Anglonautes > English vocabulary > Industry, energy

durable orders / durable goods >
durable goods, everything from commercial jetliners to home appliances USA
http://www.usatoday.com/money/economy/production/2006-02-24-durable_x.htm

sweatshop
http://www.nytimes.com/reuters/2010/06/02/technology/tech-us-apple.html
http://www.nytimes.com/2009/01/19/opinion/l19kristof.html

energy
http://www.nytimes.com/ref/science/earth/energy.html

energy firms
http://www.timesonline.co.uk/tol/news/uk/article3177612.ece
http://www.timesonline.co.uk/tol/news/uk/article3177628.ece
http://www.timesonline.co.uk/tol/comment/leading_article/article3177707.ece

fossil fuels
http://www.nytimes.com/2008/11/25/world/25climate.html

natural gas - a combustible, gaseous fossil fuel USA
http://topics.nytimes.com/top/news/business/energy-environment/natural-gas/index.html
http://www.nytimes.com/2011/04/16/opinion/16nocera.html
http://www.nytimes.com/2011/04/12/opinion/12nocera.html
http://www.nytimes.com/2011/02/27/us/27gas.html
http://www.nytimes.com/2009/12/08/business/energy-environment/08fracking.html

natural gas 2008
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5391435.ece

renewable energy USA
http://www.nytimes.com/2010/10/28/opinion/28thurs1.html

green energy
http://www.guardian.co.uk/science/story/0,,1836907,00.html

clean energy USA
http://www.nytimes.com/2011/11/19/opinion/federal-subsidies-for-renewable-energy.html
http://www.nytimes.com/2011/11/12/business/energy-environment/a-cornucopia-of-help-for-renewable-energy.html
http://www.nytimes.com/2008/11/25/world/25climate.html

solar energy USA
http://topics.nytimes.com/top/news/business/energy-environment/solar-energy/index.html
http://www.nytimes.com/2009/09/30/business/energy-environment/30water.html

solar power plants USA
http://www.nytimes.com/2010/10/06/science/earth/06solar.html

wind power
http://www.guardian.co.uk/environment/windpower
http://environment.independent.co.uk/green_living/article3236132.ece

wind power USA
http://topics.nytimes.com/top/news/business/energy-environment/wind-power/index.html
http://www.nytimes.com/2011/11/05/business/energy-environment/as-wind-energy-use-grows-utilities-seek-to-stabilize-power-grid.html
http://www.nytimes.com/2010/01/26/business/energy-environment/26wind.html
http://topics.nytimes.com/top/news/business/energy-environment/wind-power/index.html
http://www.nytimes.com/2009/11/09/opinion/l09wind.html
http://www.nytimes.com/2009/11/02/opinion/02mon3.html
http://www.nytimes.com/2008/11/28/us/28wind.html

wind farm USA
http://www.guardian.co.uk/environment/2008/apr/14/windpower.energy

wind turbine / wind farm
http://www.guardian.co.uk/politics/reality-check-with-polly-curtis/2011/nov/21/prince-philip-windfarms-useless
http://www.guardian.co.uk/artanddesign/jonathanjonesblog/2009/apr/01/windfarm-countryside-alternative-energy
http://www.guardian.co.uk/environment/2008/oct/21/windpower-renewableenergy1

onshore windfarms
http://www.guardian.co.uk/environment/2012/mar/01/local-opposition-onshore-windfarms-tripled

offshore wind farm
http://www.guardian.co.uk/environment/2008/oct/21/windpower-renewableenergy1
http://www.guardian.co.uk/environment/2007/oct/05/windpower.renewableenergy

biomass power
http://www.nytimes.com/2010/06/19/science/earth/19biomass.html

nuclear energy / power USA
http://www.nytimes.com/2011/03/15/opinion/15tue1.html
http://www.nytimes.com/info/nuclear-energy/
http://www.nytimes.com/2010/02/20/opinion/l20nuclear.html
http://www.nytimes.com/2010/02/18/opinion/18thur2.html

nuclear power safety USA
http://www.nytimes.com/2011/03/22/world/asia/22atomic.html
http://www.usatoday.com/money/industries/energy/2007-12-11-nuclear-plant-safety_N.htm

nuclear industry
http://www.guardian.co.uk/nuclear/0,,181325,00.html

power station
http://politics.guardian.co.uk/homeaffairs/story/0,,1777264,00.html

new generation of nuclear power stations 2007
http://observer.guardian.co.uk/politics/story/0,,2084016,00.html
http://observer.guardian.co.uk/business/story/0,,2083534,00.html
http://observer.guardian.co.uk/leaders/story/0,,2083795,00.html
http://business.guardian.co.uk/story/0,,2070133,00.html

Drax power station in North Yorkshire Britain's biggest coal-fired power station 2006
http://politics.guardian.co.uk/green/story/0,,1862065,00.html

Documents reveal hidden fears over Britain's nuclear plants 2006
http://www.guardian.co.uk/nuclear/article/0,,1812795,00.html
http://www.guardian.co.uk/nuclear/article/0,,1812870,00.html
http://www.guardian.co.uk/nuclear/article/0,,1812840,00.html

Price of cleaning up UK's ageing reactors 2006
http://observer.guardian.co.uk/business/story/0,,1789671,00.html

New generation of atomic stations endorsed by PM 2006
http://www.guardian.co.uk/nuclear/article/0,,1776499,00.html

nuclear
http://politics.guardian.co.uk/homeaffairs/story/0,,1777264,00.html
http://www.guardian.co.uk/nuclear/0,2759,181325,00.html
http://www.guardian.co.uk/graphic/0,5812,180750,00.html
http://www.guardian.co.uk/graphic/0,5812,585008,00.html

nuclear watchdog

nuclear crisis

nuclear facility

nuclear plant
http://www.nytimes.com/2011/03/22/world/asia/22atomic.html

at the plant

nuclear reactor
http://www.usatoday.com/news/nation/2006-11-02-3-mile-island_x.htm
http://www.guardian.co.uk/nuclear/article/0,,1776411,00.html
http://www.guardian.co.uk/nuclear/article/0,,1691749,00.html
http://news.bbc.co.uk/onthisday/hi/dates/stories/february/9/newsid_2730000/2730083.stm

core

vessel

containment vessel

explosion

nuclear threat

nuclear waste

radioactive waste
http://www.guardian.co.uk/nuclear/article/0,,1834259,00.html

reprocessing

reprocessing plant
http://www.guardian.co.uk/nuclear/article/0,2763,1479527,00.html

plutonium

uranium

storage

fuel-cooling pool

spent fuel rod

overheating

meltdown

leakage

radioactive

radioactivity

a spike of radioactivity

spew radioactivity into the atmosphere

radioactive gases and particles

radiation

radiation measurement

nuclear crisis

nuclear disaster

catastrophe

danger zone

fallout

shelter

steel

steel magnate

the industry's largest player

Factory Jobs Return,

but Employers Find Skills Shortage

July 1, 2010
The New York Times
By MOTOKO RICH

BEDFORD, Ohio — Factory owners have been adding jobs slowly but steadily since the beginning of the year, giving a lift to the fragile economic recovery. And because they laid off so many workers — more than two million since the end of 2007 — manufacturers now have a vast pool of people to choose from.

Yet some of these employers complain that they cannot fill their openings.

Plenty of people are applying for the jobs. The problem, the companies say, is a mismatch between the kind of skilled workers needed and the ranks of the unemployed.

Economists expect that Friday’s government employment report will show that manufacturers continued adding jobs last month, although the overall picture is likely to be bleak. With the government dismissing Census workers, more jobs might have been cut than added in June.

And concerns are growing that the recovery could be teetering, with some fresh signs of softer demand this week. A central index of consumer confidence dropped sharply in June, while auto sales declined from the previous month.

Pending home sales plunged by 30 percent in May from April as tax credits for home buyers expired. Fretting that global growth is slowing, investors have driven stock indexes in the United States down to their levels of last October, for losses as great as 8 percent for 2010.

As unlikely as it would seem against this backdrop, manufacturers who want to expand find that hiring is not always easy. During the recession, domestic manufacturers appear to have accelerated the long-term move toward greater automation, laying off more of their lowest-skilled workers and replacing them with cheaper labor abroad.

Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker.

Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills.

“That’s where you’re seeing the pain point,” said Baiju R. Shah, chief executive of BioEnterprise, a nonprofit group in Cleveland trying to turn the region into a center for medical innovation. “The people that are out of work just don’t match the types of jobs that are here, open and growing.”

The increasing emphasis on more advanced skills raises policy questions about how to help low-skilled job seekers who are being turned away at the factory door and increasingly becoming the long-term unemployed. This week, the Senate reconsidered but declined to extend unemployment benefits, after earlier extensions raised the maximum to 99 weeks.

The Obama administration has advocated further stimulus measures, which the Senate rejected, and has allocated more money for training. Still, officials say more robust job creation is the real solution.

But a number of manufacturers say that even if demand surges, they will never bring back many of the lower-skilled jobs, and that training is not yet delivering the skilled employees they need.

Here in this suburb of Cleveland, supervisors at Ben Venue Laboratories, a contract drug maker for pharmaceutical companies, have reviewed 3,600 job applications this year and found only 47 people to hire at $13 to $15 an hour, or about $31,000 a year.

The going rate for entry-level manufacturing workers in the area, according to Cleveland State University, is $10 to $12 an hour, but more skilled workers earn $15 to $20 an hour.

All candidates at Ben Venue must pass a basic skills test showing they can read and understand math at a ninth-grade level. A significant portion of recent applicants failed, and the company has been disappointed by the quality of graduates from local training programs. It is now struggling to fill 100 positions.

“You would think in tough economic times that you would have your pick of people,” said Thomas J. Murphy, chief executive of Ben Venue.

How many more people would be hired if manufacturers could find qualified candidates is hard to say. Since January, they have added 126,000 jobs, or about 6 percent of those slashed during the recession. The number may understate activity somewhat, as many factories have turned to temporary workers.

Christina D. Romer, chairwoman of the Council of Economic Advisers, said the skills shortages reported by employers stem largely from a long-term structural shift in manufacturing, which should not be confused with the recent downturn. “I do think that manufacturing can come back to what it was before the recession,” she said.

Automakers, for example, have been ramping up and mainly filling slots with people laid off a year or two ago.

Manufacturers who profess to being shorthanded say they have retooled the way they make products, calling for higher-skilled employees. “It’s not just what is being made,” said David Autor, an economist at the Massachusetts Institute of Technology, “but to the degree that you make it at all, you make it differently.”

In a survey last year of 779 industrial companies by the National Association of Manufacturers, the Manufacturing Institute and Deloitte, the accounting and consulting firm, 32 percent of companies reported “moderate to serious” skills shortages. Sixty-three percent of life science companies, and 45 percent of energy firms cited such shortages.

In the Cleveland area, historically a center of metalworking and rubber production, more than 40,000 manufacturing workers lost their jobs in the recession, a 21 percent decline, according to an analysis of employment data by Cleveland State University. Since the beginning of the year, the region has added 4,500 positions.

Employers say they are looking for aptitude as much as specific skills. “We are trying to find people with the right mindset and intelligence,” said Mr. Murphy.

Ben Venue has recruited about half its new factory hires from outside the pool of former manufacturing workers. Zachary Flyer, a 32-year-old Army veteran, had been laid off from a law firm filing room when he applied at the drug maker last summer.

He spent four months this year learning how to operate a 400-square-foot freeze dryer that helps preserve vials of medicine. Monitoring vacuum pressure and temperatures on a color-coded computer screen with flashing numbers, Mr. Flyer said last month that he preferred his new work to the law firm, where he had spent seven years.

“I like jobs that are more hands-on, as opposed to watching paperwork all day,” he said.

Local leaders worry that the skills shortage now will be exacerbated once baby boomers start retiring. In Ohio, officials project that about 30 percent of the state’s manufacturing workers will be eligible for retirement by 2016.

“The new worker of tomorrow is in about sixth grade,” said John Gajewski, executive director of the advanced manufacturing, engineering and apprenticeship program at Cuyahoga Community College in downtown Cleveland. “And they need training to move into manufacturing.”

At Astro Manufacturing and Design, a maker of parts and devices for the aerospace, medical and military industries, Rich Peterson, vice president for business development, recently gave a tour to a group of eighth graders.

He showed off surgical simulators and torpedo parts, saying he wanted them to see the “cool” things the company makes. By the end of the tour, more than a third of the students said they might consider working at a place like Astro, which is based in Eastlake and has five plants in the Cleveland area.

For now, the company urgently needs six machinists to run what are known as computer numerical control — or CNC — machines. An outside recruiter has reviewed 50 résumés in the last month and come up empty.

The jobs, which would pay $18 to $23 an hour, require considerable technical skill. On an afternoon last month, Christopher Debruycker, 34, was running such a machine, the size and shape of a camper van parked on the factory floor.

Mr. Debruycker, who has been an operator for 15 years, had programmed the machine to carve an intricate part for a flight simulator out of a block of aluminum, and he monitored its progress on a control pad with an array of buttons.

“We need 10 more people like him,” Mr. Peterson said.

David Maxwell contributed reporting.

Factory Jobs Return, but Employers Find Skills Shortage, NYT, 1.7.2010, http://www.nytimes.com/2010/07/02/business/economy/02manufacturing

In Wisconsin, Hopeful Signs for Factories

September 13, 2009
The New York Times
By PETER S. GOODMAN

MEQUON, Wis. — At the Rockwell Automation factory here, something encouraging happened recently that might be a portent of national economic recovery: managers reinstated a shift, hiring a dozen workers.

After months of layoffs, diminished production and anxiety about the depths of the Great Recession, the company — a bellwether because most of its customers are manufacturers themselves — saw enough new orders to justify adding people.

Given the panicked retreat that has characterized life on the American factory floor for many months, any expansion registers as a hopeful sign for the economy. Last week, the Federal Reserve found signs of “modest improvement” in manufacturing. That reinforced the direction of a widely watched manufacturing index tracked by the Institute for Supply Management, which surged into positive territory last month for the first time in a year and a half.

Yet these indications, while welcome, promise no vigorous expansion: For now, factory overseers remain uncertain that a lasting resurgence is at hand, making them reluctant to hire workers aggressively and invest in new equipment.

“We’re starting to see stabilization,” said Keith D. Nosbusch, chairman and chief executive of Rockwell, which makes machinery used in manufacturing. “The deceleration is slowing, but we haven’t seen the bottom yet. We have yet to see a turnaround.”

The tentative signs of factory improvement largely reflect a replenishing of inventories after months of weak sales, rather than an increase in demand for goods. For manufacturing to return to strength and help power a broader economic recovery, consumers would have to start buying more products, experts say.

Still, the mere process of expanding inventories could be enough to sustain several months of increased production, say economists. That could eventually generate more factory jobs, giving workers money to spend at other businesses. And that might instill enough momentum for a broader economic expansion.

“After one of the most incredible cutbacks and slicing away ever, just replenishing inventories is sufficient to maintain increased output,” said Allen Sinai, chief global economist at Decision Economics. “It’s part of the process of recovery in the United States, which is imminent.”

On Wall Street and in academic circles, where economists pick through often contradictory indicators for evidence of revival, the situation inside American factories is of crucial interest. Though manufacturing has diminished as a share of the economy, it still employs 11.7 million people, and it tends to trace the ups and downs of broader business prospects, making it a useful indicator of overall economic vigor.

The recent manufacturing data has been seized on by many economists as a signal that the recession is, technically speaking, already over or nearing an end.

“Those are genuine signs that this economy has turned the corner and begun to recover,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.

However, for now, growth in manufacturing jobs is mostly just a hope. Though improved business prospects appear to have tempered layoffs, manufacturing lost 65,000 net jobs in August, according to the Labor Department, adding to more than 2 million jobs in the sector that have disappeared since the recession began.

“None of these factories are yet convinced that this is a sustainable recovery, so they’re very cautious about hiring,” said Mr. Baumohl.

Wisconsin is an ideal laboratory in which to assess manufacturing. No other state has a larger share of its jobs in manufacturing — more than 17 percent, according to the Labor Department. Today, that translates into a palpable lack of security.

At the original Miller brewery in downtown Milwaukee — now a tiny piece of a mammoth operation that produces more than 100 million cases of beer annually — roughly 25 of the 550 workers who labor for hourly wages typically leave the company in the course of a year. This year, the number is zero.

“It used to be you might leave here and go over there for a higher-paying job,” said Andrew K. Moschea, a brewing vice president for Miller Coors. “ ‘Over there’ isn’t there anymore, or it’s laying off.”

The Miller plant is a bright spot in the local economy. Though production of kegs of beer is down a little, reflecting business at restaurants and bars, lower-priced cans are up, making for expanded volume.

When Miller recently hired 30 part-time workers to round out its weekend shifts, paying more than $20 an hour, thousands applied, many from skilled trades that once paid twice as much.

Rockwell Automation’s machinery, computer software and know-how form the guts of assembly lines in a wide array of industries.

“The products they produce through the whole range are critical for doing manufacturing,” said John S. Heywood, an economist at the University of Wisconsin, Milwaukee.

In recent months, Rockwell has suffered along with much of American industry. As car sales plummeted, automakers canceled new orders for Rockwell’s machinery. As the price of oil plunged this year, energy companies scrapped expansion plans, eliminating demand for Rockwell’s machinery.

In recent years, Rockwell has established a presence in more than 80 countries, deriving roughly half its revenue overseas. But as the slowdown spread to Asia, Europe and Latin America, the comforts of being global evaporated.

As Rockwell’s customers grew fearful of losing access to credit, they eliminated plans for new factories, idled existing plants and put off replacing and servicing older gear. “It came quick,” Mr. Nosbusch said. “It was steep.”

Rockwell began large-scale layoffs in October 2008 — three percent of its 20,000-plus workers worldwide, including 300 in the United States. Scattered layoffs continued in the months after. The company also cut working hours, trimmed wages and eliminated its own contributions to employee retirement accounts.

Here in Mequon, about 20 miles north of Milwaukee, management trimmed its production work force from about 240 to 220. It scrapped a shift in its board shop, where workers in lab coats use sophisticated machinery to attach capacitors, transistors and other electronics to custom-sized circuit boards.

The circuit boards are the brains of Rockwell’s power-regulating machines. Production declined by one-fifth this year. But in recent weeks, as Rockwell has rebuilt its inventory, production has nudged up 5 percent, prompting the resurrection of the third shift.

Still, worry remains, making future hiring unlikely. Rockwell’s customers have resumed replacing older gear, but have not begun full-scale expansions, which would generate much more business.

Factory managers doubt whether American consumers — still reeling from lost jobs and savings — can snap back vigorously enough to restore manufacturing.

“I’ve got 22 years of experience and I’ve never seen anything like this,” said Mike Laszkiewicz, 48, vice president and general manager of Rockwell’s power control business. “This is a tough one. I’m a little uncertain which way this is going to go.”

In Wisconsin, Hopeful Signs for Factories, NYT, 13.9.2009, http://www.nytimes.com/2009/09/13/business/economy/13manufacture.html

Obama’s Strategy to Reverse Manufacturing’s Fall

July 21, 2009
The New York Times
By LOUIS UCHITELLE

If the Obama administration has a strategy for reviving manufacturing, Douglas Bartlett would like to know what it is.

Buffeted by foreign competition, Mr. Bartlett recently closed his printed circuit board factory, founded 57 years ago by his father, and laid off the remaining 87 workers. Last week, he auctioned off the machinery, and soon he will raze the factory itself in Cary, Ill.

“The property taxes are no longer affordable,” Mr. Bartlett said glumly, “so I am going to tear down the building and sit on the land, and hopefully sell it after the recession when land prices hopefully rise.”

Though manufacturing has long been in decline, the loss of factory jobs has been especially brutal of late, with nearly two million disappearing since the recession began in December 2007. Even a few chief executives, heading companies that have shifted plenty of production abroad, are beginning to express alarm.

“We must make a serious commitment to manufacturing and exports. This is a national imperative,” Jeffrey R. Immelt, chairman and chief executive of General Electric, said in a speech last month, while acknowledging that G.E. was enriched by its overseas operations too.

President Obama, agreeing in effect, has declared, “The fight for American manufacturing is the fight for America’s future.”

The United States ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing — 13.9 percent, the World Bank reports, down 4 percentage points in a decade. The 19-month-old recession has contributed noticeably to this decline. Industrial production has fallen 17.3 percent, the sharpest drop during a recession since the 1930s.

So far, however, Mr. Obama’s administration has not come up with a formal plan to address the rapid decline. Instead, it has pursued ad hoc initiatives — bailing out General Motors and Chrysler, for example, and pushing green energy by supporting the manufacture of items like wind turbines and solar panels.

“We want to make sure that we grow a manufacturing base for renewable energy,” said Matthew Rogers, a senior adviser in the Energy Department, explaining that this is being accomplished in part by “accelerating loan guarantees from zero” in the Bush years.

Xunming Deng, a physicist and the chairman of the Xunlight Corporation, sees himself as a beneficiary of what he describes as the Obama administration’s more flexible loan guarantees. His factory in Toledo, Ohio, with 100 employees, is in the early stages of making solar panels, and Dr. Deng is already planning to quadruple the plant’s size. He has applied to the Energy Department for a $120 million loan guarantee. If he gets it, he will not have to pay the hefty fees charged for loan guarantees before Mr. Obama took office.

“Getting rid of that fee makes the loan guarantee very attractive and very helpful,” Dr. Deng said. “We can’t grow as fast without it.”

Beyond energy, the administration’s approach gradually outlines the elements of a manufacturing policy — what Lawrence H. Summers, director of the National Economic Council, described as “a number of things to support manufacturing.”

The auto bailout, for all its improvisations, served notice that the administration would probably rescue any giant manufacturer it deemed too big (or too iconic) to fail, and would help the suppliers of failing giants transition to other industries.

The Buy America clause in the stimulus package pointedly favors the purchase of American-made goods for infrastructure projects. The Commerce Department is adding $100 million, more than double the current outlay, to a program that helps American manufacturers operate more effectively. And trade agreements negotiated by the Bush administration — agreements that would make the United States more open to imported manufactured goods — have been allowed to languish in Congress.

“The administration’s policy is evolving in the right direction,” said Representative Sander M. Levin, Democrat of Michigan, who is particularly concerned about auto imports. “I think they have essentially shed the political chains that prevented government from having a role in manufacturing. They are working their way toward what makes sense.”

Not everyone agrees.

“Bush and Obama,” Mr. Bartlett said scornfully, “one is as bad as the other in terms of manufacturing policy.”

He acknowledged that the recession was the immediate reason for the demise of his family’s business. But what really did it in, he said in an interview, was the competition from less expensive Chinese circuit boards — less expensive, he argued, because the Chinese undervalue their currency and this administration, like the ones before it, lets them get away with it.

“Our orders went from $8 million at an annual rate to $4 million, which was not enough to make money,” he said.

Mr. Bartlett, who is co-chairman of an organization called the Fair Currency Coalition, said that Chinese competitors charged only $1 for each printed circuit board sold in this country, while he charged $1.40. Like many economists and government officials, he says he believes the Chinese currency is artificially undervalued. As a countermeasure, he said the Obama administration should impose a 40 percent tariff on imported Chinese goods.

“I can compete against Chinese entrepreneurs, and Chinese labor cost is not that big a factor,” he said, “but I cannot compete against the Chinese government’s manufacturing policies.”

Manufacturing has long been viewed as an essential pillar of a powerful economy. It generates millions of well-paid jobs for those with only a high school education, a huge segment of the population. No other sector contributes more to the nation’s overall productivity, economists say. And as manufacturing weakens, the country becomes ever more dependent on imports of merchandise, computers, machinery and the like — running up a trade deficit that in time could undermine the dollar and the nation’s capacity to sustain so many imports.

One tactic for strengthening the manufacturing sector, in the administration’s view, would be a shift in tax policy. The research and development tax credit, which is now subject to renewal by Congress, would be made permanent, encouraging much more R.& D. among manufacturers, a senior Commerce Department official argued. And foreign taxes paid on profits earned overseas would not be deductible in this country until the profits were repatriated, a restriction that might discourage locating factories abroad.

