[Cid_Yama]

Oil prices could hit $200 a barrel in the next few months. A year ago no one was talking about $200 oil, and now everyone in the markets is, for scary reasons.

It's almost impossible to fully imagine the world of $200 oil. No question, the shock will force nations to go greener much faster than now, particularly by conserving energy and developing and adopting new non-fossil fuels. But none of this can happen full stop in six to 24 months. So the predictions tend to be gloomy: some analysts see a shift toward regional trade, and even a major reversal of globalization itself, as rising transport costs make it too expensive to ship many kinds of goods long distances. A major acceleration in the transfer of wealth that has, in the past five years, shifted trillions of petrodollars from oil consumers to producers would alter the world balance of power—including a boost for the troublesome oil autocrats of Iran, Venezuela and Russia.

Worse conflicts are possible. "As areas like the Mideast and Africa, Russia and Venezuela continue to rise, you're going to see increasing energy greed, aggressive behaviors and neocolonial actions on the part of various countries," predicts Scott Nyquist, the head of McKinsey's energy practice. As Iran gets richer, Hizbullah might get stronger. China will clearly wield more might in Africa.

More blood will almost certainly be spilled. Oil wealth tends to wreak havoc on a nation's economy and politics, discouraging diversity, aggravating ethnic grievances and making it easier to fund insurgencies. Oil countries now host about a third of the world's civil wars, up from one fifth in 1992. "There's a vicious cycle, which you can see played out in places like Iraq and Nigeria, where conflict fuels higher prices, and higher prices in turn fuel conflict," says UCLA's Ross.

Meanwhile, though numerous green technologies hold plenty of promise, none of them are going to save the day any time soon. "It's a false god," says Robin West, chairman of PFC Energy. "There will be step changes in technology, but people forget the scale of the oil business. <b>Ethanol production was 5 billion gallons last year, with huge subsidies to farmers and rising food prices. But that's the size of one production platform off the coast of West Africa."</b>

"At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, the United States will increasingly import from Latin America. "If you look at the period from 1973 to 1979 [when oil spiked] you'll find the same thing happened," he notes. "The share of imports to the U.S. from Latin America and the Caribbean rose by 6 percentage points. That was all about freight costs."

No industry will be unaffected. Any company that moves goods or people needs oil. "It's more than a change, it's a revolution," says Spinetta. "We would have a lot of bankruptcies very rapidly in Europe, the U.S., and Asia. There could be social unrest as the world's poorest become more desperate.

http://www.newsweek.com/id/139395/page/3

[gmin]

"At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, the United States will increasingly import from Latin America.

this is another valid reason why oil price cannot go up anymore. if oil price, like price of most other strategic commodities, are firmly controlled by the globalist elites, then it has to come down to avoid reversal of globalization.

[vetusfirma]

Oh contrair, one missile into Al Jubyal and oil will go beyond $200 quicker than you can spit.

Why do you think we are in the Middle East, TO PROTECT THE OIL maybe?

[Kaj]

Why do you think we are in the Middle East, TO PROTECT THE OIL maybe?

Nearly. We're there to "PROTECT" the oil.

[Mettezz]

Oil can rise even to 300$ in the future.
It all depends how much a country like the U.S.A., China, Japan, Europe, India, South east Asia,... is willing too offer for it.

And the countries that can't pay for it their economies will fall first.

But 300$ is still far away in my opinion cause we don't have that much shortages yet

[dissident]

More FUD to keep the sheeple frightened and ready to swallow another oil war. Autocrats in Russia and Venezuela? Really now, wasn't Saudi Arabia the biggest exporter and didn't it have 12 million barrels per day of total capacity. Why aren't the real autocrats in Saudi Arabia responsible. Russia's oil exports have been increasing since 1998 and have only stalled now for peak oil reasons. So I guess the supposed Russian "autocrat" (who got 70% of the vote) must be responsible for Russia's geology. This is a Newsweek article and not some fringe rag so this is evidence of how the western mainstream media is nothing more than a hate propaganda factory. Tools of de facto autocrats and oil war starters like Bush.

[Kylon]

The rest of the world may be screwed, but barring mind numbing incompetence from the U.S, the U.S should be fine(by fine I mean we won't have a massive civil war, and mass death/starvation).

The U.S is the Saudi Arabia of coal. We can produce all the energy we need(for now) from coal. We can also power our vehicles on coal with a simple modification.

This, of course, won't last forever. But if we have competent leaders who will then use the resources available to start building breeder reactor nuclear right away, then we could easily weather out this storm.

