 9und@Q 8reach added. 8reach said that since 2ig !il receipts n!* g! t! the 2udget surplus and reserves the ec!n!m' is running !n ).$. )$D 3+ per 2arrel !il price@ n!t )$D &+ per 2arrel !il price.
T0his is ver' p!sitiveC it 2!!sts credit*!rthiness@ "eeps vulnera2ilit' t! !il prices l!*@ and all!*s 3!r sustained@ str!ng e5pansi!n@Q 8reach said. %!*ever@ the d!*nturn in >DP gr!*th al!ng *ith pr!tests 2' dissatis3ied pu2lic sect!r *!r"ers !ver l!* salaries has !nl' increased pressure !n the g!vernment t! spend 3r!m the $ta2iliRati!n 9und. 0he $ta2iliRati!n 9und@ *hich *as esta2lished !n Nanuar' 1@ 2++.@ accumulates the 3ederal 2udgetQs e5tra revenues 3r!m pr!gressive !il e5p!rt ta5es !n )rals 2lend !il prices e5ceeding )$D 2+ per 2arrel. President ;ladimir Putin has signed a 2ill int! a la* hi"ing the 2ase !il price used 3!r calculating c!ntri2uti!ns t! the $ta2iliRati!n 9und t! )$D 27 per 2arrel starting Nanuar' 1@ 2++&. 4sta2lished in 2++.@ the $ta2iliRati!n 9und has accumulated 9&+.7 2illi!n ru2les as !3 Oct!2er 1. 0he 9und is pr!Kected t! am!unt t! 1..25 trilli!n ru2les as !3 Nanuar' 1@ 2++&@ ussiaQs 9inance :inister -le5ei Vudrin said last m!nth. Putin said !n $eptem2er 27 that ussiaQs $ta2iliRati!n 9und *!uld n!t 2e used 3!r s!cial purp!ses@ 2ut t! sta2iliRe the ussian ec!n!m'. T(t <$ta2iliRati!n 9und= is 2eing 3!rmed n!t t! res!lve s!cial issues 2ut t! "eep macr!ec!n!mic 3igures sta2le@ t! n!t destr!' the ec!n!m'@ t! prevent prices hi"es and restrict in3lati!n@T Putin said. ussian g!vernment !33icials have als! reiterated that the 3und is !nl' t! 2e used 3!r reserve purchases and de2t repa'ment. 0he 9inance :inistr' plans t! pa' )$D 1+ 2illi!n?)$D 15 2illi!n !n ussiaQs s!vereign 3!reign de2t ahead !3 schedule in 2++&@ Vudrin said last m!nth. (n the remainder !3 this 'ear@ ussia plans t! pa' )$D 3 2illi!n?)$D 5 2illi!n !n ussiaQs s!vereign 3!reign de2t ahead !3 schedule@ Vudrin added. 0he earl' de2t repa'ment is t! 2e 3inanced 3r!m ussiaQs $ta2iliRati!n 9und@ he added. $! 3ar this 'ear ussia paid )$D 18.3 2illi!n ahead !3 schedule t! the (nternati!nal :!netar' 9und@ !r (:9@ and the Paris /lu2 !3 credit!rs. Q9inance :inister -le5ei Vudrin has s! 3ar *!n the 3ight s! that all m!ne' g!ing t! the $ta2iliRati!n 9und can !nl' 2e used 3!r reserve purchases !r de2t repa'ment@Q 8reach said. Q,hile there is l!!sening planned in 2++&@ the
-ll!*ing t!! much cash t! 2e tied up in the $ta2iliRati!n 9und c!uld 2e a drag !n the ec!n!m'@ Orl!va !3 -l3a 8an" said. Q( d!nQt 2elieve the g!vernment is pr!perl' managing the
2udget sh!uld 2alance at )$D 33 per 2arrel 8rent prices@Q he added. $!me ec!n!mists 2elieve the time has alread' c!me t! rem!ve the l!c" 3r!m the $ta2iliRati!n 9und.
!il revenues@Q she said. Q0he $ta2iliRati!n 9und has e5panded greatl' and the ec!n!m' needs this m!ne'. 0he' sh!uld increase spending@ 2ut 3irst the' have t! de3ine *here the m!ne' sh!uld 2e spent and evaluate the macr!ec!n!mic implicati!ns@Q Orl!va added. 9unds must 2e all!cated 3!r pr!Kects in a *a' that *ill minimiRe the in3lati!nar' impact@ anal'sts said@ such as pr!Kects t! impr!ve in3rastructure !r create empl!'ment. Q%!*ever@ the g!vernment sh!uld n!t necessaril' e5pect t! meet its g!al !3 l!*ering in3lati!n t! .I in t*! 'ears <i3 spending is increased=@Q she added. Other ec!n!mists 2elieve an' spending 3r!m the $ta2iliRati!n 9und *!uld 2e irresp!nsi2le given the g!vernmentQs stated g!al t! l!*er in3lati!n. Q( d!nQt thin" an' <!3 the m!ne'= in the $ta2iliRati!n 9und sh!uld 2e released@ there are !ther s!urces *ithin the 2udget that can 2e reall!cated t! achieve the g!vernmentQs spending pri!rities@Q Hevgen' 7ad!rshin@ chie3 ec!n!mist at 0rust (nvestment 8an"@ said. Q0here is a ver' imp!rtant reas!n 3!r this@ and that is a p!litical and ec!n!mic !2ligati!n t! l!*er in3lati!n. (3 the /8 </entral 8an" !3 ussia= c!ntinues its current e5change rate p!lic' the' need the $ta2iliRati!n 9und t! remain unt!uched <in !rder t! c!ntr!l in3lati!n=@Q 7ad!rshin said. 7ad!rshin 2elieves the g!vernment *ill n!t have misgivings a2!ut spending 3r!m the $ta2iliRati!n 9und i3 !il prices decline. Q0he g!vernment al*a's has an intenti!n t! spend 3r!m the $ta2iliRati!n 9und i3 !il prices decrease@Q 7ad!rshin said. Q( disagree *ith this p!lic'. -s s!!n as the' t!uch the $ta2iliRati!n 9und *ill 3ace m!netar' pr!2lems@ namel' high in3lati!n. (3 the g!vernment is 3aced *ith a 2udget de3icit ( *!uld rather the' 3inance the de2t *ith 2!nds instead !3 turning t! the $ta2iliRati!n 9und.Q ,ith Duma electi!ns scheduled 3!r 2++7 and a presidential electi!n in 2++8 p!liticians c!uld have an!ther e5cuse t! spend 3r!m the $ta2iliRati!n 9und in !rder t! curr' 3av!r *ith v!ters. Q0here *ill pr!2a2l' 2e s!me pressure <!n p!liticians= t! increase spending@ 2ut an' e5pansi!n !3 spending *!uld m!st li"el' 2e m!derate@ health' and *!uld n!t have adverse a33ects@Q Orl!va !3 -l3a 8an" said. 8ut s!me anal'sts said it is p!ssi2le that !il prices rise t! )$D 1++ per 2arrel and remain at that level 3!r an e5tended peri!d !3 time. Q)nder !ur )$D 1++ per 2arrel scenari! the picture starts t! 2!rder !n the surrealC PutinQs g!al !3 d!u2ling >DP 2' 2+12 *!uld 2e met in 2+11 and his 2+++ target !3 catching P!rtugal !n a >DP per capita 2asis *ithin 15 'ears *!uld have 2een achieved in 2+12@Q Peter ,estin@ chie3 ec!n!mist at -t!n /apital@ *r!te in a recent rep!rt. 8ut Orl!va said the picture ma' n!t 2e that e5citing. Q0he implicati!ns are that ussia *ill 2ec!me m!re dependent !n !il@ l!cal pr!ducers *ill l!!se their c!mpetitiveness t! imp!rters and the 2udget *ill rel' even m!re !n !il revenues@Q she said Orl!va. 0his scenari! *!uld 2e negative 3!r ussia@ 7ad!rshin !3 0rust 8an" said. Q%igh !il prices d! n!t al*a's 2ring e5tra!rdinar' gr!*th@Q he said. QD!mestic energ' prices als! increase@ causing the pr!ducer price inde5 t! rise@ ma"ing it pr!2lematic 3!r industr' t! devel!p. ( *!uld e5pect stagnati!n t! !ccur@ even in an envir!nment *ith an incredi2l' high 2udget surplus. <-n !il price !3 )$D 1++= *!uld threaten instituti!nal m!di3icati!ns necessar' 3!r the ec!n!m' t! e5pand@Q he added. /!ntrar' t! p!pular
!pini!n@ !il *ealth is n!t al*a's a 2lessing and can create m!re pr!2lems than it s!lves@ ec!n!mists said. QOil *ealth all!*s g!vernments t! pursue p!pulist@ sh!rt?termist p!lic' and reduces the incentive t! ma"e hard decisi!ns@Q 8reach said. Q9!r e5ample@ *h'
privatiRe )4$ and the electricit' industr' *hen !ne c!uld simpl' use s!me !3 the ample state 3unds t! rene* its capital st!c"D Or *!rse still@ *h' n!t 2u' up m!re previ!usl' privatiRed assetsD Put an!ther *a'@ the 2est case *!uld 2e 3!r the !il *ind3all t! 2e used t! help mitigate the e33ects !3 speeded?up re3!rm@ rather than used t! dela' needed !nes@Q he added. 4nd

Russia *conomy 324

/ussian econo!ic collapse causes nuclear con'lict $teven David@ Pr!3. !3 p!litical science at N!hns %!p"ins@ 1999@ 9!reign -33airs
(3 internal *ar d!es stri"e ussia@ ec!n!mic deteri!rati!n *ill 2e a prime cause . 9r!m 1989 t! the present@ the >DP has 3allen 2' 5+ percent. (n a
s!ciet' *here@ ten 'ears ag!@ unempl!'ment scarcel' e5isted@ it reached 9.5 percent in 1997 *ith man' ec!n!mists declaring the true 3igure t! 2e much higher. 0*ent'?t*! percent !3 ussians live 2el!* the !33icial p!vert' line <earning less than L 7+ a m!nth=. :!dern ussia can neither c!llect ta5es <it gathers !nl' hal3 the revenue it is due= n!r signi3icantl' cut spending. e3!rmers t!ut privatiRati!n as the c!untr'Qs cure?all@ 2ut in a land *ith!ut *ell?de3ined pr!pert' rights !r c!ntract la* and *here su2sidies remain a *a' !3 li3e@ the pr!spects 3!r transiti!n t! an -merican?st'le capitalist ec!n!m' l!!" rem!te at 2est. -s the massive devaluati!n !3 the ru2le and the current p!litical crisis sh!*@ ussiaQs c!nditi!n is even *!rse than m!st anal'sts 3eared. (3 c!nditi!ns get *!rse@ even the st!ic ussian pe!ple *ill s!!n run !ut !3 patience. - 3uture c!n3lict *!uld quic"l' dra* in ussiaQs militar'. (n the $!viet da's civilian rule "ept the p!*er3ul armed 3!rces in chec". 8ut *ith the /!mmunist Part' !ut !3 !33ice@ *hat little civilian c!ntr!l remains relies !n an e5ceedingl' 3ragile 3!undati!n ?? pers!nal 3riendships 2et*een g!vernment leaders and militar' c!mmanders. :ean*hile@ the m!rale !3 ussian s!ldiers has 3allen t! a danger!us l!*. Drastic cuts in spending mean inadequate pa'@ h!using@ and medical care. - ne* emphasis !n d!mestic missi!ns has created an ide!l!gical split 2et*een the !ld and ne* guard in the militar' leadership@ increasing the ris" that disgruntled generals ma' enter the p!litical 3ra' and 3eeding the resentment !3 s!ldiers *h! disli"e 2eing used as a nati!nal p!lice 3!rce. 7e*l' enhanced ties 2et*een militar' units and l!cal auth!rities p!se an!ther danger. $!ldiers gr!* ever m!re dependent !n l!cal g!vernments 3!r h!using@ 3!!d@ and *ages. Dra3tees serve cl!ser t! h!me@ and ne* la*s have increased l!cal c!ntr!l !ver the armed 3!rces. ,ere a c!n3lict t! emerge 2et*een a regi!nal p!*er and :!sc!*@ it is n!t at all clear *hich side the militar' *!uld supp!rt. Divining the militar'Qs allegiance is crucial@ h!*ever@ since the structure !3 the ussian 9ederati!n ma"es it virtuall' certain that regi!nal c!n3licts *ill c!ntinue t! erupt. ussiaQs 89 repu2lics@ "rais@ and !2lasts gr!* ever m!re independent in a s'stem that d!es little t! "eep them t!gether. -s the central g!vernment 3inds itsel3 una2le t! 3!rce its *ill 2e'!nd :!sc!* <i3 even that 3ar=@ p!*er dev!lves t! the peripher'. ,ith the ec!n!m' c!llapsing@ repu2lics 3eel less and less incentive t! pa' ta5es t! :!sc!* *hen the' receive s! little in return. 0hree?quarters !3 them alread' have their !*n c!nstituti!ns@ nearl' all !3 *hich ma"e s!me claim t! s!vereignt'. $tr!ng ethnic 2!nds pr!m!ted 2' sh!rtsighted $!viet p!licies ma' m!tivate n!n? ussians t! secede 3r!m the 9ederati!n. /hechn'aQs success3ul rev!lt against ussian c!ntr!l inspired similar m!vements 3!r aut!n!m' and independence thr!ugh!ut the c!untr'. (3 these re2elli!ns spread and :!sc!* resp!nds *ith 3!rce@ civil *ar is li"el'. $h!uld ussia succum2 t! internal *ar@ the c!nsequences 3!r the )nited $tates and 4ur!pe *ill 2e severe. - maK!r p!*er li"e ussia ?? even th!ugh in decline ?? d!es n!t su33er civil *ar quietl' !r al!ne. -n em2attled ussian 9ederati!n might pr!v!"e !pp!rtunistic attac"s 3r!m enemies such as /hina. :assive 3l!*s !3 re3ugees *!uld p!ur int! central and *estern 4ur!pe. -rmed struggles in ussia c!uld easil' spill int! its neigh2!rs. Damage 3r!m the 3ighting@ particularl' attac"s !n nuclear plants@ *!uld p!is!n the envir!nment !3 much !3 4ur!pe and -sia. ,ithin ussia@ the c!nsequences *!uld 2e even *!rse. Nust as the sheer 2rutalit' !3 the last ussian civil *ar laid the 2asis 3!r the privati!ns !3 $!viet c!mmunism@ a sec!nd civil *ar might pr!duce an!ther h!rri3ic regime. :!st alarming is the real p!ssi2ilit' that the vi!lent disintegrati!n !3 ussia c!uld lead t! l!ss !3 c!ntr!l !ver its nuclear arsenal . 7! nuclear state has ever 3allen victim t! civil *ar@ 2ut even *ith!ut a clear precedent the grim c!nsequences can 2e 3!reseen. ussia retains s!me 2+@+++ nuclear *eap!ns and the ra* material 3!r tens !3 th!usands m!re@ in sc!res !3 sites scattered thr!ugh!ut the c!untr'. $! 3ar@ the g!vernment has managed t! prevent the l!ss !3 an' *eap!ns !r much material. (3 *ar erupts@ h!*ever@ :!sc!*Qs alread' *ea" grip !n nuclear sites *ill slac"en@ ma"ing *eap!ns and supplies availa2le t! a *ide range !3 anti?-merican gr!ups and states. $uch dispersal !3 nuclear *eap!ns represents the greatest ph'sical threat -merica n!* 3aces.
-nd it is hard t! thin" !3 an'thing that *!uld increase this threat m!re than the cha!s that *!uld 3!ll!* a ussian civil *ar.