The goal is to arrest manufacturing’s dizzying decline. It “was the pillar on which we built the middle class,” said Thea Lee, policy director for the A.F.L.-C.I.O., “and it is hard to see how you rebuild the middle class without reviving manufacturing.”

Obama’s Strategy to Reverse Manufacturing’s Fall, NYT, 21.7.2009, http://www.nytimes.com/2009/07/21/business/economy/21manufacture.html

Factory Orders Rise for Second Time in 3 Months

June 3, 2009
Filed at 12:14 p.m. ET
By THE ASSOCIATED PRESS
The New York Times

WASHINGTON (AP) -- Orders to U.S. factories rose 0.7 percent in April, the second increase in three months and further evidence that manufacturers may be recovering.

Still, the Commerce Department's report Wednesday was below analysts' expectations of a 0.9 percent increase. The department also sharply marked down the March figure to a 1.9 percent drop, compared with the 0.9 percent decline previously reported.

Shipments fell 0.2 percent, the ninth consecutive drop, though at a much slower pace than the 1.8 percent fall in March.

Manufacturers have been hit hard by the recession, the longest since World War II, which has cut back both domestic shipments and exports. The auto sector is also reeling as both General Motors Corp. and Chrysler LLC have filed for bankruptcy in the past month. Their restructuring plans call for sharply reducing U.S. production, which also puts thousands of their supplier companies at risk.

But other recent news has been better. Americans bought more cars in May than in any other month this year, according to data released Tuesday, as deep discounts by GM and Chrysler pushed sales above expectations.

The improvement was reflected in Wednesday's numbers, as orders for motor vehicle parts and assemblies rose 2.2 percent in April. A 5.8 percent jump in transportation equipment, which includes motor vehicles, drove the overall increase in factory orders.

GM's sales in May dropped 29 percent from the previous year, a smaller drop than earlier this year. Ford Motor Co.'s sales fell 24 percent from last May, but were up 20 percent from April, the company said Tuesday. Chrysler's sales fell 47 percent, about the same as before it filed for bankruptcy protection. Overall, industry sales fell 34 percent from a year ago.

Orders for big-ticket durable goods, such as industrial machinery and appliances, rose 1.7 percent, down slightly from the government's initial estimate last week of a 1.9 percent rise.

Orders for non-defense capital goods excluding aircraft, a measure that is seen as a proxy for business investment, fell 2.4 percent in April, a sign that businesses are still cutting back on spending amid the weak economy.

U.S. gross domestic product, the broadest measure of the economy's output, fell at a 5.7 percent annual rate in the first quarter of this year, the government said last week. Most economists expect the pace of decline to slow to roughly 2 to 3 percent in the April-June period.

In April, orders for machinery increased 0.6 percent, while electrical equipment and appliance orders rose 0.9 percent. Consumer goods, such as food, chemicals and paper products, dipped 0.1 percent.

Separately, the Institute for Supply Management said Monday that manufacturing activity in May contracted at the slowest pace in eight months. The trade group's index of manufacturing activity was 42.8, up from 40.1 in April. A reading below 50 still indicates activity contracted, but the figure surpassed economists' forecasts.

And an important measure of new orders placed with U.S. factories rose to 51.1 in May. It was the first time this barometer had grown since November 2007, the month before the recession began.

Factory Orders Rise for Second Time in 3 Months, NYT, 4.6.2009, http://www.nytimes.com/aponline/2009/06/03/business/AP-US-Factory-Orders.html

Steel Industry, in Slump, Looks to U.S. Stimulus

January 2, 2009
The New York Times
By LOUIS UCHITELLE

The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes — and it is now in collapse — so will go the national economy.

That maxim once applied to Detroit’s Big Three car companies, when they dominated American manufacturing. Now they are losing ground in good times and bad, and steel has replaced autos as the industry to watch for an early sign that a severe recession is beginning to lift.

The industry itself is turning to government for orders that, until the September collapse, had come from manufacturers and builders. Its executives are waiting anxiously for details of President-elect Barack Obama’s stimulus plan, and adding their voices to pleas for a huge public investment program — up to $1 trillion over two years — intended to lift demand for steel to build highways, bridges, electric power grids, schools, hospitals, water treatment plants and rapid transit.

“What we are asking,” said Daniel R. DiMicco, chairman and chief executive of the Nucor Corporation, a giant steel maker, “is that our government deal with the worst economic slowdown in our lifetime through a recovery program that has in every provision a ‘buy America’ clause.”

Economists in the Obama camp said the president-elect’s proposals to Congress will include significant infrastructure spending that draws on heavy industry.

New spending should provide an immediate jolt to the steel business, which has already gone through the painful makeover now demanded of automakers. Steel mills were closed, companies were consolidated, hundreds of thousands lost their jobs and the survivors agreed to concessions. As a result, productivity shot up and so did profits, to record levels in the first nine months of this year. Even as the economy wobbled, steel held its own.

But then the recession hit in force. Steel goes into nearly everything made in America, from homes and office buildings to cars, appliances and light bulb sockets, and as construction and manufacturing wound down, so did the output of steel, plunging 50 percent since September.

The steel industry’s collapse closely tracks the alarming late-autumn swoon in the national economy, as the housing bust and the credit crisis converted a mild downturn into “a severe one that has much further to run,” says Nigel Gault, chief domestic economist at IHS Global Insight, offering a view increasingly shared by forecasters.

Through August, steel production was actually up slightly for the year. The decline came slowly at first, and then with a rush in November and December. By late December, output was down to 1.02 million tons a week from 2.1 million tons on Aug. 30, the American Iron and Steel Institute reported. The price of a ton of steel is also down by half since late summer.

“We are making our steel at four mills instead of six,” said John Armstrong, a spokesman for the United States Steel Corporation, adding that two mills were recently idled and the four still operating are running at less than full capacity.

“The third quarter was one of the best in U.S. Steel’s history,” Mr. Armstrong added. “And it has been a very precipitous drop from there.”

The cutback has been particularly hard on workers at the big integrated mills like those at U.S. Steel and Arcelor Mittal USA, with their blast furnaces and coke ovens converting iron ore and other materials into steel. Operated at less than full capacity, these mills are less efficient than the equally large “minimills,” like Nucor, whose electric arc furnaces can be operated efficiently at lower speeds.

So the plant closings have been mostly at the integrated mills, whose 50,000 workers — roughly 40 percent of the nation’s steelworkers — are represented by the United Steelworkers. The union says that early this year it expects 20,000 workers to be on furlough.

Ten thousand already have been. Kathleen Loepker, a millwright and mechanic, is among the most recent to join their ranks. She was laid off on Dec. 19 from the U.S. Steel plant in Granite City, Ill., which shut, putting more than 2,000 employees out of work. With nearly 30 years seniority, Ms. Loepker, 48, has worked through bankruptcies, union concessions and consolidations during which her mill was acquired by U.S. Steel in 2003.

Her income today is tied more to incentive bonuses than in the past. On layoff, she is collecting $20 an hour, which is 80 percent of her base pay of $25.12 an hour. That base pay, rather than rising significantly, is fattened by incentive bonuses tied to amounts of steel produced and to profits. It had been averaging an additional $7 an hour — money now gone until the mill reopens.

“No one knows when that will happen,” said Ms. Loepker, who lives by herself in a four-bedroom home she bought in nearby Belleville, three blocks from a married sister. “The company tells us the end of March, but they don’t know either,” Ms. Loepker said. “The uncertainty has everyone fearful.”

Not since the 1980s has American steel production been as low as it is today. Those were the Rust Belt years when many steel companies were failing and imports of better quality, lower cost steel were rising.

Foreign producers no longer have an advantage over the refurbished American companies. Indeed, imports, which represent about 30 percent of all steel sales in the United States, also are hurting as customers disappear.

The industry, in response, is lobbying the Obama transition team for infrastructure projects that would require big amounts of steel. Mass transit systems are high on the list, and so is bridge repair.

“We are sharing with the president-elect’s transition team our thoughts in terms of the industry’s policy priorities,” said Nancy Gravatt, a spokeswoman for the American Iron and Steel Institute.

The Obama team has not yet revealed details of the president-elect’s soon-to-be-announced recovery plan other than to indicate that most of the package will probably go into infrastructure spending rather than tax breaks.

“If the president-elect really follows through, he’ll fund a lot of mass transit projects,” said Wilbur L. Ross Jr., the Wall Street deal maker who put together the steel conglomerate known as Arcelor Mittal USA. “All the big cities have these projects ready to go.”

The sharp slide in steel production has several causes. Construction and auto production have fallen sharply; between them, they account for 57 percent of the steel bought each year in the United States, according to the Iron and Steel Institute. Appliances, machinery and other electrical equipment account for an additional 13 percent, and the fall-off in production of these goods has also reduced steel orders.

Then there are the wholesalers, known in the steel industry as service centers. They buy in huge quantities from the mills, building up inventories and selling to customers like a construction company that needs I-beams to build a shopping center, or a manufacturer of auto parts in need of steel tubing.

Until recently, the inventories were bought on credit, and the service centers constantly replenished these stockpiles as steel was sold to end users. But now the service centers, unable to borrow money easily and reluctant to borrow anyway in these hard times, have stopped buying from the steel mills. They are selling off their inventories instead, raising cash in the process. It is a tactic that annoys Mr. DiMicco, the Nucor chief, no end.

“They don’t want to be without cash when they go into whatever the black hole is that is being created by the financial crisis,” he said, and faulted the nation’s lenders for collecting billions in government bailout money and then, in his view, refusing to lend it to the service centers on reasonable terms. “Credit completely dried up,” Mr. DiMicco said, “and it is still hard to get.”

Steel Industry, in Slump, Looks to U.S. Stimulus, NYT, 2.1.2009, http://www.nytimes.com/2009/01/02/business/02steel.html

UK's reliance on gas continues to grow,

as domestic fuel reserves diminish

December 24, 2008
From The Times
Robin Pagnamenta, Energy and Environment Editor

Britain's dependence on natural gas as a source of energy is growing, even as supplies from the North Sea are running out, figures suggest.

They indicate that the UK is relying increasingly on gas as its primary source of fuel for electricity generation, even though the country is being forced to import more and more as domestic reserves grow scarce.

The use of gas to generate power in the UK soared by 21 per cent in the third quarter of this year, compared with the same period last year, to 44 terrawatt hours, according to Energy Trends, a quarterly report on UK energy use published by the Department of Energy and Climate Change.

Meanwhile, output from Britain's ageing fleet of nuclear power stations, which have been beset by maintenance problems this year, fell by 30 per cent during the same period, to 11 terrawatt hours.

The figures emerged as leaders of some of the world's leading gas-exporting countries met in Moscow yesterday for talks about the formation of the Gas Exporting Countries Forum, an Opec-style cartel.

The meeting has alarmed gas-consuming countries, raising fears that the group, which includes Russia, Iran, Venezuela and Libya, would try to massage prices higher by setting production quotas.

Vladimir Putin, the Russian Prime Minister, who is embroiled in a dispute with Ukraine over gas supplies, told delegates at the meeting: “The time of cheap energy resources, cheap gas, is surely coming to an end. Costs of exploration, gas production and transportation are going up. It means the industry's development costs will skyrocket.”

The figures contained in the British Government's latest study reflect the huge challenges facing the country in weaning itself off gas and other fossil fuels.

The report showed that household use of gas in the UK fell by about 6 per cent during the third quarter of the year, mainly as a result of record price rises that prompted consumers to adopt a more frugal approach to energy use. However, the commercial use of gas for power generation is surging, as it displaces other fuels, such as coal and nuclear power.

Overall, UK gas demand in the third quarter was 5.3 per cent higher than during the third quarter of last year.

Although the Government wants energy harnessed from renewable sources, such as wind and waves, to play a much bigger role in electricity production in the long term, it still accounts for only 5 per cent of electricity supplies.

Meanwhile, many coal-fired plants are operating under restricted hours because of tough new European emissions standards, and Britain's nuclear industry, which produces little carbon dioxide, has also struggled with a string of technical problems at key plants this year. Commercial reactors at Hartlepool, Dungeness, in Kent, and Heysham, in Lancashire, were all out of service for repairs this year.

With the depletion of gas from the UK continental shelf, Britain is becoming dependent on imports, either by pipelines from Norway or elsewhere on the Continent or as liquefied natural gas from places farther afield, such as Algeria and Qatar.

Andrew Horstead, of Utilyx, the energy consultancy, said: “Having an energy system that is so reliant on gas at a time when our own supplies are running out is a concern.”

Gas bill

By 2015, the UK is expected to import up to 80 per cent of its gas supplies compared with about 40 per cent now.

The UK was a net exporter of gas as recently as 2004.

UK petrol consumption has fallen by 6 per cent over the past year.

Source: Department of Energy and Climate Change

UK's reliance on gas continues to grow, as domestic fuel reserves diminish, Ts, 24.12.2008, http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5391435.ece

Manufacturing output falls again

Tuesday, 9 December 2008
The Independent
By Russell Lynch, PA

Manufacturing's biggest slump in almost 30 years deepened today after a worse-than-expected 1.4 per cent fall in output during October.

October's dire performance represents the eighth successive month of decline in the worst run since 1980, according to the Office for National Statistics (ONS).

This leaves annual output 4.9 per cent down after September's figures were also revised lower.

Overall industrial production, which also includes the mining and utility sectors, fell 1.7 per cent between September and October, at the peak of the crisis in the banking sector.

Paul Dales, of Capital Economics, said "activity all but fell off a cliff" at the start of the final quarter of 2008.

This follows a 0.5 per cent drop in output between July and September - the first in 16 years - as the ailing UK economy lurches into recession.

"The recession is clearly deepening and the downside risks to our forecast that GDP will fall by 1.5 per cent next year are growing," said Mr Dales.

Declines across the manufacturing sector were widespread, with transport equipment the worst hit. Output from firms making vehicle bodies and parts was almost 15 per cent below the previous year in the three months to October.

Car sales have slumped amid worries over "big ticket" spending and yesterday Birmingham-based Wagon became the latest victim, calling in administrators to its UK business and putting 500 jobs at risk.

Meanwhile, output from brick and cement makers was nearly 22 per cent lower in the three months to October - reflecting the current slump in the housing market.

Bank of England rate-setters have slashed interest rates from 5 per cent to 2 per cent in the past two months in a bid to revive the struggling UK economy and experts suggested more cuts to come following today's figures, taking rates to an all-time low.

"We expect interest rates to fall to a low of 0.5 per cent in the second quarter of 2009 and then stay there for the rest of the year," IHS Global Insight economist Howard Archer said.

Manufacturing output falls again, I, 9.12.2008, http://www.independent.co.uk/news/business/news/manufacturing-output-falls-again-1058577.html

In Factory Sit-In, an Anger Spread Wide

December 8, 2008
The New York Times
By MONICA DAVEY

CHICAGO — The scene inside a long, low-slung factory on this city’s North Side this weekend offered a glimpse at how the nation’s loss of more than 600,000 manufacturing jobs in a year of recession is boiling over.

Workers laid off Friday from Republic Windows and Doors, who for years assembled vinyl windows and sliding doors here, said they would not leave, even after company officials announced that the factory was closing.

Some of the plant’s 250 workers stayed all night, all weekend, in what they were calling an occupation of the factory. Their sharpest criticisms were aimed at their former bosses, who they said gave them only three days’ notice of the closing, and the company’s creditors. But their anger stretched broadly to the government’s costly corporate bailout plans, which, they argued, had forgotten about regular workers.

“They want the poor person to stay down,” said Silvia Mazon, 47, a mother of two who worked as an assembler here for 13 years and said she had never before been the sort to march in protests or make a fuss. “We’re here, and we’re not going anywhere until we get what’s fair and what’s ours. They thought they would get rid of us easily, but if we have to be here for Christmas, it doesn’t matter.”

The workers, members of Local 1110 of the United Electrical, Radio and Machine Workers of America, said they were owed vacation and severance pay and were not given the 60 days of notice generally required by federal law when companies make layoffs. Lisa Madigan, the attorney general of Illinois, said her office was investigating, and representatives from her office interviewed workers at the plant on Sunday.

At a news conference Sunday, President-elect Barack Obama said the company should follow through on its commitments to its workers.

“The workers who are asking for the benefits and payments that they have earned,” Mr. Obama said, “I think they’re absolutely right and understand that what’s happening to them is reflective of what’s happening across this economy.”

Company officials, who were no longer at the factory, did not return telephone or e-mail messages. A meeting between the owners and workers is scheduled for Monday. The company, which was founded in 1965 and once employed more than 700 people, had struggled in recent months as home construction dipped, workers said.

Still, as they milled around the factory’s entrance this weekend, some workers said they doubted that the company was really in financial straits, and they suggested that it would reopen elsewhere with cheaper costs and lower pay. Others said managers had kept their struggles secret, at one point before Thanksgiving removing heavy equipment in the middle of the night but claiming, when asked about it, that all was well.

Workers also pointedly blamed Bank of America, a lender to Republic Windows, saying the bank had prevented the company from paying them what they were owed, particularly for vacation time accrued.

“Here the banks like Bank of America get a bailout, but workers cannot be paid?” said Leah Fried, an organizer with the union workers. “The taxpayers would like to see that bailout go toward saving jobs, not saving C.E.O.’s.”

In a statement issued Saturday, Bank of America officials said they could not comment on an individual client’s situation because of confidentiality obligations. Still, a spokeswoman also said, “Neither Bank of America nor any other third party lender to the company has the right to control whether the company complies with applicable laws or honors its commitments to its employees.”

Inside the factory, the “occupation” was relatively quiet. The Chicago police said that they were monitoring the situation but that they had had no reports of a criminal matter to investigate.

About 30 workers sat in folding chairs on the factory floor. (Reporters and supporters were not allowed to enter, but the workers could be observed through an open door.) They came in shifts around the clock. They tidied things. They shoveled snow. They met with visiting leaders, including Representatives Luis V. Gutierrez and Jan Schakowsky, both Democrats from Illinois, and the Rev. Jesse Jackson.

Throughout the weekend, people came by with donations of food, water and other supplies.

The workers said they were determined to keep their action — reminiscent, union leaders said, of autoworkers’ efforts in Michigan in the 1930s — peaceful and to preserve the factory.

“The fact is that workers really feel like they have nothing to lose at this point,” Ms. Fried said. “It shows something about our economic times, and it says something about how people feel about the bailout.”

Until last Tuesday, many workers here said, they had no sense that there was any problem. Shortly before 1 p.m. that day, workers were told in a meeting that the plant would close Friday, they said. Some people wept, others expressed fury.

Many employees said they had worked in the factory for decades. Lalo Muñoz, who was among those sleeping over in the building, said he arrived 34 years ago. The workers — about 80 percent of them Hispanic, with the rest black or of other ethnic and national backgrounds — made $14 an hour on average and received health care and retirement benefits, Ms. Fried said.

“This never happens — to take a company from the inside,” Ms. Mazon said. “But I’m fighting for my family, and we’re not going anywhere.”

In Factory Sit-In, an Anger Spread Wide, NYT, 8.12.2008, http://www.nytimes.com/2008/12/08/us/08chicago.html?hp

At Exxon, Making the Case for Oil

November 16, 2008
The New York Times
By JAD MOUAWAD

SIX years of relentlessly rising prices have showered the oil industry with record profits even as whipsawing energy costs have left many Americans alternately furious and baffled.

Now that the roller coaster ride appears to be screeching to a halt, one corporate giant remains confident it can weather the slowdown and uncertainty better than its rivals.

“It’s not that we like lower prices, but our competitive advantage is more obvious to people in a low-price environment,” says Rex W. Tillerson, the chairman and chief executive of Exxon Mobil, the world’s largest, mightiest oil company. “But in a high-price environment, our competitive advantage has been quite evident as well.”

However undaunted Exxon feels, it’s still facing more complicated scenarios than mere price shifts. It’s straining to adjust to a host of potentially seismic issues that raise pointed questions about its long-term strategy. Oil reserves are harder to find, resource-rich governments have become more assertive, and global warming concerns have spurred forceful calls to action on environmental matters.

Moreover, with the election of Barack Obama, a new chapter is about to open for the nation’s energy policy. Mr. Obama says he wants to move away from oil dependence, and his policies are likely to emphasize conservation, alternative energy sources and new limits on the emissions of greenhouse gases responsible for climate change.

The question for Exxon, which Mr. Obama repeatedly singled out as an exemplar of corporate greed during the presidential campaign, is whether the model that has served the company so well for so long will keep it competitive — or whether it will still be producing hydrocarbons long after the world has moved away from dirty fuels.

Last year, Exxon, which is based in Irving, Tex., celebrated its 125th anniversary, marking a straight line that connects it to John D. Rockefeller’s original Standard Oil Trust before the government broke up the enterprise. While other oil companies try to paint themselves greener, Exxon’s executives believe their venerable model has been battle-tested. The company’s mantra is unwavering: brutal honesty about the need for oil and gas to power economies for decades to come.

“Over the years, there have been many predictions that our industry was in its twilight years, only to be proven wrong,” says Mr. Tillerson. “As Mark Twain said, the news of our demise has been greatly exaggerated.”

FROM a purely financial standpoint, there’s no doubt that Exxon’s business strategy has paid off. Despite the broader economic turmoil, Exxon is worth around $375 billion — more than General Electric, Bank of America and Google combined — making it the world’s largest corporation.

Its balance sheet is pristine and its credit rating is better than that of most governments. If Exxon’s revenue were stacked against the world’s G.D.P.’s, it would rank between Austria and Greece as the 26th-largest economy. As oil prices peaked this summer, the company once again set a record as the most profitable American corporation, earning $14.8 billion in the third quarter. Since 2004 alone, the company has rung up profits of about $180 billion.

Throughout its various incarnations — the Standard Oil Trust, Standard Oil of New Jersey, the Exxon Corporation, and now Exxon Mobil — the company has been an ambiguous fascination for many Americans. It is an enduring icon, as lasting as Coca-Cola or General Electric, but also a perennial corporate villain, one that reminds the nation of its dependence on hydrocarbons.

For some, the environmental impact of that earnings gusher outweighs the financial gains.

“Being Exxon is never having to say you’re sorry,” says Kert Davies, the research director at Greenpeace, the environmental advocacy group that has battled with Exxon for years.

On the financial front, however, Exxon’s jaw-dropping results have continued to leave many analysts beaming.

“It’s the world’s greatest company, period,” says Arjun N. Murti, a Goldman Sachs oil analyst. “I would put Exxon up against any other company at any other period of time.”

“It is also the most misunderstood company in the world,” he adds. “For many people, the image of Exxon is the Exxon Valdez. But there is much more to Exxon than that. Somehow, Exxon has persevered over the past 100 years with the best culture and management team any company could have.”

What might be called the Exxon Way can be summed up in three ideals: discipline, patience and long-term vision. It is a formula the company drills into its managers from the moment they join Exxon, and which it keeps repeating through their careers. It explains the company’s resilience and its view that it has survived, and thrived, through countless commodity cycles.

“We are all homegrown,” Mr. Tillerson says. “That happens through a very deliberate and very closely managed process, and it starts the day the person walks through the door with us. And we are the product of that system. If there is a DNA it is something you grow into after many years of working with your colleagues. It is clearly the defining strength of the company.”

TAKE a room full of oil managers, and the Exxon people usually stand out, even as they try not to draw much attention to themselves. They typically band together, and often cultivate an aura of secrecy — and sometimes superiority — toward the outside world.

At Exxon, the engineers rule. From its very early days, the company has focused relentlessly on one thing: finding more ways to squeeze every penny out of each barrel of oil.

Mr. Rockefeller was an accountant who was obsessed with efficiency, and his fixations still run through the company’s veins, says Joseph Allen Pratt, a historian and management professor at the University of Houston. Mr. Pratt is writing the fifth volume of Exxon’s official corporate history, which the company is partly financing.

