Rising Oil Prices Skirt Poorer Nations - Asian Tribune
Contrary to expectations, the sharp increase in world oil prices has not had any devastating consequences on the fragile economies of the world's developing nations, according to a new U.N. report released here. "Oil prices are expected to remain high in the near term, and the impact on growth and inflation will vary from country to country," says the 160-page study on the "World Economic Situation and Prospects 2005". The price of a barrel of crude oil, which averaged 20 dollars through most of the 1990s, hit 64 dollars last week but is expected to stabilize around 60 dollars per barrel this year. With international oil prices about 42 percent higher than in 2004 on average, the combined oil export revenues of energy-rich Middle Eastern nations are estimated to have reached a hefty 300 billion dollars in 2005, according to the report. The projected figure for 2006 "is expected to stay at roughly similar levels", although the U.S. Department of Energy has predicted revenues to reach a record 522 billion dollars this year, further strengthening the incomes of oil-blessed economies. Asked why most developing nations aren't complaining about the impact of high oil prices -- at least, as bitterly as they did in the 1970s -- Rob Vos, director of development policy and analysis at the U.N.'s Department of Economic and Social Affairs (DESA), says that many are currently benefiting from the higher oil prices. They are benefiting "either because they are net oil exporters or because also non-oil commodity prices are up and prices for many of the products they import are down. So many have gained," Vos told IPS. High growth rates in much of the developing world to a large extent are explained by their buoyant export prices, he added. As the new U.N. report also explains, many oil importers are feeling a bit more of a strain as oil prices stay up and the subsidies many governments in developing countries put on domestic energy prices are more difficult to finance, so more of the oil price increase is passed on to consumers and is increasing production costs. "So, we expect that during 2006 there will be more complaints about high oil prices from groups of countries," Vos said. The 160-page annual report points out that there are, however, a number of downside risks to economic growth in 2006. A prolonged high oil price over the next one to two years will have a stronger inflationary impact on most African economies. Despite the higher oil prices, however, many countries have registered terms-of-trade gains owing to increased commodity prices -- particularly minerals and base metals -- and lower prices of imported manufactures, thus offsetting inflationary pressures until recently. Although the report says that higher oil prices are taking a greater toll on oil-importing countries, many of these countries have adopted measures to protect domestic consumers by introducing or strengthening energy price controls and subsidies. Taking a broader view, the study says that world economic growth slowed noticeably in 2005 from the strong expansion in 2004. The world economy is expected to continue to grow at this more moderate pace of about three percent during 2006. This rate of growth is the same as the average of the past decade. According to the report, the U.S. economy remains the main engine of global economic growth, but the dynamic growth of China and India, and a few other large developing economies, is "becoming increasingly important". Still, economic growth slowed down in most of the developed economies during 2005, with no recovery expected in 2006. Growth will moderate further to 3.1 percent in the United States, while "lacklustre performance" will still prevail in Europe, with growth reaching a meagre 2.1 percent in 2006. The recovery in Japan is expected to continue but at a very modest pace of about two percent. At the same time, economic growth in most parts of the developing world and the economies in transition (former Eastern European countries and ex-Soviet republics) is well above the world average. On average, says the report, developing economies are expected to expand at a rate of 5.6 percent and the economies in transition at 5.9 percent, "despite the fact that these economies may face larger challenges during 2006". While China and India are by far the most dynamic economies, the rest of East and South Asia is expected to grow by more than five percent. Latin America, on the other hand, is lagging somewhat behind, with growth of about 3.9 percent. But African economic growth is expected to remain above five percent. Even if these record levels are sustained, the report argues, per capita growth is still not strong enough in many of these countries to make sufficient progress towards the eradication of extreme poverty by 2015. The study is a collaborative effort by the Department of Economic and Social Affairs, the U.N. Conference on Trade and Development (UNCTAD) and the U.N.'s five regional commissions covering Asia, Africa, Europe, Latin America and the Caribbean, and Western Asia (the Middle East).
