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China & Iran - The Energy Tightrope

China wants to double its exposure to alternative energy over the next fourteen years, echoing recent remarks by President Bush.

According to China Daily, the Chinese government " is working on a long-term plan to increase the use of alternative fuels to reduce the dependence on oil. Coal, gas and renewable energy sources such as biomass and solar power are expected to become "major alternatives," according to the National Development and Reform Commission (NDRC)."

The report added that eventually China would like to reduce the use of coal and oil and replace it with "nuclear, wind and solar energy."

China's use of solar energy has been increasing "at more than 25 per cent in China" making it "the highest in the world."

( Full story here )

The psychology of a falling dollar

Given a current-account deficit in excess of 6% of US gross domestic product (GDP), many fear the dollar must decline. At the World Economic Forum in Davos, Switzerland, policymakers disagreed as to the severity of the risk, its causes and cures.

In a nutshell, the United States does not export enough to the rest of the world to balance its own appetite for cheap Asian imports. The American consumer spends too much and saves too little. As a result, dollars are leaving the US in return for goods and services. Unless those dollars are reinvested in US-denominated assets at a rate in excess of US$2 billion a day, the dollar will decline.

( Full story here )

Gold ETFs Changing Market Dynamics

An expected pullback for gold got underway about two weeks ago and after a $40 retrace the metal has bounced off the technically popular 50-day moving average. Whether that’s it for this pullback remains to be seen, but meanwhile there is little doubt that the dynamics for the gold market are changing, and changing in a profound way.

We lead off with some commentary on Gold ETFs this week. Regular weekly commentary begins below that.

( Full story here )

Concern over oil production capacity

Furious debate about how much oil the world has left is matched in intensity by the argument about how much it matters.

For producers, consumers and big oil companies, the holy grail of precise measurement for now is less vital than the speed at which barrels are pumped out of the ground.

"Production capacity over the next few years is more important than reserves," said Sadad Husseini, a former top official at Saudi Arabia's state oil company Saudi Aramco.

Controversy over alleged miscalculation of reserves resurfaced this year after a media report said Opec producer Kuwait had only about half as much oil as officially stated and Kuwait stopped short of a robust denial.

( Full story here )

Nigerian oil crisis may be prolonged by politics

LAGOS, Feb 19 (Reuters) - World energy markets could face a prolonged shortfall of Nigerian oil supply after militants halted 21 percent of the OPEC nation's exports and kidnapped nine foreigners, analysts and diplomats said on Sunday.

The latest Niger Delta crisis feeds into mounting political instability in Africa's top oil producer ahead of elections next year. "Jockeying in the run-up to Nigeria's presidential elections and swelling violence in the unstable Niger Delta threaten the country's unity and could result in the break-up of the ruling party, damage regional stability and roil global oil markets," said Eurasia Group in a recent research note.

( Full story here )

China Huaneng to start building 370 mln usd nuclear plant this year

China Huaneng Group, the parent company of Hong Kong-listed Huaneng Power International Inc, is expected to start building a 370 mln usd nuclear power plant this year, the China Daily reported.

The planned 190-megawatt reactor, which will be located in east China's Shandong province, will use pebble-bed technology, a method employing a gas-cooled reactor as an alternative to using pressurized water or boiling water reactors, the newspaper said.

( Full story here )

Stop oil subsidies

Most of us can think of a company suffering under the burdens of high energy prices. Few of us would put the major oil and gas producers in that category.

Why, then, are these companies poised to collect at least $7 billion ... in special federal relief? And why isn't the White House in the forefront of efforts to correct this disgrace?

The windfall is traceable to the mid-1990s, when oil and gas prices were relatively low and energy companies weren't eager to invest in the high-cost, high-risk endeavor of developing new deep-water wells in the Gulf of Mexico.

( Full story here )

‘Get serious’ about oil shock

The appearance of $3 gas in the wake of Hurricane Katrina last year showed the tenuous U.S. hold on plentiful and cheap fuel.

The worst of it, however, was soon over, and prices declined.

But what if there were a sharp shortfall in oil supplies that was permanent instead of lasting just a few weeks or months? An event so far-reaching that it could transform the American way of life and much of the world economy?

Matthew Simmons has a message for you: Count on it.

( Full story here )

Read My Lips... No New Energy Strategy

by Byron King
for Whiskey & Gunpowder
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WHAT DID I THINK of President Bush's State of the Union address? Of course, as I am sure any of you who have followed my articles could have predicted, I was (ahem) mesmerized. I soaked in every image of the great and historic chamber of the House of Representatives in the U.S. Capitol building. Probably not unlike many of you, dear readers, I hung onto every word that fell from the lips of the Nation's chief magistrate.

I must start by saying that I was riveted by the broadcast images of this nation's unique species of "politico norteamericano." There they were, this assemblage of selfless public servants, resplendent in their ruby red neckties and sky blue scarves, collectively getting their aerobic exercise as they loudly applauded Mr. Bush while hopping up and down like a room full of Jack La Lannes. The 43rd chief executive may or may not be remembered by history as the "education president." But he sure is headed toward becoming the "workout president."

Not a senator or representative could engage in a bit of body language, and I was reaching for my copy of the Berlitz Body Language Phrase Book. The television camera would, on occasion, point to famous faces. Was that a smile or a smirk on the mug of Hillary Clinton? Was Ted Kennedy sound asleep, or merely in deep contemplation of some important issue? There was my old Harvard classmate, John Roberts, sitting in the front row and thinking to himself (I will wager), "It's good to be the chief justice of the United States." And how can some of those Republican guys smile so hard without breaking their faces? Why do the Democrats frown so much? Bad Botox?