“There definitely is an Exxon way,” Mr. Pratt says. “This is John D. Rockefeller’s company, this is Standard Oil of New Jersey, this is the one that is most closely shaped by Rockefeller’s traditions. Their values are very clear. They are deeply embedded. They have roots in 100 years of corporate history.”

But the company’s DNA goes well beyond the surface. Rivals acknowledge its expertise around an oil field, even as they bristle at what they call arrogance. Exxon’s own executives brag that their company outperforms its peers by sticking to their playbook.

“Exxon is a very professional company,” says Jeroen van der Veer, the chief executive of a leading competitor, Royal Dutch Shell.

Others say they respect the company’s clarity of vision. “People know the rules when they work with Exxon,” said a top oil executive who asked not to be identified in order not to jeopardize his company’s relationship with Exxon. “Exxon can pick its battles. It’s a pretty good strategy to have if people know that you will fight to the bitter end.”

Examples of such grit abound. After a dispute with the Venezuelan government, during which Exxon persuaded a British court to briefly freeze $12 billion in government assets to fight what it considered an expropriation, the country’s oil minister accused the company of “legal terrorism.”

Whatever its critics might say about the company’s hard-headedness, it has paid off in Exxon’s bottom line. Last year, Exxon’s profit per barrel was $17, exceeding BP’s $12 a barrel, Shell’s $14 and Chevron’s $16, according to Neil McMahon, a Bernstein Research analyst.

No one is apologetic at Exxon about what it takes to get those results, especially Mr. Tillerson.

“The business model is based on a disciplined and rigorous approach to dealing with scientific data and facts,” he says. “What we do is largely invisible to the public. They see the nozzle at the pump, and that’s about it. They don’t see the enormous level of risk that is managed very well to get that gallon of gas.”

Exxon has battled powerful forces in recent years, locking horns with governments and multinational rivals from Africa to Central Asia, from Eastern Europe to South America. But last spring, the challenge struck closer to home — at the company’s annual shareholder meeting in Dallas.

As oil prices zoomed above $100 a barrel, a group of investors tried to force Exxon to lay out a new strategy for developing alternative fuels and addressing global warming. While the challenge was not unprecedented — raucous shareholder meetings have been a staple for years — the dissent was led by a symbolic, if slightly quixotic, constituency: descendants of Mr. Rockefeller, who founded Standard Oil in 1882.

“Exxon Mobil needs to reconnect with the forward-looking and entrepreneurial vision of my great-grandfather,” said Neva Rockefeller Goodwin, a Tufts University economist, speaking for the family. The company, she added at the time, was focused “on a narrow path that ignores the rapidly shifting energy landscape around the world.”

Exxon’s top managers easily brushed off the Rockefeller revolt, as they have so many obstacles over the years. Even so, Exxon and the other oil giants are facing a stark new landscape.

High prices have meant stratospheric profits, of course, but they have also led to more restrictions on access to oil fields around the world, making it harder for companies to increase their production and replace reserves.

“The largest oil companies are under tremendous pressure,” said Fadel Gheit, a veteran oil analyst at Oppenheimer & Company, who worked for the Mobil Corporation before moving to Wall Street.

In the 1960s, the so-called Seven Sisters oil companies, including Exxon and Mobil, controlled most of the world’s oil reserves. Today, state-owned companies, like Saudi Aramco, hold the vast majority of these reserves, while other resource holders like Russia and Venezuela have become increasingly assertive about limiting access to their reserves.

“The problem is very real,” said Henry Lee, a lecturer in energy policy at Harvard University. “The oil majors are looking at a very different world than 20 years ago. That has big implications for the future of these companies. They all know it and they are all trying to figure out where they are going to be in 10 and 20 years.”

The threat from state-controlled energy companies — and the larger question of tapping reserves — led to the big wave of industry mergers in the late 1990s, including Exxon’s $81 billion purchase of Mobil in 1999.

“We were worried,” says Lou Noto, the former chairman of Mobil. “We expected the environment to become more volatile, and more competitive, and more difficult geographically and geologically. The easy stuff had been found and we were getting into very esoteric stuff.”

While the combination of Exxon and Mobil created the world’s most valuable oil company, the joint entity has struggled to expand production. Exxon derives its strength from its size. But its problems are also a function of size: the company has become so large that to grow it must find increasingly big projects.

At an analyst meeting on Wall Street in March, Mr. Tillerson acknowledged the difficulty he faces: “The challenge we have today is continuing to have access to resources.”

Since 1999, Exxon has spent about $125 billion foraging for new energy supplies around the globe. It expects to spend $25 billion to $30 billion each year through 2012 to seek and develop hydrocarbons. Yet the company is pumping about as much oil and gas today as Exxon and Mobil once did separately. In fact, Exxon’s hydrocarbon production has been falling recently, dropping 8 percent, to 3.6 million barrels a day in the third quarter, compared with 3.9 million barrels a day in the period last year.

With about $37 billion in cash and a clean balance sheet, Exxon can afford to be picky about what prospects to explore. It has about 120 projects on its books, either in operation or in the planning stages, and it sits on up to 72 billion barrels of oil and gas reserves around the world, the most of any nonstate oil company.

To keep up momentum, Exxon plans to start up more than 60 fields or major projects by 2011, including dozens of offshore fields in West Africa, export terminals for liquefied natural gas in the Middle East, and scores of gas and oil developments in Australia, Indonesia, the United States and the Caspian Sea.

Still, despite its ability to stride the energy world like a colossus, Exxon remains more cautious than its rivals. Rather than overspend, it sows its huge returns in-house through share buybacks and large dividend payments to shareholders.

From 2003 to the third quarter of 2008, the company has paid out nearly $150 billion to shareholders — spending over $40 billion in dividends and buying back about $110 billion worth of shares.

Yet Exxon’s shares are on track for their worst performance since the early 1980s, a result of the market sell-off and the drop in oil prices recently. Some analysts also said it reflected the questions hanging over the company’s long-term strategy. “Exxon is a cash machine, and they could be using that cash to invest in clean technologies that would expand their base,” said Andy Stevenson, an energy analyst at the Natural Resources Defense Council. “Right now, they have no growth story. They are trapped in oil and gas.”

IF Exxon maintained its current buyback rate of $8 billion each quarter, it would become a private corporation between 2020 and 2030, according to a report by Bernstein Research. While that’s unlikely, these payouts — $30 billion so far this year — have been criticized by some experts, who would like to see the company invest more to increase its production or expand its reserves.

“If a company is not replacing reserves, and they are spending their cash to buy back their shares, and they are not growing their production, that is called liquidating the company,” says Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston.

Ultimately, the biggest test for Exxon’s long-term business model is the fact that rising energy use — whether in the United States or in China — will eventually have to be reconciled with reducing carbon emissions and finding low-carbon energy sources. But as its contentious shareholder meeting with the Rockefeller heirs demonstrated, few topics are as touchy as Exxon’s stance on climate change.

During the tenure of Lee R. Raymond, who ran the company from 1993 to 2005, Exxon became the lightning rod in the debate about climate change. Throughout the 1990s, the company was vilified by environmental groups and scientists for questioning the impact of human activities — especially the use of fossil fuels — on global warming.

Gingerly, over the last three years, Exxon has moved away from its extreme position. It stopped financing climate skeptics this year, and has sought to soften its image with a $100 million advertising campaign featuring real company executives, scientists and managers. One of the ads said the company aimed to provide energy “with dramatically lower CO2 emissions.”

The company has acknowledged that climate change is a risk to the world. In a speech given before the Royal Institute of International Affairs in London last year, Mr. Tillerson said policy makers should consider setting a carbon tax or a plan that limits carbon emissions through a cap-and-trade system.

But while Exxon is slowly unshackling itself from Mr. Raymond’s stance on global warming, it remains faithful to his legacy by dismissing most green alternatives and sticking with hydrocarbons. Although the company’s tone has changed, its strategy has not. Despite growing pressures on oil companies to invest in alternative energy, Exxon’s long-term view remains unapologetically tied to fossil fuels.

“Rex looks more approachable than his predecessor,” says a rival executive who requested anonymity because he did not want to jeopardize his relationship with Mr. Tillerson, “but he is more inflexible.”

Exxon’s belief is that as populations expand and economies grow in developing countries, they will aspire to the comforts and amenities taken for granted in industrialized nations, and this will mean more cars on the roads — and more oil to power them.

According to Exxon’s own outlook, global oil demand is set to reach 116 million barrels a day by 2030, up sharply from 86 million barrels a day today.

Meanwhile, renewable fuels, like solar, wind and biofuels, will grow at a brisk pace but they will account for just 2 percent of the world’s energy supplies by then, according to Exxon, while oil, gas and coal will represent 80 percent of global energy needs by 2030.

“For the foreseeable future — and in my horizon that is to the middle of the century — the world will continue to rely dominantly on hydrocarbons to fuel its economy,” Mr. Tillerson says.

For the moment, Exxon does not see much business sense in investing in solar, as BP has, or wind, like Shell, or geothermal, like Chevron. Like many oil executives, Mr. Tillerson also has little sympathy for corn-based ethanol, which he once derisively referred to as “moonshine.”

Exxon does not entirely close the door to alternative investments someday. But its previous forays into renewable fuels — it was a big investor in nuclear power, synthetic fuels and solar energy in the 1970s — are seen as a costly lesson.

“Being first in something is not necessarily the best position to be in,” Mr. Tillerson says. “You can be more profitable for your shareholders by coming at a later stage.”

Still, Exxon sees itself as a technology-based company. Its labs are developing a thin-film battery separator and an onboard hydrogen system that could increase the range of electric cars or make the current internal combustion engines much more efficient.

The company points out that it has invested more than $1.5 billion to improve its own energy use and cut carbon emissions since 2004. And it boasts that it is spending $100 million to finance a long-term research program at Stanford University, along with General Electric, Toyota and the oilfield-services company Schlumberger, to find ways to increase energy supplies while reducing the emissions of greenhouse gases.

But to many of the company’s critics, these measures look like a convenient smoke screens.

“That’s kind of laughable,” says Mr. Davies of Greenpeace. “What Exxon is clearly saying is that we are addicted to oil.”

THE biggest area where Exxon may have an impact in tackling climate change is in what the industry calls carbon capture and sequestration. Most climate experts say that combating global warming will involve preventing heat-trapping gases like carbon dioxide from being spewed into the atmosphere by capturing them and pumping them underground.

In May, Exxon said it would invest $100 million in a demonstration plant in Wyoming to test a new cryogenic technology to capture carbon dioxide by freezing it. Managing these flows, and reducing the costs of this prohibitively expensive technology, may ultimately create a new business for Exxon if it can apply it to large emission sources, like coal-fired power plants.

But for the company to see this as a large-scale opportunity would require a “cultural leap,” Ms. Jaffe says.

“Exxon may wind up being the carbon sequestration king, by accident,” she says.

Whatever shape Exxon’s business model takes, analysts say it is unlikely that the company will get there quietly.

“They are tough, and they have the reputation of being an unyielding company,” says Michelle Michot Foss, who heads the Center for Energy Economics at the University of Texas at Austin. “But it’s a tough business. They are criticized for being too conservative. But they are very patient, and probably in the long term that pays off.”

At Exxon, Making the Case for Oil, NYT, 16.11.2008, http://www.nytimes.com/2008/11/16/business/16exxon.html?hp

Tech Industry, Long Insulated, Feels a Slump

November 15, 2008
The New York Times
By ASHLEE VANCE

The technology industry, which resisted the economy’s growing weakness over the last year as customers kept buying laptops and iPhones, has finally succumbed to the slowdown.

In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

October “was like turning a switch,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm. “Everything pretty much shut down.”

After industry leaders like Intel and Nokia warned of slowing sales this week, investors aggressively sold technology stocks. On Friday, the Nasdaq composite index, which is full of technology names, fell 5 percent. Advanced Micro Devices and eBay both dropped more than 10 percent.

Tech companies directly account for about 4 percent of the nation’s employment. And globally, companies and governments spend about $1.75 trillion on technology a year, according to Forrester Research. But the industry’s importance to the world economy is larger than its size might suggest. Technology has fueled many of the productivity gains of the last two decades. And about half of the capital spending by corporations goes toward technology products, according to Moody’s Economy.com.

As struggling businesses cut back on spending of all kinds, a slowdown in tech proved inevitable.

During the dot-com crash, technology companies were victims of Internet hype that they helped create. Once the enthusiasm faded, so did the boom-era sales on software and infrastructure equipment.

However, consumer enthusiasm for products like video games, wireless phones and high-definition televisions helped the industry recover.

This time around, the tech sector finds itself at the mercy of a double-barreled slump in both corporate and consumer spending caused by the housing decline and the economic crisis on Wall Street. Technology companies are also feeling the effect of frozen credit markets as business and government customers struggle to finance computer and software purchases that can run to millions of dollars.

“We have never seen anything like this in history,” said William T. Coleman III, a Silicon Valley veteran who founded the software maker BEA Systems and is now chief executive at a start-up called Cassatt.

Best Buy, the leading electronics retailer, declared this week that “rapid, seismic changes in consumer behavior” had fostered the worst conditions in its 42-year history, and its main rival, Circuit City Stores, filed for bankruptcy protection. Nokia, the world’s largest maker of cellphones, predicted Friday that global sales of handsets would fall in 2009, which would be only the second decline ever.

Technology giants like Intel, which makes chips for personal computers and servers, and Cisco Systems, which makes network equipment, warned that revenue was plummeting at rates last seen in 2001.

Dozens of start-ups, like the messaging service Twitter and the electric carmaker Tesla Motors, have been cutting staff members as they prepare for a slow economy.

And on Friday, Sun Microsystems, a leading maker of computers used by financial services companies, announced that it would lay off as many as 6,000 employees, or 18 percent of its work force.

The turnaround has been as sudden as it is severe. Until late September, a number of large technology companies maintained an optimistic stance, despite the obvious distress in the global economy.

Cisco was the first large technology company to reveal its sales data from October, noting a 9 percent fall in sales compared with the same month last year. On Nov. 5, Cisco, which is based in San Jose, cautioned that because of a “completely different environment,” revenue in its current quarter could plummet as much as 10 percent — a major reversal from the 7 percent growth that Wall Street had been expecting.

Intel, the world’s largest chip maker, followed this week, warning that sales in the fourth quarter could fall as much as 19 percent compared with the same period last year.

Even Google, an advertising juggernaut that many analysts said they believed would weather a downturn better than other companies, is now feeling the impact.

About eight weeks ago, the company’s chief executive, Eric E. Schmidt, told reporters, “My guess is that the drama is in New York and not here.” A month later, Google surprised Wall Street when it reported strong financial results for the quarter that ended Sept. 30, sending its shares up 10 percent.

But Google’s stock has dropped 16 percent since, as the same analysts who were upbeat about its results have since cut their revenue and profit forecasts. This week, its shares dipped below $300 for the first time in three years, well below their $742 peak. And the company, known for its torrid hiring and free-spending on employee perks, has begun the most serious belt-tightening in its 10-year history.

“We don’t know as managers how long the crisis goes,” Mr. Schmidt said last week.

For all the gloom, the tech industry is still far healthier than Wall Street. Unlike the banks, many technology companies are flush with cash. Cisco has close to $27 billion; Google, $14 billion; and Apple, $24 billion. It is likely that some of these funds will go toward acquiring struggling competitors. “The guys that aren’t as strong will be good pickings,” Mr. Coleman said.

Powered by technology, Silicon Valley has stood out as a bright spot for jobs in the United States, with employment growing at about 2 percent a year while national employment slowed. Through 2007, the region continued to add 20,000 jobs, although that positive trend has started to change.

“With this now having become a worldwide event, it’s clear that the job losses will come,” said Stephen Levy, director of the Center for Continuing Study of the California Economy.

Given the unpredictability of the current economy, the industry’s past experience will only go so far, said Chris Cornell, an economist with Economy.com. “It would be a tragic mistake for C.E.O.’s who did a great job fighting the last recession to think the same tactics will work this time,” he said.

Miguel Helft contributed reporting.

Tech Industry, Long Insulated, Feels a Slump, NYT, 15.11.2008, http://www.nytimes.com/2008/11/15/technology/15tech.html?hp

Manufacturing index at lowest level in 26 years

3 November 2008
USA Today

NEW YORK (AP) — A measure of U.S. manufacturing activity plummeted to its lowest level in 26 years in October as the credit crisis and Hurricane Ike disrupted businesses from plastics companies to lumberyards.

The reading of 38.9 reported Monday by the Institute for Supply Management was the worst reading since September 1982. Any reading below 50 signals contraction, and a reading below 40 is exceptionally weak.

"Pretty grim. It means we're in a recession, it's as simple as that ... a pretty solid manufacturing recession," said Robert Macintosh, chief economist at Eaton Vance in Boston, adding:

"... The question is how long or deep is it going to be? Where is this group of economists that is charged with declaring a recession? Why haven't they said anything?"

Economists had expected a reading of 41.5, according to the median of forecasts in a Reuters poll.

The report was uniformly weak, and employment in the sector was dismal. The ISM's gauge of employment fell to its lowest since March 1991 and suffered its biggest one-month drop in 20 years.

The data foreshadowed a grim outlook, with the index of new orders hitting its lowest since 1980.

The index had been hovering near what economists call "the boom-bust" line for most of the year until its sharp fall in September brought it to the lowest level since the aftermath of the Sept. 11, 2001 attacks.

"It appears that manufacturing is experiencing significant demand destruction as a result of recent events," Norbert J. Ore, chairman of ISM's manufacturing business survey committee, said in a statement accompanying the report.

Another report said that construction spending fell a smaller-than-expected amount in September as a rebound in non-residential activity helped offset further weakness in home building.

The Commerce Department said construction spending dropped 0.3% in September, less than the 0.8% decline many economists had been expecting. Spending had been up by 0.3% in August after a huge 2.4% plunge in July.

The weakness in September was led by a 1.3% drop in housing construction, which has fallen every month but two over the past 30 months. Spending on government projects fell 1.3%, the biggest setback since January.

Contributing: Reuters

Manufacturing index at lowest level in 26 years, UT, 3.11.2008, http://www.usatoday.com/money/economy/2008-11-03-ism-construction_N.htm

Oil, down 36% in Oct., heads for worst month ever on Nymex

31 October 2008
USA Today
By Stevenson Jacobs, AP Business Writer

NEW YORK — Oil prices kept falling Friday, heading for their biggest monthly drop since futures trading began 25 years ago on signs that a contracting U.S. economy will suppress energy demand well into 2009.

Oil's monumental collapse — prices are down 36% for the month and 56% from their July record — has stunned oil-producing countries while giving cash-strapped U.S. consumers a rare dose of relief. Pump prices have fallen by almost half since their summer peak above $4 a gallon — a huge drop that's expected to result in more than $100 billion in annual savings for American households.

"That's a pretty powerful stimulus to consumers," said Adam Sieminski, chief energy economist at Deutsche Bank Global Markets in Washington.

Friday's oil decline was tied to a significantly stronger U.S. dollar. Oil market traders often buy oil as a hedge against inflation when the dollar falls and sell those investors when the greenback rises. The dollar has rallied in recent weeks as the financial crisis begins hurting economies in Europe and elsewhere, prompting investors to shift funds into the greenback as a safe-haven.

Light, sweet crude for December delivery fell $1.35 to $64.61 a barrel on the New York Mercantile Exchange, after earlier falling as low as $63.12.

Prices closed at $100.64 a barrel on the last trading day in September. That gives oil the biggest monthly slide since the launch of the Nymex crude futures contract in 1983. The previous record was a 30% drop set in February 1986.

"We're seeing a huge paradigm shift," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "We went from $100 at the beginning of the month to around $65 today. It's quite a decline and shows how weak the demand picture really is."

Crude hit a record price of $147.27 set on July 11.

At the pump, a gallon of regular gasoline fell 4.3 cents overnight to a national average of $2.504, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices hit a record $4.114 a gallon on July 17.

Cheaper gas has been a rare bit of good news for consumers rattled by huge drops in the stock market, rising mortgage payments and difficulty in obtaining credit. According to Deutsche Bank research, for every dollar that comes off pump prices, U.S. households save a $100 billion a year — money that can be spent on other goods and services to help jolt the economy.

Deutsche Bank estimates that the $100 billion would be worth 3 million new jobs.

But even with cheaper energy, Deutsche Bank's Sieminski predicts the weak global economy will weigh on fuel demand well into 2009 — bringing oil to a quarterly average of $50 a barrel for that year.

OPEC and international energy agencies earlier this year predicted oil demand would rise by 800,000 barrels a day next year, driven by growth from developing economies like China and India.

Given the widening economic downturn, Sieminski said those figures now seem wildly optimistic.

U.S. gross domestic product, the broadest barometer of a nation's economic health, shrank at a 0.3% annual rate in the July-September quarter, the Commerce Department said Thursday. It marked the worst showing for the world's largest economy since it contracted at a 1.4% pace in the third quarter of 2001.

"We believe there will be no growth in oil demand in 2009, and we may even see a decline," Sieminski said.

The drop in oil has come despite moves by OPEC to prop up prices. Last week, the Organization of the Petroleum Exporting Countries announced plans to cut 1.5 million barrels of production per day at an extraordinary meeting in Vienna.

Venezuela's Oil Minister Rafael Ramirez says OPEC, which controls about 40% of world crude oil production, will need to cut production by at least another 1 million barrels per day to boost falling prices.

Analyst believe oil price hawks like Venezuela and Iran need prices at near $100 a barrel to balance their national budgets, while Saudi Arabia and other members would like to see prices stabilize at around $80.

Opinion, however, is mixed on whether all members of the cartel will follow through on the cuts — or keep churning out as much crude as they can on fears that prices will plummet more.

"A further fall in the oil price cannot be ruled out. It is difficult to predict where the bottom could be," said David Moore, commodity strategist with Commonwealth Bank of Australia in Sydney. "An important factor over the next few months will be whether OPEC can achieve its output cuts. If it can that will certainly tighten market conditions."

In other Nymex trading, gasoline futures fell 3.95 cents to $1.4275 a gallon, while heating oil fell 2.22 cents to $1.9774 a gallon. Natural gas for December delivery was up 5.7 cents at $6.791 per 1,000 cubic feet.

In London, Brent crude fell $2 to $61.71 a barrel on the ICE Futures exchange.

AP writers By Louise Watt in London and Stephen Wright in Bangkok, Thailand contributed to this report.

Oil, down 36% in Oct., heads for worst month ever on Nymex, UT, 31.10.2008, http://www.usatoday.com/money/industries/energy/2008-10-31-oil-oct_N.htm

Exxon Mobil Posts Biggest US Quarterly Profit Ever

October 30, 2008
Filed at 9:01 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

HOUSTON (AP) -- Exxon Mobil Corp., the world's largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations by a U.S. corporation, earning $14.83 billion in the third quarter.

Bolstered by this summer's record crude prices, the Irving, Texas-based company said net income jumped nearly 58 percent to $2.86 a share in the July-September period. That compares with $9.41 billion, or $1.70 a share, a year ago.

The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.

Revenue rose 35 percent to $137.7 billion.

On average, analysts expected the company to earn $2.39 per share in the latest quarter on revenue of $131.4 billion.

Exxon Mobil's results got a boost of $1.62 billion in the most-recent quarter from the sale of a natural gas transportation business in Germany. It also took a special, after-tax charge of $170 million related to a punitive damages award related to the 1989 Exxon Valdez oil spill.

Excluding those items, third-quarter earnings amounted to $13.38 billion -- nearly 15 percent above its previous profit record from the second quarter.

As expected, Exxon Mobil posted massive earnings at its exploration and production, or upstream, arm, where net income rose 48 percent to $9.35 billion. Higher oil and natural gas prices propelled results, even though production was down from the third quarter a year ago.

Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27 -- and their profits have reflected it. Crude prices, however, have quickly fallen 50 percent from the summer's highs, and the global economic malaise has raised questions about energy demand at least into 2009.

Some companies, especially smaller producers, are scaling back spending on new exploration and production projects because of the uncertainty, though analysts say that its less likely to happen at the well-heeled giants like Exxon Mobil.

