Spartan Debate Institute Oil Core v. 1.

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Burke/Stone/Walters lab 2008 - 2009

Oil Core
*Peak Oil* Oil Core...........................................................................................................................................................................1 Peak Oil – True (Frontline).............................................................................................................................................3 Peak Oil True – XT #1 – Will happen around 2012.......................................................................................................6 Peak Oil True – XT #2 – Alternatives sources can’t solve.............................................................................................7 Peak Oil True – XT #3 – Not fringe science...................................................................................................................8 Peak Oil True – XT #5 / No Reserves.............................................................................................................................9 Peak Oil –Not true (Frontline)......................................................................................................................................11 Peak Oil –Not true / XT #1(a) – Reserves will exist for a while .................................................................................14 Peak Oil –Not true / XT #1(b) – Unconventional sources............................................................................................16 Peak Oil –Not true / XT #2 – Peak Oil is a myth.........................................................................................................17 Peak Oil –Not true / XT #3 – Hubbert’s Model wrong.................................................................................................18 Peak Oil –Not true / XT #4 – New Tech Solves...........................................................................................................20 Peak Oil – No Impact....................................................................................................................................................21 Yes – Prices High.........................................................................................................................................................22 Perception Key to Prices...............................................................................................................................................23 High Prices Inevitable - Frontline.................................................................................................................................24 High Prices Inevitable - Frontline.................................................................................................................................25 High Oil Prices Inevitable XT #1 – China/India..........................................................................................................26 High Prices Inevitable XT #3 – Global Demand..........................................................................................................27 Oil Prices – Russia DA (1nc)........................................................................................................................................28 Russian Economy High.................................................................................................................................................29 High Oil Prices Key Economy......................................................................................................................................31 US-Russian Relations Impact Add-on..........................................................................................................................33 Russia Has Vast Oil Supplies.......................................................................................................................................34 AT: Russia has diversified economy.............................................................................................................................35 Russia production has peaked.......................................................................................................................................36 Alexander Kolyandr, Dow Jones Newswires, July 1 2008 OIL CONGRESS: Russia's Oil Output Has Reached Plateau -Dep Min..........................................................................................................................................................36 http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20080701%5cACQDJON200807010803DOWJONES DJONLINE000223.htm&&mypage=newsheadlines&title=OIL%20CONGRESS:%20Russia's%20Oil%20Output%2 0Has%20Reached%20Plateau%20-Dep%20Min.........................................................................................................36 MADRID -(Dow Jones)- Russia's oil production will grow only marginally this year and in the near term, Russia's deputy minister for energy said Tuesday, and has in effect hit a plateau for now........................................................36 "No one should expect that Russia's oil production growth will match the one we've witnessed in the past eight years," Anatoly Yanovsky said on the sidelines of the World Petroleum Congress.....................................................36 Over that period, Russia's annual oil production grew from 360 million metric tons to just above 490 million tons. 36 "Nothing like that will happen", the official said, adding, that Russia's oil production has hit a plateau which will remain unchanged until new large fields in Eastern Siberia and offshore come upstream..........................................36 After several years of stable growth, production of oil and gas condensate in Russia dropped 0.3% in the first four months of this year compared with the same period a year previously, to 161 million tons, or 1.18 billion barrels, according to the government.........................................................................................................................................36 Russia has diversified...................................................................................................................................................37 Russian economy resilient............................................................................................................................................38 High Oil Prices Bad – Deters Economic Liberalization...............................................................................................39 High Oil Prices Bad – Collapse Russian Democracy...................................................................................................40 High Oil Prices Bad – Causes hyperinflation...............................................................................................................41 High oil prices bad: Hurt Russian Economy ................................................................................................................42 Russia weakness /collapse impact................................................................................................................................43 Renewables (1nc)..........................................................................................................................................................44 High Prices key to Renewables.....................................................................................................................................45 Renewables 2ac.............................................................................................................................................................49 AT Renewables – XT #1 – Not dependent on oil prices...............................................................................................50

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Renewables Fail...........................................................................................................................................................51 Oil Prices – Saudi Arabia DA (1nc)..............................................................................................................................52 Saudi Economy High....................................................................................................................................................53 Link XT / High Oil Prices Key to SA Stability............................................................................................................54 Impact XT / US draw in...............................................................................................................................................55 Saudi Arabia Answers (2AC)........................................................................................................................................56 Saudi Arabia Answers – XT #1 / SA has diversified....................................................................................................57 Saudi Arabia Answers – XT #3 / High Oil Prices= Reforms........................................................................................58 Saudi Arabia Answers – XT #4 / SA funds terrorism...................................................................................................59 Backstopping (1NC).....................................................................................................................................................60 Yes - Renewables..........................................................................................................................................................61 Link XT – OPEC will flood the market........................................................................................................................62 Impact XT – Low oil prices increase dependence........................................................................................................65 No link – OPEC can’t control market with flooding....................................................................................................66 Hedge Funds Collapse (1nc).........................................................................................................................................67 Hedge Funds XT...........................................................................................................................................................68 Oil Prices Fluctuate.......................................................................................................................................................69 High oil prices (bad) = dollar collapse..........................................................................................................................70 High Oil Prices (bad) - Hurt Economy ........................................................................................................................71 High Oil Prices (Bad) – Collapse Democracy (general)...............................................................................................72 AT: Venezuela Oil Prices/Econ DA..............................................................................................................................73 Extend #3- Resources Curse.........................................................................................................................................75 Dependence Bad – Terrorism Module..........................................................................................................................76 Dependence Bad – Causes Terrorism (XT)..................................................................................................................77 Dependence Bad – Oil Shocks Module........................................................................................................................81 Dependence Bad – Causes Oil Shocks (XT)................................................................................................................82 Shocks bad – A2: the economy will bounce back.........................................................................................................83 Strategic Reserves Fail..................................................................................................................................................84 Oil Shocks won’t cause recession.................................................................................................................................85 Dependence Bad – Caspian..........................................................................................................................................88 Dependence Bad – US Hegemony...............................................................................................................................90 Dependence Bad – Middle East Democracy................................................................................................................92 Dependence Good – US Presence in the Caspian.........................................................................................................93 Dependence Good – US Presence in the Caspian.........................................................................................................94 Caspian Defense............................................................................................................................................................95 Dependence Good – Prevents shocks...........................................................................................................................97 Dependence good – terrorism.....................................................................................................................................100

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Peak Oil – True (Frontline)
1. Peak will happen around 2010-2012. New technologies can’t produce enough to really matter and new discoveries have been declining for ever.
Michael

Klare June 26, 2008 http://www.fpif.org/fpiftxt/5326 End of the Petroleum Age?

We could live with the decline of these great reservoirs if we had some confidence that new reserves were being discovered all the time to replace all those now reaching the end of their productive life. But this is not the case. Despite a sharp increase in spending on exploration and development, the rate of new reserve discovery has been falling steadily for the past 30 years. According to the U.S. Army Corps of Engineers, the last decade in which new discoveries exceeded the rate of extraction from existing fields was the 1980s. Since then we have been consuming more oil than we have
been finding – a pattern that can only result, eventually, in the complete exhaustion of the world’s known petroleum reserves. Few New Finds

– Kashagan in Kazakhstan’s sector of the Caspian Sea – and it has turned out to be an unmitigated disaster. With estimated reserves of 7-13 billion barrels of oil and natural gas liquids, Kashagan was originally expected to come on line in 2005 at a cost of $50 billion. As a result of environmental hazards, government intervention, and disputes among members of the consortium established to operate the field, it is now scheduled to begin pumping oil in 2011 at the earliest at a minimum cost of $135 billion. Recently the Brazilian state firm Petrobras has announced an equally large discovery in the deep waters of the Atlantic, some 150 miles off the coast of Rio de Janeiro. Although very promising, the Tupi field will take many years to develop and will require the use of more costly and advanced technology than any now in widespread use. These new discoveries may add one or two million barrels of
Only one giant field has been discovered in the past 25 years oil per day to existing output in 2015 and beyond, but by that point output from existing fields is likely to be considerably lower than it is today. Nobody can predict exactly where combined worldwide production will stand at that time. But more and more analysts are coming to the conclusion that the output of conventional (i.e., liquid) petroleum will peak at about 95 million barrels per day in the 2010-2012 time-frame and then begin an irreversible decline. The addition of a few million added barrels from Kashagan or Tupi will not alter this trend.

2. Peak is coming - Unconventional oil sources can’t fill the gap.
Robert L. Hirsch SAIC, Project Leader Roger Bezdek, MISI Robert Wendling MISI February 2005 PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf We know of no comprehensive analysis of how fast the Canadian and suddenly short of conventional oil. Recent statements by the World Venezuelan heavy oil production might be accelerated in a world

,

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Energy Council (WEC) guided our wedge estimates:143 • “Unconventional oil is unlikely to fill the gap (associated with conventional oil peaking). Although the resource base is large and technological progress has been able to bring costs down to competitive levels, the dynamics do not suggest a rapid increase in supply but, rather, a long, slow growth over several
decades.”

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3. Peak is approaching. Where once peak oil studies were fringe studies now even the most optimistic and governmental sources agree that the peak will be soon. We must act now to have a chance
John

Bellamy Foster m o n t h l y r e v i e w / j u l y - a u g u s t 2 0 0 8 Peak Oil and Energy Imperialism

Publicly of course the peak oil problem has often been characterized by establishment sources and the media as a “fringe issue.” Yet over the past decade the question has been pursued systematically with increasing concern within the highest echelons of capitalist society: within both states and corporations.24 In February 2005 the U.S. Department of Energy released a major report that it had commissioned entitled Peaking of World Oil Production: Impacts, Mitigation, and Risk Management. The project leader was Robert L. Hirsch of Science Applications International Corporation. Hirsch had formerly occupied executive positions in the U.S. Atomic Energy Commission, Exxon, and ARCO. The Hirsch report concluded that peak oil was a little over two decades away or nearer. “Even the most optimistic forecasts,” it stated, “suggest that world oil peaking will occur in less than 25 years.” The main emphasis of the Hirsch report commissioned by the Department of Energy, however, was on the issue of the massive transformations that would be needed in the economy, and particularly transportation, in order to mitigate the harmful effects of the end of cheap oil. The enormous problem of converting
virtually the entire stock of U.S. cars, trucks, and aircraft in just a quartercentury (at most) was viewed as presenting intractable difficulties.25 In October 2005, Hirsch wrote an analysis for Bulletin of the Atlantic Council of the

oil peaking will be abrupt and revolutionary. The world has never faced a problem like this. Without massive mitigation at least a decade before the fact, the problem will be pervasive and long lasting.”26 Similarly, the U.S. Army released a major report of its own in September 2005 stating: The doubling of oil prices from 2003–2005 is not an anomaly, but a picture of the future. Oil production is approaching its peak; low growth in availability can be expected for the next 5 to 10 years. As worldwide petroleum production peaks, geopolitics and market economics will cause even more significant price increases and security risks. One can only speculate at the outcome from this scenario as world
United States on “The Inevitable Peaking of World Oil Production.” He declared there that, “previous energy transitions (wood to coal, coal to oil, etc.) were gradual and evolutionary; petroleum production declines.27 Indeed, by 2005 there was little doubt in ruling circles about the likelihood of serious oil shortages and that peak oil was on its way soon or sooner. In its 2005 World Energy Outlook the IEA raised

.” Likewise the In February 2007 the U.S. Government Accountability Office (GAO) released a seventy-five-page report on Crude Oil pointedly subtitled: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production. It argued that almost all studies had shown that a world oil peak would occur sometime before 2040
the issue of Simmons’s claims in Twilight in the Desert that Saudi Arabia’s super-giant Ghawar oil field, the largest in the world, “could,” in the IEA’s words, “be close to reaching its peak if it has not already done so U.S. Department of Energy, which had initially rejected Simmons’s assessment, backtracked between 2004 and 2006, degrading its projection of Saudi oil production in 2025 by 33 percent.28 and that U.S. federal agencies had not yet begun to address the issue of the national preparedness necessary to face this impending emergency. For the GAO the threat of a major oil shortfall was worsened by the political risks primarily associated with four countries, accounting for almost one-third of world (conventional) reserves: Iran, Iraq, Nigeria, and Venezuela. The fact that Venezuela contained “almost 90 percent of the world’s proven extraheavy oil reserves” made it all the more noteworthy that it constituted a significant political risk” from Washington’s standpoint.29 In April 2008, Jeroen van der Ver, CEO of Royal Dutch Shell, pronounced that “we wouldn’t be surprised if this [easy] oil would peak somewhere in the next ten years.” Due to a combination of factors including production shortfalls and a declining dollar, oil in May 2008 reached over $135 a barrel (it

The same month Goldman Sachs shocked world capital markets by coming out with an assessment that oil prices could rise to as much as $200 a barrel in the next two years. Western oil interests were particularly
averaged $66 in 2006 and $72 in 2007). distressed that the first production from Kazakhstan’s Kashagan oil field (considered the largest oil deposit in the world outside the Middle East) was eight years behind schedule due in part to waters frozen half the year. By May 2008 the IEA, according to analysts for the New York Times, was preparing to reduce its forecast of world oil production for 2030 from its earlier forecasts of 116 mb/d to no more than 100 mb/d.30 It was alarm about gasoline prices and national energy security (and no doubt the specter of a world oil peak) that induced the Bush administration in 2006 to take a more aggressive stance in promoting cornbased ethanol production as a fuel substitute. In 2007, 20 percent of U.S. corn production was devoted to ethanol to fuel automobiles. The price of grain spiked worldwide partly as a result. As environmentalist Lester R. Brown wrote in his Plan B 3.0: “Suddenly the world is facing a moral and political issue that has no precedent: Should we use grain to fuel cars or to feed people?...The market says, Let’s fuel the cars.”31

4. The technology argument is wrong—no chance that can resolve the peak.
Q.Y. Meng (State Key Laboratory of Petroleum Resource and Prospecting, China University of Petroleum, Beijing) and

R.W. Bentley

(Department of Cybernetics, The University of Reading) August 2008 Energy 33 (2008) 1179– 1184
the case for ‘abundant supplies of oil’
Maugeri’s final argument is that ‘‘in countries closed to foreign investments, the technologies and techniques used are, in most cases, obsolete’’

Global oil peaking: Responding to

. Though some of the major countries have been closed to upstream oil investment, few have been closed to technological improvement. Saudi Arabia, for example, has applied some of the world’s best oil-extraction technologies. It is true that some of these countries could increase production if better technology was used, but mainly at the expense of faster depletion after peak. To expect improved technology to access much extra oil in the short or medium term is mistaken. looked in detail at the reasoning and data
behind the oil peaking calculations. It must be admitted, however, that oil peaking is counterintuitive. As countries past peak such as the US, UK and Norway all show, the resource-limited production peak in a region occurs when there are still large reserves in the ground, when technology and enterprise are expected to raise the recovery rate of these reserves, when new finds are still occurring, and when there is known to be quite a lot of oil yet to discover. So

The only sure indicator of peak is the quantity of oil that has already been found (using industry 2P data), the history of when these discoveries occurred (the discovery trend), geological knowledge on what the rest of the region is likely to yield in new discovery, and sensible estimates on when such discoveries are likely to occur. Such
to determine if the peak is close it helps little to analyse what is currently happening in an oil region. knowledge of how to predict oil peaking was general some 30 years ago, but largely forgotten in more recent times.

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5. Some dismiss peak oil theory because they believe all their previous oil forecasts were wrong This isn’t true. Peak oil theorists have consistently been accurate in proving oil production growth is declining, no more reserves exist and peak will hit around 2010 at current rates.
Q.Y. Meng (State Key Laboratory of Petroleum Resource and Prospecting, China University of Petroleum, Beijing) and R.W. Bentley (Department of Cybernetics, The University of Reading) August 2008 Energy 33 (2008) 1179– 1184 Global oil peaking: Responding to the case for ‘abundant supplies of oil’

2.1. Failure of past oil forecasts
Maugeri’s first argument is that since as early as 1919 there have been many predictions of imminent oil shortage that turned out to be incorrect. In Maugeri’s words: ‘‘these cycles of hysteria followed by new bonanzas have continued to the present.’’ His implication is that today’s forecasts of near-term oil supply constraint based on oil peaking calculations will prove equally wrong. Examination of past oil

forecasts shows a more complex picture, however, than a simple view that ‘all past oil forecasts were wrong’. Oil has long been important, so it is not
surprising that as particular regions went into decline there were concerns about the future supply. In the 1970s, in particular, there were widespread fears, based on the contemporary estimate of proved reserves, that the world oil resource would be depleted within about 30 years. But it was also well known in the 1970s that such fears were unrealistic, see the oil forecasts given in Table 1 (and see [6] for details). Proved reserves were known to report only very conservative ‘market-ready’ quantities of oil, and that the quantity to use instead was the amount of oil actually discovered, given typically by the ‘proved plus probable’ reserves. To this must be added the expected ‘reserves growth’ (known oil in existing fields that better technology was expected to access) plus the anticipated amount of oil in new fields then yet-to-find. Calculations of this type in the 1970s and 1980s showed that the expected size of this total global ‘recoverable-resource’ base of conventional oil was in the region of 2000 billion barrels (Gb), of which only about 400Gb had been consumed by that date. Thus the 2000 Gb total was known to be able to support the anticipated growth in global production up to around the year 2000 before it would reach its anticipated resource-limited ‘midpoint’ peak. The figure of interest is the date of peak production, rather than the date when the current proved reserves will have been produced.

In the event, oil production growth was constrained by the high prices of the late 1970s and early 1980s, so that the same estimate today for the size of the recoverable conventional oil resource base puts the global production peak at around 2010. Moreover, oil industry data show that global discovery of oil in new fields has been in decline since the mid-1960s [7]. For this reason, most estimates of the size of the recoverable resource base of conventional oil have
changed remarkably little since the 1970s. This is because once discovery started to slow by the early 1970s it was possible to estimate with reasonable accuracy the amount of oil likely to be found in future, and hence the total size of the recoverable resource base. Today, we now know where much of the oil anticipated back in the 1970s actually lies, but the recent history of discovery has only underlined the falling trend in the volume of oil from new discoveries that started in the 1960s. In summary, those oil forecasts from the 1970s to the

present day that were based on the anticipated size of the total recoverable resource base of conventional oil have been remarkably consistent (see Table 1). Taking the 1980s demand reduction into account, these forecasts have all indicated that the resource-limited peak of global conventional oil production would occur at around 2010, giveor-take about 5 years.

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Peak Oil True – XT #1 – Will happen around 2012
Crude oil production will not be able to keep up with demand starting in 2010.
Mikael Höök on Wed, 2008-06-25 16:34. Headline news EIA slashes forecast for world oil output by 2010 Source: Upstream Online http://www.peakoil.net/headline-news/eia-slashes-forecast-for-world-oil-output-by-2010 The US Energy Information Administration said crude oil production from non-Opec countries will not be able to keep up with growing global demand in the next few years, forcing oil consuming nations to rely more on Opec for supplies. In its long-term energy forecast, the EIA lowered its estimate of non-Opec oil production in 2010 to 51.8 million barrels per day, down 1.1 million bpd from last year's forecast. For the same period, Opec oil output was cut by just 400,000 bpd to 37.4 million. Meanwhile, world oil demand in 2010 will be 1.5 million bpd less than previously thought at 89.2 million bpd, due to higher oil prices, the EIA said. China will account for almost half the lower oil consumption, with the country's oil use cut 600,000 bpd to 8.8 million bpd, said Reuters.The EIA said its forecast for India's oil demand in 2010 was unchanged at 2.7 million bpd. Overall, world energy consumption is forecast to grow 50% by 2030, with demand from developing countries rising 85% compared with a 19% increase in industrialised countries, the EIA said.

We are reaching the peak. This will cause shortages of vehicle fuel. Timeframe is as soon as 2012 Irish Times June
Put another way, the 4,

2008 HEADLINE: The growing dilemma of the production of biofuels and their human costs

rate of oil production is close to reaching its peak and after that, it will slow down and this finite resource will become scarcer and more expensive. Peak oil, now or in the near future, will cause shortages of vehicle fuel. The world currently gets through around 30 billion barrels a year, which is about 82 million barrels every day.
Currently, oil prices are closing in on $135 per barrel, and some commentators are predicting that it won't be long before it costs $200. "There is a 4 per cent decline in production in the major oilfields and this translates into 30 million fewer barrels per day over the next 10 years," says Aleklett. He predicts that overall production could decline as early as 2012, with emerging countries such as China requiring more oil and being forced to look for imports.

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Peak Oil True – XT #2 – Alternatives sources can’t solve
Oil peak models do include oil from non-convention sources and still predict peak is true
Q.Y. Meng (State Key Laboratory of Petroleum Resource and Prospecting, China University of Petroleum, Beijing) and

R.W. Bentley

(Department of Cybernetics, The University of Reading) August 2008 Energy 33 (2008) 1179– 1184
the case for ‘abundant supplies of oil’

Global oil peaking: Responding to

Maugeri’s third main argument against a near-term peak is that the world contains large quantities of nonconventional oil, and that these are not usually considered in the ‘oil doomsters’ models. This is not correct. All the detailed models listed above explicitly include calculations on the rates that the various nonconventional oils will come on-stream. They find that these rates are not sufficient in total to offset the decline expected in global conventional oil production. However, it is fair to say that the issue of rate limits to the production of nonconventional oils and oil substitutes—where these limits include cost, pollution (including CO2) and, crucially, net-energy rate limits—needs looking at in much more detail. The question is: what would be physically, financially and energetically possible (and what the CO2 impacts) of a ‘crash programme’ into these alternatives once conventional oil peaks?

Oil production has peaked in many areas. The production of alternatives to oil can’t make up for it. Stephen Holland, Modeling Peak Oil, Energy Policy Energy Journal, 2008, Vol. 29 Issue 2, p61-79
Indeed, oil production in many regions has peaked. After increasing for over 100 years, U.S. annual crude production peaked in 1970 at3.5 billion barrels of oil and has generally declined since. Brandt (2006) analyzes 139 (potentially overlapping) oil producing regions throughout the world and argues that production in 123 regions

can be reasonably modeled as single peaked and that production in 74 of these regions has already peaked." Furthermore, production of other resources has also peaked.'" This wide.spread empirical evidence of production peaking highlights the importance of understanding why production of an exhaustible resource might peak.

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Peak Oil True – XT #3 – Not fringe science
Peak-oil theorists are winning out. Deepak Gopinath, Bloomberg News, National Post's Financial Post & FP Investing (Canada), “Oil is going, oil is going! Or is it?” September 1, 2006 lexis
That's not the prophecy of some apocalyptic cult. Mr. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil. Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline - and some geologists say it already has - oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200US - and keep rising. To the peaksters, today's energy crunch is nothing next to the pain that will follow. "Peak oil is a reality," says Mr. Kadijk, a senior equity salesman at Kepler Equities, an Amsterdam-based brokerage. He plans to start a fund to capitalize on what he sees as a looming crisis for the world's fossil fuel-based economy and the ultimate bull market in oil. As energy prices soar and violence convulses the Middle

East, the peak oil movement - an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists - is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat Web sites, much the way warnings of global warming did a decade ago. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street. U.S. Energy Secretary Samuel Bodman, former boss of Boston-based Cabot
Corp., an oil and chemicals company, has asked the National Petroleum Council, which advises him, to investigate whether oil supplies can keep pace with demand. The U.S. Government Accountability Office, the nonpartisan congressional watchdog, is due to release a study on peak oil this November. Rep. Roscoe Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to sound the alarm. "The world has never faced a problem like this," Mr. Bartlett says. Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur - and what will happen then. Colin Campbell, a British geologist who popularized the peak-oil theory in his book The Coming Oil Crisis, says world production of conventional oil, the kind that comes from gushing wells, is reaching its apex. Society isn't prepared for the consequences, Mr. Campbell, 75, says. It's too late to develop alternative sources of power, such as solar cells, nuclear reactors and windmills, to fill the oil gap before energy prices soar, says Mr. Campbell, who has a doctorate in geology from the University of Oxford and more than 40 years' experience in the oil industry. "We have come to the end of the first half of the Oil Age," Mr. Campbell says. Nonsense, says Russ Roberts, a spokesman for Exxon Mobil Corp., the world's largest oil company. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as The New York Times. The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4-trillion barrels of oil left, four times the amount we have used so far, the ad says. "The world is nowhere near running out of oil," Mr. Roberts says. Exxon Mobil geologists believe global oil production will keep rising through 2030. Cambridge Energy Research Associates, whose chairman, Daniel Yergin, is a leading peak-oil critic, says production will reach an "undulating plateau" sometime in the future. "Our outlook goes to 2020, and we see no evidence of a peak," CERA geologist Peter Jackson says. "Eventually, we will start to see a decline. There is still time to think about alternatives." Predictions of an imminent oil famine are as old as the industry itself. When production at the first U.S. wells, located in western Pennsylvania, began to decline in the late 19th century, some people predicted the country would soon run out of oil. Then crude was discovered in east Texas, whose oil fields yielded so much black gold that the Texas Railroad Commission capped production to support prices. In the past, Mr. Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Mr. Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010. Kenneth Deffeyes, a geologist and professor emeritus at Princeton University, first pinpointed Nov. 24, 2005, as the peak- oil date and then revised it to Dec. 16, 2005. Mr. Campbell says the exact day or year isn't important. What matters is that peak oil is coming, and soon. Almost a century and a half after the first U.S. wells were drilled in Titusville, Pennsylvania, production has begun to decline in more than a dozen countries, including the U.S., according to the BP Statistical Review of World Energy. At a time when U.S. President George W. Bush has urged the country to break its addiction to foreign oil, the fact is, the U.S. is becoming ever more dependent on overseas crude. U.S. oil production peaked 36 years ago, in 1970, at 11.3 million barrels a day. Since then, output has fallen 39%, to 6.8 million barrels a day, or 8% of the world total, in 2005, according to BP. Investors have started to listen to the peaksters. Billionaire Boone Pickens says he's a peak believer. So does Peter Thiel, who co-founded PayPal Inc. and now runs Clarium Capital Management LLC, a $2US.1-billion hedge fund firm. Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time. Even some oil companies and industry veterans sound nervous. Chevron Corp. has run a series of full-page ads in U.S. newspapers that highlight surging oil consumption and declare, "The era of easy oil is over." Thierry Desmarest, chief executive of Paris-based Total SA, told the World Gas Conference in Amsterdam in June that global oil production would peak in 2020. Matthew Simmons, whose Houston-based investment bank, Simmons & Co., trades oil and gas stocks, says Saudi Arabia's production may decline soon. Alex Cranberg, chairman of Denver-based independent oil company Aspect Energy LLC, calls the peaksters Chicken Littles -- misguided souls who think the sky is falling. In fact, Mr. Cranberg hired two people to dress in chicken costumes and hand out fliers dismissing peak oil at the conference Mr. Kadijk attended in July. Like many oil-industry vets, Mr. Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy. More and more, however, the peaksters are drowning out everyone else, Mr. Cranberg says. "You can't turn around without seeing or hearing these ideas," he says. "I think they are gaining."

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Peak Oil True – XT #5 / No Reserves
Peak oil is true – despite optimism no one has been able to substantiate claims that significant increases in production are possible. We have reached a plateau in production that can’t sustain our consumption patterns.
Matthew R. Simmons. 6-28-08 Matthew R. Simmons is chairman and CEO of Simmons & Company International, an independent investment bank specialising in the energy industry. He is one of the world's leading experts on peak oil New Scientist HEADLINE: Kicking the oil habit; Ignore the energy optimists. The odds are that " peak oil " has come and gone, leaving the US to wrestle with its addiction to oil, argues Matthew R. Simmons ON 1 February 2006, the day after his state of the union address, President George W. Bush was discussing his 2006 agenda with the press when he made one of the most far-reaching statements of his presidency. "America," he declared, "must end its dependence on oil. When you're hooked on oil from the Middle East, it means you've got an economic security issue and a national security issue." Whether his remarks signalled a belief that global oil supplies were nearing a peak and would then decline is something for energy historians to argue about. Whatever its basis, it was a remarkable statement. But was Bush right? Based on the best information we have on global oil supply, there is growing evidence that global production of crude oil actually peaked in 2005, and for the past three years has struggled to remain at an undulating plateau of some 73 to 74 million barrels a day. Since the world's total petroleum consumption is about 88 million barrels per day, we currently bridge this gap through the intensive use of liquefied natural gas, refining processing gains and tapping into the world's oil inventory.

While energy optimists claim that oil is not even close to reaching peak output, their cheerful views are not substantiated by any solid, verifiable data indicating that significant increases in production are possible. The vast
majority of available information, which includes figures from the most important oilfields, shows a relentless pattern of individual oilfields or oil basins reaching peak output and then plunging into irreversible decline. In fact, the intensity of the debate about peak oil and when it might occur has become a roar among oil and gas analysts. With each passing week, more senior industry figures announce that oil supplies seem incapable of much further growth. The debate about oil supply began in 1956 when M. King Hubbert, chief consultant and geologist with Shell Development Company, predicted that US oil production would peak around 1970 and decline thereafter. When the US's oil supplies carried on growing and seemed to be in no danger in the years that immediately followed, most energy experts began to ridicule Hubbert. In fact, by 1970, when the US's production of oil peaked as Hubbert predicted it would, the event went largely unnoticed. That was until the second oil crisis, in 1980, which caused the oil price to leap from $17 a barrel to almost $40. In a panic, virtually all of those who had scoffed at the notion of peak oil suddenly began warning that the oil price was heading to $50 barrel and that by the 1990s it might even reach $200. We now know that these pundits' fears were premature. Oil prices soon plunged because demand faltered and because oil from three major basins around the world, which had been discovered at the end of the 1960s, finally came on stream. By 1986, the price had fallen to less than $15 a barrel and an "oil depression" was well under way. Low prices forced oil companies to cut back on the money they spent maintaining the pipelines and other essential parts of the oil infrastructure and so, by the time the depression ended, much of the infrastructure that could have helped add sustainable new supplies had begun to rust. Meanwhile, throughout most of the developing world, low oil prices were considered a blessing: the energy appetites of poor countries increased dramatically as they struggled to build stronger economies and a better way of life. As oil prices stayed low, demand skyrocketed. Between 1995 and 2008, global daily oil demand grew by 18 million barrels. This unexpected growth has devoured the world's spare capacity. To meet the unprecedented demand, drilling activity soared until the very last spare rig was in production. Naturally, this frantic drilling has served to increase the rate at which the output of mature oil basins declines. Based on the best data on country-by-country oil production, the chances are high that, in practical terms, sustainable global oil output did indeed peak in 2005. Major new projects may still occasionally be brought online and they may nudge production slightly above the 2005 "peak", but the odds of growing this

beyond 74 million barrels of crude oil per day are low. The bottom line is that the US must now wean itself off oil and also help to teach the rest of the world how to successfully and rapidly retreat from its addiction to the stuff. How well the world does in beating a hasty and forced retreat from oil consumption will very likely determine whether the remainder of the 21st century will be relatively peaceful. The stakes could not be any higher.

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Little reason to believe we will find additional reserves to save us from the peak – we have been looking extensively for those for over 30 years Southern States Energy Board 2006 BUILDING A BRIDGE TO ENERGY INDEPENDENCEAND TO A SUSTAINABLE
ENERGY FUTURE, http://www.americanenergysecurity.org/AES%20Report.pdf, July.

Extensive exploration has occurred worldwide for the last 30 years, but results have been disappointing. If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future. This situation is evident in Figure I-2, which shows the difference between annual world oil reserves additions minus annual consumption.3 The image is one of a world moving from a long period in which reserve additions were much greater than consumption, to an era in which annual additions are falling increasingly short of annual consumption. Recently, many credible analysts have become much more pessimistic about the possibility of finding the huge new reserves needed to meet growing world demand. Even many of the optimistic forecasts suggest that world oil peaking will occur in less than 20 years. Various individuals and groups have used available information and geological estimates to develop projections for when world oil production might peak, and a sampling of recent projections is shown in Table I-3.

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Peak Oil –Not true (Frontline)
1. Peak predictions are false. Predictions about shortages since the 1850’s and we still have plenty. High prices encourage new exploration for reserves and reserves exist. At least 500 years remaining. Fumento,
Senior fellow at Hudson Institute, ’04 [Michael, a senior fellow at Hudson Institute in Washington and a nationally syndicated columnist with Scripps Howard News Service, Scripps Howard News Service, May 7, "Is oil spigot running dry?", l/n]
In 1914, the U.S. Bureau of Mines predicted American oil reserves would last merely a decade. In both 1939 and 1951, the Interior Department estimated oil supply at only 13 years. "We could use up all of the proven reserves of oil in the entire world by the end of the next decade," declared Pres. Jimmy Carter gloomily in 1977. In fact,

the earliest claim that we were running out of oil dates back to 1855 - four years before the first well was drilled.

Still, with gasoline oil prices seemingly rocketing past the moon and towards Mars, and newly-published books like "Out of Gas: The End of the Age of Oil" and "The End of Oil," it seems fair to ask if the world's fuel tank needle isn't finally tilting towards "E."
Yet historically prices aren't particularly high. Adjusted for inflation, they're slightly below what they were back in 1950 when we falsely recall gasoline flowing like water. Then the national average was $1.89 in today's dollars, compared to $1.84 at this writing. In 1981, gas was almost a dollar more per gallon than it is now when adjusted for inflation. Further, this is not your father's gasoline. Now it's unleaded and reformulated in other ways to burn cleaner. Or, alas, to pander to the gasohol lobby. Oil prices have also almost reached an all-time high when not adjusting for inflation, approaching $40 a barrel. But again, when adjusted the cost is far less than it was from 1973 to the mid-1980s. But there's no denying the sharp increase over several years. Are we really just experiencing a short-term spike because of voluntary production cutbacks, political unrest in places like Iraq and Venezuela, and a huge decline in the value of the dollar?