Like the legendary, but now deceased, Pittsburgh bookie Tony Grosso, I took a few notes as I listened to the speech. I was making some hunches, handicapping the chances for new government programs and pondering the odds and fates of old ones. I spent the hour sitting at the edge of my chair. Didn't you?

"Information of the State of the Union"

The State of the Union address, delivered to the nation by a sitting president of the United States, is, as you may know, a mandate of the U.S. Constitution, Article II, Section 3. The wording of the Constitution is precise and elegant in a manner that is, to my way of thinking, almost lost to our current culture. The president...

"shall from time to time give to the Congress Information of the State of the Union, and recommend to their Consideration such Measures as he shall judge necessary and expedient."

Originally, and for all of the 19th century, the "Information of the State of the Union" was summarized annually in a written document that the president would send to Congress. Starting in the early 20th century, about coincident with the advent of a national mass media, the president's presentation became a yearly address delivered before a joint session of Congress. Under current practice, the presidential address not only reports on the condition of the nation, but also allows the man who holds the Constitution's "executive power" to outline his legislative agenda and national priorities to Congress.

Few things in this world are more highly scripted than a State of the Union address. By comparison, the Academy Awards are just a bunch of little old ladies at a bingo call down at the fire station.

It takes months of background work to prepare the speech. When it comes to the State of the Union, the entire resources of the U.S. federal government are at the disposal of the Office of the President. What the Man wants, the Man gets. At the same time, there is utterly fierce fighting within the federal bureaucracy to secure a favorable nod, let alone a passing positive mention, of a particular agency or its pet programs. The point papers flow back and forth, eventually being sharpened to such a degree that one could use them like a scalpel to perform brain surgery.

At many federal offices during the run-up to the State of the Union address, you can cut the suspense with a knife. Suppose "Program X" is competing for funding with its arch-rival, "Program Y." If the president says something good about "Program X," then the next day there are small armies of federal employees and additional divisions of private industry contractors, "X" men all, laying out PowerPoint presentations to highlight the president's recognition of the many superior virtues of "X."

And if the president refers positively to "Program Y" in the State of the Union address, then, as the expression goes, "The Ys have it." (Sorry, I couldn't resist.) The next day, the "Y" people will also muster their own small armies of federal employees, and their own divisions of private industry contractors to lay out PowerPoint presentations that highlight the many superior virtues of "Y."

The result? The "X" Men and "Y" People will each send their respective legislative liaisons up to Capitol Hill to brief the congresspersons. And Congress will probably keep both programs, "X" and "Y," going for another year. "Funding," as they say, "is life." And after all, if Congress terminates a program, there will be layoffs down at the plant in somebody's congressional district. We can't have that, can we?

"Addicted to Oil"

According to an account in The Washington Post, the State of the Union speech went through more than 30 drafts before Mr. Bush delivered it. At the end of such an elaborate process, it is more than significant that President Bush devoted a few words (very few) to discussing what passes for a long-term energy strategy in this country. The man from Midland, Texas, said "America is addicted to oil."

"Addicted?" The president did not say "America uses lots of oil" and illustrate the point that this nation with about 5% of the world's population uses about 26% of the world's oil production every day. That would have been a good starting point for the education president, although this one comparative statistic should not control the rest of the discussion. The key point in the comparative statistic is that current patterns of U.S oil use are a product of the unique history of the nation's industrial and social history, and the country's economy and culture. The president could have discussed in front of Congress and American people how the world is changing, and that with these changes, patterns of energy availability and use are going to change, as well. It is surely a discussion that the nation is going to have sooner or later, under one set of circumstances or another. Why not now?

It would have been hoping for too much to expect the president to mention that it has served the U.S. national interest that, for many decades, the U.S. dollar has been the so-called "reserve currency" of the world. In the past, if the U.S. economy needed dollars with which to purchase oil, the U.S. government always had at its disposal, to use the words of a certain newly installed Federal Reserve chairman, "a technology, called a printing press." But I digress. Back to the speech.

Nor did the president say "America uses too much oil," and call people's attention to the obvious point that many of the nation's citizens spend hours every day in their vehicles, which translates into weeks and months each year sitting in traffic. That is something that most people can understand. The education president could, for example, have continued along with this theme and used the occasion as a "teachable moment." He could have explained that the nation uses over 250 barrels of oil per second and compared it with the average U.S. stripper well, which produces an average of about five barrels of oil per day. He could have paid homage to the obvious, that the nation's daily use of imported oil has controlled a good deal of U.S. foreign and military policy over the decades. The president could have told the American people that the medium- and long-term trends in the nation's use of oil are completely unsustainable. Some of you may scoff at this notion that Mr. Bush would say something like this. I happen to believe that Mr. Bush is a pretty smart and informed man (albeit horribly ill advised by many of his court jesters), and I think that he knows this is the case.

But after 30 drafts of his speech, Mr. Bush actually used the "A" word. The phrase "addicted to oil" is hardly original, having been a staple of energy commentary for several decades. But this turn of a phrase from the mouth of a sitting president is powerful, and hits with a lot of psychological momentum.

Addiction is Bad for You

I believe that most Americans have some idea what addiction means, because most Americans know at least a few people who are "addicted" to things like smoking, drinking, or drugs. I also believe that most Americans have at least an intuitive understanding that addiction is bad for you. That is, doing something that is "addictive" over the long term will degrade your quality of life, if not just plain kill you. My hunch is that most Americans are generally in favor of "addicted" people getting some sort of treatment for their issues and, as the saying goes, "getting well." And helping people to get well is a fundamental tenet of Christianity, which is part of Mr. Bush's own personal background and journey.