Company shares rose 96 cents to $75.61 in premarket trading.

Exxon Mobil Posts Biggest US Quarterly Profit Ever, NYT, 30.10.2008, http://www.nytimes.com/aponline/business/AP-Earns-Exxon-Mobil.html

Oil falls below $63 to 17-month low as investors eye falling demand

27 October 2008
USA Today

SINGAPORE (AP) — Growing evidence of a severe global economic slowdown drove oil prices to 17-month lows below $63 a barrel Monday, as investors brushed off a sizable OPEC output cut.

Traders were taking their cues from world markets, which slumped again Monday with the Nikkei index in Japan closing at its lowest in 26 years, down 6.4%. Hong Kong, and European markets followed suit, closing or trading substantially lower. The Dow Jones industrial average fell 3.6% Friday.

Light, sweet crude for December delivery declined $1.57 to $62.58 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe, the lowest since May 2007.

On Friday — even after the Organization of Petroleum Exporting Countries announced a 1.5 million barrel-a-day cut — oil fell $3.69 to settle at $64.15. Prices have plunged 57% from a record $147.27 on July 11.

"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "If there is further weak economic data in the U.S. or Europe, prices could come under more downward pressure."

Iran's OPEC governor Mohammad Ali Khatibi said Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December — a meeting that might even be held early if necessary.

"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."

Vienna's JBC Energy said prices were out of OPEC's control — for now.

"Oil is currently being driven by the present financial crisis and not by OPEC cuts," said its research report. "As oil prices are being pressured by the credit squeeze and a lack of liquidity, they may stay largely detached from supply factors for several weeks to come. As a result, OPEC is currently struggling with factors beyond its control."

Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the U.S., the world's largest oil consumer.

The U.S. Department of Transportation said Friday that Americans drove 5.6% less, or 15 billion fewer miles (24 billion fewer kilometers), in August compared with same month a year ago — the biggest single monthly decline since the data was first collected regularly in 1942.

"If we're looking a severe economic downturn, it's hard to say what the bottom of any commodity price will be," Moore said.

In other Nymex trading, gasoline futures fell more than 3 cents to $1.44 a gallon, while heating oil slipped by more than 4 cents to $1.91 a gallon. Natural gas for November delivery fell nearly 21 cents to $6.03 per 1,000 cubic feet.

In London, November Brent crude was down $1.75 to $60.30 a barrel on the ICE Futures exchange.

Oil falls below $63 to 17-month low as investors eye falling demand, UT, 27.10.2008, http://www.usatoday.com/money/industries/energy/2008-10-27-oil-monday_N.htm

UK overtakes Denmark as world's biggest offshore wind generator

Completion of a 194MW windfarm off the coast of Lincolnshire sees the UK become the world leader in generating electricity from offshore wind

Tuesday October 21 2008
15.36 BST
Guardian.co.uk
Alok Jha, green technology correspondent
This article was first published on guardian.co.uk on Tuesday October 21 2008.
It was last updated at 15.36 on October 21 2008.

The UK now leads the world in generating electricity from offshore wind farms, the government said today as it completed the construction of a farm near the coast off Skegness, Lincolnshire.

The new farm, built by the energy company Centrica, will produce enough power for 130,000 homes, raising the total electricity generated from offshore wind in the UK to 590 megawatts (MW), enough for 300,000 UK homes.

The completion of 194MW of turbines at Lynn and Inner Dowsing means that the UK has overtaken Denmark, which has 423MW of offshore wind turbines.

"Offshore wind is hugely important to help realise the government's ambition to dramatically increase the amount of energy from renewable sources. Overtaking Denmark is just the start," said Mike O'Brien, a minister at the Department of Energy and Climate Change. "There are already five more offshore windfarms under construction that will add a further 938MW to our total by the end of next year."

But despite today's announcement, the UK is still near the bottom of the European league table when it comes to harnessing renewable energy, campaigners say.

Nick Rau, Friends of the Earth's renewable energy campaigner, said: "The government must stop trying to wriggle out of European green energy targets and put a massive effort into making renewable power the number one source of energy in the UK. The UK has one of the biggest renewable energy potentials in Europe - this must be harnessed to make this country a world leader in tackling climate change."

Maria McCaffery, the chief executive of the British Wind Energy Association, was enthusiastic but also urged more government action. "We are now a global leader in a renewable energy technology for the first time ever. Now is the time to step up the effort even further and secure the huge potential for jobs, investment and export revenues that offshore wind has for Britain."

Greenpeace chief scientist, Doug Parr, said the only downside was that many of the turbines for the UK windfarms were being manufactured abroad. "We need a green new deal for renewable energy, creating tens of thousands of new jobs and providing a shot in the arm to the British manufacturing sector. If the government now diverts serious financial and political capital towards this project it will put Britain in pole position to tackle the emerging challenges of the 21st century."

The UK currently gets 3GW of electricity from wind power, but 80% of that is from onshore farms. On Tuesday, the Carbon Trust detailed its plans to accelerate the development of offshore wind in the UK. The trust plans to work with major energy companies on a £30m initiative to cut the cost of offshore wind energy by 10%.

"The UK has an amazing opportunity not just to lead the world but to be the dominant global player," said Tom Delay, chief executive of the Carbon Trust. "Our research shows that by 2020 the UK market could represent almost half of the global market for offshore wind power. To make that happen it will be critical to improve the current economics of offshore wind power."

UK overtakes Denmark as world's biggest offshore wind generator, G, 21.10.2008, http://www.guardian.co.uk/environment/2008/oct/21/windpower-renewableenergy1

Oil Prices Slip Below $70 a Barrel

October 17, 2008
The New York Times
By THE ASSOCIATED PRESS

Crude oil plunged below $70 a barrel Thursday, bringing its price to less than half its July record high after the government reported massive increases in U.S. crude and gasoline supplies.

Investors took the news as more evidence that a global credit crisis and a shaky economy are curbing demand for oil, which has not been this cheap in nearly 14 months.

The sell-off came despite an announcement by the OPEC cartel on Thursday that it was moving up by almost a month an emergency meeting to discuss oil’s rapid drop in value. The Organization of the Petroleum Exporting Countries will now meet Oct. 24 in Vienna, Austria, instead of Nov. 18, the cartel said in a statement.

Light, sweet crude for November delivery dropped as low as $69.15 a barrel on the New York Mercantile Exchange before gaining slightly to trade down $3.81 to $70.73. It was crude’s lowest trading level since Aug. 22, 2007.

Crude has now fallen 53 percent since surging to a record closing price of $145.29 in early July.

Thursday’s declines accelerated after the Energy Information Administration said in its weekly report that crude stocks rose by 5.6 million barrels last week, well above the 3.1 million barrel increase expected by analysts surveyed by energy research firm Platts.

The agency also says gasoline stock rose by 7 million barrels last week, more than double the build analysts had expected.

Oil Prices Slip Below $70 a Barrel, NYT, 17.10.2008, http://www.nytimes.com/2008/10/17/business/worldbusiness/17oil.html?hp

Commodity Prices Tumble

October 14, 2008
The New York Times
By CLIFFORD KRAUSS

HOUSTON — The global financial panic and the economic slowdown have put at least a temporary end to the commodity bull market of the last seven years, sending prices tumbling for many of the raw ingredients of the world economy.

Since the spring and early summer, when prices for many commodities peaked amid fears of permanent shortage, wheat and corn — two cereals at the base of the human food chain — have dropped more than 40 percent. Oil has dropped 44 percent. Metals like aluminum, copper and nickel have declined by a third or more.

The swift turnaround is the brightest economic news on the horizon for consumers, putting money into their pockets at a time they need it badly. Gasoline prices in the United States are falling precipitously — by about 24 cents over the last five days, to a national average of $3.21 a gallon on Monday — and analysts said they could go below $3 a gallon nationally this fall, down from a high of $4.11 a gallon in July.

Prices for most commodities remain elevated by past standards, and they rose a bit on Monday amid the broad market rally. But the trend seems to be downward as traders weigh the prospect that the global economic crisis will lead to sharp drops in demand. The big question is whether prices will drop all the way to long-term norms or whether Asia’s continuing economic boom has set a floor.

The rapid commodity decline has eased fears of inflation, a reason central banks were able to lower interest rates around the world last week in an effort to salvage economic growth. It also represents a fundamental shift of view that is driving markets these days.

A scant few months ago, Americans were seen as participants in a bidding war with the emerging Chinese, Indian, Russian and Brazilian middle classes for a basket full of products. But that was before an extreme slowdown in demand for things as diverse as gasoline and aluminum and the retreat of investment money from commodity futures into safer havens like government bonds.

The commodity bust began before last week’s broad market declines, though the panic has exacerbated the pressure on commodities. Oil dropped by 10 percent on Friday alone, but then recovered some of that loss Monday to settle at $81.19 a barrel, far below its high in July of $145.29.

“Commodities followed the euphoria cycle that we had along with housing,” said Robert J. Shiller, an economist at Yale who specializes in market bubbles. “We had the idea that the world is growing very fast, people are getting very rich and, by the way, we are running out of everything. That theory doesn’t seem so good when the economy is collapsing.”

Some analysts, while welcoming the recent declines, say they believe that prices are likely to remain above long-term norms. Food, in particular, could be a continuing problem: today’s prices are still too high to allow many people in developing countries to afford adequate diets. Nor have the recent declines been passed along in American grocery stores, at least as of yet. The United Nations has projected that global food prices will remain elevated for years.

The price increases of recent years served their economic function, calling forth additional supplies of many commodities — farmers planted every acre they could, mining companies opened new mines and oil companies went to the far corners of the earth to drill wells. In many cases, the prices also caused demand to decline even as supply started rising.

Americans, the world’s largest fuel consumers, have been cutting back on gasoline all year, and the decline is approaching double digits. Motorists pumped 9.5 percent less gasoline for the week ended Oct. 3 compared with the same week a year earlier, according to MasterCard Advisors, which tracks spending. In a report on Friday, the International Energy Agency cut its forecast for global oil consumption yet again, projecting that 2008 would end with the slowest demand growth in 15 years.

Big increases in world wheat production because of increased acreage in the United States, Canada, Russia and much of Europe have brought wheat prices to less than $6 a bushel today from nearly $13 in March.

Soybean prices have dropped to $9 a bushel from $16 since July, in part because of a record crop in China and a slowdown in Chinese imports. Corn prices are also easing amid expanded supply.

A theory among economists is that commodity prices are still at the beginning of a steep fall as the credit squeeze takes the world economy into a deep recession.

“When you have a seven-year bull run, you are going to have more than a four-month correction, and we are just beginning our fourth month,” said Richard Feltes, senior vice president and director of commodity research at MF Global Research. “We have got more deflation coming in the housing sector, in capital assets, and it’s going to continue in commodities as well.”

But many economists say a lasting price collapse is unlikely because the emerging middle class and growing populations in developing economies will continue to have strong appetites for fuels and metals.

Some say that the other commodity bull markets in modern history — approximately spanning 1906 to 1923, 1933 to 1955 and 1968 to 1982 — lasted more than twice as long as the current run. They included some sharp corrections before they ran their course, suggesting that the current drop, however precipitous, could be temporary.

Though the picture is slightly different for every commodity, prices generally hit a low point for the decade soon after the terrorist attacks of Sept. 11, 2001, then rose as the global economy strengthened in the following years. From late 2001 until mid-2008, the price of oil rose 800 percent, copper rose 700 percent and wheat rose 400 percent.

The decline of recent weeks has taken virtually every major commodity more than halfway back to its late 2001 price, adjusted for inflation. The recent drop has been so rapid that if the pace continued, it would take only a few more weeks to erase the gains of the bull market entirely.

That suggests to some analysts that prices could hit a floor fairly soon. “The underlying fundamentals of strong demand for energy, food and industrial commodities will come back,” said Michael Lewis, global head of commodities research for Deutsche Bank.

Many analysts think oil could fall to $70 a barrel in the next few months, if not sooner. But it is hard for them to believe it will go much lower: oil is not becoming easier to find, as fields in Mexico peter out and suppliers like Iran, Nigeria and Venezuela remain unreliable.

The costs of finding oil in deep waters or mining oil sands in Canada remain high, in the $60 to $70 a barrel range — and since those are now vital sources of supply, they could help put a floor under the oil price. Additionally, the Organization of the Petroleum Exporting Countries could cut production to try to shore up prices, probably at an emergency meeting it will hold Nov. 18. Analysts note that the credit crisis and economic slowdown will inevitably stall new industrial projects, reducing demand for metals. But the falling prices will also discourage new mining and drilling. When economic growth resumes, that could produce metal shortages that would drive prices back up.

The biggest single factor that will decide whether a prolonged bull market in commodities is over, or just in a lull, is the Chinese economy. The industrial development of that country in recent years was responsible for much of the world’s increased consumption of copper, aluminum and zinc, and almost a third of the increase in oil consumption.

Chinese growth has slowed but is still running above 12 percent, and that country is expected to undertake some huge projects in coming months as it repairs damage from earthquakes and storms.

Kevin Norrish, a senior commodities researcher at Barclays Capital, said that in a recent visit to China he found that domestic demand for copper was still strong but that exports were weakening. Chinese copper wire manufacturers, he said, “are very depressed indeed because their export orders have fallen a long way.”

He said that as high as prices for commodities rose in recent years, the bull run in the late 1970s and early 1980s was even more buoyant. Of all the major commodities, only oil at its peak in July traded at a higher price than in the last bull market, adjusted for inflation.

That previous bull run, stimulated by years of high economic growth and inflation, was followed by nearly two decades of weak prices that accompanied the transition in the United States from an industrial to a service economy. Then China and India appeared on the world stage as major economies at the turn of the new century, followed by the oil-driven economy in Russia and greater consumption in the Middle East the last four or five years. Mr. Norrish is one of many commodities analysts who think that the story of China, India and other developing countries’ spurring commodity demand is not over.

“What we are seeing is a pause in what we see as a very, very long bull run,” Mr. Norrish said.

Commodity Prices Tumble, NYT, 14.10.2008, http://www.nytimes.com/2008/10/14/business/economy/14commodities.html

Manufacturing Slowed in September

October 2, 2008
The New York Times
By THE ASSOCIATED PRESS

A measure of American manufacturing activity contracted more than expected in September as new orders slowed sharply.

The reading of 43.5 from the Institute for Supply Management was down from 49.9 in August. It also was worse than economists’ prediction of 49.5, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.

A reading above 50 signals growth.

“The headline I.S.M. has plunged into recession territory,” Ian Shepherdson, chief United States economist at High Frequency Economics, said Wednesday.

The index has been hovering on what economists call “the boom-bust” line for most of the year, but this is the first time it has dropped significantly. One component of the reading, the purchasing managers’ index, fell to its lowest level since October 2001, immediately after the Sept. 11 attacks.

The survey of purchasing managers found that new orders fell to 38.8 in September from a reading of 48.3 in August. Employment, deliveries, inventories and manufacturers’ order backlogs also fell.

Industries reporting contraction include apparel, furniture, machinery, transportation equipment and electrical appliances. High prices for commodities, along with tight credit conditions, have begun to squeeze companies.

In another economic report released Wednesday, the Commerce Department said that construction activity was unchanged in August even though spending for residential projects posted the first increase in 17 months, a rare bit of good news in the midst of the worst housing downturn in decades.

The report said that construction activity was flat in August, a better-than-expected outcome than the 0.5 percent fall that economists expected.

The big surprise was a 0.3 percent rise in residential activity, the first increase in housing activity since March 2007.

It was only the second monthly rise for housing in the last 29 months, a prolonged period of distress when the industry has been battered by slumping sales, falling prices and soaring mortgage defaults.

The performance in August for overall construction was better than the decline analysts expected. However, the government revised July activity to show a much bigger drop of 1.4 percent, in contrast to the 0.6 percent decline initially reported.

The 0.3 percent increase in housing left spending in this area at a seasonally adjusted annual rate of $343.6 billion. The gain was offset by a 0.8 percent drop in spending on nonresidential projects, which fell to $415.95 billion.

Spending on government projects rose 0.8 percent to a record $312.5 billion at a seasonally adjusted annual rate, with both state and local governments and federal projects at record highs.

Manufacturing Slowed in September, NYT, 2.10.2008, http://www.nytimes.com/2008/10/02/business/economy/02econ.html

Oil Falls Sharply on Renewed Economic Fears

September 30, 2008
The New York Times
By JAD MOUAWAD

Crude oil prices dropped sharply on Monday because of concerns that a $700 billion American bailout plan for the financial markets may fail to revive the economy, depressing demand for petroleum products.

Crude oil futures fell as much as 7 percent to $99.80 a barrel on the New York Mercantile Exchange. They have lost more than $20 since last Monday.

In the last two weeks, commodity markets have been shaken by the turmoil on Wall Street while still recovering from the impact of two powerful hurricanes in the Gulf of Mexico. After reaching $145.29 a barrel in July, prices had slumped to nearly $90 a barrel earlier this month as the nation’s economic prospects dimmed. But in a wild market, they spiked back up last week on the back of tremendous uncertainty in the financial markets.

Anxiety has gripped investors once again on Monday even after Congressional leaders said they had reached an agreement about the financial bailout plan, the largest in history. The plan would allow the Treasury Department to buy back troubled assets held by banks and other financial institutions.

But the news was overshadowed by fresh concerns that the financial crisis was far from over, helping push down equity as well as commodity markets.

In the latest episode of the unfolding meltdown, Citigroup will buy the banking operations of the Wachovia Corporation, the government said Monday. Meanwhile, the Belgian, Dutch and Luxembourg governments partially nationalized the European financial conglomerate Fortis, another sign that the crisis that began because of sour home mortgages in the United States could be spreading.

Analysts at Barclays Capital said the frantic weekend negotiations that led to the bailout agreement “appear to have failed to revive market sentiment.” As the economic situation deteriorates, the demand for commodities, including oil, is expected to slow.

“The outlook for global equity, interest rate and exchange rate markets has become increasingly uncertain,” analysts at Deutsche Bank wrote in a note to investors. “We believe commodities will be unable to escape the contagion. From a commodity perspective our most pressing concern is to what extent the U.S. virus spreads globally and specifically to China.”

The bank’s analysts pared their expectations for next year as oil consumption drops because of slowing economic growth, reducing their oil and gas price forecasts by about 20 percent for 2009.

Concerns that the crisis might be spreading to Europe helped push down the value of the European common currency. The euro dropped against the dollar to $1.43 on Monday from $1.46 on Friday.

The weaker economic outlook could further push down oil prices in the coming months if demand for oil in developed countries keeps falling, according to Ben Dell, an analyst at Bernstein Research. He expects oil consumption could fall by 1.3 million barrels a day, or 2.6 percent, in the fourth quarter this year. That is much more than the 470,000 barrels a day drop forecast from the International Energy Agency.

“This dynamic is similar to that of the 1980s and suggests that investors should be increasingly concerned with the slowdown in Europe, Japan and the U.S.,” he wrote in a note to clients.

Oil Falls Sharply on Renewed Economic Fears, 30.9.2008, http://www.nytimes.com/2008/09/30/business/30oil.html

Texas Approves a $4.93 Billion Wind-Power Project

July 19, 2008
The New York Times
By KATE GALBRAITH

Texas regulators have approved a $4.93 billion wind-power transmission project, providing a major lift to the development of wind energy in the state.

The planned web of transmission lines will carry electricity from remote western parts of the state to major population centers like Dallas, Houston, Austin and San Antonio. The lines can handle 18,500 megawatts of power, enough for 3.7 million homes on a hot day when air-conditioners are running.

The project will ease a bottleneck that has become a major obstacle to development of the wind-rich Texas Panhandle and other areas suitable for wind generation.

Texas is already the largest producer of wind power, with 5,300 installed megawatts — more than double the installed capacity of California, the next closest state. And Texas is fast expanding its capacity.

“This project will almost put Texas ahead of Germany in installed wind,” said Greg Wortham, executive director of the West Texas Wind Energy Consortium.

Transmission companies will pay the upfront costs of the project. They will recoup the money from power users, at a rate of about $4 a month for residential customers.

Details of the plan will be completed by Aug. 15, according to Damon Withrow, director of government relations at the Public Utility Commission, which voted 2 to 1 to go ahead with the transmission plan. The lines will not be fully constructed until 2013.

Wind developers reacted favorably.

“The lack of transmission has been a fundamental issue in Texas, and it’s becoming more and more of an issue elsewhere,” said Vanessa Kellogg, the Southwest regional development director for Horizon Wind Energy, which operates the Lone Star Wind Farm in West Texas and has more wind generation under development. “This is a great step in the right direction.”

Ms. Kellogg said that the project would be a boon for Texas power customers, whose electricity costs have risen in conjunction with soaring natural gas prices across the state. “There’s nothing volatile about the wind in terms of the price, because it’s free,” she said.

The Texas office of the consumer advocacy organization Public Citizen also lauded the news.

“We think it’s going to lower costs, lower pollution and create jobs. We think that for every $3 invested, we’ll probably see about an $8 reduction in electric costs,” said Tom Smith, the state director.

The transmission problem is so acute in Texas that turbines are sometimes shut off even when the wind is blowing.

“When the amount of generation exceeds the export capacity, you have to start turning off wind generators” to keep things in balance, said Hunter Armistead, head of the renewable energy division in North America at Babcock & Brown, a large wind developer and transmission provider. “We’ve reached that point in West Texas.”

Jay Rosser, a spokesman for Boone Pickens, the legendary Texas oilman who plans to build what has been called the world’s largest wind farm in the Texas Panhandle, welcomed the announcement.

But because about a quarter of the Pickens project capacity will come online by 2011, two years before the Texas lines are fully ready, “we will move forward with plans to build our own transmission,” he said.

Lack of transmission is a severe problem in a number of states that, like Texas, want to develop their wind resources. Wind now accounts for 1 percent of the nation’s electricity generation but could rise to 20 percent by 2030, according to a recent Department of Energy report, if transmission lines are built and other challenges met.

But other states may find the Texas model difficult to emulate. The state is unique in having its own electricity grid. All other states fall under the jurisdiction of the Federal Energy Regulatory Commission, adding an extra layer of bureaucracy to any transmission proposals.

The exact route of the transmission lines has yet to be determined because the state has not yet acquired right-of-way, according to Mr. Withrow of the utility commission.

The project will almost certainly face concerns from landowners reluctant to have wires cutting across their property. “I would anticipate that some of these companies will have to use eminent domain,” he said, speaking of the companies that will be building the transmission lines.

Texas Approves a $4.93 Billion Wind-Power Project, NYT, 19.7.2008, http://www.nytimes.com/2008/07/19/business/19wind.html

McCain Proposes a $300 Million Prize

for a Next-Generation Car Battery

June 24, 2008
The New York Times
By MICHAEL COOPER

FRESNO, Calif. — In the 18th century the British offered a £20,000 prize to anyone who figured out how to calculate longitude. More recently, Netflix offered a million dollars for improving movie recommendations on its Web site. Now Senator John McCain is suggesting a new national prize: He said here Monday that if elected president he would offer $300 million to anyone who could build a better car battery.

The high cost of gasoline — a gallon of regular was selling for $4.65 at a gas station near California State University, Fresno, where Mr. McCain spoke — has made energy policy a big issue in this year’s presidential campaign, and barely a day has passed recently without one of the candidates weighing in with new energy policies, proposals and attacks on opponents.

Mr. McCain, of Arizona, alienated some environmentalists last week during a speech in Houston when he dropped his opposition to allowing offshore drilling for oil; this week, in a swing through California, he spoke about trying to wean the nation from its dependence on oil. He called for improving the enforcement of fuel economy standards, building more cars that could run on alternative fuels, dropping the tariff on imports of sugar-based ethanol from Brazil and offering big tax credits for nonpolluting cars.

“I further propose we inspire the ingenuity and resolve of the American people,” Mr. McCain said, “by offering a $300 million prize for the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars.”

He said the winner should deliver power at 30 percent of current costs. “That’s one dollar, one dollar, for every man, woman and child in the U.S. — a small price to pay for helping to break the back of our oil dependency,” he said.