Certainly supply isn't declining yet. "Proved" oil reserves increased from 677 billion barrels in 1982 to 1,048 billion in 2002, a 55 percent increase. "Proved" means quantities that with reasonable certainty can be recovered from known reservoirs under existing economic and operation conditions. Meanwhile worldwide consumption increased only 13 percent. That's not a particularly spooky trend.
Or are current prices indicating that reality is finally beginning to catch up to the Cassandras' predictions? Much oil goes to electricity production and home heating, in competition with natural gas and coal. So it's also important to know that proved natural gas reserves have increased by more than 60-fold since 1982 while coal reserves are also increasing. If necessary, almost all oil not used for vehicle fuel could be replaced by these other resources as well as nuclear energy.

oil production will continue to steadily increase until the last year of the projection, which is 2025. But oil consumption will continue to increase. This will be partly from population growth, albeit growth that's leveling, and partly from worldwide improvements in living standards that allow people to trade in shoe leather and bicycles for cars. Even so, if consumption continues to increase at an average rate of 1.4 percent a year and not a single new drop is found, we still won't exhaust proved reserves until 2056 according to a 2003 National Center for Policy Analysis (NCPA) report. Further, the "nice aspect" of high oil prices, if those driving around in gas-slurping SUVs will forgive the term, is that they are the greatest motivator for discovering and exploiting new reserves. This includes Canada's oil sands, containing a tar-like substance convertible to oil . These hold an estimated 1.7 trillion barrels of
What about the future? According to a just-released Energy Information Administration report
petroleum, of which 255 billion barrels (equal to the entire proved oil reserves of Saudi Arabia) is currently considered recoverable. Because of reductions in production costs, some of this goop is already being extracted and sold. But if oil prices remain anywhere near current levels, oil sand development will replace hockey as Canada's national obsession.

Oil sands worldwide could provide more than 500 years of oil at current usage rates, calculates the writer
of the NCPA report, David Deming. He's a professor of geology and geophysics at the University of Oklahoma in Norman.

Five hundred years? Civilization should be so lucky as to consider this a worry.

2. Insiders say that peak oil is a myth. More than twice as much oil exists as what the peak oil theorists say.
Steve

Connor June 11, 2008

Canberra Times (Australia) HEADLINE: Oil shortage myth: insider tells of dodgy calculations

There is more than twice as much oil in the ground as major producers say, according to a former industry adviser who It is widely assumed that oil production has peaked and proven reserves have sunk to roughly half of original amounts. But former oil industry man Richard Pike, who is now chief executive of the Royal Society of Chemistry, said this idea was based on flawed thinking. Current estimates suggest there are 1200 billion barrels of proven global reserves, but the industry's internal figures suggest this is 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. Dr Pike said there was anecdotal evidence that big oil producers were glad to go along with underclaims there is widespread misunderstanding of the way proven reserves are calculated.

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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 implications of his analysis, based on more than 30 years in the industry,will alarm environmentalists who have exploited the concept of peak oil to press the urgency of the need to find greener alternatives. "We should not be surprised if oil dominates well into the 22nd century.

3. Hubbert’s model is the basis for their claims and it’s just wrong. Their claims are just doomsaying and products of a herd mentality. These predictions are empirically false. Bailey ‘04
(Ronald, Science Correspondent for Reason Magazine, Feb. 18, “Are We Out of Gas Yet?” Reason Online, http://www.reason.com/rb/rb021804.shtml)

So swears a spate of books and articles in the past few years, reviving '70s-era fears of impending oil catastrophe. The once-invaluable, now highly political, Scientific
Once again, the gauge on our national economy is dropping dangerously to the red. American ran an article in March 1998 declaring "The End of Cheap Oil." Fred Pearce similarly declared in a July 1999 New Scientist article, "Dry Future," that "the world is probably only two years off peak oil production, after which decline is inevitable." In his 2001 book Hubbert's Peak: The Impending World Oil Shortage, Princeton University Professor Kenneth Deffeyes found "that world oil production will peak in this decade—and there isn't anything we can do to stop it. While long-term solutions exist in the form of conservation and alternative energy sources, they probably cannot—and almost certainly will not—be enacted in time to evade a short-term catastrophe." More recently, in January Caltech physics Professor David Goodstein upped the ante in his book, Out of Gas: The End of the Age of Oil, warning that the peak of world production is imminent and that "we can, all too easily, envision a dying civilization, the landscape littered with the rusting hulks of SUVs." There is a choirmaster to this chorus of oily doom: the late geophysicist M. King Hubbert. In 1956 Hubbert

Like Hubbert, current doomsayers reach their grim conclusions of impending octane depletion by using estimates of the world's recoverable reserves of oil and comparing them with estimates of rates of future use. From this they derive predictions of when the
(correctly) predicted that U.S. oil production would peak in the early 1970s. demand for oil will outstrip the supply, and most suggest that dry pumps will greet us before the end of this decade. Once the peak is reached, oil doomsters foresee skyrocketing prices leading to economic ruin and social and environmental collapse. One reviewer of Goodstein's book despaired, "If he's right, I'm sorry for my kids. And I'm especially sorry for theirs."

But we've heard it all before. "These kinds of doom and gloom energy predictions become popular every 10 years or so," says Michael Lynch, president of Strategic Energy and Economic Research, a Massachusetts consulting firm. "In this case there's very little original research and everybody is citing the same handful of articles. It's an example of how the herd instinct drives the psychology of scientific consensus ." Lynch's new study "The New
Pessimism about Petroleum Resources," pokes holes in forecasts of imminent oil doom. Lynch points out that the supply of oil is determined not only by geologic factors, but also by political, economic, and technological ones. It's true that oil discoveries peaked in 1982, but Lynch argues that's because of politics, not geology. "The big factor in the decline in oil discoveries is that Saudi Arabia, Kuwait, Iraq, and Iran all nationalized their oil industries in the 1970s. Plus Iraq and Iran went to war and essentially stopped exploring for more oil," explains Lynch. "They have so much oil, why would they bother looking for more?" He adds dryly that Scientific American doomster Colin Campbell has been predicting that the peak of oil production is three to

four years away for the past 15 years.

4. New off-shore drilling tech, new management tech and new synthetic oils will decrease costs and will solve Peak in Status Quo Schoen ‘04
(John, MSNBC, “Can Technology Help Find Oil Fast Enough,” 09/23, http://msnbc.msn.com/id/6072980/)

Advances in drilling techniques do hold the promise of further lowering the cost of producing new oil and extending the industry’s reach. That’s especially true in deepwater offshore fields where many promising discoveries are turning up. Aside from the huge cost of conventional steel drilling platforms, operations on gigantic rigs are subject
costly interruptions from hurricanes in the Gulf of Mexico and typhoons in the Pacific rim. “Ten years from now they’re going to become obsolete,” said Barton Smith, an economics professor at Rice University in Houston. “What they’re moving toward is robotics -- in which you literally have submarine operations. The drilling activity all occurs at the bottom of the ocean. And these robotics will have all the capabilities of being able to fix anything down there.”

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Long-range communications technology is also helping to cut the cost of managing oilfields -- in some cases halfway around the world, Smith said.
“With a lot of these oilfields the trick is not just finding the oil and pulling the oil out of the ground,” he said. “But the trick is then -- through vast pipelines and so forth -- getting it to some deliverable point. And those pipelines require all sorts of types of monitoring. They’re going to monitor that from Houston.” Technology is even expanding the definition of oil. Vast deposits of oil shale and tar sands –- formations of oil-

have until recently been uneconomic to produce. But as recovery methods improve, and oil prices rise, production of this so-called “synthetic” oil has increased. New technologies are also being
saturated rock and sand –developed to extract natural gas from coal -– which remains plentiful in the U.S.

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Peak Oil –Not true / XT #1(a) – Reserves will exist for a while
No such thing as peak oil – the world can run on oil for another 200 years. Neil Reynolds, The Globe and Mail (Canada), "'Peak oil' doomsayers fall silent as reserves grow ever larger" April 11, 2007 lexis
The "peak oil" hypothesis, relentlessly propounded for decades, holds that the world has passed (or will
momentarily pass) the highest point it can ever reach in oil production - at the halfway mark in the depletion of global oil resources. It holds that this imminent peak necessarily marks the start of an irreversible decline in production. It holds, in other words, that the end of oil is nigh. The principal problem is that the hypothesis

is demonstrably wrong - and is vigorously proven wrong year after year. In 1979, the "life-index" of global oil reserves was calculated as 35 years - suggesting, superficially, that
known oil reserves could support the current level of production only through 2007. In 2003, after decades of accelerated production, this index had risen to 40 years. It has now risen further to 45 years - moving us safely through mid-century. Indeed,

the record-setting oil production last year marked the umpteenth consecutive year that "peak oil" theorists have found it necessary once again to run the numbers and once again to postpone the end time of oil. It was in

1989 that Colin Campbell, the prominent Irish champion of "peak oil," proclaimed that the global peak had already occurred - a declaration he found it expedient, almost immediately, to amend; "peak oil," he said, would instead occur in 1995. He now opts for 2010. Yet global oil production, since 1989, has risen by 20 per cent (13.8 million barrels a day), global oil supply by 28 per cent (18.9 million barrels a day). The production records set last year were significant for a number of other "peak oil" prophets, including Marion King Hubbert himself, the American geophysicist who devised "peak oil" analysis in the mid-fifties and who accurately predicted that U.S. oil production would peak in 1979. In 1956, he determined that global oil would peak "in about 50 years" - in other words, 2006. At the pinnacle, he said, the world would consume 12 Gb of oil a year. In 2004, Mr. Campbell increased this number, almost doubling it, to 23 Gb. For his part, Texas oilman T. Boone Pickens has held that oil

the world's most comprehensive measure of oil resources keeps right on growing - higher, yes, but at a faster pace as well.
would peak at 30 Gb - a level exceeded last year. Yet TrendLines, the Canadian statistical research company, confirms this assertion in its February report on URR "ultimate recoverable reserves." In an analysis of optimum reserves, TrendLines concludes that the world's URR is now increasing, depending on the period you select for comparison, at twice or thrice its historical pace. From 1957 through 2006, it says, URR grew at an average annual rate of 2.4 per cent. From 1979, it grew at an average annual rate of 4.2 per cent. From 2000, it grew at an average annual rate of 6 per cent. "Peak oil" prophet Mr.

In 2000, the U.S. Geological Service (USGS) calculated that global URR would increase by 2.4 per cent a year for the foreseeable future - rising from 1,669 billion barrels in 1995 to 3,345 billion
Campbell, TrendLines says, has underestimated the actual rise in URR by tenfold. barrels in 2025. (A billion barrels - one Gb - is roughly the amount of oil that the U.S. keeps in its Strategic Petroleum Reserve.) "Peak oil" proponents dismissed the USGS analysis as impossibly optimistic. As with all apocalyptic manifestations, peaks must necessarily be imminent. Yet the forecast has proven significantly understated.

Driven by smart technology, global URR now increases each year at unprecedented rates. It has now (December, 2006) reached 3,288 Gb, not far off the USGS calculation for
2025. It increased last year by 114 Gb, compared with a historical annual average increase of 47 Gb.

Sustained at this rate for another 20 years, the world's ultimately recoverable oil could increase by another two-thirds to 5,568 Gb, or three times the resource when "peak oil" proclamations began. Assuming consumption of 30 Gb a year, this URR could sustain production for something approaching 200 years. Once again, the end is not nigh.

Decades of oil and gas in current reserves; and more is being discovered constantly Wingrove ’04 [Martyn, Lloyd’s List, Issue #58687, Insight & Opinion, June 25, l/n]
WITH oil and natural gas demand continuing to climb, higher this year than anyone predicted, the question of the volumes of reserves is gaining importance. BP's leading analysts estimate that the world now holds 1.15trn barrels of oil in proven reserves,

which is enough to carry on producing at current levels for 41 years. The picture for natural gas is even rosier with 176trn cu m of proven reserves, which would provide 67 years of production. While there is enough oil to cover

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more than 40 years of production, in both cases the Middle East and former Soviet Union hold the majority of these resources. This may be good news for these nations, but is less than pleasant for countries heavily dependant on oil imports. And security of supply will continue to be a major geopolitical issue for perhaps the next four decades, so political stability in the Middle East will remain important. "Reserves have grown over time and it is clear that the issue of energy security is driven not by a physical shortage of supply, but by the challenges of ensuring that there will be sufficient traded oil and gas to meet rising demand," says BP's group chief executive Lord Browne of Madingley. "On recent trends there appears to be considerable scope for proved reserves to keep rising in Russia and elsewhere." There is also clear evidence that the international oil companies, who have only limited access to resources in the Middle East and FSU, need to raise their exploration levels to find new reserves not held in these regions. "Despite those who say we are about to run out of oil and gas, the figures in our review confirm there is no shortage of reserves," says Peter Davies, BP's chief economist. The British oil major has released its annual Statistical Review of World Energy, providing a timely reminder that the only issue when it comes to reserves is access. BP's review has incorporated data from national statistics and other secondary sources to compile the reserves figures. BP's review also provides production, consumption, pricing, trade movement and refining margin data back for the past 10 years. There are also sections for nuclear power, hydroelectricity and renewables. On oil reserves, the review shows globally that they have increased by 10% since 2002, although part of this is through new data gathering work. The figures also include 11bn barrels of resources in Canadian oil sands that are under active development and a better informed data series for Russia. "1.15trn barrels represents 41 years of world oil production at current rates," says Mr Davies. "This does not mean that oil will run out in 41 years time; more oil will inevitably be proved before then while production is unlikely to be flat of constant." This is in contrast to 1980, when BP's review showed there were only 29 years of production with 700bn barrels of oil resources. "The world has since produced 80% of the proved reserves of 1980 and we are still left with 70% more reserves than when we started, as a result of exploration success and new technologies," says Mr Davies.

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Peak Oil –Not true / XT #1(b) – Unconventional sources
Unconventional petroleum sources remain abundant Schafersman,
Next,
Professor of Geology, Miami – Ohio, ’02 (Steven, prof. of geology @ Miami University, Oxford, OH, “Be Scared; Be Very Scared,” http://www.freeinquiry.com/skeptic/badgeology/energy/commentary.htm)

the doomsayers universally ignore petroleum resources other than oil. Coal and natural gas remain abundant in the world, and the former can be converted to oil (synthetic fuels) and the latter is now replacing it on ever greater scales. No one is predicting that these will run out soon. But in addition, oil can be profitably produced today using modern technologies from oil sands and heavy oil deposits (tar sands), and proven reserves of these in Canada, Venezuela, and Russia equal or exceed all the crude oil produced until the present. In addition, liquified natural gas (gas liquids) resources are believed to be enormous and their exploitation only just begun. That leaves gas hydrates (clathrates) in oceanic sediments and oil shale (actually, kerogen in shale that can be converted to oil). These petroleum resources are simply colossal, although they cannot be exploited with today's prices or technology, but that could change. All of the doomsayer arguments rest on the decline in crude oil alone, and their arguments fail to the extent that other petroleum resources are able to replace oil as an energy source. Since the amount of these additional petroleum resources is many times greater than the proven crude oil reserves, the doomsayers' arguments fail quite readily, indeed.

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Peak Oil –Not true / XT #2 – Peak Oil is a myth
Former oil industry executives argue that we have double the amount of recoverable oil as we think Sarah Barmak, staff-Toronto Star June 21, 2008 S The Toronto Star HEADLINE: Oil, oil everywhere? Well, just maybe; An English
industry insider says we've grossly underestimated our reserves. Could he be right?

Dr. Richard Pike has a rather sunny outlook. Oil and gas, he says confidently, will be around well into the next century. Pike can maintain his optimism because he knows something no believes that a simple mathematical error - the sort made by first-year university statistics students - is causing much of our panic over a worldwide oil shortage. It's an error that oil companies, riding high on skyrocketing crude prices, may want you to believe. "This might be hard for some of your readers to take," he warns. With oil at $132 a barrel yesterday, tensions over gas prices are at a boiling point. But listen, he says: at 1.2 trillion barrels, we have grossly underestimated the world's proven oil reserves. If he's right, we likely have double the amount of recoverable oil that we think we have in the ground, or perhaps even more.
Ask him about oil, and one else knows. He The argument is attracting attention at a time when many governments are looking for new sources of oil; U.S. President George W. Bush reversed his long-held position against offshore drilling this week. Skeptics say Pike is just recycling an old argument: that companies underreport reserves on purpose to keep prices up. He claims the problem is more systemic than a few corporations playing with the stats, however. Pike is an oil industry insider, an engineer by training. An employee of British Petroleum for 25 years, he is now the chief executive of England's Royal Society of Chemistry. He explains the world's most epic math mistake patiently, like a vaguely bemused schoolteacher going over a problem with a dull student.

He first realized there was a problem two years ago, when he saw alarming discrepancies between figures the oil industry uses to estimate the world's crude and those used by everyone else. Calculating the amount of oil in a field is notoriously difficult, so companies
issue a probability figure, called their proven reserves, to shareholders and outside bodies. It represents the amount of oil that has a 90 per cent chance of being met or exceeded by the field's actualproduction (giving it its name, P90). Apparently, no one bothered to let us know that oil companies have long been generating an entirely different number for their own internal use. Not content with the hard certainty of P90, which in practice is almost always exceeded by a field's output, oil companies use more sophisticated measurements to yield numbers often two or even three times as high, helping them decide things like how many wells they drill. Very often, those higher estimates are more accurate. Too bad they don't make it into the public domain. Instead, in order to get a picture of how much oil we have left, international organizations often simply add up the conservative, proven reserve estimates for every field in the world. That's when the real headaches begin. "Because it's a probability-based set of numbers, you can't add them like that," says Pike. "That's completely wrong." Think of estimating oil fields like rolling a pair of dice, Pike says. If youthrow just one die, the probability that you will roll higher than a one is five out of six. But if you throw two dice, the probability that you will roll higher than two - snake eyes - is not five out of six, it's 35 out of 36, since there are 36 different possible outcomes of a single throw of two dice. With two dice, you have a five-of-six chance of rolling not a two, but a four. "It's an interesting case where ... one plus one equals four," says Pike.Sooil is at $132 a

"There are some very interesting mind games going on," he muses. Oil companies, particularly those in the Middle East, are happy to let our shoddymath stand if it helps push crude prices ever higher.
barrel all because of ... a math screw-up? That, says Pike, and the fact that oil companies are likely turning a blind eye.

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Peak Oil –Not true / XT #3 – Hubbert’s Model wrong
Hubbert’s Model is misinterpreted, misapplied, and it been proven wrong. Schafersman, Professor of Geology, Miami – Ohio, ’02 (Steven, prof. of geology @ Miami University, Oxford, OH, “Be Scared;
Be Very Scared,” http://www.freeinquiry.com/skeptic/badgeology/energy/commentary.htm)

Hubbert's analysis and curve has been consistently misinterpreted and misapplied by the doomsayers (for their interpretation, go to http://www.energycrisis.com/hubbert/). Hubbert's curve is not a normal curve, but a plot of oil production plotted over time; therefore, predictions from statistical tests applied to this curve are invalid. While Hubbert correctly predicted the peak and decline of U.S. oil production with his curve, his attempts to do the same with both U.S. natural gas production and world oil production failed . Fisher points out that a major flaw in using a symmetrical life cycle curve to predict future production is its static nature: it assumes a known amount of an ultimate resource, and does not allow for resource expansion due to technological advances or economic demand pressures. Ahlbrandt advocates a production-plateau model of oil
M. King resources rather than the traditional Hubbert curve, because the former better represents the real-world conditions as we understand them now.

Doom-saying claims of peak oil are proven empirically false. This is complex issue but their research is weak, stemming from the same old model by Hubbert. They can fool editors but the historical record and better studies show that their model and their pessimistic claims are repeatedly wrong. Lynch, Director, Asian Energy and Security, Center for International Studies, M.I.T., ‘98
[Michael, download date: 2-15-05, http://sepwww.stanford.edu/sep/jon/world-oil.dir/lynch/worldoil.html ]
In the past two years,

a number of articles have appeared warning not only of a new oil crisis, but of the end of the oil era, as oil production inevitably

peaks and declines due to inexorable geological forces. These include "Mideast Oil Forever?" by Joseph J. Romm and Charles B. Curtis and "Heading Off the Permanent Oil Crisis," by James J. MacKenzie, among others. The profusion of articles on the subject is unfortunate, since the casual reader (and policy-maker) might conclude that the large number of articles have an equally large amount of research behind them. In truth, most of these are not actually about oil, but take the assumption that oil scarcity is imminent, especially outside the Middle East, and nearly all rely on a few pessimistic quotes from oil men, or recent work by one or two geologists using what is known as a "Hubbert approach." Most notable are the recent publication of the book The Coming Oil Crisis by Colin Campbell and the
March 1998 Scientific American article "The End of Cheap Oil" by Colin J. Campbell and Jean H. Laherrere. The gist of their argument is that most of the world's oil has already been found, as evidenced by the alleged lack of recent giant discoveries; Middle East reserves have been overstated for political reasons; actual total recoverable resources are only about 1.8 trillion barrels, not the 2.4 trillion barrels that others have estimated; existing fields will not continue to expand in size and production as others suggest; and most oil producing countries outside the Middle East are said to be near, if not past, their point of peak production, which occurs when 50% of total oil resources have been produced. Production is predicted to drop off steeply afterwards. Thus, they forecast that "The End of Cheap Oil" is at hand and prices will be rising shortly. Understanding Forecasts (Good and Bad) These issues are hugely complex. A wide variety of political, economic and geological factors affect oil production, and analysis requires an enormous amount of data, much of which is either not readily available or is unreliable. Few observers have the capacity to analyze the forecasts of others, let alone make their own forecasts. Thus, as Vannevar Bush realized, when an expert, particularly with a scientific background, comes forward with detailed work and large quantities of (albeit hidden) data, it gains almost instant respectability, particularly among editors who are not familiar with the subject. But there are several methods of judging research that don't involve time-consuming or labor-intensive analysis. For one thing, analysts who don't acknowledge either data or research which contradicts their theories are implying they can't explain inconsistencies or weakness in their work. Because in a complex system like world oil production, there is always some data which can support alternative viewpoints. Dry holes are always being drilled and new fields are always being found, and citing one or the other to support pessimism or optimism proves nothing.

A better way to test forecast validity is to look at the historical record,

and particularly, examine work done by the person making the forecast in question. In 1992, I did precisely this to improve long-term oil price forecasting. The realization that the previous errors were due to forecasters assuming a 3% per year increase in real oil prices over the long-term made it possible to produce much more accurate forecasts.

In 1996, I published a piece discussing the various methods which were used to forecast oil supply, and argued that they, too, were flawed by certain repetitive errors, namely: 1) bias, and especially pessimism, since nearly every forecast has been too low since 1978, despite relying on price assumptions that were much too high; 2) similar forecasts for every region, despite different fiscal systems, drilling levels and/or the maturity of the industry, suggesting omitted variables; 3) misinterpretation of recoverable resources as total resources by using a point estimate instead of a dynamic variable, growing with technology change, infrastructure improvements, etc.; so that 4) there is a tendency for all national, regional or non-OPEC production forecasts to show a near-term peak and decline, which was always moved outward and higher in later forecasts (the opposite of price forecasts).
As an example, note the behavior of the U.S. Department of Energy's production forecasts for the non-OPEC Third World, a region which, in aggregate, has experienced very little drilling and shows no sign of peaking, causing the forecasts to be repeatedly revised upwards. I have numerous other such examples, for various countries and regions, as well as the globe. The Case in Question: Campbell Thus, an examination of the history of forecasts performed by these gentlemen is in order. First,

Few, if any, have been too optimistic.

the company Petroconsultants, which both men have been associated with in the past and which published Campbell's 1997 book, published a nearly identical forecast in 1986, which showed regional production to 1995, at $25/barrel (equal to about $35/bbl in 1997$). The

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forecast incorrectly put non-OPEC, non-Communist production at 20 mb/d in 1995 and dropping, when in reality it was 28 mb/d and rising. (Figure 2) Figure 3 shows the regional forecasts, normalized to 1986=100 to show the rates of change. Note that all regions peak within the time horizon of the forecast. It is not clear if either Campbell of Laherrere was involved in producing this forecast, however, they are employing the same database of oil fields, and their results are suspiciously similar.
Subsequently, Campbell published an article in the December 1989 Noroil which stated that "Most economic forecasts see relatively stable prices over the near future followed by a ramp of modest increase to the end of the century. But suggests that the slope of declining supply will become a precipice if production is held at present levels, never mind increasing. When that happens, a major leap in prices seems inevitable unless the major exporting governments exercise deliberate restraint....Shortages seem to be inevitable by the late 1990s, but knowledge of an impending supply shortfall may trigger an earlier price response, as foreseen in the Figure." His figure shows world oil production (including the Middle East) peaking in the late 1980s, and dropping sharply, from about 58 mb/d to 45 mb/d, with the comment that "Any short-term increase steepens subsequent decline." He also shows prices rising to the low $20s (about $27 in 1997$) as "increasing probability" with an "anticipated price leap from increased perception of declining reserves, falling non-Middle East production, and falling exports, esp. from USSR." He predicted this might cause oil prices to reach $50/bbl (about $65 in 1997$) by 1994, then fluctuate around that level to the end of the century. That same year, my Oil Prices to 2000 was published, taking the contrary view. I argued that most forecasts were too pessimistic about non-OPEC production and predicted that inflation-adjusted prices would fall to 2000, which the September 1989 Petroleum Economist correctly noted was "heretical". Yet this proved quite accurate, as a comparison of forecasts from that period shows . (Later figures will compare production forecasts.) Since Campbell (1989) includes only a graph of his price forecast, it is not shown here, but by the mid-1990s, he showed prices fluctuating around $50/bbl, about 200% too high. The 1991 Forecast: Deja vu all over again? Campbell's 1991 book is more illuminating, and damning, since he provides detailed production tables for most countries, including 32 non-Middle East, non-FSU producing countries which account for 36.8 mb/d in 1996. The aggregate error by 1996 is 7.9 mb/d, or 21.5% of production in those countries, as about their nature.

Figure 3

(Figure 4)

Table 1 shows. Twenty-four of the forecasts are too low, and eight are too high. An examination of the particular countries' errors is instructive

For example, except for Italy, Tunisia and Oman in all of the countries where Campbell's forecast is too high, the upstream sector is controlled by national oil companies. This shows the importance of policy and economics, refuting the argument that geology alone determines long-term production profiles. If Campbell is said to be projecting possible, not actual production, so that his error on these countries should be disregarded, then it leaves a total "optimistic" error of only 106 tb/d a trivial amount. This demonstrates clearly that his method is biased in a scientific sense, always producing forecasts which will tend to be too low.

,

,

the enormous error in countries like Canada and the United States indicates the inability of this measure to produce accurate results. He argues that these are mature producing areas, where no more giants are to be found and cause surprise increases in oil production, and the oil field
Additionally, database he employs corrects for the conservative bias due to SEC reserve reporting requirements. Since the oil resources are thus so well-known, the production curve should be extremely accurate. Yet even without any giant field

both countries have outperformed his forecast far beyond levels conceivable to him. If this method doesn't work in mature regions with high-quality data, it is hardly likely to be reliable elsewhere.
discoveries, Similarly, the enormous predictive failure in the North Sea shows that extrapolation of discovery size does not produce accurate predictions of either future field size or resource estimates, since the error should be due more to underestimating new discoveries than pessimism about the role of older fields, as is the case for the U.S.

considering individual countries in the Third World, his method seems to always generate a bell curve with imminent peaks for everyone outside the Middle East. Examples include Argentina, Egypt and Malaysia. As Table 1 showed, he was repeatedly too low for Third World producers, especially those with relatively open upstream investment. In fact, what is remarkable is the similarity between Campbell's 1989, 1991 and 1997/98 forecasts (if one ignores the dates). Always, the peak is imminent. But this precisely conforms to the argument in Lynch (1996), namely that this method almost always produces a near-term peak, no matter when or where it is applied, and thus constantly needs to be revised upwards.
Finally, Broader Comparison It might be thought that Campbell has simply reproduced the poor forecasts so often seen in the oil industry, but his errors are larger than most. As a test of the validity of my own 1989 forecast, I had earlier assembled other forecasts from that period for comparison, and to these I add Campbell's projections. The fact that his work was done two years later than the others (although EMF11 was also 1991), should provide him with an advantage, since he has two more years of data to observe and any inherent errors in his work will have less of an impact because of the shorter test period. Again, the forecasts are all normalized to common starting points, and some points are interpolated. In , the forecasts for non-OPEC, non-FSU are shown, and Campbell's is clearly the worst of the lot. The same is true for OECD oil production, although for non-OPEC Third World, his inability to predict the impact of state-owned companies' lower exploration levels leaves him in the middle of the forecast group, at least to 1996. Clearly, this method does not produce accurate results. 1997/98: Deja Vu All Over Again Again In 1997 and 1998, C. J. Campbell published a book and two Oil and Gas Journal articles which argued that the price of oil is about to increase, since most major oil producing nations outside the Middle East are reaching their depletion midpoints, after which production will decline, and decline sharply. Essentially this is the same argument from his 1989 and 1991 work, namely that oil production will imminently peak in all major countries outside the Middle East and global production cannot go much higher than the present amount. Since he is clearly using precisely the same methodology, and does not explain the failure of his earlier predictions, it appears that all he has done is update his data, increase his resource estimates and production forecasts, and move his production peaks higher and further out, exactly as Lynch (1996) contended would be necessary with this method. Specifically, he increased his estimate of global oil resources from 1650 billion barrels to 1800 billion barrels, close to the amount of oil produced during that period. The 1997 book contains only a few regional tables, so his predictions for individual nations cannot be analyzed. However, the world total is published, and as shows, it has increased dramatically from the 1991 publication. Also, W. Europe and the U.S. were published in his 1997 book, and they too show the same pattern of increasing. In his 12/29/97 OGJ article, he did present a number of small graphs showing bell curves for a variety of countries, some which he described as being past their depletion midpoint, some of which had not yet reached it. These are shown in , along with the depletion midpoint which he gave in his 1991 book, and they reaffirm my earlier arguments. The fact that all of these countries are predicted to peak by 2001 implies that there is a pessimistic bias (#1 and 2 from Lynch 1996 above). And his having to move the depletion midpoint out an average of 4 years for the countries which haven't peaked supports the argument (#4 from Lynch 1996 above) that this method always requires correction, and that the peak constantly needs to be revised to a higher, later level. Conclusion If Campbell's estimation methods produce accurate, rather than conservative, resource estimates, overcoming the objections about field and resource growth made by Adelman and Lynch, and if the Petroconsultants field size estimates are accurate because they don't have to conform to SEC rules requiring conservative field size reporting, why have his production forecasts been much too low and why have his resource estimates increased?

Figure 12

Figure 15

Table 2

Hubbert method fails because it takes recoverable (not total) resources as fixed, and assumes that to be the area under the curve of total production. When the estimate of the area under the curve (resources) is increased, the entire increase must be applied to future production. This is exactly what is happening with Campbell, as Figure 15 shows. The errors
Lynch (1996) argued that the in his 1991 forecast and the adjustments he has made in his latest work are thus predicted by Lynch (1996). Campbell has not provided an alternative explanation, merely ignored them. And as Figure 18 shows, his forecast is well outside the mainstream. Short-term prices will certainly fluctuate, and we will surely have more oil crises, since they are short-term events. Unfortunately, there is little doubt that the certain failure of the current Cassandras will be forgotten within a few years and a new round of alarms will be sounded. Hopefully, it will not receive the attention that the current (and previous) ones did, and even more hopefully, most governments and companie the tens of billions of dollars wasted when others cried wolf during the 1970s.

s have already learned their lesson from

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Peak Oil –Not true / XT #4 – New Tech Solves
New technologies are developing quickly and will solve the impacts of the peak Schafersman,
Now we come to Professor of Geology, Miami – Ohio, ’02 (Steven, prof. of geology @ Miami University, Oxford, OH, “Be Scared; Be Very Scared,” http://www.freeinquiry.com/skeptic/badgeology/energy/commentary.htm)

modern energy technologies--hybrid gasoline/electrical engines, hydrogen fuel cells, etc.--that are slowly but steadily increasing their importance in the energy mix of our country. Yes, these are proportionately small now, but they are increasing faster than most people are aware. In fact, they are increasing so rapidly that many energy experts believe that they
will significantly supplant fossil fuels in specific circumstances in the coming decade. The unit energy per cost factor of these alternative and renewable energy sources already equals coal and will soon equal petroleum in many cases. Once again , a decline in oil availability

alternative and renewable energy sources--wind,

solar, biomass fuels, etc.--and

would not significantly affect total energy availability, as other energy sources replace the use of oil. This will happen naturally now, even before there is a decline in oil availability, since the alternative energy sources are cleaner and potentially less expensive.