So for President Bush to characterize the nation as being "addicted to oil" is quite the philosophical opposite of the underlying premise of former President George H.W. Bush's famous comment that "the American way of life is nonnegotiable." Either that or Congress should review the mandatory sentencing guidelines for people convicted of most drug-related crimes. (Memo to George W. Bush: This is probably a good idea in any event.)

The 75% Solution

In the same sentence as the comment about being "addicted to oil," the president set a "goal" of replacing "more than 75% of our oil imports from the Middle East by 2025." Mr. Bush talked about replacing that 75% of the nation's oil imports with ethanol and other so-called "renewable" energy sources.

Replace 75% of U.S. oil imports from the Middle East by 2025? Viewed in another way, this is not a "goal"; it is a prophesy. There is no way that the United States will be importing as much oil from the Middle East in 2025 as it imports today. And there is no way that the nations of the Middle East will be exporting as much oil in 2025 as they are exporting now.

Whether or not the Bush statement is a "goal," in 2025, the United States will not be importing much in the way of petroleum from anyplace. The oil just will not be there for one side to export or for the other side to import. Welcome to the future. As I said above, this could have been a "teachable moment" for the nation.

As I have noted in other articles, Kuwait has announced that its principal oil field, the super giant Burgan, has entered the phase of irreversible decline. At current depletion and decline rates, by 2025, Kuwait will be exporting negligible amounts of oil, and at prices that most nations of the world will be unable to afford. (This is another discussion for another time.)

Saudi's super giant Ghawar oil field is close to being in irreversible decline. The Saudis are only managing to maintain current oil production volumes by virtue of a massive seawater injection program that pumps more than 7 million barrels of saltwater per day into its oil fields. This pumping helps to maintain production pressures in the oil reservoirs, but is also the source of formation damage due to the presence of oxygen and bacteria in the seawater. By 2025, Saudi Arabia will still export oil, but far less oil than now and each tanker will be of such value as to require its own armed escort. (See note above.)

Iran is not quite at its production peak, but within 20 years, even the most optimistic estimates forecast that Iran will cease to be a net oil exporter. This may also have something to do with Iran's desire to develop a nuclear program for both domestic power production and military uses. Again, here was another "teachable moment" for the nation.

Conservation, Efficiency and Strategy

Two simple words that were missing from the State of the Union speech were (a) "conservation," and (b) "efficiency." Mr. Bush must know that U.S. oil production peaked in 1970. And the president cannot be unaware that, despite nominal price increases over the years, additional government incentives for drilling, and advances in technology for exploration and drilling, U.S. oil production has continued to decline. The only fundamental thing about oil that has increased in the past 35 years is America's tendencies to consume the depleting substance and to obtain it from more-and-more unstable regions of the world. How much longer can this continue?

Would it have been so difficult for Mr. Bush to use his speech as an opportunity to raise the topics of conservation and efficiency to the American people? After all, Vice President Cheney once referred to conservation as a "personal virtue." (Although in the next sentence he made the unfortunate comment that conservation is not something on which a nation can base its energy policy. Oh yeah? Wait and see, Mr. Veep.)

After the energy price spikes caused by Hurricanes Katrina and Rita this past fall, I suspect that the American people are ready to listen to some intelligent discussion of the virtues of conservation. And after watching what has happened to the major U.S. automakers in the past few years, I suspect that the American people are ready to listen to some intelligent discussion of the virtue of efficiency. The American people are ready for some "reachable moments" on this subject.

Another important phrase missing from the State of the Union speech was "energy plan." What is the president's plan for the long term? Mr. Bush spent many months of 2005 trumpeting his plan for the future of Social Security. He sponsored a plan to reform Medicare. So what is his plan for U.S. energy security in the coming years? After all, as the saying goes, "Plans are nothing; planning is everything." This is a famous quote from Gen. Eisenhower that is usually found painted on the wall of every staff college of the U.S. military.

Strategic planning is critical. It is not as if things will exactly follow plan. But it is important that you have at least planned something and thought things through with respect to whatever you hope to accomplish. You have identified your challenge. You have considered your desired end state and determined which pathways might get you there. There are many roads from which to choose, so you have to make choices. What are you going to do? You need to marry up your resources to your action plan. What do you need in order to accomplish your mission and how you are going to get it? And have you considered the alternatives along the way?

Strategic planning requires that you think in terms of "What if this?" and "What if that?" And then you act, starting tomorrow morning, knowing full well that the next day some darn thing will occur to screw you all up. But at least you have a plan for this as well. And whoever has the better plan, the United States or China or Russia or the European Union or the Bolivians or the Venezuelans...they are going to be left standing at the end of the day.

For example, and to put it in terms that some of Mr. Bush's principal advisers can understand, the U.S. Navy has a 50-year plan. Why? Because the Navy builds big ships, some of which have a useful life of 50 years. What will the world look like in 50 years? Beats me, and I am sure that it beats any admiral in the Pentagon. But I will bet that if you are around in 50 years, you will see U.S. Navy nuclear-powered aircraft carriers floating on the waters of the world. The Navy is inventing its own future, Congress permitting and appropriating.

So what is the U.S. energy strategy for the next 50 years? Are we to place our trust in the so-called "free market" to come up with better forms of ethanol from such noted energy storage media as switch grass? Is the Republican president who wanted to restructure Social Security and Medicare afraid of laying out a comprehensive plan for the nation's energy strategy? Apparently so. And without a well-thought-out energy strategy, this nation had better have a workable military strategy. On that note, I will end for now.