It's true, that communities will have to become more localized, and mass transit as well as rail will have to become more standard, but we can survive this with a standard of living as good as we currently have, or at least as good as a Western European has it.

Now the rest of the world, well, barring being a stable oil rich country, or France, Switzerland, or one of the Nordic countries, your screwed.

[ProudFossil]

But if we have competent leaders who will then use the resources available to start building breeder reactor nuclear right away, then we could easily weather out this storm.

And pray tell me, when was the last time we had competent leaders. Every election cycle for the last 60 years, the crop of candidates gets worse and worse, less and less competent. (and yes I think Truman was the last person who would fit your criteria)

And this is not only at the national level, but also at the state and local level.

I truly believe those peope who would be competent are smart enough to stay away from public service because of the growing climate of hate and distruct in our society today.

And the other big problem you do not even address, how do we satisfy our addiction to big, powerful, speedy automobiles with nuclear power? It will take a decade to replace the gas automobiles with just minimum electric powered golf carts.

[Peleg]

"At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, the United States will increasingly import from Latin America.

this is another valid reason why oil price cannot go up anymore. if oil price, like price of most other strategic commodities, are firmly controlled by the globalist elites, then it has to come down to avoid reversal of globalization.

The globalization they seek is financial and political and that can be done as long as the Internet is kept alive. Regional (even sub-regional) markets controlled by a global financial network is still one world from that perspective. Although it does get harder to project power and so if we are talking about an unexpected shock (say because alot of hot air was in the pipe about oil reserves and the state of major fields) all bets are off. We could see implementation of plans toward economic and poitical integration gaining speed.

In fact why would someone who owns all the regional markets care as long as there was still a profit margin? Ownership is the important term here.

[gmin]

The globalization they seek is financial and political and that can be done as long as the Internet is kept alive. Regional (even sub-regional) markets controlled by a global financial network is still one world from that perspective. Although it does get harder to project power and so if we are talking about an unexpected shock (say because alot of hot air was in the pipe about oil reserves and the state of major fields) all bets are off. We could see implementation of plans toward economic and poitical integration gaining speed.

In fact why would someone who owns all the regional markets care as long as there was still a profit margin? Ownership is the important term here.

the problem with this kind of internet based, "virtual" globalization is that it's not reliable. revolution can happen, grass-root can take over the power over-night. if these ppl can produce and manufacture all locally before the revolution, then things will only get better once they break loose from blood-sucking globalization.
and their neighbor might follow suit.

globalization has to become indispensible for the ppl's physical survival to be really lasting. globalization needs to break big, self-sufficient countries into smaller countries that cannot stand on their own. just watch how urbanization, and industrilized farming broke down farming communities and you will get the idea of how it works.

another point is: the greater the distance, the more countries, essential goods have to be transported, the easier it is for outsiders to control the trade, and vise versa.

[threadbear]

Anything over 100.00 per barrel is spec due to poor yield elsewhere. That money began flowing out of oil this week and really started to gusher out today with Bernanke's comments about holding interest rates steady or raising them. I think you'll see rationing and a Manhattan type project for alternatives, before you see any more wars for oil.

But the U.S. isn't out of the woods yet, as part of the original neocon mandate when they stole office was to bomb Iran, and not just for oil, for Israel. Oil could rocket up to 200.00, or beyond, in that scenario.

[vetusfirma]

Why does everyone always worry about the US and wars. Remember China, remember India. How many countries have NUKES. Don't discount the idea of oil wars just yet.

[threadbear]

Why does everyone always worry about the US and wars. Remember China, remember India. How many countries have NUKES. Don't discount the idea of oil wars just yet.

Because the US is the only major power who has started a war of aggression in an oil producing region in the last decade?

[mercurygirl]

Obviously, the winners in this game are those who export oil, and the losers are those who import it. The victory is not only economic but political as well. The ability to control where exports go and where they don't go transforms into political power. The ability to export in a seller's market not only increases wealth but also increases the ability to coerce, if that is desired.

The game is somewhat more complex than this. The real winners are countries that can export and generate cash in excess of what they need domestically. So countries such as Venezuela, Indonesia and Nigeria might benefit from higher prices, but they absorb all the wealth that is transferred to them. Countries such as Saudi Arabia do not need to use so much of their wealth for domestic needs. They control huge and increasing pools of cash that they can use for everything from achieving domestic political stability to influencing regional governments and the global economic system. Indeed, the entire Arabian Peninsula is in this position.