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Peak Oil – No Impact
Transition away from oil will be smooth, not a crash. Previous transitions prove this. Bailey ‘04 (Ronald, Science Correspondent for Reason Magazine, Feb. 18, “Are We Out of Gas Yet?” Reason Online,
http://www.reason.com/rb/rb021804.shtml)

If demand for oil begins to outstrip the supply, prices will rise, signaling companies and consumers to use less, develop new technologies, switch to other fuels, increase their insulation, and so forth. "Demand for energy is going to move away from heavy hydrocarbons," Lynch predicts. "Coal is first, oil is next." He expects that our old hydrocarbon friends will be replaced in our affection by natural gas, nuclear, and other forms of energy as those technologies improve. "It will be much like the transition in the 20th century from coal to oil in the residential heating and transportation sectors or like the transition from horses to cars," he says. The Oil Age will end, not with a horrific screech leading to a destructive crash, but with a barely perceptible, well-lubricated, smoothly braked halt, one that is merely a prelude to moving smoothly and rapidly forward again.

Transition from the peak will be smooth – No depression, No wars, No crash
Schafersman, Professor of Geology, Miami – Ohio, ’02 (Steven, prof. of geology @ Miami University, Oxford, OH, “Be
Scared; Be Very Scared,” http://www.freeinquiry.com/skeptic/badgeology/energy/commentary.htm) Furthermore, when the peak and decline are reached--as must inevitably occur sometime in the future-- why

shouldn't the decline be gradual and steady, thus allowing economies to slowly but steadily transition to alternative and renewable energy resources? The doomsayers predict, again with no or little evidence, that when the decline begins the price surge will be enormous and chaotic, thus leading to political upsets and territorial wars. The alarmists apparently believe that there are no buffering effects in national and global economies, such as, for example, when the supply of oil decreases with a constant demand, the price will rise proportionately, causing demand to decrease until supply and demand are once again in equilibrium. Of course, some will experience a decrease in their standard of living, but major depression and war? I don't think so.

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Yes – Prices High
Oil prices are high now myiris.com July 3, 2008 Oil at new highs, crosscuts USD 144 mark
Crude oil prices touched a new record high on Wednesday as it crossed USD government report showed an unexpected decline in inventories. 144 a barrel
in New York after a U.S.

The US Energy Department said that the supplies had declined by 1.98 million barrels to 299.8 million barrels last week, the lowest since January.
Light, sweet crude for August delivery rose 70 cents, to settle at a record of USD 144.27 a barrel on the New York Mercantile Exchange (NYMEX). Earlier during the day it had crossed the USD 145 a barrel mark.

Oil prices are reaching record highs in the status quo
Jason Hau

July 5, 2008

HEADLINE: Diesel price crosses $2 mark The Straits Times (Singapore)

Diesel prices have gone up by 80 cents in the last 12 months, a 40 per cent increase and the most among the five main fuel variants at pump

This latest round of price hikes is the 14th since July last year. It comes as crude oil prices reached another record high of $146US.69 ($199S.35) per barrel two days ago.
stations here.

Oil Prices are high AFP Oil prices blaze past record 146 dollars Thu Jul 3 2008, 3:35 PM ET
http://news.yahoo.com/s/afp/20080703/bs_afp/commoditiesenergyoilprice_080703193549

Red-hot world oil prices blazed over a record 146 dollars a barrel Thursday in the face of falling US oil reserves,
geopolitical tensions and a weak dollar, traders said. Russian energy giant Gazprom meanwhile forecast that soaring oil prices would "very soon" hit 250 dollars a barrel. New York's main oil futures contract, light sweet crude for August delivery, leapt to an all-time pinnacle of 145.85 dollars before a record close at 145.29 dollars, marking a gain of 1.72 dollars from a day earlier.In London, Brent North Sea oil for August delivery surged to a lifetime peak of 146.69 dollars a barrel after breaching 146 dollars for the first time in earlier trading.The contract subsequently settled up 1.82 dollars at 146.08 dollars, "Prices

rose to set new all-time highs ... supported by a decline in US

crude oil inventories," said Barclays Capital analyst Kevin Norrish. Oil prices have increased over half since the end of last year Sun Sentinel Oil
prices continue their climb flzoilbrief0703sbjul03,0,6414745.story?track=rss

July 3, 2008

http://www.sun-sentinel.com/business/sfl-

Oil prices shot to a record above $144 a barrel Wednesday as the government reported a bigger-than-expected drop in U.S.
supplies and the threat of conflict with Iran weighed on traders' minds.

The latest spike means a barrel of crude has gone up by about half since the end of last year, when
oil was going for $96 a barrel. Retail gasoline prices climbed to a record of their own in the United States. Light, sweet crude for August delivery rose as high as $144.32 on the New York Mercantile Exchange shortly after the regular trading session ended. The contract also notched a closing record, settling at $143.57 — $2.60 above the previous high from a day earlier.

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Perception Key to Prices
Perception is key in energy policy—nations carefully monitor oil price volatility Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 93-4
So embedded has oil become in today’s political and economic spheres that the big industrial governments now watch the oil markets as closely as they once watched the spread of communism — and with good reason: six of the last seven global recessions have been preceded by spikes in the price of oil, and fear is growing among economists and policymakers that, in today’s growth-dependent, energy-intensive global economy, oil price volatility itself may eventually pose more risk to prosperity and stability and simple survival than terrorism or even war. In this bleak context, it becomes easier to understand why nations as powerful and technologically advanced as Japan, Britain, and the United States have such abysmal records when it comes to long-term energy planning or alternative energy. Indeed, when the major nations speak of energy policy today, about energy for the future, or about the much-touted energy security,” they are not talking about depletion curves, or fuel cells, or a hydrogen economy. They are not talking about fuel efficiency, or solar power, or any of the potentially significant but speculative sources of energy. Rather, when nations discuss energy security today, what they are really talking about is the geopolitics of energy — and specifically, the actions, money, and alliances necessary to keep oil flowing steadily and cheaply through the next fiscal quarter.

Perception and Psychology determine oil prices – shifts can be quick and large Schoen '08 [John W., Senior Producer at MSNBC, "Oil price spike has wide economic impact,"
http://www.msnbc.msn.com/id/24778287/ download date: 7-2-08]

So far, there seems to be enough oil and gasoline to go around: Refineries are still adequately supplied with crude, and gas

stations aren’t running out of fuel. Prices are surging as traders see an increased risk of that happening. But that so-called panic buying could quickly reverse, sending oil prices sharply lower. “This is all about psychology, and we are not very good at oil companies about forecasting the psychology of prices," Jeroen van der Veer, CEO of global giant Royal Dutch/Shell, said on CNBC Thursday. “So we'd better prepare ourselves for more volatility because if this is psychology, it can change very quickly.”

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High Prices Inevitable - Frontline
1. High oil prices are inevitable and won’t go down – strong demand from China and India Associated Press, July 6 2008 OPEC chief: Strong demand will keep oil prices up Sun Jul 6, 1:27 PM ET OPEC chief Chakib Khelil says the world's surging oil prices are not likely to fall.
He says strong market demand, especially from China and India, is one reason prices will stay as high as they are. But Khelil told a conference on energy in Algiers on Sunday that the steady increases of late "have nothing to do with
supply and demand." Khelil, who serves as Algeria's energy minister, blames the rise on the weak U.S. dollar, the currency that oil is sold in.

2. Oil producers will keep prices high regardless—increased supply won’t depress prices Seeking Alpha 12-30-2007, (Jim Kingsdale), http://seekingalpha.com/article/58567-what-the-fundamentals-sayabout-future-oil-prices All this looks right on paper and it may well happen, but I wouldn’t bet on it. I would bet that if prices do fall sometime soon, maybe after the peak winter demand season, exporters will cut back fairly quickly to try to keep the price above $80 or so. Further, when prices eventually begin to rise again, perhaps in the Spring or Fall of 2008, exporters will then be slow to raise production, having just experienced lower prices. So I think a possible reduction in the oil price next year would be shallow and would likely be followed by a counter trend leg up that will probably bring the price well above $100. My thesis is based in part on the hoarding mindset that now dominates the oil market and is hardly ever discussed. Exporters (read OPEC, particularly KSA, UAE, Kuwait, and Venezuela) are now addicted to high and rising oil prices. Their ever increasing cash flows from oil have led to their making huge future capital commitments; they are not willing to see falling oil prices endanger those commitments. They also know that due to tight global supplies relatively minor production cuts are sufficient to raise prices. Finally they now believe that oil in the out years will only get more expensive. Thus near term production cuts will also be rewarded because the oil not sold now can be sold later for more money. In summary, exporters today have their hands on a hair-trigger for raising the oil price and they will not hesitate to pull it if the price falls much below $85. I summarize this series of attitudes on the part of oil exporters as the “hoarding mindset.” Meanwhile global oil production is now at an historically high level but still does not seem to be able to satisfy demand. The Saudis and the Iraqis have both managed to increase production by roughly 500,000 b/d helping to cause the 85 mb/d global production plateau that has existed for nearly two years to be eclipsed during the past few months; production now seems to be running in excess of 87 mb/d as shown in this chart: Yet the price of oil refuses to sink. Each time oil goes into the high $80s it seems to bounce right back in the face of tight inventories. U.S. crude oil inventories keep sinking – they are now the lowest in nearly three years. This is a chart that indicates the tightness of U.S. oil supplies measured in days of inventory:

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High Prices Inevitable - Frontline
3. Global oil demand will keep prices high Jad Mouawad. "Rising Demand For Oil Provokes New Energy Crisis." The New York TImes. 9 Nov. 2007.
http://www.nytimes.com/2007/11/09/business/worldbusiness/09oil.html?_r=1&oref=slogin&pagewanted=print This is the world’s first demand-led energy shock,” said Lawrence Goldstein, an economist at the Energy Policy Research Foundation of Washington. Forecasts of future oil prices range widely. Some analysts see them falling next year to $75, or even lower, while a few project $120 oil. Virtually no one foresees a return to the $20 oil of a decade ago, meaning consumers should brace for an era of significantly higher fuel costs. At the root of the stunning rise in the price of oil, up 56 percent this year and 365 percent in a decade, is a positive development: an unprecedented boom in the world economy. Demand from
China and India alone is expected to double in the next two decades as their economies continue to expand, with people there buying more cars and moving to cities to seek a way of life long taken for granted in the West. But as prices rise, the global economy is entering uncharted territory. The increase so far does not appear to be hurting economic growth, but many economists wonder how long that will last. “These prices are too high and will end up hurting everybody, producers and consumers alike,” said Fatih Birol, chief economist at the International Energy Agency. Oil futures closed at $95.46 on the New York Mercantile Exchange yesterday, down nearly 1 percent from the day before. But the price has become volatile, and many analysts expect the psychologically important $100-a-barrel threshold to be breached sometime in the next few weeks. “Today’s markets feel like the crowds standing up in the final minutes of a football game shouting: ‘Go! Go! Go!,’” said Daniel Yergin, an oil historian and the chairman of Cambridge Energy Research Associates, a consulting firm. “People seem almost more relaxed about $100 than they were about $60 or $70 oil.” Oil is not far from its

money. For most of the 20th century, as it transformed the modern world, oil was cheap and abundant. , for example, Even at today’s highs, oil is cheaper than imported bottled water, which would cost $180 a barrel, or milk, at $150 a barrel. “The concern today is over how will the energy sector meet the anticipated growth in demand over the longer

historic inflation-adjusted high, reached in April 1980 in the aftermath of the Iranian revolution. At the time, oil jumped to the equivalent of $101.70 a barrel in today’s Throughout the 1990s oil prices averaged $20 a barrel.

“Energy demand is increasing at a rate we’ve not seen before. On the supply side, we’re seeing it is struggling to keep up. That’s the energy challenge.” More than any other country, China represents the scope of that
term,” said Linda Z. Cook, a board member of Royal Dutch Shell, the big oil company. challenge. As it turned into a global economic behemoth over the last decade, China also became a major energy user. Its economy has grown at a furious pace of about 10 percent a year since the 1990s, lifting nearly 300 million people out of poverty. But rapid industrialization has come at a price: turning a country that was once self-sufficient into a net oil importer. India and China are home to about a third of humanity. People there are demanding access to electricity, cars, and consumer goods and can increasingly afford to compete with the West for access to resources. In doing so, the two Asian giants are profoundly transforming the world’s energy balance. Today, China consumes only a third as much oil as the United States, which burns a quarter of the world’s oil each day. By 2030, India and China together will

oil demand has more than tripled since 1980,

While demand is growing fastest abroad, Americans’ appetite for big cars and large houses has pushed up oil demand steadily in this country, too. Europe has managed to rein in oil consumption through a combination of high gasoline taxes, small cars and
import as much oil as the United States and Japan do today. efficient public transportation, but Americans have not. Oil consumption in the United States, where gasoline is far cheaper than in Europe, has jumped to 21 million barrels a day this year, from about 17 million barrels in the early 1990s. If the Chinese and Indians consumed as much oil for each person as Americans do, the world’s oil consumption would be more than 200 million barrels a day, instead of the 85 million barrels it is today. No expert regards that

global demand is expected to rise to about 115 million barrels a day by 2030, a level that is likely to tax the world’s ability to pump more oil out of the ground. Already, the world is running on a limited cushion of spare capacity; any interruption in supplies, whether from hurricanes or armed conflict, causes prices to spike. “We don’t have any shock absorbers,” Mr. Goldstein said. For oil companies, high prices have set off a frenzied search for new sources around the world. After a long lull in investments through
level of production as conceivable. More realistically, most of the 1990s because of low prices, major oil companies have invested billions of dollars to bring in more supplies. The trouble is that these big new developments take a long time, and companies have been hobbled by higher costs. The cost of drilling rigs, for example, the basic tool of the trade, has doubled in recent years. Analysts say it will take time, but new supplies will eventually work their way to market. Supplies have also been hampered by political tension in the Persian Gulf, the war in Iraq, devastating hurricanes in the oil-producing Gulf of Mexico, production difficulties in Venezuela and violence in Nigeria’s oil-rich province. Many of these geopolitical factors have

Recently, in just nine weeks, oil jumped from $75 to $95 a barrel for little apparent reason. “Fifty-dollar-a-barrel oil seems so far away at this point,” said Thomas Bentz, a senior energy analyst at BNP Paribas in New York, citing a figure that seemed an impossibly high price for oil only a few years ago. “Oil will stop rising when we see demand destruction. We haven’t seen that yet.”
contributed to a political risk premium variously estimated at $25 to $50 a barrel.

4. Peak means oil prices will never decline Financial Times. "Peak No Evil" 3 Jan. 2008. http://www.ft.com/cms/s/1/7e1b5d1e-b99e-11dc-bb660000779fd2ac.html
As millenarian prophecies go, "the peak is nigh" does not pack the same doom-laden punch as a promised "end". Except, that is, in oil circles. Oil resources are finite. "Peak oil" theorists posit that about half of all the world's crude has been used and that

output will soon peak prior to an irreversible decline. Such thinking has helped propel crude to the $100 per barrel level it touched yesterday. Conventional oil fields are like champagne bottles: once "opened", pressure forces out some of the contents. Eventually field pressure drops and, barring using such techniques as re-injecting gas, output inevitably declines. Back in the 1950s, Marion King Hubbert, a US geoscientist, correctly forecast - to within a few years - when output in the US's lower 48 states would peak (it was 1970). The "Hubbert curve" is a totem of peak oil theorists.

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High Oil Prices Inevitable XT #1 – China/India

Chinese and Indian demand will continue to drive up global oil prices. Jad Mouawad. "Rising Demand For Oil Provokes New Energy Crisis." The New York TImes. 9 Nov. 2007.
http://www.nytimes.com/2007/11/09/business/worldbusiness/09oil.html?_r=1&oref=slogin&pagewanted=print With oil prices approaching the symbolic threshold of $100 a barrel, the world is headed toward its third energy shock in a generation. But today’s surge is fundamentally different from the previous oil crises, with broad and longer-lasting global
implications. Skip to next paragraph Enlarge This Image Hiroke Masuike for The New York Times Traders at the New York Mercantile Exchange Thursday, where the price for a barrel of crude oil settled at $95.46. Related Times Topics: Oil and Gasoline Just as in the

energy crises of the 1970s and ’80s, today’s high prices are causing anxiety and pain for consumers, and igniting wider fears about the impact on the economy. Unlike past oil shocks, which were caused by sudden interruptions in exports from the Middle East, this time prices have been rising steadily as demand for gasoline grows in developed countries, as hundreds of millions of Chinese and Indians climb out of poverty and as other developing economies grow at a sizzling pace. “This is the world’s first demand-led energy shock,” said Lawrence Goldstein, an economist at the Energy Policy Research Foundation of Washington. Forecasts of future oil prices range widely. Some analysts see them falling next year to $75, or even lower, while a few project $120 oil. Virtually no one foresees a return to the $20 oil of a decade ago, meaning consumers should brace for an era of significantly higher fuel costs. At the root of the stunning rise in the price of oil, up 56 percent this year and 365 percent in a decade, is a positive development: an unprecedented boom in the world economy. Demand from China and India alone is expected to double in the next two decades as their economies continue to expand, with people there buying more cars and moving to cities to seek a way of life long taken for granted in the West.

China and India demand fills in. Gal Luft. "Ending America's Dependence on Middle East Oil." Middle East Forum. 27 Oct. 2004
http://www.meforum.org/article/653 To complicate the matter, America is not the only country with a growing demand for foreign oil. China and India, hosting two of the largest and fastest growing economies, are also experiencing a steep rise in their demand for transportation fuel. China, for example, will likely enter into Middle Eastern politics in order to meet this demand.

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High Prices Inevitable XT #3 – Global Demand
High oil prices inevitable. Other countries are driving them because consumption has actually been decreasing in the US. Detroit Free Press, “What's driving oil prices” July 6, 2008
Worldwide demand: This, of course, is the biggie -- the centerpiece of all free market economic debates. And there are certainly indications that demand -- particularly with China and India ramping up their industrial might -- is increasing worldwide. Problem is, consumption is actually down in the United States, and an economic slowdown affecting nations around the world should be reducing demand, bringing down prices. That is not happening.

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Oil Prices – Russia DA (1nc)
Oil prices are high and will continue to rise without a significant decline in demand Asia Pulse July 3, 2008 HEADLINE: BRIEFING - ASIA ENERGY - JULY 3, 2008
Skyrocketing crude oil prices are likely to continue the upward march and could reach $175US a barrel by Diwali (October 28) unless there is significant decline in demand from growing economies, Indian analysts say. Crude oil prices have risen by about $40US since March. Currently on New York Mercantile Exchange, oil traded near record high
levels around $142US.

Price decline wrecks Russia's economy. BBC Worldwide Monitoring, "Russian finance minister warns of effects of possible oil price fall" April 12, 2008
lexis

A fall in the oil price could inflict a serious blow on the Russian economy, the moment the country's economy is seriously dependent on the oil price, and that in the case of a fall in the price a crisis will affect both the state and private sectors.
[Presenter] Finance Minister Aleksey Kudrin has said during a visit to Washington. He said that at

Impact is nuclear war. Steven David, Prof. of political science at Johns Hopkins, 1999, Foreign Affairs
If internal war does strike Russia, economic deterioration will be a prime cause. From 1989 to the present, the GDP has fallen by 50 percent. In a
society where, ten years ago, unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to be much higher. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 a month). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the country's cure-all, but in a land without welldefined property rights or contract law and where subsidies remain a way of life, the prospects for transition to an American-style capitalist economy look remote at best. As the massive devaluation of the ruble and the current political crisis show, Russia's condition is even worse than most analysts feared. If conditions get worse, even the stoic Russian people will soon run out of patience. A future conflict would quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with the Communist Party out of office, what little civilian control remains relies on an exceedingly fragile foundation -- personal friendships between government leaders and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership, increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow ever more dependent on local governments for housing, food, and wages. Draftees serve closer to home, and new laws have increased local control over the armed forces. Were a conflict to emerge between a regional power and Moscow, it is not at all clear which side the military would support. Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does little to keep them together. As the central government finds itself unable to force its will beyond Moscow (if even that far), power devolves to the periphery. With the economy collapsing, republics feel less and less incentive to pay taxes to Moscow when they receive so little in return. Three-quarters of them already have their own constitutions, nearly all of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If

. Should Russia succumb to internal war, the consequences for the United States and Europe will be severe. A major power like Russia -- even though in decline -- does not suffer civil war quietly or alone. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. Massive flows of refugees would pour into central and western Europe. Armed struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poison the environment of much of Europe and Asia. Within Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a second civil war might produce another horrific regime. Most alarming is the real possibility that the violent disintegration of Russia could lead to loss of control over its nuclear arsenal. No nuclear state has ever fallen victim to civil war, but even without a clear precedent the grim consequences can be foreseen. Russia retains some 20,000 nuclear weapons and the raw material for tens of thousands more, in scores of sites scattered throughout the country. So far, the government has managed to prevent the loss of any weapons or much material. If war erupts, however, Moscow's already weak grip on nuclear sites will slacken, making weapons and supplies available to a wide range of anti-American groups and states. Such dispersal of nuclear weapons represents the greatest physical threat America now faces. And it is hard to think of anything that would increase this threat more than the chaos that would follow a Russian civil war.
these rebellions spread and Moscow responds with force, civil war is likely

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Russian Economy High
Russia’s economy is advancing in the SQ because of oil prices
Jason Corcoran and Nick Clark July 1, 2008 The Independent (London) HEADLINE: RUSSIA'S NEW REVOLUTION; Bankers were thought to be facing tough times after the credit crunch. But in Moscow, where business is booming, Brits are being attracted by soaring salaries. Marcus Svedberg, chief economist at East Capital, an asset manager that focuses on Eastern Europe, said: "Ten years ago, the country was nearly bankrupt; now the economy is dynamic and, despite what is happening elsewhere, the growth has been accelerating this year." As an illustration of some of the advances in the Russian economy, which is based on its oil and gas reserves, Mr Svedberg pointed out that GDP in Russia had risen from $271bn in 1998 to $1.6 trillion this year. At the same time, debt has fallen from 50 per cent of GDP to 3 per cent. Inflation is down from 84 per cent to 10 per cent, while the interest rate has fallen from 150 percent to 11 per cent.The country now has an oil fund that has so far invested only in AAA-rated bonds. It is believed that when the mandate is renewed in October, the fund will have a much more aggressive buying strategy.

Russia’s economy is growing because of high oil prices
Scott For

Bevan June 7, 2008

ABC Transcripts (Australia) HEADLINE: New Russian laws may restrict foreign investment

Russia's economy is powering along, fuelled by oil and gas money, and with forecasts of GDP (gross domestic product) growth of about eight per cent this year. Victor Mizin, from Moscow's Institute of Strategic Assessments, says Russia's leaders want to use the forum to get the message across that their country is good for business.

Russia's oil-driven economy is high but vulnerable. Birmingham Post, Trevor Law, "Betting on the Russian Bear" March 8, 2008 lexis
Russia is rich in natural resources, especially oil and gas. Russian energy companies are well-run,
conservative companies that Robin Geffen, manager of the excellent Neptune Russia and Greater Russia funds, thinks "are not going to get caught in the classic 'boom to bust' oil cycle that we have seen at least twice over the last 25 years". Other than gas and oil, Russia is also one of the world's largest producers of platinum and palladium. Both are important metals for needs as wide-ranging as fuel cell production, microchips and, of course, jewellery. Russia is also a large and growing producer of gold. It is one of the two key global producers of diamonds and this should be beneficial given the increasing demand of diamonds in Asia, particularly China. The rise of the Russian

consumer is probably the most significant development in this market. Average wages have increased by over 20 per cent per annum in recent years in a relatively low inflationary environment. A recent Goldman Sachs study
stated that over the next 20 years we will see a middle-class spread across Brazil, Russia, India and China of no fewer than 800 million people, which is larger numerically than the current combined total population of the US, Europe and Japan. While this may seem encouraging news, it is a little misguided to view Russia in the same terms as a Western democracy with similar economic values. According to recent surveys, almost 70 per cent of Russians have no savings at all and you can hardly expect to find a significant pensions industry when the life expectancy of the Russian male has been estimated as low as 59, a year before pension age. The average Russian's distrust of banks is understandable if you look back to the 1990s. Millions lost their rouble savings when the Soviet Union collapsed in 1991 and in the financial crisis of 1988, the rouble's value against the dollar fell fourfold. Mr Putin's recent tirades against the West and the recent forced closure of the British Council offices in his country owe more to the old Cold War regime than a bright new dawn of democracy. Evidence that Russia should not be regarded as a happy ally searching for Western values came last month with a somewhat chilling warning from a high-ranking official: "If you continue to preach to us, we will become your enemies." In May, Mr Putin hands over the presidency to his hand-picked successor Dmitry Medvedev, but few doubt he will remain the guiding light behind his country's policies. Perhaps St Petersburg University professor Stanislav Tkachenko best illustrated the often confusing messages coming out of the new Russia when he summed up Mr Putin's character saying: "You can't say he is a Slavophile or a Westerner because he is both, but above all he stands for a great Russian state." These considerations aside, there have been high rewards for investors turning to Russia. Funds like the Neptune Russia and Greater Russia Fund offering 215.2 per cent growth since launch on December 31, 2004, will look attractive to many investors. With high returns come higher risk and volatility. We all know by now that there is no 'easy money' or 'easy ride' when it comes to equity investing. However, in these changing world

dynamics, Russia will play a very key role as a resource-rich country with a welleducated and strongly motivated workforce so a sensible exposure within your portfolio may prove beneficial.

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Russia’s economy is growing in the status quo primarily because of oil prices BBC Monitoring Middle East – Political Text of report by Jordanian newspaper Al-Arab al-Yawm on 21 June June 24, 2008 HEADLINE: Russian envoy to Jordan discusses energy cooperation, Iraq
[Interview with Russian Ambassador to Jordan Alexander Kalugin by As'ad al-Azuni; place and date not given: "Moscow Considers Supplying Jordan with Oil" - the interview is preceded by a short introduction] [Kalugin] Russia under President-elect Medvedev is continuing its domestic and foreign policies along the same lines as his predecessor, Putin. Recently Russia registered a 7-per cent

annual economic growth, which is a good indicator of the economy's movement. Some officials say that, by the end of this year, Russia's Gross National Product will take sixth place among world economies. There is the
advanced technology industry, and gas, oil, metal, and timber exports, all of which play an important role in securing national income. Nowadays, Russia also plays an important role in the manufacturing industry, and we are working to consolidate this, because we believe that dependence solely on oil is harmful.

Russia's economy high now. The Korea Herald, "Leadership transition, Russian style" May 12, 2008 lexis

But more than anything else, growth of the Russian economy has been helped by the rising prices of energy. Revenues from oil and gas, metals and timbers constitute 80 percent of total exports, and they provide up to 30 percent of government income. The oil bonanza has allowed Moscow to pay back foreign debts and achieve a 7 percent growth for close to a decade.

Russia's oil-rich economy high now. Daily Mail (London), Alex Brummer, "Oil-rich Russian economy ready to take off" May 21, 2008 lexis
Oil-rich Russia is buzzing. On our arrival here the city is celebrating the victory of the Russian national team in the world ice hockey championships. This essentially consists of Moscovites driving their cars up and down the vast boulevards at unimaginable speeds in an urban environment, sounding their horns and hanging out of the sunroofs in daredevil style. The speeding German cars now outnumber the Ladas ten to one as they whizz pass Zara, Canali and the Western designer stores. But there is not a Marks & Spencer or Tesco in sight. Our nation of shopkeepers has not yet had the courage to make the journey from the old Soviet empire of Eastern Europe to Prime Minister Vladamir Putin's mother state. Putin, with the assistance of the natural resource economy, has brought a normality to the Russian economy.

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High Oil Prices Key Economy
Price decline would crush Russia. David Blair, "Analysis Putin's aggressive posturing cannot hide an underlying weakness" August 23, 2007 lexis
Russia’s nuclear bombers are permanently airborne once again and President Vladimir Putin loses no opportunity to strut the world stage and flex his country's muscles. Yet all the sound and fury disguises one essential fact: far from being a rising power like China or India, Russia is locked in long-term decline. At present, high oil

prices give Russia's economy a temporary lift

- and afford Mr Putin the cash to display his military prowess. But demographics underlie every dimension of national power. Mr Putin cannot avoid the fact that Russia's population falls by about 800,000 people every year. Instead of the present level of 142 million, Russia will probably have fewer than 100 million people by 2050 and vast swathes of the country will be depopulated. Nations with a real chance of shaping events in the late 21st century do not have falling populations. National decline is virtually guaranteed by low life expectancy, alcohol abuse and the remarkable fact that Russian women experience more abortions than live births. Power in the 21st century will divide between America's 300 million people, the European Union's 460 million and China and India with more than a billion each. Against this background, Russia looks insignificant. Mr Putin's second Achilles Heel is the Russian economy. Its dependence on oil and natural gas is a blessing when,

as now, prices are high. If prices fall or a long period of volatility begins, Mr Putin will
quickly feel the pinch. The uncomfortable fact is that Russia is not a centre of innovation. There are no world class Russian manufacturing companies, no universities churning out new inventions. Instead, the economy is largely resource-dependent

and rises or falls with global energy prices. In other words, Mr Putin has virtually no control over Russia's
economic destiny. The vagaries of the world energy market will decide how belligerent he can afford to be.

High oil prices are key to the Russian economy The National Interest, Summer 2003
The improved appearance of Moscow (although not the rest of the country) is indisputable, but it is mainly a product of the high price of oil. Every dollar difference in the price of oil translates into roughly $1 billion in budget revenue; a high price for oil has therefore become the key to the government's ability to balance the budget, pay state employees and repay Russia's foreign debt. If the price should fall significantly and stay relatively low, as it did in much of the 1980s and 1990s, Russia will be plunged into a severe economic crisis.

Russia’s economy is growing but they are in a precarious position. Their economy relies on oil and a fall in oil prices will collapse their economy
Donald h. Gold Investor's Business Daily June 23,

2008 HEADLINE: Globalization Fuels Brave New World

After a storybook revolution -- from Lech Walesa to the Berlin Wall to Boris Yeltsin facing down the tanks of an attempted putsch -- the new Russia is in a precarious position. That may sound odd. The RTSI, Russia's benchmark stock index, is among the world's hottest. But Russia is a one-sector economy, warns Josef Karasin, head of emerging markets at IDEAGlobal in London. Russia is sitting on vast stores of oil and natural gas. It's the No. 1 gas source for Europe. Sounds great. What's more, Russia's untapped deposits are the equivalent of low-hanging fruit, Karasin says. That makes its cost of production far lower than untapped sources in, say, Canada, the U.S. or the North Sea. Or much of the Middle East. After decades of Communist Party rule, investment in Russian oil exploration, drilling and extraction was sorely neglected. Elsewhere around the world, the easy-to-get-at oil had already been pumped, refined and burned. So what's the problem? First, Russia has not translated its energy wealth into a broader base, Karasin says. If oil and gas prices fall, so will Russia's economy -- and the RTSI, which is like one giant energy ETF. Second, despite the oil -and-gas boon, Russia is an inefficient, heavily regulated economy. "The authorities have not made any reforms." Karasin said.

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Russia’s economy is dependent on oil Africa News BYLINE: Ghanaian Chronicle June 10, 2008 HEADLINE: Ghana;
Today everyone is talking about making a fortune from the oil yet to be
produced. Oil, Millionaires And the Poor

It is dangerous for us to build our economy from oil alone. Rather we should think of diversifying our economy away from the oil dependency. Russia and Nigeria have fallen into the oil trap. They have become lazy riding on the back of oil money.

The plan would would cause a price decline – affecting Russia especially. Business Week, John Carey ”Taming the Oil Beast” February 24, 2003 lexis
Yet reducing oil use has to be done judiciously. A drastic or abrupt drop in demand could even be counterproductive. Why? Because even a very small change in capacity or demand

''can bring big swings in price,'' explains Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University's Robinson College of Business. For instance, the slowdown in Asia in the mid-1990s reduced demand only by about 1.5 million bbl. a day, but it caused oil prices to plunge to near $10 a barrel. So today, if the U.S. succeeded in abruptly curbing demand for oil, prices would plummet. Higher-cost producers such as Russia and the U.S. would either have to sell oil at a big loss or stand on the sidelines. The effect would be to concentrate power -- you guessed it -- in the hands of Middle Eastern nations, the lowest-cost producers and holders of two-thirds of the known oil reserves. That's why flawed energy policies, such as trying to override market forces by rushing to expand supplies or mandating big fuel efficiency gains, could do harm.

Russian growth is dependant on oil income (A2: Oil Prevents Real growth) MSNBC News 9/21/2004 http://msnbc.msn.com/id/6063583/
Another big concern: How much the country's economic boom is tied to high oil prices. Russia is expected to export nearly $76 billion in oil this year, just under half of all exports. “There's this inherent instability that will always be existing as long as the economy depends excessively on one or two products,” said Christof Ruhl of World Bank, Russia. The Russian economy has never grown by more than five percent if oil prices are not rising. So, despite and expanding middle class, a rise in consumerism and a more diverse economy, the fate of Russia remains closely tied to the outlook for oil.