Until we meet again...
Byron W. King

Byron W. King is a practicing attorney in Pittsburgh, Pennsylvania, with real clients and real law books on his shelves. After graduating from Harvard University more years ago than he cares to discuss, Byron worked as a geologist in the exploration and production division of a major international oil company. He has followed developments in the oil and gas industry for almost three decades. However, in the process of seeking more excitement than a man can safely obtain from flaring over-pressurized gas whipping out of a 21,000-foot well, Byron also served for many years in both the active and reserve components of the United States Navy.

While in the sea service, Byron logged more flight time in tactical jet aircraft than George W. Bush, as well as 127 more carrier landings than the recently-re-elected commander in chief. Among other assignments, Byron has served as a field historian with the Navy.

Byron looks at current events, economics, and politics through the lens of history. He brings to the table a unique perspective that incorporates many millions of years of the Earth’s geologic history, and blends its significance into the more recent, man-made kind of tale.

India and France Agree to Cooperate on Nuclear Energy

A visit to India by the president of France has led to an agreement for the two nations to cooperate on civilian nuclear technology. But, lurking in the background is an ongoing dispute between India and Europe over a bid by an Indian-born steel magnate to take over a major European steelmaker.

After an hour of talks in New Delhi, French President Jacques Chirac and Indian Prime Minister Manmohan Singh signed an agreement on future cooperation in the civilian nuclear energy sector.

( Full story here )

Protests hit Ecuador oil exports

Ecuador's state oil firm Petroecuador has been forced to suspend crude exports after a violent demonstration in Napo province shut a key pipeline.

Petroecuador's halt to its 144,000 barrels per day (bpd) of exports came into effect on Tuesday after the Trans-Ecuadorean pipeline was closed.

Protesters had occupied a pumping station to demand more state resources for the poor province in the Amazon.

( Full story here )

Did US planned to Invade Canada ?

A recent Washington Post article entitled:

Raiding the Icebox; Behind Its Warm Front, the United States Made Cold Calculations to Subdue Canada, by Peter Carlson (30 December 2005),

focuses on a detailed US Plan to Invade Canada entitled "Joint Army and Navy Basic War Plan -- Red," It was formulated in the late 1920s, approved by the US War Department in 1930, updated in 1934 and 1935, withdrawn in 1939 and declassified in 1974. (See complete WP article below)

Following the publication of the WP article, which was casually presented as political humor, Canadian network TV and print media were quick to dismiss the matter outright.

It was in a bygone era. It no longer applies: the US administration would never dream of actually invading Canada.

Yet upon more careful examination, an ongoing plan to annex Canada to the US, is still (unofficially of course) on the books. The underlying procedure, however, is not straightforward as in the case of an outright military invasion (e.g. under the 1930 "Joint Army and Navy Basic War Plan -- Red"). Today, it involves what the media refer to as "Deep Integration", which constitutes a more polite term for "Annexation".

( Full story here )

Analysts stick with oil price over $US59

Two more analysts have revised upwards their oil price forecasts for this year, continuing the bullish view despite a dip in price early this year.

The Centre for Global Energy Studies and the National Australia Bank on Monday raised their forecasts for oil prices this year due to rising geo-political risks and strong Chinese demand.

With these revisions and the addition of BNP Paribas, a Reuters poll of 33 analysts' shows the price of benchmark US light crude oil futures in 2006 to average a record $US59.85 a barrel.

( Full story here )

Houston, we have a problem

President Bush's recent statement that it's time to break America's addiction to oil surprised many Americans not just because it was a man from the "Oil Patch" who called for a move beyond petroleum but because of the way he charted to get there. It was the first time the President called for action on oil security without touting domestic drilling. Instead, he envisioned a shift to battery operated cars and vehicles running on next generation fuels made from domestically available non-petroleum energy resources.

Bush's decision to use the bully pulpit of the presidency for such a goal surely stems from his recognition that it is dangerous to be buying billions of dollars worth of oil from nations that, in his words, "don't particularly like us," and that the petrodollars we provide such nations contribute to the terrorist threats we face. But make no mistake: neither the underwriting of terrorism nor the frantic weather patterns which caused last year's spike in gasoline prices would have been enough to get President Bush to move beyond the traditional drill-as-much-as-you-can strategy if not for the alarm bells sounded by the oil industry itself.

( Full Story here )

Iran, Oil and Euros: The War Scenario

Here’s the scenario. On March 20 Iran opens a new “bourse” (exchange) on which countries all over the world can buy and sell oil and gas not only for dollars but also for euros. It also establishes a new oil “marker” (oil pricing standard) based on Iranian crude and denominated in euros, in open rivalry to the existing West Texas Intermediate, Norway Brent and UAE Dubai markers, all of which are calculated in US dollars.

The Iranian bourse is an instant success with countries and companies that are unhappy about having to hold huge amounts of overvalued US dollars to finance their oil transactions, all of which must presently be conducted in that currency. Very large sums start to shift from the dollar to the euro, although exactly how much is unknown because the US Federal Reserve System (by pure coincidence, of course) has chosen late March as the time to stop publishing the data that would make it easy to know how fast the hemorrhage was.

( Full Story here )

Precious metals gain on firm oil, soft dollar

Precious metals advanced in early European trade today, supported by a rise in crude oil prices and weakness in the dollar against the euro, dealers said.

Gold and silver rose to their highest in more than a week, while platinum climbed 1,6% from its close in New York late on Friday.

Spot gold touched $554,25 an ounce before easing to $552,75/553,45 in early trade, still higher than $551,70/552,60 in New York on Friday.