The Obama campaign countered by noting that Mr. McCain had voted against improving fuel efficiency standards in the Senate. Jason Furman, the Obama campaign’s economic policy director, said in a conference call that Mr. McCain had been focused on “meaningful relief for oil companies that are struggling with record profits.”

In his speech in Fresno, Mr. McCain called for automakers to act more quickly to build so-called flex-fuel vehicles than can run on alternative fuel. He approvingly cited the example of Brazil, which he said had moved to building 70 percent of all new vehicles that way in just three years, and he issued a not-so-veiled threat to automakers.

“Whether it takes a meeting with automakers during my first month in office, or my signature on an act of Congress,” he said, “we will meet the goal of a swift conversion of American vehicles away from oil.”

And Mr. McCain emphasized one of his differences with Mr. Obama, without mentioning him by name, by restating his opposition to subsidies for corn-based ethanol, which Mr. Obama supports.

“As taxpayers, we foot the bill for the enormous subsidies paid to corn producers,” he said. “And as consumers, we pay extra at the pump because of government barriers to cheaper products from abroad.”

Mr. McCain, who spoke against corn-based ethanol when he ran for president in 2000, said this time around that he became a supporter of it when oil grew too expensive, but he has said he still opposes subsidies for ethanol.

While the McCain and Obama campaigns were sparring over energy, Mr. Obama was in Albuquerque, where he focused on the economy and working women, a critical constituency. He journeyed deep into the prosaic land of gut-level economics at the Flying Star Café Commissary, where talk of globalization and vertical economies yields to “how can I afford to make it through this week and the one after that?”

Speaking to a group of women, Mr. Obama, of Illinois, was offered a glimpse into one of the realities of the American economy: that wages for the working-class have lagged far behind those of upper-income Americans. Some of the women at the commissary, like Carrie Hummel, 28, told of holding down multiple jobs and still barely being able to find the money to pay for gas, much less for her health insurance. “You know, this life is pretty hard,” she said.

Ms. Hummel was followed by a woman who asked Mr. Obama if he would consider waiving taxes on tips, and another who asked about the cost of college tuition, which has risen at a rate far outstripping inflation.

Mr. Obama offered a variety of proposals, including requiring employers t0 provide seven paid sick days for all employees (he has not specified the size of the employer) and extending the Family and Medical Leave Act to cover any company with 25 or more employees (the act now applies to those with 50 or more employees).

He also criticized Mr. McCain over his opposition to legislative action to help bring wages of women up to those of men. The McCain campaign fired back, saying the legislation to do so would have been a boon to trial lawyers, who have supported Mr. Obama’s campaign.

Michael Powell contributed reporting from Albuquerque, and Larry Rohter from New York.

McCain Proposes a $300 Million Prize for a Next-Generation Car Battery, NYT, 24.6.2008, http://www.nytimes.com/2008/06/24/us/politics/24campaign.html

Obama Camp Closely Linked With Ethanol

June 23, 2008
The New York Times
By LARRY ROHTER

When VeraSun Energy inaugurated a new ethanol processing plant last summer in Charles City, Iowa, some of that industry’s most prominent boosters showed up. Leaders of the National Corn Growers Association and the Renewable Fuels Association, for instance, came to help cut the ribbon — and so did Senator Barack Obama.

Then running far behind Senator Hillary Rodham Clinton in name recognition and in the polls, Mr. Obama was in the midst of a campaign swing through the state where he would eventually register his first caucus victory. And as befits a senator from Illinois, the country’s second largest corn-producing state, he delivered a ringing endorsement of ethanol as an alternative fuel.

Mr. Obama is running as a reformer who is seeking to reduce the influence of special interests. But like any other politician, he has powerful constituencies that help shape his views. And when it comes to domestic ethanol, almost all of which is made from corn, he also has advisers and prominent supporters with close ties to the industry at a time when energy policy is a point of sharp contrast between the parties and their presidential candidates.

In the heart of the Corn Belt that August day, Mr. Obama argued that embracing ethanol “ultimately helps our national security, because right now we’re sending billions of dollars to some of the most hostile nations on earth.” America’s oil dependence, he added, “makes it more difficult for us to shape a foreign policy that is intelligent and is creating security for the long term.”

Nowadays, when Mr. Obama travels in farm country, he is sometimes accompanied by his friend Tom Daschle, the former Senate majority leader from South Dakota. Mr. Daschle now serves on the boards of three ethanol companies and works at a Washington law firm where, according to his online job description, “he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy.”

Mr. Obama’s lead advisor on energy and environmental issues, Jason Grumet, came to the campaign from the National Commission on Energy Policy, a bipartisan initiative associated with Mr. Daschle and Bob Dole, the Kansas Republican who is also a former Senate majority leader and a big ethanol backer who had close ties to the agribusiness giant Archer Daniels Midland.

Not long after arriving in the Senate, Mr. Obama himself briefly provoked a controversy by flying at subsidized rates on corporate airplanes, including twice on jets owned by Archer Daniels Midland, which is the nation’s largest ethanol producer and is based in his home state.

Jason Furman, the Obama campaign’s economic policy director, said Mr. Obama’s stance on ethanol was based on its merits. “That is what has always motivated him on this issue, and will continue to determine his policy going forward,” Mr. Furman said.

Asked if Mr. Obama brought any predisposition or bias to the ethanol debate because he represents a corn-growing state that stands to benefit from a boom, Mr. Furman said, “He wants to represent the United States of America, and his policies are based on what’s best for the country.”

Mr. Daschle, a national co-chairman of the Obama campaign, said in a telephone interview on Friday that his role advising the Obama campaign on energy matters was limited. He said he was not a lobbyist for ethanol companies, but did speak publicly about renewable energy options and worked “with a number of associations and groups to orchestrate and coordinate their activities,” including the Governors’ Ethanol Coalition.

Of Mr. Obama, Mr. Daschle said, “He has a terrific policy staff and relies primarily on those key people to advise him on key issues, whether energy or climate change or other things.”

Ethanol is one area in which Mr. Obama strongly disagrees with his Republican opponent, Senator John McCain of Arizona. While both presidential candidates emphasize the need for the United States to achieve “energy security” while also slowing down the carbon emissions that are believed to contribute to global warming, they offer sharply different visions of the role that ethanol, which can be made from a variety of organic materials, should play in those efforts.

Mr. McCain advocates eliminating the multibillion-dollar annual government subsidies that domestic ethanol has long enjoyed. As a free trade advocate, he also opposes the 54-cent-a-gallon tariff that the United States slaps on imports of ethanol made from sugar cane, which packs more of an energy punch than corn-based ethanol and is cheaper to produce.

“We made a series of mistakes by not adopting a sustainable energy policy, one of which is the subsidies for corn ethanol, which I warned in Iowa were going to destroy the market” and contribute to inflation, Mr. McCain said this month in an interview with a Brazilian newspaper, O Estado de São Paulo. “Besides, it is wrong,” he added, to tax Brazilian-made sugar cane ethanol, “which is much more efficient than corn ethanol.”

Mr. Obama, in contrast, favors the subsidies, some of which end up in the hands of the same oil companies he says should be subjected to a windfall profits tax. In the name of helping the United States build “energy independence,” he also supports the tariff, which some economists say may well be illegal under the World Trade Organization’s rules but which his advisers say is not.

Many economists, consumer advocates, environmental experts and tax groups have been critical of corn ethanol programs as a boondoggle that benefits agribusiness conglomerates more than small farmers. Those complaints have intensified recently as corn prices have risen sharply in tandem with oil prices and corn normally used for food stock has been diverted to ethanol production.

“If you want to take some of the pressure off this market, the obvious thing to do is lower that tariff and let some Brazilian ethanol come in,” said C. Ford Runge, an economist specializing in commodities and trade policy at the Center for International Food and Agricultural Policy at the University of Minnesota. “But one of the fundamental reasons biofuels policy is so out of whack with markets and reality is that interest group politics have been so dominant in the construction of the subsidies that support it.”

Corn ethanol generates less than two units of energy for every unit of energy used to produce it, while the energy ratio for sugar cane is more than 8 to 1. With lower production costs and cheaper land prices in the tropical countries where it is grown, sugar cane is a more efficient source.

Mr. Furman said the campaign continued to examine the issue. “We want to evaluate all our energy subsidies to make sure that taxpayers are getting their money’s worth,” he said.

He added that Mr. Obama favored “a range of initiatives” that were aimed at “diversification across countries and sources of energy,” including cellulosic ethanol, and which, unlike Mr. McCain’s proposals, were specifically meant to “reduce overall demand through conservation, new technology and improved efficiency.”

On the campaign trail, Mr. Obama has not explained his opposition to imported sugar cane ethanol. But in remarks last year, made as President Bush was about to sign an ethanol cooperation agreement with his Brazilian counterpart, Mr. Obama argued that “our country’s drive toward energy independence” could suffer if Mr. Bush relaxed restrictions, as Mr. McCain now proposes.

“It does not serve our national and economic security to replace imported oil with Brazilian ethanol,” he argued.

Mr. Obama does talk regularly about developing switchgrass, which flourishes in the Midwest and Great Plains, as a source for ethanol. While the energy ratio for switchgrass and other types of cellulosic ethanol is much greater than corn, economists say that time-consuming investments in infrastructure would be required to make it viable, and with corn nearing $8 a bushel, farmers have little incentive to shift.

Ethanol industry executives and advocates have not made large donations to either candidate for president, an examination of campaign contribution records shows. But they have noted the difference between Mr. Obama and Mr. McCain.

Brian Jennings, a vice president of the American Coalition for Ethanol, said he hoped that Mr. McCain, as a presidential candidate, “would take a broader view of energy security and recognize the important role that ethanol plays.”

The candidates’ views were tested recently in the Farm Bill approved by Congress that extended the subsidies for corn ethanol, though reducing them slightly, and the tariffs on imported sugar cane ethanol. Because Mr. McCain and Mr. Obama were campaigning, neither voted. But Mr. McCain said that as president he would veto the bill, while Mr. Obama praised it.

Obama Camp Closely Linked With Ethanol, NYT, 23.6.2008,http://www.nytimes.com/2008/06/23/us/politics/23ethanol.html

Editorial

Iraq Oil Rush

June 22, 2008
The New York Times

So great is the demand for oil today — and so great the concern over rising prices — that it would be tempting to uncritically embrace plans by major Western oil companies to return to Iraq.

Unfortunately, the evolving deals could well rekindle understandable suspicions in the Arab world about oil being America’s real reason for invading Iraq and fan even more distrust and resentment among Iraq’s competing religious and ethnic factions.

As reported by Andrew Kramer in The Times, Exxon Mobil, Shell, Total and BP — original partners in the Iraq Petroleum Company — are in the final stages of discussions that will let them formally re-enter Iraq’s oil market, which expelled them 36 years ago. The contracts also include Chevron.

Iraq can certainly use the modern technology and skills these oil giants offer. Although Iraq’s oil reserves are among the world’s largest, years of United Nations sanctions and war have badly eroded the industry. Government officials say they aim to increase production from 2.5 million barrels of oil a day to 3 million barrels. That is a minor increase in global terms, but with oil at $140 a barrel, it is good news for Iraqis, who need the money to rebuild their war-torn country.

We cannot blame Baghdad for wanting to get on with exploiting the country’s lucrative oil deposits, especially when Kurds in northern Iraq are rapidly signing contracts to develop oil fields in their own semiautonomous region. Still, the negotiating process pursued by Baghdad is flawed and troubling.

The contracts are being let without competitive bidding to companies that since the American invasion have been quietly advising Iraq’s oil ministry how to increase production. While the contracts are limited to refurbishing equipment and technical support and last only two years, they would give these companies an inside track on vastly more lucrative long-term deals.

Given that corruption is an acknowledged problem in Iraq’s government, the contracts would have more legitimacy if the bidding were open to all and the process more transparent. Iraqis must apply that standard when they let contracts for long-term oil field development.

Also troubling is that the deals were made even though Iraq’s parliament has failed to adopt oil and revenue sharing laws — critical political benchmarks set by the Bush administration. That is evidence of continued deep divisions in Iraq over whether oil should be controlled by central or regional government, whether international oil companies should be involved in development and how the profits should be distributed.

The United States and the oil companies must encourage Iraqi officials to make the political compromises needed to establish in law the rules for managing Iraq’s abundant natural resources with as much transparency as possible. Otherwise, oil will just become one more centripetal force pulling the country apart.

Iraq Oil Rush, NYT, 22.6.2008, http://www.nytimes.com/2008/06/22/opinion/22sun1.html

Oil Nears $140 a Barrel; Weak Dollar Cited

June 17, 2008
The New York Times
By THE ASSOCIATED PRESS

Oil futures are hitting a new milestone near $140 a barrel, a dramatic surge analysts attributed to the weakening dollar. The surge comes even despite expectations that Saudi Arabia, the world’s biggest oil exporter, was planning to increase its output by about a half-million barrels a day.

Light, sweet crude for July delivery rose to a trading record of $139.89 a barrel Monday, but retreated slightly to trade up $3.45 at $138.31 a barrel on the New York Mercantile Exchange.

The dollar fell on a weak report on New York state manufacturing activity, analysts said. Many investors buy commodities like oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies.

Many analysts believe the dollar’s protracted decline is a major factor behind oil’s doubling in price over the last year.

Plans by Saudi Arabia to increase production could bring its output to a level of 10 million barrels a day, which, if sustained, would be the kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices.

Saudi Arabia is currently pumping 9.45 million barrels a day, which is an increase of about 300,000 barrels from last month.

While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy.

Oil Nears $140 a Barrel; Weak Dollar Cited, NYT, 17.6.2008, http://www.nytimes.com/2008/06/17/business/worldbusiness/17oil.html

Fade to black: Is this the end of oil?

For generations, we've taken it for granted. But as prices soar and reserves dwindle, the time is fast approaching when mankind will have to live without oil. Are we ready to confront some really inconvenient truths? Michael Savage reports from the North Sea

Thursday, 12 June 2008
The Independent

Aberdeen heliport is heaving. Dozens of rig men are waiting to board helicopters and begin a two-week stint in the middle of the North Sea. It appears that business out on the rigs, known simply as "the job" in these parts, is booming. Eventually, it's our turn to board a cramped chopper, shoulder to shoulder with the solidly built workers who sit silently, psyching themselves up for a fortnight surrounded by cold, crashing waves.

Two hours later, we land at a rusting rig named Alwyn, 440 kilometres off the coast of Aberdeen. Ollie Bradshaw, the rig's burly production supervisor, meets the new arrivals.

"What's life like offshore? Busy. Very busy," he says. He's not joking. As we traipse around the rig's two platforms, perched 200 feet above the (thankfully) calm waters of the North Sea, we navigate between the numerous piles of scaffolding, timber and new equipment that take up almost every last square inch of space. The on-board population has swollen to 250 people lately. In some cases, three men are having to share a room, while new digs are built next to the rig's busy helipad, where several flights land and take off each day, delivering a conveyer belt of fresh workers – from painters and decorators to extra scaffolders and, of course, the men whose expertise lies in harvesting fossil fuels from beneath the sea bed.

Even in the common room, no one is standing idle – not around the television, nor the snooker table. The on-board gym is empty. In the canteen, a few men grab bacon rolls before heading off to start their 4pm shift. Those on an earlier shift have just had their lunch – there's been a run on lemon tart. Yet the hive of activity that Alwyn has become of late is not down to all the oil it is producing. Far from it.

"Alwyn started out as an oil well and platform more than two decades ago. As oil production has fallen, it has been adapted and changed," says Bradshaw, a man who seems devoted to his life here in the middle of nowhere. The rig's expanding team is having to work harder than ever to keep it going. A vast network of underground pipes has linked it to new pockets of oil and gas – some of the neighbouring platforms seem like they are just touching distance away. New techniques have been used to boost the quality of the last dregs of oil coming out of the ground. Empty reservoirs are being drained of natural gas. Now, a major discovery of a field of natural gas has meant that, after 21 years of work, Alwyn's creaking infrastructure is being given a facelift to keep going for another 20 years. But it will also mean its conversion from the oil platform it once was will be complete.

The end of Alwyn's oil well days is a familiar story in the North Sea. The rig men may be working as hard as ever, but UK oil production has been falling rapidly ever since 1999. In the past, that hasn't been such a problem – other producers around the world have always been able to produce more of the black stuff to keep the wheels of world industry lubricated. But according to some, that may be about to change. Oil prices are so high – $137 a barrel – and predicted by Alexey Miller, head of Gazprom, the Russian state energy giant, to rise as high as $250 a barrel – that social tensions have begun to emerge, while the world's leaders have been going cap in hand to oil producers, asking them to squeeze a few more barrels out of their wells. And as prices have kept on breaking records, an ever-growing worry looms in the background, the elephant in the room of the oil price rise: what if they can't produce any more? What if, this time, the oil taps really are running dry?

Worryingly, for a world reliant on the dirt-cheap energy that oil provided throughout the last century, the idea that oil production in all nations may soon start to decline just as in the North Sea has been seeping into the mainstream. The "peak oil" theory – that oil production has reached its maximum and will soon begin its decline, bringing potentially catastrophic consequences to the modern world – no longer just comes from internet crackpots and conspiracy theorists; now geologists, market analysts and oil prospectors believe that this scenario is becoming reality. And within the past year, there have been signs that the major oil companies are admitting this themselves. If they are right, high petrol prices could be the least of the world's problems.

The idea is simple enough. Those warning against an imminent peak oil crisis – the "peakists" – say that while the world will not totally run out of oil, all of the oil that is easy to reach has been all but used up, meaning that producing enough oil to meet the growing world demand is becoming an ever harder task. Worse, we now stand at the high water mark of oil production. That means that not only will we never be able to produce much more oil than the 87 million barrels a day we now consume, but world oil production will actually begin to fall very soon, causing not only ever higher prices, but also creating the prospect of shortages, industrial upheaval, battles over ever-depleting resources, and even an end to the modern world built upon the assumption of a plentiful supply of cheap oil.

"A lot of people keep talking about 'this peak oil theory' – but there's nothing theoretical about it. It's just a very obvious fact of nature," says Colin Campbell, a geologist who searched for oil on behalf of several oil companies, and is the high priest of the peakists. "Oil is formed in the geological past. That means it's a finite resource. That means production begins and ends, and passes a peak in between. So the fact that there is a peak is beyond dispute. We've had the first half of the age of oil, which has changed the world in every conceivable way. We now face a decline."

Campbell is in no doubt that the world's oil production is as high as it is ever going to get. "The result of the latest update I made using industry data was that the regular, conventional oil peaked in 2005 and if you put all the other types in – the heavy oils, the gas liquids, the Arctic oil, the deep water projects – I have it this year," he says, in a softly spoken, matter-of-fact tone. "That's not cast in stone. It could slip a year or two. But I'm absolutely confident that it's in the right area."

Whereas Campbell's fears once branded him a wacky radical, as the years have gone by he has been joined by a growing band of industry experts who have reached a similarly grim conclusion. One of those was an American investment banker examining "flow rates" – the speed at which oil was being taken out of the ground. After being asked to advise Donald Rumsfeld and George Bush on energy policy during the 2000 election campaign, Matthew Simmons found that more and more oil fields had begun to decline. That was because, though new technology was helping to extract oil faster than ever before, it was also causing the fields to run dry more quickly, too. "All of a sudden there were fields that were declining by as much as 30 per cent per year," he says. "But I didn't call it 'peak oil' – I didn't even know what that was back then."

Simmons came across peak oil in 2002, when he attended the first meeting of a new group founded by Colin Campbell. Only around 45 people showed up to the first meeting of the Association for the Study of Peak Oil (Aspo), but since then, its findings have convinced a lot more people around the world. Aspo now has branches in 36 countries, with Kuwait the latest wanting to found one. And some serious analysts have also made the mental journey from dissenters to peak-oil prophets.

"I've been on that journey," says Chris Skrebowski, who spent half his career in the oil industry and now edits the UK oil industry's publication of record, Petroleum Review. He admits to having been dismissive of the idea that the world's wells were running dry. It was a visit from Campbell in 1996 that made him change his mind. "I didn't quite believe him, but I didn't think he was the average nutter," he says. Skrebowski began to take a look at the issue himself. The numbers told a clear story. "You can just about struggle through to 2011, if everything goes to plan – which, of course, it won't – but after that, the numbers don't add up. And that's taking a reasonably conservative rate of decline. If you wind it up to a 5 or 6 per cent annual decline, then you are at this peak or plateau now."

One man who believes that could be the real rate of decline is the archetypal US oilman, T Boone Pickens, otherwise known as the "Oracle of Oil". Having made a fortune in the oil industry, Pickens now invests heavily in the oil alternatives he believes will be necessary to fill the gap left by falling oil production.

From the window of helicopter, flying above the uninviting waves of the North Sea, it seems hard to believe that the world could really be running low on easy oil. Dozens of rigs pepper the vast expanse of water, their burning flares making them look like floating candles. Spiralling wisps of smoke fill the North Sea sky – a reminder that there is still oil churning around. Despite the pedigree of the peakists, it's hard not to think we've heard it all before, that it's just the usual doomsayers predicting that the oilfields would run out, and that more will be found somewhere. But for the peakists, the North Sea is a great case study. Its rapid decline has come despite all the advantages the modern world could throw at it.

"The North Sea has the benefit of all the investment anybody could need," says Campbell. "It's got the most modern technology, and it's got a political environment that's stable. There's no reason why it would be producing less oil than is possible, yet it has been declining at a rate of 7 per cent a year." Perhaps even more worryingly, the last year has seen major oil companies begin to make more noises about potential problems ahead. Foremost among them has been head of the French oil company Total, Christophe de Margerie, who has declared that world production will never exceed 100 billion barrels a day, a level of demand expected in less than a decade. "The oil companies are changing their tune," says Campbell. "They can't quite say 'peak' in so many words. They don't want to rock the boat."

Back on dry land, in a seafood restaurant in Aberdeen, a senior oil executive talks freely about a future. "We can try to slow the decline, but we will never stop it," he says casually, over a plate of scallops. "All we can do is get as much oil out of the ground as possible." Meanwhile, Colin Campbell is flirting with official approval. He is already advising a Norwegian oil firm, and has recently been invited to give informal presentations to executives from two of the world's biggest oil companies. A clear momentum has been built up around peak oil fears. For Simmons, it is the peak oil deniers that are now the ones sounding shrill. "I daily read these shrill sounding experts who still believe that oil should be at $40 a barrel," he says. "It's just unbelievable. It's still cheap."

Not everyone is convinced by the peak oil theory, though. This week, The Independent reported that, according to Richard Pike, a former oil industry man, now chief executive of the Royal Society of Chemistry, there is more than twice as much oil in the ground than producers claim. But the most notable peak oil refusnik is the International Energy Agency (IEA), the oil supply watchdog set up by the world's richest nations. It has said that not only is the world not running out of oil, but that production will continue to match the 135 million barrels a day that is forecast to be needed by 2050. It says that while conventional sources of oil may only provide around 92 million barrels a day of that, investment in Saudi Arabia's fields and the growth of new sources of oil will provide the rest.

To the peakists, these standard oil industry ripostes are starting to wear a little thin, and have been damaged by the crashing and burning of some great white hopes. Not a single barrel of commercially viable shale oil, made from oil-rich sedimentary rock, has yet been produced. Oil made from tar sands found in northern Canada is near the top of the list of innovative sources of oil, but even the oil companies themselves admit that the amount of energy currently needed to produce a single barrel of it makes it very inefficient. And while drilling into ever-deeper waters might keep world production on its current plateau, the peakists say the days of "easy oil" are over.

As for the comforting idea that Saudi Arabia could simply turn up its taps and produce far more oil if it felt like it – the preferred belief of President Bush and Gordon Brown – the peakists have some pretty big problems with that, too. "The one thing that made peak oil a bogus issue was the supposedly proven fact that in the Middle East, we had 200 years of oil supply," says Simmons. "Because of that, we obviously couldn't have peaked. I'd just assumed it had to be true. Then I started doing my research." After poring over more than 200 technical papers, he made the grim conclusion that, just like elsewhere, production in Saudi Arabia was either at or very near its peak.