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US-Russian Relations Impact Add-on
High prices key to U.S.-Russian relations David Victor (Analyst at CFR ‘03 (David, Foreign Affairs, march/april)
Ever since the Iron Curtain came crashing down, American and Russian diplomats have been searching for a special relationship between their countries to replace Cold War animosity. Security matters have not yielded much. On issues such as the expansion of NATO, stabilizing Yugoslavia, and the war in Chechnya, Washington and Moscow have sought each other's tolerance more than cooperation. Nor have the two nations developed much economic interaction, as a result of Russia's weak institutions and faltering economy. Thus, by default, "energy" has become the new special topic in Russian-American relations. At a Kremlin summit in May 2002, Presidents George W. Bush and Vladimir Putin pledged to work together to reduce volatility in global energy markets and promote investment in Russia's oil industry. Soon after, at the first-ever summit of U.S. and Russian oil executives in Houston, Russia's energy minister, Igor Yusufov, reiterated this goal. The two governments have created a special working group on energy cooperation, and Russia will host the next commercial energy summit in 2003. In Moscow, especially, the potential of new oil ties has attracted extensive media coverage and political speculation. For instance, Grigory Yavlinsky, head of Yabloko, one of Russia's leading opposition parties, has suggested that the United States and Russia could sideline the Organization of Petroleum Exporting Countries (OPEC) as the arbiter of world oil prices. This enthusiasm is misplaced, however. A collapse of oil prices in the aftermath of an invasion of Iraq may

soon lay bare Washington's and Moscow's divergent interests. Russia needs high oil prices to keep its economy afloat, whereas U.S. policy would be largely unaffected by falling energy costs. Moreover, cheerleaders of a new RussianAmerican oil partnership fail to understand that there is not much that the two governments can do to influence the global energy market or even investment in Russia's oil sector.

Cooperation is critical to prevent the spread of infectious disease Sestanovich ‘06 (Stephen- Senior fellow for Russian and Eurasian Studies, “Russia's Wrong Direction: What the
United States Can and Should Do”, Council on Foreign Relations, March, http://www.cfr.org/publication/9997/ ) U.S.-Russian cooperation can help the United States to handle some of the most difficult challenges it faces: terrorism, the proliferation of weapons of mass destruction, tight energy markets, climate change, the drug trade, infectious diseases, and human trafficking. These problems are more manageable when the United States has Russia on its side rather than aligned against it.

Infections disease spread risks global extinction Steinbruner ‘98 (John D- Senior Fellow at Brookings Institution, “Biological weapons: A plague upon all
houses,” Foreign Policy)
It is a considerable comfort and undoubtedly a key to our survival that, so far, the main lines of defense against this threat have not depended on explicit policies or organized efforts. In the long course of evolution, the human body has developed physical barriers and a biochemical immune system whose sophistication and effectiveness exceed anything we could design or as yet even fully understand. But evolution is a sword that cuts both ways: New diseases emerge, while old diseases mutate

and adapt. Throughout history, there have been epidemics during which human immunity has broken down on an epic scale. An infectious agent believed to have been the plague bacterium killed an estimated 20 million people over a four-year period in
the fourteenth century, including nearly one-quarter of Western Europe's population at the time. Since its recognized appearance in 1981, some 20 variations of the HIVvirus have infected an estimated 29.4 million worldwide, with 1.5 million people currently dying of aids each year. Malaria, tuberculosis, and cholera-once thought to be under control-are now making a comeback. As we enter the twenty-first century, changing conditions have enhanced the potential for widespread contagion. The rapid growth rate of the total world population, the unprecedented freedom of movement across international borders, and scientific advances that expand the capability for the deliberate manipulation of pathogens are all cause for worry that the problem might be greater in the future than it has ever been in the past. The threat of infectious pathogens is not just an issue of public health, but a fundamental

security problem for the species as a whole.

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Russia Has Vast Oil Supplies
Russia can continue selling oil -Russian reserves will double or triple within the next decade CNBC News 9/20/2004 http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P94992.asp
Some 1,200 miles east of Moscow, across the tundra of western Siberia, lies the secret behind Russia's return to the ranks of oil superpowers. The Priobskoye field, a 400,000 barrel a day gusher, is the largest field tapped in Russia since the fall of the Soviet Union. It has helped the country push oil output above 9 million barrels a day, from just 7 million in 2001. Russia now rivals Saudi Arabia for the title of the world's No. 1 producer. "Without the increase in output from Russia over the last three or four years, probably a couple of million barrels a day, we'd have had definitely a much tighter supply situation, leading to higher prices," says Stephen O'Sullivan, an oil expert at United Financial Group. In Russia, prosperity is spelled O-I-L. It's oil from places like Priobskoye that's fueling the economic revolution back in Moscow. And it may only have just begun. Analysts think untapped Russian oil reserves may be much larger than current estimates.

"The reserve numbers are being revised upwards," says Paul Collison, an oil analyst at Brunswick UBS. "We believe that over the next 10 or 15 years a double or triple (in reserve estimates) is feasible."

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AT: Russia has diversified economy
Russia’s economy is growing but they are in a precarious position. Their economy relies on oil and a fall in oil prices will collapse their economy
Donald h. Gold Investor's Business Daily June 23,

2008 HEADLINE: Globalization Fuels Brave New World

After a storybook revolution -- from Lech Walesa to the Berlin Wall to Boris Yeltsin facing down the tanks of an attempted putsch -- the new Russia is in a precarious position. That may sound odd. The RTSI, Russia's benchmark stock index, is among the world's hottest. But Russia is a one-sector economy, warns Josef Karasin, head of emerging markets at IDEAGlobal in London. Russia is sitting on vast stores of oil and natural gas. It's the No. 1 gas source for Europe. Sounds great. What's more, Russia's untapped deposits are the equivalent of low-hanging fruit, Karasin says. That makes its cost of production far lower than untapped sources in, say, Canada, the U.S. or the North Sea. Or much of the Middle East. After decades of Communist Party rule, investment in Russian oil exploration, drilling and extraction was sorely neglected. Elsewhere around the world, the easy-to-get-at oil had already been pumped, refined and burned. So what's the problem? First, Russia has not translated its energy wealth into a broader base, Karasin says. If oil and gas prices fall, so will Russia's economy -- and the RTSI, which is like one giant energy ETF. Second, despite the oil -and-gas boon, Russia is an inefficient, heavily regulated economy. "The authorities have not made any reforms." Karasin said.

Claims that Russia can handle lower prices are based on flawed data – the impact on Russia’s economy would be massive Clifford Gaddy and Barry Ickes, The Brookings Institution and The Pennsylvania State University, Eurasian Geography and Economics, Volume 46, Number 8, December 2005 , pp. 559-583(25)
What is distinctive for Russia, we would argue, is the scale of the informal rent redistribution. Like the part of the iceberg that lies
beneath the surface, the informal rent categories may turn out to be most important in assessing current and future economic and political developments. To take one example, one frequently hears statements to the effect that a decline in oil prices would have

little impact on the Russian economy. The government’s oil stabilization fund, it is said, absorbs the windfall. The core budget is sustainable at much lower oil prices. But this line of thinking is based on looking at formal taxes alone. In fact, we see that the formal taxes and the formal budget are only a part of the picture. Informal rent-sharing sustains a much broader part of the economy and society. Lower oil prices mean smaller overall rents, and thus less to be shared among all the categories – not just the part represented by formal taxes.

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Russia production has peaked
Russia’s oil production has peaked in the SQ – can’t sell significantly more to contribute to economy Alexander Kolyandr, Dow Jones Newswires, July 1 2008 OIL CONGRESS: Russia's Oil Output Has Reached Plateau
-Dep Min http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20080701%5cACQDJON200807010803DOWJONESDJONLINE000223.ht m&&mypage=newsheadlines&title=OIL%20CONGRESS:%20Russia's%20Oil%20Output%20Has%20Reached%20Plateau%20Dep%20Min

MADRID -(Dow Jones)- Russia's oil production will grow only marginally this year and in the near term, Russia's deputy minister for energy said Tuesday, and has in effect hit a plateau for now. "No one should expect that Russia's oil production growth will match the one we've witnessed in the past eight years," Anatoly Yanovsky said on the sidelines of the World Petroleum Congress. Over that period, Russia's annual oil production grew from 360 million metric tons to just above 490 million tons. "Nothing like that will happen", the official said, adding, that Russia's oil production has hit a plateau which will remain unchanged until new large fields in Eastern Siberia and offshore come upstream. After several years of stable growth, production of oil and gas condensate in Russia dropped 0.3% in the first four months of this year compared with the same period a year previously, to 161 million tons, or 1.18 billion barrels, according to the government.

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Russia has diversified
Oil price drop would have no effect on the Russian economy. Prices could get as low as $55 a barrel and the effect would still be insignificant Russia & CIS Banking & Finance Weekly June 20, 2008 headline: russia does not fear drop in oil prices - kudrin
Russia should be prepared for both further growth as well as a rapid drop in oil prices, he said. It is better for Russia when oil prices are high, he said, but these prices must be utilized soundly and oil windfalls should not be wasted. "If oil prices are higher and is spent immediately, the ruble's exchange rate will strengthen," he said, stressing that the appreciation of the ruble would have a negative effect on Russian industry. A decline in the price of oil will not have a significant impact on the Russian budget, Kudrin said. "Russia is not afraid of a price drop," Kudrin said in an interview with Vesti 24 TV while in Osaka following the meeting of the G8 finance chiefs. "Our budget would not have a deficit at a price of $55 per barrel. The tax system for our oil companies is set up so that as the price of oil declines, taxation declines. So no substantial changes will take place. It will have some effect on

our GDP growth, but an insignificant one compared with the earlier period. I repeat, the effect will be insignificant," he said.

Low oil prices will not affect Russia - they have shielded themselves from price decline and diversified their economy. Belfast Telegraph, Mary Dejevsky, "Russia will not cut oil and gas production, Putin says" September 17, 2007 lexis
Mr Putin was answering questions from foreign Russia-watchers at his summer residence near the southern resort city of Sochi. What had prompted a response that should reassure Russia's Western customers, at least in the short term, was a comment by a senior official two days before to the effect that Russia's oil and gas bonanza was almost as much trouble as it was worth. He had said that, while Russia had benefited hugely from the high energy prices of recent years, these had also created problems. Because the Russian economy simply could

not absorb so much money productively in such a short time, the government had to spend much specialist time and energy on how best to use it. A proportion goes to the "stabilisation fund", now standing at $130bn, seen as an insurance against energy prices falling. Another share goes into an "investment fund" for infrastructure projects, higher pensions and public service salaries. What is left over is invested abroad, much of it in foreign bonds, to be as safe as possible. Russia's foreign investment policy was, the official said, deliberately"conservative". The official
also said that Russia was looking to invest more in foreign companies, and would already have done so but for what it saw as unwarranted suspicion of Russia's intentions and closet protectionism on the part of foreign governments. It was in this context that a participant in the discussion with Mr Putin asked this question: Why, if Russia found administering its new oil and gas wealth so burdensome, did it not consider cutting production? Keeping the stuff in the ground, he suggested, would have several beneficial effects for Russia. It would raise the world price, so yielding more money for less effort. It would, assuming no dramatic fall in prices in the near future, guarantee Russia a good income for many more years. And it would save ministers the time and effort involved in figuring out how to invest its windfall. The question clearly appealed to Mr Putin. He smiled and described the proposition as interesting, as he seemed to turn it over in his mind. But his response was categorical. "We will extend and increase production of both oil and gas, and we will do that because global demand

is growing." He said that Russia had no intention of banking on further rises in energy prices. "We remember that there was a time when coal was the main source of energy, and then all at once the price fell sharply. What good would come of speculating?" Russia, he said, "wants to behave responsibly" not for its own sake, but because "harmonious relations" with the rest of the world was as much in the national interest as high energy prices.
Apparently alluding to Western charges that Russia used its position as an energy supplier as a weapon, Mr Putin said that Russia had never " blackmailed" the world market. He went on: "We are not a member of Opec though we keep a close eye on what it does and one reason is that we don't have the level of state monopoly over energy production that most Opec countries have."

Russia’s economy has diversified: no impact Journal of Commerce 4/26/2004
Although Russia's remoteness from the U.S. - and its proximity to the huge European market - limits its potential as an economic partner,

Russian companies in such sectors as information technology, telecommunications and aerospace are becoming competitive, Marshall said. Even Russia's agriculture sector is becoming viable. Last year, Russia became a net exporter of grain, which is "mind-boggling" to Marshall, who remembers the ineptitude of the Soviet era. "Yes, they are still heavily dependent on energy, but not completely. Sure, the foreign reserves of $85 billion - because of high energy prices - has helped. But it's not just that."

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Russian economy resilient
Russian economy is resilient. Bruce Stokes. "Don't Ignore the Russian Bear." Council on Foreign Relations. 2008.
http://www.cfr.org/publication/3225/dont_ignore_the_russian_bear.html
A little less than a year ago, August 17 to be precise, the post-Cold War Russian economic experiment imploded. The ruble collapsed and debt payments to foreigners were frozen. Wall Street lost billions of dollars. Long Term Capital Management, one of the world's biggest hedge funds, had to be taken over by its bankers. Once burned, international investors yanked their capital out of all emerging markets — from Latin America to East Asia— causing world interest rates to spike. The global economy teetered on the edge of

depression. But, much to the surprise of most economic pundits, international markets quickly righted themselves. The Russian economy proved far more resilient than anticipated. And, in retrospect, the events of August, 1998 were little more than a very large bump in the road. The lessons of this "crisis that wasn't" are now clear: Russia is not too big to fail (the volume of its debts do not dictate special treatment by its creditors); the financial world can cope with such failure; and the Russian economy can bounce back without much overt help from the West. But the impending $4.5
billion loan to Russia by the International Monetary Fund— reflecting Washington's gratitude for Moscow's help in Kosovo, continued fear of Russian nuclear proliferation and concern about Russia's internal political stability— demonstrates that Russia still remains too important for the world to ignore. This contradiction— not too big to fail, but still too big to flounder— highlights the friction inherent when economic policy is used to further geo-political goals. Up until a year ago, the Clinton Administration argued that aid to Russia was needed, in part, to avoid global economic collapse. August, 1998 exposed that rationale as a charade. Now American support for assistance to Russia can only be justified for two reasons: to reinforce Russia's transition to a market economy or as ransom in Moscow's continued strategic blackmail of the West. Evidence to justify the former is dubious. Its time to own up to the latter. Last summer's fleeting economic fright reflected Russia's staggering economic collapse. The ruble fell by more than 70 per cent in a couple of weeks. The economy shrank by 4.3 per cent. Real wages fell 41 per cent. But the crisis was cathartic. "The shock accomplished what reform was intended to achieve," said Anders Aslund, a senior associate at the Carnegie Endowment for International Peace in Washington. The banking system now functions better. Barter is declining. Most important, there has been no reversion to central planning, government-directed lending, industrial subsidies or government reliance on simply printing money.

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High Oil Prices Bad – Deters Economic Liberalization
High oil-revenue deters economic liberalization. Christian Science Monitor, Fred Weir, Correspondent of The Christian Science Monitor, "Has Russian oil output peaked?" May 28, 2008 lexis

Oil profits, on the other hand, are taxed at nearly 90 percent, which has filled the state's coffers as prices for crude oil have risen from $10 per barrel a decade ago to more than $130 last week. Petrowealth was a key factor enabling Mr. Putin to concentrate political power in the Kremlin, which he used to take over huge slices of the formerly private oil and gas industry. The looming production crunch, therefore, suggests a need for sweeping political reforms as well as economic adjustments, some experts say. "As long as energy prices keep going up and the easy money keeps rolling in, there is no incentive to liberalize," says Yevgeny Gavrilenkov, chief economist at Troika Dialog, a Moscow investment bank. "If the golden goose stops laying eggs, then they'll start to recognize the need for change."

Forcing Russian liberalization now key to Russia's economy. Christian Science Monitor, Fred Weir, Correspondent of The Christian Science Monitor, "Has Russian oil output peaked?" May 28, 2008 lexis

A sharp debate is breaking out among economists, some of whom argue that the crisis is an opportunity for Russia to develop a long-term strategy to husband its remaining energy resources and diversify its economy. They point to figures showing that gas and oil exports have risen since 2000 from under half to over 60 percent of Russia's gross domestic product and say that to continue trading nonrenewable resources for rapidly devaluing dollars is a big mistake. "Russia should not be a colonial country that provides raw materials to more developed countries," says Nodari Simonia, director of the Center for World Energy Studies, an independent Moscow think tank. "We don't need to export more crude, we have to invest resources in our manufacturing base." Russian oil profits, taxed by the state, have been accumulating in a special 'stabilization fund' that now totals about $130 billion. Earlier this year the government put another $32 billion into a sovereign wealth fund that is expected to begin investing in Russian infrastructure and social welfare schemes. "Russia's economy so far can't absorb the oil cash that's coming in. That, not increasing oil output, is our biggest worry," says Sergei Glaziev, head of the National Institute for Development, a Moscow think tank. "We urgently need to diversify our economy away from this dependence on natural resources."

David impact

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High Oil Prices Bad – Collapse Russian Democracy
High oil prices are collapsing democracy and creating increased authoritarianism in Russia States News Service June
SIGNIFICANTLY To coincide with today's release of the Freedom House Nations in Transit 2008 report, three of the study's authors gathered at RFE/RL's Washington, DC headquarters to discuss one of its key findings - that, as oil and natural gas revenues surge in Russia and Central Asia, democratic institutions in these countries are eroding significantly. [Read more about the Nations in Transit 2008 Report] "The resource curse is taking root," Freedom House Director of Studies Christopher Walker told the group. "The growing authoritarianism in oil and natural gas-rich countries such as Russia, Kazakhstan and Azerbaijan is severely restricting the ability of democratic institutions to operate." According to the report, the regression in Azerbaijan, Kazakhstan and Russia has occurred systematically and across sectors, including in the areas of electoral process, civil society, independent media and judicial independence. "Russia's decline in all of the report's categories over the past eight years is dramatic," said Robert Orttung, the author of the section on Russia and a Senior Fellow at the Jefferson Institute. "For years, Vladimir Putin has been using oil and natural gas revenues to build up his police forces and consolidate power in such a way that there is no space for 24,

2008 HEADLINE: AS

OIL WEALTH RISES IN EURASIA, DEMOCRACY DECLINES

democracy to grow."

Failure of democracy in Russia will cause global nuclear war Muravchik 2001 (Joshua- Resident Scholar at the AEI, “Democracy and Nuclear Peace” July 14,
http://www.npec-web.org/Syllabus/Muravchik.pdf, Date Accessed 7/29/2006)
That this momentum has slackened somewhat since its pinnacle in 1989, destined to be remembered as one of the most revolutionary years in all history, was inevitable. So many peoples were swept up in the democratic tide that there was certain to be some backsliding. Most countries' democratic evolution has included some fits and starts rather than a smooth progression. So it must be for the world as a whole. Nonetheless, the

overall trend remains powerful and clear. Despite the backsliding, the number and proportion of democracies stands higher today than ever before. This progress offers a source of hope for enduring nuclear peace. The danger of nuclear war was radically reduced almost overnight when Russia abandoned Communism and turned to democracy. For other ominous corners of the world, we may be in a kind of race between the emergence or growth of nuclear arsenals and the advent of democratization. If this is so, the greatest cause for worry may rest with the Moslem Middle East where nuclear arsenals do
not yet exist but where the prospects for democracy may be still more remote.

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High Oil Prices Bad – Causes hyperinflation
High oil prices will cause hyperinflation in Russia-turns back their impact. RIA Novosti July 4, 2008 HEADLINE: An in-depth look at the Russian press, July 4
Surging oil and gas prices could be even more dangerous for Russia than for Europe. If money is flowing freely into Russia's economy, Russia will face hyperinflation. "No one has made any estimates yet, but it is obvious that such prices
($250 per bbl of oil and $1,000 per 1,000 cu. m. of gas) will entail double-digit inflation figures, the first one being 'two'," a Russian Finance Ministry official said. In this situation the best the ministry could do is to channelthe superprofits into the oil and gas reserve fund. However, unlike Gavrilenkov, the ministry official described these figures as "fantastic." Fuel prices surging to these levels would bring a global recession which would hit everyone severely, warned Adam Sieminski, Deutsche Bank's economist. Even a growth in gas prices to $500 is enough to slow down the global economy similar to the early 1980s situation. The IMF estimated each $25 per bbl increment in the global oil price cuts global GDP by 0.5%, Sieminski said. With average yearly oil prices at $125 per bbl, the global economy will grow by 3.5% in 2008, and only by 2% if the oil price reaches $200.

Turn- lowering prices key to Russian economy- its the only way to solve inflation St. Petersberg Times 10/23/2001
THE world's biggest problem at the moment is terrorism, and Russia's is falling oil prices. At least this is the impression one gets from reading the Russian and international press. Russian media and politicians continue to fret about the impact of a global slowdown on oil prices. Worse,

even financial markets have started to worry and the RTS has recently been falling in parallel with the oil price, mainly amid worries about Russia's ability to meet future debt repayments. This does not reflect much consideration of the longer term. While high world energy prices such as were experienced in 2000 may be good for Russian oil majors and natural-gas monopoly Gazprom, in the longer term they are clearly bad for the rest of Russia. The explanation is simple. At prices around $26 for a barrel of Urals blend, Russia ran a current-account surplus of around $46 billion (roughly 18 percent of GDP) in 2000. Such an imbalance is huge by any standards and either induces a rapidly appreciating real exchange rate or forces the Central Bank to print money on a large scale to buy up the incoming dollars. The former is poison for Russia's recovering industry and the latter leads to sizeable inflation.
Choosing between these two evils, the Central Bank has so far rightly chosen a small dose of the former, and a good dose of the latter. It will, however, not be able to maintain this course indefinitely without creating a major inflation problem. Hence, lower oil prices would be a great boon for the Russian economy.

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High oil prices bad: Hurt Russian Economy
Sustained high oil prices would turn Russia into a petro-state, rife with poverty, corruption, and an inevitably collapsing economy Moises Naim (Editor) Jan/Feb 2004 Foreign Policy
Russia's future will be defined as much by the geology of its subsoil as by the ideology of its leaders. Unfortunately, whereas policymakers can choose their ideology, they don't have much leeway when it comes to geology. Russia has a lot of oil, and this inescapable geological fact will determine many of the policy choices available to its leaders. Oil and gas now account for roughly 20 percent of Russia's economy, 55 percent of its export earnings, and 40 percent of its total tax revenues. Russia is the world's second largest oil exporter after Saudi Arabia, and its subsoil contains 33 percent of the world's gas reserves. It already supplies 30 percent of Europe's gas needs. In the future, Russia's oil and gas industry will become even more important, as no other sector can be as internationally competitive, grow as rapidly, or be as profitable. Thus, Russia risks becoming, and in many respects may already be, a "petro-state." The arrest of oil magnate Mikhail Khodorkovsky sparked a debate over what kind of country Russia will be. In this discussion, Russia's characteristics as a petro-state deserve as much attention as its factional struggles. Petrostates are oil-rich countries plagued by weak institutions, a poorly functioning public sector, and a high concentration of power and wealth. Their population is chronically frustrated by the lack of proportion between their nation's oil wealth and their widespread poverty. Nigeria and Venezucla are good examples. That Russia has lots of oil is old news. What's new is the dramatically enhanced role that changes in Russian politics, oil technology, and energy markets have given to its petrolcum sector. Throughout the 1990s, privatization in Russia and innovations in exploration and drilling technologies brought into
production oil fields that had hitherto been underperforming or completely off-limits. To energy companies worried about growing domestic instability among the major oil exporters of the Middle East, Russia became an even more attractive hedge. Regardless of its political turmoil, Russia will continue to appeal to oil companies, which know how to operate profitably in countries with weak property rights and unstable politics. Thus, while the Khodorkovsky affair may temporarily scare away some investors, Russia's beguiling geology will eventually attract energy companies that cannot afford to be left out of some of the world's richest oil reservoirs. But when oil revenues

flood a nation with a fragile system of democratic checks and balances, dysfunctional politics and economics ensue, and a petro-state emerges. A strong democracy and an effective public sector explain why oil has not distorted the United States or Norway as it has Nigeria and Venezuela. A lot of oil combined with weak public institutions produces poverty, inequality, and corruption. It also undermines democracy. No petro-state has succeeded in converting oil into prosperity for the majority of the population. An economy that relies mostly on oil exports inevitably ends up with an exchange rate that makes imported goods less expensive and exports more costly. This overvalued exchange rate makes other sectors--agriculture, manufacturing, tourism--less internationally competitive and hinders their growth. Petro-states also
have jobless, volatile economic growth. Oil generates export revenues and taxes for the state, but it creates few jobs. Despite its economic heft, Russia's oil and gas industry employs only around 2 million workers out of a total workforce of 67 million. Also, because the international price of oil is volatile, petro-states suffer constant and debilitating economic boombust cycles. The busts lead to banking crises and public budget cuts that hurt the poor who critically depend on government programs. Russia already experienced this effect in 1998 when the drop in oil prices sparked a financial crash. If oil prices fall below $20 a barrel, Russia will surely face another bout of painful economic instability. Petro-states also suffer from a narrow tax base, with the bulk of government revenues coming from just a few large taxpayers. In Russia, the 10 largest companies account for more than half of total tax revenues. Weak governmental accountability is a typical side effect of this dependency, as the link between the electorate and government spending is indirect and tenuous. The political consequences are also corrosive. Thanks to the inevitable concentration of the oil industry into a few large firms, owners and managers acquire enormous political clout. In turn, corruption often thrives, as a handful of politicians and government regulators make decisions that are worth millions to these companies. Nationalizing the oil industry fails to solve these problems: State-owned oil companies quickly become relatively independent political actors that are rife with corruption, inefficiency, and politicization, and can dominate other weak public institutions. Privatizing the industry without strong and independent regulatory and tax agencies is also not a solution, as unbridled private monopolists can be as predatory as public ones. In petro-states, bitter fights over the control and distribution of the nation's oil rents become the gravitational center of political life. It is no accident that the current crisis in Russia hinges on control of the country's largest oil company and the political uses of its profits. But Russia is not Nigeria and has yet to become a full-fledged petro-state. It is a large, complex country with a highly educated population, a relatively strong technological base, and a still somewhat diversified economy. A strong

democracy could help Russia compensate for the economic and political weaknesses that plague all countries dominated by oil. Russia is still struggling to overcome the crippling effects of its ideological past. Let's hope it will also be able to avoid the crippling effects of its geological present.

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Russia weakness /collapse impact
Russian weakness = civil wars and lashout
Fiona Hill, Senior Fellow in the Foreign Policy Studies Program at The Brookings Institution, Director of Strategic Planning at the Eurasia Foundation, The Foreign Policy Centre, http://fpc.org.uk/fsblob/307.pdf September 2004
Elsewhere in the region, in the South Caucasus states of Georgia, Armenia, and Azerbaijan, and in Moldova and Tajikistan,

Russian politicians exploited state weakness and civil wars to retain Russia’s presence on key military bases and borders. Moscow also employed military force to rein in countries trying to move beyond Russia’s orbit, as well as to gain the upper-hand in the arbitration of relations between regional states. This included permitting ‘volunteer forces’ to cross Russian borders to assist opposing sides in conflicts, and deploying Russian military personnel and hardware in armed clashes – most notably in

the conflict between Georgia and Abkhazia that led to the latter’s secession from the Georgian republic in 1993.15

Russia also used threatening rhetoric, political ultimatums, and economic pressure to induce countries like Azerbaijan, Georgia, and Moldova that initially refused to join the CIS to become members of the Russian-led political and economic bloc. And these methods
were used to try to discourage Central Asian states for pursuing closer economic and political relations with Turkey, China, and Iran. And, in the case of Ukraine, the Russian government repeatedly cut access to critical gas supplies during a series of disputes over the dismantling of Ukraine’s nuclear arsenal, the division of the Soviet

Coercion involving the deployment of hard power resources to force former Soviet states to comply with Russian interests served to turn states away from, not toward Russia.
Black Sea fleet, and the future of Ukraine’s ethnic Russian dominated Crimean peninsula.16

Moscow was increasingly perceived as the bully on the block. Over the course of the 1990s, it lost its formerly dominant position in the region as well as the confidence of its neighbours. Only the most desperate countries like Armenia, Tajikistan, and Belarus (beleaguered by civil war, security concerns, and economic decline) clung to close relations with Russia. Countries like the Baltic States, Ukraine, Georgia, and Azerbaijan turned pointedly toward the West. And the Baltic States appealed directly to the United States, European countries, and international institutions for assistance in dealing with the issue of Russian troops on their soil and

For example, international US threats to withhold vital financial aid and technical assistance to Russia were instrumental in securing the withdrawal of Russian troops first from Lithuania in August 1993, and then from Estonia and Latvia in August 1994.17 Russian hard power exertion also drew unfavorable attention from Western analysts and policymakers in the 1990s. They saw a revival of Russian imperial ambitions and desires
in mediating the growing conflict over their Russian-speaking populations. pressure on Moscow and

to reconstitute the USSR, albeit on the cheap.18 This led to a series of policy responses to shore up the independence of the other former Soviet states and to offer them at least a modicum of security from Russian predation. These included the expansion of NATO and extending membership to the states of the former Soviet bloc in eastern Europe, including to the Baltic States; innovations like Partnership for Peace (PfP) as a NATO halfway house for other states of the former Soviet Union; and bilateral US initiatives emphasizing economic and technical assistance and closer political relationships with regional states, especially those perceived as most vulnerable to Russian pressure like Ukraine and Georgia. US and other international investors also moved into key commercial ventures in the increasingly attractive energy sector in the Caspian Basin. International investment in Caspian energy development was backed by the United States government, which spearheaded the creation of a new east-west corridor for the export of oil and gas to world markets from the Caspian across the Caucasus and

Russia finally reached the nadir in August 1998 with the collapse of the Russian ruble and resulting financial crisis. The
Turkey, avoiding Russia as a potential risk and bottleneck. 1998 crash diminished Russia’s regional economic standing even further.

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Renewables (1nc)
High energy prices leads to development of renewables Josef Braml is editor-in-chief of the Yearbook on International Relations at the German Council on Foreign Relations (DGAP) in Berlin.
States Shed Its Oil Addiction? The Washington Quarterly • 30:4 pp. 117–130.

2007 Can the United

Higher energy prices will provide strong market incentives to find alternative sources of energy, to develop new technologies, and to improve energy efficiency. For these effects, there is an additional driving force: increasing public concern about environmental damage caused by traditional forms of energy consumption.
In the long run, however, U.S. markets may adapt to these challenges.

Empirically lower oil prices slash renewable development Bryce ’07 [Robert Bryce lives in Austin, Texas and managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate. Petroleumworld does not necessarily
share these views. "The Politics of Cheap Oil," Petroleumworld News 01/28/07, Editor's Note: This commentary was originally published by CounterPunch, January 17, 2007. Petroleumworld reprint this article in the interest of our readers. http://www.petroleumworld.com/SF07012801.htm download date: 7-8-08]

Cheap crude will short-circuit the push for renewable energy. We've seen this before. The surge in oil prices that occurred after the 1973 oil embargo didn't last. As prices softened, so, too, did the interest in solar power, wind power and other technologies. The best hope for the renewable energy sector is a sustained period of high prices for fossil fuels of all types, from coal to natural gas.
Low-cost oil would increase emissions of greenhouse gases. One can argue all day about what's causing global warming. But if policymakers want to embrace Kyoto or other anti-warming initiatives, cheap oil is the last thing they should want.

Shift to renewables or extinction James Reynolds June 18 2003 “EARTH 'IS HEADING FOR MASS EXTINCTION IN JUST A CENTURY”,
The Scotsman THE worst mass extinction in the history of the planet could be replicated in as little as a century if global warming continues, according to new evidence. Researchers at Bristol University have discovered that a six-degree increase in the global temperature was enough to annihilate
up to 95 per cent of species which were alive on Earth at the end of the Permian period, 251 million years ago. Up to six degrees of warming is now predicted for the next century by United Nations scientists from the Intergovernmental Panel on Climate Change (IPCC) if nothing is done about emissions of the greenhouse gases, principally carbon dioxide, which cause global

The end-Permian mass extinction is now thought to have been caused by gigantic volcanic eruptions, which triggered a "runaway greenhouse effect" and nearly put an end to life on Earth. Conditions in what geologists have termed this "post-apocalyptic greenhouse" were so severe that only one large land animal was left alive, and it took 100 million years for species diversity to return to former levels. The new finding is revealed in a book by Professor Michael Benton, the
warming. head of Earth sciences at Bristol University. Prof Benton said: "The end-Permian crisis nearly marked the end of life. It's estimated that fewer than one in ten species survived. "Geologists are only now coming to appreciate the severity of this global catastrophe and to understand how and why so many species died out so quickly." Tropical latitudes were the first areas of the Earth to feel the effect of the warming, and loss of species diversity spread out from there. Reduction of vegetation, soil erosion and the effects of massively increased rainfall wiped out the lush

"The endPermian extinction event is a good model for what might happen in the future because it was fairly non-specific. "The sequence of what happened then is different from today because then the carbon dioxide came from massive volcanic eruptions, whereas today it is coming from industrial activity. However, it doesn't matter where this gas comes from; the fact is that if
diverse habitats of the tropics, which would today lead to the loss of animals such as hippos, elephants and all of the primates, according to Prof Benton. He added: it is pumped into the atmosphere in high volumes, then that gives us the greenhouse effect and leads to the warming with all the other consequences." Modern predictions of the apocalyptic consequences of global warming and climate change due to increases in carbon dioxide first began to circulate in the early 1980s. Carbon dioxide is, like oxygen, translucent to sunlight but opaque to infra -red radiation. After the sun's rays have warmed the Earth and sea, the heat produced can therefore not be re-radiated back into space. When the industrial revolution began about 200 years ago, there were roughly 280 parts per million (ppm) of carbon dioxide in the atmosphere. Today, there are 350ppm. More carbon dioxide is being pumped into the atmosphere as the human population grows and turns to heavy industry, and less is being removed by the rest of nature because, possibly due to human activity, global vegetation which removes the damaging gas is in retreat. In the mid-1980s, scientists first started to predict that temperatures would increase somewhere in the order of between four and six degrees by 2080. Sea levels were also predicted to rise 20cm by 2030, and 45cm by 2070. In the light of modern records, these estimates were a little overstated. Dr Ian Brown, a senior researcher with the Tyndall Climate Research Centre at the University of East Anglia, said: "More or less every year now we have a temperature which is higher than the previous year and the Met Office has predicted this year that there is a 50 per cent chance it will be the warmest on record. "Each year is now pretty much an exceptional one by previous standards. "Sea-level rise is more complicated because we have a shorter record. At the moment, in global terms, it is probably in the order of about one and a half millimetres per year. "By the end of the century, the rise in sea level could then be a lot more than five or even ten centimetres. "Certainly in the past two decades we have now recorded rises in sea levels in the region of one or two millimetres a year which are measured by tide gauges at various sites. "These instruments are quite precise and show that predictions of the consequences of global warming are certainly observable." He added: "Much

Climate experts and environmentalists said yesterday they were appalled that a disaster of such magnitude could be repeated within this century because of human activities. Mark Lynas, an author who has written extensively on global warming and recently travelled around the world cataloguing impacts of climate change, said the findings must be a wake-up call for politicians and citizens alike. "This is a global emergency," he said. "We are heading for disaster and yet the world is still on fossil fuel autopilot. There needs to be an immediate phase-out of coal, oil and gas, and a phase-in of clean energy sources. "People can no longer ignore this looming catastrophe."
land has in the past been reclaimed from the sea, such as in the Forth estuary, and those areas are now looking increasingly vulnerable."