"If gold can hold above $550, the metal could work towards the $565-$568 resistance band while a failure to stay up would lead the yellow metal back into the $535-$550 area," James Moore, analyst at TheBullionDesk.com, said in a daily report.

( Full story here )

Bush: U.S. must not be 'hostage' to foreign oil

MILWAUKEE (Reuters) - The United States must reduce its dependence on oil from foreign countries that can hold it hostage, President George W. Bush said on Monday as he tried to revive an agenda obscured by controversy over Vice President Dick Cheney's hunting accident.

"Some of the nations we rely on for oil have unstable governments or fundamental differences with the United States," Bush said in a speech at the start a two-day swing through Wisconsin, Michigan and Colorado.

( Full story here )

Oil Firms Bidding Up Canada's Sands

CALGARY, Canada -- Canada's hottest piece of real estate isn't much to look at, a mix of swamp and scattered spruce and pine trees in northern Alberta.

Underneath the muskeg lie the oil sands, by some measures the world's largest petroleum reserves outside Saudi Arabia. To tap the deposits, companies such as Royal Dutch Shell are paying record prices for undeveloped land. Already this year, the province of Alberta has raised more money from oil sands leases than the record amount earned in all of 2005.

The sands have "become the Beverly Hills of the oil patch," said Gregg Scott, president of Calgary-based Scott Land & Lease, Canada's biggest land broker. "This is the most high-profile play I've seen in my 24 years as a broker."

( Full story here )

T. Boone Pickens, oil tycoon

T. Boone Pickens Jr. -- who in 1983 as president of Mesa Petroleum mounted an unsuccessful corporate takeover of Gulf Oil -- no longer runs his own independent oil company. But the self-made tycoon from Oklahoma still is very much on top of the day-to-day madness of the global energy business, where prices are spiking, world oil production is said to have peaked and Americans live in daily terror of unfriendly despots in the Middle East and South America.

These days Pickens, 77, is running BP Capital, a successful hedge fund that invests primarily in oil and gas futures, alternative energy and energy-related companies. I talked to Pickens -- who says he went after Gulf Oil not to move it out of Pittsburgh but because he thought it was being so badly managed -- by telephone on Thursday from his offices in Dallas

( Full story here )

Cheap oil is over

BELFAST (Feb 20): Are we on the brink of an oil crisis?

A close adviser to the Bush administration, an international economist and a former Irving Oil executive who spoke Saturday in Belfast said, unequivocally, yes. And it is the United States, they say, that must lead the way in instituting drastic measures to reduce oil consumption.

It’s one thing when environmentalists raise an alarm. It’s another matter entirely when the call for federally mandated conservation measures comes from the likes of energy investment banker Matthew Simmons, who advised Vice President Dick Cheney on energy policy.

( Full story here )

Nigeria: Fresh attacks on oil installations

Militants holding nine foreign hostages in southern Nigeria destroyed an oil pipeline and blew up a boat in violence that has cut about 20% of crude production in Africa's oil giant.

The Movement for the Emancipation of the Niger Delta said they attacked a Shell-operated oil-pipeline switching station known as a "manifold" and a military houseboat in the oil-rich southern region. "Both were destroyed with explosives," the group said in an email.

( Full story here )

Gold May Rise for 2nd Week on Inflation Concern, Survey Shows

Gold may rise for a second week, extending a rally that sent prices to a 25-year high, as investors buy bullion as a hedge against inflation.

Twenty-three of 37 traders, investors and analysts surveyed from Sydney to Chicago on Feb. 16 and Feb. 17 advised buying gold, which last week rose $1.10 to $554.60 an ounce in New York. Ten respondents advised selling and four were neutral.

Jim Rogers, who co-founded the Quantum hedge fund with George Soros in the 1970s, said in a Feb. 14 interview that gold's rally will continue, eventually topping its record high of $873 an ounce. U.S. wholesale prices rose 0.3 percent in January, and costs excluding food and fuel increased by the most in a year, the government said Feb. 17.

( Full story here )

Warm January saved crippled natural gas supply; hurricanes left nation at crisis point

HOUSTON -- American consumers are paying for the most expensive winter on record. But consider how much worse it might have been.

When hurricanes Katrina and Rita ripped through the heart of the nation's offshore energy-producing region last year, natural gas experts feared the worst -- record gas prices and supply shortages.

December blew in cold. Prices soared.

Then came the warmest January since at least 1934. Cherry trees budded in Virginia; daffodils began to emerge in the nation's capital.

And gas supplies the last week of January stood at their highest level in 17 years, the federal government reported last week.

( Full story here )

China; Power plants warned of natural gas shortage

BEIJING, Feb. 19 (Xinhuanet)-- China should remain cautious while developing natural gas-fired power plants due to unstable fuel supply, Wang Yonggan, secretary-general of China Electricity Council (CEC), told a forum here on Sunday.

In East China, insufficient natural gas supply made gas-fired generators with a total installed capability of four million kilowatts stop working last year, Wang said.

Some gas-fired power stations in the southern parts of the country had to suspend production right after they started operation because of gas shortage, which worsened the situation in the power-hungry areas, he added.

( Full story here )

Venezuela's Chavez Says Natural Gas Is for Region, Not U.S.

Venezuelan President Hugo Chavez said his country's natural gas is for the domestic market and South America, and not the U.S., whose policies remain unfriendly toward his government.

Venezuela's natural gas reserves, which total about 151 trillion cubic feet and are the eighth-largest in the world, are first and foremost for the domestic market, Chavez said during his weekly televised broadcast. The South American market, and specifically Brazil, Argentina, and Uruguay comes next, he said.