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Oil Wealth in Niger Delta Triggers More Tension - Voice of America
There has been a string of attacks on several oil companies operating in Nigeria's southern Delta region, including the recent abduction of four foreign employees working as sub-contractors for Royal-Dutch Shell. The recent attacks merely highlight decades of tension between ordinary people, the government and huge multi-national companies that have turned Nigeria into Africa's biggest producer of crude oil. The vast quantities of oil in the southern Niger Delta have not brought stability and prosperity to the people who live there. Despite the resources that are pumped daily from the Gulf of Guinea off the coast of Nigeria, Delta locals have seen little of evidence of it. Antony Goldman, an Africa analyst for Clearwater Research services, who has spent a lot of time in the Delta, says many people are not satisfied. "In the Delta people have complained that not enough resources from the oil sector are going back to the region, they're saying states should have more of a proportion of oil revenue than is presently the case," said Mr. Goldman. "But what is true certainly is that what money has gone into the delta, there have been serious issues about how that money has been spent." Oil revenues have not translated into the basics that villages throughout the region desperately need, such as schools, water pumps, paved roads and hospitals. For years, as barrel after barrel of highly valued crude has been exported from Nigeria, tensions have turned to violence, with armed ethnic groups demanding what they consider to be their fair share. Their tactics include abducting oil workers, seizing control of oil platforms and stealing oil from pipelines -- locally known as "bunkering" -- to sell on the black market. According to Tunde Martins, a public affairs analyst and former journalist, many of those who turn to violence in the Delta are not acting on behalf of ordinary Nigerians. "The money cannot get to the poorest of the poor in the sense that these demands are not organized," he said. "It is the spur of the moment as each group decides this is the time: we are cash strapped and they decide to hold the oil workers hostage and make demands for financial ransom. They are not especially militants fighting for the rights of their people. They are a bunch of thugs and they are not using this cash to develop their communities for their people. " The current crisis involves a group, which calls itself the Movement for the Emancipation of the Niger Delta. The militants are holding four foreign oil workers hostage, demanding the release of an ethnic Ijaw separatist leader, who is facing treason charges, and the former governor of Bayelsa state, accused of corruption and money laundering. The group is also demanding one and one-half billion dollars from Shell, accusing the company of polluting the region. A Shell spokesman declined to be interviewed for this report. When attacks on oil installations or fighting erupt in the Delta, the Nigerian government often deploys security forces to quell the violence. But, Ulrika Sandberg, a researcher in the Africa program for the international human rights watchdog group, Amnesty International, says in many cases they end up abusing human rights in the process. "And in many of these cases, the security forces are using excessive force," she said. "For example, in February last year, we reported on two cases in which the security forces used excessive force. And in one case, at least 17 people were killed in a raid when they tried to arrest one or two criminals." She accuses Nigerian security forces of acting with impunity, adding that while federal officials conduct investigations into such incidents, they rarely bring those responsible to justice. Sandberg, who has met with locals, activists, security forces and others in the Delta, says the crisis in the region remains, despite the end of military rule in 1999. She says oil plays a key role. "We see a situation where we still have injustice, violence and human rights abuses committed in the area where oil is being extracted and produced," said Ms. Sandberg. "And, of course, oil is part of the equation of why there is such high tensions and a high level of violence in the Delta." But public affairs analyst Tunde Martins says there has been progress. He says the Nigerian government and oil companies have been trying to compensate villagers. "They may not have been able to meet all the needs of the demands of the host communities but it is on record that the Nigerian government has been meeting their needs through the Niger Delta Development Corporation, which was set up to provide social amenities and facilities for the people of the Niger Delta," he said. "And it is also on record that the multi-national oil companies have been giving out both cash and other humanitarian things to the community." Analyst Antony Goldman says current attempts to address the concerns of impoverished communities are still far less than needed. He points out that oil companies themselves have admitted that past projects have fostered even more violence as diverse ethnic groups compete for development money. In light of this, Mr. Goldman says there is a new awareness among oil companies that they need to find more productive ways to deal with the problem. "There's nothing altruistic here. I think that what companies have begun to realize is that if they're looking to protect the medium and long-term interests of their shareholders, they need to find a more effective way of operating in the Niger Delta," said Mr. Goldman. "And what that means is, that they need to find a way of engaging with the kind of people or factions or communities that have been making their lives so difficult in terms of targeting installations, stealing their products and threatening their employees." That point is hitting home. The recent attacks in the Delta region have cut Nigeria's oil output by an estimated eight to 10 percent.