And even the conservative estimates of the IEA have not been unaffected by the spectre of peak oil. It has decided to review how it sources its data on oil reserves, which is widely expected to lead to a lowering of its predictions of future oil supplies when it publishes its overview of the industry in November. If it, too, reveals that the days of free flowing oil could be over, the halls of power might begin to take notice.

None of this will make any difference to life on the Alwyn rig in the near future. For the next 20 years, it will be producing natural gas, and making low-grade oil from some of it. "We'll be here until every last drop of oil is out of the ground," Ollie Bradshaw reassures me.

But unlike Alwyn, more rigs will be decommissioned than refurbished if the peak oil theorists turn out to be right – and they warn that the effects on the world could be dramatic.

A world without plentiful oil, as described by the peakists, looks very different from today's. The peakists are in no doubt about the aspect of modern living that would have to change. With transport soaking up the vast majority of the world's oil, they maintain that our addiction to the car will have to go. According to Chris Skrebowski, large-scale electrification will be needed in all vehicles, perhaps with pylons placed down motorways to provide power. Diesel-powered public transport needs to be replaced with electric trains, trams, and trolley buses. That would create breathing space to make more profound societal changes, such as a growth of working from home. Matthew Simmons also sees the current global economy soon becoming unsustainable. "Local farms are now coming back," he says. "We have all the technology in place to do that."

That's just for starters. According to Campbell, a wholesale change in the western lifestyle will be needed a little further down the road. "Cities will face massive challenges," he says. "By the end of the century, when there really isn't very much oil left, the world will be a very different one – much more rural, probably with fewer people. It's a sort of doomsday message, but in some ways, it's just a change from the modern mindset. There are people in the world who live a simple life like that and are very happy." But that's nothing compared with what could happen if we attempt to carry on regardless with ever-growing oil consumption. "If we don't make changes, we're going to have a resource war and blow ourselves up," says Simmons. "I think that would be a really inconvenient way to end the world."

So will the end of the oil age herald in a new dark age? Are we doomed to go back to sheltering in mud huts and living off a diet of turnips and water? Not necessarily. Thankfully, other peakists are optimistic that we can cope with a world without such vast quantities of cheap oil – if we act now. "Humanity is very ingenious," says Skrebowski. "But at the moment, it doesn't yet see a crisis. We're just acting like a spoilt child who has had its lollipop taken away. At some point, some politician has got to come out and state clearly that the world is going to be different. It's not the end of the world, but we're all going to have to change the way we do things. And the sooner we get on with it, the better. The anticipation is probably worse than the reality."

Let's hope he's right.

Fade to black: Is this the end of oil?, I, 12.6.2008, http://www.independent.co.uk/environment/green-living/fade-to-black-is-this-the-end-of-oil-845092.html

Oil shortage a myth, says industry insider

Monday, 9 June 2008
The Independent
By Steve Connor, Science Editor

There is more than twice as much oil in the ground as major producers say, according to a former industry adviser who claims there is widespread misunderstanding of the way proven reserves are calculated.

Although it is widely assumed that the world has reached a point where oil production has peaked and proven reserves have sunk to roughly half of original amounts, this idea is based on flawed thinking, said Richard Pike, a former oil industry man who is now chief executive of the Royal Society of Chemistry.

Current estimates suggest there are 1,200 billion barrels of proven global reserves, but the industry's internal figures suggest this amounts to less than half of what actually exists.

The misconception has helped boost oil prices to an all-time high, sending jitters through the market and prompting calls for oil-producing nations to increase supply to push down costs.

Flying into Japan for a summit two days after prices reached a record $139 a barrel, energy ministers from the G8 countries yesterday discussed an action plan to ease the crisis.

Explaining why the published estimates of proven global reserves are less than half the true amount, Dr Pike said there was anecdotal evidence that big oil producers were glad to go along with under-reporting of proven reserves to help maintain oil's high price. "Part of the oil industry is perfectly familiar with the way oil reserves are underestimated, but the decision makers in both the companies and the countries are not exposed to the reasons why proven oil reserves are bigger than they are said to be," he said.

Dr Pike's assessment does not include unexplored oilfields, those yet to be discovered or those deemed too uneconomic to exploit.

The environmental implications of his analysis, based on more than 30 years inside the industry, will alarm environmentalists who have exploited the concept of peak oil to press the urgency of the need to find greener alternatives.

"The bad news is that by underestimating proven oil reserves we have been lulled into a false sense of security in terms of environmental issues, because it suggests we will have to find alternatives to fossil fuels in a few decades," said Dr Pike. "We should not be surprised if oil dominates well into the twenty-second century. It highlights a major error in energy and environmental planning – we are dramatically underestimating the challenge facing us," he said.

Proven oil reserves are likely to be far larger than reported because of the way the capacity of oilfields is estimated and how those estimates are added to form the proven reserves of a company or a country. Companies add the estimated capacity of oil fields in a simple arithmetic manner to get proven oil reserves. This gives a deliberately conservative total deemed suitable for shareholders who do not want proven reserves hyped, Dr Pike said.

However, mathematically it is more accurate to add the proven oil capacity of individual fields in a probabilistic manner based on the bell-shaped statistical curve used to estimate the proven, probable and possible reserves of each field. This way, the final capacity is typically more than twice that of simple, arithmetic addition, Dr Pike said. "The same also goes for natural gas because these fields are being estimated in much the same way. The world is understating the environmental challenge and appears unprepared for the difficult compromises that will have to be made."

Jeremy Leggett, author of Half Gone, a book on peak oil, is not convinced that Dr Pike is right. "The flow rates from the existing projects are the key. Capacity coming on stream falls fast beyond 2011," Dr Leggett said. "On top of that, if the big old fields begin collapsing, the descent in supply will hit the world very hard."

Oil shortage a myth, says industry insider, I, 9.6.2008, http://www.independent.co.uk/environment/climate-change/oil-shortage-a-myth-says-industry-insider-842778.html

Oil Prices Skyrocket, Taking Biggest Jump Ever

June 7, 2008
The New York Times
By JAD MOUAWAD

Oil prices had their biggest gains ever on Friday, jumping nearly $11 to a new record above $138 a barrel, after a senior Israeli politician raised the specter of an attack on Iran and the dollar fell sharply against the euro.

The unprecedented gains on Friday capped a second day of strong gains on energy markets, and fueled suspicions that commodities might be caught in a speculative bubble.

Oil futures surged $10.75, or 8 percent, to $138.54 a barrel on the New York Mercantile Exchange. The record gain followed a jump of 5.5 percent on Thursday, bringing total two-day gains to $16 a barrel.

Stocks fell sharply. The Dow Jones industrials fell 323.97 points, or 2.53 percent, in midday trading. Chevron Corp. was the only stock that rose on the blue-chip index.

“This market is going to shoot itself in the foot,” said Adam Robinson, an analyst at Lehman Brothers. “It is searching for a price that will build a safety cushion in the system — either as inventories or as spare capacity. But this takes time. The market has gotten extremely impatient and is not willing to wait.”

Even as uncertainties abound about the fundamentals of the market, geopolitical tensions in the Middle East regained center stage after Israel’s transportation minister, Shaul Mofaz, said Friday that an attack on Iran’s nuclear sites looked “unavoidable.” Iran is the second-largest oil producer within the OPEC cartel and any interruptions in its exports could push prices higher levels.

“The return of the Iranian risk premium calls for a careful assessment of the potential oil supply impact of military strikes on Iran,” said Antoine Halff, an analyst at Newedge, an energy broker.

The strong volatility in energy markets in recent weeks have continued to puzzle investors and traders. Prices keep rising despite a lack of shortages in the market, and strong evidence of lower consumption in industrialized countries. But investors seem to be caught in a bullish mood, focusing instead on perceived risks to future oil supplies and continued growth in oil demand from emerging economies that subsidize fuels.

The latest jump in oil prices also came as the dollar lost almost 1 percent against the euro amid bleak economic news that fanned recession fears on Friday. The unemployment rate surged to 5.5 percent last month, the government said, the biggest increase in more than two decades.

Investors reacted to the latest forecast by a large Wall Street bank that oil prices would spike to $150 a barrel in the next month because of strong demand from Asian economies. Morgan Stanley said “an unprecedented share” of Middle East oil exports are headed to Asia.

Some analysts also said that the threat of a strike by Chevron’s workers in Nigeria could lead to “considerable” shutdowns of Nigerian production. A similar strike by Exxon Mobil workers last April, which lasted a week, reduced Nigerian output by 800,000 barrels a day, or nearly a third of the country’s daily exports.

A strike might delay the start of Chevron’s 250,000 barrels-a-day Agbami project, the country’s largest offshore venture, which is slated for June 15.

One view that has been gaining ground in recent months is that the commodity market is caught in a speculative bubble akin to the housing or technology bubble of the late 1990s. The notion is buffered by the fact the oil prices have doubled in 12 months despite a slowing economy.

That theory was raised by politicians in Washington and a slew of OPEC producers, who blame speculators for the staggering rally in oil prices. Speaking before Congress recently, George Soros, a prominent hedge fund investor, said the current oil markets presented some characteristics of a bubble.

“I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance, which led to the stock market crash of 1987,” Mr. Soros said earlier this week. But he cautioned that an oil market crash was not imminent. “The danger currently comes from the other direction. The rise in oil prices aggravates the prospects for a recession.”

Jeffrey Harris, the chief economist at the Commodity Futures Trading Commission, who was speaking before another Senate committee last month, said he saw no evidence of a speculative bubble in the commodity market. Instead, Mr. Harris pointed out to a confluence of trends that have contributed to the oil price rally, including a weak dollar, strong energy demand from emerging-market economies, and political tensions in oil-producing countries.

“Simply put, the economic data shows that overall commodity price levels, including agricultural commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand,” Mr. Harris said. “Together these fundamental economic factors have formed a ‘perfect storm’ that is causing significant upward pressures on futures prices across the board.”

Oil prices had been weakening in recent days but reversed dramatically after the president of the European Central Bank, Jean-Claude Trichet, suggested on Thursday that the bank might raise interest rates. That pushed up the euro against the dollar and prompted investors to buy into commodities to hedge against the weaker American currency.

Gasoline prices have also been rising steadily. American drivers are now paying an average of $3.99 for a gallon of gasoline nationwide, according to AAA, the automobile group. In many parts of the country, like California, Connecticut and New York, consumers are already paying well over $4. Diesel costs $4.76 a gallon on average.

“I don’t know how else to say it, this is not a bubble,” Jan Stuart, global oil economist at UBS, said. “I think this is real. There is a whole bunch of commercial buyers out there who are spooked and are buying. You are an airline, right now, you’re scared. But I don’t see who would buy at these prices unless they need to.”

Oil Prices Skyrocket, Taking Biggest Jump Ever, NYT, 7.6.2008, http://www.nytimes.com/2008/06/07/business/07oil.html

FACTBOX: Why oil prices are at a record high

Mon May 5, 2008
1:47pm EDT
Reuters

(Reuters) - U.S. crude oil hit an all-time high of $120.21 a barrel on Monday.

Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.

Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.

DOLLAR WEAKNESS

The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.

OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

Some analysts say investors have been using oil as a hedge against the weaker dollar.

FUNDS

Since the Federal Reserve cut U.S. interest rates in mid-August last year and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.

Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.

Some of that money has found its way into energy and commodities, analysts say.

DEMAND

While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a limited effect on economic growth.

Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they have been until now lower than during previous price spikes and some economies have become less energy intensive.

OPEC SUPPLY RESTRAINT

The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, started to reduce oil output in late 2006 to stem a fall in prices.

Fewer OPEC barrels entering the market helped propel the rally and consumer nations led by the International Energy Agency have urged OPEC to pump more oil.

At its meetings since December, OPEC has agreed to leave output unchanged, saying there is enough crude in the market. It next meets formally on September 9.

Few in the group believe there is much it can do to tame a market it says defies logic.

NIGERIA

Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.

Oil companies and trading sources have detailed about a million bpd of shut Nigerian production due to militant attacks and sabotage.

IRAN

Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear program.

Western governments suspect Iran is using its civilian nuclear program as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.

IRAQ

Iraq is struggling to get its oil industry back on its feet after decades of wars, sanctions and underinvestment.

Exports of Kirkuk crude from the country's north are stabilizing as the system recovers from technical problems that had mostly idled the pipeline since the U.S.-led invasion of Iraq in March 2003.

REFINERY BOTTLENECKS

Refiners in the United States, the world's top gas guzzler, struggled with unexpected outages which have drained inventories.

FACTBOX: Why oil prices are at a record high, R, 5.5.2008, http://www.reuters.com/article/idUSL0526637220080505?virtualBrandChannel=10005

Fuel crisis Q&A

April 30, 2008
From The Times

Why do oil prices keep on rising?

Oil is becoming scarcer and harder to produce. Several former big areas of oil production are in decline while other top oil-producing countries, including Nigeria, Russia, Saudi Arabia, Iran and Venezuela, are either unwilling or unable to lift production. Chinese demand is expected to more than double by 2030. Hedge funds and investment banks have been placing big bets that oil prices will continue to rise, amplifying the volatility in prices.

Is petrol rising in tandem with oil?

In general, yes, although there tends to be a time lag of four to six weeks between increases in global crude prices and the price on forecourts.

Is the price pressure the same for diesel and unleaded petrol?

Because of the different components that make up the two, the pressures are slightly different. Overall, diesel is in shorter supply than petrol in Europe as gasoil, which goes into diesel, is used extensively for heating on the Continent. The increase in the number of diesel cars has also increased demand for diesel.

Is the Government cashing in?

Revenue from fuel duties and taxes over the past decade has increased in line with rising fuel costs and increased production. If the Government increases fuel duty, as is expected widely, later this year it would boost revenue by between £500 million and £600 million.

What can the Government do?

The Government has little influence on global crude prices. But cutting or freezing fuel duty is possible.

Is the price rise inexorable?

The head of Opec and Goldman Sachs have said that prices could rise to $200 per barrel but other industry players have said that they are baffled by current prices because, despite the pressures in the market, there is still sufficient oil to meet global demand. High prices are also stimulating a frenzy of investment in new fields previously considered too small, expensive or geologically challenging to extract commercially. This could have a dampening impact on oil prices when more of these enter production. But production simply cannot continue to grow indefinitely. By 2035 the world will use more than twice as much energy as it does today and demand for oil could rise from 85 million barrels a day to more than 120 million barrels.

How do the oil giants justify profits?

These are global companies with huge investment requirements. Shell invested $8 billion in the three months ended March 31. Costs in the industry are also thought to be rising at about 20 per cent per year.

Are biofuels the answer?

The EU has called for 10 per cent of all fuel to come from biofuels by 2020 but they seem to be creating as many problems as they solve by hindering food production and causing deforestation.

What should Opec do?

It is unlikely to agree to boost its production soon. It argues that speculators have more influence over the market than it does.

Fuel crisis Q&A, Ts, 30.4.2008, http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3841955.ece

Oil Prices Pass Inflation-Adjusted Record

March 3, 2008
The New York Times
By JAD MOUAWAD

Setting an all-time record, oil prices rose to nearly $104 a barrel on Monday morning, exceeding their inflation-adjusted high reached in the early 1980s during the second oil shock.

Oil futures rose as much as $2.11 to $103.95 on the New York Mercantile Exchange. That level tops the record set in April 1980 of $39.50 a barrel, which would translate to $103.76 a barrel in today’s money.

The latest surge in oil prices is taking place as investors seek refuge in commodities to offset a slowing economy and declines in the dollar, as well as to hedge against inflation.

The dollar fell to its lowest level in three years against the yen on Monday. It also dropped to a record $1.5274 in early New York trading against the euro following steep declines last week.

Today’s record oil prices are markedly different from the energy crises of the 1970s and 1980s, which were brought about by sudden interruptions in oil supplies.

Since the year 2000, oil prices have more than quadrupled as strong growth in demand from the United States and Asia outstripped the ability of oil producers to increase their output.

Other energy futures also rallied on Monday. Heating oil futures jumped 6.06 cents to $2.8675 a gallon, while gasoline futures rose 5.65 cents to $2.7264 a gallon. Natural gas gained 20 cents to $9.566 per thousand cubic feet.

In London, Brent crude futures rose $2.07 to $102.17 a barrel on the ICE Futures exchange.

The OPEC oil cartel meets on Wednesday and is expected to leave its production levels unchanged. The oil producing group had suggested last month that it might curb production soon to make up for a seasonal decline in oil demand.

But with oil prices at their current levels, analysts said members of the Organization of the Petroleum Exporting Countries will find it politically difficult to curb their output at this time.

Oil Prices Pass Inflation-Adjusted Record, NYT, 3.3.2008, http://www.nytimes.com/2008/03/03/business/worldbusiness/03cnd-oil.html

Oil Jumps to New Record on Dollar's Fall

March 3, 2008
Filed at 10:19 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

NEW YORK (AP) -- Oil prices surged to a new record high Monday as the dollar weakened to another low against the euro.

Light, sweet crude for April delivery rose $1.93 to $103.77 on the New York Mercantile Exchange after earlier rising as high as $103.95. That's higher than the price of $103.76 that many analysts believe oil hit in 1980, when adjusted for inflation into 2008 dollars.

Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

Oil isn't the only commodity rising on the dollar's weakness -- gold, copper and wheat are among the other commodities that have rallied in recent weeks as the dollar has fallen.

''It's coming down to another commodity price rally,'' said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

Other energy futures also rallied Monday. In other Nymex trading, April heating oil futures jumped 6.06 cents to $2.8675 a gallon, and April gasoline futures rose 5.65 cents to $2.7264 a gallon. April natural gas futures gained 20 cents to $9.566 per 1,000 cubic feet.

In London, Brent crude futures rose $2.07 to $102.17 a barrel on the ICE Futures exchange.

Oil Jumps to New Record on Dollar's Fall, NYT, 3.3.2008, http://www.nytimes.com/aponline/business/AP-Oil-Prices.html?hp

The Energy Challenge

Move Over, Oil, There’s Money in Texas Wind

February 23, 2008
The New York Times
By CLIFFORD KRAUSS

Correction Appended

SWEETWATER, Tex. — The wind turbines that recently went up on Louis Brooks’s ranch are twice as high as the Statue of Liberty, with blades that span as wide as the wingspan of a jumbo jet. More important from his point of view, he is paid $500 a month apiece to permit 78 of them on his land, with 76 more on the way.

“That’s just money you’re hearing,” he said as they hummed in a brisk breeze recently.

Texas, once the oil capital of North America, is rapidly turning into the capital of wind power. After breakneck growth the last three years, Texas has reached the point that more than 3 percent of its electricity, enough to supply power to one million homes, comes from wind turbines.

Texans are even turning tapped-out oil fields into wind farms, and no less an oilman than Boone Pickens is getting into alternative energy.

“I have the same feelings about wind,” Mr. Pickens said in an interview, “as I had about the best oil field I ever found.” He is planning to build the biggest wind farm in the world, a $10 billion behemoth that could power a small city by itself.

Wind turbines were once a marginal form of electrical generation. But amid rising concern about greenhouse gases from coal-burning power plants, wind power is booming. Installed wind capacity in the United States grew 45 percent last year, albeit from a small base, and a comparable increase is expected this year.

At growth rates like that, experts said, wind power could eventually make an important contribution to the nation’s electrical supply. It already supplies about 1 percent of American electricity, powering the equivalent of 4.5 million homes. Environmental advocates contend it could eventually hit 20 percent, as has already happened in Denmark. Energy consultants say that 5 to 7 percent is a more realistic goal in this country.

The United States recently overtook Spain as the world’s second-largest wind power market, after Germany, with $9 billion invested last year. A recent study by Emerging Energy Research, a consulting firm in Cambridge, Mass., projected $65 billion in investment from 2007 to 2015.

Despite the attraction of wind as a nearly pollution-free power source, it does have limitations. Though the gap is closing, electricity from wind remains costlier than that generated from fossil fuels. Moreover, wind power is intermittent and unpredictable, and the hottest days, when electricity is needed most, are usually not windy.

The turbines are getting bigger and their blades can kill birds and bats. Aesthetic and wildlife issues have led to opposition emerging around the country, particularly in coastal areas like Cape Cod. Some opposition in Texas has cropped up as well, including lawsuits to halt wind farms that were thought to be eyesores or harmful to wetlands.

But the opposition has been limited, and has done little to slow the rapid growth of wind power in Texas. Some Texans see the sleek new turbines as a welcome change in the landscape.

“Texas has been looking at oil and gas rigs for 100 years, and frankly, wind turbines look a little nicer,” said Jerry Patterson, the Texas land commissioner, whose responsibilities include leasing state lands for wind energy development. “We’re No. 1 in wind in the United States, and that will never change.”

Texas surpassed California as the top wind farm state in 2006. In January alone, new wind farms representing $700 million of investment went into operation in Texas, supplying power sufficient for 100,000 homes.

Supporters say Texas is ideal for wind-power development, not just because it is windy. It also has sparsely populated land for wind farms, fast-growing cities and a friendly regulatory environment for developers.

“Texas could be a model for the entire nation,” said Patrick Woodson, a senior development executive with E.On, a German utility operating here.

The quaint windmills of old have been replaced by turbines that stand as high as 20-story buildings, with blades longer than a football field and each capable of generating electricity for small communities. Powerful turbines are able to capture power even when the wind is relatively weak, and they help to lower the cost per kilowatt hour.

Much of the boom in the United States is being driven by foreign power companies with experience developing wind projects, including Iberdrola of Spain, Energias de Portugal and Windkraft Nord of Germany. Foreign companies own two-thirds of the wind projects under construction in Texas.

A short-term threat to the growth of wind power is the looming expiration of federal clean-energy tax credits, which Congress has allowed to lapse several times over the years. Advocates have called for extending those credits and eventually enacting a national renewable-power standard that would oblige states to expand their use of clean power sources.

A longer-term problem is potential bottlenecks in getting wind power from the places best equipped to produce it to the populous areas that need electricity. The part of the United States with the highest wind potential is a corridor stretching north from Texas through the middle of the country, including sparsely populated states like Montana and the Dakotas. Power is needed most in the dense cities of the coasts, but building new transmission lines over such long distances is certain to be expensive and controversial.

“We need a national vision for transmission like we have with the national highway system,” said Robert Gramlich, policy director for the American Wind Energy Association. “We have to get over the hump of having a patchwork of electric utility fiefdoms.”

Texas is better equipped to deal with the transmission problems that snarl wind energy in other states because a single agency operates the electrical grid and manages the deregulated utility market in most of the state.

Last July, the Texas Public Utility Commission approved transmission lines across the state capable of delivering as much as 25,000 megawatts of wind energy by 2012, presuming the boom continues. That would be five times the wind power generated in the state today, and it would drive future national growth.

Shell and the TXU Corporation are planning to build a 3,000-megawatt wind farm north of here in the Texas Panhandle, leapfrogging two FPL Energy Texas wind farms to become the biggest in the world.

Not to be outdone, Mr. Pickens is planning his own 150,000-acre Panhandle wind farm of 4,000 megawatts that would be even larger and cost him $10 billion.

“I like wind because it’s renewable and it’s clean and you know you are not going to be dealing with a production decline curve,” Mr. Pickens said. “Decline curves finally wore me out in the oil business.”

At the end of 2007, Texas ranked No. 1 in the nation with installed wind power of 4,356 megawatts (and 1,238 under construction), far outdistancing California’s 2,439 megawatts (and 165 under construction). Minnesota and Iowa came in third and fourth with almost 1,300 megawatts each (and 46 and 116 under construction, respectively).

Iowa, Minnesota, Colorado and Oregon, states with smaller populations than Texas, all get 5 to 8 percent of their power from wind farms, according to estimates by the American Wind Energy Association.

It has dawned on many Texans in recent years that wind power, whatever its other pros and cons, represents a potent new strategy for rural economic development.