;0/93 Herndon/Petit/Tate/Quinn
!ndermine economy
Hig" Prices under!ine /ussian econo!%5 spur in'lation and spur investor 'lig"t -"annel 1e s7sia 2+03 <-ug 8@ A%igh Oil PricesB@ le5is=
:!sc!* c!uld@ h!*ever@ have tr!u2le "eeping in3lati!n 2el!* 1+ percent this 'ear 2ecause !3 increased liquidities pr!vided 2' !il revenue@ *arned -ndrei Velpach@ in charge !3 3!recasting at the ec!n!mic devel!pment ministr'. $tephen OO$ullivan !3 the investment gr!up )9> saidC A ec!rd !il prices are g!!d 3!r the stateOs c!33ers 2ut the' d! n!t enc!urage re3!rmsB that are "e' t! the devel!pment !3 the ussiaOs ec!n!m'. 0he (nternati!nal ratings agenc' $tandard and P!!rOs stressed in mid Nul' that there *as a gr!*ing ris" !3 ussian re3!rms sl!*ing d!*n as the' ran int! resistance 3r!m p!litical and industrial interests as *ell as 3r!m pu2lic !pini!n. - g!vernment a*ash in !il revenue c!uld easil' 2e tempted t! dela' unp!pular structural ec!n!mic re3!rms. /apital 3light plague ussian in the 199+s c!uld increase this 'ear as *ell. >re3 has estimated that net capital !ut3l!*s *!uld reach 8.5 2illi!n d!llars this 'ear@ *hile in Nanuar' auth!rities had 2een c!unting !n a net in3l!*. A0he Hu"!s crisis has pla'ed a r!le in the capital 3lightB Vant!r!vich said A (nvest!rs pre3er t! put their capital else*here.B ussian ta5 !33icials are pressing Hu"!s@ the c!untr'Os 2iggest !il c!mpan'@ t! pa' 2illi!ns in 2ac" ta5es even *hile Kustice !33icials 2l!c" 2an" acc!unts that *!uld all!* Hu"!s t! c!ntinue dail' !perati!ns and pa' !33 the arrears.

!ndermine economy dutch disease

Mone% 'ro! "ig" oil prices causes in'lation5 dutc"+disease5 and is e!piricall% asted $% corrupt conglo!erates T"e ,cono!ist5 :a' 22@ 2003 0he ec!n!mist v371 i837& p9)$
4ven s!@
than"s t! high !il prices@ the 3ederal g!vernment has run 2udget surpluses. (snQt this g!!dD 7!C the m!ne' all t!! !3ten 2ails !ut regi!nal g!vernments@ *hich use it as a quic" 3i5 3!r l!cal unempl!'ment 2' creating pu2lic?sect!r K!2s@ *hen it *!uld 2e 2etter spent !n 2uilding in3rastructure !r l!*ering ta5es t! help the private sect!r. 7!r is the !il cash an unmi5ed 2lessing 3!r the ec!n!m' <see chart 5@ ne5t page=. /!m2ined *ith a *ea" d!llar@ it has driven up the r!u2le much 3aster than the central 2an" *!uld li"e@ leading s!me ec!n!mists t! argue that ussia still ris"s catching TDutch diseaseT C a str!ng currenc'@ rising imp!rts@ less c!mpetitive e5p!rts. 8an"s are tr'ing t! lend as much as the' can@ s! there might 2e a small *ave !3 de3aults in t*! !r three 'ears. 8ut the 2an"ing s'stem is t!! shall!* t! a2s!r2 all the cash *ashing ar!und. 0!p !33icials have started 3lagging up the ris" !3 an asset?price 2u22le. 0he surplus cash@ al!ng *ith 3light capital returning 3r!m a2r!ad@ is 3uelling *hat !land 7ash at enaissance /apital@ a :!sc!* investment 2an"@ descri2es as Tthe m!ther !3 all sh!pping spreesT 2' the 2ig c!ngl!merates@ !3ten c!mpared t! V!reaQs !vergr!*n chae2!lP their rush !3 acquisiti!ns is leaving Tsmall islands !3 industr' in a sea !3 chae2!lised assetsT. 0h!ugh these 3irms are driving a much?needed c!ns!lidati!n !3 the le3t!vers !3 $!viet industr'@ the' are??acc!rding t! the ,!rld 8an"??n! m!re e33icientl' run than !ther 2usinesses@ and their mar"et p!*er and a2ilit' t! *ring 3av!urs 3r!m regi!nal g!vernments is a threat t! smaller 3irms.

***72 "ig" oil good***

$2 high oil good (or economy

Mc?illopEs clai!s t"at "ig" oil prices $oost t"e glo$al econo!% are rong D!n ,gginton@ Nune 1.@ 2003@ Oil and >as N!urnal
:cVill!p ma"es a num2er !3 asserti!ns and !2servati!ns that are repeated 2el!*. 0here are a num2er !3 !ther@ e5trane!us c!mments in :cVill!pQs article@ 2ut these are n!t dealt *ith. O2servati!ns lead :cVill!p t! c!nclude that sharpl' rising !il and gas prices increase ec!n!mic gr!*th rates. 9!r
e5ample@ during 1975?79@ *ith !il prices in t!da'Qs prices at L 38?55122l@ m!st c!untries in the OrganiRati!n 3!r 4c!n!mic /!!perati!n and Devel!pment achieved gr!*th rates !3 a2!ut 3.75I1'ear. :cVill!pQs vie* starts 3r!m the !2servati!n that high !il prices and rapid gr!ss d!mestic pr!duct gr!*th can c!incide. %e attri2utes this t! high !il prices causing high gr!*th. Het c!rrelati!n d!es n!t indicate causati!n. (t is m!re plausi2le t! 2elieve that !il prices are high 2ecause a 3ast?gr!*ing *!rld ec!n!m' <!r e5pectati!ns there!3= raises the *!rld demand 3!r !il. (n this situati!n@ the depressing e33ects !3 high !il prices ?? 3alling >DP and rising in3lati!n and unempl!'ment ?? are mas"ed 2' gr!*th@ and in3lati!n is
e5acer2ated 2' it. /ausati!n 3l!*s 3r!m str!ng demand t! high !il prices@ and there3!re@ in3erring that high prices can 2!!st *!rld activit' is *r!ng. ,hat :cVill!p *!uld have t! d! is distinguish 2et*een high prices caused 2' str!ng demand and high prices caused 2' suppl' c!nstraints.
:cVill!p ma"es little attempt t! d! this. -lth!ugh :cVill!p p!ints !ut that the O4/D achieved gr!*th during 1975?79 !3 3.75I1'ear@ it sh!uld 2e n!ted that this is *ell 2el!* the gr!*th rates achieved in 19&1?73 !3 5.5I1'ear. (n 3act@ 197. and 1975 rec!rded the l!*est c!nsecutive annual gr!*th rates since 3igures 2egan in 19&1@ *ith an average gr!*th rate !3 Kust +.9I 'ear?!n?'ear. 0he sl!* gr!*th a3ter the 1973?7. !il price sh!c" is c!nsistent *ith the standard
vie*@ n!t :cVill!pQs.
Mc?illopEs clai!s t"at t"e last 3 oil s"oc&s ere not detri!ental to oil de!and are !isleading5 "is o n data proves "i! rong D!n ,gginton@ Nune 1.@ 2003@ Oil and >as N!urnal
:cVill!p als! asserts that there have 2een 3!ur !il price sh!c"s since 1973 2ut that n!ne !3 these Thad an immediate@ large impact !n dem!graphic demand X!il demand per capitaY.T 0his asserti!n hinges !n the *!rd Timmediate.T 7! ec!n!mist@ p!lic' advis!r@ !r even p!litician e5pects the ec!n!m' t! react immediatel' t! changes in the ec!n!mic envir!nment. #ags in reacti!n t! changes in the ec!n!mic envir!nment are an imp!rtant part !3 all ec!n!mies. Once this is ac"n!*ledged@ it is clear 3r!m :cVill!pQs 0a2le 1 <replicated in part in 0a2le 1 here= that the ver' high real price !3 !il in 1979 su2sequentl' led t! signi3icantl' reduced dem!graphic demand. :!re!ver@ his data 3!r 1985 als! sh!* that high !il prices 2el!* his L 75?1++122l estimate als! reduced demand.
Mc&illopEs clai!s t"at "ig" oil prices increases de!and are inapplica$le to t"e real orld D!n ,gginton@ Nune 1.@ 2003@ Oil and >as N!urnal
:cVill!p als! claims that higher !il prices@ at least up t! L 75?1++122l@ *ill result in a 3all in *!rld !il demand and are Td!!med t! 3ailureT 2ecause high !il prices lead t! higher demand 3!r !il. :cVill!p la2els this a Treverse elasticit'@T *hich is *r!ng. 9!r this t! 2e c!rrect higher prices *!uld have t! lead t! higher demand 3!r !il *ith!ut !ther 3act!rs changing. 4c!n!mists "n!* this as the >i33en parad!5 2ut have 'et t! pr!vide
c!nclusive evidence that the the!retical p!ssi2ilit' e5ists in practice. (3 :cVill!p c!uld sh!* !il is a T>i33en g!!d@T this *!uld 2e a revelati!n. )n3!rtunatel'@
:cVill!pQs argument rests up!n a trans3er !3 res!urces rather than a price e33ect@ and his Treverse elasticit'T is a simple distri2uti!nal e33ect 2ecause !3 the alleged di33erences in the pr!pensities t! c!nsume.