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Oil production fears fuel grim economic warnings - The New Zealand Herald
As the oil price nudged above $64 a barrel this month on heightened concerns about disruption to supplies from Iran and Nigeria, a group of geologists, economists and commodity traders met in London to consider a more fundamental question: when will the world begin to run out of oil? That moment is known as "peak oil" - the point at which production stops increasing and goes into inexorable decline. Some commentators believe that moment may be as little as two years away, some reckon we do not need to worry for another 20 years and some think the peak of production is so far in the distance that it is pointless to even try to put a timescale on it. But one thing that is agreed on is that when peak oil does happen, its impact on the world economy - and the consumer lifestyles so many of us take for granted - will be profound. Chris Skrebowski, editor of the Energy Institute's Petroleum Review, believes peak oil will occur in 2008, at which point the world will move into "a land without maps where we are all likely to be poorer". For oil is essential to almost everything we do - 90 per cent of world transport is oil-dependent; all petrochemicals are produced from oil; 99 per cent of our food relies on oil in some way; and 95 per cent of lubricants are oil-based. And, in many cases, oil is not easily replaceable. There are no realistic alternatives to oil for fuelling aircraft and ships, producing petrochemicals or powering cars, without huge investments in technology such as hydrogen. Given that world oil consumption has doubled since 1970 from 42 million barrels a day to 84 million, that poses a stark challenge. At present rates of depletion, five million barrels a day of new production will need to be brought on stream for the next 10 years just to keep world output rising. The peak oil debate tends to divide into two camps. On the one hand there are geologists who argue it is almost upon us, based on analysing past production and discovery rates and field exhaustion and extrapolating into the future. On the other hand there are economists, political scientists and the oil majors who believe that oil producers - be they governments or companies - will always find a way to meet demand, whether through cleverer ways of finding and extracting oil or greater fiscal incentives to discover and produce more. The conference in London, organised by the Dutch investment bank Insinger de Beaufort, represented both strands of opinion. Skrebowski says that the world's big five oil majors all produced less last year than they did in 2004 while North Sea oil production is declining so rapidly that it will halve in the next seven years. According to the University of Reading's Dr Roger Bentley, secretary of the Association for the Study of Peak Oil & Gas, the evidence is irrefutable. He points out that 64 of the world's 100 or so oil-producing countries are past the point of peak production and on the downward slope. Although there may be a "mini-glut" as output is stepped up from Russia, the Caspian and Iraq and new sources come on stream such as deepwater oil and oil sands, the trend, he says, is unmistakable. Bentley believes that non-Opec production will reach a peak within the next 30 months and global output will start to decline between 2010 and 2015 or 2020 at the latest. "Alongside global warming, this is one of the two extraordinary challenges facing mankind," he says. "The numbers may slip a little but the fundamental underlying direction does not change." Dr Jeremy Leggett, an oil industry geologist turned environmental campaigner turned chief executive of a solar energy company, paints an even more apocalyptic scene. He believes that peak oil will occur some time this decade. That will not only produce "horrible economic pain" as oil prices rise to choke off demand but it will also precipitate environmental disaster as oil-consuming countries switch to coal and hasten global warming. "The shortfall between current expectations of oil supply and actual availability will be such that neither gas, nor renewables, nor liquids from gas and coal, nor nuclear, nor any combination thereof will be able to plug the gap in time to head off economic trauma," he warns. What is his evidence? Dr Leggett points to the lessons of history. In 1956, a world-renowned geologist, M.K. Hubbert, predicted that US oil production would peak in 1971, much to the disbelief of almost everyone, including his employer, Shell. He turned out to be wrong - peak production occurred a year earlier in 1970. Using the same methodology, the "Hubbert curve" falls smoothly to this day, pointing to a peak some time between 2005 and 2010. Despite the ingenuity of the oil industry in extracting oil from ever more hostile environments, it is, adds Dr Leggett, a quarter of a century since the world discovered more oil in one year than it produced. Six years ago there were 16 discoveries of giant fields containing 500 million barrels or more - in 2003 there were none. Not all those attending the conference are sold on the idea of peak oil. Mike Lynch, an adviser to the US Government who runs his own energy and economic research consultancy, is one sceptic. He says that the study of peak oil is not a science and that those who advocate it are guilty of naivety, ignorance and plain manipulation of the data. "There are a lot of zealots out there and a lot of claims are made which are not tested," he says. "It is true that oil is finite but since 1989 people have repeatedly predicted the peak too soon and have had to keep on increasing their estimate of reserves." Lynch is one of the few pundits who forecasts that oil prices will begin to ease, but as even he jokes: "I have predicted nine of the last two price decreases."
