[Biofuel] Oil in troubled waters
Keith -- http://www.economist.com/displaystory.cfm?story_id=3884623 or http://www.commoditytrader.com/archives/000233.php Oil in troubled waters Apr 28th 2005 From The Economist print edition Prices are sky-high, with profits to match. But looking further ahead, the industry faces wrenching change, says Vijay Vaitheeswaran THE time when we could count on cheap oil and even cheaper natural gas is clearly ending. That was the gloomy forecast delivered in February by Dave O'Reilly, the chairman of Chevron Texaco, to hundreds of oilmen gathered for a conference in Houston. The following month, Venezuela's President Hugo Chavez gleefully echoed the sentiment: The world should forget about cheap oil. The surge in oil prices, from $10 a barrel in 1998 to above $50 in early 2005, has prompted talk of a new era of sustained higher prices. But whenever a new era in oil is hailed, scepticism is in order. After all, this is essentially a cyclical business in which prices habitually yo-yo. Even so, an unusually loud chorus is now joining Messrs O'Reilly and Chavez, pointing to intriguing evidence of a new price floor of $30 or perhaps even $40. Confusingly, though, there are also signs that high oil prices may be caused by a speculative bubble that could burst quite suddenly. To see which camp is right, two questions need answering: why did the oil price soar? And what could keep it high? Oil The New York Mercantile Exchange posts information about the prices of Brent crude oil and West Texas Intermediate crude oil. OPEC announces its basket price and posts the opening address, a summary, resolutions and quotas from its March meeting in Iran. The Institute for International Economics publishes Energy: A Gathering Storm?, by Philip K. Verleger Jr. CERA releases an interview with its director, K F Yan, about Chinese oil demand. See also Chevron Texaco, PFC Energy, Saudi Aramco, the Federal Reserve and Goldman Sachs. To make matters more complicated, there is in fact no such thing as a single oil price: rather, there are dozens of varieties of crude trading at different prices. When newspapers write about oil prices, they usually mean one of two reference crudes: Brent from the North Sea, or West Texas Intermediate (WTI). But when ministers from the Organisation of the Petroleum Exporting Countries (OPEC) discuss prices, they usually refer to a basket of heavier cartel crudes, which trade at a discount to WTI and Brent. All oil prices mentioned in this survey are per barrel of WTI. The recent volatility in prices is only one of several challenges facing the oil industry. Although at first sight Big Oil seems to be in rude health, posting record profits, this survey will argue that the western oil majors will have their work cut out to cope with the rise of resource nationalism, which threatens to choke off access to new oil reserves. This is essential to replace their existing reserves, which are rapidly declining. They will also have to respond to efforts by governments to deal with oil's serious environmental and geopolitical side-effects. Together, these challenges could yet wipe out the oil majors. The ghost of Jakarta But back to the question of why prices shot up in the first place. The short explanation is that oil markets have seen an unprecedented combination of tight supply, surging demand and financial speculation. One supply-side factor is OPEC's clever manipulation of output quotas. Back in 1997, at a ministerial meeting in Jakarta, the cartel decided to raise output just as the South-East Asian economies were hit by crisis, sending prices plunging to $10. Desperate to engineer a price rebound, Saudi Arabia targeted inventory levels: whenever oil stocks in the rich countries of the OECD started rising, OPEC would reduce oil quotas to stop prices softening. It worked like a charm. Another supply-related factor has been the shortage of petrol in the American market. Over the past year or two, prices have spiked as refineries have been unable to meet local demand surges. Supply concerns have also played a part in the so-called fear premium. The nerve-wracking uncertainty before the invasion of Iraq, and the terrible terrorist attacks in Iraq and Saudi Arabia afterwards, have pushed up prices to a higher level than the fundamentals would seem to justify. Other supply worries arose from the crackdown by the Russian president, Vladimir Putin, on the oil company Yukos, and from civil strife in Venezuela and Nigeria. Some pundits think the fear premium may have added $7 to $15 to the cost of oil on futures markets in New York and London. Adding to the froth has been the sudden influx of new kinds of financial investors into the oil market. Some are merely chasing the huge returns recently offered by oil. Big equity funds, fearful of what $100 oil could do to their holdings, might invest in oil futures at $40 or $50