$2 high oil good (or small economies

Mc?illopEs argu!ent t"at "ig" oil prices "elp poor nations and t"e glo$al econo!% in turn are e!piricall% disprovenP "ig" oil prices are $ad 'or poor nations D!n ,gginton@ Nune 1.@ 2003@ Oil and >as N!urnal
(n essence@ :cVill!p argues the 3!ll!*ingC %igher !il prices stimulate the n!n?O4/D *!rld ec!n!m' and then stimulate gr!*th inside the O4/D. apidl' rising !il prices raise the prices !3 c!mm!dities@ and this ena2les c!mm!dit'?e5p!rting c!untries t! raise their c!nsumpti!n !3 imp!rts 3r!m 2!th !ther n!n?O4/D c!untries and O4/D c!untries. (ncreases in activit' raise the demand 3!r !il@ and the pr!cess iterates in a Ve'nesian?multiplier 3ashi!n leading t! higher *!rld >DP. 0he
heart !3 the argument is that higher !il prices raise the prices !3 su2stitute 3uels and !ther c!mm!dities@ in turn raising the spending p!*er !3 these c!untries@ and the *!rldQs >DP gr!*s thr!ugh a Ve'nesian spending multiplier. :cVill!pQs vie* ign!res the negative e33ect !n !il imp!rting c!untries@ *hich is highlighted in the standard vie* set 3!rth here later@ merel' sa'ing that the pr!pensit' t! c!nsume in
c!mm!dit' e5p!rters is higher than in the !il imp!rting c!untries. 0hese central themes are simpl' inc!rrect. )sing 0he 4c!n!mist Tall?itemsT inde5 in )$ d!llars as a measure !3 c!mm!dit' prices@ *e 3ind that this is negativel' c!rrelated *ith !il prices measured 2' the average !3 the -ra2 #ight and -ra2 %eav' !il prices. ,hat this means is that n!n!il c!mm!dit' e5p!rters als! see their terms !3 trade *!rsen *hen !il prices rise and the same e33ects as descri2ed in the standard vie* impact them. 9urtherm!re@ there is n! evidence t! suggest that the pr!pensit' t! spend !3 !il e5p!rters is higher than the
pr!pensit' t! spend !3 !il imp!rters. 0he (nternati!nal :!netar' 9und estimates that !nl' a2!ut a third !3 the additi!nal revenues is spent 2' !il pr!ducers in the 3irst 'ear !3 rising !il prices@ rising t! three 3!urths a3ter 3 'ears.n2 0his pr!duces a negative Ve'nesian? multiplier e33ect !n the *!rld ec!n!m'. 0hese c!mments p!int t! the unc!m3!rta2le truthC P!!r c!mm!dit' pr!ducing c!untries *ith!ut net !il e5p!rts are hurt 2' rising real !il prices. :cVill!p als! c!ntends that higher !il prices help p!!rer c!untries t! devel!p !il@ gas@ and c!al res!urcesP *ith!ut higher !il prices@ the 3unds t! devel!p these res!urces *ill n!t 2e availa2le. %igher !il prices *ill n!t help p!!rer c!untries devel!p !il@ gas@ and c!al res!urces i3@ in the sh!rt term@ the' are pa'ing m!re 3!r their !il imp!rts. (ndeed@ higher !il prices@ 2' raising interest rates t! !33set in3lati!n@ might hinder devel!pment !3 these energ' s!urces. (n 3act@ :cVill!p ign!res the r!le !3 the *!rldQs capital mar"ets in ma"ing res!urces availa2le 3!r ec!n!mic devel!pment and@ c!nsequentl'@ a rise in !il prices is n!t a necessar' prerequisite 3!r investment in ne* !il 3ields.
Hig" oil prices are $ad 'or t"e glo$al econo!% and inde$ted nations D!n ,gginton@ Nune 1.@ 2003@ Oil and >as N!urnal
0he ans*er t! the questi!n@ %!* much *ill high !il prices hurtD depends !n h!* high !il prices rise@ h!* l!ng the' rise 3!r@ and *hich c!untr' is e5amined. 0he (:9 stud' previ!usl' cited pr!vides the 3!ll!*ing estimates !3 a L 5122l increase <2+I= in the !il price. 0he rise in !il prices leads t! a l!ss !3 >DP !ver a pr!tracted peri!d. :!re!ver@ alth!ugh the l!sses in the devel!ping c!untries are initiall' smaller than in industrialiRed c!untries@ the real impact !n the p!!rest c!untries is mas"ed 2' the presence !3 !il e5p!rters *ithin this categ!r'. (:9 estimates that@ 3!r the 29 m!st heavil' inde2ted p!!r c!untries <%(P/=@ the l!ss !3 >DP in the 3irst 'ear a3ter the simulated 2+I !il price rise *ill e5ceed the +.1I 3all sh!*n in 0a2le 2 3!r 28 !3 these c!untries. 0he average decline in >DP *ill 2e +.8I@ and 3!r #a!s the decline *!uld 2e 2.2I in the 3irst 'ear !3 the simulati!n.

;)/93 Herndon/Petit/Tate/Quinn
$2 shocks )ounce )ack

Price spi&es li!it econo!ic recover% Paul /o$erts5 energ' e5pert and *riter 3!r %arpers52003@ 0he 4nd !3 Oil@ pg. 1+8
Het 3!r man' in the ,est@ the >ul3 ,ar had simpl' reemphasiRed the 3undamental 3la*s in the !il !rder. 4ven i3 OP4/ had declared an era !3 price sta2ilit'@ ,estern !2servers@ particularl' in the )nited $tates@ c!ntinued t! argue that as l!ng as !il remained under the p!litical c!ntr!l !3 states li"e $audi -ra2ia and ;eneRuela @
v!latilit' *!uld p!se an en!rm!us ris" t! the 3ast?gr!*ing gl!2al ec!n!m'. esearch sh!*ed that a3ter each !3 the si5 maK!r !il price spi"es since the $ec!nd ,!rld ,ar@ gl!2al ec!n!mic activit' had 2egun t! 3all *ithin si5 m!nthsP t'picall'@ ever' 3ive?d!llar increase in !il prices 2r!ught a .5 percent decline in ec!n!mic gr!*th. ,!rse@ the e33ects !3 price hi"es *ere Aas'mmetrical.B ,hen prices came 2ac" d!*n@ ec!n!mies usuall' regained !nl' a2!ut a tenth !3 *hat the' had l!st in the preceding spi"e. /umulativel'@ acc!rding t! energ' ec!n!mist Philip ;erleger@ price spi"es had c!st the ec!n!m' 15 percent in gr!*th@ and m!re than a L1.2 trilli!n in direct l!sses@ Aas *ell as unc!unta2le c!sts in pers!nal disl!cati!ns.B

;(/93 Herndon/Petit/Tate/Quinn
$2 Stockpile solves
T"e 98 canEt stoc&pile oil>t"e O,-D prevents it -nth!n' -ordes!an@ -rleigh -. 8ur"e /hair in $trateg' at /$($@ Nanuar' 3+ 2003@
httpC11***.csis.!rg12ur"e1mees1meea3teriraq.pd3
Oil is a gl!2al c!mm!dit' distri2uted in a gl!2al mar"et. ,ith the e5cepti!n !3 di33erences in price 2ecause !3 crude t'pe and transp!rtati!n c!sts@ all 2u'ers c!mpete equall' 3!r the suppl' !3 availa2le e5p!rts@ and the directi!n and 3l!* !3 e5p!rts changes acc!rding t! demand. 0he percentage !3 !il that 3l!*s 3r!m the :iddle 4ast t! the )nited $tates at an' given time has little strategic !r ec!n!mic imp!rtance. (3 a crisis !ccurs@ !r prices change drasticall'@ the s!urce !3 ).$. imp!rts *ill change acc!rdingl'. :!re!ver@ the )nited $tates is required t! share all imp!rts *ith !ther OrganiRati!n 3!r 4c!n!mic /!?!perati!n and Devel!pment
<O4/D= c!untries in a crisis under the m!nit!ring !3 the (4-. (n a crisis@ the )nited $tates *ill pa' the same gl!2all' determined price as an' !ther nati!n.

;;/93 Herndon/Petit/Tate/Quinn
$2 5ood (or rene"a)les

,cono!ic da!age and slo rate o' conversion prevents a s"i't to rene a$les 'ro! "ig" prices David Goodstein@ Ph'sicist and ;ice Pr!v!st at /ali3!rnia (nstitute !3 0echn!l!g'@ 2003@ Out !3 >as@ pg. 32
Once past %u22ertOs pea"@ as the gap 2et*een rising demand and 3alling suppl' gr!*s@ the rising price !3 !il ma' ma"e th!se alternative 3uels ec!n!micall' c!mpetitive@ 2ut even i3 the' are net energ' p!sitive@ it ma' n!t pr!ve p!ssi2le t! get them int! pr!ducti!n 3ast en!ugh t! 3ill the gr!*ing gap. 0hatOs called the rate?!3?c!nversi!n pr!2lem. ,!rse@ the ec!n!mic damage d!ne 2' rapidl' rising !il prices ma' undermine !ur a2ilit' t! m!unt the huge industrial e33!rt needed t! get the ne* 3uels int! acti!n.
T"e response to "ig" prices ill $e ras" and rate o' conversion pro$le!s prevent a <uic& transition David Goodstein@ Ph'sicist and ;ice Pr!v!st at /ali3!rnia (nstitute !3 0echn!l!g'@ 2003@ Out !3 >as@ pg. .7
$pea"ing !3 c!nventi!nal ec!n!mics@ ec!n!mists 3irml' 2elieve that *hen the !il starts t! run !ut@ the rising price *ill 2ring !ther m!re e5pensive 3uels t! the mar"etplace. -s *e have alread' seen@ the truth is a little m!re c!mplicated than that. %ist!r' sh!*s that *e d!nOt react in
an !rderl'@ predicta2le *a' even t! a temp!rar' sh!rtage !3 !ur preci!us gas!line. -nd *hether *e panic !r n!t@ the rate?!3?c!nversi!n pr!2lem is li"el' t! de3eat us. -ls!@ n! !ther 3!ssil 3uel can replace the cheap !il that is the c!rnerst!ne !3 !ur civiliRati!n. -nd 3inall'@ i3 *e d! manage t!
2urn up the !ther 3!ssil 3uels t!!@ the c!nsequences 3!r !ur climate cann!t 2e predicted. -ll in all@ *e clearl' have a seri!us energ' pr!2lem.
2ndonesia proves uncertainties prevent ne invest!ent Mala%sian Cusiness@ 71112003

8ut thereQs an!ther pr!2lemC the *!rld is running !ut !3 !il. 0here is increasing evidence that *!rld !il disc!veries pea"ed in the 19&+s and have since steadil' declined. OP4/Qs declarati!n !3 massive !il reserves is at 2est suspect@ since n!ne are independentl' veri3ia2le. (nd!nesia@ the current president !3 OP4/ and the largest and m!st p!pul!us c!untr' in $!utheast -sia@ *as !nce a net !il e5p!rter@ 2ut its pr!ducti!n has 3allen 3r!m 1.2 milli!n 2arrels per da' t! 1.1 milli!n ? 2el!* its OP4/ qu!ta !3 1.27 milli!n. (n the last t*! m!nths@ (nd!nesia has slipped t! 2ec!me a net !il imp!rter. ,!rse@ n! ne* invest!rs are p!uring m!ne' int! ne* disc!veries as !ld !nes 3ace depleti!n. ,ere it n!t 3!r *!rld uncertainties@ !il invest!rs sta'ing a*a' in dr!ves at a time *hen *!rld !il is 3etching rec!rd prices *!uld have seemed peculiar.