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Iraq's Oil Bust - Newsweek
Guarding the Fatah oil refinery used to be a pretty straightforward job. Insurgents hit the complex only sporadically, at night, and usually missed important targets. But by early last year, attackers were using rocket-propelled grenades, mortars and heavy machine guns in brazen daylight assaults. They seemed to know about everything and everybody in the refinery. Ambushes were common. "We were afraid to even take vacation and go home," says 26-year-old Saif Mohammed, an Iraqi security guard assigned to help protect the vast network of blackened pipes and smokestacks. "The people who worked with us used to tip off the fighters. They wanted to play both sides—to keep their jobs and be informants for the terrorists." When insurgents killed the man Mohammed shared duty with last April, then threatened Mohammed with the same, he quit. In the past year, there have been close to 20 large-scale assaults on or around Fatah, part of Iraq's largest oil-production complex in Bayji, deep in the Sunni Triangle northwest of Baghdad. Last month the Bayji site shut down completely for two weeks. It reopened with the New Year, but three days later insurgents pinned down a 60-truck fuel convoy there in an hourlong gun battle. Across the country, insurgents mount a major attack on oil facilities about once every three days, and the situation is getting worse. December was the third month in a row that Iraqi oil production went down, marking the lowest level of exports since the invasion. At a time when global supplies are stretched thin, the Iraqi oil bust helps keep world prices near record highs. Instead of looking forward to the prospect of their country standing on its own, after final results in polls to elect a new, permanent government were announced last week, Iraqis are now facing a massive oil and gas price hike designed to ease part of a crippling $120 billion debt. Only three years ago, before the United States led the invasion of Iraq, the Bush ad—ministration dreamed of liberating the country on the cheap. Billions in untapped oil reserves would pay for reconstruction and nation-building. But hundreds of billions of American tax dollars later, Iraq's oil still isn't flowing at prewar levels. And in a country where 90 percent of the government's $35 billion in revenues comes from petroleum, the old promise has come to seem a curse. "Some people wish we didn't have all this oil," says National Assembly Speaker Hajim al-Hassani, "because it has brought us all these problems." What happened? There's certainly no question that the Bush administration, heavily peopled with veterans of the oil industry, focused on the importance of petroleum to Iraq's economy. Even as the rest of Baghdad was left open to looters in April 2003, the Ministry of Oil was secured by U.S. troops. But no force was put in place to protect the pumps and pipes. Finally in August 2003, the Americans awarded $40 million to a private security firm for the training of 5,500 Iraqis. Largely drawn from Sunni tribes, the recruits were given one-year contracts to guard refineries and distribution hubs. But the contract was terminated as too expensive, say U.S. officials. Then the U.S. military took responsibility for the Oil Protection Force, but guards were never deployed to cover the 7,000 kilometers of pipelines, not even those vital for exports. Those pipelines soon became primary insurgent targets. When the U.S. Congress allocated $18.4 billion to Iraq's reconstruction, no money was earmarked for oil security, so the job went to regular Iraqi Army and police units. After the elections last January, the task of protecting the nation's most precious resource was shifted to the Oil Ministry. Then last summer, a new 4,000-man unit called the Strategic Infrastructure Battalions started training. But the SIBs quickly fell into bureaucratic cracks. "The ministers have had the hardest time figuring out who the SIBs even work for," says Brig. Gen. William H. McCoy, commander of the Army Corps of Engineers in Baghdad. As late as October, confusion at critical oil facilities like the Fatah site, where Saif Mohammed worked, left it vulnerable to at least one attack per week. The insurgents, meanwhile, are precise in their timing and ruthless in their choice of targets. They often wait for key repairs to be completed before attacking the same location, sometimes the day after the oil starts flowing. "We fix them and they just hit us again and again," says Iraqi Oil Minister Ibrahim Mohammed Bahar al-Aloum. Personnel are targeted, too. On Jan. 4, insurgents struck at the Oil Ministry itself, killing Director General Rahim Ali al-Sudani and his son. Washington has allocated $1.7 billion to finance oil reconstruction projects across the country, but of that, only $77 million worth has been completed. Al-Aloum says U.S. confusion and incompetence has kept the work tangled in red tape: "Most of these projects were supposed to be done last year. If U.S. money had been made available, Iraqis could have done the job faster." Yet the United States has recently made clear that it no longer wants to be the principle donor. Other foreign investors are biding their time, hoping some sort of peace can be restored. "Whichever way you look in the short term, it comes back to security," says Lawrence Eagles of the International Energy Agency in Paris. Under mounting pressure, Iraqi officials try to remain optimistic. Al-Aloum has decorated his living room with propaganda posters. with oil we realize our ambitions, says one of them. But for workers more worried about ambushes, such notions seem lost in a distant future.
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