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Page added on June 29, 2007

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Global Agenda: Oil’s well

ISRAEL – Four years ago, a barrel of oil sold for $25. Not coincidentally, at that time the recent American invasion of Iraq had removed nasty Saddam and created the expectation – not a vague hope but a very real expectation – that Iraq’s oil production would soon double, in line with its existing capacity, and would eventually rise much further, in line with the country’s enormous reserves and potential production.

Yet June 2003 proved to be the low point for oil prices, and for the next three-plus years rose almost non-stop, topping out (so far

Instead, we are left with the consistent, prosaic and boring of the many reasons that have been put forward over recent years to explain the ongoing strength in the oil price. Demand is growing fast, supply is tight and new sources are expensive to develop and take a long time to “come on stream.” There are nasties in Nigeria who attack oil installations and kidnap foreign oil workers; the experts are still trying to work out whether the perpetrators are in it for the money or are pursuing an intra-Nigerian political agenda – but it probably doesn’t make much difference in practice.

Then there are the “nutters.” One set operates in South America, led by the presidente of Venezuela, Hugo Chavez. He has thrown out the gringo oil companies, nationalized their operations and thereby brought peace, prosperity and plenty to the Venezuelan proletariat – if not this year, then soon. Another set of nutties, probably more dangerous to the rest of the world, operates in the USA. Their response to the oil price problem is a) not to allow the building of new oil refineries, thereby ensuring a shortage of gasoline and other oil-derivative products b) to promote the use of ethanol as a source of alternative fuel for cars, thereby creating a shortage of corn (the source of ethanol), causing the price of this staple to double to $4 a bushel, pushing farmers to switch from wheat or soybeans to corn (thereby causing wheat and soybean prices to soar, too), generating price rises all along the food chain – and all this for a gasoline substitute that is as energy-intensive and polluting to produce as gasoline itself.

Jerusalem Post



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