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Quick jump to below stories:
5-nation pipeline to form 'ring' of self-sufficiency
Chavez Stokes Confrontation Over US Role in Venezuela
Lawmakers move to extend daylight-saving time
Think it's hot? Be glad you're not in Cuba
Twilight in the Desert: the coming Saudi oil shock and the world economy by Matthew R Simmons
Research shows ethanol isn't worth the energy
New Peak Oil / Oil Crisis documentary DVD available in UK & Europe

5-nation pipeline to form 'ring' of self-sufficiency

By Kenneth Rapoza
The Washington Times
Published July 19, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

RIO DE JANEIRO - Political crises in Bolivia have led five South American nations to rush together a natural-gas pipeline project that would give the region energy self-sufficiency at a time when oil and natural-gas prices threaten national economies.

Leaders from Argentina, Brazil, Chile, Peru and Uruguay have met four times in three weeks to discuss building a 745-mile pipeline from the Camisea Gas Field in Peru to northern Chile. The pipeline then would connect to 4,349 miles of existing lines in Argentina, Brazil and Uruguay. The project is expected to cost $2.5 billion.

Camisea pumps roughly 1.75 billion cubic feet of natural gas per day.

Political unrest in Bolivia led Chile and its three neighbors to propose the pipeline project in Lima, Peru, on June 13. The topic arose again on June 20 at the Mercosur Summit in Asuncion, Paraguay. Mercosur is the trade bloc of Argentina, Brazil, Paraguay and Uruguay.

Financing sought
Two days later, energy ministers flew to Washington to discuss financing at the Inter-American Development Bank (IDB). Energy and economy ministers met again in Buenos Aires on July 18.

IDB President Enrique Iglesias said the bank would help finance the project. "This project will be a milestone in the history of South America's integration," Mr. Iglesias said.

Bolivian engineers are expected to participate in the project, dubbed "the South American energy ring." Bolivia's interim president, Eduardo Rodriguez, said in a June 23 interview on CNN International that his government would develop policies favorable to national and regional energy needs first.

Bolivia's original plan to export liquefied natural gas to the United States and Mexico has proved politically damaging. The country has gone through two presidents in two years over energy matters.

Bolivians have pressed their government, with some success, to nationalize the country's natural-gas resources, 40 percent of which is managed by Petrobras, Brazil's oil company.

Bolivia doubles tax
Last month, Bolivia increased taxes on energy production from 16 percent to 32 percent and said it would start auditing foreign energy firms to make sure they are up to date on royalty payments. Bolivia has the second-largest natural-gas reserves in South America, after Venezuela. Peru is a distant third.

Bolivia's gas reserves are estimated to be at least 27.6 trillion cubic feet. By comparison, the Camisea field contains an estimated 8.7 trillion cubic feet, Peruvian figures show.

"This project is about becoming energy self-sufficient in natural gas, and in the volatile oil and gas world that we live in today, that means you're guaranteed an energy supply and balance of payments," said Claudio Porto, director of Macroplan Strategies, a consulting firm whose clients include Petrobras.

Burdens of history
Energy ministers have discussed energy integration for decades, but little has been accomplished. Peru and neighboring Bolivia do not have their gas lines connected to each other. Peru's gas doesn't reach its eastern neighbor, Brazil.

Political disputes between Bolivia and Chile that date back to the 1879-83 War of the Pacific haven't helped. Bolivia's natural-gas contract with Argentina specifies that Argentina cannot sell Bolivian gas to Chile, according to the Argentine Embassy in Brasilia. A plan for a natural-gas line between Argentina and Bolivia collapsed when Carlos Mesa stepped down as Bolivia's president June 6 after just 20 months in office.

Secure energy supplies are on the minds of many national leaders because of wars in the Middle East and a rising imbalance between availability and demand. For South America, the project means cheaper energy and another step toward economic integration.

European model eyed
Peruvian Foreign Minister Manuel Rodriguez Cuadros compares the proposal to the coal and steel projects that led from the European Common Market to the European Union. "This is the most important economic integration project ever done in South America," Mr. Cuadros said at the Mercosur summit in June.

Former Brazilian Energy Minister Dilma Rouseff said in Paraguay that "an energy ring like this one in Latin America makes the Latin America market more attractive, because it used to be that you looked at the gas market and would think instead about how to export it to the United States."