;=/93 Herndon/Petit/Tate/Quinn
***Oil is B212T,***

0inite oil
9? stud% s"o s pea& oil ill occur in 201) 7ic" Hodge@ edit!r at 4nerg' and /apital@ A2+15C 4nd !3 the Oil -ge /!nsensus >r!*s 3!r #!!ming Pea"B@ Nul' 1st@ 2+11@ httpC11***.energ'andcapital.c!m1articles12+15?end?!3?the?!il?age11&+9@ accessed !n Nul' 3@ 2011@ /NN
-s recentl' as 2++9@ the )nited Vingd!mQs !33icial p!siti!n *as that Agl!2al !il <and gas= reserves are su33icient t! sustain ec!n!mic gr!*th 3!r the 3!reseea2le 3utureBP als! that e5isting p!licies put it Ain a g!!d p!siti!n t! deal *ith the l!nger?term challenge !3 declining !il reserves.B 0he g!vernment c!nsistentl' cited the (nternati!nal 4nerg' -genc'Qs 3!recast that Pea" Oil *!uldnQt !ccur until 2+3+@ i3 at all. 7!*@ a3ter 2eing repeatedl' threatened under the 9reed!m !3
(n3!rmati!n -ct@ the release !3 a 'ears?!ld rep!rt sh!*s the )V g!vernment has "n!*n a2!ut imminent Pea" Oil and its c!nsequences. ,e n!* "n!* the #a2!ur >!vernment spent si5 m!nths evaluating the li"el' impacts !3 Pea" Oil 2ac" in 2++7. <H!u can see that research in a P!*erP!int recentl' released 2' the g!vernment.= -s a result !3 that research@ the g!vernment *as *arned !3 Asigni3icant negative ec!n!mic c!nsequencesB@ sh!uld Pea" Oil !ccur in the sh!rt term. 0he rep!rt als! n!ted it *as imp!ssi2le t! 3!recast the e5act m!ment *hen suppl' *!uld pea" M 2ut there *!uld 2e gl!2al c!nsequences@ including Acivil unrestB@ *hen it did. (n a *!rst?case scenari!@ the pea" *!uld happen 2e3!re 2+15. 0he rep!rtQs c!nclusi!n stated it is AclearB thatC 45isting 3ields are maturingP 0he rate !3 investment in ne* and e5isting pr!ducti!n is 2eing sl!*ed d!*n 2' 2!ttlenec"s@ the ec!n!mic d!*nturn@ and 3inancial crisisP and -lternative techn!l!gies t! !il *ill ta"e a l!ng time t! devel!p and depl!' at scale. -gain@ the )V g!vernment has had this rep!rt 3!r 'ears and has 2een
den'ing its c!nclusi!ns the entire time.
204 Tec"nolog% is not a 'i: a04 -o!panies "ave stopped investing in ne e:traction tec"nolog% proving t"e end o' oil is near Dale P'ei''er < en!*ned >e!l!gist= 713+12003 httpC11gl!2alresearch.ca1articles1P943+7-.html
%!*ever@ the
maK!r !il c!mpanies have started ma"ing c!ded ann!uncements indicating that the' "n!* the 3uture !3 the !il 2usiness *ill n!t match its past. (nstead !3 investing in pr!ducti!n and disc!ver'@ all !3 the maK!rs have 2een shedding e5pl!rati!n sta33 and c!ns!lidating their h!ldings. 7!ne !3 this 2espea"s a gr!*ing industr'. -nd insiders "n!* that there is ver' little e5cess capacit' t! 2e 3!und an'*here. $audi -ra2ia is Kust a2!ut the !nl' c!untr' *ith the capa2ilit' t! increase pr!ducti!n 2' an' n!ticea2le am!unt@ and even the' *!uld 2e
hard pressed t! d! s!.
$04 T"e past 30 %ears prove ne tec"nolog% leads to onl% !arginal gains in suppl% Dale P'ei''er < en!*ned >e!l!gist= 713+12003 httpC11gl!2alresearch.ca1articles1P943+7-.html
$till there
are ec!n!mists *h! *ill tell '!u that it is !nl' a matter !3 m!ne'. (3 *e thr!* en!ugh m!ne' int! e5pl!rati!n and devel!pment *e *ill increase pr!ducti!n. 0his seems t! 2elie actual e5perience. Over the last thirt' 'ears increased investment and techn!l!gical advances have led t! !nl' marginal gains in disc!ver' and pr!ducti!n. (3 it *ere !ther*ise@ the industries *!uld n!t 2e scaling
2ac".
30 4,nerg% e:perts agree+ oil opti!isits are 'ueled $% political $ene'its not $% actual science Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p.&1?&2
0hus@ despite
the *idel' underst!!d 3act that all !il estimates are highl' speculative statistical e5trap!lati!ns 2ased !n data 3r!m "n!*n !il 3ields such 3!recasting agencies as the )$>$@ the 4(-@ and 4ur!peOs (nternati!nal 4nerg' -genc' are under intense p!litical pressure t! err !n the side !3 *ild !ptimism. -nd err the' d!. During the 199!s@ 3!r e5ample@ a )$>$ rep!rt giving a l!* 3igure 3!r !il reserves in the -rctic 7ati!nal ,ildli3e e3uge *as *ithdra*n under pressure 3r!m pr!?!il la*ma"ers in -las"a and re*ritten *ith a m!re !ptimistic c!nclusi!n. -cc!rding t! industr' and g!vernment !33icials@ this Pangl!ssian d'namic !ccurs in ever' 3!recasting 2ureaucrac' and d!es little t! enc!urage p!lic'ma"ers even t! c!nsider the issue !3 !il depleti!n. A(t *!uld 2e a huge mista"e t! 2ase ).$. energ' p!lic' !n *hat the )$>$ thin"s a2!ut 3uture !il suppliesCO sa's !ne 3!rmer high?ran"ing ).$. energ' !33icial@ Aand the 4nerg' (n3!rmati!n -genc' has put !ut such !ver2l!*n num2ers@ and d!ne it *ith such arr!gance@ that it sh!uld 2e statut!ril' 2arred 3r!m ans*ering questi!ns a2!ut !il.B
)04 Oil depeletion is increasing rapidl% Oil Depletion 7nal%sis -entre 812312003 httpC11***.ems.!rg1n*s12++.1+81231!verGaGmilli!nG2
0he *!rld is n!* l!sing m!re than a milli!n 2arrels !3 !il a da' t! depleti!n ? t*ice the rate !3 t*! 'ears ag! ? acc!rding t! a ne* anal'sis pu2lished this m!nth in Petr!leum evie*@ the !il and gas magaRine !3 the 4nerg' (nstitute in #!nd!n. 0he anal'sis sh!*s that !utput 3r!m 18 signi3icant !il?pr!ducing c!untries@ acc!unting 3!r alm!st 29 percent !3 t!tal *!rld pr!ducti!n@ declined 2' 1.1. milli!n 2arrels a da' <m21d= in 2++3. 0he annual rate !3 decline als! appears t! 2e accelerating@ c!ntrar' t! the *idel' held vie* that depleti!n pr!gresses sl!*l'.
8ased !n data in the latest 8P $tatistical evie* !3 ,!rld 4nerg'@ pr!ducti!n 3r!m this gr!up !3 18 c!untries pea"ed in 1997 at 2..7 m21d and 2' 2++3 it had 3allen t! 22.1 m21d. (n 1998 their t!tal pr!ducti!n dr!pped 2' less than !ne percent@ *hereas last 'ear it declined 2' nearl' 3ive percent. T(t appears that depleti!n is n!* 2ec!ming a much m!re signi3icant@ th!ugh largel' unrec!gnised@ c!nsiderati!n in the suppl'?demand equati!n@ and ma' 2e c!ntri2uting t! the rise in !il prices@T said /hris $"re2!*s"i@ 4dit!r !3 Petr!leum evie* and a 8!ard mem2er !3 0he Oil Depleti!n -nal'sis /entre <OD-/=@ *h! prepared the ne* anal'sis. T,ith *!rld !il demand surging 3aster than an'!ne e5pected@ it is n! *!nder that current supplies are stretched t! the limit@T he said.

=0/93 Herndon/Petit/Tate/Quinn
(04 Oil discover% "as pea&ed+ ne 'ields are !uc" s!aller t"en old 'indings Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil
*hen !ne charts the average v!lume !3 !il that has 2een disc!vered each 'ear since the 2eginning !3 the centur'@ it 2ec!mes clear that ne* !il is indeed getting harder t! 3ind. Hear 2' 'ear@ the v!lume !3 ne*l' disc!vered !il M that is@ the num2er !3 2arrels 3!und each 'ear and red in the 2!!"s as "n!*n !r disc!vered reserves M clim2s steadil' up*ard 3r!m 18&+ until ar!und 19&1@ *hen it pea"s. $ince then@ !il c!mpanies have 3!und@ !n average@ a little less !il each 'ear M *ith the e5cepti!n !3 a small 2lip in the late 199+s@ as 2ig 3inds *ere ann!unced in the /aspian@ !33 the sh!re !3 ,est -3rica@ and in the >ul3 !3 :e5ic!. (n 3act@ since 1995@ the *!rld has used 2. 2illi!n 2arrels !3 !il a 'ear 2ut has 3!und@ !n average@ Kust 9.& 2illi!n 2arrels !3 ne* !il annuall'. -cc!rding t! a stud' 2' ,!!d :ac"enRie /!nsultants@ industr' is 3inding less than .+ percent !3 the ne* !il it needs t! "eep the 2ase !3 "n!*n reserves 3r!m shrin"ing.
(n 3act@

*+tend ,1 Peak coming

Pea& oil soon # 8audi 7ra$ian reserves lo 5 concern a!ong oil consu!ing nations 0!m .evitt@ 3reelance c!nsultant !n cr!ss?sect!r partnerships 3!r /P$P@ APea" !il is bgetting cl!serO 2ut the *!rld is n!t read'B@ Nune 28th@ 2011@ httpC11***.theec!l!gist.!rg17e*s1ne*sGanal'sis195.+321pea"G!ilGisGgettingGcl!serG2utGtheG*!rldGisGn!tGread'.html@
accessed !n Nul' 3rd@ 2+11@ /NN (n a surprising m!ve@ the maK!r !il c!nsuming c!untries@ principall' 4ur!pe and the )$@ agreed last *ee" t! release s!me !3 their emergenc' reserves !3 !il in an attempt t! tr' and cut the high mar"et price !3 !il. (t *as !nl' the third time in hist!r' such c!llective acti!n had 2een ta"en@ the previ!us 2eing during the >ul3 ,ar in 1991 and in 2++5@ a3ter %urricane Vatrina damaged !33sh!re !il rigs@ pipelines and re3ineries in the >ul3 !3 :e5ic!. O33iciall'@ it *as t! !33set the l!ss !3 !il 3r!m #i2'a as a result !3 the !ng!ing c!n3lict in the c!untr'. 8ut there are suggesti!ns the )$ and !thers had l!st 3aith in the ,!rldQs 2iggest !il e5p!rter@ $audi -ra2ia@ 2eing a2le t! increase !il pr!ducti!n en!ugh t! "eep prices 3r!m rising. 0his c!mes a3ter a lea"ed mem! 3r!m a seni!r $audi !il e5ecutive in 9e2ruar' alleged the c!untr'Qs !il reserves *ere 2eing !verstated. 7e* era !3 !il egardless !3 the m!tives@ the decisi!n is 2eing seen as the start !3 a ne* era !3 g!vernment interventi!n in the !il mar"et. Q,e have learnt a 2ig less!n. 0his is a dr' run 3!r h!* g!vernments *ill resp!nd in a 3e* 'ears time *hen *e get a permanent !il price rise@Q sa's N!hn :iles@ chairman !3 the )V (ndustr' 0as"3!rce !n Pea" Oil and 4nerg' $ecurit'. $!me !2servers g! 3urther in sa'ing the m!ve is evidence that *e ma' alread' 2e entering a Qpea" !ilQ peri!d. 0he' sa' rising mar"et prices re3lect a 3alling c!n3idence in the a2ilit' !3 "e' !il pr!ducing c!untries t! increase pr!ducti!n t! meet the rising demand 3!r !il 3r!m emerging nati!ns li"e /hina <alread' the *!rldQs sec!nd largest !il c!nsumer a3ter the )$= and (ndia. David $trahan@ auth!r !3 0he #ast Oil $h!c"@ sa's *hile n!t de3initive pr!!3 !3 pea" !il@ Qit sh!*s d!u2ts am!ngst c!untries a2!ut !il supplies and suggests *e ma' 2e ver' cl!se t! pea" !ilQ.
Pea& oil ill occur $et een 2010 and 201) # Hu$$ertEs !odel proves Ganos 0;/03111 <0!dd >an!s@ *ealth manager and pr!3essi!nal trustee@ 3!rmer )$-9 !33icer@ la* degree@ ##: in ta5ati!n@
D!ct!ral degree in 3inanceP Nul' 3@ 2+11P 9!r2esC A0he ,!rld ,ill 7ever un Out O3 Oil M :ight (ts Price 0an"DBP httpC112l!gs.3!r2es.c!m1t!ddgan!s12+111+71+31the?*!rld?*ill?never?run?!ut?!3?!il?might?its?price?tan"1= 8ac" in the 195+s@ :. Ving %u22ert devel!ped l!gistical m!dels t! predict p!ints in time called Apea" !il@B *hich is *hen the ma5imum rate !3 petr!leum e5tracti!n *!uld 2e reached . 9!r the )$@ pea" !il *as the p!int in time *hen the ma5imum rate !3 )$ petr!leum e5tracti!n *as reached. %u22ert c!rrectl' predicted the )$ *!uld reach pea" !il in the 19&5 t! 197+ time3rame . %is l!gistical m!dels are n!* called %u22ert Pea" 0he!r'. 0!da'@ %u22ert Pea" 0he!r' is used predict pea" !il p!ints 3!r !il *ells@ !il 3ields@ regi!ns@ and c!untries *ith reas!na2le accurac'. ,hen %u22ert applied his m!dels t! gl!2al pr!ducti!n@ the' p!inted t! a pea" petr!leum e5tracti!n 2eing s!me*here in the 2+1+ t! 2+15 time3rame. $eparatel'@ there have 2een a num2er !3 studies pu2lished 2' the -ss!ciati!n 3!r the $tud' !3 Pea" Oil and >as that reach a similar c!nclusi!n. >iven the aut!m!2ile industr'Os current em2racing !3 electricit'@ %u22ertOs predicti!n !3 gl!2al pea" !il might *ell c!me t! pass. $!me might p!int t! the emerging middle class in /hina@ (ndia@ 8raRil@ and else*here and suggest that the demand 3!r aut!m!2iles is Kust ramping up. ,hile there is n! den'ing this increasing demand 3!r aut!m!2iles@ 2ut h!* *ill th!se vehicles 2e
p!*eredD Nerr' :atecun@ p!rt3!li! manager at (ntegrated ,ealth /!unsel <***.integrated*ealth.c!m=@ n!tes that there is intense interest in rene*a2le energ' 2' emerging mar"et g!vernments. During the past t*! 'ears@ he attended c!n3erences in $ingap!re and 8eiKing *h!se 3!cus *as Kust that. $!@ it might *ell 2e
that gl!2al c!nsumpti!n !3 !il *ill pea" !ut this decade and@ in the 3ace !3 price?c!mpetitive energ' alternatives@ its price 2egins t! 3all.
Pea& oil is real # econo!ic crisis proves /. Paul Davis@ $eni!r ;ice President !3 0itan Oil ec!ver'@ AOil $uppl'C Pea" Oil and :icr!2esUB@ Nune 7th@ 2011@
httpC11***.!ilv!ice.c!m1n1OilG$uppl'GPea"GOilGandG:icr!2es1deae75135.asp5@ accessed !n Nul' 3rd@ 2+11@ /NN 7!* si5 'ears later@ ( *!uld estimate <2ased !n m' pers!nal research@ stud'@ and readings= that *ell !ver 3i3t' percent <5+I= !3 !il pr!3essi!nals n!* 2elieve in Pea" Oil. 0he 3inancial crisis !3 2++8 and the attendant high gas!line prices that 3!ll!*ed have 2r!ught the Pea" Oil de2ate t! the 3!re3r!nt 3!r seri!us discussi!n ? 3inall'. -ls!@ t!da' there are m!re c!untries spea"ing !ut !n the p!tential l!ng?term impact that the c!nsequences !3 Pea" Oil *ill have !n their c!untries and the *!rld. Pe!ple are 3inall' addressing h!* 2est t! mitigate the seri!us impact and c!nsequences that the *!rld is starting t! e5perience as the result !3 n!t having en!ugh a33!rda2le !il t! meet their needs. /!untries li"e the )nited $tates@ the )nited Vingd!m@ /anada@ -ustralia@ $*eden and man' !thers have ac"n!*ledged Pea" Oil <at least in c!ncept= and are 3inall' attempting t! put int! place pr!grams that *ill address the c!nsequences !3 Pea" Oil in a seri!us
*a' 2' investigating s!me via2le s!luti!ns. 0ime *ill tell *hether !thers *ill als! 2e 2ec!me c!nvinced !3 the seri!usness !3 Pea" Oil and accept it as a signi3icant and imminent challenge. #etOs h!pe this happens.
7nd5 Pea& oil "appens in t"e ne:t ) %ears 8ta''ord ( # 11 X#iRRie $ta33!rd@ Nune 11@ 2+11@ sta33 *riter@ 0he /!urier :ail <-ustralia=C A9inding the energ' t! 3i5 climate@B
#e5is7e5is@ #$Y a,eQre at the 2eginning !3 the end !3 the 3!ssil 3uel age. 433ectivel' *hat *e have is an !utdated 19th?centur' techn!l!g' 2ased !n c!al@ a 2+th?centur' !ne 2ased !n gas and !il . . . and *e have 21st?centur' pr!2lems *e need t! deal *ith.Q Dr N!hn 8arr' ene*a2le green energ' is 3ast 2ec!ming the investment !3 ch!ice *ith the !ld 3!ssil 3uels clearl' !n their *a' !ut@ *rites #iRRie $ta33!rd 849O 4 '!u read !n@ ta"e a l!!" ar!und the r!!m '!u
are sitting in. /an '!u thin" !3 s!mething that hasnQt 2een made !r transp!rted@ in *h!le !r part@ *ith!ut the use !3 !ilD Pr!2a2l' n!t@ sa's Dr N!hn 8arr'@ the