Since the wind boom began a few years ago, the total value of property here in Nolan County has doubled, and the county judge, Tim Fambrough, estimated it would increase an additional 25 percent this year. County property taxes are going down, home values are going up and the county has extra funds to remodel the courthouse and improve road maintenance.

“Wind reminds us of the old oil and gas booms,” Mr. Fambrough said.

Teenagers who used to flee small towns like Sweetwater after high school are sticking around to take technical courses in local junior colleges and then work on wind farms. Marginal ranches and cotton farms are worth more with wind turbines on them.

“I mean, even the worst days for wind don’t compare to the busts in the oil business,” said Bobby Clark, a General Electric wind technician who gave up hauling chemicals in the oil fields southwest of here to live and work in Sweetwater. “I saw my daddy go from rags to riches and back in the oil business, and I sleep better.”

Wind companies are remodeling abandoned buildings, and new stores, hotels and restaurants have opened around this old railroad town.

Dandy’s Western Wear, the local cowboy attire shop, cannot keep enough python skin and cowhide boots in stock because of all the Danes and Germans who have come to town to invest and work in the wind fields, then take home Texas souvenirs.

“Wind has invigorated our business like you wouldn’t believe,” said Marty Foust, Dandy’s owner, who recently put in new carpeting and air-conditioning. “When you watch the news you can get depressed about the economy, but we don’t get depressed. We’re now in our own bubble.”

Correction:

Because of an editing error, an earlier version of an article Saturday about the growing use of wind power in Texas left unclear the amount of money that Louis Brooks is paid for having 78 wind turbines on his ranch on the outskirts of Sweetwater, Tex. It is $500 a month for each, not $500 for all of them.

Move Over, Oil, There’s Money in Texas Wind, NYT, 23.2.2008, http://www.nytimes.com/2008/02/23/business/23wind.html?em&ex=1204002000&en=3ede15dc922971a4&ei=5087%0A

As Nuclear Waste Languishes, Expense to U.S. Rises

February 17, 2008
The New York Times
By MATTHEW L. WALD

WASHINGTON — Forgotten but not gone, the waste from more than 100 nuclear reactors that the federal government was supposed to start accepting for burial 10 years ago is still at the reactor sites, at least 20 years behind schedule. But it is making itself felt in the federal budget.

With court orders and settlements, the federal government has already paid the utilities $342 million, but is virtually certain to pay a total of at least $7 billion in the next few years and probably over $11 billion, government officials said. The industry said the total could reach $35 billion.

The payments come from an obscure and poorly understood government account that requires no new Congressional appropriations, and will balloon in size, experts said.

The payments are due because the reactor owners were all required to sign contracts with the Energy Department in the early 1980s, with the government promising to dispose of the waste for a fee of a 10th of a cent per kilowatt-hour. It was supposed to begin taking away the fuel in the then far-off year of 1998.

Since then, the utilities have filed 60 lawsuits. The main argument — employing legions of lawyers on both sides — is when the government would have picked up the fuel if it had adhered to the original commitment, and thus how much of the storage expense would have fallen on the utilities anyway.

But the damage number is rising. If the repository that the government is trying to develop at Yucca Mountain, near Las Vegas, could start accepting waste at the date now officially projected, in 2017, the damages would run about $7 billion, according to Edward F. Sproat III, director of the Office of Civilian Radioactive Waste Management.

But that date is actually “clearly out the window,” Mr. Sproat said in a conference call with reporters, because Congress underfinanced the effort to build the repository, among other problems, he said. Mr. Sproat said the goal of applying by this June for a license to build Yucca could no longer be met.

If the repository opens in 2020, the damages would come to about $11 billion, he said, and for each year beyond that, about $500 million more. The industry says the total could reach $35 billion.

“The rate-payer has paid for it,” said Michael Bauser, the associate general counsel of the Nuclear Energy Institute, the industry’s trade group. “The Department of Energy hasn’t done it, and now the taxpayer is paying for it a second time.”

Initially, the Energy Department tried to pay the damages out of the Nuclear Waste Fund, the money collected from the nuclear utilities, plus interest, which comes to about $30 billion. But other utilities sued, saying that if the government did that, there might not be enough money left for the intended purpose, building a repository. So the government now pays the damages out of general revenues.

The damages are large relative to the annual budget of the Energy Department, which is about $25 billion. But the money comes out of the Treasury, not the Energy Department. Under a law passed in the Carter administration, such payments are recognized as obligations of the federal government and no further action by Congress is required to make them.

The money comes out of a federal account called the Judgment Fund, which is used to pay settlements and court-ordered payments. For the last five years, the fund has made payments in the range of $700 million to $1 billion, with the average payment being $80,000 to $150,000. In contrast, payments to utilities have been in the tens of millions.

The government is also running up extra expenses on its own wastes. Some of the waste that is supposed to go to Yucca, left over from nuclear weapons production, is sitting in storage that is expensive to maintain.

Some extra expense was assured, because Yucca has been beset with legal and managerial problems, and it is not clear whether the geology is suitable for the goal, storing the waste for a million years with only very small radiation doses for people beyond the site boundary. The interim solution is storing wastes in steel casks, pumped full of inert gas to prevent corrosion, an arrangement that will keep the wastes isolated for decades at least.

At some point, the escalating costs slow down, because some of the expenses for dry storage are incurred only once, like the engineering work, or installation of a crane to get the cask in and out of the spent fuel pool, officials said. But costs rise again at the point where the reactor that generated the fuel becomes too old to run, and is torn down; at that point, the entire expense of the guard force and the maintenance workers are attributable to the waste.

That has already happened in California, Connecticut, Maine, Massachusetts and Michigan. Jay Silberg, a lawyer who represents some of the utilities, said some companies that had sold reactors were suing the government and maintaining that they could have gotten a higher price if their plants had not come with the waste attached.

Each reactor typically creates about 20 tons of waste a year, which is approximately two new casks, at roughly $1 million each. If a repository or interim site opened, clearing the backlog would take decades, experts say. At present, waste is in temporary storage at 122 sites in 39 states.

The Energy Department has launched an initiative to gather the waste and run it through a factory to recover re-usable components, which would allow centralized storage, but that program’s prospects are highly uncertain.

The government has spent $11 billion on Yucca Mountain, Mr. Sproat said. The project has dragged on so long that some of the research data is stored on obsolete computers that must be replaced, program officials said.

As Nuclear Waste Languishes, Expense to U.S. Rises, NYT, 17.2.2008, http://www.nytimes.com/2008/02/17/us/17nuke.html

Britain's wind power revolution

Hutton's dramatic policy shift signals less reliance on nuclear energy
Offshore farms could provide all UK homes with electricity within 13 years

Published: 09 December 2007
By Geoffrey Lean, Brian Brady and Jonathan Owen

Britain is to embark on a wind power revolution that will produce enough electricity to power every home in the country, ministers will reveal tomorrow.

The Independent on Sunday has learnt that, in an astonishing U-turn, the Secretary of State for Business, John Hutton, will announce that he is opening up the seas around Britain to wind farms in the biggest ever renewable energy initiative. Only weeks ago he was resisting a major expansion of renewable sources, on the grounds that it would interfere with plans to build new nuclear power stations.

The revelation rounds off an unprecedented week in the battle against global warming in Britain and the United States. On Wednesday and Thursday measures to boost US use of renewable energy for electricity and motor fuel and cut greenhouse gas emissions were approved in Congress. The move comes as 190 nations meet in Bali, Indonesia, to negotiate what is seen as the world's "last chance" of avoiding the worst effects of climate change.

Yesterday hundreds of thousands of demonstrators took to the streets in 86 countries across the globe to demand urgent action from the Bali meeting. Several thousand campaigners marched in torrential rain through London to rally at the US embassy. Some posters carried a picture of President George Bush and the words "Wanted for crimes against the planet".

Mr Hutton's announcement, which will be made at a conference in Berlin tomorrow, will identify sites in British waters for enough wind farms to produce 25 gigawatts (GW) of electricity by 2020, in addition to the 8GW already planned – enough to meet the needs of all the country's homes.

It means that within only eight years, Britain's offshore wind industry will be twice the size of that of any other nation in the world.

The move will put the country well on the way to achieving a tough EU target of providing 20 per cent of the country's energy from renewable sources by 2020. But just six weeks ago, Mr Hutton's department, far from attempting to meet the target was trying to kill it.

In a confidential memorandum, Gordon Brown was advised that the target was expensive and faced "severe practical difficulties". It went on to warn how it would reduce "the incentives to invest in other technologies like nuclear power".

But the Prime Minister overruled Mr Hutton and insisted in his first green speech as PM last month that the target would be maintained and met. Now the Business Secretary will also announce tomorrow that he is to set up a panel under his chairmanship to work out how to hit it.

"By 2020 enough electricity could be generated off our shores to power the equivalent of all of the UK's homes," Mr Hutton is expected to say in a speech to the European energy industry in Berlin."The challenge for Government and for industry is to turn this potential – for our energy and economy – into a cost-effective reality. This will be a major challenge."

The announcement is the first step in implementing the offshore wind power revolution, which is likely to run into far less environmental opposition than proposals to build wind farms on land. Once sites have been identified, companies will then draw their plans and submit them for approval to Mr Hutton's department and the Department for Environment, Food and Rural Affairs.

So far two things have held them back: site identification and an assurance that the resulting installations will be connected to the national grid. This move removes the former.

Yesterday Maria McCaffery, chief executive of the British Wind Energy Association, hailed the move as a "decisive step". She added: "We welcome the Government's effort to place wind energy on a sound footing and promote Britain into a leader in this sector."

Britain's wind power revolution, IoS, 9.12.2007, http://environment.independent.co.uk/green_living/article3236132.ece

Oil Producers See the World and Buy It Up

November 28, 2007
The New York Times
By STEVEN R. WEISMAN

WASHINGTON, Nov. 27 — Flush with petrodollars, oil-producing countries have embarked on a global shopping spree.

With a bold outlay of $7.5 billion, the Abu Dhabi Investment Authority is about to become one of the largest shareholders in Citigroup.

The bank had already experienced the petrodollar’s power this month when another major shareholder, Prince Walid bin Talal of Saudi Arabia, cleared the way for the ouster of its chief executive, Charles O. Prince III.

The Dubai stock exchange, meanwhile, is negotiating for 20 percent of a newly merged company that includes Nasdaq and the operator of stock markets in the Nordic region. Qatar, like Dubai a sheikdom in the Persian Gulf, might compete in that deal.

In late October, Dubai, which has little oil but is part of the region’s energy economy, bought part of Och-Ziff Capital Management, a hedge fund in New York. Abu Dhabi this month invested in Advanced Micro Devices, the chip maker, and in September bought into the Carlyle Group, a private equity giant.

Experts estimate that oil-rich nations have a $4 trillion cache of petrodollar investments around the world. And with oil prices likely to remain in the stratosphere, that number could increase rapidly.

In 2000, OPEC countries earned $243 billion from oil exports, according to Cambridge Energy Research Associates. For all of 2007 the estimate was more than $688 billion, but that did not include the last two months of price spikes.

“If you look at gulf countries, they have a total common economy that is about the size of the Netherlands,” said Edward L. Morse, chief energy economist of Lehman Brothers. “These are tiny countries, but they have to place collectively over $5 billion a week from their oil revenues. It’s not an easy thing to do.”

The explosion in investment has set up some of its own cross-currents. While the recent decline in the value of the dollar is making investment in the United States cheaper, many investors are holding back out of fear that the dollar will decline further, diminishing the worth of their dollar holdings.

Many oil investors are also worried about a potential political reaction in the United States similar to the furor of last year when Dubai tried to acquire a company that operates American ports. European leaders, at the same time, worry that Russia is using its oil revenues to snatch up pipelines and other energy infrastructure in their region.

Such concerns seem to be driving investments to other parts of the world, many analysts say.

“The investments are diversifying outside the United States, though the U.S. still has the bulk of it,” said Diana Farrell, director of the McKinsey Global Institute, a research arm of the McKinsey consulting firm, which calculated in October that petrodollar investments reached $3.4 trillion to $3.8 trillion at the end of 2006.

“Europe is a prime target,” she added, “but at least 25 percent of foreign investments from the Persian Gulf are in Asia, the Middle East and North Africa.”

Though oil-producing countries have been looking at investments in the West since the 1970s, their strategies back then were largely confined to safe assets with a low return, like United States Treasury debt.

By 2001, with the collapse in oil prices, many of the oil exporters had depleted their dollar reserves, economists say.

But the boom in oil prices in the last five years has changed all that. It has persuaded oil producers to set up or expand “sovereign wealth funds” as vehicles to invest far more aggressively in the West, in their own economies and in emerging markets.

Other petrodollar investments are made through government-owned corporations, corporations and individuals like Prince Walid, who owns stakes not only in Citigroup but also News Corporation, Procter & Gamble, Hewlett-Packard, PepsiCo, Time Warner and Walt Disney.

The oil-rich nations are also investing more in real estate, private equity funds and hedge funds, analysts say, and increasingly they are investing the money on their own, bypassing the major financial institutions of the United States and Europe.

“The oil-producing countries simply cannot absorb the amount of wealth they are generating,” said J. Robinson West, chairman of PFC Energy. “We are seeing a transfer of wealth of historic dimensions. It is not just Qatar and Abu Dhabi. Investment funds are being set up in places like Kazakhstan and Equatorial Guinea.”

Precise figures of the global picture in petrodollars are not easy to come by, in part because the big investors in the Persian Gulf and elsewhere are not obliged to disclose their portfolios or activities.

The lack of transparency is a problem to leaders of Western industrial economies. In October, Henry M. Paulson Jr., Treasury secretary of the United States, and the finance ministers of other major industrial democracies called for an international code of “best practices” by cross-border investors requiring greater disclosure of assets and actions.

The petrodollar era has benefited the world economy, economists say, notably by enhancing liquidity at a time when foreign currency reserves of export giants in Asia are also making the world flush with cash.

Recently Ben S. Bernanke, chairman of the Federal Reserve, has spoken of a “global savings glut” that has lowered interest rates worldwide. Ms. Farrell, of the McKinsey Institute, estimates that petrodollars may have kept American interest rates three-quarters of a percentage point lower than they would otherwise be, a direct benefit to American consumers.

But the flood of investments is also causing problems, like overheated economies and asset bubbles in oil-rich nations.

“The gulf countries are pouring credit into their economies, adding to excess liquidity,” said Charles H. Dallara, managing director of the International Institute of Finance, an organization of leading private financial companies. “It is eroding the earning power of local citizens and becoming a source of economic instability over time.”

Some investment deals have fallen through, to the embarrassment of all sides. This year Qatar sought to do a leveraged buyout of a retailer in Britain, the J Sainsbury supermarket chain.

After starting the bid in July, Qatar faced concerns from unions, the Sainsbury family and others over whether the Qataris wanted Britain’s third-largest grocery chain just for the underlying real estate and whether the company could survive the amount of debt being incurred. The deal fell through three weeks ago, , when Qatar said that the global credit squeeze made the borrowing costs too high.

The decline in the dollar has also introduced new uncertainties into predicting petrodollar investment patterns. C. Fred Bergsten, director of the Peterson Institute of International Economics, said that while some countries in the gulf were trying to diversify their investments away from the dollar and into euros and pounds sterling, the Saudis were trying to quell that trend out of fear that the dollar will decline further and diminishing the value of their assets.

A measure of discord over the dollar was apparent at the OPEC meeting in Saudi Arabia this month. Iran and Venezuela, the two biggest political foes of the United States among the oil producers, complained that oil was being sold in a currency whose value was eroding by the day.

Oil Producers See the World and Buy It Up, NYT, 28.11.2007, http://www.nytimes.com/2007/11/28/business/worldbusiness/28petrodollars.html

FACTBOX: Why oil prices are at a record high

Wed Nov 21, 2007
7:49am EST
Reuters

(Reuters) - U.S. crude oil hit a record high of $99.29 a barrel on Wednesday.

Strong demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of the year.

Adjusted for inflation, oil is still below the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.

DOLLAR WEAKNESS

The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.

OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

Some analysts say investors have been using oil as a hedge against the weaker dollar.

FUNDS

Since the Federal Reserve cut U.S. interest rates in mid-August and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.

Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.

Some of that money has found its way into energy and commodities, analysts say.

DEMAND

While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a very limited effect on economic growth.

Analysts say the world is coping well with high nominal prices because, adjusted for exchange rates and inflation, they are lower than during previous price spikes and some economies have become less energy intensive.

OPEC SUPPLY RESTRAINT

The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, started to reduce oil output in late 2006 to stem a fall in prices.

Fewer OPEC barrels entering the market helped propel this year's rally and consumer nations led by the International Energy Agency for months urged OPEC to pump more oil.

At a meeting in September, OPEC agreed to increase oil output by 500,000 barrels per day from November 1.

Few in the group believe there is much they can do to tame a market they say defies logic.

NIGERIA

Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.

Oil companies have detailed about 547,000 bpd of shut Nigerian production due to militant attacks and sabotage.

IRAN

Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear program.

Western governments suspect Iran is using its civilian nuclear program as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.

On October 25, Washington slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction.

IRAQ

Iraq is struggling to get its oil industry back on its feet after decades of wars, sanctions and underinvestment.

Exports of Kirkuk crude from the country's north are sporadic as sabotage and technical problems have mostly idled the pipeline since the U.S.-led invasion of Iraq in March 2003, preventing exports returning to the pre-invasion rate.

REFINERY BOTTLENECKS

Refiners in the United States, the world's top gas guzzler, struggled with unexpected outages which drained inventories ahead of the summer, when motor fuel demand peaks.

FACTBOX: Why oil prices are at a record high, R, 21.11.2007, http://www.reuters.com/article/newsOne/idUSL2166824420071121

Oil prices hit a record $97 a barrel

6 November 2007
By Pablo Gorondi, Associated Press Writer
USA Today

Oil futures jumped to a record $97 a barrel Tuesday after bombings in Afghanistan and an attack on a Yemeni oil pipeline compounded supply concerns that have driven crude prices higher in recent weeks.

*Light, sweet crude for December delivery was up$2.80 to $96.78 a barrel on the New York Mercantile Exchange Tuesday after rising as high as $97.

Other energy futures also rose Tuesday. December gasoline futures jumped 6.79 cents to $2.449 a gallon on the Nymex, while December heating oil futures added 6.14 cents to $2.6053 a gallon.

Natural gas for December delivery rose 12.4 cents to $8.126 per 1,000 cubic feet on the Nymex.

In London, Brent crude rose $2.54 to $93.03 a barrel on the ICE Futures exchange. A number of North Sea oil platforms were being evacuated Tuesday in advance of expected severe weather.

Market participants expect the U.S. Energy Department to report Wednesday that oil inventories fell last week, in part because of a suspension of output at Mexico's state oil company Petroleos Mexicanos, a major crude exporter to the United States.

Last week, crude futures jumped more than $4 after figures showed a sharp, unexpected drop in U.S. crude inventories for the second week in a row.

"The oil market is really supported by the tight inventories in the U.S. market and the general expectations for the inventory report this week are that the crude inventories will likely fall," said Victor Shum of Purvin & Gertz in Singapore.

Analysts believe some traders and investors will try to push oil prices to the psychologically important $100-a-barrel level this week. Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

"While it is on the uptrend, there is a tremendous amount of volatility," Shum said. "It's not unusual to see prices change in a range of $2 in a day."

Crude stocks are expected to fall 1.6 million barrels, according to the average forecast in a Dow Jones Newswires survey of energy analysts. Gasoline inventories are expected to increase by 200,000 barrels, while distillates, which include heating oil and diesel fuel, are likely to have fallen 500,000 barrels, the survey showed.

"With the disruption to Mexican crude oil exports, it's to be expected that U.S. crude imports will remain on the low side in tomorrow's DOE report and keep U.S. crude oil stocks under pressure," said Olivier Jakob at Petromatrix in Switzerland.

The Nymex crude contract had fallen $1.95 to settle at $93.98 a barrel Monday, weighed down by news of more Citigroup write-downs, the release of Turkish soldiers that had been captured by Kurdish militants and a drop in U.S. share prices.

Traders and analysts said the pullback was a result of speculators locking in recent gains, rather than a change in sentiment that could threaten the continuation of crude's 15% runup in the past month.

Contributing: Reuters; Associated Press Writer Gillian Wong in Singapore

Oil prices hit a record $97 a barrel, UT, 6.11.2007, http://www.usatoday.com/money/industries/energy/2007-11-06-oil-tues_N.htm

Price of Oil Reaches $96 a Barrel

November 1, 2007
Filed at 7:15 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

SINGAPORE (AP) -- The price of oil rose to a new record above $96 a barrel Thursday after a surprise drop in U.S. crude stockpiles raised concerns about supplies for coming winter demand. Other energy futures also gained.

It was the second week in a row the U.S. Energy Information Administration reported a sharp and unexpected drop in oil inventories.

''The decline in U.S. crude oil inventories has been a key driver of oil prices,'' said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.

Light, sweet crude for December delivery rose as high as $96.24 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore before dropping back to $95.59 a barrel.

Crude prices have reached inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.

''We are stepping into an unknown area. Nobody wants to sell (given the fear of a) further rise,'' broker Ken Hasegawa of Fimat Japan told Dow Jones Newswires.

The December Nymex crude contract rose $4.15 Wednesday to $94.53 a barrel -- the highest-ever settlement.

December Brent crude futures also surged to a new trading record of $91.63 a barrel Thursday on the ICE futures exchange in London, up $1 from the previous session, before retreating to $91.37.

In its weekly inventory report, the U.S. Energy Department's Energy Information Administration said oil supplies fell by 3.9 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 100,000 barrels.

''The report acted to solidify concerns about the possibility of tightening market conditions ahead of the northern winter,'' Moore said.

Much of that decline was due to a big drop in crude supplies at a closely watched oil terminal in Cushing, Oklahoma.

Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread, has given storage tank owners a financial incentive to sell their oil, rather than hold it in inventory. Analysts have also blamed falling Cushing supplies, in part, for the rally in which oil prices have jumped 35 percent since August.

The EIA also reported that refinery activity fell by 0.9 percentage point last week to 86.2 percent of capacity. Analysts had expected an increase of 0.5 percentage point.

Supplies of gasoline rose last week by 1.3 million barrels. Analysts expected a 400,000-barrel decrease.

And inventories of distillates, which include heating oil and diesel fuel, rose by 800,000 barrels. Analysts had expected a 1 million barrel decrease.

The U.S. Federal Reserve's move to cut interest rates by a quarter point also supported prices.

Interest rate cuts generally support oil prices because they tend to send the U.S. dollar downward; the dollar is already at multiple-decade lows against major currencies.

Oil futures have been driven to record levels in recent months partly because they offer a hedge against a weak dollar.

Other energy futures followed oil's lead. Nymex December heating oil rose 1.59 cents to $2.5452 a gallon while December gasoline futures added 1.87 cents to $2.3557 a gallon.

Natural gas futures advanced 7.6 cents to $8.406 per 1,000 cubic feet.

Price of Oil Reaches $96 a Barrel, NYT, 1.11.2007,
http://www.nytimes.com/aponline/business/AP-Oil-Prices.html

Record Price of Oil Raises New Fears

October 17, 2007
The New York Times
By JAD MOUAWAD

The price of oil jumped to yet another record yesterday, sparking predictions that motorists would see sharply higher gasoline prices by Thanksgiving — and fears that $100-a-barrel oil is no longer such a distant prospect.

Crude oil for November delivery settled at a new nominal high of $87.61 a barrel, up $1.48. Futures touched $88.20 a barrel during the day yesterday, after jumping nearly 3 percent on Monday.

In recent years the economy has seemed immune to rising energy prices, but some analysts fear that as they spiral higher they will undermine growth, already strained because of the downturn in the housing market. Such concerns contributed to a stock sell-off yesterday, with broad market indexes closing down about a half-percent.

Oil traders, discussing the latest rise, cited a potential conflict on the border between Turkey and Iraq that could heighten Middle East tensions and possibly affect oil supplies from the region.