``And if we have any gas reserves left, we will send them to the U.S.,'' said Chavez, who again charged during his broadcast that the U.S. aggression toward his country is because Washington covets Venezuela's oil and natural gas reserves.

( Full story here )

'Thousandsmay lose jobs as cost of energy soars'

THE leader of one of Wales' biggest trade unions has warned the "lights could go out" and employers be forced to shed thousands of jobs because of a mounting energy crisis.

The head of the Transport and General Workers Union (TGWU) in Wales, Andy Richards, said Welsh firms must be protected from wholesale energy prices that have risen by up to 100% since January of last year.

Mr Richards says businesses from Ford, in Bridgend, to Anglesey Aluminium, in North Wales, have expressed concerns about spiralling energy costs.

Business leaders from some of North Wales' largest employers like Airbus and Synthite Ltd will meet Mr Richards and the leaders of Amicus at an energy summit today.

( Full story here )

India, Oil and Nuclear Weapons

Exploding at the seams with building, investment and trade, India can hardly keep up with itself. Airplanes coming into Delhi and Mumbai routinely end up circling the airports for hours, wasting precious jet fuel, because there are not enough runways or airport gates. City streets originally built for two lanes of traffic are teeming with four and sometimes five lanes of cars, auto-rickshaws, mopeds, buses and trucks. This energy-guzzling congestion will only become worse as India continues producing fairly high-quality goods and services at lower and lower prices — from automobiles that cost only $2,500 to low-budget airline flights for $50.

India's president, A. P. J. Abdul Kalam, sounded exactly like President Bush when he told the Asiatic Society in Manila earlier this month that energy independence must be India's highest priority. "We must be determined to achieve this within the next 25 years, that is, by the year 2030," he said. Unfortunately, Mr. Kalam, like Mr. Bush, is far better at talking than at any real action to reduce energy consumption. In the new enclaves for India's emerging middle class and its rapidly rising nouveau riche, environmentally unsustainable, high-ceilinged houses feature air-conditioning systems that stay on year round.

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End of the U.S. dollar hegemony?

After the Second World War and following the fall of the Soviet Union in 1989, the so-called “dollar diplomacy”, a policy instituted by William Howard Taft and his Secretary of State Philander C. Knox and designed to enhance U.S. commercial investments in Latin America and the Far East, evolved into “dollar hegemony.” Several years later, today, the American dollar’s great influence on the global economy and its dominance seems to be coming to an end.

The reason why the U.S. has been the depreciating value of the American dollar, especially in comparison to the Euro is mind-boggling to the American nation and the entire world specially the past few months. How long will this trend last? Is it a good thing or a bad thing?

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3 Americans among 9 oil workers kidnapped

LAGOS, Feb 18: Nigerian militants launched a string of attacks in the world’s eighth largest oil exporter on Saturday, abducting nine foreign workers, bombing a major oil export platform and sabotaging two pipelines.

Royal Dutch Shell suspended exports from the 380,000 barrel-a-day Forcados tanker terminal, a senior industry source said, cutting at least 16 per ent of Nigeria’s 2.4 million barrels of daily supply to world markets.

The Movement for the Emancipation of the Niger Delta said the attacks were a response to military air raids on villages in Delta state earlier this week and would be followed by another wave of violence “on a grander scale”.

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An analysis on global energy crisis and security

Since the beginning of the new century, crude oil price has been increasing and broken the highest record many times. But the cost of production didn't increase much, what's the reason for the price hike?

During a forum held by the overseas edition of People's Daily, experts have given their analysis about the situation.

Shen Jiru, a research fellow from the World Economic and Political Institute in Chinese Academy of Social Sciences (CASS) says oil supply is certain, but oil demand is increasing. Some accidents such as Hurricane Katrina and regional conflicts like Iraq war, or sanctions and embargo of oil to certain countries, all these can cause oil price hikes.

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Fashion sets off a new gold rush

Demand has soared while output stayed flat. Angus McCrone explains the driving forces behind the rise and rise of the precious metal

IN the classic 1964 James Bond film Goldfinger, the villain hatches a dastardly plan to corner the world bullion market. If he were around today, he might well decide to drop the scheme and concentrate instead on counting his wealth — the price of gold has surged from $250 a troy ounce in 2001 to a peak of $574 this month.

And, anyway, what would be the point of cornering the market? The increasingly exuberant upswing in the price of gold — and other precious metals — in the past four years seems to have become a self-fulfilling prophecy.

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Nigeria suspends 380,000 bpd oil exports after attack

LAGOS (Reuters) - Royal Dutch Shell suspended exports from the 380,000 barrel-a-day Forcados terminal on Saturday after militants bombed the tanker loading platform, a senior oil industry source said.

The company is still trying to ascertain the damage to the platform, which is located three miles offshore, but has already begun shutting oilfields in the area which feed the terminal, the source added.

"Of course no ships can go near there now. This is going to be a major deferment," the senior industry source said.

"If we can't export, we can't produce," he added.

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Nigeria: Militants kidnap oil workers

NIGERIAN militants launched a string of attacks in the world's eighth largest oil exporter overnight, abducting nine foreign workers, bombing a major oil export platform and sabotaging two pipelines.

Royal Dutch Shell suspended exports from the 380,000 barrel-a-day Forcados tanker terminal, a senior industry source said, cutting at least 16 percent of Nigeria's 2.4 million barrels of daily supply to world markets.

The Movement for the Emancipation of the Niger Delta said the attacks were a response to military air raids on villages in Delta state earlier this week and would be followed by another wave of violence "on a grander scale".