[Biofuel] Oil in Troubled Waters
t r u t h o u t Energy Special: Oil in Troubled Waters By Michael Peel Financial Times Friday 25 March 2005 In the mangrove swamps of Nigeria's oil-producing Rivers State, the Niger Delta People's Volunteer Force was in restless repose. A fighter worked out with dumbbells while others lounged on mattresses in front of a large outbuilding. One young man was reading, aloud in English, from a copy of Macbeth. Their leader, Alhaji Mujahid Dokubo-Asari, was preparing to take me to a swamp facility where he claimed to refine oil taken from a pipeline operated by Royal Dutch/Shell, the energy multinational. (Asari says this is not stealing; it is the Nigerian government that is stealing.) He had just changed out of a black tracksuit into a bright orange jumpsuit with the Shell logo on the back. He put on a white hard hat belonging to Willbros, the oil services company. Do I look fine? he asked, running his hands over his ample stomach. On this, the third of four occasions I visited Asari, he had not yet quite become the symbol of a Robin Hood-like quest by the poor for a share of the nation's oil wealth that he claims to be today. But he was fast gaining notoriety: his critics, outside government as well as within, saw him as a gangster rather than a political revolutionary. Either way, his rising profile says much about the way the Delta is being choked by a violent and corrupt web of relationships between oil multinationals, government officials, smugglers, ethnic fighters and local communities. I wanted to find out whether he was a true challenge to the inequities - perhaps even the existence - of Nigeria's multinational-operated oil regime. The country already provides about 10 per cent of US oil imports, while Britain expects to source a similar proportion of its energy needs from the Delta by 2010. The more than $300bn of revenues earned by Nigeria from Delta oil since independence in 1960 has in substantial part been stolen and squandered by generals and civilian governments, leaving its people among the poorest in the world. In September last year, Asari threatened to launch an offensive called Operation Locust Feast unless government troops backed off from the area in which he operated and the authorities began talks about oil-resource control. He denounced oil companies and said he could not be responsible for the safety of foreign nationals working in the area. This helped push the price of oil on the world markets through $50 a barrel for the first time. Shell evacuated over 200 staff. Nigeria's government invited Asari to Abuja, the capital, where he and another militia leader agreed to make peace and disarm. The Rivers State government claimed it later collected over a thousand weapons from the militias, but many Deltans still see the whole process as an emergency arrangement aimed at reassuring oil markets, rather than a serious attempt to end the region's conflict. Asari was cultivating media interest before the deal, so a colleague and I accepted an invitation to meet his men early one morning at a jetty about an hour and a half's drive from the oil city of Port Harcourt. They eventually arrived by speedboat and moored, half-hidden behind the end of the jetty. We quickly climbed aboard. A machine gun and three Kalashnikov rifles lay behind benches on the floor: one of the youths apologised as he passed the machine gun over my head. The men were swigging gin, which blew in my face in a fine spray as we picked up speed. They said sorry again; then one of them fired two shots in the air. The camp, reached after an exhilarating high-speed ride through a series of branching waterways, was full of the signs of expansion. A new accommodation block was being built and boat engines were being repaired by the waterside. Asari told us there was no shortage of willing expert helpers who support his idea of an independent nation for his Ijaw people, although none was around that day. Doctors have been coming twice a week, we have people volunteering, we have lawyers, he said. The struggle of the Ijaw people is a defining feature of Nigeria's post-colonial politics, which have been dominated by dictatorship, corruption and infrastructural collapse. The country was created by British colonial order in 1914, binding together people from hundreds of ethnic groups who speak hundreds of different languages. The Ijaw, the Delta's largest ethnic group, have in effect been disenfranchised by modern political boundary-setting: being a widely dispersed people concentrated around the Delta's coastline and rivers, their communities form parts of many states, rather than a single homogeneous zone. In the Delta, a long-running conflict over the distribution of local government posts between the Ijaw and the Itsekiri peoples is thought to have killed hundreds of people in the past few years, and even led, in