ass!ciate direct!r !3 the (nstitute 3!r a $ustaina2le ,!rld in (reland. aa,e are surr!unded 2' pr!ducts 3r!m the 2ene3its !3 !il@ *hether it 2e in plastics@ the 3!!d '!uQre eating !r the c!33ee '!uQve had@QQ he sa's. aa-t s!me p!int al!ng the K!urne' 3r!m the earth t! '!u c!nsuming it@ !il has 2een used. Our s!ciet' is addicted t! 3!ssil 3uels.QQ Oil@ c!al and natural gas suppl' nearl' 88 per cent !3 the *!rldQs energ' needs@ *ith !il at .1 per
cent@ c!al 2. per cent and natural gas 22 per cent. 8ut !ur dependence !n 3!ssil 3uels cann!t last. -s *ell as the devastating e33ects !3 car2!n di!5ide ? pr!duced *hen 3!ssil 3uels are 2urnt ? !n climate change@ these res!urces are running !ut. /!al@ petr!leum@ !il and natural gas ta"e th!usands !3 'ears t! 3!rm. 0he' simpl' cann!t 3!rm at the rate *e are using them@ sa's )niversit' !3 -delaide Pr!3ess!r $tephen #inc!ln. %e sa's it is *idel' agreed the *!rld has .+ t! 5+ 'ears suppl' !3 !il le3t . 0he latest 3igures suggest that@ at the current rate !3 e5tracti!n@ crude oil ? *hich is used 3!r ever'thing 3r!m 3uel 3!r cars@ truc"s@ planes and 2!ats t! ma"ing r!ads@ t!'s@ 2!ttles and 3!!d pac"aging ? could run out in five years unless ne* disc!veries are made. #inc!ln sa's pea" !il ? the p!int *hen the pr!ducti!n reaches its ma5imum as ne* disc!veries decline ? happened s!me time in the past 3ive 'ears. aa,e have t! l!!" 3!r alternative energ' s!urces 2ecause !il *ill n!t sustain us@QQ he sa's. ,hile c!al is li"el' t! last 3!r an!ther several hundred 'ears@ its adverse e33ects !n the envir!nment ma"e its use unsustaina2le.
,:perts sa% pea& oil no Winder 11 <;irginia ,inder@ c!mmunicati!ns maK!r and 3reelance K!urnalist@ +&12112+11@ A:a"ing a p!st?!il transiti!n@
httpC11***.stu33.c!.nR1tarana"i?dail'?ne*s1li3e?st'le151&97191:a"ing?a?p!st?!il?transiti!n1@ #>= ,hen '!u menti!n phrases such as Tpea" !ilT and Tclimate changeT s!me pe!ple *ill s*itch !33@ !thers *ill sc!33 and a 3e* *ill n!d. T(tQs a c!nspirac' the!r'@T s!me sa'. T7!t in m' li3etime@T !thers cr'. 0hen there are the T*h! caresDT l!t@ the T*hat can ( d!DT 2unch@ 3!ll!*ed cl!sel' 2' the
envir!nmentall' minded TletQs ta"e acti!nT cre*. (tQs OV t! thin" all !3 these things ? a3ter all@ *e are c!nstantl' enc!uraged t! 3!cus !n the Tn!*T and Tlive in the m!mentT. 0his is Kust a heads? up that@ 'es@ things are g!ing t! change s!!n and *e need t! 2e prepared. 0hin" !3 the $c!utsQ m!tt! !r the ads a2!ut getting read' 3!r retirement. (n this case@ the TretirementT is crude !il and the Tgetting read'T plan is setting up a transiti!n t!*n@ *hich is a plan 3!r the 3uture. 0ransiti!n t!*n adv!cate David 0urner sa's that 3uture is cl!se and plans need t! 2e put in place n!*. 0he O"at!?2ased
8rit sa's that *hen he *as gr!*ing up in 8ritain in the 198+s@ he heard !3 an !il crisis and h!* it *!uld a33ect T!ur childrenT. T,e are the children the' *ere tal"ing a2!ut@ and *e *ill 2e ar!und t! see this ? *e *ill 2e here in 2+ 'ears@T the .5?'ear?!ld sa's. David li"ens
!il t! a drug and sa's *e *ill s!!n 3ace *ithdra*al. T%!* man' pe!ple live in a denial !3 their addicti!n until itQs t!! lateD 0hen the' need an interventi!n. (n this case the interventi!n is *hen the !il runs !ut and then the' are g!ing t! have t! 3ace their addicti!n c!ld tur"e'.T ,hile tal"ing@ he re3ers t! 0he 0ransiti!n %and2!!" ? 9r!m Oil Dependenc' t! #!cal esilience@ *ritten 2' transiti!n m!vement c!?3!under !2 %!p"ins. T0hereQs a secti!n in this !n h!* t! get a*a' 3r!m *!rld addicti!n t! !il@T sa's David. %e tal"s clearl'@ c!nvincingl' a2!ut a ne* p!sitive 3uture 3!r the *!rld. 0he ans*er is t! 2e sel3? sustaining. %e 2elieves that *hen transp!rtati!n c!sts 2ec!me t!! high@ t!*ns and cities *ill 2e 3!rced t! pr!vide 3!r themselves. T4ver'2!d' has t! 2e 3ed@ cl!thed and h!used ? ever'thing else is a 2!nus. (3 these three things are n!t in p!siti!n and read'@ '!u are in a heap !3 tr!u2le.T 8ut David d!esnQt see the changes as a 2ad thing. T0he *a' ( see it@ *e
are m!ving 3!r*ard. ,e havenQt had t! use !ur imaginati!n 3!r the last 1++ 'ears since !il came !ut and it *as the ans*er t! ever'thing.T 4ven the e5perts 2elieve the T!il ageT is near an end. 0he (nternati!nal 4nerg' -genc' <(4-= sa's the gl!2al pr!ducti!n !3 c!nventi!nal crude !il pea"ed in 2++&. 0hat means the *!rld is n!* !n the d!*nhill slide in terms !3 !il pr!ducti!n. 0he 7e* Zealand parliamentar' paper 0he 7e5t Oil $h!c" sa's that alth!ugh there remain large reserves !3 !il *hich can 2e e5tracted@ the *!rldQs dail' capacit' t! e5tract !il cann!t "eep increasing inde3initel'. T- p!int *ill 2e reached *here it is n!t ec!n!micall' and ph'sicall' 3easi2le t! replace the declining pr!ducti!n 3r!m e5isting *ells and add ne* pr!ducti!n 3ast en!ugh 3!r t!tal pr!ducti!n capacit' t! increase@T the Oct!2er 2+1+ rep!rt sa'. TPr!Kecti!ns 3r!m the (4- and !ther gr!ups have this !ccurring@ at least temp!raril'@ as s!!n as 2+12.TDavid 2elieves that n!* is the time t! set up transiti!n t!*ns and cities@ *hich are starting t! spr!ut all !ver the *!rld. %e is pr!ud t! c!me 3r!m
8ritainQs 3irst transiti!n cit'@ 8rist!l@ *hich has Kust intr!duced its 3irst 3ree 2us service. 0he 3irst transiti!n t!*n in 8ritain *as the 4nglish t!*n !3 0!tnes. -n!ther transiti!n t!*n adv!cate is Vama 8ur*ell@ a permaculture teacher 3r!m Vaimata near (ngle*!!d. $he 2elieves the *!rld *!nQt c!mpletel' run !ut !3 !il. T0here *ill 2e a little 2it ever'*here.T 8ut there *!nQt 2e en!ugh t! 3uel ever'thing and t! ma"e all the pr!ducts *e ta"e 3!r granted. Pause 3!r a m!ment and l!!" ar!und '!u t! c!nsider *hat is made !3 !il. %ereQs a sh!rt listC /l!thes@ "itchen appliances@ c!mputers@ printers@ 3!am mattresses@ carpets@ glue@ n'l!n@ p!l'ester@ credit cards@ lipstic"@ sh!pping 2ags@ dish?*ashing liquid@ sh!es@ D;Ds@ /Ds@ plastic 2!ttles and t!!th2rushes. 0he items in dail' use are endless@ 2ut the maK!rit' !3 the !il e5tracted 3r!m the earth is used 3!r transp!rtati!n.
Pea& oil "appening no 8"a 2011 <0ristan $ha*@ stud'ing cultural anthr!p!l!g' at the )niversit' !3 ;anc!uver (sland@ .12+12+11@ A8ell /urve and
>l!2al Disc!ver' 7et*!r".B httpC11***.r!se2udmag.c!m1envir!nment1pea"?!il?2ell?curve?and?gl!2al?disc!ver'?3@ #>= (n 2++8@ data pu2lished 2' 7ati!nal >e!graphic sh!*ed that !ut !3 the 5+ largest !il pr!ducing c!untries@ .2 had passed their pea" and are in decline. (t is stri"ingl' clear that the *!rldOs maK!r c!nventi!nal !il 3ields can n! l!nger 2e relied !n t! sustain current levels !3
c!nsumpti!n n!t t! menti!n the gr!*ing p!pulati!n and ec!n!mic demand in c!untries such as /hina@ *hich require ever increasing rates !3 petr!leum use. (t *!uld 2e c!mpletel' natural t! assume the maK!r !il cartels have this stu33 3igured !ut and@ *hen the time c!mes@ *ill Kust increase investment in e5pl!ring@ drilling@ and e5pl!iting ne* !il reserv!irs. 0his ma"es sense@ 2ut it d!es n!t c!mpl' *ith the data. $impl' put@
all the maK!r !il 3ields have 2een disc!vered@ and this e5plains *h' !il c!rp!rati!ns have 2een m!ving t! unc!nventi!nal drilling and c!stl' retrieval meth!ds@ li"e the tar sands in -l2erta@ /anada. /urrentl'@ thereOs a2!ut 3!ur !r 3ive 2arrels !3 !il used 3!r ever' !ne 2arrel disc!vered. 7! rati!nal pers!n can e5pect *!rld petr!leum suppl' t! 3ill the increasing demand 2' inde3initel' disc!vering m!re !il 3ields it is a ph'sical imp!ssi2ilit'. ,e *!uld have t! disc!ver si5 m!re $audi -ra2ias 2' the 'ear 2+3+. %!* man' times have *e 3!und a reserv!ir as 2ig as $audi -ra2iaOsD Nust !nce. Ph'sicist and !il ge!l!gist :. Ving %u22ert e5p!sed this
mathematical certaint' in 19.9. <%e *as laughed at.= %is predicti!ns have pr!ven alarmingl' accurate <Kust the speci3ic predicti!n date 3!r gl!2al Pea" Oil *as !33@ 2ut his !verall l!gic has 2!rne !ut=. %e gave us@ c!mpiled n!* *ith m!dern statistics and techn!l!g'@ the clear understanding that !il
pr!ducti!n pea"s appr!5imatel' .+ 'ears a3ter disc!veries d!. (t al*a's 3!ll!*s@ much li"e 2acteria in a petri dish@ a 2ell curve. ,e