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Energy expert is clutching at straws

By Brian O’Mahony
A RESPECTED authority on fossil fuels has turned the debate on its head claiming the world has enough fossil fuels to energise the globe for at least 500 years. This is the view of a man who, for 20 years, believed the energy situation was grim.

Professor Mark Jaccard is an expert in sustainable energy. He concludes in his new book Sustainable Fossil Fuels that we have plenty of oil, gas and coal to sustain us indefinitely.

It’s a myth, he argued, that we are running out of oil and gas, he told a London audience at the signing of his book last week.

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Nexen, OPTI boost oil sands spending

CALGARY -- Nexen Inc. and OPTI Canada Inc. plan to spend another $360-million on their Long Lake, Alta., oil sands project -- 10 per cent more than the $3.5-billion budget -- but they're not blaming cost overruns that plague the industry. The companies say the money will add reliability to the operation and cut operating costs.

The companies, which own Long Lake 50-50, said $250-million will be used to increase the generation of steam, which is injected into wells to loosen up gooey bitumen so it can flow to the surface for processing. Having more steam available will decrease the chances of poor bitumen production results.

Nexen described it as "insurance."

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OPEC Output Down 120,000 bpd in January

Overall crude production by oil cartel OPEC fell again in January, dropping by 120,000 barrels per day to 29.68 million barrels per day (mil b/d) from December's 29.8-mil b/d, a Platts survey of OPEC and oil industry officials showed February 13.

That figure includes Iraqi production at 1.53-mil b/d. Excluding Iraq, which does not participate in OPEC output accords, the ten members with crude

production quotas pumped an average 28.15-mil b/d in January, 100,000 b/d down from December's 28.25-mil b/d and just 150,000 b/d above their 28-mil b/d ceiling.

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Cantarell — An Omen?

There are a lot of bad things out there waiting to bite as the world moves towards peak oil— Iran, Iraq, Nigeria, Venezuela, China, globalization, and hurricanes to name a few. Last week a new bogeyman arose — super fast oil depletion.

Our story begins 65 million years ago when the Chicxulub meteor (or perhaps comet) crashed into the sea near the Yucatan Peninsula . This was one big bang, for it not only wiped out all our dinosaurs, but also took out 75% of the species living on earth.

As our 10 km wide meteor was tooling along at 60,000 miles per hour when it hit, there was not much left of the meteor but vapor after the impact, but for a few seconds, there was a monster hole in the earth 100 miles in diameter. I won't go into all the terrible things that happened to our earth in the months after the blast, but few living things survived.

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Riding the rails to $100 oil

NORWALK, Conn. (MarketWatch) -- Recent meetings of the Organization of Petroleum Exporting Countries have been relatively benign, but when oil ministers meet in Vienna on March 8, you can bet they'll have more on their minds than shopping for chocolate or taking in the sights.

In recent years, these meetings have been watched very closely. How much more so now, with the spike in oil prices and all that's been happening in the world.

Many analysts, including yours truly, believe that the OPEC ministers will tighten production and drastically cut into supply at the next meeting. Gone are the days of easy cheap oil. They've been replaced by strained relations, war, and geopolitical worries over nuclear development, among other things.

We forget OPEC is a cartel, and like all cartels they have one primary goal: to make money and lots of it.

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Reports: China, Iran Near Oil Field Deal

SHANGHAI, China — China and Iran are close to setting plans to develop Iran's Yadavaran oil field, according to published reports, a multibillion-dollar deal that comes as Tehran faces the prospect of sanctions over its nuclear program.

The deal is thought potentially to be worth about $100 billion.

According to Caijing, a respected financial magazine, a Chinese government delegation is due to visit Iran as early as March to formally sign an agreement allowing China Petrochemical Corp., also known as Sinopec, to develop Yadavaran.

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Oil Workers Said Urged to Leave Nigeria

WARRI, Nigeria — A Nigerian militant leader reportedly warned foreign oil workers to leave the country's troubled delta by midnight Friday as an army helicopter gunship exchanged fire with militants in the latest violence to strike the region.

The British Broadcasting Corp. reported militant commander Godswill Tamuno had announced his Movement for the Emancipation of the Niger Delta was declaring "total war" on foreign oil interests and warned them to leave the oil-rich southern delta by midnight.

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Chavez says US won't get oil if it "crosses line"

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez warned on Friday the U.S. government would not get any more Venezuelan oil if Washington "crosses the line" and said he had started taking measures in preparation.

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Interview with Chevron Vice Chairman (Audio)

This week on The Interview, Mike Williams meets Peter Robertson -- a man who sits at the top table in one of the most wealthy and powerful industries.

As vice-chairman of the American oil giant Chevron, he deals with projects from Angola to Australia and last year oversaw profits of more than 14 billion dollars.

But his company is facing up to the end of its life-blood. When the world's finite oil reserves eventually run out, Chevron is starting to ask what comes next. So does Peter Robertson have any answers?

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Cost of E85 fuel is higher than gasoline

The heavily promoted alcohol fuel called E85 might cut America's oil use and help support U.S. agriculture, but it's not reducing motorists' fuel bills. It's boosting them significantly.
A sign advertises E85 fuel at a Chicago gas station.

The price of E85 — a fuel that's 85% ethanol made from grain and 15% conventional gasoline — is higher than that of gasoline, even though E85 has only 72% as much energy. The U.S. Department of Energy says a vehicle has to use 1.4 times as much E85 as gasoline to go the same distance.

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A Long Row To Hoe

Proposals for an alcohol-fueled end to dependence on foreign oil do not sit lightly on the American landscape. Can they fit within our borders at all?