Mrs. Rouseff was made chief of staff to Brazilian President Luiz Inacio Lula da Silva this month and was succeeded as energy minister by Silas Rondeau.

"Energy integration is crucial," said Michel Alaby, president of the Brazilian Association of Market Integration, a Sao Paulo lobbying firm. "The tendency is for South America to become totally integrated within a generation or two -- a new 'European Union of the South.'"

Self-sufficiency goal
Becoming self-sufficient is good news for a region that has gone through nearly three decades of boom-and-bust cycles and does not want to be subject to global energy price shocks.

The oil crisis of the 1970s increased Brazil's national debt, creating a burden that remains heavy. The debt has made Brazil subject to austere macroeconomic policies designed to pay lenders first, often at the expense of other national priorities, Vice President Jose Alencar says.

By contrast, higher natural-gas prices put the United States at a competitive disadvantage because natural gas costs less elsewhere, according to the American Gas Association.

"The best-case scenario is if the southern cone has a major grid to move natural gas around to other South American nations, driving economic growth at lower cost," said Amy Jaffe, associate director of Rice University's Energy Program. "That's fundamentally cheaper than having to import liquefied natural gas, like the U.S. is going to have to do."

The Chavez model
South American energy issues have taken center stage since Venezuelan President Hugo Chavez has used state-owned Petroleos de Venezuela to forge political alliances with energy-starved Caribbean nations. Part of Petroleos de Venezuela's oil income has gone to social programs, including bringing in roughly 20,000 medical doctors from Cuba to serve poor neighborhoods.

Mr. Chavez has praised the energy ring and called for creation of a regional gas company. His proposal to create a regional oil company, called PetroSur, has been received well by Mercosur politicians. PetroSur calls for joint-venture projects among Petrobras, Petroleos de Venezuela and Enarsa of Argentina.

Petrobras and Petroleos de Venezuela will build a refinery this year in the Brazilian state of Pernambuco. Heavy Venezuelan crude will be refined there to serve northern Brazil.

Lofty goals espoused
In March, Mr. Chavez and Uruguayan President Tabare Vazquez signed a declaration regarding PetroSur, announcing as their goal to "guarantee our country's access to its own nonrenewable natural energy resources and defend our people's use of those energetic resources to create more just societies and fight poverty."

On May 25 in Caracas, Venezuelan Energy Minister Rafael Ramirez Carreno declared that Petroleos de Venezuela's mission was to build "new socioeconomic relationships," leading to "socialism."

Mr. Carreno is also the president of Petroleos de Venezuela.
Such rhetoric worries the Bush administration that Venezuela eventually could ground oil tankers heading for the United States, but Foreign Minister Ali Rodriguez has said the oil shipments will continue. The United States imports up to 15 percent of its oil from Venezuela.

But specialists say it is unlikely that any energy integration that included Venezuela would close the door to U.S. investment.

"Energy raises emotional and political reactions like no other topic," said James Jones, U.S. ambassador to Mexico from 1993 to 1997 and a lawyer specializing in energy at Manatt Jones Global Strategies.

"If you look at PetroSur objectively, it makes sense. It's worth talking about," said Mr. Jones. Moreover, even when oil profits have been distributed to the poor, as in Venezuela and Brazil, inequality and poverty persist.

"You don't see oil profits reducing poverty," said Mr. Alaby, head of Brazil's Association of Market Integration. "It's not enough just to donate money. Petrobras isn't building new schools. It's not raising teachers' salaries."

Something is missing
"What's missing is a shared strategy for development," said Roberto Mangabeira Unger, a political consultant and lawyer in Rio de Janeiro who hopes to run for president of Brazil next year. "The energy project is incidental. We're very far away from having a shared economic and social strategy. Venezuela's petroleum populism is certainly not a model. The model is China, India and Russia. The nightmare of stagnant growth and inequality is one in which we have yet to awake."

More oil and gas are being discovered in Brazil, Argentina, Venezuela and Peru. Petrobras produced more oil than Iraq back in 2003 at 1.5 million barrels per day, and expects to produce 2.3 million per day within the next five years.

But the region is no energy paradise. South America produced roughly 119.5 billion cubic meters of natural gas in 2003, compared with 766.4 billion in North America.

Only Africa produces less. South America also has the lowest number of proven natural-gas reserves, followed by North America.

Oil production isn't much better. Brazil's National Petroleum Association says the region produced 6.7 billion barrels per day in 2003, the least of any continent.