“Markets hate uncertainty,” said Lawrence J. Goldstein, an economist at the Energy Policy Research Foundation. “The fundamentals are very supportive of high oil prices. But the latest run-up has nothing to do with market fundamentals, but has to do with fear.”

Since the American invasion of Iraq in 2003, oil exports from northern Iraq through Turkey have been sporadic at best because of frequent bombings of Iraq’s northern pipeline. But as oil producers worldwide are straining to meet demand, commodity investors are focused on anything that might hurt supplies.

Turkey is an important corridor for oil exports from Iraq and the Caspian Sea. The Turkish military has threatened in recent days to cross the Iraqi border to root out Kurdish separatists who have mounted attacks inside Turkey.

Oil prices have more than quadrupled since 2001 as strong demand for oil from Asia, the Middle East and the United States has outpaced the ability of producers to bring on new supplies. With little spare production capacity, the oil markets have become more volatile.

After adjusting for inflation, oil prices are getting closer to historic levels reached in the early 1980s, when an energy crisis, the Iranian revolution, and the outbreak of the Iran-Iraq war sent prices spiraling to about $100 a barrel in today’s dollars.

Energy analysts generally believe the market is overreacting to a possible Turkish incursion into northern Iraq. Antoine Halff, an analyst at Fimat, an oil brokerage, said he expected prices to ease once the market realized supplies would not be affected.

“The rally seems bound to run out of steam,” he said.

In the meantime, though, higher crude will translate into more costly gasoline, according to AAA, the automobile club. Gasoline has declined in recent weeks after demand dropped with the end of the summer driving season. But that is likely to change as refiners begin passing on higher oil costs to consumers, according to AAA’s spokesman, Geoff Sundstrom.

Gasoline averaged $2.76 a gallon nationwide yesterday, according to AAA. Gasoline exceeded $3 a gallon this summer.

Reacting to the rally of the last week, the Organization of the Petroleum Exporting Countries ruled out an emergency release of oil supplies. When it met in Vienna last month, the oil cartel agreed to a modest production increase of 500,000 barrels a day.

OPEC’s secretary general, Abdalla Salem El-Badri, said in a statement yesterday that OPEC was concerned with rising prices. But he pointedly added that “there has been no interruption in crude supplies.”

“While the organization does not favor oil prices at this level, it strongly believes that fundamentals are not supporting current high prices and that the market is very well supplied,” Mr. El-Badri said. “The rising oil prices which we are currently witnessing are, however, largely being driven by market speculators.”

Most analysts say the reasons behind the price increases are complex. They include refinery bottlenecks in the United States, a weak dollar, geopolitical threats in the Middle East, the war in Iraq, violence in oil-producing Nigeria, and resource nationalism in Venezuela and Russia that is driving away foreign oil investment.

They also include strong growth in demand from China and the Middle East, where fuel prices are kept artificially low through government subsidies.

The International Energy Agency, an energy adviser to industrialized countries, said last week that it expected global oil demand to jump by 2.4 percent next year, to 88 million barrels a day. Some traders cited that prediction as one cause of the rally, although several analysts said the figure was unrealistically high given the slowing global economy.

“There is a perception that fundamentals are more bullish than they actually are,” said Roger Diwan, an analyst at PFC Energy, an oil consulting firm.

Investors and hedge funds have also contributed to the run-up. Commodity investors seem to have shrugged off the risk of a recession in the United States after the Federal Reserve cut interest rates last month. As a result, they have returned to commodity markets in force recently, analysts said.

Some investors are buying oil to hedge against the decline in the value of the dollar. Since the beginning of the year, the dollar has declined nearly 8 percent against the euro.

Record Price of Oil Raises New Fears, NYT, 17.10.2007, http://www.nytimes.com/2007/10/17/business/worldbusiness/17oil.html

A Quest for Energy in the Globe’s Remote Places

October 9, 2007
The New York Times
By JAD MOUAWAD

HAMMERFEST, Norway — For a quarter-century, energy executives were tantalized by vast quantities of natural gas in one of the world’s least hospitable places — 90 miles off Norway’s northern coast, beneath the Arctic Ocean.

Bitter winds and frequent snowstorms lash the region. The sun disappears for two months a year. No oil company knew how to operate in such a harsh environment.

But Norway has finally solved the problem. The other day, on an island just offshore, a giant yellow flame illuminated the sky here. It was just a temporary flare for excess gas, but it signaled a new era in energy production.

Across the bay from this small fishing town, where reindeer wander the streets, one of the world’s most advanced natural gas plants is coming to life.

Within weeks, gas will start crossing the ocean in specially designed ships, feeding into the pipeline network for the American East Coast. Before Christmas, furnaces in Brooklyn and stoves in Washington will be burning the gas. It will be the first commercial energy production from waters north of the Arctic Circle.

As global demand soars and prices rise, energy companies are going to the ends of the earth to find new supplies.

In Kazakhstan, petroleum engineers are braving wild temperature swings in the shallow waters of the Caspian Sea to tap the biggest oil discovery of the last 30 years. They are drilling wells six miles deep in the Gulf of Mexico. And on the island of Sakhalin, off far eastern Russia, they have drilled horizontal wells through miles of rock to produce oil from a stretch of ocean notable for giant icebergs.

But as the industry extends its reach, the quest is becoming more arduous. The cost of producing new oil and gas is rising fast, and companies are troubled by worsening delays. Drilling rigs are scarce. Engineers, geologists and petroleum specialists are in critically short supply.

And the politics of oil and gas are getting trickier, with producing countries demanding a bigger share of the revenue and growing angry about project delays that postpone their payments.

Industry executives say their ability to keep up with global demand is badly strained.

“We’re facing bigger risks and bigger difficulties when we go into new frontier regions,” said Odd A. Mosbergvik, a senior manager at the dominant Norwegian energy company, StatoilHydro. “But this is why the oil industry is for big boys. It’s a big gamble.”

The industry’s new reach is shifting the economics of energy extraction. According to a recent study, discovery and development costs, a key indicator for the industry, tripled from 1999 to 2006, to nearly $15 a barrel.

Last year alone, companies spent $200 billion developing new energy projects worldwide, according to the study by the consulting firms John S. Herold Inc. and Harrison Lovegrove — an amount larger than the economies of 147 countries.

These higher costs mean that the industry needs higher energy prices to finance new projects. They are also constraining its ability to expand quickly.

“There are no easy barrels left,” said J. Robinson West, chairman of PFC Energy, an industry consulting firm in Washington. “The only barrels are going to be the tough barrels.”

There is plenty of oil and gas still in the ground, energy executives say. But global consumption is rising so fast that they must keep looking for new sources. Despite worldwide concern over global warming and the role of fossil fuels in causing it, United States government specialists project that global oil and gas demand will increase by some 50 percent in the next 25 years.

At the same time, the big discoveries of the last three decades, like those in the North Sea and on the North Slope of Alaska, are drying up. This is leading oil companies to remote places like Hammerfest.

The United States will need to import about a fifth of the natural gas it uses by 2030, mostly in a liquefied form shipped across the seas in tankers. Such imports are expected to swell more than sixfold from 2005 to 2030, according to the Energy Information Administration. And consumption is rising fast in the economically booming Asian countries.

Producing oil and gas in polar regions is not entirely new, of course. Russian engineers have been doing it in Siberia for decades, with mixed results, and Alaska’s North Slope was long the most important United States oil field.

But those fields are on land. The Norwegian field is the first Arctic project to tap oil and gas reserves far offshore, in water more than 1,000 feet deep, where traditional exploration methods would be too costly.

The gas field, 340 miles north of the Arctic Circle beneath a stretch of ocean more commonly known as the Barents Sea, is called Snow White — Snohvit in Norwegian, where energy projects are named after mythical characters. Though the field was discovered in 1981, oil executives long considered Snohvit out of reach, because of the Barents Sea’s shifting ice packs, brutal waves and extreme cold.

“This is considered an unfriendly place, even by Norwegian standards,” Mr. Mosbergvik said.

Another big problem the engineers faced here was that Snohvit is situated hundreds of miles from Norway’s traditional pipeline network.

Over the years, Statoil considered many ways to get at the gas, including huge offshore platforms armored against the waves, but discarded them as too costly. Building a vast undersea pipeline that would take the gas south along the country’s stretched coastline was also out of the question.

Statoil engineers eventually came up with an ingenious solution. They installed production equipment directly on the seafloor, with no rigs breaking the surface. The wellheads are linked by 90 miles of pipe to a small island just off Hammerfest. Anti-freeze is injected into the pipes to prevent the natural gas from clogging on its way to shore.

On the island, Melkoya, Statoil built a processing facility to separate the brew of natural gas, oil, water and carbon dioxide that flows out of the field. The natural gas is cooled to a temperature of 260 degrees below zero, shrinking its volume to one-six hundredth and turning it into a liquid that can be shipped in tankers.

Construction of the liquefaction plant over the last several years involved 22,000 workers, one of the largest industrial projects in Europe, and cost nearly $10 billion, up from $6 billion when the project was begun in 2002.

“We did not have the experience to operate in an environment like this,” Mr. Mosbergvik acknowledged.

The field is so large that it could eventually supply nearly 10 percent of the demand for natural gas demand in eastern states of the United States. Dominion, an energy company, has expanded a gas import terminal at Cove Point, Md., to accommodate the Arctic gas, according to Donald R. Raikes, its vice president for marketing and customer services.

By the end of October, Statoil’s gas will begin flowing through a network of pipes to a stretch of the country from Maryland to Massachusetts, the largest consumer market in the United States, with some 16 million residential customers and 5 million industrial clients.

With the plant nearly ready, Statoil maintains that the Barents Sea could turn into a major oil and gas region in coming decades. Indeed, the world’s fast-rising use of fossil fuels, by contributing to global warming, could eventually make the Arctic more accessible for oil and gas production.

In Hammerfest,residents have welcomed Statoil’s project, hoping it will offset declines in fishing. Modern buildings are rising to house the influx of gas workers. New taxes from the gas plant are helping finance a cultural center.

Statoil hopes to double its capacity on Melkoya by 2015. That will require finding new gas fields in the Barents Sea.

Hans M. Gjennestad, strategy manager at Statoil for the Barents region, said, “We believe this resource potential may contribute significantly to the long-term security of supplies of Europe and the United States.”

A Quest for Energy in the Globe’s Remote Places, NYT, 9.10.2007, http://www.nytimes.com/2007/10/09/business/worldbusiness/09polar.html?hp

Demand for Durable Goods Plummets

September 26, 2007
By THE ASSOCIATED PRESS
Filed at 10:49 a.m. ET
The New York Times

WASHINGTON (AP) -- Demand for big-ticket manufactured goods plunged in August by the largest amount in seven months, with widespread weakness signaling a slowdown in the nation's industrial sector.

The Commerce Department reported Wednesday that orders for durable goods, everything from commercial jetliners to home appliances, fell by 4.9 percent in August, the biggest decline since a 6.1 percent fall in January.

It was far larger than the 3.5 percent drop that economists had been expecting and resulted from across-the-board decreases in a number of categories. The concern is that the steep downturn in housing and turbulence in financial markets could start to affect the economy more broadly, raising the risks of a full-blown recession.

The Federal Reserve last week cut a key interest rate by a bigger-than-expected half-point, hoping to avert a slump. Analysts believe further rate cuts are likely at the Fed's final two meetings of the year in October and December.

In a favorable development for the economy, the United Auto Workers and General Motors Corp., agreed early Wednesday to a tentative contract that ends a two-day national strike. A lengthy strike against the nation's largest automaker could have had ripple effects that would have dragged business growth down even further.

Many analysts believe the overall economy, after racing ahead at a 4 percent annual rate in the spring, slowed in the summer to growth in the gross domestic product of around 2.5 percent. They also believe this growth rate will slow to around 2 percent in the final three months of the year. Some put the chance of a recession as high as 50-50.

The 4.9 percent fall in orders for durable goods, items expected to last three or more years, followed a big gain of 6.1 percent in July. That increase reflected in part a jump in orders for autos as dealers tried to stockpile inventory in advance of a threatened strike.

For August, orders for transportation equipment fell 11.2 percent, the biggest setback since January. The weakness was led by a 41 percent drop in demand for commercial aircraft. Boeing Co. reported fewer orders in August after a big surge in July.

Orders for motor vehicles and parts dropped 6.2 percent after having surged by 10.5 percent in July. Offsetting the weakness somewhat was a 43.2 percent surge in demand for military aircraft.

Excluding the volatile transportation category, orders would have still been down by 1.8 percent after a 3.4 percent rise in orders outside of transportation in July.

Orders fell in a large number of categories including primary metals such as steel, machinery and communications equipment. Demand was up for computers and electrical equipment.

Demand for Durable Goods Plummets, NYT, 26.9.2007, http://www.nytimes.com/aponline/business/AP-Economy.html

Ministers act to stop lights going out in 2015

· Threat of energy crisis sees nuclear go-ahead
· Coal-fired stations coming to the end of their lives

Wednesday May 2, 2007
Guardian
Larry Elliott and Mark Milner

Fears that Britain could be plunged into an energy crisis by 2015 will result in the green light being given by Christmas for a new generation of nuclear power stations, senior Whitehall sources are indicating.

With more than a fifth of the UK's electricity generating capacity due to be closed down in the next eight years, ministers are planning to fast-track Labour's energy strategy with the publication of two white papers this month.

Sources said that the government would mount a full public consultation process over the coming months, after which a final decision will be taken. But ministers have been persuaded of the need to act quickly. "We are concerned that unless we act soon, the lights could go out in 2015 in the event of a really hot or really cold spell", said one Whitehall insider.

One of the white papers will argue that Britain needs a balanced energy portfolio, including nuclear, to meet its needs over the coming decade. The other is designed to speed up the planning system, allowing new power stations to be given the go-ahead within two to three years.

The government's energy blueprint will include plans for an expansion of renewable forms of electricity generation, but ministers believe there will still be a potential shortfall by the middle of the next decade. They are concerned that victory for the Scottish Nationalists in tomorrow's elections could sound the death knell for more windfarms in Scotland.

Consultation on energy policy, ordered by the courts after a judicial review earlier this year, will be relaunched at the same time as the white paper is published and the government hopes to be in a position to unveil its plans before the end of the year.

Britain is facing the risk of an "energy gap" over the coming years as ageing nuclear plant is closed down and a number of coal-fired power stations are due to stop generating by the end of 2015 at the latest because they do not meet the European commission's emission regulations. Two nuclear stations were closed at the end of last year and another six nuclear plants are currently scheduled to close between now and 2015.

At present Britain's generating capacity is around 20% higher than peak demand, which enables the system to maintain full supplies even if a number of power stations unexpectedly drop off the grid. Industry estimates suggest more than 20 gigawatts of generating capacity will be retired over the next 15 years and it will cost about £20bn to replace. Generating companies have tabled plans for around 20 megawatts of new capacity but while some have passed the planning stage others are barely beyond the drawing board.

According to the source the government is worried the comfort zone - the excess of supply over peak demand - will be eroded between now and 2015 and that, despite efforts to conserve energy, there is a real risk of power shortages.

Generating companies accept the need for new capacity, but are facing a number of uncertainties over what kind of capacity should be built. A number of clean coal projects are on the stocks but the big questions are the extent of the political commitment to nuclear power and what will happen to the price of carbon under carbon dioxide emission trading schemes.

Companies will be reluctant to commit to nuclear if they believe a policy of new build would be overturned by a subsequent government, while the price of carbon will be a key influence on the economics of the industry. A high price will encourage renewables and nuclear but a lower price would suggest gas and coal would remain top of the agenda.

The government has set a target that 20% of Britain's electricity will come from renewables by 2020 but the source said that was challenging and would become even more difficult if Labour were defeated in the Scottish elections.

The government is also concerned about the decline in output from the North Sea which is occurring more rapidly than earlier forecasts had predicted.

Ministers act to stop lights going out in 2015, G, 2.5.2007, http://business.guardian.co.uk/story/0,,2070133,00.html

Oil prices finish 2006 about where they started,

but consumers still got pinched

Updated 12/29/2006 6:42 PM ET
AP
USA Today

WASHINGTON (AP) — Oil prices settled above $61 a barrel Friday to finish 2006 roughly where they began, marking another tough year for energy consumers and another stellar one for the petroleum industry.

On Friday, light sweet crude for January delivery rose 52 cents to settle at $61.05 a barrel on the New York Mercantile Exchange, up a penny from where they ended last year.

Nymex oil futures peaked at $78.40 on July 14, but averaged $66.25 for the year, compared with $56.70 in 2005 and $41.47 in 2004.

It was the fifth straight year in which oil prices were higher than the year before, on average.

Many analysts are looking for that streak to end, but they still expect crude-oil futures next year to average more than $60 a barrel because of robust demand growth in Asia and the Middle East, efforts by OPEC to trim supply and market-rattling instability in energy-rich countries such as Nigeria and Iraq.

Slower economic growth in the USA and a production spurt from non-OPEC countries should keep prices below the 2006 average, analysts said. And with expectations of fewer refining bottlenecks, gasoline and other fuels should be less expensive — though not cheap when compared with costs from just a few years ago.

"There will be an easing of conditions, but not a dramatic reversal," said Antoine Halff, an analyst at Fimat, who cautioned that supply disruptions — whether the result of hurricanes or geopolitics — have the potential to cause short-term spikes.

"Nigeria looks increasingly unstable," Halff said, adding that internal politics in Iraq could hamper that country's all-important oil sector, too. The other country to keep an eye on is Iran, whose nuclear ambitions recently prompted United Nations sanctions.

The average retail price of gasoline in the U.S. ended the year around $2.34 a gallon, or 14 cents higher than a year ago. Analysts say the $3 level could be within reach in some parts of the country next summer, but that prices in 2007 should mainly be lower than in 2006, when they averaged $2.38 a gallon nationwide.

Oil Price Information Service analyst Tom Kloza said he expects the cost at the pump for the eastern two-thirds of the country to rise to $2.50-$2.80 a gallon ahead of summer, the peak demand period. Motorists out West will, as usual, pay even more, he said.

Kloza said "petronoia," or fears about supply disruptions, should drive the retail price of gasoline to $3 a gallon and more in California, Nevada, Oregon and Washington.

The price of natural gas plummeted almost 41% from start to finish in 2006 thanks in large part to mild weather and bulging U.S. inventories, but remained high by historical standards. For the year, natural gas futures averaged $6.98 per 1,000 cubic feet, or 23% below the 2005 average of $9.01.

Natural gas futures settled Friday at $6.299 per 1,000 cubic feet, an increase of 5.1 cents. In other Nymex trading, heating oil futures declined by 2.52 cents to settle at $1.5979 a gallon, while unleaded gasoline futures fell 4.02 cents to settle at $1.5419.

The high price of oil and natural gas throughout 2006 was a boon to major oil companies such as ExxonMobil (XOM), Chevron (CVX) and ConocoPhillips (COP), who are expected to earn more than $70 billion combined, according to analysts surveyed by Thomson Financial. In 2005, the same three companies raked in just under $64 billion.

Their soaring profits and stock prices again caught the attention of Congress, which will be controlled by Democrats next year for the first time in more than a decade.

A price below $60 a barrel would be welcome news to energy-intensive industries, particularly airlines, which have retooled their operations to use fuel more efficiently but are still struggling to maintain profitability.

Global oil demand is expected to rise 1.5 million barrels a day to 86 million barrels a day in 2007, according to the Paris-based International Energy Agency. But this increased consumption shouldn't burden the market too badly, analysts say, because supplies from non-OPEC countries in Africa, Latin America and the former Soviet Union are anticipated to rise by nearly that much.

Oil prices finish 2006 about where they started, but consumers still got pinched, UT, 29.12.2006, http://www.usatoday.com/money/industries/energy/2006-12-29-yearend-oil_x.htm

On This Day - June 13, 1957

From The Times Archive

A year after the first nuclear power station opened in Britain,
and at a time when the country was conducting atomic bomb tests
on Christmas Island in the Pacific,
scientists were beginning to question if the risks
from nuclear power were acceptable

“VERY small amounts at the present time but amounts that we need to watch” was the phrase applied to radiation dangers by Dr. F. G. Spear in an address yesterday to the Royal Society of Health in London. Dr Spear is deputy director of the Strangeways Research Laboratory, Cambridge, and served on one of the panels contributing to the Medical Research Council study, published last year, of radiation hazards.

He commented that the amounts of radioactive matter scattered into the atmosphere by bomb tests and later incorporated in plants or ingested by animals or fish used as human food, though detectable, had so far no biological significance. Dust near the site of an explosion might be highly charged with radioactive material and sufficient in quantity to be a serious hazard.

On civil uses of radiation he observed that nearly everyone took sides, very often without the slightest knowledge. As a rule beneficial effects had been discovered before harmful effects, which tended in the early, optimistic days to be explained away. The present uneasiness was partly the result of a genetic hazard of undetermined dimensions, and partly the fact that any element could be made radioactive by the “machinations of modern physicists”.

From The Times Archives > On This Day - June 13, 1957, The Times, 13.6.2005, http://www.newsint-archive.co.uk/pages/main.asp

Thursday April 17, 1873

The happy and wealthy road to Wigan Pier

From the Guardian archive

If there be one who proposes to visit Wigan - on the same purpose as the provincial runs up to London, or the Cockney over to Paris, or the legislator across to New York, or the New Yorker all over Europe, to notice what alteration in its condition has been made by circumstances of abnormal and enormous prosperity - let him select the mining metropolis of West Lancashire on its market days.

Then will a sight present itself which perchance may convince him that when the sage wrote there was nothing new under the sun he had not contemplated the probability of a stranger being in Wigan on Monday, Friday, or Saturday.

Wigan market has an individuality all its own. A long street winds up and down through the heart of the town. Shops and houses range themselves irregularly on either side.

Above all things the Wigan collier is independent. His motto might be taken from the Deeside miller's song - "I care for nobody, and nobody cares for me".

In the bar are a dozen youths - the "young persons" of the Mines Regulation Act. Half of them are smoking cigars. They are well-dressed young persons with clean linen, smart neckties, gorgeous "belchers" round their throats, and brightly polished boots. The high wages are certainly producing a better style of dress. Five years ago the young man who was "smart" in his appearance would be set down as a "swell" , the most objectionable form of Philistinism.

A dense cloud of smoke rises from the pipes of the smokers. Talk is running solely upon "dawgs", "pigyuns" and "wrastling ", the odds on the Chester Cup and the Derby. This is the collier's Tattersall's, where a large portion of his surplus earnings finds itself wings fleeter than his pigeons with which to fly away.

There was no lack of money. Sovereigns were often changed. Only in one house did I hear any reference to the wages question - that was the intention to demand another 10 per cent.

These ladies who are the fortunate wives of colliers, have they not enough of what Dick Swiveller calls "the ready?" Oh, the pleasant feeling excited by jingling coins in one's own pocket! Her husband is earning his £3 a week, and two sons are bringing in an equal sum. The butcher weighs and prices the massive mutton joint, and without haggling she pays.

A stall or two away is a fishmonger. Forthwith a large piece of [salmon] is added to her provision for Sunday.

· This is one in a series of reports on colliers at home

From the Guardian archive > The happy and wealthy road to Wigan Pier, G, Thursday April 17, 1873, Republished 17.4.2006, http://www.guardian.co.uk/fromthearchive/story/0,,1755389,00.html

commodities

commodities > coal

commodities > oil > gas

commodities > gold

economy

economy > capitalism

economy > currencies, credit card, money

economy > currencies > euro

economy > business > companies / firms / corporations

economy > inflation, deflation, stagflation

economy > consumer

economy > consumer > shopping, retailers

economy > consumer > e-commerce, online shopping / retailers

economy > consumer > bills

economy > auction, bid

economy > lottery, gambling

economy > debt, deficit, borrowing

economy > U.S. federal budget

economy > taxes

economy > banks > Bank of England

economy > banks

economy > markets / stocks / stock markets

economy > down

economy > bailout

economy > downturn / recession / depression / recovery

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economy > jobs > unemployment

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