State Of The Union speeches tend to cross using figures with speaking figuratively, and this hybrid rhetoric can bear strange fruit, like the switchgrass mania spreading up K Street like kudzu. Math has never been the Beltway's strongest suit, and it will take a while for many in DC to realize that biofuel, like the solar and wind energy franchises already on offer, suffers from sheer lack of real estate.

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Among Other Things; Where are oil and gas prices heading?

Have you wondered if the cost of gasoline will ever level off and at what price?

Recently I asked Francis Davidson of Polson where he thought things were heading. Francis has considerable background in the oil industry. After obtaining a degree in chemistry from the University of Houston in 1969, he was employed in the petroleum testing area of the industry. In 1977 he formed his own company and operated it for four years until selling it to Core Laboratories of Dallas. He remained with Core for 11 more years, retiring as a vice president, and moving to Livingston.

There he formed another company and provided testing and processing equipment throughout the Rocky Mountain region, Hawaii and Alaska.Basically, he said, the oil industry is divided into two sectors -- upstream and downstream. The upstream concerns exploration, drilling and production. The downstream, in which Davidson was involved, included refining, distribution and marketing.

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Boone Pickens is back, better than ever

SHAWN MCCARTHY

DALLAS -- Boone Pickens may have seen brighter days -- perhaps when he was winning renown as a corporate raider in the 1980s -- but they couldn't have been much better than his current run of good fortune. The legendary 78-year-old U.S. oilman believes he has finally achieved vindication, both for his role in shaking up entrenched oil company management 20 years ago and for his abiding faith that oil and gas markets would turn bullish again after the dismal 1990s.

His market conviction -- backed by adroit trading in energy stocks and commodities -- has in the past two years vaulted him into the ranks of America's wealthiest people, as measured by Forbes magazine.

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End of the fossil fuel era?

By Alvin Powell

A car about to run out of gas can be traveling 70 mph until the moment the tank runs dry. Good thing cars have fuel gauges.

While the world economy is humming right along, the fuel gauge for oil production is broken and at least one oil industry expert believes we may be in for a rude shock.
Matthew Simmons, chairman of Simmons & Co. International and author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," used the fuel-gauge analogy to illustrate his concerns about world energy supplies during a Feb. 8 talk in the Science Center.

Simmons said the energy industry is so large that its problems can affect all aspects of modern life. Overall, it is an $8 trillion to $9 trillion business, four to five times larger than the next-largest. The 20th century's explosion in technology and health care, as well as new ways of making war, were largely due to advances made possible by abundant, cheap energy, he said.

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Is China Preparing for War?

By Mark W. HughesInfoshop NewsFebruary 15, 2006This analysis will first look at recent developments concerning the Chinese economic and energy policies. This will be followed by an analysis of data concerning global oil consumption and peak oil. Finally, the data concerning China and the data concerning global energy and peak oil will be utilized to examine the possibility that China is preparing to launch a war against Russia to seize Russian far-east oil reserves.

The Chinese central bank holds foreign currency reserves that have reached $819 billion, a foreign currency reserve second only to Japan and expected to exceed that nation's reserves this year. China has invested about three-quarters of this reserve in U.S. Treasury bills and other dollar-dominated assets. China's purchase of Treasury bills, in additions to similar purchasing by Japan and other nations (predominantly OPEC members) is responsible for much of the value of the U.S. dollar, and China uses the purchases to keep its own currency -- the yuan -- undervalued, thus maintaining a balance of trade that vastly favors cheap Chinese manufacturing goods. This also has the effect of holding U.S. interest rates at low levels, besides keeping the dollar at a high value worldwide. Chinese currency reserves are growing at an average rate of $15 billion each month.

However, China is now poised to move much of its currency reserves away from dollars and into other currencies, including the euro, and into commodities purchases -- predominantly oil. China's State Administration of Foreign Exchange has said they will "actively explore more efficient use of our foreign exchange reserves." This followed statements from one of China's central bank monetary policy committee's economist that "The general trend for the U.S. dollar is continually weakening." The economist, Yu Yongding, continued, "Countries with huge foreign-exchange reserves will have their assets shrunken." Finally, in July of 2005 China adjusted its own currency evaluation and increased the yuan by 2-percent against the dollar, and stated that rather than keeping with the system of the yuan's value automatically shifting in accord with the U.S. dollar, the yuan would now fluctuate based upon numerous other currencies such as the euro and the Japanese yen.

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Gold Gains in London as Fund Investors Buy Metal to Diversify

Feb. 16 (Bloomberg) -- Gold gained in London as investors sought to diversify their portfolios and get higher returns.

Investors are buying gold because it's outperforming stocks and bonds. Gold rose 90 percent in the five years to the end of 2005, while the Standard & Poor's 500 Index returned 2.7 percent with dividends reinvested. An index of Treasuries maturing in two years or more returned about 30 percent including interest reinvested, Merrill Lynch & Co. indexes show.

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Commodity Strategists: Crude Oil May Reach Record $80

Feb. 16 (Bloomberg) -- Oil may rise to a record $80 a barrel in the third quarter as an economic expansion in China boosts demand for fuel, according to Sumitomo Corp., Japan's third-largest trading company.

China's oil demand growth may rebound from last year's 2.9 percent, said Keiichi Sano, Sumitomo's chief commodity analyst. Oil rose less than forecast in the past five months because Chinese refiners cut imports, he said. Futures prices, down 5 percent this year, will bottom out this month, he said.

"Demand from China will continue to increase and support further rises in oil prices,'' said Sano. "The country needs more heavy fuel oil for power plants, and fuel for trucks is needed too.''

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