[Biofuel] Oil on troubled waters
with Big Oil and the way the two impact life around us. Consider the following and substitute Big Oil with renewable oils (biodiesel ect) and the net outcome would have been completely different. Luc http://news.independent.co.uk/world/americas/story.jsp?story=606121 When crude oil devastated Alaska's coast in 1989, the damage to wildlife was all too clear. Only now is the cost to human life being fully realised. Andy Rowell reports 31 January 2005 It was at 7.15am on a cold Alaskan morning on 24 March 1989 that Dr Riki Ott was awoken by a loud banging on her front door. It sounded urgent. Still in her nightdress, she raced downstairs. How long will it take you to get dressed? asked a distressed colleague. Five minutes. Why? Ott replied. We've had the big one. There's a tanker aground on Bligh Reef. It's lost 10 million gallons, but there's four times that on board. Only the night before, Ott, a marine biologist, had warned the local mayor's oil action committee about the possibility of a big spill. Given the high frequency of tankers into Port Valdez, the increasing age and size of that tanker fleet, and the inability quickly to contain and clean up an oil spill in the open water of Alaska, fishermen feel that we are playing a game of Russian roulette, she said. Gentleman, it is not a matter of what if, but when. Hours later, on a calm, moonlit night, the 1,000ft-long Exxon Valdez ploughed into reef, a well known hazard in Prince William Sound. In charge was Captain Joseph Hazelwood, who, it would transpire later, had lost his driving licence through drink-driving. Having been drinking that night, he'd left the third mate at the wheel. The collision tore a car-sized hole in the vessel's side and ruptured eight of the 11 cargo tanks. Since that day, Ott has tried to uncover the true social, health and environmental costs of the spill, and has just written a book exposing the lies and myths surrounding it. The oil spill killed more wildlife than any in history, but her book also tells of the mounting human cost of the catastrophe, and the implications for our use of oil. Ott, 50, grew up in Wisconsin at the height of the scare over the toxic pesticide DDT. Her father gave her a copy of Rachel Carson's book Silent Spring, which exposed the problems of DDT and helped to spark the modern environmental movement. At 13, I decided to become a marine biologist, like Carson. At 18, I left to find an ocean. She gained a doctorate in marine toxicology and became a commercial fisherwoman. Flying over the Exxon Valdez the morning after, Ott watched as the vessel spewed millions of gallons of highly toxic oil into the sea. A bluish haze was rising above the oil. The official estimate of the spill was 11 million gallons, but years later Ott uncovered a secret report by the State of Alaska putting the true figure at about 30 million. The slick spread over 10,000 square miles of Alaska's coastal seas, as far as 1,200 miles away. The images were a public-relations disaster for Exxon and other oil companies. Pictures of workers wiping rocks with rags looked totally inadequate. The numbers killed ranged from thousands of marine mammals, including otters, seals and orcas, to hundreds of thousands of sea birds, such as murres and ducks, to millions of fish. Every oil spill brings untried new ways of trying to clean up. The unacknowledged truth is that only really effective tactic is not to spill it in the first place. They didn't know what to do. The oil industry collectively is not able to clean up oil once it is spilled on beaches, Ott says. Still, 11,000 people were hired to clean up the oil. Exxon tried an untested method of blasting the rocks with high-pressure hot-water hoses. This washed the oil away, but with devastating consequences. As well as wiping out wildlife that had survived the disaster, the hoses caused chronic health problems for the workers - and this is the hidden story. They vaporised the oil into a fine mist that the workers inhaled. This toxic cocktail contained polycyclic aromatic hydrocarbons, now classified as some of the worst chemicals known to man. Crude oil was known to be dangerous. A 1988 Exxon Safety Data Sheet said High vapour concentrations are irritating to the eyes and the respiratory tract, may cause headaches and dizziness... may cause unconsciousness, and may have other central nervous system effects including death and added Minimise breathing vapours. Minimise skin contact. Fishermen trying to stop the oil spreading soon became nauseous and dizzy. So did the first workers, who claim they weren't given protective equipment or warned that the oil fumes could be hazardous to their health. Ott argues that Exxon failed to protect workers because it did not provide protective clothing, adequate training or information about the risks. Some clean-up crews were told that respirators were optional, while
