2004 August 03 Tuesday
Oil Prices Hit $44 Per Barrel, May Rise To $50 This Winter

Oil futures prices peaked at over $44 per barrel before retreating.

Oil prices reached record levels for the second day in succession as the price of a barrel of crude in New York broke through the $44 (£24) mark to peak at $44.24.

...

Analysts have forecast that prices are likely to rise further ahead of winter, possibly to a peak of $50 a barrel.

So much for the conspiracy theory that the Saudis were going to cause oil prices to drop in order to help George W. Bush get reelected.

Rising demand from China and the United States combined with fears about supplies have pushed up prices.

The price was fuelled by fears of a terrorist attack in the U.S., concerns about the reliability of oil shipments from Russia - and the realisation that there may not be much that the Organization of Petroleum Exporting Countries can do to stabilize prices.

High energy prices take money from consumers that otherwise would have been spent on other goods. This decreases demand for locally produced goods in oil consuming nations while at the same tine increasing inflation. Higher oil prices may force the Federal Reserve to hike interest rates.

The US may be more directly exposed, however, in that the Federal Reserve has not ruled out a rise in interest rates in the case of increased inflation and has slightly lowered its GDP growth forecast for 2004, now between 4.50 per cent and 4.75 per cent, ahead of a more marked slowdown in 2005 of between 3.5 per cent and 4 per cent.

US consumer spending turned down in June.

U.S. consumer spending in June took its biggest plunge since September 2001 as shoppers, sapped by high energy costs, cut back sharply on car purchases, a government report showed on Tuesday.

Consumer spending might have bounced back in July according to some preliminary reports. But rising energy prices are going to put pressure on consumer spending.

The Saudis are denying that they are having problems pumping oil.

But there is little OPEC can do to relieve the pressure: it is already operating within 5% of capacity. There are even rumours that Saudi Arabia’s state oil company is experiencing production difficulties, suggestions the kingdom strenuously denies.

The Saudis claim they have huge oil reserves. But the information which they use to make their reserve estimates is not available for other parties to examine and verify. Some analysts believe that the Saudis are exaggerating the size of their oil reserves (see the update at the bottom of that post). If the more pessimistic assessments of oil reserves are correct then the current high prices of oil may be the beginning of a trend toward still higher oil prices.

Looked at in inflation-adjusted terms the highest peak in oil prices came in 1981 when oil was almost $60 per barrel when measured in 2004 dollars. An attack on Saudi oil fields could put oil prices up to the level reached in 1981 and perhaps even well above that.

A different kind of bad news could cause oil prices to drop. A big terrorist on an oil consuming nation could lead to a reduction in economic activity that results in lower oil demand and lower oil prices.

However, Tony Nunan at Mitsubishi Corporation in Tokyo, said that should an attack happen, prices would be more likely to fall.

"After 9/11 people stopped consuming because of the uncertainty... If the target is a consuming nation, you would expect an attack to affect the market to the downside," he said.

We need a better energy policy along with better immigration and border control policies to make it harder for terrorists to get into the United States. Rising oil demand from China means more money for the Wahhabis.

Share |      By Randall Parker at 2004 August 03 12:20 PM  Politics Grand Strategy


Comments
noone said at August 3, 2004 5:16 PM:

This is the achilles heel of the US,the West and the global economy.
To date our enemies have been too unable,too unwilling or too ignorant of this to make a swing at it.
Attacks on western oil people in SA are a new phenomenon,so maybe they've decided to go for the oil weapon.

MichaelA said at August 4, 2004 10:22 AM:

It will be interesting to see if the price stays high enough, long enough, for innovation effects to kick in. At what threshold will new alternatives become cost effective?

Invisible Scientist said at August 4, 2004 9:49 PM:

I apologize for repeating myself like a broken record, but I must
re-emphasize the alternative sources of energy, including recent advances
in nuclear reactors that are becoming more economical, and much cleaner environmentally.
Right now, it is known that some of the improved nuclear reactor designs require only 1 % of the
uranium fuel that the current stone age reactors consume per unit of energy generated. And the
new reactors have the capability to consume the plutonium and other artificial byproducts as fuel,
leaving behind only short term low level nuclear waste, with half-life less than 300 years,
making the Yucca mountain storage unnecessary. This means that the entire world can use
nuclear energy to charge car batteries or even to make diesel fuel from hydrogen generated by
nuclear reactors, and we have enough uranium for many centuries.

http://www.nuc.berkeley.edu/designs/ifr/
http://www.decentria.com/ifr.html
http://www.nationalcenter.org/NPA378.html
http://www.newton.dep.anl.gov/askasci/phy99/phy99xx7.htm
http://www.anlw.anl.gov/anlw_history/reactors/ifr.html

But unless we start a Manhattan Project to re-define our national energy policy,
the other alternative is the draft, which will send all our kids to war!
Please read the article I am pasting below:
-----------------------------------------------------------------
http://www.newsmax.com/archives/articles/2004/6/24/104815.shtml