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Chavez Stokes Confrontation Over US Role in Venezuela

By Monte Reel
Washington Post
July 19, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

After the rumble of tanks died down and the last soldier high-stepped past the spectators' pavilion, President Hugo Chavez told the thousands attending Venezuela's Independence Day parade July 5 that no invading army could match the fighting force that had just marched by, "armed to the teeth." The hypothetical invasion he invoked was patently clear: Two days before, Chavez had announced the discovery of evidence that the United States had drawn up blueprints to invade Venezuela, a plan he said was code-named "Operation Balboa." American officials dismissed the claim as fiction, just as they have denied Chavez's repeated assertions that the CIA is trying to assassinate him, or that the Bush administration was behind the military coup that briefly toppled his government in April 2002. There is little doubt, however, that relations between Venezuela and the United States, strained for years, are plunging to new lows.

Chavez has always been outspoken in condemning what he calls "U.S. imperialism," mocking President Bush as "Mr. Danger" and Defense Secretary Donald H. Rumsfeld as "Mr. War." But Venezuelan officials insist that his recent threats to sever ties with Washington -- thereby suspending the export of 1.5 million barrels of oil per day -- are more than the rhetoric of a populist rallying domestic support. "When the president talks, it is not a joke," said Mary Pili Hernandez, a senior Foreign Ministry official. "The only country Venezuela has bad relations with is the United States; with all other countries we have good or very good relations. But with just one word, the U.S. could resolve all of the problems. That word is 'respect.' "

Chavez asserts that the 21st-century equivalent of the Cold War is the developed world's thirst for oil -- and its attempts to manipulate weaker governments to secure it. Oil-rich Venezuela sells 60 to 65 percent of its crude oil to the United States, making it the fourth-largest oil supplier to the U.S. market. This year, near-record-high oil prices have helped Chavez finance a variety of social programs that he vows will make the country more independent of U.S. influence.

Observers say the oil revenue also has emboldened Chavez's foreign policy strategy. He has recently inked oil agreements with Argentina, Brazil and his Caribbean neighbors and has launched efforts to strengthen ties with China through oil accords. Rafael Quiroz, an oil industry analyst in Caracas, said the Chavez government believes that the conflict between developing countries endowed with such natural resources and nations with high demands will only intensify in coming years. Chavez would like to precipitate that conflict, Quiroz said. "I think he's correct to try to speed up that kind of confrontation, because the developing world -- where 85 percent of world reserves are -- will stand in a better place after that," Quiroz said. "Every day it is more apparent that oil is fundamental for Venezuela in its international relations, and it is the main ingredient Chavez uses to form strategic alliances."

Venezuela could find other buyers for oil and the United States could find other suppliers, but both have sound financial incentives to continue the current trade arrangement. If Venezuela cut supplies, the United States would probably have to pay more to fill the gap, driving up domestic fuel prices. Venezuela would also suffer because of higher shipping and infrastructure costs, according to U.S. officials. There are now five refineries in the United States specifically tooled to process Venezuela's variety of heavy crude oil; no other countries are similarly equipped, officials said. "It would be a disruption, but at the end of the day, no one country can control the international oil market," said William R. Brownfield, the U.S. ambassador to Venezuela.

U.S. officials have also complained about strains in the traditionally cooperative efforts against drug trafficking. Earlier this year, the Venezuelan National Guard seized equipment from neighboring Colombia's anti-drug task force, which works closely with the United States. And last month, the head of Venezuela's drug-fighting squad -- whom international drug agents had considered very supportive -- was fired. Venezuelan authorities bristle at suggestions they are being uncooperative in law enforcement matters. They argue that the U.S. government follows a double standard, pointing in particular to the case of Luis Posada Carriles, a former CIA operative who participated in the failed Bay of Pigs invasion of Cuba in 1961. A naturalized Venezuelan citizen now in a Texas prison on immigration charges, Posada, 77, has been accused of bombing a Cuban airliner in 1976, killing all 73 aboard. He was arrested in Venezuela on terrorism charges but escaped from prison in 1985.