=3/93 Herndon/Petit/Tate/Quinn n!* "n!* gl!2al !il disc!veries pea"ed in the mid 19&+s@ *hich means the pea" is right n!*@ at this ver' hist!ric m!ment. ,e stand
l!!"ing !ver the edge !3 gl!2al !il pr!ducti!n@ right !n the precipice !3 a ne* age@ !ne that is depleted !3 !il *hether *e li"e it !r n!t. Oil is a n!n?rene*a2le res!urce. %uman civiliRati!n@ in the -ge !3 Oil@ is 2uilt 2' and relies up!n this n!n?rene*a2le and highl' p!tent res!urce. 0here are 1+ h'dr!car2!n cal!ries !3 energ' in ever' single cal!rie !3 3!!d c!nsumed in the industrialiRed *!rld. 0a"e a*a' that energ'@ and *hat *ill happenD ,ill it 2e a 2rutal transiti!n !3 3amine and *ar in a *!rld 2ere3t !3 petr!leumD Or *ill it 2e a peace3ul m!ve int! a green 3uture a *!rld that n! l!nger p!llutes !r destr!'s itsel3 *ith *eap!nr'. ,hatever '!ur !utl!!"@ *hether pessimistic !r !ptimistic@ the paradigm is 2eing shi3ted. -nd in the *!rds !3 legendar' Pea" Oil activist@ petr!leum ge!l!gist@ and auth!r /!lin /amp2ell@ A0he human race *ill n!t 2ec!me e5tinct@ 2ut the su2species !3 Petr!leum man alm!st certainl' *ill.B
Pea& oil set at 2020+ current trends prove T"e ,cono!ist 09 <ne*s and internati!nal a33airs pu2licati!n@A0he pea"?!il de2ate 2+2+ visi!n@ 0he (4- puts a date !n pea" !il
pr!ducti!nB@ httpC11***.ec!n!mist.c!m1n!de115+&5719 @ Decem2er 1+th 2++9@ accessed 713111=N4 9-0(% 8( O#@ the chie3 ec!n!mist !3 the (nternati!nal 4nerg' -genc' <(4-=@ 2elieves that i3 n! 2ig ne* disc!veries are made@ Athe !utput !3 c!nventi!nal !il *ill pea" in 2+2+ i3 !il demand gr!*s !n a 2usiness?as?usual 2asis.B /!ming 3r!m the 2and !3 ge!l!gists and 3!rmer !il? industr' hands *h! 2elieve that the *!rld is 3acing an imminent sh!rtage !3 !il@ this *!uld 2e unremar"a2le. 8ut c!ming 3r!m the (4-@ the s!urce !3 cl!sel' *atched annual predicti!ns a2!ut *!rld energ' mar"ets@ it is a ne* and stri"ing claim .
Oil production in decline # 98 and 9? tapping into reserves and tar sands arenEt t"e ans er .evitt 0(/2= <0!m@ 4dit!r !3 0he 4c!l!gistP Nune 28@ 2+11P 0he 4c!l!gistC APea" !il is Qgetting cl!serQ 2ut the *!rld is n!t read'BP
httpC11***.theec!l!gist.!rg17e*s1ne*sGanal'sis195.+321pea"G!ilGisGgettingGcl!serG2utGtheG*!rldGisGn!tGread'.htmlP= 0he end !3 cheap !il has g!t g!vernments panic"ing t! c!ntr!l prices rather than planning 3!r a p!st?!il era . 0!m #evitt rep!rts ,as it a sign !3 desperati!n !r sh!* !3 strengthD (n a surprising m!ve@ the maK!r !il c!nsuming c!untries@ principall' 4ur!pe and the )$@ agreed last *ee" t! release s!me !3 their emergenc' reserves !3 !il in an attempt t! tr' and cut the high mar"et price !3 !il . (t *as !nl' the third time in hist!r' such c!llective acti!n had 2een ta"en@ the previ!us 2eing during the >ul3 ,ar in 1991 and in 2++5@ a3ter %urricane Vatrina damaged !33sh!re !il rigs@ pipelines and re3ineries in the >ul3 !3 :e5ic!. O33iciall'@ it *as t! !33set the l!ss !3 !il 3r!m #i2'a as a result !3 the !ng!ing c!n3lict in the c!untr'. 8ut there are suggestions the US and others had lost faith in the World5s biggest oil e/porter, Saudi "rabia, being able to increase oil production enough to keep prices from rising . 0his c!mes a3ter a lea"ed mem! 3r!m a seni!r $audi !il e5ecutive in 9e2ruar' alleged the c!untr'Qs !il reserves *ere 2eing !verstated . 7e* era !3 !il egardless !3 the m!tives@ the decisi!n is 2eing seen as the start !3 a ne* era !3 g!vernment interventi!n in the !il mar"et. Q,e have learnt a 2ig less!n. 0his is a dr' run 3!r h!* g!vernments *ill resp!nd in a 3e* 'ears time *hen *e get a permanent !il price rise@Q sa's N!hn :iles@ chairman !3 the )V (ndustr' 0as"3!rce !n Pea" Oil and 4nerg' $ecurit'. Some observers go further in saying the move is evidence that we may already be entering a 5peak oil5 period. #hey say rising market prices reflect a falling confidence in the ability of key oil producing countries to increase production to meet the rising demand for oil from emerging nations like ,hina <alread' the *!rldQs sec!nd largest !il c!nsumer a3ter the )$= and India. David $trahan@ auth!r !3 0he #ast Oil $h!c"@ sa's *hile n!t de3initive pr!!3 !3 pea" !il@ Qit sh!*s d!u2ts am!ngst c!untries a2!ut !il supplies and suggests *e ma' 2e ver' cl!se t! pea" !ilQ. 0ar sands n! ans*er 0his ne* peri!d@ the Qappr!ach t! pea" !ilQ as Dr ichard :iller 3r!m the Oil Depleti!n -nal'sis /entre <OD-/= re3ers t! it@ has er!ded spare capacit' and reduced the am!unt !3 ne* !il c!ming !n stream t! replace declines 3r!m e5isting 3ields ar!und the *!rld. ,ith!ut cheap alternatives@ the !il industr' is 2eing 3!rced t! l!!" at m!re unc!nventi!nal s!urces !3 !il@ such as tar sands. 0he OD-/ sa' these are n!t su33icient t! 2e a2le t! 3ill the 3uture gap 2et*een suppl' and demand. ,hatQs m!re the' c!me at a high c!st. 8!th in ec!n!mic terms and in the@ as 'et unacc!unted 3!r@ envir!nmental c!sts. (tQs pr!ducti!n pr!cess is three times m!re car2!n?intensive than c!nventi!nal !il s!urces ? *ith e5tracti!n requiring the creati!n !3 vast !pen mines t! get t! the mi5ture !3 !il@ cla' and sand. (n /anada@ *hich h!lds the largest "n!*n dep!sits@ e5tracti!n has als! 2een lin"ed t! rising incidence !3 cancer and the p!lluti!n !3 maK!r rivers *ith arsenic@ lead and mercur'.

*+tend ,2 -e" &echnology -ot $ 0i+

1e tec" is slo and too e:pensive Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p.&3?&.
$uch 2ad luc" 3its int! the larger pattern !3 ver' mi5ed e5pl!rati!n results *!rld*ide. -lth!ugh the ne* techn!l!g' is unquesti!na2l' unc!vering ne* 3ields@ it has n!t reversed the trend !3 declining disc!veries. (n 2++2@ 3!r e5ample@ *!rld*ide disc!veries 3ell t! si5 2illi!n 2arrels !3 ne* !il 3ar less than the hist!ric average and *ell 2el!* the t*ent'?seven 2illi!n 2arrels that the mar"et suc"ed up. :!st !3 the eas' !il M the huge !il reserves in eas'?t!?reach 3ields M has alread' 2een disc!vered and in man' cases@ especiall' !utside OP4/@ pumped !ut. 0he !il that
remains *ill 2e ris"ier t! e5tract@ and the li"elih!!d !3 une5pected c!sts@ missed pr!ducti!n targets@ and !utright 3ailure *ill 2e greater. 0he m!re !il *e pr!duce@ the greater the ris"s ass!ciated *ith *hat remains.

=)/93 Herndon/Petit/Tate/Quinn
*+tend ,16 .urning Oil 0ast

Oil is 'inite+ t"e orld consu!es over =0$illion $aralles per da% and increasing Paul /o$erts <4nerg' 45pert= 71512003 8altim!re $un p.#7
(0 $%O)#D 84 clear 2' n!*@ even t! th!se in the ,hite %!use@ that -merica needs a ne* !il strateg'. $ince 198+@ ).$. !il p!lic' has centered alm!st entirel' !n enlarging !ur suppl' !3 !il ?? either 2' drilling m!re !il *ells at h!me !r 2' c!R'ing up t! 3!reign pr!ducers such as 7igeria !r $audi -ra2ia. 8ut as a means t! energ' securit'@ this plan is danger!usl' !2s!lete. ).$. !il 3ields are nearl' tapped !ut. :!st !3 !ur !il allies are s! unsta2le that suppl' disrupti!ns ?? and price spi"es ?? *ill 2ec!me r!utine. :!re t! the p!int@ !il is a 3inite res!urce. 0!da'Qs high prices
have less t! d! *ith turm!il in (raq than *ith the 3act that !il c!mpanies canQt 3ind ne* !il as 3ast as the )nited $tates@ /hina and !ther 2!!ming ec!n!mies are using it ?? and this trend isnQt li"el' t! change. 0he )nited $tates uses a2!ut 2+ milli!n 2arrels !3 !il a da'P the *!rld@ a2!ut 8+ milli!n 2arrels.
We "ave alread% consu!ed )0H o' t"e orldEs oil suppl% Millu a&ee @ournal 8entinel &12712003
Oil@ the auth!rs n!te@ is a 3inite res!urce. T0he p!int can 2e seen *ith!ut an' 3anc' mathematics at all@T *rites >!!dstein. TO3 the 2 trilli!n 2arrels !3 !il *e started *ith@ nearl' hal3 has alread' 2een c!nsumed.T 0hatQs perhaps the *!rst?case estimate@ 2ut even the 2est?case estimates ac"n!*ledge the hal3*a' p!int is li"el' t! 2e reached *ithin a generati!n.