> U.S. Readies for Draft
>
> Dave Eberhart, NewsMax.com
> Friday, June 25, 2004
>
> Despite denials that the U.S. plans to re-institute the draft, the Pentagon has stepped up preparations for a new Selective Service System that could allow for a full-blown draft by next year.
>
> Every few months Secretary of Defense Donald Rumsfeld gets peppered with the nettlesome question about whether the administration, straining to keep boots on the ground around the globe, is considering reviving the compulsory military service draft – moribund since 1973. The answer is always an unqualified “No.”
>
> Story Continues Below
>
> Inquiries by NewsMax – and a persistent host of others, says the agency – to the Selective Service System (SSS) about an impending return to the draft are answered as well with an explicit canned denial:
>
> “Notwithstanding recent stories in the news media and on the Internet, Selective Service is not getting ready to conduct a draft for the U.S. Armed Forces – either with a special skills or regular draft.
>
> “Rather, the Agency remains prepared to manage a draft if and when the President and the Congress so direct. This responsibility has been ongoing since 1980 and is nothing new.
>
> “Further, both the President and the Secretary of Defense have stated on more than one occasion that there is no need for a draft for the War on Terrorism or any likely contingency, such as Iraq.
>
> “Additionally, the Congress has not acted on any proposed legislation to reinstate a draft. Therefore, Selective Service continues to refine its plans to be prepared as is required by law, and to register young men who are ages 18 through 25.”
>
> Is Getting Ready
>
> But savvy draft-watchers, including author, radio personality and attorney Col. Ron Ray, USMCR (Ret.), dispute the “is not getting ready” phrase, suggesting that there is, indeed, evidence indicating a new, heightened urgency within the agency, which these days is independent and no longer falls under the aegis of the Department of Defense. Ray himself had served as a Pentagon official during the Reagan administration.
>
> For sure, “The Selective Service System’s Annual Performance Plan for Fiscal Year 2004,” is a document that leaves the careful reader with anything but the impression of a sleepy agency drilling for a fire it knows will never flare.
>
> # By early next year, the government will be test firing a mobilization infrastructure of 56 state headquarters, 442 area offices, and 1,980 local boards.
>
> # Funding is in the coffers to kick off a rigorous “Area Office Prototype Exercise,” which will “test the activation process from SSS Lottery input to the issuance of First Armed Forces Examination Orders.”
>
> # Ramping up is the “Selective Service System’s High School Registrar Program,” a plan to put volunteer registrars in at least 85 percent of the nation’s high schools – an increase from 65 percent in 1998.
>
> # At the head of the busy-work list – a no-nonsense commitment to report to the president by March 31st, 2005 that the system is ready to roll full steam within 75 days, which would clear the decks for a first lottery by June 15th, 2005.
>
> Meanwhile, helping the agency to reach its goals and objectives is a little known provision of the No Child Left Behind Act that requires schools to provide contact information for every student – upon pain of losing federal aid dollars.
>
> Standby Plans
>
> Alyce Burton, a spokeswoman for the Selective Service, says that at the request of the Pentagon, SSS has been developing standby plans for drafting doctors, nurses and medical technicians.
>
> Furthermore, SSS has been mulling draft procedures for other types of specialists – in particular linguists and computer programmers. But true to form, Burton is careful to add the stock denial: “We’ve been told that a draft of untrained manpower would not be necessary in the future.”
>
> But that gratuitous disclaimer aside, Col. Ray, who defended Specialist Michael New, the U.S. soldier who refused to wear the U.N. uniform, tells NewsMax regarding the agency’s heady agenda: “If you were working for the intelligence service of an enemy foreign government, all the indicators are there [for a headlong ramp-up to a draft].”
>
> Ray further points to what he suggests is a telling February 2004 statement the director of the Selective Service agency sent to the Pentagon:
>
> “In line with today’s needs, the Selective Service System’s structure, programs and activities should be re-engineered toward maintaining a national inventory of American men, and for the first time, women, ages 18-34, with an added focus on individuals with critical skills.”
>
> Despite SSS’s studious low profile and careful tidbits promulgated for public consumption, draft-return rumors recently abounded on the heels of word that the Selective Service was racing to fill vacancies on local draft boards. Advertisements were appearing in local newspapers calling for recruits to man the review panels.
>
> Business As Usual
>
> However, SSS quashed the furor by simply stating that all was just business as usual: The longest anyone can serve on a local draft board is 20 years and most of the members were appointed in 1980 when President Jimmy Carter reinstated registration for the draft.
>
> What appeared to be a frantic exercise was nothing more than a mundane routine replacement of warm bodies, soothed the agency. The canned response by SSS to a frantic media and public:
>
> “There is NO connection between this ongoing, routine public outreach to compensate for natural board attrition and current international events. Both the president and the secretary of defense have stated on several occasions that a draft is not needed for the war on terrorism, including Iraq.”
>
> In truth, some experts don’t outright dismiss the government’s pro forma dismissals of an untrained manpower draft – at least for the near term.
>