The big losers are countries that not only have to import oil but also are heavily industrialized relative to their economy. Countries in which service makes up a larger sector than manufacturing obviously use less oil for critical economic functions than do countries that are heavily manufacturing-oriented. Certainly, consumers in countries such as the United States are hurt by rising prices. And these countries' economies might slow. But higher oil prices simply do not have the same impact that they do on countries that both are primarily manufacturing-oriented and have a consumer base driving cars.

East Asia has been most affected by the combination of sustained high oil prices and disruptions in the food supply. Japan, which imports all of its oil and remains heavily industrialized (along with South Korea), is obviously affected. But the most immediately affected is China, where shortages of diesel fuel have been reported. China's miracle -- rapid industrialization -- has now met its Achilles' heel: high energy prices.

China is facing higher energy prices at a time when the U.S. economy is weak and the ability to raise prices is limited. As oil prices increase costs, the Chinese continue to export and, with some exceptions, are holding prices. The reason is simple. The Chinese are aware that slowing exports could cause some businesses to fail. That would lead to unemployment, which in turn will lead to instability. The Chinese have their hands full between natural disasters, Tibet, terrorism and the Olympics. They do not need a wave of business failures.

Therefore, they are continuing to cap the domestic price of gasoline. This has caused tension between the government and Chinese oil companies, which have refused to distribute at capped prices. Behind this power struggle is this reality: The Chinese government can afford to subsidize oil prices to maintain social stability, but given the need to export, they are effectively squeezing profits out of exports. Between subsidies and no-profit exports, China's reserves could shrink with remarkable speed, leaving their financial system -- already overloaded with nonperforming loans -- vulnerable. If they take the cap off, they face potential domestic unrest.

The Chinese dilemma is present throughout Asia. But just as Asia is the big loser because of long-term high oil prices coupled with food disruptions, Russia is the big winner. Russia is an exporter of natural gas and oil. It also could be a massive exporter of grains if prices were attractive enough and if it had the infrastructure (crop failures in Russia are a thing of the past). Russia has been very careful, under Vladimir Putin, not to assume that energy prices will remain high and has taken advantage of high prices to accumulate substantial foreign currency reserves. That puts them in a doubly-strong position. Economically, they are becoming major players in global acquisitions. Politically, countries that have become dependent on Russian energy exports -- and this includes a good part of Europe -- are vulnerable, precisely because the Russians are in a surplus-cash position. They could tweak energy availability, hurting the Europeans badly, if they chose. They will not need to. The Europeans, aware of what could happen, will tread lightly in order to ensure that it doesn't happen.

As we have already said, the biggest winners are the countries of the Arabian Peninsula. Although somewhat strained, these countries never really suffered during the period of low oil prices. They have now more than rebalanced their financial system and are making the most of it. This is a time when they absolutely do not want anything disrupting the flow of oil from their region. Closing the Strait of Hormuz, for example, would be disastrous to them. We therefore see the Saudis, in particular, taking steps to stabilize the region. This includes supporting Israeli-Syrian peace talks, using influence with Sunnis in Iraq to confront al Qaeda, making certain that Shiites in Saudi Arabia profit from the boom. (Other Gulf countries are doing the same with their Shiites. This is designed to remove one of Iran's levers in the region: a rising of Shiites in the Arabian Peninsula.) In addition, the Saudis are using their economic power to re-establish the relationship they had with the United States before 9/11. With the financial institutions in the United States in disarray, the Arabian Peninsula can be very helpful.

China is in an increasingly insular and defensive position. The tension is palpable, particularly in Central Asia, which Russia has traditionally dominated and where China is becoming increasingly active in making energy investments. The Russians are becoming more assertive, using their economic position to improve their geopolitical position in the region. The Saudis are using their money to try to stabilize the region. With oil above $120 a barrel, the last thing they need is a war disrupting their ability to sell. They do not want to see the Iranians mining the Strait of Hormuz or the Americans trying to blockade Iran.

The Iranians themselves are facing problems. Despite being the world's fifth-largest oil exporter, Iran also is the world's second-largest gasoline importer, taking in roughly 40 percent of its annual demand. Because of the type of oil they have, and because they have neglected their oil industry over the last 30 years, their ability to participate in the bonanza is severely limited. It is obvious that there is now internal political tension between the president and the religious leadership over the status of the economy. Put differently, Iranians are asking how they got into this situation.

Suddenly, the regional dynamics have changed. The Saudi royal family is secure against any threats. They can buy peace on the Peninsula. The high price of oil makes even Iraqis think that it might be time to pump more oil rather than fight. Certainly the Iranians, Saudis and Kuwaitis are thinking of ways of getting into the action, and all have the means and geography to benefit from an Iraqi oil renaissance. The war in Iraq did not begin over oil -- a point we have made many times -- but it might well be brought under control because of oil.