After becoming embroiled in a network run by former White House aide Oliver L. North to smuggle weapons to anti-government rebels in Nicaragua, and an alleged assassination attempt against Cuban President Fidel Castro for which he was imprisoned in Panama, Posada was spotted in Miami earlier this year. U.S. officials indicated they were unaware of his whereabouts, but in May, after he was interviewed by the Miami Herald, he was arrested and sent to a detention facility in El Paso. He is now seeking asylum to protect him from a Venezuelan extradition request. He faces a hearing in August. The Posada case is as complex as a spy novel, but Venezuelan authorities say it boils down to this: If the United States is serious about prosecuting the war on terrorism, it should extradite Posada -- whom they compare to Osama bin Laden -- to face justice in the airliner bombing. If you have a president who speaks all the time about the importance of fighting terrorism," said Hernandez, the Foreign Ministry official, "we don't understand" the U.S. reluctance to extradite Posada. "The main reason to do it is to give justice to the families of the 73 people who died."

Posada's attorneys assert that he essentially was acquitted twice -- first by a Venezuelan military court, then by a civilian court that failed to convict him. His attorney here, a former intelligence officer named Joaquin Chaffardet, was indicted but never convicted for allegedly organizing Posada's prison break. "I absolutely justify that decision," Chaffardet said of Posada's escape, adding that he was convinced Posada could never get a fair trial in Venezuela. "It is not justice to have someone waiting nine years for a trial after being acquitted already." Venezuelan authorities say the civil case against Posada was still proceeding when he escaped. Posada's defenders insist the Venezuelan extradition request has nothing to do with bringing a terrorist to justice; they say Chavez is simply using the case as a tool against the United States.

Political opponents of Chavez also criticize the president's repeated claims that the CIA is backing a plot to murder him. On June 24, the government canceled an annual military parade, citing reports of an assassination plot against Chavez. On Independence Day, he watched a parade of the newly formed military reserve force that he hopes will eventually grow to 2 million loyal defenders. One group of opposition legislators calculates that Chavez has increased funding for his own security by 673 percent in the past six years. The president's security concerns are not surprising, since he was temporarily toppled by a coup three years ago. This month, a judge ruled that the opposition group Sumate -- accused of accepting $31,000 from the U.S. government-funded National Endowment for Democracy -- must stand trial for its alleged role in inciting the coup.

One of the group's members, Maria Corina Machado, also is charged with civil rebellion for her role in the government that replaced Chavez for two days, until loyalists returned him to power. In May, Bush met with Machado in the White House, a move that infuriated Chavez. A State Department spokesman earlier this month defended Sumate, saying the group is devoted to educating voters and encouraging democracy. "The judicial actions that are being taken here are, from our perspective, simply part of a Venezuelan government campaign that's designed to intimidate members of civil society and prevent them from exercising their democratic rights," Tom Casey, a State Department spokesman, said at a July 8 briefing.

U.S. officials say the atmosphere between the two countries is tainted with so much bad blood that no simple solution is likely to wash it away. "We are going to constantly be in his cross hairs," one senior U.S. official said of Chavez. "We're talking about a man who has gone through all of his adult life in confrontation mode. It's not a question that we will have a negative relationship with him."

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Lawmakers move to extend daylight-saving time

Measure part of energy bill

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

WASHINGTON (AP) -- An agreement was reached Thursday to extend daylight-saving time in an effort to conserve energy, but not to the extent the House approved in April.

House and Senate negotiators on an energy bill agreed to begin daylight-saving time three weeks earlier, on the second Sunday in March, and extend it by one week to the first Sunday in November. The House bill would have added a month in the spring and another in the fall.

According to some senators, farmers complained that a two-month extension could adversely affect livestock, and airline officials said it would have complicated scheduling of international flights.

"We ought to take a hard look at this before we jump into it," said Sen. Larry Craig, R-Idaho, who questioned how much oil savings the extension would produce.

Reps. Edward Markey, D-Massachusetts, and Fred Upton, R-Michigan, agreed to scale back their original proposal, and Senate negotiators accepted the new version, along with a call for a study on how much daylight-saving time actually affects oil consumption.

"The beauty of daylight-saving time is that it just makes everyone feel sunnier," said Markey.

Upton noted that the extension means daylight-saving time will continue through Halloween, adding to safety. "Kids across the nation will soon rejoice," said Upton, because they'll have another hour of daylight trick-or-treating.

Lawmakers said they hoped to complete the energy legislation next week.

Copyright 2005 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.

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[A glimpse into our future? Energy infrastructure and needed grid improvement are not being made in Cuba because -- as Matthew Simmons prophetically observed -- "the return on investment is uncertain." Yes, Cuba is feeding its people without oil. But can it take care of their other needs without energy and without new generating capacity? Most writers credit the elevator with the birth of modern metropolises. I think air conditioning is what has made that possible and modern construction depends upon air conditioning to be habitable.