=(/93 Herndon/Petit/Tate/Quinn
*+tend ,26 !ndiscovered 0ields

1o undiscovered places e:ist to prove ne 'ields ill $e large Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p..+?5+
Het 3!r all their dar" the!ries and !ccasi!nal paran!ia@ !il pessimists are right t! challenge the !il num2ers 2eing t!ssed ar!und t!da'@ 2ecause in man' cases th!se num2ers simpl' d!nOt ma"e sense. 0a"e the estimates 3!r Aundisc!veredB !il. :an' !ptimists@ including the )$>$@ 2elieve that a huge am!unt !3 !il remains t! 2e 3!und M an'*here 3r!m 1 trilli!n t! 1.5 trilli!n 2arrels. 0he pr!2lem is@ 3e* places !n earth remain *here all that !il c!uld 2e hiding 2ut *here !il c!mpanies have n!t alread' l !!"ed. Oil is n!t a rand!m ge!l!gical event@ s!mething that can !ccur Kust an'*here. (t is the pr!duct !3 c!mple5 ge!l!gical pr!cesses that ta"e place !nl' in certain quite speci3ic c!nditi!ns. -s *e sa* in the st!r' !3 $pindlet!p@ '!u must 3irst have s!urce r!c"M the deepl' 2uried sediments rich in !rganic matter. (t is als! necessar' t! have a migrati!n path*a' M crac"s !r p!r!us r!c" thr!ugh *hich the ne*l' 3!rmed petr!leum can escape t!*ard the sur3ace. 9inall'@
a la'er !3 impermea2le st!ne !r cla' !r salt is required@ t! trap the petr!leum and create a reserv!ir@ !r 3ield.
T"e end o' eas% oil is near+ t"eoretical oil is uncertaian Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p..7
(n truth@ h!*ever@ as s!me energ' c!mpanies and g!vernment agencies tacitl' ac"n!*ledge@ the !ptimistsO r!s' picture is 3ar 3r!m accurate. 0h!ugh vast quantities !3 !il still remain in the gr!und@ m!st is *hat might 2e called the!retical !il M it ma' e5ist@ 2ut in highl' uncertain and even pr!2lematic envir!nmentsC deep 2el!* the -rctic ice@ 3!r e5ample@ !r in small -3rican regimes *rac"ed 2' civil *ar. Or@ m!st imp!rtant@ inside the !il 3!rtress "n!*n as OP4/@ *h!se p!litical machinati!ns *ill a33ect l!ng? term suppl' m!re p!*er3ull' than an' ge!l!g'. 0hus@ !ur a2ilit' t! get at this the!retical !il@ and t! use it@ depends !n a m'riad !3 varia2les M techn!l!gical@ ec!n!mic@ 3inancial@ and p!litical M that are@ at this p!int@ hard t! predict and even harder t! c!ntr!l. (n !ther *!rds@ alth!ugh *e *ill n!t run !ut !3 !il t!m!rr!*@ *e are nearing the end !3 *hat might 2e called the eas' !il. 4ven in the 2est !3 circumstances@ the !il that remains *ill 2e m!re c!stl' t! 3ind and pr!duce and less dependa2le than the !il *e are using t!da'. 0his 3act means n!t !nl' higher prices@ 2ut m!re v!latile
prices@ *hich *ill ma"e it harder t! see h!* 3ast !il supplies are 2eing depleted@ and harder still t! "n!* *hen *eOll need t! start l!!"ing 3!r s!mething ne*.

=;/93 Herndon/Petit/Tate/Quinn
$2 so(t landing
8o't landing t"eor% rong # lac& o' a$ilit% to !eet de!and5 conse<uences to production 0ina -se%@ c!ntri2uting *riter 3!r /lean0echnica@ A /(- Predicted Pea" Oil :!re than 3+ Hears -g!B@ Nune 9th@ 2011@
httpC11***.triplepundit.c!m12+111+&1prepare?pea"?!il1@ accessed !n Nul' 3@ 2+11@ /NN 0he Oil e3iner' 8!ttlenec" 0here are t*! maK!r pr!2lems *ith the s!3t landing scenari! as a l!ng term s!luti!n. 9irst@ the a2ilit' t! e5tract !il 3r!m vari!us s!urces is !nl' !ne 3act!r in meeting demand. (3 !il pr!ducti!n c!ntinues t! increase@ then !il transp!rtati!n and re3iner' res!urces *ill als! need t! gr!* apace *ith demand@ and militar' anal'sts *a5 3airl' pessimistic !n that p!int acc!rding t! a 2+1+ rep!rt 3r!m the ).$. N!int 9!rces /!mmand. 0he Price !3 Pea" Oil 0he sec!nd pr!2lem ta"es us 3ull circle 2ac" t! the /(-Os interest in the issue@ mainl'@ the relati!nship 2et*een energ' and p!litical insta2ilit'. 0he s!3t landing scenari! applies !nl' t! the quantit' !3 energ' pr!duced@ n!t t! the c!nsequences !3 pr!ducing it. Oil and !ther 3!ssil 3uels 3r!m c!nventi!nal s!urces have alread' pr!ved t! 2e a ris"' energ' strateg' 3raught *ith envir!nmental and pu2lic health haRards. ,ith these s!urces in depleti!n@ *e are turning t! even ris"ier strategies tar sands@ shale@ and deep !cean *aters. 0hese have alread' esta2lished themselves as desta2iliRers due t! their rec!rd !3 real and p!tential threats t! *ater supplies@ 3isheries@ and !ther 3undamentals !3 ec!n!mic sta2ilit'. 0he pursuit !3 unc!nventi!nall' s!urced !il and !ther 3!ssil 3uels ma' !33set the c!ming decline in c!nventi!nal !il pr!ducti!n@ 2ut it ma' *ind up 2ringing a2!ut e5actl' th!se c!nsequences *e sh!uld 2e striving t! av!idC sh!rtages !3 2asic c!mm!dities@ price spi"es@ d!mestic stri3e and gl!2al turm!il

==/93 Herndon/Petit/Tate/Quinn
$2 7arket #ill Predict Peak

Balse+ t"ere is a "uge disparit% $et een production costs and actual oil prices+ price increases tell us not"ing Culletin o' 7to!ic 8cientists Nan19e2 2003 httpC11***.the2ulletin.!rg1issues12++.1K3+.1K3+.cavall!.html
the di33erential 2et*een petr!leum pr!ducti!n c!st and mar"et price is s! large that mar"et price cann!t 2e used as a measure !3 res!urce depleti!n. 9!r e5ample@ the variati!n in the average price !3 !il 2et*een 1998 <L1+ per 2arrel= and 2+++ <L2. per 2arrel= had n!thing t! d! *ith depleti!n !3 reserves and ever'thing t! d! *ith an attempt t! e5ercise Tmar"et disciplineT 2' the OrganiRati!n !3 Petr!leum 45p!rting /!untries <OP4/=.
(n realit'@
T"e !ar&et isnt 'ree no 5 price c"anges occur ar$itraril%5 !a&ing it "arder to 'igure out Paul /o$erts <4nerg' -uth!r= 2003 0he 4nd !3 Oil p.&+?&1
$ec!nd@ in
!rder 3!r price t! re3lect changes in suppl' accuratel' and thus *arn us *hether depleti!n is actuall' ta"ing place@ the mar"et in questi!n must 2e relativel' 3ree@ *hich 3!r !il is n!t the case. (n a 3ree !il mar"et *here all !il *as accessi2le t! *h!ever c!uld pa' 3!r it@ !il c!mpanies *!uld al*a's pr!duce the easiest@ m!st accessi2le !il 3irst@ 2ecause it c!sts less t! d! s!. -s that eas' !il *as depleted@ c!mpanies *!uld turn t! the increasingl' e5pensive !il@ *hich *!uld graduall' push up the price and simultane!usl' send a
timel' signal t! c!nsumers t! start using less !il. 9!r this marvel!us mechanism t! 3uncti!n@ th!ugh@ !il c!mpanies must have access t! that cheaper !il@ s! the' can use it up 3irst@ 2e3!re m!ving !n t! the e5pensive stu33. (n the real *!rld@ h!*ever@ Kust the !pp!site !ccurs. 8ecause OP4/ !*ns m!st !3 the cheap Aeas'B !il and limits h!* much is pr!duced <and *h! can pr!duce it=@ ,estern !il c!mpanies are essentiall' 3!rced t! pr!duce the e5pensive !il 3irst@ and s! must charge m!re 3!r it M ar!und t*ent' t! t*ent'?3ive d!llars a 2arrel M t! c!ver their higher pr!ducti!n c!sts. <0his
d'namic in turn all!*s OP4/ t! charge the same price 3!r its !il@ even th!ugh OP4/ !il is much@ much cheaper t! pr!duce.

$2 High Prices %ause -e" nvestment

1o ne invest!ent no + political insta$ilit% constrains invest!ent and 1990s proved invest!ents 'ail M81C- 91912003 httpC11msn2c.msn.c!m1id159.5&781
(n the!r'@ higher !il prices sh!uld e5pand supplies@ 2' 2ringing !n line !il that Kust isnOt pr!3ita2le t! pr!duce at l!*er prices. 8ut the recent surge in prices and c!ntinued gr!*th in demand havenOt 2een matched 2' a maK!r 2!!st in !il industr' capital spending !n e5pl!rati!n and pr!ducti!n. 7e* spending has 2een c!nstrained@ in part@ 2' p!litical insta2ilit' in parts !3 the *!rld 2elieved t! h!ld vast p!tential@ such as ;eneRuela@ (ran@ (raq and parts !3 -3rica. 8ut 8ig Oil is gun sh' 3!r !ther reas!ns. 0he sting is still 3resh 3r!m a maK!r investment 2!!m in the 199+s@ *hen the industr' l!st heavil' *hen it 2et !n an !il price run?up that c!llapsed 3!ll!*ing a gl!2al recessi!n. 8' 1998@ the price !3 a 2arrel !3 !il had 3allen t! L12.

$2 &ar Sands
Tar sands donEt solve pea& oil 0!m .evitt@ 3reelance c!nsultant !n cr!ss?sect!r partnerships 3!r /P$P@ APea" !il is bgetting cl!serO 2ut the *!rld is n!t read'B@ Nune 28th@ 2011@ httpC11***.theec!l!gist.!rg17e*s1ne*sGanal'sis195.+321pea"G!ilGisGgettingGcl!serG2utGtheG*!rldGisGn!tGread'.html@
accessed !n Nul' 3rd@ 2+11@ /NN
0his ne* peri!d@ the Qappr!ach t! pea" !ilQ as Dr ichard :iller 3r!m the Oil Depleti!n -nal'sis /entre <OD-/= re3ers t! it@ has er!ded spare capacit' and reduced the am!unt !3 ne* !il c!ming !n stream t! replace declines 3r!m e5isting 3ields ar!und the *!rld. ,ith!ut cheap alternatives@ the !il industr' is 2eing
3!rced t! l!!" at m!re unc!nventi!nal s!urces !3 !il@ such as tar sands. 0he OD-/ sa' these are n!t su33icient t! 2e a2le t! 3ill the 3uture gap 2et*een suppl' and demand. ,hatQs m!re the' c!me at a high c!st. 8!th in ec!n!mic terms and in the@ as 'et unacc!unted 3!r@ envir!nmental c!sts. (tQs pr!ducti!n pr!cess is three times m!re car2!n?intensive than c!nventi!nal !il s!urces ? *ith e5tracti!n requiring the creati!n !3 vast !pen mines t! get t! the mi5ture !3 !il@ cla' and sand. (n /anada@ *hich h!lds the largest "n!*n dep!sits@ e5tracti!n has als! 2een lin"ed t! rising incidence !3 cancer and the p!lluti!n !3 maK!r rivers *ith arsenic@ lead and mercur'. 7!ne !3 this has st!pped 8P@ $hell@ 0!tal and !thers 3r!m l!!"ing t! invest.
-o!panies "ave co!!itted to reLect tar sand 8toc&!an 10 <#!rne@ :a' &@ A0ar $ands Oil :eans %igh >as PricesB@ httpC11dirt'!ilsands.!rg13iles1/4(?
0ar$ands:eans%igherOilPrices.pd3= 0ar sands <als! "n!*n as !il sands= !il pr!ducti!n is the m!st e5pensive !il pr!ducti!n in the *!rld. 0he Ve'st!ne _# pipeline *ill create signi3icant !ver capacit' 3!r tar sands crude int! the ).$. raising pipeline tari33s and adding t! the alread' high c!st !3 tar sands pr!ducti!n. 0he gr!*th in tar sands pr!ducti!n needed t! 3ill the Ve'st!ne _# pipeline *ill !nl' !ccur i3 !il prices "eep rising . 0ar sands pr!ducti!n e5erts little i3 an' in3luence !ver gl!2al !il prices 2ecause it maintains n! spare pr!ducti!n capacit'. 0ar sands pr!ducti!n is a s'mpt!m !3 high !il prices and n!t a
2asis 3!r l!*er prices. 0ar sands !il pr!ducti!n is the m!st e5pensive !il pr!ducti!n in the *!rld t!da' and has 2een la2eled the bmarginal 2arrelO 2' the (nternati!nal 4nerg' -genc'. (n -pril 2+1+ :arvin Odum@ Shell7s head of tar sands, announced that the company would not go ahead with any new tar sands pro-ects in the ne5t 3ive 'ears and perhaps l!nger 2ecause !3 the e5pense !3 d!ing s!. %e said that@ bthe !il sands have 2ec!me !ne !3 the m!st c!stl' places !n earth t! pursue !il pr!KectsO. e3erring t! the c!mpan'Os recent L1. 2illi!n e5pansi!n !3 its tar sands mining pr!Kect he said that it represented@ bs!me !3 the m!st e5pensive pr!ducti!n that *e have.Oiii %e stated that the 1++@+++ 2arrel a da' <21d= pr!Kect *ill require minimum !il prices !3 L7+?75 t! turn a pr!3it. 9urther@ c!nstructi!n c!sts in -l2erta are !nl' g!ing up. 0he rush t! devel!p tar sands pr!Kects
and the huge requirements 3!r la2!r@ cement@ steel@ engineering equipment and !ther res!urces mean that ever'thing 3r!m rigs t! h!using are at a premium in the tar sands regi!ns. - recent decline in c!sts spurred 2' the recessi!n is alread' 2eing reversed.iv (n 7!vem2er 2++9@ !ne
!3 /anadaOs respected energ' thin" tan"s@ the /anadian 4nerg' esearch (nstitute </4 (= pr!duced its 2++9 t! 2+.3 3!recast 3!r the tar sands industr'.v (n this 35 'ear timeline it e5pects !il prices t! rise t! ar!und L2++122l stimulating gr!*th in tar sands pr!ducti!n !3 2et*een 5 and & milli!n 21d 2' the 2+3+s t! 2+.+s. (t calculates that the !il price required t! 3acilitate this level !3 pr!ducti!n ranges 3r!m L119 t! L13.122l. 0he last time !il prices *ere at this level@ in mid?2++8@ ).$. gas!line prices averaged L3.9& per gall!n.vi 0he tar sands industr' is clearl' 2etting !n high !il prices in !rder pr!duce much !3 the as 'et undevel!ped res!urce. %!*ever@ there is a ra3t !3 ec!n!mic anal'sis including that 3r!m the (4- and !thers that sh!*s that high !il prices hinder ec!n!mic gr!*th and are there3!re unsustaina2le. /4 ( and the tar sands industr' are c!unting !n a situati!n that *!uld 2e devastating 3!r the ).$. ec!n!m'. (3 !il prices ever did reach L2++122l@ gas!line prices *!uld pr!2a2l' 2e a2!ve L7 per gall!n. 0ar sands pr!ducti!n is e5pensive primaril' 2ecause it is 2itumen@ a s!lid !r semi?s!lid 3!rm !3 degraded !il. 45tracting and pr!cessing it requires m!re c!mple5 pr!cedures than m!st c!nventi!nal !il pr!ducti!n. 0hese
pr!cesses require e5tensive specialiRed in3rastructure leading t! huge capital investment c!sts and high !perating c!sts. /!mpare 3!r e5ample the estimated c!st !3 devel!ping a heav' !il 3ield in $audi -ra2ia *ith $hellOs recent tar sands mining e5pansi!n. 0he :ani3a 9ield in
$audi -ra2ia is estimated t! c!st L15.75 2illi!n t! devel!p and as such is !ne !3 the m!st e5pensive devel!pments in the c!untr'. (t is slated t! pr!duce 9++@+++ 21d !3 !il as *ell as signi3icant quantities !3 natural gas and c!ndensate.i5 (n c!ntrast@ $hellOs -tha2asca Oil $ands Pr!Kect <-O$P= e5pansi!n c!st L1. 2illi!n 2ut !nl' added 1++@+++ 21d !3 crude !il capacit'.