For the United States, the situation is largely a push. The United States is an oil importer, but its relative vulnerability to high energy prices is nothing like it was in 1973, during the Arab oil embargo. De-industrialization has clearly had its upside. At the same time, the United States is a food exporter, along with Canada, Australia, Argentina and others. Higher grain prices help the United States. The shifts will not change the status of the United States, but they might create a new dynamic in the Gulf region that could change the framework of the Iraqi war.

This is far from an exhaustive examination of the global shifts caused by rising oil and grain prices. Our point is this: High oil prices can increase as well as decrease stability. In Iraq -- but not in Afghanistan -- the war has already been regionally overshadowed by high oil prices. Oil-exporting countries are in a moneymaking mode, and even the Iranians are trying to figure out how to get into the action; it's hard to see how they can without the participation of the Western oil majors -- and this requires burying the hatchet with the United States. Groups such as al Qaeda and Hezbollah are decidedly secondary to these considerations.

We are very early in this process, and these are just our opening thoughts. But in our view, a wire has been tripped, and the world is refocusing on high commodity prices. As always in geopolitics, issues from the last generation linger, but they are no longer the focus. Last week there was talk of Strategic Arms Reduction Treaty (START) talks between the United States and Russia -- a fossil from the Cold War. These things never go away. But history moves on. It seems to us that history is moving.

Interesting, from here: Geopolitics of $130 Oil

[threadbear]

You have to wonder...Will oil at 120.00 to 130.00 per barrel provoke oil wars, in and of itself, or is the present price, driven at least partly by a risk premium that assumes war? And does it make a difference? If the price is ever properly broken down and assessed, and it turns out that speculation AND risk premium are major drivers AND this is communicated to the masses, there will be blood and it won't be on foreign soil.

[dissident]

In the case of oil the price will be driven by shortages and tight supplies. I don't see the third world demand evapourating and any demand destruction will be soaked up by economies such as China, India, other rapidly developing nations and the developed world itself. Don't forget that US oil consumption went up about 20% from 1990. So the developed world is not in steady state in terms of oil use. Since there is already some sort of crisis in Europe over the current price and it will only get worse including in the USA, the incentive for pillage will be high. The problem is the crusader complex of the west, it endlessly wallows in its delusion of pure righteousness and constantly demonizes basically the rest of the world. So there will always be a pretext to export "democracy" or some other crap produced by propaganda drivel. But unlike the old colonial era it will not be easy today as demonstrated by Iraq where insurgents without any real support in terms of weapons are grinding the occupation down. If for some reason the west decides to go after bigger fish, it may as well be committing suicide.

[yeahbut]

In the case of oil the price will be driven by shortages and tight supplies. I don't see the third world demand evapourating and any demand destruction will be soaked up by economies such as China, India, other rapidly developing nations and the developed world itself.

But what about this?

China's miracle -- rapid industrialization -- has now met its Achilles' heel: high energy prices.

China is facing higher energy prices at a time when the U.S. economy is weak and the ability to raise prices is limited. As oil prices increase costs, the Chinese continue to export and, with some exceptions, are holding prices. The reason is simple. The Chinese are aware that slowing exports could cause some businesses to fail. That would lead to unemployment, which in turn will lead to instability. The Chinese have their hands full between natural disasters, Tibet, terrorism and the Olympics. They do not need a wave of business failures.

Therefore, they are continuing to cap the domestic price of gasoline. This has caused tension between the government and Chinese oil companies, which have refused to distribute at capped prices. Behind this power struggle is this reality: The Chinese government can afford to subsidize oil prices to maintain social stability, but given the need to export, they are effectively squeezing profits out of exports. Between subsidies and no-profit exports, China's reserves could shrink with remarkable speed, leaving their financial system -- already overloaded with nonperforming loans -- vulnerable. If they take the cap off, they face potential domestic unrest.

The Chinese dilemma is present throughout Asia.

(fascinating article btw, mercurygirl)

That sounds like approaching demand destruction(aka recession), don't you think? A no-win situation- either they keep subsidising oil and keep export prices low(thereby draining their reserves and weakening their economy), or they raise export prices, and remove the cap and face very unhappy citizens. That doesn't seem too good either way. If oil prices are hurting, and beginning to make an impact in 'first world' economies(less miles driven, airlines making cuts, auto makers in trouble etc), why would it not be so in developing nations? Demand destruction has to begin some time, maybe this is one of the ways it starts.