> At the heart of the matter is the election year, and selective service is a hot button issue that neither contestant in November is raring to push.
>
> A recent CNN-USA TODAY-Gallup Poll indicates that no less than 80 percent of Americans are against a return to the draft. Furthermore, only 17 percent say they support a draft.
>
> Little Support
>
> It should be noted that just prior to the Iraq war, support for the draft was at 27 percent. And, finally, a no-brainer: the poll also found that young people were least likely to support a draft.
>
> Second in the hit parade of reasons why an untrained manpower draft is unlikely at this time is Defense Secretary Donald Rumsfeld. When he was a young congressman from Illinois, Rumsfeld introduced one of the first bills in Congress to abolish the draft.
>
> These days the still anti-draft Rumsfeld is careful not to suggest that draftees are by their nature second-class soldiers because they are coerced to serve.
>
> Having taken a hit for just that sentiment not long ago, the secretary now points to the more academic of his rationales – high turnover and a complicated deferment system that a draft engenders.
>
> Rumsfeld’s most recent pronouncement on the subject: “I don’t know anyone in the Executive Branch who thinks it’s appropriate or necessary to reinstitute the draft.”
>
> Third reason: The Army – albeit experiencing serious shortfalls of military policemen, linguists, interrogators, civil affairs specialists and medics – has ready access to a handy pool of manpower, the Individual Ready Reserve, the inactive component of the military that consists of vets who have completed their enlistment contracts but still have time remaining on a total 8-year commitment. As many as 6,500 could be recalled to active duty.
>
> Fourth: Stopgap measures by the DoD are working to keep the outposts manned. “Stop loss” and “stop move” orders are in effect. The first bar members of the military from retiring or resigning. The second extends overseas assignment involuntarily – as was the case with the 20,000 troops kept overtime in Iraq.
>
> Fifth: Troop shortages related to the war in Iraq and other deployments are being eased by turning over to civilians jobs now done by members of the armed forces. Rumsfeld hopes to reassign to civilian employees jobs now performed by no less than 300,000 uniformed men and women.
>
> Sixth: Trust that Congress will bail the armed forces out in time. A cadre of both Democrats and Republicans on Capitol Hill are pushing to permanently increase the size of the Armed Forces by at least 30,000.
>
> Draft Already Begun?
>
> The inevitable critics of the DoD’s stopgap measures, however, say that many volunteers already have served one or more tours of duty in Kosovo, Afghanistan or Iraq. “Stop move” obviously frustrates those who are ready to be honorably discharged.
>
> Some even suggest that this device amounts to nothing less than constructive conscription – a draft. Instead of drafting the civilian population, the military is “drafting” the soldiers who already are enlisted by forcing them to serve longer than usual.
>
> Col. Ray, who served on a presidential commission on women in the military, is one of these skeptics, telling NewsMax, “Stop loss is nothing less than the beginning of a draft.”
>
> Such arguments have not gone unheeded.
>
> Just days after the Pentagon extended the tours of 20,000 troops in Iraq, Sen. Chuck Hagel, R-Neb., said, “There’s not an American ... that doesn’t understand what we are engaged in today and what the prospects are for the future.”
>
> “Why shouldn’t we ask all of our citizens to bear some responsibility and pay some price?” Hagel added, arguing that restoring the draft would force “our citizens to understand the intensity and depth of challenges we face.”
>
> Indeed, a pair of bills was introduced in Congress last year that would bring back the military draft.
>
> The Senate version of the legislation, sponsored by Sen. Fritz Hollings, D-S.C., says its purpose is “to provide for the common defense by requiring that all young persons in the United States, including women, perform a period of military service or a period of civilian service in furtherance of the national defense and homeland security, and for other purposes.”
>
> The House of Representatives version of the bill was sponsored by Rep. Charles Rangel, D-N.Y.
>
> Neither bill is winning a footrace on the long road to passage. And therein rests the overriding reason why some experts are not looking to see the draft revisited any time soon.
>
> Obstacles to Reinstatement
>
> Congress must pass legislation authorizing the reinstatement of the draft. It’s not something that can be done by the Chief Executive with the stroke of a pen on an executive order.
>
> If, however, another front appears on the nation’s already extended battle lines – N. Korea or Iran, for instance – all bets may be off. And the preparations underway today could mean that a draft could be up and running in just a matter of months.
>
> Col. Ray already sees the writing on the wall, referring to the writings of former NATO Supreme Commander Gen. Wesley Clark, who has suggested that there was and may be yet afoot a rather ambitious, albeit clandestine, agenda for American arms, mentioning war scenarios for Iran, North Korea and even ostensible ally Saudi Arabia.
>
> Ray wrinkles his brow and rubs his forehead, mulling over what he sees as a dogging question: “Why have we kept the numbers of troops artificially low? We’re half the combat strength we had in 1991, yet we are manning 735 bases around the world.”
>
> Ray doesn’t suggest to NewsMax that he has the answer to the conundrum. Yet he sees the draft as perhaps an inevitable consequence of our war on terror.


Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

      
 
Web parapundit.com
Go Read More Posts On ParaPundit
Site Traffic Info
The contents of this site are copyright ©