Here's to good old adobe. - MCR]

Think it's hot? Be glad you're not in Cuba

Daily blackouts putting nation in a bad mood; Dennis only made it worse

By Mary Murray
NBC News
Updated: 2:10 p.m. ET July 12, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

HAVANA - Summer's searing temperatures getting you down? Just be glad you don't live in Cuba where daily blackouts make it about impossible to beat this year's record heat. The island's electric company began dimming the lights last month after it began rotating its most important power plants off line for regular maintenance. At first, the blackouts were tolerable, four hours twice a week. But by mid-month they had grown to daily six-hour ordeals.

The island's power grid, which has the capacity to produce 3,200 megawatts a day, is barely producing half of that. But, a recent hot spell caused a major meltdown. The Antonio Guiteras generator, located some 60 miles east of the capital, broke down for more than a full day, causing an energy deficit of more than 70 percent.
"It's enough to drive anyone crazy," moaned Raúl Jiménez, who said he "barely survived" the 18-hour blackout that hit his crowded neighborhood in Central Havana.

His neighbor, Luisa Diaz, described the blackouts as "exhausting." Returning home from her factory job, the 42-year old machinist said she braces for her "daily fight with the refrigerator. I'm either worried about it breaking, mopping up a pool of water because it defrosted, or throwing out food."

The outages have not only sparked widespread complaining, but random incidents of protests. Residents of two Havana high rises report that during nighttime blackouts - when it's too dark to identify the culprits - some people hurl empty glass bottles and cans off their balconies while others shout anti-government slogans.

Appeal for patience
Yadira Garcia, Cuba's Minister of Basic Industry - the oveseer of power generation - went on national TV last week to beg for people's patience while offering a cautious hope that things should begin improving later this month.

"But, no one can guarantee that there won't be new breakdowns in the old equipment," Garcia said. Age, she said, is a big part of the problem. Cuba's seven principal power plants, built with now outdated technology from the former Soviet bloc, have been generating electricity for over three decades.

Breakdowns are routine, said Garcia, and parts have to be imported. "Sometimes replacement parts aren't even manufactured any more and have to be made special to order just for us." Upgrading just one thermoelectric plant outside of Havana is costing $20 million. That's why she's warning the public to "prepare for a very tense summer."

Hurricane Dennis
And that was before Hurricane Dennis tore across the island this past weekend, knocking down over a thousand electric poles, 36 high tension towers and causing more than $1.4 billion in material damage.

For Digna Despaigne, 42, this only makes matters worst, and guarantees no respite from her daily grind. She wakes at 4 a.m. every day to cook her 5-month-old son's baby food and iron his cloth diapers. "My whole life is turned upside down. I'm always tired."

Still, she considers herself lucky. "We live on the top floor apartment so we get to use the roof to sleep." People's biggest complaint has to do with the nighttime blackouts. It's hard to sleep without the use of an air conditioner or fan. Almost 96 percent of Cuba has electricity, comparable to developed countries and far ahead of
most in Latin America. Conversely, blackouts have plagued the communist government since 1990, when Soviet oil shipments to the island began drying up.

With energy as its Achilles heel, Havana has invested over $150 million in developing its own petroleum production. While Cuba now can generate 90 percent of its electricity from local gas and oil extraction, its high-sulfur crude easily clogs the thermoelectric machinery and requires expensive cleaning. So, the island relies partly on Venezuelan imports, quality crude that burns cleaner.

© 2005

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[This is not just a positive book review of Simmons' important book. It's a demonstration that, in addition to myriad credentialed prostitutes grinning on the telescreen, there are genuine political thinkers in Anglo-American academia who live here in Reality with the rest of us. John Gray is the author of some of the finest works of political theory since the heyday of his model, Isaiah Berlin. For twenty years, Gray has been among the more insightful advocates of the view that the 18th Century "Enlightenment" sowed the seeds of its own destruction. In other words, the foundation of American political culture - free markets, democracy as a panacea, and science as a sure path to endless social progress - was bunk from the beginning. It all originated in a disastrous contempt for human limitations, for the differences among the world's peoples and localities, and for the sheer entropic wildness of the physical world. As Gray has explained in several books (some popular and some scholarly), this critique applies as much to Uncle Sam as it does to his convenient enemies, Lenin and bin Laden; all are dreamers who regard progress as inevitable, cherishing the toxic idea that their own notions of progress constitute a universal ideal, applicable everywhere. This is a mistake; in fact, it is The Mistake.