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High Prices key to Renewables
High prices spur clean energy and less oil use worldwide – market forces are superior to government regulation Hunter, Senior Fellow, Hudson Institute, ’08 [Rod, also former senior director at the National Security Council under President George W. Bush responsible for
international economics, "Opinion: The Market Is Responding to the Oil Shock," July 8, Wall Street Journal http://online.wsj.com/article/SB121547405022734039.html?mod=opinion_main_commentaries download date: 7-8-08]

Yet market forces may already be solving these problems, as high oil prices drive a shift away from the polluting, petroleum-fueled internal combustion engine to cleaner forms of transportation. That's a change worth cheering, even if oil prices are painful in the meantime. Oil is the United States' principal transportation fuel, and the source of a third of the country's greenhouse gas emissions. Other major countries are similarly dependent on oil for transportation. As prices have risen, worries about energy security and long-term climate effects have reached a fever pitch. History teaches that innovation directed by markets can solve problems such as these. In New York at the end of the 19th century,
The leaders of the G-8 and of major developing countries will discuss how to respond to energy security and climate change tomorrow. Their first instinct will likely be to propose new regulations. horses were the main form of transport – and a major source of pollution. As many as 200,000 horses each produced 15 to 35 pounds of manure per day. Manure piles along the roads and in stables produced vast numbers of flies, an important vector for infectious diseases such as typhoid fever. Horses became increasingly expensive, thanks to rising prices for hay, oats and the urban land required for stables.

Initially the automobile wasn't much competition for the horse. Then, around the turn of the century, a series of innovations involving the internal combustion engine and manufacturing (mass production, assembly lines and interchangeable parts) improved performance, reliability and costs. As car prices fell, the horse, the manure and the "typhus fly" were done for. The same thing may be happening today. This March, American entrepreneur Elon Musk
started production of his electric sports car, the Tesla. This car accelerates from 0 to 60 miles per hour in four seconds, tops out at 125 mph, and has a range of 220 miles. The $110,000 price tag limits the Tesla to the wealthy, but

Recent cost comparisons by Deutsche Bank's auto analysts suggest electric cars will be cheaper to operate than conventional vehicles. Fuel costs per mile for gasoline-fueled cars are $0.27 in Germany, $0.24 in Britain, $0.17 in Brazil and $0.11 in the U.S., with differences driven by local fuel taxes. For electric
mass-production models are in the works. General Motors has committed itself to rolling out its electronic vehicle, the Volt, by 2010. Toyota plans a successor to its popular Prius hybrid. vehicles, the cost per mile is a mere $0.02. Adding in a battery amortized over the life of the car, the cost is still only $0.10. Batteries will be expensive, at least in early years, but electric cars won't need costly engines or complex transmissions like today's autos.

Cost differentials like those could drive a quick transition to energy-efficient forms of transportation. There
would surely be failures along the way – even Henry Ford had a couple of flops and an encounter with bankruptcy before making it big with the Model T. And it would take a while to replace the existing transportation fleet made up of cars that last 15 years.

Developed countries would grow less dependent on oil producers, and transportation-related greenhouse gas emissions could ease (even coal-fired power plants are better than millions of gasoline-powered autos). As costs fall, electric vehicles could be adopted in developing countries, amplifying energy security and climate benefits.
Nonetheless, incremental effects on oil demand could be powerful. The transition would reduce the world's dependence on regimes run by thugs and theocrats. More than 80% of proven reserves are controlled by national oil companies and Russian firms, which don't operate like normal profitmaximizing businesses. (Witness Russian threats to turn off gas supplies to Ukraine and Eastern Europe.) High oil prices have corrupted countries with weak institutions and reinforced misbehavior of international miscreants such as Iran and Venezuela.

regulation comes with unintended consequences – the more complex the regulation (think cap-and-trade), the more scope for undesired consequences. High oil prices, as unpleasant as they are, are making a lot of alternative energy and transportation technologies look attractive. The petroleum-powered auto has provided affordable independence to millions for a century, but has brought its own problems. Innovation and markets could well send the internal combustion engine and its oil-related worries the way of the horse and buggy.
Regulation and taxes can of course shape market incentives. But

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High Oil prices spur alternative energy and less use of oil Yetiv, Professor of political science and international studies, Old Dominion University, '06
[Steve A., "OPINION: America benefits from high oil prices," The San Diego Union-Tribune, February 6, L/N]
From Wall Street to Main Street, people hate high oil prices because they cause economic pain. But like coffee, red wine, and perhaps even chocolate, high oil prices can do some good too. Current energy legislation, which was passed by Congress and signed by President Bush in August 2005, moved America in the right direction, but it has a core weakness. This legislation, like President Bush's vision of oil independence laid out in his recent State of the Union speech, fails to do what higher oil prices can accomplish: decrease oil consumption in the transportation sector where 70 percent of oil is used and diminish our dependence on foreign oil. Current energy legislation, and President Bush's vision, does encourage power sources such as nuclear, coal, solar and wind. But, with the potential partial exception of solar power, they can't run vehicles. Astonishingly, less than one-eighth of that $14.6 billion in energy legislation actually decreased oil use in transportation.

what can high oil prices do that America's energy policy fails to do? First, sooner or later, high oil prices spur the development of alternative energy resources because they make it more profitable to produce them. The higher prices go, the more entrepreneurs and companies around the world work to move us beyond the hazardous petroleum era. Second, the higher oil prices go, the more likely automakers will mass-produce more efficient, less pricey vehicles. That is precisely what we need to shift the current oil-guzzling paradigm. A
In particular, joint report by the Transportation Research Institute's Office for the Study of Automotive Transportation at the University of Michigan and the Natural Resources Defense Council shows that higher oil prices will hurt America's top automakers by decreasing sales of SUVs and pickup trucks. The report calls on them to make fuel efficient vehicles their top priority to better the country and their bottom line. Most automakers are experimenting with fuel cell vehicles that run on hydrogen rather than oil. They are also selling 2005 hybrid vehicles that run on an internal combustion engine, as do conventional cars, plus an electric motor. Depending on the car, they yield between 10 percent and 50 percent better gas mileage than regular vehicles, and far better mileage than the ubiquitous SUV. But hybrids represent a drop in the market bucket, because automakers have

High oil prices are an incentive for making efficient vehicles on a mass, affordable scale, and sooner rather than later.
so far made their profits by mass-producing less efficient, money-making vehicles. And fuel cell vehicles aren't expected to reach the market until 2010. Third, high oil prices make consumers less likely to waste gas and more likely to buy hybrids. In Europe, high gas prices -- roughly double that in the United States -- have led to mass adoption of hybrids. Investment banking firm

high oil prices benefit the environment. Indeed, one study has shown that a broad energy tax on carbon content in fuels would reduce oil use and carbon emissions by over 10 percent. For that matter, vehicles that run on fuel cells emit only water and heat as waste, and hybrids emit more limited emissions than conventional vehicles. Since carbon emissions cause global warming -- a scientific fact rather than science fiction -- we should tip our hats to high oil prices, in this respect. Fifth, high oil prices are raising consciousness about the hazards of the oil era. Ninety-three
Goldman Sachs predicts that gas prices would have to hit $4.30 a gallon in the United States to change the gas-guzzling culture. But it is better to see the impact as relative to price. Fourth, percent of Americans believe that oil dependence is a serious problem. Although they still act like oil is an entitlement, pricey oil may lead them eventually to put pressure on politicians to move toward greater oil independence, as

higher oil prices are painful. But, over time they can serve the environment, decrease our dependence on Middle East oil, especially from countries like Iran which uses oil money to build nuclear capability and force us to take actions that make us less vulnerable when oil starts to dwindle in the future.
reflected perhaps in President Bush's speech. Of course,

Investment in renewable energy is increasing because of the rising price of oil Federal News Service July 1, 2008 HEADLINE: DAILY UNITED NATIONS PRESS BRIEFING (AS RELEASED BY
THE UNITED NATIONS); BRIEFER: MICHELE MONTAS, SPOKESWOMAN FOR THE SECRETARY-GENERAL; LOCATION: U.N. HEADQUARTERS, NEW YORK CITY, NEW YORK

In a new study released today, the UN Environment Programme (UNEP) says that investment in the renewable energy and energy efficiency industries rose more than 60 per cent last year, to nearly $150 billion. UNEP cites the rise in oil prices as a major cause.

New investment in renewable energy is increasing and the industry is maturing because of high prices Thai Press Reports July 4, 2008 HEADLINE: THAILAND WORLD BANK SUPPORTS CARBON-FINANCE PROJECT
IN CHON BURI'S KOH SICHANG DISTRICT

A UN Environment Programme (UNEP) study has shown that new investment in clean energy across the world last year topped $148US billion (Bt5 trillion), a 60-per-cent increase from 2006, as renewables and energy efficiency attract fast-growing interest. Growth continues this year on climate-change worries, growing support from world governments, rising oil prices
and ongoing energy security concerns.

"The clean-energy industry is maturing and its backers remain bullish. These findings should empower governments - both North and South - to reach a deep andmeaningful new agreement by the crucial climate convention meeting
in Copenhagen in late 2009," said Achim Steiner, the head of the UNEP.

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High oil prices are the biggest power driving the fast development of the renewable energy industry SinoCast July 8, 2008 HEADLINE:
Renewable Energy Becomes Bonanza When Oil Price Flys

The soaring international oil price is becoming the biggest power that drives the renewable energy, like wind, solar, and biomass energy, to grow up as one of the fastest-developing industries around the world, said Gu Jie,
deputy director of the Investment Promotion Bureau of Ministry of Commerce of China. Mr. Gu points out that China is a big energy consumer and its demand is increasing rapidly along with the economic and social development. There are enormous investment opportunities in the renewable energy sector in the country.

High oil prices are supercharging initiatives for renewable energy
Richard Woods

July 6, 2008 The Sunday Times (London) HEADLINE: How China's thirst for oil can save the planet

These days even diehard petrolheads know that in the long run there is no choice but to find an alternative to the black gold that has lubricated the world for more than a cen- tury. All sorts of initiatives for clean, green and renewable energy are being supercharged

by oil prices that hit a new record last week of $146 a barrel - and may well go higher.

Low oil prices undercut investments in renewables Leonardo Maugeri, ENI SPA's senior vice-president of corporate strategies and international relations, senior
fellow at the World Economic Laboratory at MIT, a senior fellow at the Foreign Policy Association, and a member of the executive council of the Center for Social Investment Studies, degree in petroleum economics and a PhD in international political economy,, 12/15/2003, Oil & Gas Journal Hysteria aside, cheap oil has always been and remains a curse for industrialized countries and the most elusive enemy of oil security. It hampers any possibility of dealing with new energy alternatives to oil -- which are all very expensive -- or with the
development of new oil regions. It maintains Western habits -- and particular those of the US -- of not promoting any form of energy-saving. Finally, it increases consumer dependence on a limited group of countries with the lowest production costs, which today still are those in

the Persian Gulf. However, cheap oil is a curse for them too.

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High Oil prices drive conservation efforts and development of alternative energy sourcesonly hope to solve global warming St. Louis Post-Dispatch 2004 GWYNNE DYER, “Higher oil prices may save the planet”, August 24
Some time this week or next, oil is likely to reach $50 a barrel for the first time ever. The price is up by a third since the end of
June, and U.S. prices have set record peaks in all but one of the past 15 trading sessions. This is a good thing. It's certainly a good thing for the oil producers, who have seen the value of their oil exports eroded by the steady fall in the value of the U.S. dollar. Even at $40 a barrel, they were getting no more in real terms than they were when oil was trading in the high $20s, but at $50 a barrel they are actually seeing more money. It's less obviously a good thing for everybody else, but the best things often come in heavy disguise. This isn't an "oil shock" like in 1980, when the price of oil spiked at the equivalent in today's money of $80 a barrel after the Iranian revolution and then slid back down after a year or so. It is a "demand shock," which is a much more enduring change. Thanks mainly to the rapid economic growth of China and India, there is now a market for every barrel of oil that the producers can pump. Most of the growth in the global economy used to happen in the developed countries, whose economies typically grow at 2 percent or 3 percent a year. Last year, almost half the growth happened in developing nations: China alone added as much demand as the United States, and India added as much as continental Europe. There is no way that oil production can be expanded fast enough to keep up with these growing economies. As a result, oil prices will fluctuate much more wildly than before. If Iraqi production is disrupted by the uprising in southern Iraq, the Deutsche Bank warned recently, "it is not unthinkable that a second disruption (loss of some exports from Russia, for example) would push prices towards $100." Ever since 2000, the Organization of Petroleum Exporting Countries has tried to keep the price of oil in the $22-$28 range, cutting production if it fell below that band and increasing output if it climbed above it. It has been well above that band for six months. "Our ministers realize they need to revise the price band, particularly given the changing value of the dollar," said OPEC spokesman Abdul al-Khereigi last week -- and speculated that the new band would be $25-$30 or even $26-$32. The price of oil may

never actually fall back that far again. Why is that a good thing? The main reason is global warming, which is coming on faster and harder than even the pessimists feared. In a system as complex as climate, all sorts of things change in
unpredictable ways when you raise the total amount of heat in the system. Some of the changes we are observing now are very worrisome. It was assumed, for example, that the rise in global temperature would be canceled out partly by a higher rate of evaporation from the oceans that produced more cloud cover. Instead, the higher temperatures seem to be burning off the clouds. And recent research suggests that the higher level of carbon dioxide in the atmosphere is stimulating bacteria that live in peat bogs, greatly increasing the speed with which they dissolve the peat into more carbon dioxide. If this turns out to be a runaway feedback loop, we are in serious trouble, because the peat bogs of the Northern Hemisphere contain the equivalent of 70 years' worth of global industrial emissions of carbon dioxide. New calculations suggest that we may be facing a global temperature rise over the next century not of 10.6 degrees Fahrenheit, which would be bad enough, but as much as 18 to 21 degrees. That would be calamitous, but key players in the world of politics and most of the business world (apart from the insurance industry) remain in denial. The only short-term hope of slowing the rise in temperature is a steep drop in the use of oil

and gas, and the only thing that is going to make that happen is a steep rise in price. It has happened before. Alternative energy sources take a long time to build, but energy conservation works relatively quickly: The big oil price increases of the 1970s caused the industrialized countries to bring in energy conservation measures that cut global oil consumption drastically. Twenty-five years of profligacy since then means that there is once again huge scope for rapid gains from conservation. It will only happen, however, if the oil price goes up and stays up.

Renewable companies live on the margins – even small price changes could wipe them out Smart Money '07[By Rob Wherry, Smart Money is an investment website and a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership."Alternative-Energy Funds Could Offer HighPowered Returns," June 21, http://www.smartmoney.com/fundinsight/index.cfm?story=20070621&hpadref=1%29 download date: 7-8-08]

forms of alternative energy — solar, hydro, geothermal, biomass — are quickly coming into vogue across the globe thanks to record high oil prices, shrinking reserves and world-wide demand that is expected to increase 50% by 2030, according to the International Energy Agency. What has also given them some attention is that these sources are now at the heart of profitable businesses. That hasn't always been the case. Clean Edge, an industry research firm, anticipates biofuels, wind, solar and fuel cells will
Wind power and other generate $217 billion in industry wide revenues by 2016, up from $56 billion in 2006. Even the typical American has changed his perception: A survey by Calvert, a socially-responsible investment firm, found that 85% of the 1,094 people that they polled thought putting money into alternative energy was a good way to protect the environment and make money, too. Add all that up and you have a decent investing opportunity. You could spend your time reading over analyst reports on alternative-energy companies — what little there are on these thinly-traded firms — looking for a diamond in the rough. But a smarter option is to scoop up the shares of one of the growing number of mutual and exchange-traded funds that specialize in this field. As always, though, be prepared for sector funds like these to experience dramatic ups and downs. And we would suggest only building a 5% or smaller position in this niche. The

Many alternative-energy companies are small firms that are barely profitable. Lose a few customers or fail to make a piece of technology work and it could be lights out. Alternative-energy investors not only need to be aware of the price of a commodity like oil — the higher it goes the more attractive managing solar and wind farms becomes — but also others like corn, a chief ingredient in ethanol.
concerns here are numerous.

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Renewables 2ac
1. Renewable development is not dependent on high oil prices Environment News Service, 6-21-07, http://www.ens-newswire.com/ens/jun2007/2007-06-21-04.asp
While the report finds that high oil prices have driven investors into the renewable energy market, UNEP Executive Director Achim Steiner says many investors are choosing renewables regardless of oil prices. "One of the new and fundamental messages of this report is that renewable energies are no longer subject to the vagaries of rising and falling oil prices - they are becoming generating systems of choice for increasing numbers of power companies, communities and countries irrespective of the costs of fossil fuels, said UNEP Executive Director Achim Steiner, introducing the report Wednesday.

2. Economic damage and slow rate of conversion prevents a shift to renewables from high prices David Goodstein, Physicist and Vice Provost at California Institute of Technology, 2004, Out of Gas, pg. 32
Once past Hubbert’s peak, as the gap between rising demand and falling supply grows, the rising price of oil may make those alternative fuels economically competitive, but even if they are net energy positive, it may not prove possible to get them into production fast enough to fill the growing gap. That’s called the rate-of-conversion problem. Worse, the economic damage done by rapidly rising oil prices may undermine our ability to mount the huge industrial effort needed to get the new fuels into action.

3. Security concerns drive renewable development-prices not key Gal Luft, executive director of Institute for the Analysis of Global Security, 7-5-07,
http://www.iags.org/n050707.htm To insulate the U.S. further, President Bush seeks to double the size of the American oil reserve in the coming years. The President also seeks to reduce America's oil dependence through increased efficiency and to shift to alternative fuels. Applied in unison, these tactics advance the strategic goals of reducing global energy prices, protecting the West against supply disruptions, and limiting the flow of petrodollars to Tehran. This increased pressure on the Iranian regime could, over time, generate a much desired regime change. If Washington executes this strategy with expediency and determination, this outcome could be achieved before Iran becomes a nuclear power. (some affs may also be able to read renewables fail/transition now bad cards)

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AT Renewables – XT #1 – Not dependent on oil prices
Even without high oil prices, the renewable energy industry will still grow. Science Letter July 8, 2008 HEADLINE: INTEGRITY INTERNATIONAL; Integrity International Launches Renewable
Energy Staffing Division

"While business ideas in the renewable energy field will work and fail, we project that the job opportunities will grow dramatically in the near term," Ahumada said. "Even without the recent spike in oil prices, the pressure to
increase renewable energy is strong and will continue to grow."

Prices will not fuel the transition. Ian Bremmer. "Prices Transform Oil Into A Weapon." International Herald Tribune. 27 Aug. 2005.
http://www.iht.com/articles/2005/08/26/news/edbremmer.php Second, petro-states are rethinking their assumptions about the elasticity of global demand for oil. When oil sold for $30 a barrel, they accepted the conventional view that substantial price hikes might lower demand - and hurt their bottom lines - as importing states actively looked for new sources of oil, energy alternatives and other ways to cut fossile-fuel consumption. Now that oil sells for well above $60 a barrel, without (so far) a sharp drop in demand, energy-exporting states are changing their minds. Some now believe they can push the price still further and increase profits without a drop in demand.

Oil prices have little effect on wind and solar Hill ’06 Oil Daily
September 22, 2006 Friday SECTION: FEATURE STORIES LENGTH: 571 words HEADLINE: Renewables Risk Losing Momentum With Oil Price Drop BYLINE: Katherine Hill, New York

In contrast, an oil price drop would have little impact on the solar sector, according to Noah Kaye of the Solar Energy Industries Association. Likewise, the wind sector would be largely unaffected. The only risk they face from an oil price drop is that investor could drop off, as the general concept of renewables would not generate as much buzz in a climate of low oil prices as they do today. Otherwise these industries would remain healthy -- demand currently exceeds supply both for solar photovoltaics and wind turbines.

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Renewables Fail
Renewables won’t catch on – 4 reasons
(wind; solar) (fossil fuels are getting cheaper, vulnerable to price swings, politically vulnerable, skittish investors) Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 201-2 Other problems become more apparent when we look more closely at cost. Although wind and solar are getting cheaper, proponents often overlook the fact that their competitors are also getting cheaper and will continue to do so. Just as fuel cells must compete with a constantly improving internal-combustion engine, wind and solar will have to battle with gas- and coal-fired technologies that will grow more efficient and less expensive and less polluting by the year. Renewables are also extremely vulnerable to energy price swings: if gas prices were to come down, for example, wind and solar power would lose much of their cost advantage. Renewables are politically vulnerable, as well: if wind or solar were to lose their government subsidies, the current boom in new installations would come to a screeching halt: the mere threat of such a loss has many potential investors looking elsewhere.

Renewables can’t compete Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 191-2
But there are other reasons for the slow rise of alternative energy —reasons that go beyond the greed and duplicity of individuals or an entrenched system. For all their huge potential, most alternative technologies really aren’t ready for prime time. Despite decades of (R&D)research and development — and despite recent growth rates that rival that of computers and cell phones — nearly every major alternative technology still suffers from serious engineering or economic drawbacks. Automotive fuel cells are still many times more expensive than even a vintage gasoline engine, and they may require decades of work to be competitive. Solar power, even after nearly thirty years and many billions of dollars in R & D, still costs five times as much as coal-fired power. Beyond questions of cost, these technol ogies may still face inherent limits in the quality of the energy they produce, and where and when they can be used, that could keep them from assuming a dominant share of the future energy mix.

Despite considerable development, renewables will not significantly contribute to energy production Glenn Schleede, president of Energy Market and Policy Analysis, July 16, 2002, Federal Document
Clearinghouse Congressional Testimony
Renewables. Many people like the sound of getting energy from "renewable" energy but, again, it is necessary to be realistic and look at the facts. a. Hydropower is the only significant source of economical renewable energy. Advocates of "renewable" energy do not like hydropower despite the fact that it is the one "renewable" energy source that is providing a significant contribution; in fact, over 7% of the nation's electricity. They favor only the non- hydro "renewables." Furthermore, the potential for an increased contribution from hydropower is limited because few sites are available, there is opposition to expansion and the very real possibility that the contribution from hydropower could be reduced in the future. Reductions could come from diversion of water around dams to serve other needs (e.g., fish, recreation), breaching dams in some areas, and the slow pace of re-licensing of existing hydropower projects. b.

Non-hydro "renewables" will provide little usable energy. The non-hydro renewables - wind, solar, geothermal, biomass (including wood and wood wastes) and municipal solid wastes (5) are, essentially, niche technologies that are not likely to ever make a significant contribution towards supplying US energy requirements. DOE has spent hundreds of millions in tax dollars on renewable energy R&D during the last 20 years. The small role that non-hydro renewable energy sources can be expected to play in supplying our energy and electricity requirements during the next 20 years is demonstrated clearly in the two tables, based on EIA data, shown on the next page. For example, the tables show that all non-hydro renewables combined (wind, solar, wood, wood, waste, biomass, geothermal, and municipal solid wastes) supplied only: - 3.67% of US overall energy requirements in 2000 and may reach only a 4.57% contribution by 2020. - 2.13% of US electricity generation in 2000 and are not expected to reach a 3% contribution by 2020. These small but realistic forecasts by EIA take into account the enormous federal and state subsidies now being provided some renewables such as "wind energy." Furthermore, it is important to recognize that all the generous subsidies now being provided for "renewable" energy -- and others being contemplated such as federal "renewable portfolio standards" -- merely shift costs from renewable energy developers to consumers and taxpayers - and hide those costs in tax bills and monthly electric bills. Some of these technologies have negative environmental implications that are only now being recognized, such as the significant scenic impairment cause by windmills in some areas - even though the huge structures produce very little electricity.

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Oil Prices – Saudi Arabia DA (1nc)
Cheap Oil brings Saudi instability, overthrow, collapse, civil war, and U.S intervention Bryce ’07 [Robert Bryce lives in Austin, Texas and managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate. Petroleumworld does not necessarily
share these views. "The Politics of Cheap Oil," Petroleumworld News 01/28/07, Editor's Note: This commentary was originally published by CounterPunch, January 17, 2007. Petroleumworld reprint this article in the interest of our readers. http://www.petroleumworld.com/SF07012801.htm download date: 7-8-08]

A long period of cheap petroleum could result in instability in key countries in the Middle East. This runs directly counter to the neocon gospel. If the U.S. could, magically, be energy independent, Friedman and his fellow travelers claim that global crude prices will collapse. That will mean, according to Friedman, that the rulers of repressive oil-rich countries would be forced to "open up their economies and their schools and liberate their women." He might be right. Or he could be disastrously wrong. And if that instability does occur, A.F. Alhajji, an energy economist and professor of economics at Ohio Northern University, says "the West cannot turn a blind eye to such conflicts." Indeed, the U.S. could not stay on the sidelines if a key ally like Saudi Arabia or Kuwait were to get embroiled in a nasty internal conflict due to an economic crisis caused by low prices. Just to drive that point home, Gaffney and Woolsey and their ilk love to bash the Saudis. Would they be happier, if, thanks to their push for energy independence and cheap oil, Saudi Arabia's king, Abdullah, who is a moderate and a staunch ally of the U.S., were to be deposed and replaced by a group of Wahhabi clerics who hate the U.S. as well as everything modern?

A Saudi collapse spreads in the Mideast and collapses the global economy Robert Baer, former CIA field officer in the Middle East, Sleeping With the Devil, 2003, pg. 206-7
Not all the wishing and hoping in the world will change the basic reality of the situation, which is as follows: The industrial world is dependent on the oil reserves of the Islamic world and will be for decades to come, whether it’s the already developed reserves of the largely Arab states or the soon to be developed reserves of Central Asia. Of the Islamic oil states, none is more critical than Saudi Arabia, because (a) it sits on top of the largest proven reserves; (b) it serves as the market regulator for the entire global petroleum industry; and (c) it has the money, the polit¬ical will, and the religious zeal to pursue control of the Arab Peninsula and Central Asia. Of all the oil-

consuming states, none consumes more than the United States, none enjoys anything like the most-favored-nation status that the U.S. enjoys with the Saudis, and thus none is more dependent on Saudi oil to fulfill its appetite and to keep doing so at a compliments-of-the-house rate. If Saudi Arabia tanks, and takes along the other four dysfunc¬tional families in the region who collectively own 60 percent of the world’s proven oil reserves, the industrial economies are going down with it, including the economy of the United States of America.

The impact is nuclear war. Mead 92 (Walter Russel, fellow, Council on Foreign Relations, New perspectives quarterly, summer pp. 28)
if the global economy stagnates - or even shrinks? In that case, we will face a new period of international conflict: South against North, rich against poor. Russia, China, India - these countries with their billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and Japan did in the '30s.
But what if it can't? What

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Saudi Economy High
Saudi Arabia’s economy is expanding because of oil earnings The Irish Times July 7, 2008 HEADLINE: Saudi banks set to profit due to record oil prices
Saudi Arabia's economy will expand 4.9 per cent this year as record oil earnings fuel government spending on energy projects, public works and development ventures such as the $120 billion (EUR 76 billion) King Abdullah Economic City, according to a Bloomberg survey of economists.

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Link XT / High Oil Prices Key to SA Stability
If oil prices crashed Saudi Arabia would become less stable
Ian Bremmer, Winter 2007 Ph.D. in Political Science, Stanford, The National Interest HEADLINE: In the Right Direction

A state's relative prosperity determines its baseline for stability. If North Korea suddenly struck oil, it would become more
stable at every point along the curve, because it would have more resources with which to artificially reinforce stability at every given level of openness. If oil prices suddenly crashed to $20 per barrel, Saudi Arabia would become considerably less stable. But the basic relationship between stability and openness (the shape of the curve) remains the same whether the entire

curve is rising or falling.

High oil prices are key to temper social unrest and terrorism in countries like Saudi Arabia Leonardo Maugeri, ENI SPA's senior vice-president of corporate strategies and international relations, senior
fellow at the World Economic Laboratory at MIT, a senior fellow at the Foreign Policy Association, and a member of the executive council of the Center for Social Investment Studies, degree in petroleum economics and a PhD in international political economy,, 12/15/2003, Oil & Gas Journal This policy has few alternatives, particularly for the great Persian Gulf producers, since their economics remain heavily oilbased while their demography has dramatically changed. Countries such as Saudi Arabia have doubled their population in 12 years. Sixty percent of the gulf countries' population is less than 21 years old. This demographic explosion has created expectations and frustrations to which stagnant and monocultural economies cannot give a credible answer. Only sustained oil revenues allow these countries to temper social unrest by preserving huge social assistance programs. Gulf countries' oil revenues are already much lower today than 20 years ago, and cheap oil prices mean a dramatic dip in per capita oil income. Therefore, frustration and violent revolt may erupt whenever the minimum needs for living are endangered by decreasing oil prices, particularly among people who already live in poverty and cannot permit themselves the luxury of hoping for a different future. Clearly, fundamentalism today -- like socialist pan-Arabism of yesterday -- is finding fertile ground in these hopeless people. Indeed, this is the cause of its strength and its diffusion.

Loss of US oil revenue undermines the House of Saud—spurs internal destabilization MORSE & RICHARD 2002 [Edward L.- Executive Adviser at Hess Energy Trading Company, Jamesportfolio manager at Firebird Management, Foreign Affairs, “The Battle for Energy Dominance”, March/April] lp One of the hidden aspects of the relationship is the Saudi dependence on the United States for providing an expanding market. Although Asian demand for oil is expected to grow dramatically in coming decades, no other economy rivals that of the United States for the growth of its oil imports. Over the past decade, the increase in the U.S. share of the oil market, in terms of
trade, was higher than the total oil consumption in any other country, save Japan and China. The U.S. increase in imports accounts for more than a third of the total increase in oil trade and more than half of the total increase in OPEC's production during the 1990s. This fact, together with the fall in U.S. oil production, means that the United States will remain the single most important force in the oil market. The hope of Saudi Arabia and OPEC for an increased market and for greater market share is uniquely

dependent on growth in U.S. demand. Hence it is not for security alone that Riyadh depends on the United States but for the very economic basis of the Saudi regime, which relies almost entirely on oil for revenue.

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Impact XT / US draw in
US will defend and protect saudi regieme from any threats, internal or external Michael T. Klare (Professor of World Security Studies at Amherst) 2001 Resource Wars the New Landscape of
global conflict p. 75 The third scenario that dominates U.S. military planning is an internal threat to the Saudi monarchy. Protection of the Saudi regime has heen a basic feature of U. S. security policy since 1945, when President Roosevelt met Ibn Saud and assured him of America's support.54 At the core of this arrangement is a vital but unspoken quid pro quo: ill return for protecting the royal family against its enemies, American companies will be allowed unrivaled access to Saudi oil fields. To defend the monarchy against its external opponents, the United States has fought a war against Iraq and conducted the military buildup described above. Increasingly, however, internal defense is becoming I he greater priority.55

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Saudi Arabia Answers (2AC)
Saudi Arabia has diversified their economy and can stay on a growth path even if oil prices decline. Arsene Aka Global Insight August 2, 2007 HEADLINE: Fitch Raises Outlook for Saudi Arabia's Sovereign Foreign Currency
1.
Significance: A sharp decrease in international oil prices remains the main risk facing the kingdom. However, during the current oil boom,

Saudi Arabia has used part of its oil-revenue windfall to build up assets overseas, which could be drawn upon if global energy prices falter in the future. With global oil demand expected to remain strong over the next two years, the sovereign's creditworthiness seems relatively secure. Meanwhile, Saudi Arabia has made good progress in promoting the non-oil sector. Despite a fall in oil production in 2006, the economy expanded robustly, on the back of strong growth in the nonoil sector.

