Oil

 Buried in Joseph White's interesting Wall Street Journal piece about the enormous power of incremental improvements in auto fuel economy (versus so-called moonshots) sits an interesting statistic:

"Mr. Fedewa estimates auto makers can deliver 10% or better fuel efficiency improvement for about $500 a vehicle." (That is Eric Fedewa, described as "a vice president with the automotive consulting firm CSM Worldwide.")

$500 for 10 percent improvement!

What if the government just paid the costs upfront as part of the stimulus package?  Could we invest in fuel economy standards as a sort of time-release piggy bank?

Last night, in the few minutes we weren’t talking about the financial crisis and the impending bailout, President Clinton waxed political on the potential for energy investment in the United States.  According to the President, the near-certain reality of approving legislation liberalizing off-shore drilling should be seen as a political opportunity for progressives interested in sustainable environment and combating climate change. But if we’re going to “give” drilling to the right, the left should negotiate hard for the environment, including:

Oil revenues of OPEC countries were nearly as much in the first half of 2008 as in the entire year of 2007. Oil revenue for January through June 2008 totaled $645bn and this year's total transfer from oil importers to exporters is forecast to be $1.5 trillion. Despite the recent drop in oil prices, revenues are expected to remain high given greater demand at lower prices. Oil prices continue to fall and have reached $115 per barrel.

Snapshot asks, has the recent price adjustment in crude taken oil exporters to a medium term "sweet spot" of high demand, high prices, and soaring revenues?

Financial Times - OPEC income hits record as oil prices soar
Daniel Yergin - Testimony before US Congress Joint Economic Committee
Financial Times - Price unlikely to spike soon, says Greenspan

I'm still looking for what is new and more sophisticated about Barack Obama's New York Times opinion article, My Plan For Iraq. Maybe the answer is that there is little new here, except for the news hook provided by the Maliki government.

Steve Clemons has a good overall assessment of the article at The Washington Note. I'm going to focus on a few items I think are essential that I want Senator Obama to address.

The overall problem I see with this statement of Iraq policy is that it is too focused on the troop issue, not enough on the twisted politics of the Persian Gulf. Clausewitz is still right: war is the extension of politics by other means. In order to really get the troops out of Iraq, the next president will have to fundamentally change the politics of Iraq and of the region. I just do not see Senator Obama really willing to go there, publicly. That is why his plan requires such a potentially large follow-on force.

The unprecedented rise in oil prices from 100 dollars to almost 150 dollars a barrel over the past six months has stoked speculation over the possibility of oil hitting 200 dollars in the near future. Call options for oil at 200 dollars a barrel doubled in trading over the past month and more companies are buying long term contracts locking them into high oil prices, an indication that the market anticipates further oil price increases. Such an outcome would devastate the world economy, especially the automobile and airline industries, and would cripple American consumers.

Snapshot asks, how much of this unparalleled increase in prices is due to speculative fever as opposed to market forces?

Businessweek - What If GM Did Go Bankrupt...
Market Watch - Allianz predicts oil price of $200 barrel in next 2 years
Financial Times - Bets double on oil hitting $200
Wall Street Journal - Oil's Rapid Rise Stirs Talk of $200 a Barrel This Year

According to a report released yesterday by the IMF, high food and oil prices are having a devastating effect on import dependent, small and middle-income countries. Since January 2007, high food prices cost 33 net food importers $2.3bn or .5% of GDP, while oil cost 59 net oil importers $35.8bn or 2.2% of GDP. IMF head Strauss-Khan says many countries are at a "tipping point."

Inflation is driven by the integration of large emerging economies and is expected to continue even as the U.S. economy slows. Oil prices are expected to remain high for years due to the time needed to develop drilling and refining capacity, while food production will increase more quickly due to price incentives.

Snapshot asks, has the IMF done its part to help the world deal with high inflation?

IMF - Price Surge Driving Some Countries Close to Tipping Point
Financial Times – Trade has saved America from recession
Morgan Stanley – The Oil Shock Debate: Recession, Inflation or Both?
Oxford Energy – Why do oil price shocks, no longer shock?

With the rising price of oil, a consensus has been building that the world is becoming less "flat" than it was in Tom Friedman's bestseller The World is Flat. With higher energy prices global supply chains will fail, countries in East Asia will re-think their export orientation and try to stimulate domestic demand, and countries such as the United States may gain a competitive edge in their domestic market. Oil makes up nearly half of total freight costs and over the past three years every one dollar rise in oil caused a 1% increase in transport costs.

Snapshot asks, will higher energy costs make U.S. manufacturing more competitive?

Business Week - Can the U.S. Bring Jobs Back from China?
Morgan Stanley - High Transport Costs to ‘Un-Flatten' the World
Wall Street Journal - China's Export Machine Threatened by Rising Costs
CIBC - Will Soaring Transport Costs Reverse Globalization?

During the past year Angola joined OPEC, Ecuador rejoined, and Indonesia dropped out. Indonesia dropped its membership because it is now a net importer of crude, due to lower production and higher domestic demand. Indonesia produced 1.5-1.6 million barrels/day in the mid-1990s and now produces 800,000 barrels/day. It was the only OPEC member in Southeast Asia. It will save approximately $3.1million in membership fees per year for leaving the organization.

OPEC accounts for 30% of global oil production. Current OPEC agreements are based on maintaining production levels and not setting specific quotas. However, in a meeting at the end of 2007, Angola was given a quota of 1.9 million barrels/day.

Snapshot asks, as oil prices continue to rise, will OPEC set more quotas upon its members?

Bloomberg - Indonesia to Pull Out of OPEC as Oil Output Drops
International Energy Agency - Oil Market Report
Jadwa Investments - Oil's Surge: what's behind it and what it means for Saudi Arabia
Financial Times - Opec Meeting: Angola faces curbs on production

Financial Express (4/27) speaks with Parag Khanna about the decline of US influence
The Boston Globe (4/27) quotes Flynt Leverett on the dangerous alliances oil producers and despots.
The Tory Conservative (4/27) features Afshin Molavi's book, Persian Pilgrimages.
MWC News (4/25) discusses prospects for a Palestinian state with Ghaith al-Omari.
The Jewish Week (4/23) asks Daniel Levy about the Presidential candidates' Middle East Policies.

BAR CODES: Ghana considers adding bar codes to its ballots to protect against errors and fraud.

TAIWAN REFERENDUM DIDN'T MEASURE UP: Foreign observers took a hard look at procedures in the Taiwanese referenda on joining the U.N., and didn't like what they saw.

NO VOTE ON OIL PIPELINE: The Bulgarian opposition has blocked an effort to let Bulgarians vote on whether to establish an oil pipeline. The pipeline has been passed by Parliament. The winner? Vladimir Putin.  Russia can use the pipeline to send its oil from the Black Sea to the Aegean.

JOINING THE IRISH? Czech communists are proposing a national referendum of the Lisbon Treaty.

MONKS BARRED FROM BALLOT: Burmese monks won't be able to vote in their country's constitutional referendum, an election that clearly won't meet any common sense standard of fairness.