Nothing could be further from the figure of John Gray than a man like Thomas Friedman, author of the glibly absurd best-seller, The World Is Flat. Quite apart from the fact that Mr. Friedman simply cannot write, his book is a perfect representative of the error Mr. Gray has warned about for so long. The world is not flat, it is a self-enclosed sphere; unlike the narcissism of American capitalist spokespuppets, it has demonstrable limits beyond which there are grief and regret and death.

Gray is an actual political thinker who actually understands Peak Oil. Like the peregrine falcon, this is a rare bird whose numbers may now be increasing. -JAH]


Twilight in the Desert: the coming Saudi oil shock and the world economy by Matthew R Simmons

Reviewed by John Gray

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

During the 1990s it was fashionable to scoff at the notion of limits to growth. A knowledge-based economy was coming into being in which natural resources didn't matter. The future would be driven by a search for new ideas rather than the struggle for control of the planet's assets. We were entering an era defined by information technology, in which rapid economic growth could continue for ever. It was never easy to square this fanciful philosophy with historical reality: the 1990s began with the first Gulf war, which was fought solely to secure oil supplies, and cheap oil was the basis of the prosperity of that feckless decade. Yet somehow or other these facts were forgotten, until Iraq.

With the launching of the second Gulf war, the crucial role of oil in the world economy was exposed. From statements made by a number of its American supporters, it seems clear that the strategic objective of the Iraq war was to enable the United States to withdraw from Saudi Arabia, which had come to be seen as an unreliable ally. According to the game plan, Saddam Hussein would be toppled, Iraq would be pacified in a few months and oil would fall to $10 a barrel. The global economy would then take off in another boom with the US in firm control of the world's second-largest oil reserves.

This was always a far-fetched scenario, and things have not worked out as envisaged. Iraq is a failed state in the grip of an intractable insurgency, and the price of oil is roughly $60 a barrel. The scramble to secure energy supplies is more frenzied than ever. The Great Game has been resumed, not only in central Asia but also in the Gulf. If Iran is attacked by the US in the course of the coming year or so, one reason for this will be to stymie energy supply agreements that Tehran may be planning with America's competitors, notably China and India.

The limits to growth have not gone away. They have re-emerged as classical geopolitics - a condition of continuous rivalry among the great powers for control of the world's most valuable natural resources. In this intensifying struggle, no country is more important than Saudi Arabia. The kingdom is the world's pivotal oil producer. Any disruption in supplies of its oil would be hugely destabilising to global markets. Even more crucially, it is the most important resource base for the oil that will be tapped to meet growing world demand. As emerging countries industrialise, their energy use increases exponentially. Saudi Arabia is the site of the planet's largest low-cost oil reserves, and in effect acts as the energy bank of worldwide industrialisation.

Matthew R Simmons is convinced that Saudi oil production is near its peak, or indeed may have passed it, a development with awesome implications. Simmons, a veteran oil finance insider who has been an important adviser to the Bush administration, has done a huge amount of research and bases his conclusions on carefully sifted evidence, not large theories. Yet his view is consistent with the theory of M King Hubbert, a Shell geophysicist who argued in 1956 that production rates for oil and other fossil fuels exhibit a bell curve: when roughly half the oil has been extracted, production declines. No one took much notice of Hubbert at the time, but he predicted that oil production in the continental United States would peak and start declining in the late 1960s or early 1970s - as it did. Since then a number of large oilfields have also peaked, including the North Sea in 1999. When oil peaks it does not run out - there is usually a slow decline that can be spun out by new technologies - but the unavoidable result is falling production.

Could we be near a global oil peak? Simmons believes that point may already have passed and warns that the idea that technology can arrest the decline may be a delusion. In his view, Saudi oil production has been boosted by the use of technologies which actually reduce the future supply of recoverable oil. The implication is that Saudi production has peaked, and with it global oil production, at a time when demand is rising inexorably.