2. Saudi Arabia is reforming their economy now
Erlend Paasche Saudi Arabia's economic liberalization Wednesday, December 12, 2007 http://www.speroforum.com/site/article.asp?id=12974

Still, Saudi economic reforms do merit attention. The UNCTAD report came roughly two weeks after a World Bank report, Doing Business 2008, described Saudi Arabia as the world's seventh fastest reforming economy. It also stated that the country had joined the ranks of the top 25 countries worldwide in terms of the ease of doing business.

3. High oil prices have allowed Saudi Arabia to reform its economy
Erlend Paasche Saudi Arabia's economic liberalization Wednesday, December 12, 2007 http://www.speroforum.com/site/article.asp?id=12974

According to conventional wisdom, high oil prices would render economic reform in oil-rich countries a poor chance of success with increases in state income lessening the pressure for such change. In a time of sky-high oil prices, Saudi Arabia proves that conventional wisdom sometimes misses the mark. Saudi oil export revenues constituted a meager US$34.3 billion in 1998, but rose to US$46.8 billion in 1999 and US$65.5 billion in 2002. SABB, one of the kingdom's largest banks, projects oil revenues of US$165 billion this year. Even though the Saudi state has thus gradually gained access to a greatly increased volume of external rent, it has somewhat paradoxically loosened its tight grip on the economy, opened up its markets for privatization and foreign investment and actively strengthened its private sector.

4. Dependence on oil from Saudi Arabia puts US at risk of terrorism David Sandalow January 22, 2007 ENDING OIL DEPENDENCE
http://www.brookings.edu/views/papers/fellows/sandalow20070122.pdf

Compounding this problem, the huge money flows into the region from oil purchases help finance terrorist networks. Saudi money provides critical support for madrassas with virulent anti-American views. Still worse, diplomatic efforts to enlist Saudi government help in choking off such funding, or even to investigate terrorist attacks, are hampered by the priority we attach to preserving Saudi cooperation in managing world oil markets.

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Saudi Arabia Answers – XT #1 / SA has diversified
Saudi Arabia has reformed its economy and diversified away from oil
Rehab Al Mahfudh Global Insight July Business in 2008

3, 2008 HEADLINE: Saudi Arabia Moves Up in Forbes' List of Best Countries for

Saudi Arabia made a substantial improvement this year moving up 37 places. Saudi

authorities have implemented a wide range of economic reforms over the past few years to diversify the economy away from oil and create employment opportunities for Saudi nationals. Saudi Arabia's recent economic reforms have received wide acknowledgement from international organisations. Saudi Arabia ranked the twenty third out of 178 countries and the first among Arab countries on the ease
of doing business report for 2008 published by International Finance Corporation, a member of the World Bank Group.

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Saudi Arabia Answers – XT #3 / High Oil Prices= Reforms
High oil prices have driven reform efforts in Saudi Arabia
Arsene

Aka Global Insight August 2, 2007 HEADLINE: Fitch Raises Outlook for Saudi Arabia's Sovereign Foreign Currency

While maintaining Saudi Arabia's long-term foreign and local currency Issuer Default Rating (IDR) at A+, Fitch Ratings upgraded the kingdom s outlook from stable to positive on 31 July. The agency pinned the improvement on high international oil prices, increased transparency,
the favourable business environment, recent improvements in security and less political uncertainty.

High global oil prices have given rise to large current-account and budget surpluses, which in turn have led to lower domestic debt, increased international reserves, an increased net public external creditor position, and an increase in both private and public investments in infrastructure.

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Saudi Arabia Answers – XT #4 / SA funds terrorism
Dependence on Saudi Arabia for oil causes terrorism
Dr. John Scire Adjunct Professor of Political Science at UNR “Oil dependency, national security” February 10, 2008 http://www.nevadaappeal.com/article/20080210/OPINION/227691244 Oil dependency forces the U.S. to support oil regimes that oppress their citizens. As a result, other states and the citizens of oppressive oil regimes see the U.S. as their real enemy. It isn't surprising that Osama bin Laden's first Fatwah was against the U.S. for stationing troops in Saudi Arabia to protect the oppressive Saudi Royal Family. U.S. oil dependency also strengthens worldwide Islamist terror campaigns as funding for these groups comes primarily from Middle Eastern Islamic charities, located primarily in Saudi Arabia. Because of oil dependency, we both motivate the terrorists and provide the money to fund their attacks on us. American oil dependency also strengthens other
states opposed to American foreign policy interests, such as Venezuela and Russia. Foreign policy options are further reduced when other oil importing countries, such as China, block our UN Security Council resolutions targeted at their sources of oil. This has already occurred in regard to Sudan and Myanmar.

Saudi oil revenues help fund terrorism Online Investor News 6/20/2004 http://www.gold-eagle.com/editorials_04/ridley061904.html
To help keep the masses somewhat happy however, billions of dollars have been doled out to the under classes. These funds have gone to some positive things such as schools and mosques however there is a clear money trail showing that al Qaeda terrorists have also been on the receiving end. Clearly, this terrorist financial support shows there is dissention within the ranks of the Saudi power elite. The clearest example being Osama bin Laden himself.

Oil dependence on Saudi Arabia impedes out ability to fight terror The Business Times Singapore January 9, 2002
THE United States' dependence on the Middle East, particularly Saudi Arabia, for its crude oil supply is nothing new, but the Sept 11 terrorist attacks have trained the spotlight on this insatiable dependency that is fraught with considerable risks. Of course, the untimely Opec decision to cut production recently by 1.5 million barrels to "stabilise" the market did not help matters. Indeed, it has further angered critics who say the decision will slow the country's economic recovery, when it is in the midst of prosecuting a war against the Taliban. Willynilly, the Saudi connection comes at a price: the US guarantees protection of that kingdom under a treaty with Riyadh in return for steady oil supplies. The downside is that it has tied Washington's hands in dealing with terrorists and the Middle East peace process without stepping on sensitive Arab toes. No doubt, the debate about ending the reliance on Arab oil partly stems from the fear, however remote, of a Taliban-like force destabilising key oil suppliers such as Saudi Arabia. That fear is not misplaced considering that 15 of the Sept 11 hijackers were Saudis, and hundreds had slipped out to attend training in Osama bin Laden's Afghan camps.

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Backstopping (1NC)
A. Slow shift towards renewables now- no impact on oil consumption The Associated Press, Business News “Renewable energy use to grow rapidly”. December 5, 2006. Lexis.
Energy markets will shift further toward alternative sources in the coming years, driven primarily by higher prices for traditional fossil fuels and recently enacted public policy, according to a Department of Energy report released Tuesday. But despite rapid growth projections for renewable sources, as well as expectations for a nuclear renaissance, the department's Energy Information Administration (EIA) predicted in its annual energy outlook that oil, coal and natural gas will still account for the same 86 percent share of the U.S. energy market in 2030 that they did in 2005. Total energy demand is anticipated to grow 1.1 percent annually between now and 2030.

B. OPEC will flood the market with oil, lowering prices if renewables become an immediate threat, making it impossible for them to compete Salon.com October 22, 2007 BYLINE: Amanda Griscom Little
Tancredo pushes for more nuclear energy R&D Would you fund R&D for emerging technologies like wind and solar? Yes, and it can be broader than that. It can be R&D into biotechnology and biofuels. There are two reasons I am willing to do that: One, the national-security thing. The other is that we have OPEC, so there isn't truly a free market. You have to have some degree of government involvement in this because the OPEC nations can and do control the market to a certain extent. When emerging technologies become a interview with U.S. Rep. Tom Tancredo, R-Colo HEADLINE:

threat to oil, OPEC can [ flood the market with oil], driving the price down to make it impossible to compete, and that new technology goes down the toilet.

C. Turns the case- renewable will flop and dependency will increase Maugeri 2003 (Leonardo, oil and gas journal, Time to debunk mythical links between oil and politics, lexis)
In short, the world is not running out of oil, and there's no current problem of oil security in today's world market. However, the problem is that many Western observers speak about "oil security" when what they have in mind is "stable and cheap oil supplies," thus confusing two very different things -- a confusion that usually stems from public hysteria when oil prices soar; then, when prices drop, oil matters are completely forgotten. Few remember that in 1998-99, when oil prices plummeted below $ 10/bbl, the general refrain was "bad for oil companies and producing countries, good for everyone else." No one spoke about problems such as oil security, energy alternatives to oil, etc., back then. Hysteria aside, cheap oil has always been and remains a curse for industrialized countries and the most elusive enemy of oil security. It hampers any possibility of dealing with new energy alternatives to oil -- which are all very expensive -- or with the development of new oil regions. It maintains Western habits -- and particular those of the US -- of not promoting any form of energy-saving. Finally, it increases consumer dependence on a limited group of countries with the lowest production costs, which today still are those in the Persian Gulf. However, cheap oil is a curse for them too.

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Yes - Renewables
Renewables are spreading and will globally replace fossil fuels
(In 100 years they’ll cause a peak in CO2 emissions) Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 200-1 With prospects like these, it’s easy to see why advocates for both wind and solar energy have such high hopes for a “renewable” energy economy — and why they tend to discount the gloomier forecasts offered by conventional industry types. Groups like the European Wind Energy Association believe that if costs continue to fall, wind power will fulfill 12 percent of global energy needs by 2020. And some advocates of renewables say the number will eventually be much higher. Given current trends in cost and efficiency — and assuming a continuation of political pressure to replace carbon-intense energy systems with emission-free power — the potential of renewables is only now being realized. The wind market has been growing by a third every year — so fast that the amount of new wind capacity, in megawatts, being installed each year now exceeds the capacity of new gas-fired power plants. Solar energy, though well behind wind, has apparently hit its stride as well, posting gains of some 30 percent a year. And although these rates are not sustainable, even a more typical growth rate of 10 percent will still leave wind and solar vying for serious market share by 2020. From that point on, says Jim MacKenzie, a renewables expert at the World Resources Institute, solar and wind not only will be adding to the world energy supply “at the margins” but should actually begin competing directly with conventionally produced energy, on a one-to-one basis, and especially energy that emits lots of C02, like coal. By around 2030, some advocates believe, solar and wind together could be meeting one-fifth of power demand in the industrialized world — and could even be making inroads in the developing world, where renewables offer a way to get electricity to remote areas. MacKenzie, a former official with the White House Council on Environmental Quality, speculates that by 2100, renewables could displace all conventional fuels in the United States — and help ensure a peak in CO2 emission before the middle of the century.

Revolution towards renewables beginning Margaret Roosevelt, “The Winds of Change,” TIME, 8/26, 2002
Clean energy has a long way to go. Only 2.2% of the world’s energy comes from “new” renewables such as small hydroelectric dams, wind, solar and geothermal. (Traditional renewable energy from large dams provides another 2.2%.) How to boost that share—and at what pace— is debated in industrialized nations—from Japan, which imports 99.7% of its oil, to Germany, where the nearby Chernobyl accident turned the public against nuclear plants, to the U.S., where the Bush Administration has strong ties to the oil industry. But the momentum toward clean renewables is undeniable. Globally, solar- and wind-energy output is growing more than 30% annually—far faster than conventional fuels—and their cost is plummeting. “We are on the cusp of an energy revolution,” says Christopher Flavin, president of the World-watch Institute, a Washington nonprofit. “It will be as profound as the one that ushered in the age of oil a century ago.” Even oil companies are trying to cash in on the decarbonization trend. The world has gradually moved toward cleaner fuels—from wood to coal, from coal to oil and from oil to natural gas. Renewables are the next step. Royal Dutch/Shell has pledged to spend up to $1 billion on renewables through the next five years. Japanese manufacturers, led by Sharp and Kyocera, have moved ‘aggressively into photovoltaic cells, which turn sunlight into electricity.

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Link XT – OPEC will flood the market
Attempts to shift to renewables cause OPEC to flood the market Bob Williams, Executive Editor, Oil and Gas Journal, 2004,
http://ogj.pennnet.com/articles/edpro_article_display.cfm?Section=Archives&Article_Category=EdPro&ARTICLE_ ID=201727&KEYWORD=opec%20capacity%20flood We have acted on our policy statement that we want stable oil markets. We want fair prices. We have maintained capacity to do so. We have done everything possible we know, other than just produce to flood the market, which would be damaging to the objective of a stable oil market." Threats to oil Al-Naimi addressed two key threats to future oil market stability: a shift away from oil owing to concerns over postulated catastrophic climate change and a return to competition for market share among major producing countries. He contends that, regarding which solutions are implemented to combat the perceived threat of global warming, "whatever the world does should not be prejudiced against oil."

OPEC controls prices. They will lower prices in response to alternative energy exploration.
Steve Yetiv June 24, 2008 HEADLINE: Calculating peak oil's due date The Virginian-Pilot(Norfolk, VA.) In the past, OPEC, and especially Saudi Arabia, have often increased oil production to try to prevent prices from rising high enough to trigger alternative energy exploration; a Western political backlash; and the ire of the gendarme of the Persian Gulf -- the United States. When I visited OPEC headquarters in May 2003, OPEC researchers underscored how the organization was keeping the price of the OPEC oil basket around $22-$28 per barrel (roughly $25-$31 on the New York Mercantile Exchange). OPEC succeeded in doing so more than 80 percent from June 2001 to June 2003.

OPEC will push to flood the market leading to a drop in prices Discuss Economics 2008 (OPEC’s response to Alberta oilsands market share, http://www.discusseconomics.com/energy/opecs-response-to-alberta-oilsands-marketshare-part-3/)
If the parameters stated above hold true, what particular market reactions could one expect from OPEC? If Alberta displaces the exports of Venezuela and Saudi Arabia, this will account for just over 4% of total OPEC production. Therefore the new question is: will OPEC attempt to recover their lost market share? Or is it possible that emerging markets elsewhere such as India or China will substitute for the lost market. It is impossible to speculate what future market trends will be, whether developing markets will in fact meet expectations when it comes to crude oil demand. One thing, however, is certain: OPEC will attempt to recover any losses if the US market was the most profitable market for them, and if it was the most accessible. Venezuela may be concerned with their diminished share; 2002 US exports accounted for about 37% of total national production. This number reaches almost 50% with the increase in future US demand, however, diminishes to about 42% once the oilsands 'steals' their share. Finding alternate markets with ease may be difficult for Venezuela in comparison with Saudi Arabia due to geographic location. Despite ideas OPEC may be willing to forego production in 2012 for future production, the loss of the Venezuelan market share may be enough to elicit a response from OPEC. Any firm, or in this case cartel, rarely relinquishes established market shares without concern. What type of actions might OPEC take in attempt to recapture market share? As previously noted, the production cost of oilsands is much higher than conventional production with many OPEC members, namely those in the Middle East. It may be appealing for OPEC to flood the world with too much supply thereby reducing market prices, assuming the market responds the increase supply. If the market price were to decline to a point that expansion for oilsands ventures were no longer profitable, one would see oilsands development grind to halt. Not only would development slow with lower market prices, yet output would slow as well. Producers will only produce until their MC=MR. If expected MR declines due to a lower market price, production quotas will be adjusted to reflect the new break-even point. This will reduce the amount of supply the oilsands producers will export to the world market. (I will also assume that there are adequate world reserves to justify erroneously increasing supply simply to crowd out competitors.) The lost export supply from oilsands would be compensated by the new supply provided by OPEC. This now suggest that excess supply on the world market would be consumed by those, in our case the United States, who were once relying on the once cost effective oilsands supply. The market would adjust, substituting competitive supply with uncompetitive; downward pressure on the price would cease as the market returns to equilibrium. Although market price for crude will diminish, supply provided by OPEC will increase. If the increase in production accounts for the lost revenue from the reduction in price, then OPEC will support and favour the move. This is one method OPEC may attempt in order to recapture lost market share.

Threat of alternative energy means OPEC will respond with slowing supply then flooding the market driving down prices

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McCarthy 2007 (shawn, OPEC warns of fall in oil demand, the globe and mail, lexis)
OPEC ministers are increasingly concerned about growing momentum among consuming countries to find ways to reduce oil demand, and warn they may respond by limiting supply growth. As the U.S. Senate prepared to debate legislation aimed at slashing gasoline consumption by 20 per cent from forecast demand in 10 years, Saudi Arabia's Oil Minister Ali al-Naimi said the drive to conserve fuel could slow investment by members of the Organization of Petroleum Exporting Countries. Producers worry about a repeat of the mid-1980s, when sky-high prices triggered a slump in demand and a flood of new supply into the market, eventually driving down crude prices to rock bottom levels. Saudi Arabia, the world's largest oil exporter, is expanding its production capacity to 12.5 million barrels per day, from 11.3 million, but Mr. al-Naimi said further expansion plans could be shelved. "Our feeling now with this thrust and push for conservation, efficiency and the use of alternatives is that we probably need not go beyond 12.5 million barrels per day," he said.

New alternative energy sources will cause OPEC to flood the market Kolle 2007 Despite rising prices, OPEC appears to be in no rush to raise its output targets,
http://nwitimes.com/articles/2007/09/08/business/business/doc7e79bb33cb7ec6f28625734f00723bfd.txt) " If you remember what happened in the 1970's (look it up if you don't) you will find the biggest fear OPEC has. It is that oil prices will go up and stay high long enough to fuel investment into conservation and alternative energy sources to the point that a critical mass is reached and the need for their oil is greatly diminished or replaced by other energy sources they don't control. That's exactly what started happening in the 1970's and it took OPEC opening up the tap to make oil cheap again over a decade to reverse the trends. The result was that interest in conservation and alternative energy waned and investments dried up in the face of cheap oil again. We are once again nearing that point and you can expect to see OPEC flood the market again if they see us getting serious with conservation and alternative energy sources that compete with, or worse yet, actually replace demand for their oil. OPEC walks the fine line between price and demand and wants to keep us hooked up to their oil like a bunch of junkies on drugs while making as much money as possible... "

Increased renewable means OPEC will flood the market- they fear loss in profits Phil 2007 (http://www.philforhumanity.com/The_End_of_Cheap_Oil.html, the end of cheap oil)
However, the oil cartel, called OPEC, is keeping a very close eye on the costs of these alternative sources of energy. Because of greed, OPEC tries to regulate the supply of oil to ensure the highest price of oil while also limiting interest in developing alternative sources of energy. This is a delicate balance, since the costs of other sources of energy are much more chaotic than oil and especially since OPEC does not regulate the large oil reserves of the United States of America or Russia. In most countries of the world, cartels are illegal, since they use their monopolies to fix the prices of their goods. In other words, cartels artificial control supply and demand of any product to maximum their profits with no regard to actual supply and demand of a free market. Yet OPEC only has a semi-monopoly on the supply, and therefore the price, of oil. However, this is enough of a reason why other countries need to stop being dependent on expensive oil and develop other sources of energy. Preferably, countries should invest only in pollution free power sources. Therefore, the cost of oil will remain forever high, unless other sources of energy have a sudden price drop so that they are significantly cheaper than oil. Only at that point in time would OPEC flood the world with a large supply of cheap oil in an attempt to bankrupt any competition.

OPEC can flood the market in response to renewable development
John Goff July 2006 CFO Magazine HEADLINE: Power Source

Clean-fuel executives know they can't avoid every risk. OPEC could flood the market with cheap oil. Big-oil companies could jump into the renewable-fuels business, pushing smaller players aside in the process. (The former
British Petroleum is now BP Plc, and brands itself as "Beyond Petroleum.") Or, they could take their massive cash reserves and

buy alternative-power technologies -- and then let them wither.

OPEC sees renewables as a direct threat to their market share Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 282
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Not everyone at Johannesburg was pleased by such talk. Whereas European states would gain from such a commitment to renewables (most wind-powered technology, for example, is manufactured in Europe), other countries saw the proposal as an economic disaster. Diplomats from OPEC oil states, for example, made it clear that they regarded any measure to boost renewable energy as a direct threat to their own market share. Delegates from developing nations, meanwhile, complained that such a commitment might reduce available supplies of cheap hydrocarbon energy, which many poorer nations now depend on.

Fluctuations in US energy demand send oil prices into a tailspin Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, p 14-15
In writing this book, I have focused on all aspects of the energy economy — the past and present of energy, the technology and business of energy, and the major players. I’ve studied the big energy producers, like Saudi Arabia and Russia, who control most of the world’s oil reserves and who will play a critical role in the transition to a post-oil economy. I’ve looked in depth at China and India, two energy paupers whose enormous populations and growing economies will nonetheless make them the biggest energy players of the twenty-first century. I have examined Japan and Germany, countries that, lacking their own domestic oil supplies, have adopted energy-efficient policies and have fostered a culture that accepts if not embraces a low-energy way of life. But by necessity, much of this book will focus on the United States. For all that the new energy economy is an international issue, no nation will play a greater role in the evolution of that economy than ours. Americans are the most profligate users of energy in the history of the world: a country with less than 5 percent of the world’s population burns through 25 percent of the world’s total energy. Some of this discrepancy is owing to the American economy, which is bigger than anyone else’s and therefore uses more energy. But it is also true that the American lifestyle is twice as energy-intensive as that in Europe and Japan, and about ten times the global average. The United States is thus the most important of all energy players: its enormous

demand makes it an essential customer for the big energy states like Saudi Arabia and Russia. Its large imports hold the global energy market in thrall. (Indeed, the tiniest change in the U.S. energy economy — a colder winter, an increase in driving, a change in tax law —can send world markets into a tailspin.) And because American power flows
from its dominance over a global economy that in turn depends mainly on oil and other fossil fuels, the United States sees itself as having no choice but to defend the global energy infrastructure from any threat and by nearly any means available — economic, diplomatic, even military.

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Impact XT – Low oil prices increase dependence
Cheap oil increases demand leading to US increased dependence and causes oil shocks Maugeri 2003 (Leonardo, oil and gas journal, Time to debunk mythical links between oil and politics, lexis)
This brings us to the first paradox: Oversupply drove down oil prices in real terms (and during the 1960s in nominal terms as well), which in turn fed the upsurge in oil consumption worldwide and exacerbated Western dependence on Middle Eastern oil. In the early 1970s, there was no spare oil capacity in the US (until then considered a cushion for Western security) because every producer had been allowed to pump without restriction in order to fulfill evergrowing demand. At the same time, low prices made reserve replacement unattractive, thus eroding American oil stocks. This shortsighted pattern of Western consumption and the policies that favored it were responsible for progressively transferring an extraordinary power to the Middle East countries -- i.e., the ability to use oil as an economic sanction to achieve political ends -- which, once wielded, led to the first oil shock in 1973.

Low cost means no new technology or renewable Maugeri 2003 (Leonardo, oil and gas journal, Time to debunk mythical links between oil and politics, lexis)
Given current oil consumption levels, every additional percentage point of recovery means 2 more years in terms of the life-index of existing reserves. Overall, cost and price are the pivotal variables for increasing reserves. Cheap oil (i.e., oil with a price that does not significantly exceed the breakeven cost of producing and marketing oil in the long term) leads to a reduction of investment in both new exploration and technology, thus undermining future additions to existing reserves. All of these factors may explain why the life-index of world reserves has constantly improved, even as major new oil discoveries have been decreasing since the 1960s. In 1948, the ratio between proven oil reserves and current production indicated a remaining life of 20 years for existing reserves; in 1972, the life index rose to 35 years; today it stands at about 43 years.

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No link – OPEC can’t control market with flooding
OPEC no longer has the capacity to flood the market Hatch 8 Senator Orrin G. Hatch, HATCH ASKS ENERGY COMMITTEE TO LIFT MORATORIUM ON OIL SHALE DEVELOPMENT,
Trade Observatory, http://www.tradeobservatory.org/headlines.cfm?refID=102799

Second, OPEC no longer has anywhere near the spare capacity necessary to flood the world market. In fact, due to the meteoric rise in global demand for oil, I doubt OPEC has the capacity to cause even a significant drop in the price of oil. Thirdly, technology and regulatory protections in every aspect of oil, gas, and mining have matured impressively since the early 1980's. Those advances not only make oil shale development much more viable, but they also ensure much better protections for the environment.

OPEC can no longer influence prices Sodhi 2008 (The Myth of OPEC, The center for independent studies http://www.cis.org.au/executive_highlights/EH2008/eh63608.html)
The massive reserves of Saudi Arabia have also historically been a tool to encourage quota compliance. The Saudis, with their massive oil reserves and high levels of spare production capacity, have in the past threatened to flood the market with oil to engineer a collapse in price. With the world’s cheapest production costs and lots of spare capacity, it was a threat the Saudis could theoretically carry out. Not anymore. Saudi Arabia no longer has the buffer of excess production, and there is a lack of confidence in the sustainability of its largest fields. The long standing threat to flood the market with cheap oil has now become a bluff, and the other members of OPEC know it. OPEC goes to great trouble to pretend that it can influence prices. It holds regular meetings where it ordains a new production target with much ceremony. But honestly, you would have to be a mug to believe that OPEC countries are purposefully limiting production. When oil prices rise, so does the opportunity cost of sticking to the allocated quota. So while its possible to maintain a cartel when prices are low, you can bet your life that each member is pumping out as much crude as it possibly can at $140 a barrel.

OPEC can’t control pricing through flooding the market
Gary Nicks Daily Star June 23, Brown makes fuel plea to rich Saudis

2008 HEADLINE: PLEASE SIR. . .COULD WE HAVE MORE OIL;

It's the kind of thing he could do here at home." And Tory Alan Duncan blasted: "The idea that Opec can just go like that and flood the market with oil and bring the price down shows Gordon Brown does not understand global markets." The summit was arranged after oil doubled in a year to hit a record $140 per barrel two weeks ago, sending prices rocketing so high at UK forecourts that gangs of thieves are draining lorry fuel tanks across the country.

OPEC has lost control over prices- they’re on a downward spiral Brown 2008 (May, OPEC's Days Are Numbered, http://www.rightsideadvisors.com/public/commentary.go/rsa/commentary/commenergy/20080513_032411_msg.html/OPECs-Days-Are-Numbered.html)

There was an excellent article by Jim Kingsdale this weekend on the coming end of OPEC. You are probably thinking why would OPEC disappear when their control over oil prices is so strong. Unfortunately that is no longer true. OPEC has lost control over prices and that was the main reason the organization was formed in 1960.

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Hedge Funds Collapse (1nc)
A. Predictions of high oil prices through 2010 are driving up massive hedge fund investments Fusaro and Vasey 2004
PETER FUSARO, chairman of energy and environmental financial advisory Global Change Associates and DR. GARY VASEY is Vice President for Utilipoint, a leading energy and utility industry analysis firm. December 2004 “Energy Hedge Funds: Why Have They Appeared Now?” <http://www.global-change.com/articles/energy_hedge_funds.pdf> Continued High Energy Prices in Prospect? Next year’s energy markets promise to actually be more volatile than ever before. One reason for this is the sustained lack of investment in the

productive capacity by OPEC over the past 20 years as well as a hesitancy by the oil majors to invest because they have been hurt by prior oil price collapses. This time they are reluctant to step up with new drilling programmes and instead have collected their rent cheques as prices continue to appreciate. They make
upstream money by maintaining a business-as-usual approach. Rather than using profits to expand exploration and production budgets, many have been returning money to shareholders through increased dividends and stock buy-backs. Expect more great quarters for the majors and a rise in their stock prices. Many securities analysts have been slow to grasp this fundamental change i.e. the lack of new investment except for some independent drillers who’s

. Led by the US and China once again, oil demand promises more of the same in the funds are scaling up their oil trading operations; particularly in Europe and Asia as well in North America. In the US, the latest play by the investment banks and hedge funds is to buy physical oil and gas reserves in the ground. This action has not only pushed out the forward curve and created greater open interest in the back months on the NYMEX WTI contract, but also suggests that higher prices through 2010 are to be the order of the day. What our research has also demonstrated is that the hedge funds are now investing in the energy complex in growing numbers and with a longerterm viewpoint. They are, and always have been, involved in distressed asset securities – both debt and equity – but now increasingly seem to be taking a longer-term view with respect to these investments. This has been evidenced by the funds flexing their shareholder muscle at British Energy and in other situations. Buying oil and gas reserves in the ground is just part of a picture in which hedge funds are acquiring assets across the energy value chain in the upstream, midstream and downstream energy sectors. The global oil markets have now reached a new plateau in oil prices. The majors have been slow to react to this phenomenon, but are now studying the longe -term price affects. Another factor that has brought hesitancy to stepping up oil and gas drilling by the majors is that other commodity prices have also increased this year which has ballooned their exploration and production budgets this year and next. What is different this time in the energy complex is that the entire sector is benefiting by higher prices. We see higher prices in the upstream, downstream oil and gas markets but also a bull market in tankers, storage and every conceivable part of the energy supply chain. That has never happened before. Usually, when the upstream is making money, downstream refining is losing money. It wasn’t so long ago (only two years) that refining margins were
activities are unlikely to do much to quench the increased demand 2005. Due to these market driven factors, depressed. Today they are robust.

B. Even a small hedge fund collapse would ripple through the financial world and cause a massive credit collapse Henry C.K. Liu, chairman of a New York-based private investment group and writes for The Asia Times, 19 Sept 2006, “The Coming Showdown” <http://archives.econ.utah.edu/archives/alist/2006w38/msg00010.htm>

A major showdown is shaping up between hedge funds, investment banks and commercial banks. Unlike LTCM, whose trouble was one fund being too big to exit without massive loss, the current Achilles heel is the proliferation of funds all imitating each other, with aggregate sums that defies orderly liquidation. Instead of one big fat man on a small row boat, no matter which side he moves, the boat overturns, we now have three thousand guys all moving together from side to side on a ferry boat in a storm, each move rocking the boat harder until its capsizes. The investment bank power houses are looking to make a killing from the demise of the hedge funds on the theory that someone's loss is someone elses' gain in any market. The do this by having more capital than any one single hedge fund. The commercial banks are looking to high profits from trading credit derivatives derived from the debts. The game is a three-legged stool that needs a cooperative symbosis among the three components to stay afloat. When anyone of the three starts to seek gains at the expense of the other two, the game implodes and quickly transforms into a game of survival of the earlier exit, which in financial terms is a systemic rout. When the hedge fund industry loses $100 billion, that money goes to the parties betting against them, which are the investment banks. The flow of funds is intermediated by commercial bank loans. The hedge fund investors as a group loses $100 billion and the investment bank share holders get $100 billion less investment bankers' take. No big deal in the macro picture. The trouble is leverage. Most hedge fund strategies rely on leverage to reap high profit and a loss of over 10% can be fatal, leaving the other two components in the game with uncollectable collectables. And the meltdown begins with margin calls that distorts the flow of funds. The housing bubble burst, while a heavy load, is not going to be the straw that will break the camel's back. The straw will be the hedge funds.

c. Credit liquidation means extinction Norman Bailey 1990 (Senior director of International Economic Affairs) The World and I,
The thirties, after all, began three months after the inception of the Great Depression arid ended four months after the start of World War II. This was not a coincidence. Tens of millions were killed and maimed in the Second World War. If another historical credit liquidation cycle is allowed to take place in the usual chaotic fashion the chances of another global armed conflict will be greatly increased-this time not only would hundreds of millions (rather than tens of millions) be killed or wounded, but the very hopes and the future of [hu]mankind*.
*we do not endorse the original gendered language of this card

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Hedge Funds XT
Hedge funds have upwards of 145 billion invested in crude oil Wall Street Journal, January 3 2008
<http://online.wsj.com/article/SB119930154139162791.html?mod=googlenews_wsj> While finding oil in the ground has been getting harder, it became a lot easier to buy oil on paper. The New York Mercantile
Exchange started round-the-clock electronic trading of its main crude benchmark in September 2006, and improved access to previously restricted energy-trading markets. Financial institutions created new vehicles for making bets on the price of oil without having to manage futures holdings. It was the Nymex where the historic $100-a-barrel price was recorded yesterday at 12:09 p.m. EST. That was the price in a single floor trade of the benchmark February crude-oil futures contract. A Nymex spokeswoman said the trade was legitimate. The benchmark price settled at $99.62, up $3.64. The ease of trading has helped attract a flood of new money. Oil markets were once dominated by physical traders -- firms that needed to take delivery of the crude oil to run through refineries or trade with partners. Most of the new market entrants have no interest in ever taking delivery of a barrel of oil. The new money comes from hedge funds seeking profits in sharp oil-price moves, pension funds seeking diversification and a hedge against inflation, and Wall Street commodity desks risking their own capital. The number of oil-futures bets outstanding on Nymex has quintupled since 2001. Because oil has been rising at the same time, the dollars at stake in the main oil-futures benchmark, not including options, rose from roughly $7 billion in 2001 to more than $145 billion, calculates Ben Dell, energy analyst at Sanford C. Bernstein & Co.

Hedge market stumble causes global econ collapse as investors rush capital away from the US Rex Nutting, writer for MarketWatch, July 26, 2007 “Subprime could create global crisis, economist says”
<http://www.marketwatch.com/news/story/economist-world-one-hedge-fundcollapse/story.aspx?guid=%7BC9E3B6A4-A22E-43D2-BA2A-EC4A8F61D2E4%7D> "Unlike the financial crisis of a decade ago, however, global capital would likely flow away from U.S. markets, not to them, as the genesis for the crisis lies within the U.S. financial system." After Bear Stearns was forced to write off the value of two large
hedge funds that had invested heavily in securities backed by subprime debt, it could take just one more "Bear-like event" for the financial system to freeze up, "If there's another major hedge fund that does stumble, that could elicit a crisis of confidence and a global shock," Zandi said. The potential "is quite high," he said. He gave it a one-in-five chance. Zandi said global

financial conditions have been supported by strong growth and substantial liquidity, supercharged by "unprecedented risk tolerance." But that's changing. Global liquidity is drying up, with central banks tightening. And risk is being repriced.