$2 Shale
7ustralia proves t"e industr% is not !aintaina$le T"e 7ge 121312003 httpC11***.theage.c!m.au1articles12++31121+211+7+35158+97+.htmlD!neclic"Etrue
0he c!llapse 'esterda' !3 $!uthern Paci3ic Petr!leum mar"ed the end !3 !ne !3 the m!st enduring and am2iti!us dreams !3 the l!cal res!urces industr'C shale !il. (n 19&8@ )$ 2usiness magaRine 9!r2es heralded shale !il@ essentiall' a pr!cess t! e5tract !il 3r!m shale r!c"@ as Ta verita2le treasure !3 2lac" g!ld . . . s! plenti3ul it can suppl' this c!untr'Qs needs 3!r at least 2++ 'ears.T 0he )$ never had a shale !il pr!Kect. ,hen
it c!llapsed@ $!uthern Paci3ic *as at *!r" !n the $tuart pr!Kect near >ladst!ne@ !ne !3 a clutch !3 shale !il pr!spects it held *est !3 the Wueensland regi!nal centre. ,hile there have 2een !ther res!urce dreams that came t! n!ught ? such as -ustralian :agnesium /!rp ? shale !il di33ered. (t died a lingering death that 2egan n!t l!ng a3ter the c!ncept emerged at the start !3 the 198+s@ *hen )$ !il giant 455!n said it *!uld !utla' a then unheard !3 L.++ milli!n t! 2u' hal3 the undle !il shale pr!spect 3r!m $!uthern Paci3ic and its /entral Paci3ic :inerals sta2lemate. $!uthern Paci3ic and /entral Paci3ic@ 3!r much !3 their li3e "n!*n as the undle t*ins@ merged in 2++2. D!u2ts a2!ut the technical 3easi2ilit' !3 e5tracting shale !il and
envir!nmental pr!2lems ar!se s!!n a3ter undle hit the ne*s@ and *ere never res!lved. (t *as a c!mple5 and ine33icient pr!cess. (n 3act@ shale !il is n!t actuall' !il at all@ 2ut "er!gen@ *ith the shale heated and the resulting vap!ur 2ec!ming liquid !il *hen c!!led.
8"ale e:traction re<uires !ore energ% t"en it produces and &ills t"e environ!ent N!hn /ic"ter 813+12002 httpC11***.therant.in3!1archive1+++++3.html
(3 tar sands e5tracti!n is ec!n!micall' 2!rderline t!da'@ s!me higher price *ill stimulate the devel!pment !3 !il 3r!m !il shale. De33e'es rep!rts that a single )$ shale dep!sit <du22ed the >reen iver 9!rmati!n= c!uld release !il Ar!ughl' equal t! all the *!rldOs c!nventi!nal !il.BiXvY 0hatOs a l!t !3 !il
shaleU 0he challenge is t! e5pend less energ' e5tracting the !il than the !il c!ntains. $hale e5tracti!n *ill als! *rec" hav!c !n the envir!nment.

$2 saudi reserves
8audi reserves running dr% 8tancli'' 11 <Dave $tancli33 @c!lumnist 3!r the 0imes?$tandard. %e is a 3!rmer ne*spaper edit!r and pu2lisher@ +.1+312+11@ A-s (t
$tandsC Pea" OilC (tQs n!t i3 it *ill happen@ 2ut *henB@ httpC11***.times?standard.c!m1davestancli331ciG177&3.3+@ #>=
,hile 3illing m' carQs gas tan" the !ther da' ( had a sense !3 3!re2!ding. ,atching the d!llars add up as each gall!n registered@ ( suspected L..25 a gall!n *as g!ing t! l!!" g!!d 2' this time ne5t 'ear. ,hatQs happeningD ,h' are prices steadil' g!ing upD H!u can than" !il speculat!rs 3!r that. 0h!se daring@ greed' glutt!ns are ma"ing us dance li"e puppets at the pumps. 8ut there are !ther things g!ing !n that drive up !il prices. %ave '!u ever heard !3 Pea" OilD ( *!nQt attempt
t! g! int! the *h!le su2Kect in this limited space@ 2ut ( *ill share s!me p!ints !n this c!ntr!versial su2Kect *ith '!u. :. Ving %u22ert@ a $hell ge!scientist@ c!rrectl' predicted in 195& that the )nited $tates *!uld pass its pea" !il pr!ducti!n 2et*een 19&5 and 197+. $ince then@ ).$. pr!ducti!n has dr!pped steadil'@ and *eQve 2ec!me m!re dependent !n 3!reign !il. 9ast 3!r*ard t! an -pril 2++9
meeting in ,ashingt!n *here Department O3 4nerg' <D!4= 2ig*igs discussed the gr!*ing demand 3!r liquid 3uels. >len $*eetnam@ *h! heads the pu2licati!n !3 D!4Qs annual (nternati!nal 4nerg' Outl!!"@ t!ld his peers the decline !3 liquid 3uels pr!ducti!n 2et*een 2+11 and 2+15 c!uld 2e the 3irst stage !3 the Aundulating plateauB pattern@ *hich *ill start A!nce ma5imum *!rld pr!ducti!n is reached <Pea" Oil=.B - hint !3 *!rr' there@ 2ut the D!4 dismissed the c!ntr!versial Pea" Oil the!r'@ *hich assumes that *!rld crude !il pr!ducti!n sh!uld irreversi2l' decrease in the near 3uture. #auren :a'ne@ resp!nsi2le 3!r liquid 3uel
pr!spects at the D!4@ recentl' t!ld the 9rench ne*spaper #e :!nde@ AOnce ma5imum *!rld !il pr!ducti!n is reached@ that level *ill 2e appr!5imatel' maintained 3!r several 'ears therea3ter@ creating an undulating plateau. -3ter this plateau peri!d@ pr!ducti!n *ill e5perience a decline.B 0he O2ama -dministrati!n g!es al!ng *ith this line !3 th!ught. $*eetnamQs *arning *as 3!ll!*ed 2' *arnings 3r!m 0he ,all $treet N!urnal@ 0he %!ust!n /hr!nicle <main dail' ne*spaper !3 the *!rld capital !3 crude !il trade=@ the /4O !3 8raRilian !il c!mpan' Petr!2ras@ 3!rmer $audi nati!nal !il c!mpan' -ramc! and an (nternati!nal 4nerg' -genc' <(4-= A*histle2l!*erB !n 7!v. 9@ 2++9. 0he *histle2l!*er *as a seni!r (4- !33icial *h! claimed the ).$. *as in3luential in enc!uraging the *atchd!g t! underpla' the rate !3 decline 3r!m e5isting !il 3ields and !verpla' the chances !3 3inding ne* reserves. 0!da'@ the ).$. 3ears that $audi -ra2ia@ the *!rldQs largest crude !il e5p!rter@ ma' n!t have en!ugh reserves t! prevent !il prices 3r!m rising. (n
a 9e2. 8 article in the >uardian@ ).V.@ ca2les released 2' ,i"i#ea"s urged ,ashingt!n t! ta"e seri!usl' a *arning 3r!m a seni!r $audi g!vernment !il e5ecutive@ al? %ussenini@ that the "ingd!mQs !il reserves have 2een !verstated 2' as much as 3++ 2illi!n 2arrels ?? nearl' .+ percent. 0he ).$. c!nsul *arned ,ashingt!n@ A,hile al?%ussenini 3undamentall' c!ntradicts the -ramc! c!mpan' line@ he is n! d!!msda' the!rist. %is pedigree@ e5perience and !utl!!" demand that his predicti!ns 2e th!ught3ull' c!nsidered.B %ereQs the thingC 4ver'!ne agrees *e *ill run !ut !3 !il s!meda'. (tQs *hen *e *ill run !ut that predicti!ns
var'. 7!* (Qm g!ing t! thr!* in an!ther 3act!r. (tQs n!t Kust h!* much !il is le3t ?? itQs als! h!* much !il can 2e e5tracted at a signi3icant energ' pr!3it. 0he 2!tt!m line. %!*ard Odum *r!te in the earl' 197+s@ A0he true value !3 energ' t! s!ciet' is net energ'@ *hich is that a3ter the energ' c!sts !3 getting and c!ncentrating that energ' are su2tracted.B 0hat net energ' is *hat p!*ers !ur *!rld@ 3r!m cars t! planes and ever'thing in 2et*een. (n 2++5@ the D!4 c!mmissi!ned a rep!rt t! e5amine the impact !3 Pea" Oil. 0he %irsch
ep!rt@ named 3!r its lead auth!r@ energ' advis!r !2ert %irsch@ put the pr!2lem in star" terms. (t rec!mmended 1+ t! 2+ 'ears !3 Aaccelerated e33!rtB t! implement alternative 3uels 2e3!re Pea" Oil hits and causes a AmaK!r ec!n!mic upheaval.B 0he general c!nsensus is *e *ill have 2ig pr!2lems in an undetermined 3uture@ starting in 1+ t! 5+ 'ears <depending up!n *h! '!u tal" t!=@ unless *e change !ur 3uel ha2its quic"l' and c!nvert !ur ec!n!m' t! alternative energies. $! *h! sh!uld *e 2elieveD %!* cl!se are *e t! reaching Pea" Oil and ec!n!mic disasterD -s (t $tands@ it d!esnQt ta"e a seer t! see L..25 a gall!n *ill actuall' seem cheap s!!ner rather than later.

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+tend ,2'3 &rillion .arrels +ist

Hig" oil $ad # 98 econo!%

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