Twilight in the Desert is not always easy to read. It largely consists of highly technical discussion of the history and condition of Saudi oilfields. Yet its impact is to transform our view of the world. Many in the oil industry - and particularly Aramco, the Saudi oil company - will dispute Simmons's claim that Saudi production is near its peak sustainable volume. For most readers the question will be whether Simmons can be trusted. I am certain that he can. He is not the only oil expert to say that a peak in global production may be near (Dr Colin Campbell of the London-based Oil Depletion Analysis Centre is another) and, unlike many in the oil industry, Simmons has no axe to grind. This is a ground-breaking book by an analyst of unimpeachable authority.

Simmons's analysis suggests that the current phase of worldwide industrialisation is crucially dependent on the uncertain reserves of a single Gulf kingdom facing vast and potentially insuperable challenges. As he shows in a superb digression, the most formidable of these is population growth. The kingdom's current population of roughly 22 million is expected to rise to roughly 50 million by 2030, and unless there is a large and sustained rise in the oil price, living standards are bound to fall steeply - as they have been doing since the early 1980s. The Saudi rentier economy is facing a Malthusian crunch, and against a background of already high unemployment the result so can only be a condition of chronic instability. If the most obvious effect of our dependency on oil is a series of resource wars, another could be an upsurge of revolutionary movements in oil-producing countries. While it would be an error to think that the Saudi regime is on the brink of collapse, in a few decades the kingdom could well be an Islamist republic - or, perhaps more likely given its origin as an artefact of the colonial era, another failed state.

Simmons makes a formidable case for the pivotal importance of Saudi Arabia, but he may actually have understated the impact of peak oil. One reason is the central role of oil in intensive farming. Contemporary agriculture relies heavily on oil-based fertilisers, pesticides and herbicides. At bottom, the green revolution was about the extraction of food from petroleum, and a peak in world oil production could trigger a peak in world food production. A second is climate change. As oil supplies are becoming scarcer and less secure, many countries are looking to other fossil fuels such as coal. New technologies can make coal much cleaner, but a large increase in coal use alongside continuing dependency on oil could magnify the greenhouse effect. In other words, peak oil could accelerate global warming.

The conjunction of peaking global oil production with quickening climate change poses fundamental challenges that no section of opinion has adequately confronted - including the Greens. The energy-intensive lifestyle which is now spreading throughout the world cannot be sustained with non-renewable and polluting fossil fuels, but it is sheer fantasy to imagine that a human population of between six and eight billion can be supported on a combination of windfarms, solar power and organic agriculture. As Simmons notes, we may be approaching the limits of growth that the Club of Rome identified more than 30 years ago, and we are no better prepared to adjust to them now than we were then.

John Gray's latest book is Heresies: Against Progress and Other Illusions (Granta)

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Research shows ethanol isn't worth the energy

Study: Production doesn't aid security, agriculture, economy, environment

The Associated Press
Updated: 4:20 p.m. ET July 17, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

ALBANY, N.Y. - Farmers, businesses and state officials - including many in Nebraska - are investing millions of dollars in ethanol and biofuel plants as renewable energy sources, but a new study says the alternative fuels burn more energy than they produce.

Supporters of ethanol and other biofuels contend they burn cleaner than fossil fuels, reduce U.S. dependence on oil and give farmers another market to sell their produce.

But researchers at Cornell University and the University of California-Berkeley say it takes 29 percent more fossil energy to turn corn into ethanol than the amount of fuel the process produces. For switch grass, a warm weather perennial grass found in the Great Plains and eastern North America United States, it takes 45 percent more energy and for wood, 57 percent.

It takes 27 percent more energy to turn soybeans into biodiesel fuel and more than double the energy produced is needed to do the same to sunflower plants, the study found.

"Ethanol production in the United States does not benefit the nation's energy security, its agriculture, the economy, or the environment," according to the study by Cornell's David Pimentel and Berkeley's Tad Patzek. They conclude the country would be better off investing in solar, wind and hydrogen energy.

The researchers included such factors as the energy used in producing the crop, costs that were not used in other studies that supported ethanol production, said Pimentel.

The study also omitted $3 billion in state and federal government subsidies that go toward ethanol production in the United States each year, payments that mask the true costs, Pimentel said.

Ethanol is an additive blended with gasoline to reduce auto emissions and increase gas' octane levels. Its use has grown rapidly since 2004, when the federal government banned the use of the additive MTBE to enhance the cleaner burning of fuel. About 3.6 billion gallons of ethanol were produced last year in the United States, according to the Renewable Fuels Association, an ethanol trade group.

This year, Nebraska's 11 ethanol plants are expected to produce more than 500 million gallons of ethanol.