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Oil Prices Fluctuate
(A/T: Hedge Funds Balance args) Prices changed based on the Dollar’s value MacDonald '08 [Elizabeth, Fox Business Network stocks editor, "Part Two: Oil Speculators vs Supply and Demand," July 1,
http://emac.blogs.foxbusiness.com/2008/07/01/part-three-oil-speculators-vs-supply-and-demand/ download date: 7-7-08]

And a

key driver is the strength of the US dollar. Since oil is traded in dollars, the plunging value of the US dollar likely has traders scrambling, as the amount earned from future oil sales may get slammed as the dollar loses real value.

Any little single comment by politician or investment banker Industry Standard [June 9, 2008, http://www.thestandard.com/predictions/oil-prices-spike-150-barrel-july download
date: 7-6-08]

Oil prices have been on a roller-coaster ride this year, sensitive to all kinds of events, ranging from a weak US dollar to a single comment made by a politician to a prediction by investment bank Morgan Stanley.

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High oil prices (bad) = dollar collapse
High oil prices contribute to the decline of the dollar and raises the trade deficit Feldstein, ‘8 http://www.nber.org/feldstein/dollarandpriceofoil.syndicate.08.pdf The Dollar and the Price of Oil
The high and rising price of oil does, however, contribute to the decline of the dollar, because the increasing cost of oil imports widens the United States’ trade deficit. In 2007, the US spent $331 billion on oil imports, which was 47% of the US trade deficit of $708 billion dollars. If the price of oil had remained at $65 a barrel, the cost of the same volume of imports would have been only $179 billion, and the trade deficit would have been one-fifth lower.

Dollar collapse will ensure a US-China war Mead 2004 (Walter Russell- Senior Fellow at Council on Foreign Relations, “America's STICKY Power,” Foreign Policy, Mar/Apr)
Similarly, in the last 60 years, as foreigners have acquired a greater value in the United States-government and private bonds, direct and portfolio private investments-

the ruin of the dollar would do more than dent the prosperity of the United States. Without their best customer, countries including China and Japan would fall into depressions. The financial strength of every country would be severely shaken should the United
more and more of them have acquired an interest in maintaining the strength of the U.S.-led system. A collapse of the U.S. economy and States collapse. Under those circumstances, debt becomes a strength, not a weakness, and other countries fear to break with the United States because they need its market and own its securities. Of course, pressed too far, a large national debt can turn from a source of strength to a crippling liability, and the United States must continue to justify other countries' faith by maintaining its long-term record of meeting its financial obligations. But, like Samson in the temple of the Philistines, a

collapsing U.S. economy would inflict enormous, unacceptable damage on the rest of the world. That is sticky power with a
vengeance. The United States' global economic might is therefore not simply, to use Nye's formulations, hard power that compels others or soft power that attracts the rest of the world. Certainly, the

U.S. economic system provides the United States with the prosperity needed to underwrite its security strategy, but it also encourages other countries to accept U.S. leadership. U.S. economic might is sticky power. How will sticky power help the United States address today's challenges? One pressing need is to ensure that Iraq's econome reconstruction integrates the
nation more firmly in the global economy. Countries with open economies develop powerful tradeoriented businesses; the leaders of these businesses can promote economic policies that respect property rights, democracy, and the rule of law. Such leaders also lobby governments to avoid the isolation that characterized Iraq and Libya under economic sanctions. And looking beyond Iraq, the allure of access to Western capital and global markets is one of the few forces protecting the rule of law from even further erosion in Russia. China's

rise to global prominence will offer a key test case for sticky power. As China develops economically, it should gain wealth that could support a military rivaling that of the United States; China is also gaining political influence in the world. Some analysts in both China and the United States believe that the laws of history mean that Chinese power will someday clash with the reigning U.S. power. Sticky power offers a way out. China benefits from participating in the U.S. economic system and integrating itself into the global economy. Between 1970 and 2003, China's gross
domestic product grew from an estimated $106 billion to more than $1.3 trillion. By 2003, an estimated $450 billion of foreign money had flowed into the Chinese economy. Moreover, China

is becoming increasingly dependent on both imports and exports to keep its economy (and its

military machine) going. Hostilities between the United States and China would cripple China's industry, and cut off supplies of oil and other key commodities. Sticky power works both ways, though. If China cannot afford war with the United States, the United States will have an increasingly hard time breaking off commercial relations with China. In

an era of weapons of mass destruction, this mutual dependence is probably good for both sides. Sticky power did not prevent World War I, but economic interdependence runs deeper now; as a result, the "inevitable" U.S.-Chinese conflict is less likely to occur.

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High Oil Prices (bad) - Hurt Economy
Continued high oil prices will cause a deep recession Schoen '08 [John W., Senior Producer at MSNBC, "Oil price spike has wide economic impact,"
http://www.msnbc.msn.com/id/24778287/ download date: 7-2-08]

As dire forecasts about runaway oil prices become reality, it’s impossible to know how much higher they’ll go. But the

impact of the price surge already is being widely felt. And if prices go much higher, the damage to the U.S. economy will be deeper and wider than the fallout from the run-up so far.
Oil prices have doubled in the past year and have shot up nearly 50 percent since January to a record $135 a barrel. Much of the rise appears to be driven by speculators betting that tight supplies — or outright shortages — will push prices even higher. Consumers — already hit with rising prices and flat wages — are being stretched further. As the Memorial Day weekend kicks off the summer driving season, gasoline prices are at record levels, reaching a national average above $3.83 a gallon. Some analysts predict the average will break past $4 as early as next week. In some parts of the country, prices are already closing in on $5. “We're already in a mild recession,” said Lakshman Achuthan, an economist at the Economic Cycle Research

Institute. “I think if we go towards $150 (a barrel), we start talking about something worse than a mild recession.”
The surge in oil prices is hitting some parts of the economy harder than others. Companies that use lots of oil have already been hurt; the recent surge will only make matters worse. Airlines have been struggling to make a profit, even as they cut jobs and flights. American Airlines became the latest to announce it was tightening its belt another notch, saying Thursday that it plans to shrink capacity by as much as 12 percent and cut thousands of jobs. To offset the rapid rise in jet fuel prices, the airline also said it plans to start charging passengers $15 to check the first bag of luggage for each passenger. United Airlines said it’s considering a similar move. The carriers already charge $25 for a second bag. “(Higher oil prices are) going to send some smaller airlines into bankruptcy," said Nick van den Brul, an airline analyst at the French investment bank, Exane BNP.

Surging gasoline prices are further dampening sales at U.S. carmakers, whose product lines are more heavily oriented toward higher-profit, lower-mileage trucks and SUVs than their foreign competitors.
Ford Motor Co. said Thursday it’s cutting production by 15 percent in the second quarter of this year and another 15 to 20 percent in the third quarter. Ford now says it won’t hit its target of getting back in the black by next year and may have to lay off more workers and close more plants.

Higher Oil Prices pushes Fed Reserve to raise interest rates, and that brings economic slump Schoen '08 [John W., Senior Producer at MSNBC, "Oil price spike has wide economic impact,"
http://www.msnbc.msn.com/id/24778287/ download date: 7-2-08]

The threat of higher inflation makes life even more complicated for policymakers at the Federal Reserve, who have been slashing rates for nearly a year to try to offset the fallout from the housing slump and turmoil in the credit markets. The surge in oil prices could force the Fed to reverse course and begin raising rates — before the benefits of those rate cuts have had time to take hold. Minutes of the Fed's April policy meeting, released Wednesday, indicated
that the central bank could start raising rates in the fall.

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High Oil Prices (Bad) – Collapse Democracy (general)
High oil prices erodes stability in developing democracies
David Sandalow January 22, 2007 ENDING OIL DEPENDENCE http://www.brookings.edu/views/papers/fellows/sandalow20070122.pdf

Oil wealth also corrodes democratic institutions. This dynamic is not inevitable, but it is widespread. A growing body of
scholarly work explores this topic, concluding that oil wealth is strongly associated with corruption and authoritarian rule.7

A few examples underscore this trend. Bahrain, the Persian Gulf country with the smallest oil reserves, was also the first to hold free elections.8 As oil prices climbed in recent years, both Vladmir Putin and Hugo Chavez moved away from democratic institutions and toward more authoritarian rule. In Nigeria, oil abundance contributes to widespread corruption.

Failure to promote democracy results in extinction Diamond 1995 (Larry- Senior Research Fellow at the Hoover Institute, Promoting Democracy in the 1990s,
1995)
This hardly exhausts the lists of threats to our security and well-being in the coming years and decades. In the former Yugoslavia nationalist aggression tears at the stability of Europe and could easily spread. The flow of illegal drugs intensifies through increasingly powerful international crime syndicates that have made common cause with authoritarian regimes and have utterly corrupted the institutions of tenuous, democratic ones.

Nuclear, chemical, and biological weapons continue to proliferate. The very source of life on Earth, the global ecosystem, appears increasingly endangered. Most of these new and unconventional threats to security are associated with or aggravated by the weakness or absence of democracy, with its provisions for legality, accountability, popular sovereignty, and openness. LESSONS OF THE TWENTIETH CENTURY The experience of this century offers important lessons. Countries that govern themselves in a truly democratic fashion do not go to war with one another. They do not aggress against their neighbors to aggrandize themselves or glorify their leaders. Democratic governments do not ethnically "cleanse" their own populations, and they are much less likely to face ethnic insurgency. Democracies do not sponsor terrorism against one another. They do not build weapons of mass destruction to use on or to
threaten one another. Democratic countries form more reliable, open, and enduring trading partnerships. In the long run they offer better and more stable climates for investment. They are more environmentally responsible because they must answer to their own citizens, who organize to protest the destruction of their environments. They are better bets to honor international treaties since they value legal obligations and because their openness makes it much more difficult to breach agreements in secret. Precisely because, within their own borders, they respect competition, civil liberties, property rights, and the rule of law, democracies are the only reliable foundation on which a new world order of international security and prosperity can be built.

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AT: Venezuela Oil Prices/Econ DA
1. Venezuela’s economic growth is slowing and terrible despite high oil prices.
Patricia I.

Vasquez, Washington International Oil Daily June

13, 2008 HEADLINE: Venezuela Economy Slows Despite Oil Prices

Venezuela 's leftist President Hugo Chavez has announced a package of measures intended to jump start the economy and rein in escalating inflation. The initiative follows a sharp drop in economic growth and a slump in investment expenditure during the first quarter of

2008. Venezuela 's economic growth slowed down to a year-on-year rate of 4.8% in the first quarter of 2008 from 8.5% in the fourth quarter of 2007, despite skyrocketing oil prices. The inflation rate during the first five months of this year has been estimated at 12%, and is expected to rise to around 30% by the end of the year. Chavez, unveiling the economic stimulus package on Wednesday, said Venezuela 's oil revenues should reach $75 billion this year. He suggested that $100 per barrel is "a fair price" for crude oil, somewhat lower than crude's recent trading range of $130 to $140.
The stimulus package announced by the president included a commitment to increase government spending, which slowed down in the first half of the year in an effort to dampen inflation. The National Assembly has already approved $9.6 billion in additional spending, on top of the $64 billion already contained in the national budget for this year. Off-budget government spending is likely to increase substantially this year, according to a report by investment bank Credit Suisse. Most of this spending will be channeled through state oil company Petroleos de Venezuela (PDV) and the national development fund known as Fonden . On Wednesday, Chavez announced the creation of a $1 billion fund to finance joint public-private projects in strategic sectors such as food, agriculture and manufacturing as well as increases in subsidies and a debt relief package for agricultural producers. The president invited the private sector to invest in Venezuela , offering tax breaks and looser foreign exchange controls as incentives. Caracas is seeking to reverse a spectacular drop in direct investment. According to the Central Bank, Venezuela had net investment outflow of $1.7 billion during the first three months of 2008. Thanks to oil exports, which constitute 90% of Venezuela 's revenues, the country had a positive current account balance of $10 billion during first quarter of 2008. However, Venezuela 's overall balance of payments, which records imports and exports and movements of capital, showed a negative balance for the quarter of $3.8 billion due to capital flight. There is much skepticism about the private sector response to Chavez's call for new investment commitments, mainly due to his interventionist style of managing the national economy.The government has taken control of cement, electricity and telecommunications companies and has confiscated private lands. Earlier this year it ordered the nationalization of steel company Sidor , which is owned by the Argentine-Italian conglomerate Techint . In the oil and gas sector, PDV took control of four multibillion-dollar projects in the Orinoco heavy oil belt from six Western oil companies: Total, Statoil , BP, Chevron, Exxon Mobil and ConocoPhillips. The takeover of the Orinoco projects came after the government unilaterally turned 32 service contracts with private companies into joint venture companies controlled by PDV. "If you were an investor, would you risk bringing in your capital to Venezuela ? ... No," said economist Ana Maria Di Leo of Caracas-based economic think tank Veneconomia . A lack of new investment, capital flight and price controls has resulted in increased imports of goods. Economists estimate that the government spent some $4.3 billion on imports of consumer goods last year.

2. Empirically, Venezuela's economy would have grown 14% more over 20 yrs without oil production Federal Bank of Dallas May/June 2004 http://www.dallasfed.org/research/swe/2004/swe0403d.pdf
How much was oil to blame for slow Venezuelan growth and declining per capita income? While with the Center for International Development at Harvard University, Jeffrey Sachs and Andrew Warner estimated that during 1970–90, Venezuela’s real GDP would have grown an average 0.77 percent faster per year without oil than with it.4 By the end of this period, GDP would have been 14 percent higher if Venezuela had not been an oil-exporting country.

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3. Dependence on Venezuela oil is an example of the resource curse- non resource filled countries always grow faster Federal Bank of Dallas May/June 2004 http://www.dallasfed.org/research/swe/2004/swe0403d.pdf
Most media coverage characterizes Venezuela’s political strife as either a situation that would not have materialized had someone other than Chavez been elected or as a struggle between rich and poor. Individual players certainly shape Venezuela’s political battles. And struggles between the rich and poor are a crucial issue. However, these factors are symptoms of a larger phenomenon that the technical economics literature calls the “resource curse.” The resource curse literature conflicts with the conventional idea that natural resource wealth contributes to economic expansion. According to this literature, abundant natural resources impose economic and

political distortions that retard economic growth in the long run, even though they can produce short-run booms. In Venezuela’s case, the resource is oil. An important observation by resource curse economists is that a positive relationship generally does not exist between a nation’s natural resources and other forms of economic wealth. Much more telling, resource-rich countries grow slower on average than resource poor countries. The term on average is a conservative one. In fact, very few resource-rich countries grow as fast as the average resource-poor country.

4. The problem is the leadership / the Chavez regieme has generated less oil income then any other venezuelan leader Venezuelaanalysis.org 7/7/2004
the government of President Hugo Chavez has received significantly lower oil revenues than the previous five Venezuelan administrations. “It is false
July 7, 2004—According to a report issued by the Venezuelan Finance Minister Tobias Nobrega, that the government of President Chavez has received fiscal oil revenues that are superior to those of previous governments,” said Nobrega. The report specified that, “The Bolivarian government has received 26% of the oil revenues obtained by the Carlos Andres Perez administration; 35% of the revenues of Luis Herrera Campins, 56% of the revenues of Jaime Lusinchi, 49% of the revenues of the second period of Carlos Andres Perez, and 85% of the revenues received by the last administration of Rafael Caldera,” based

on real per capita terms

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Extend #3- Resources Curse
Resource rich countries get booms in investment which inevitably lead to industry failure, high prices on goods and a poorer education system Federal Bank of Dallas May/June 2004 http://www.dallasfed.org/research/swe/2004/swe0403d.pdf
If all this means that a large natural resource base is somehow a curse, how does the curse work? In the simplest, purely economic version of the curse story, a boom in natural resources generates in rushes of financial capital. When the money comes in, prices for nontradable goods and services—ranging from office buildings to farmland to haircuts— go up and stay there.1 When the prices of these goods and services are bid up beyond a certain point, types of production that use them can no longer compete internationally. Export-based agricultural production falls off. Export-based manufacturing— the growth engine of the Asian tigers— never buds and certainly never blooms. Governments often try to “sow” their oil gains in subsidies to manufacturing and create other market distortions to offset the cost disadvantages infant industries face. The infants never grow up, although with continued government subsidies, they can grow very fat. Price distortions are not the only deterrents to broad economic development in resource curse countries. Thorvaldur Gylfason, a professor at the University of Iceland, finds that a nation’s educational attainment is negatively related to the share of natural resources in national wealth.2 Education levels have important implications for future industry mix and so, for growth. Workers with more education learn faster on the job. Education shifts comparative advantage away from resource production, where learning by doing is less important, toward manufacturing and services, where it is very important. Partly as a result of these factors—the crowding out of nonresource industries, the discouragement of education that could allow advancement in manufacturing and services—players in resource-based countries focus more on fighting over pieces of the nation’s economic pie and less on efforts to make the pie bigger.

GDP comparisons prove Venezuela's economy is worse then non-resource producing countries Federal Bank of Dallas May/June 2004 http://www.dallasfed.org/research/swe/2004/swe0403d.pdf
While contrasts between Venezuelan and other nations’ GDP growth are striking, Venezuela’s absolute declines in real GDP per capita are grimmer still (Chart 2). Between 1980 and 1999, the year Chavez took office, real income per capita fell about 18 percent. From 1980 to 2002, income per capita dropped 25 percent. In 1988, the percentage of Venezuelans with 12 years of schooling living below the poverty line was 2.4. By 1998, when Chavez was elected president, the percentage had risen to 18.5.

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Dependence Bad – Terrorism Module
A. Oil dependence fosters terrorism
David Sandalow January 22, 2007 ENDING OIL DEPENDENCE http://www.brookings.edu/views/papers/fellows/sandalow20070122.pdf

Oil dependence lies behind the jihadist threat – not as the only cause, but as an important one. For example, according to Brent
Scowcroft, National Security Adviser at the time of the first Gulf War, “…what gave enormous urgency to [Saddam’s invasion of Kuwait] was the issue of oil.”5 After removing Saddam from Kuwait in 1991, U.S. troops remained in Saudi Arabia where their presence bred great resentment. Osama bin Laden’s first fatwa, in 1996, was titled “Declaration of War against the Americans Occupying the Land of the Two Holy Places.” Today, deep resentment of the U.S. role in the Persian Gulf remains a powerful recruitment tool for jihadists. That resentment grows not just from the war in Iraq, but from the U.S. relationship with the House of Saud, the presence of U.S. forces throughout the region and more. Yet the United States faces severe constraints in responding to this resentment. With half the world’s proven oil

reserves, the world’s cheapest oil and the world’s only spare production capacity, the Persian Gulf will remain the indispensable region for the global economy so long as modern vehicles run only on oil. To protect oil flows, the U.S. policymakers will feel compelled to maintain relationships and exert power in the region in ways likely to fuel the jihadist movement.

B. Terrorism Leads to Extinction Alexander 2K3 (Yonah, Washington Times, August 28, LN)
Last week's brutal suicide bombings in Baghdad and Jerusalem have once again illustrated dramatically that the international community failed, thus far at least, to understand the magnitude and implications of the terrorist threats to the very survival of civilization itself. Even the United States and Israel have for decades tended to regard terrorism as a mere tactical
nuisance or irritant rather than a critical strategic challenge to their national security concerns. It is not surprising, therefore, that on September 11, 2001, Americans were stunned by the unprecedented tragedy of 19 al Qaeda terrorists striking a devastating blow at the center of the nation's commercial and military powers. Likewise, Israel and its citizens, despite the collapse of the Oslo Agreements of 1993 and numerous acts of terrorism triggered by the second intifada that began almost three years ago, are still "shocked" by each suicide attack at a time of intensive diplomatic efforts to revive the moribund peace process through the now revoked cease-fire arrangements [hudna]. Why are the United States and Israel, as well as scores of other countries affected by the universal nightmare of modern terrorism surprised by new terrorist "surprises"? There are many reasons, including misunderstanding of the manifold specific factors that contribute to terrorism's expansion, such as lack of a universal definition of terrorism, the religionization of politics, double standards of morality, weak punishment of terrorists, and the exploitation of the media by terrorist propaganda and psychological warfare. Unlike their historical counterparts, contemporary terrorists have introduced a new scale of violence in terms of conventional and unconventional threats and impact. The internationalization and brutalization of

current and future terrorism make it clear we have entered an Age of Super Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national, regional and global security concerns.

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Dependence Bad – Causes Terrorism (XT)
Oil dependence fuels terrorism against the US – its our greatest vulnerability
Daveed Gartenstein-Ross 2008 The High Cost of Oil Dependence http://counterterrorismblog.org/2008/05/the_high_cost_of_oil_dependenc.php
With the price of oil over $125 a barrel and U.S. gasoline prices hovering around $4 a gallon, high energy costs have been a top news headline lately. Though the economic effect of these surging prices has been most prominently noticed, the high cost of oil dependence extends far beyond that. Today I have a policy briefing at FDD's web site analyzing the geopolitical implications of our dangerous dependence on foreign oil -- including the impact this has on our war-on-terror policies. An excerpt:

[T]he impact of oil dependence on terrorism extends beyond the financial windfall it entails for terrorist groups and the ideology that drives them: terrorists also understand that our oil dependence is our greatest strategic vulnerability. Although Osama bin Laden initially declared Saudi Arabia's oil resources off limits as a military target because they were "a great Islamic
wealth," his thinking on the matter shifted as he came to understand how much the U.S.'s fortunes were tied to its access to cheap oil. In a midDecember 2004 audiotape, he instructed al-Qaeda operatives: "One of the main causes for our enemies' gaining

hegemony over our country is their stealing our oil; therefore, you should make every effort in your power to stop the greatest theft in history of the natural resources of both present and future generations, which is being carried out through collaboration between foreigners and [native] agents. . . . Focus your operations on it [oil production], especially in Iraq and the Gulf area, since this [lack of oil] will cause them to die off [on their own]."
Since then, other prominent voices within al-Qaeda have affirmed the group's desire to strike the oil supply. In a December 2005 video, Ayman al-Zawahiri stated: "I call on the holy warriors to concentrate their campaigns on the stolen oil of the Muslims, most of the revenues of which go to the enemies of Islam." Sawt al-Jihad, Al Qaeda in the Arabian Peninsula's online magazine, noted in February 2007 that "cutting oil supplies to the United States, or at least curtailing it, would contribute to the ending of the American occupation of Iraq and Afghanistan." Actual terrorist targeting has made clear that this is not empty rhetoric.... Indeed, former CIA agent Robert Baer warned back in 2003 that tactics in which al-Qaeda already had a demonstrated proficiency could succeed in taking a great deal of Saudi oil off the market instantaneously. He stated that "a single jumbo jet with a suicide bomber at the controls . . . would be enough to bring the world's oil-addicted economies to their knees" if crashed into a major offshore loading facility.

Following such an attack, the substantially reduced worldwide supply of oil would be joined by an inflated risk premium. While it is difficult to determine the ceiling for oil prices if such a scenario unfolded, Sawt al-Jihad may have been correct: diminished access to the military's lifeblood could spell doom for the U.S. ventures in Afghanistan and Iraq.

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Until we decrease our dependence on foreign oil, we will never be able to win the war on terrorism. Al Qaeda is currently increasing attacks in the oil sector – now is the key time to act Alon Ben-Meir, Middle East Project Director at the World Policy Institute, New York and professor of International Relations at New York University, June 21, 2004
To prevent a new catastrophic terrorist attack and ultimately defeat terrorism, the next administration must develop a comprehensive strategy comprised of 10 distinct domestic and international policy agendas that must be acted on simultaneously. A national energy-independence strategy is the second of the 10 policy agendas. A growing consensus in the United States on the need
to enact and fund an energy-independence plan as our future national security interests may depend on it. Successive Democratic and Republican administrations have failed to develop a national energy strategy to free us from dependency on outside sources. In the wake

of recent terrorist attacks in Saudi Arabia and Iraq, now would be an opportune time to develop a comprehensive strategy that will free us from foreign oil within the next eight to 10 years, a time frame considered doable by many industry experts.
Current events in the Middle East and increasing gasoline prices are reminders, not only of our vulnerability, but of our shortsightedness and negligence regarding our most critical national security concern. It is baffling that the U.S., with all its human, technological, natural, and economic resources continues to depend on Middle-Eastern oil, making itself hostage to the turmoil in the region and to the whims of oilproducing rulers. Because of our dependency on Mideast oil -- of which two-thirds of the world's reserves are located there -- we may find ourselves in a crippling crisis. We import more than 55 percent of our domestic oil consumption. Besides undermining our national security, this dependency adds tens of billions to a trade deficit already exceeding $1/2 trillion a month. Since the 1973 oil embargo, Americans have spent $7 trillion more for oil products due to OPEC's regulation of production. Under the pretext of the war on terrorism, Iraq was invaded at a cost of more than $200 billion -- and our expenditures are still rising -- when, in fact, the administration was motivated largely by oil considerations. Al-Qaida has long since discovered that America's dependency on oil is a major vulnerability that can be exploited to the detriment of both the United States and its major oil suppliers, especially Saudi Arabia. The series of bombings in that nation, beginning in May 2003 and continuing up to the most recent violence in Riyadh and the spree of killings of foreign contractors, including the attack in Khobar, signal a deliberate escalation of violence, with a focus on the oil industry. Al-Qaida's determination to undermine the Saudi regime is based on a four-part strategy: to shake the kingdom's economic base, demonstrate the government's vulnerability and subservience to the United States, spread fear to force foreign nationals out, and capitalize on public discontent to develop a much broader resistance movement. Even now the Saudi government is in denial and has ignored the gathering threat. It has failed to come to grips with the magnitude of the problem. Fearing further public alienation, unwilling to heed the cries of the nation's young people (70 percent of the population age 25 or under) for greater openness, and freedom and terrified of losing control of the country, the Saudi regime is still reluctant to take sweeping actions against the militants. The government now finds itself in a bind. A battle for the people's hearts, minds, and beliefs is underway, perhaps marking the beginning of a revolution with profound consequences not only for the future stability of the kingdom and the region but also for the supply of oil. The situation in Saudi Arabia is a foreshadowing of what could become the reality for other Arab oil-producing nations, a reality that should give pause to the next administration when it comes to continuing our dependence on Arab oil. The U.S. predicament is multiplied because our addiction to cheap oil has blurred our thinking. As we watch another American being beheaded in the Middle East, we must ask ourselves: how much

longer can we continue to delude ourselves and pursue the same failed policy of merely trying to kill or capture terrorists (albeit necessary) rather than dealing with the root causes of terrorism itself?

Dependency causes terrorism Dr. John Scire Adjunct Professor of Political Science at UNR “Oil dependency, national security” February 10, 2008 http://www.nevadaappeal.com/article/20080210/OPINION/227691244
Oil dependency forces the U.S. to support oil regimes that oppress their citizens. As a result, other states and the citizens of oppressive oil regimes see the U.S. as their real enemy. It isn't surprising that Osama bin Laden's first Fatwah was against the U.S. for stationing troops in Saudi Arabia to protect the oppressive Saudi Royal Family. U.S. oil dependency also strengthens worldwide Islamist terror campaigns as funding for these groups comes primarily from Middle Eastern Islamic charities, located primarily in Saudi Arabia. Because of oil dependency, we both motivate the terrorists and provide the money to fund their attacks on us. American oil dependency also strengthens other
states opposed to American foreign policy interests, such as Venezuela and Russia. Foreign policy options are further reduced when other oil importing countries, such as China, block our UN Security Council resolutions targeted at their sources of oil. This has already occurred in regard to Sudan and Myanmar.

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Dependence on oil supports terrorism State News Service 2008 (Arlington, Va.) June 23 (State News Service, Lexis Nexis,
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4038339083&f ormat=GNBFI&sort=BOOLEAN&startDocNo=1&resultsUrlKey=29_T4038339086&cisb=22_T4038339085&tree Max=true&treeWidth=0&csi=8058&docNo=6 Dependence On Oil Provides Direct Support To Our Enemies And Threatens The Peace: Rising Oil Prices Provide Massive Infusions Of Wealth To Some Of The World's Most Repressive Dictatorships. Oil wealth enriches bad actors in the world that support terrorism, finances the brutal repression of women in the Middle East, and supports criminal syndicates in our own hemisphere. Iran Alone Earned $66 Billion From Oil Sales to Others Last Year. This wealth encourages Iran to finance terrorists, threaten Israel, and defy international efforts to prevent it from developing nuclear weapons. This wealth also allows Iran to suppress its own long-suffering population. The Formation Of The OPEC Cartel And The Oil Embargo Of The 1970s Demonstrated Our Vulnerability. At the time of the oil embargo, we imported roughly one third of our oil. Today, we import almost two-thirds. Since 1973, the United States has gone from importing 6 million barrels of oil a day to 12 million barrels per day with petroleum payments comprising 41 percent of the U.S. trade deficit ($293 billion of $759 billion).

Oil money allows the financing of terrorist networks
David Sandalow January 22, 2007 ENDING OIL DEPENDENCE http://www.brookings.edu/views/papers/fellows/sandalow20070122.pdf

Compounding this problem, the huge money flows into the region from oil purchases help finance terrorist networks. Saudi money provides critical support for madrassas with virulent anti-American views. Still worse, diplomatic efforts to enlist Saudi government help in choking off such funding, or even to investigate terrorist attacks, are hampered by the priority we attach to preserving Saudi cooperation in managing world oil markets.

US oil dependence spurs terrorism – decreasing dependence addresses the root cause Cornell Daily Sun, March 4, 2004
David Dunford, former U.S. Ambassador to Saudi Arabia and Oman; David Driesen, associate professor at Syracuse University College of Law; and Max Martina, managing director at the Alternative Energy Institute spoke Wednesday in Myron Taylor Hall at Cornell University in a panel presentation entitled "U.S. Foreign Oil Dependence: Is Alternative Energy the Forgotten Weapon in the War on Terrorism?" The lecture was sponsored by the Clark Fund for the Middle East and the Cornell Law School Environmental Society. Moderator Steven Diamond introduced the three panel participants before turning the podium over to Dunford. "There is a new crisis each day. We have to address a different perspective -- can an alternative energy policy help?" asked Diamond. Dunford, who was first to speak, explained the current Middle Eastern political state and U.S. energy consumption's effect on the region. "We must approach the subject and

look at the U.S. interest in the Middle East, and what effect our consumption has on the economic policy of other countries," he said. He then mapped out what he believes are America's ultimate interests: counter-terrorism, oil, Israel, democracy and
human rights. With regard to oil, "U.S. and Saudi Arabia production is roughly equivalent," said Dunford. He continued, "U.S. consumption is one-fourth the world consumption. The Saudi Arabia policy is to keep us hooked. The price of oil now is $36.60 per barrel -- it is a timely moment to talk about alternative energy." Dunford then moved on to the subject of the Middle East. He considered the question of the effect of oil on producers. Economically, oil production leads to the "dutch disease," a complicated chain of events resulting in economic stagnation. Despite income increases from oil, "Middle East qualities of life don't go up as fast as you'd expect. The government is authoritarian, and much of oil revenues go to the military. Oil gives government a vacation from economics and politics," said Dunford. He then discussed the subject of Islam and terrorism. "We want to keep the peace process in play [in Israel] ... but I am not sure energy conservation will help," he said. As for globalization, Dunford said, "the spread of U.S. values, culture and lifestyle produces a powerful backlash. Terrorism becomes to them the equalizing factor." Dunford concluded by saying, "Reducing our dependency on fossil fuels is good. To reduce terrorism, we have to find the root of terrorism, and I believe it runs though Jerusalem and the Arab/Israeli conflict."