The ethanol industry claims that using 8 billion gallons of ethanol a year will allow refiners to use 2 billion fewer barrels of oil. The oil industry disputes that, saying the ethanol mandate would have negligible impact on oil imports.

Ethanol producers dispute Pimentel and Patzek's findings, saying the data is outdated and doesn't take into account profits that offset costs.

Michael Brower, director of community and government relations at SUNY's College of Environmental Science and Forestry, points to reports by the Energy and Agriculture departments that have shown the ethanol produced delivers at least 60 percent more energy the amount used in production. The college has worked extensively on producing ethanol from hardwood trees.

Biodiesel can be used in any diesel engine with few or no modifications. It is often blended with petroleum diesel to reduce the propensity to gel in cold weather.

© 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

© 2005

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New Peak Oil / Oil Crisis documentary DVD available in UK & Europe

By James Howard

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Peak Oil: Imposed by Nature is a new documentary that will be available from Friday 15th July throughout the UK and Europe via the website

Produced by Amund Prestegard and recommended by Dr Colin Campbell, it is an excellent introduction to the causes and consequences of the terminal decline of global oil production as we reach Hubbert's Peak, expected in 2007.

In the documentary, Dr Colin Campbell takes us to Stavanger in Norway, where he has worked the last 10 years of his professional career. He explains the different aspects of discovery and production, the increase and decline, and the fact that this will happen very soon. Dr Campbell serves as our 'guide' throughout the documentary, although he is just one of the many informed and informative analysts that feature.

Richard Webb is a financial risk analyst with broad experience from some of the world's largest investment banks. He expresses his opinion about signs that the market is reaching an extremity, and that this endorses what Colin Campbell and the ASPO are saying: we are near the peak. Webb underlines the importance of understanding that the dramatic event is not when we will run out of oil, but rather what will happen when there is less tomorrow than there is today.

Norwegian petroleum geologist Olve Torvanger has 30 years of worldwide experience in seismic surveys, searching for oil. He points to the seriousness of a situation in which our tools become ever more sophisticated, but we are finding less and less.

Matthew Simmons is Chairman and CEO of Simmons & Co. International, one of the world's largest energy-investment banking firms. He expresses a deep concern for the urgent need to take measures to prevent the decline that shall destroy our society. He refers to the word "crisis" as "A temporary problem that has been left unattended so long that it has become permanent"!

Aage Figenschou, Norwegian board member of Simmons & Co, expresses worry regarding the downgrading of reserves by oil companies. He believes that we are near the peak, but underlines that it will not make people run to fill up their cars. What we will see, he says, is a constant pressure towards ever-higher prices, a rather negative outcome.

Chris Skrebowski, Editor of Petroleum Review in London, argues the case for a much stronger involvement from Government that could go as far as deciding who can - and who can not - have [access to oil]. The Government, he claims, will find themselves monitoring a war-like situation.

Investigative reporter Michael C. Ruppert expresses his views on Dr Campbell being approached by US intelligence in his own village in Western Ireland. Ruppert claims that what the CIA most of all wants to know is "how close is the ASPO to penetrating the public consciousness with the issues of PEAK OIL and how close is the public to acknowledging what it's going to mean." According to Ruppert, the so-called "war on terrorism" is nothing but a war to control the last remaining oil reserves on the planet.

US president George W. Bush frets over the fact that the US now imports over half of their crude oil, and that very often they import that from countries that "don't particularly like us" and "that it could jeopardize the national security to be dependent on sources of energy from countries that don't care for America - what we stand for, what we love."

The Producer/Director/Cameraman is Norwegian Amund Prestegard, 52, experienced in all facets of filmmaking since 1972. Prestegard has run his own production company, Tropos Dokumentar, since 1995. Peak Oil: Imposed by Nature was nominated 'Best Professional Documentary' at the Norwegian Documentary Film Festival 2005. The idea for this film came about when Prestegard, during research for another project, became aware of the global oil depletion situation when reading the works of Campbell, Laherrere and Simmons during Autumn 2002.

With a running time of approximately 30 minutes, this documentary quickly absorbs, and delivers a much-needed wake-up call to anyone new to the subject of peak oil. With the need for a worldwide understanding of the causes, consequences and solutions, this documentary is a very useful tool in raising awareness. Shorter than End of Suburbia but with a strong UK focus, this is a documentary that everyone should see.

For a quick link to order visit

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