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Oil dependence prevents us from ever overcoming terrorism and destroys our leadership and the global economy – 6 reasons – Simply decreasing our dependence on oil is key to solve. Alon Ben-Meir, Middle East Project Director at the World Policy Institute, New York and professor of International Relations at New York University, June 21, 2004
An energy-independence strategy is not a luxury; it is of a paramount importance and a critical part of a comprehensive strategy we must urgently pursue to defeat international terrorism. Here is why: First, dependence on oil-producing countries compels us to protect their governments in order to maintain political stability, no matter how corrupt, rigid, and undemocratic they may be. As long as we continue to be perceived as the protector of undemocratic regimes and as long as the prospects for real reform remain elusive, we will continue to suffer the disdain and hatred of the region's masses. If these perceptions remain unchanged, we will be the target of choice for al-Qaida, whose public support in Saudi Arabia, for
example, is currently higher than 50 percent and whose main agenda there is to destabilize the country. As long as we remain beholden to the oil-producing states, we compromise our strategic interests and limit our policy choices in the region, thereby severely impeding our

chances of ever winning the war on terrorism. Second, as long we remain dependent on Arab oil, we can count on al-Qaida to even more systematically target anything related to oil -- for example, in Saudi Arabia, its oil facilities, both to undermine the U.S. economy and weaken the Saudi government's economic power base, which is oil. Perhaps even more important, frequent attacks will have a devastating psychologically effect throughout the region and on oil-consuming countries impacting not only other industries but also their stock markets. To be sure, the future economic stability of the Western hemisphere and Japan will be put in jeopardy. Third, to protect the supplies of Middle-Eastern oil, the United States may sooner rather than later find itself once again acting unilaterally, further alienating the global community, especially in the Arab and Muslim worlds.
Our experience in Iraq has demonstrated the high price to be paid for acting unilaterally; we have undermined our relations with much of the international community and precipitated a serious schism within the international system that is unhealed to this day. It is not an unbelievable scenario that a future major disruption in oil supplies could tempt the U.S. to act preemptively or take other extraordinary measures to protect its national interests. But the Iraq debacle has shown the folly of such responses, and a repetition must be avoided. Another confrontation with our Western allies will only deepen the current rift, further impeding our war on terrorism outside the Middle East. What we must take from our experience in Iraq is that protecting oil supplies in the future may increasingly become politically and militarily untenable. Fourth, few people doubt that either the first Gulf war in 1990-91, or the war in Iraq to oust Saddam Hussein, would have occurred had it not been for our continued dependence on Middle-Eastern oil. Time and again, we have placed our men and women in uniform in harm's way and spent hundreds of billions to protect our oil interests in that region. The tragedy is that our soldiers have died in Iraq for oil -- not for the freedom of the Iraqi people, as the administration would like us to believe. There are billions of people in Africa and Asia subjected to lives of perpetual misery, and we have not lifted a finger to free them from the bondage of corrupt regimes. Fifth, our dependence on Arab oil often forces us to operate according to the whim of

the oil-producing nations; under the best of circumstances, this makes us vulnerable to the needs and greed of their governments. In addition, our dependency, and the often the cozy relationships we cultivated with the leaders of countries like Saudi Arabia continue to prevent us from committing to a real energy-independence strategy. That is, as long as these governments keep the price of a barrel of oil relatively low, we will do very little to develop alternate energy sources. Leave it to fragile regimes like
those of the Saudis and other OPEC nations to manipulate oil prices, hold families "hostage" at the gas pump, and keep the levers controlling oil flow in their hands, all to inhibit us from acting independently in our own national interest. Finally, our dependence on oil makes
it impossible to change the perception of the Arab and Muslim masses about America and its goals in the region. The U.S. efforts in Iraq and elsewhere in the Middle East to promote democracy and freedom are seen as nothing more than smokescreens to hide our real agenda, the exploitation of Arab oil and wealth for our sole benefit. There is not much that the United States can say or do to change these perceptions as long as we depend on Arab oil and continue to be perceived as less than even-handed in dealing with the Israeli-Palestinian conflict. Our actions and policies in the Middle East, especially the war in Iraq and its aftermath, enforce rather than dilute such beliefs. To be sure, if we continue to support current Arab despotic regimes, the hatred

Terrorism, as the most forceful way of expressing that resentment toward us, will continue to escalate. The sooner we become less reliant on Middle-Eastern oil by adopting a specific and comprehensive energy plan, the sooner we can develop a more independent policy to deal with terrorism and other regional issues. The development of such a policy does not mean that we need to abandon oil as a tradable commodity like any other industrial or natural resource that we can buy and sell; it means that we no longer depend on it for our survival. Only when oil loses its potency as a
and scorn toward America felt by the Arab masses will not only continue unabated but grow. resource on which our entire economic national security depends will we take from al-Qaida the ability to threaten our national interests by using oil as a weapon against us. There is a legitimate discussion among various government agencies and energy experts about the kind of energy plan that could best serve our nation's needs. But the bill the administration sent to Congress, which failed to pass it, was based largely on the old premise of generating greater supplies of fossil fuel, while providing few incentives for the domestic development of renewable energy -- the technology for which has existed for years. The Senate rejected the president's energy bill because, among other things, it made oil and gas drilling into the dominant use of public lands, weakened the Clean Air Act, would have given billions of dollars to polluting coal, oil, and nuclear industries, failed to decrease our oil dependence, and contained no incentives

We must acknowledge that increasing the supply of fossil fuel is not the answer to our energy problems. We must change our national psychological disposition from that of relying on fossil fuel.
for fuel-efficient cars.

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Dependence Bad – Oil Shocks Module
A. Dependency causes disruptions/shocks which hurt the economy Dr. John Scire Adjunct Professor of Political Science at UNR “Oil dependency, national security” February 10, 2008 http://www.nevadaappeal.com/article/20080210/OPINION/227691244
The economic costs include net capital outflows, loss of competitiveness in world markets and the costs of supply and demand disruptions. In 2007, estimated net capital outflows from the U.S. to oil exporters exceeded $150 billion. The money used to purchase oil today is not repatriated in purchases of U.S. goods and services by oil exporting states as it was in the 1970s. As a result, the American economy loses $150 billion every year and that money only increases other countries' competitiveness. Supply disruptions are another economic cost of dependency. In a 2003 report, the National Defense Council Foundation (NDCF) estimated total costs to the American economy from supply disruptions in 1973, 1979, and 1990 at $2.3 to $2.5 trillion. A new term, demand disruption, has recently emerged in the financial press to explain the current high price of oil. Demand disruptions occur when demand exceeds supply. While supply disruptions tend to be short-term and fairly easily resolved, demand disruptions are longer-term and much more difficult to resolve. Other than paying up for oil and suffering the economic consequences, our only solution during extended demand disruptions would be to be capable of rapidly switching to alternative motor fuels or other means of transportation.

B. Economic decline causes global nuclear war Mead 92 [Walter Russel, fellow, Council on Foreign Relations, New perspectives quarterly, summer pp. 28]
What if the global economy stagnates - or even shrinks? In that case, we will face a new period of international conflict: South against North, rich against poor. Russia, China, India - these countries with their billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and Japan did in the '30s.
But what if it can't?

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Dependence Bad – Causes Oil Shocks (XT)
oil dependence causes “oil shocks” and collapses the economy Southern States Energy Board in 6
BUILDING A BRIDGE TO ENERGY INDEPENDENCEAND TO A SUSTAINABLE ENERGY FUTURE, http://www.americanenergysecurity.org/AES%20Report.pdf, July.

U.S. dependence on oil imports imposes a huge economic penalty that is not reflected in the retail price of gasoline. It is a penalty that costs jobs, drains investment capital, and increases the nation's defense burden, and it is a cost the U.S. cannot pay forever. Numerous analyses of these hidden costs have been conducted in recent years and the bottom line is that the economic penalty is enormous. There are at least three major elements that comprise this burden: Military expenditures specifically tied to defending Persian Gulf oil, the cost of lost employment and investment resulting from the diversion of financial resources, and the cost of the periodic "oil shocks" the nation has experienced – and will likely continue to experience. For example, these costs have been estimated to exceed $300 billion annually, and they are rising: • Expenditures associated with defending the flow of Persian Gulf oil exceed $50 billion annually.1 • The loss of economic activity resulting from the diversion of financial resources is even larger. Direct economic losses are estimated at nearly $40 billion annually and indirect losses at $125 billion, for an annual total of more than $160 billion. This loss of economic activity results in a loss of 830,000 jobs in the U.S. and a loss of $15 billion in tax revenues and royalty payments to the federal, state and local governments.

Dependence dragging down economy in ways not reflected in fuel prices Southern States Energy Board in 6
BUILDING A BRIDGE TO ENERGY INDEPENDENCEAND TO A SUSTAINABLE ENERGY FUTURE, http://www.americanenergysecurity.org/AES%20Report.pdf, July.

America imports about 60% of the oil it consumes. In 2005 U.S. oil imports totaled approximately $250 billion, or $680 million per day. That figure is fast approaching $1.0 billion per day. The direct and indirect costs to the U.S. economy have been estimated to total about $300 billion per year. U.S. dependence on crude oil and refined product imports imposes an enormous economic penalty that is not fully reflected in the retail price of gasoline, diesel fuel, and jet fuel. It is the penalty of lost jobs, drained investment capital, and an increased national defense burden. The U.S. cannot pay this $300 billion (and rising) cost forever. When all of these elements are considered, they raise the "real" price of imported oil to well over $100 per barrel of crude. This translates into a pump price for gasoline of over $5.00 per gallon, or nearly $100 to fill an average gas tank.

Dependence on oil makes US vulnerable to oil supply loss --multiple threats exist Southern States Energy Board in 6
The American Energy Security Study, http://www.americanenergysecurity.org/leg_brief.html. Tightening oil markets and near record high prices have brought America’s oil vulnerability back into focus. Hurricane Katrina recently demonstrated how quickly oil supply disruptions can impact the country. More serious supply disruptions will likely occur in the future, caused again by natural forces like Katrina, or by terrorist acts, or purposeful rationing by the OPEC cartel and rogue nations such as Iran and Venezuela.

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Shocks bad – A2: the economy will bounce back
The US economy is still highly vulnerable to oil shocks, despite arguments that we are less affected because of lower petroleum intensity
Ann Bordetsky, Roland Copyright

Hwang Anne Korin Deron Lovaas and Luke Tonachel SECURING AMERICA Solving Our Oil Dependence Through Innovation http://www.nrdc.org/air/transportation/oilsecurity/plan.pdf 2005 by the Natural Resources Defense Council.

In addition to sustained high prices, a tight marketplace makes for a greater probability of price spikes in response to fears of supply disruptions because of terrorism or other causes. Oil price spikes, according to economist Philip Verleger, have cumulatively sapped 15 percent of our economy’s growth resulting in $1.2 trillion in direct losses.9 While some have argued that our economy is less effected by oil shocks than it was 30 years ago due to lower petroleum intensity—the amount of oil used per unit of GDP—America’s economy is still highly vulnerable because of our high levels of imports, the global nature of the oil markets, and interdependence of today’s worldwide economies.10

Price spikes limit economic recovery Paul Roberts, energy expert and writer for Harpers,2004, The End of Oil, pg. 108
Yet for many in the West, the Gulf War had simply reemphasized the fundamental flaws in the oil order. Even if OPEC had declared an era of price stability, Western observers, particularly in the United States, continued to argue that as long as oil remained under the political control of states like Saudi Arabia and Venezuela, volatility would pose an enormous risk to the fast-growing global economy. Research showed that after each of the six major oil price spikes since the Second World War, global economic activity had begun to fall within six months; typically, every five-dollar increase in oil prices brought a .5 percent decline in economic growth.

Worse, the effects of price hikes were “asymmetrical.” When prices came back down, economies usually regained only about a tenth of what they had lost in the preceding spike. Cumulatively, according to energy economist Philip Verleger, price spikes had cost the economy 15 percent in growth, and more than a $1.2 trillion in direct losses, “as well as uncountable costs in personal dislocations.”

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Strategic Reserves Fail
Strategic Reserves fail – don’t properly address modern markets Victor ’08 [David G. Victor, Professor at Stanford Law School, Director of the Program on Energy and Sustainable Development at Stanford University, and an Adjunct Senior Fellow at the Council on Foreign
Relations. SARAH ESKREIS-WINKLER was Research Associate in National Security at the Council on Foreign Relations in 2006-7. "In the Tank: Making the Most of Strategic Oil Reserves," Foreign Affairs, July/August 2008 http://fullaccess.foreignaffairs.org/20080701faessay87405/david-g-victor-sarah-eskreis-winkler/in-the-tank.html download date: 7-7-08] Since the Arab oil embargo of the early 1970s, the United States has spent nearly $50 billion (in today's dollars) to build and maintain a huge strategic stockpile of crude oil. Stored in underground salt domes along the coasts of Louisiana and Texas, the U.S. Strategic Petroleum Reserve (SPR) now holds more than 700 million barrels of oil. Other major oil importers -- notably European countries and Japan -- have spent heavily to accrue their own reserves, and many are evaluating whether they should build even larger ones. In his January 2007 State of the Union address, President George W. Bush urged increasing the country's stocks to 1.5 billion barrels in the near future. With the price of crude oil likely to continue to rise above $100 per barrel, the venture could cost between $70 billion and $100 billion. Congress has authorized boosting the SPR to one billion barrels but has not yet appropriated the necessary funds. (And in May, motivated by high oil prices and election-year politics, it temporarily blocked efforts by the Bush administration to keep filling the SPR.) After the military resources spent to keep oil supplies flowing reliably from the Persian Gulf and other significant oil-producing regions, the SPR is the United States' costliest investment in energy security.

The theory behind the effort is that a well-coordinated system of oil stocks can buffer the country against foreign and domestic shocks to the world oil market. Strategic reserves allow governments to relieve the pressure of unexpected interruptions in oil supplies by releasing some of
their stocks on the market. They can help the governments of oil-importing countries dampen the effects of crises in oil-exporting regions or along critical supply routes, such as the Strait of Hormuz, through which about one-third of all the world's oil exports pass. Strategic reserves reduce dependence on pivotal suppliers prone to using oil as a bargaining chip when the market is tight, such as Iran and Venezuela. And they may reduce (at least a bit) the massive revenues that flow to oil exporters such as Russia, helping to make them less formidable troublemakers. Thus, in theory, oil reserves are an important tool of both economic and foreign policy.

In practice, however, strategic stocks can only boost energy security when they are handled properly. And on that front, the track record of most states with large holdings is discouraging. Most countries have opaque and unreliable procedures governing when their governments can fill the stocks and when they can release the oil. Washington, among other governments, makes decisions about stocking and using oil based on an outdated vision of the oil market. When the United States and other countries first built their oil caches, several major oil firms and the main oil-exporting countries
controlled the reliability and the pricing of oil supplies because they held most of the world's excess production capacity. Today's market, by contrast, has little excess capacity, and supplies are priced in commodity markets dominated

strategic stocks are rarely handled with an accurate view of these markets, even though effective management would mean offering reliable supplies in a crunch without undermining the enormous benefits of market speculation at other times. Bigger reserves could help improve U.S. energy security, but until the U.S. government better manages its strategic oil, spending up to $100 billion to double the SPR -- already the world's largest and costliest system of oil caches -- would be a tremendous waste of money.
by massive volumes of private trading for deliveries today and in the future. Yet Such an effort would be warranted only if Washington radically reformed its approach to the United States' reserves and coordinated it with those of the rest of the world. Most important, the United States should shift control over its oil reserves from the president (and his political appointees in the Department of Energy and the State Department) to an independent oil reserve board. Presidential discretion, once thought to lend flexibility to the system and make the SPR a powerful foreign policy tool, now has the opposite effect. Presidential control has politicized decisions about the reserves, especially as most U.S. presidents have proved unable to move nimbly and credibly with the commodity markets.

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Oil Shocks won’t cause recession
Oil shocks don’t threaten the economy Taylor and Van Doren October 17, 2007 Jerry and Peter,senior fellows at CATO, Financial Post.
It is time to get over our inordinate fear of oil shocks. Soaring prices aren't pretty, but they are scarcely the existential threat to our economy posited by many. Nevertheless, if we want to do something about those shocks, then we should keep government far, far way from the wage and price controls that are the true source of the macroeconomic mischief wrongly blamed on crude oil markets.

High oil prices will not cause a global recession; At the worst it will just slow growth. The US isn’t as dependent on oil. NPR.ORG October 31, 2007 http://www.npr.org/templates/story/story.php?storyId=15816615
In the past, the oil shocks were caused by a lack of supply — the OPEC embargo in 1973, the Iranian revolution in 1979, the Iran-Iraq war in 1980. Today, prices are soaring because of increased demand. Also, high oil prices are blamed for sparking

global recessions in 1973 and 1980, but that's not likely to happen this time, most economists say. For one thing, Americans, on average, earn more money and spend less on energy than they did 30 years ago. Overall, the U.S. economy is significantly less dependent on oil — and, in fact, on all forms of energy. In 1981, the
country devoted nearly 14 percent of its overall gross domestic product to energy, according to the Energy Information Administration. By 2006 that number had fallen to about 9 percent.

"We're in much better shape than we were 30 years ago," says Lester Lave, a professor of economics at CarnegieMellon University. High oil prices are like a headwind that slows the economy, he says, and that headwind is about half as strong as it was in the 1970s.

Oil will not push the economy over the brink Hargreaves October 30, 2007
Steve, CNNMoney.com. http://money.cnn.com/2007/10/30/news/economy/oil_record_prices/?postversion=2007103014 The days of rising oil prices alone threatening to knock out the economy may be over. At more than $93 a barrel, oil prices are at or near all-time highs, even when adjusted for inflation. Yet the economy has so far withstood the impact of rising crude. By contrast, the last time crude prices were this high, in the early 1980s, the economy tanked. It's not like oil no longer matters, but it's clear the the energy economy has changed dramatically. Efficiency gains, higher prices driven by demand - not supply - a more diverse energy mix and the fact that people simply make more money means that energy no longer pulls the overall economy like it used to. "The effect is more muted now," said Chris Lafakis, an associate economist at Moody's Economy.com, an economic consultancy. "The economy is more prepared for it."

Economic health and recessions are not determined by oil markets Taylor and Van Doren October 17, 2007
Jerry and Peter,senior fellows at CATO, Financial Post. Although oil prices hit US$80, the inflation, unemployment and recession that supposedly follow oil-price shocks are nowhere on the macroeconomic radar screen. If the economy goes into a tailspin, it will be in response to bad news in the housing market, not the oil market. The lesson to be derived from this is pretty clear: While oil-price spirals are certainly nothing for consumers to celebrate, the health of the economy is not held hostage to oil markets.

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No oil shock; Economies are better adapted to changes and will adjust Kansas City Star Online October 29, 2007
In recent years, the U.S. and world economies have typically shrugged off oil price increases. By contrast, oil price increases are a major part of the conventional story of the economic turmoil of the 1970s. Why the difference? We economists do not have a complete answer, but we have some clues. … The economy is far more energy-efficient today than it was in the past, in part because economic activity is based more on services and less on manufacturing. [We have] flexible labor markets, better monetary policy, and a bit of luck.

Oil prices only have 2/3 of the effect they used to on the economy Cherry Creek News, “Economist sees US better withstanding high oil prices - Peak oil”, Jan 31, 2008,
http://www.thecherrycreeknews.com/content/view/2359/2/ In a paper titled "The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so different from the 1970s?"

Blanchard and a colleague show how changes in U.S. and global economic policies have reduced the impact of oil price shocks. Cowritten with Jordi Gali of the Center for International Economic Research in Barcelona, the work was published as an MIT Economics Working Paper. Blanchard, the Class of 1941 Professor of Economics, is a former MIT economics department head and widely published author whose articles on economics appear regularly in U.S. and French media. He discussed his research on oil shocks during a recent interview with the MIT News Office. Q: Four price-doubling oil shocks have occurred in 35 years-1973, 1979, 1999 and now. How have economic reactions differed? A: In the 1970s, there were two sharp recessions and sharply higher inflation. This time around, the economy has remained strong, and inflation has barely bulged. Q: What's behind the differences? Why was 1973 so different from 2007? A: In the 1970s, the adverse effects of oil price increases were compounded by other adverse shocks-a sharp slowdown in productivity growth and large increases in the price of raw materials. In the 2000s, the effects of oil price increases have been partly offset by other shocks, this time favorable-sustained productivity growth and strong Asian growth, for example. Q: Higher oil prices make dramatic news, yet your research indicates oil actually affects the U.S. economy less than it did 35 years ago. Why is that? A: Those previous large

increases in the price of oil did their job: they led to decreased demand. The share of oil and gas in U.S. production and consumption today is roughly two thirds of what it was in the 1970s. Thus, any given increase in the price of oil has only two-thirds of the impact it had then.

High prices don’t hurt the global economy. Tom Wallin. (Principal Analyst for the Oil Industry and Market Division of the International Energy Agency)"World: Oil Markets Respond To Middle East Violence." Radio Free Europe. 19 Jul 2006.
http://www.rferl.org/featuresarticle/2006/07/877fcc0b-5d4b-4504-acda-8bc0bd39a425.html The way the oil market has been going it seems like, you know, we're not going to get any kind of major downturn. The other thing, I guess, is that the shorter-term impact beside [energy] alternatives would be an economic impact, where you have some kind of global economic recession as a result of inflation and high prices. But we seem to keep bumping up through higher and higher oil price levels without seeing major economic impact.

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Oil price rise does NOT hurt economy – diversification and recent history show resilience Baker ’07 [David R., Chronicle Staff Writer, “BUBBLING CRUDE NOT SUCH A BUST,” San Francisco Chronicle,
Section: Business, Final Edition, October 17, L/N]
High oil prices used to inspire dread among economists and panic on Wall Street. But not anymore. Prices have been rising steadily for two months, hitting a record of $87.61 per barrel Tuesday on the New York Mercantile Exchange. Economists aren't thrilled to see such high prices, because paying more for fuel can hurt corporate profit and pinch consumer spending. But they've watched oil prices climb for years without killing the economy. Listen to them fret about a possible recession, and they're more worried about the mortgage crisis than about oil. Same with the stock markets. Stocks have been rising for about two months, just like oil, although they slipped on Monday and Tuesday. Traders may be starting to worry about fuel prices eating into company earnings, but so far, it hasn't shown. Anyone old enough to remember the 1970s knows it wasn't always this way. Back then, spiking oil prices tipped an already stumbling economy into recession. Unemployment lines followed gas lines. So why hasn't that happened now?

The economy doesn't depend on oil as much as it once did. Some factories that relied on oil in the 1970s have closed, their jobs shipped overseas. Others switched fuels, burning natural gas to generate power. In addition, this week's records follow three years of rising petroleum prices. As oil passed milestone after milestone - $45 per barrel, then $55, then $65, then $75 - businesses learned to plan for high prices. So did drivers. Americans have adjusted to paying more for gasoline, no matter how much they resent it.
California's average gasoline price rose 14 cents in the last month, and now stands at $3.07 for a gallon of regular, according to the AAA auto club. Many economists now say only sudden, steep changes in oil and gasoline prices pose much danger. As long as the change is

predictable, the economy can probably handle it. Besides, the world has now endured several years of oil prices that were once considered lethal. "The price went all the way to $75, and that didn't cause a recession, so should we be scared when it hits $85?" said James Hamilton, professor of economics at UC San Diego. "I don't see another $5 in the price of oil as the straw that broke the camel's back."
There's also a question of whether this week's record prices will last. The petroleum bull market has created its own upward momentum. Speculative investors are filling the market with money. And they keep seeing reasons to bid the price higher. This week's primary cause: threats that Turkey could attack Kurdish rebels taking refuge in northern Iraq, possibly threatening the flow of Iraqi oil. Each tidbit of negative news feeds the bulls. "A lot of it is momentum," said Peter Beutel, president of the Cameron Hanover energy risk management firm. He says the price could hit $90 per barrel. "It's not 'buy low and sell high.' It's 'buy high and sell higher,' " Beutel said. Five years ago, prices hovered in the $30 range. They'd been there - or lower - for years. But starting in 2004, they began climbing, driven upward by fighting in the Middle East and China's fast-growing need for fuel. They are now about as high as they've ever been. Adjusted for inflation, oil peaked at roughly $92 per barrel in 1981, after the start of the Iran-Iraq War. The current bull market isn't far from hitting that mark.

As prices rose during the last three years, the economy occasionally wobbled but never tanked. That resilience in the face of high prices shows just how much the American economy has changed since the 1970s. Energy-hungry industries such as manufacturing have shrunk. Services and retail sales have expanded.
In addition, this decade's petroleum price increase has different root causes than the classic oil shocks of the 1970s and early 1980s. The earlier price spikes followed sudden disruptions in the supply of oil, such as the 1973 Arab embargo of oil sent to the United States for its support of Israel. Prices eased when the crude started flowing again. Now, however, prices are being driven up by rising demand throughout the world. Oil is still available, in other words, but more countries are paying top dollar to get it.

When oil prices hurt economies, demand falls. This drives prices down again. Middle East Online. "Oil Prices Fall By Two Dollars." 6 Aug. 2007. http://www.middle-eastonline.com/english/?id=21675 World oil prices fell by two dollars on Monday on expectations that energy demand may weaken because of economic troubles in the United States, analysts said. New York's main futures contract, light sweet crude for delivery in September, slumped by 2.03 dollars to 73.45 dollars per barrel. The contract had soared to a historic high of 78.77 dollars last Wednesday on news of sliding crude stockpiles in the United States, the world's biggest consumer of energy. In London on Monday, the price of Brent North Sea crude for September delivery shed 1.97 dollars to 72.78 dollars per barrel. "Oil prices have fallen back from record highs as weak non-farm payrolls and unemployment figures in the US on Friday once again undermined (economic) confidence, which has already been knocked by the subprime mortgage crisis," Sucden analyst Michael Davies said.

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Dependence Bad – Caspian
Oil dependence will lead to us-russia-china oil conflicts in central asia and the caspian sea Klare 2008 (Micheal T. Klare, The Nation’s defense correspondent, is professor of peace and world security studies at Hampshire
College. “The New Geopolitics of Energy” The Nation. New York: May 19, 2008. Vol. 286, Iss. 19; pg. 18)

No other major power is capable of matching the United States when it comes to the global deployment of military power in the pursuit or protection of vital raw materials. Nevertheless, other powers are beginning to challenge this country in various ways. In particular, China and Russia are providing arms to oil and gas producers in the developing world and beginning to enhance their military capacity in key energy-producing areas. Much the same process is under way in Central Asia, where China and Russia cooperate under the auspices of the Shanghai Cooperation Organization (SCO) to provide arms and technical assistance to the military forces of the Central Asian "stans"--again competing with the United States to win the loyalty of local military elites. In the
1990s Russia was too preoccupied with Chechnya to pay much attention to this area, and China was likewise consumed with other priorities, so Washington enjoyed a temporary advantage; in the past five years, however, Moscow and Beijing have made concerted efforts to

gain influence in the region. The result has been a far more competitive geopolitical environment, with Russia and China, linked through the SCO, gaining ground in their drive to diminish US influence. These and other efforts by Russia and China, combined with stepped-up US military aid to states in the region, are part of a larger, though often hidden, struggle to control the flow of oil and natural gas from the Caspian Sea basin to markets in Europe and Asia. And this struggle, in turn, is but part of a global struggle over energy.

Securing our oil supply will inevitably lead to low level conflicts in which escalates to a USRussia war. Klare 2008 (Micheal T. Klare, The Nation’s defense correspondent, is professor of peace and world security studies at Hampshire
College. “The New Geopolitics of Energy” The Nation. New York: May 19, 2008. Vol. 286, Iss. 19; pg. 18)

The great risk is that this struggle will someday breach the boundaries of economic and diplomatic competition and enter the military realm. This will not be because any of the states involved make a deliberate decision to provoke a conflict with a competitor--the leaders of all these countries know that the price of violence is far too high to pay for any conceivable return. The problem, instead, is that all are engaging in behaviors that make the outbreak of inadvertent escalation ever more likely. These include, for example, the deployment of growing numbers of American, Russian and Chinese military instructors and advisers in areas of instability where there is every risk that these outsiders will someday be caught up in local conflicts on opposite sides. The danger, of course, is that the great powers will be sucked into these internal conflicts. This is not a far-fetched scenario; the United States, Russia and China are already providing arms and military-support services to factions in many of these disputes. The United States is arming government forces in Nigeria and Angola, China is aiding government forces in Sudan and Zimbabwe, and so on. An even more dangerous situation prevails in Georgia, where the United States is backing the pro-Western government of President Mikhail Saakashvili with arms and military support while Russia is backing the breakaway regions of Abkhazia and South Ossetia. Georgia plays an important strategic role for both countries because it harbors the Baku-Tbilisi-Ceyhan (BTC) pipeline, a US-backed conduit carrying Caspian Sea oil to markets in the West. There are US and Russian military advisers/instructors in both areas, in some cases within visual range of each other. It is not difficult, therefore, to conjure up scenarios in which a future blow-up between Georgian and separatist forces could lead, willy-nilly, to a clash between American and Russian soldiers, sparking a much greater crisis.

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Energy competition in the Caspian is the most likely scenario for a major power nuclear war Blank in 2000 Steven J. Blank is the Douglas MacArthur Professor of Research at the U.S. Army War College and has been an Associate
Professor of Russia/Soviet Affairs at the Strategic Studies Institutes. “US Military Engagement with Trancaucasia and Central Asia,” Strategic Studies Institute, June, http://carlisle-www.army.mil/usassi/welcome.htm.

Russia’s drive for hegemony over the Transcaucasus and Central Asia therefore led those states and interested foreign powers to an equal and opposing reaction that has blunted the Russian drive. Baku, Erevan, Tashkent, Astana, and Tbilisi, to a greater or lesser degree, are seeking a Western counterbalance to Moscow, which the West, especially Ankara and Washington, are all too happy to provide.68 Central Asia has also turned to China, the United States, and Iran in energy and economics, is exploring forms of regional cooperation, and has begun to build its own national militaries to escape from Russia’s shadow. Apart from expanded trade and commercial relations and support for infrastructural projects beyond the energy and pipeline business, Turkey trains Azerbaijani troops and provides economic-political assistance to Georgia and Azerbaijan. Other Western powers, especially France and Great Britain, also display a rising regional profile. Washington’s burgeoning military-political-economic involvement seeks, inter alia, to demonstrate the U.S. ability to project military power even into this region or for that matter, into Ukraine where NATO recently held exercises that clearly originated as an anti-Russian scenario. Secretary of Defense William Cohen has discussed strengthening U.S.-Azerbaijani military cooperation and even training the Azerbaijani army, certainly alarming Armenia and Russia.69 And Washington is also training Georgia’s new Coast Guard. 70 However, Washington’s well-known ambivalence about committing force to Third World ethnopolitical conflicts suggests that U.S. military power will not be easily committed to saving its economic investment. But this ambivalence about committing forces and the dangerous situation, where Turkey is allied to Azerbaijan and Armenia is bound to Russia, create the potential for wider and more protracted regional conflicts among local forces. In that connection, Azerbaijan and Georgia’s growing efforts to secure NATO’s lasting involvement in the region, coupled with Russia’s determination to exclude other rivals, foster a polarization along very traditional lines.71 In 1993 Moscow even threatened World War III to deter Turkish intervention on behalf of Azerbaijan. Yet the new Russo-Armenian Treaty and Azeri-Turkish treaty suggest that Russia and Turkey could be dragged into a confrontation to rescue their allies from defeat. 72 Thus many of the conditions for conventional war or protracted ethnic conflict in which third parties intervene are present in the Transcaucasus. For example, many Third World conflicts generated by local structural factors have a great potential for unintended escalation. Big powers often feel obliged to rescue their lesser proteges and proxies. One or another big power may fail to grasp the other side’s stakes since interests here are not as clear as in Europe. Hence commitments involving the use of nuclear weapons to prevent a client’s defeat are not as well established or apparent. Clarity about the nature of the threat could prevent the kind of rapid and almost uncontrolled escalation we saw in 1993 when Turkish noises about intervening on behalf of Azerbaijan led Russian leaders to threaten a nuclear war in that case. 73 Precisely because Turkey is a NATO ally, Russian nuclear threats could trigger a potential nuclear blow (not a small possibility given the erratic nature of Russia’s declared nuclear strategies). The real threat of a Russian nuclear strike against Turkey to defend Moscow’s interests and forces in the Transcaucasus makes the danger of major war there higher than almost everywhere else. As Richard Betts has observed, The greatest danger lies in areas where (1) the potential for serious instability is high; (2) both superpowers perceive vital interests; (3) neither recognizes that the other’s perceived interest or commitment is as great as its own; (4) both have the capability to inject conventional forces; and, (5) neither has willing proxies capable of settling the situation.74 Russian perceptions of the Transcaspian’s criticality to its interests is tied to its continuing efforts to perpetuate and extend the vast disproportion in power it possesses relative to other CIS states. This power and resource disproportion between Russia and the smaller states of the Transcaspian region means that no natural equilibrium is possible there. Russia neither can be restrained nor will it accept restraint by any local institution or power in its pursuit of unilateral advantage and reintegration. 75

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Dependence Bad – US Hegemony
Over-reliance on oil makes us dependent on unstable producer states. These states will continue to work as counterweights to American hegemony
Josef Braml is editor-in-chief of the Yearbook on International Relations at the German Council on Foreign Relations (DGAP) in Berlin. The Washington Quarterly • 30:4 pp. 117–130. 2007 Can the United States Shed Its Oil Addiction?

If the United States continues its overreliance on fossil fuels, it will become increasingly dependent on producing nations that are unstable and that pose a risk to its interests and could come into conflict with other consumer states. Although the United States can still count on Canada and Mexico, which are its two most important petroleum providers, its tense relationship with Venezuela illustrates the challenges in securing energy resources even in its own backyard, let alone the Middle East and other volatile areas. Some observers of petropolitics go as far as to describe an “axis of oil” (Russia, China, and eventually Iran) at work that is “acting as a counterweight to American hegemony” and will deprive the United States of its oil supplies and strategic interests.6 The Persian Gulf, another region the United States used to dominate, has become very volatile and unreliable in terms of delivering energy resources. This region will continue to be vital to U.S. interests in reliable oil supply for at least the next two decades.7 The U.S.–
Saudi Arabian relationship in particular is well rooted in bilateral economic and political ties. The Saudi monarchy possesses the world’s largest oil reserves and is one of the United States’ main suppliers of oil. U.S. energy dependence, however, undermines the U.S. National Security Strategy’s aim of fighting terrorism by demanding meaningful political reform from authoritarian regimes to become more democratic and market oriented.8 Through interventions in the markets, Saudi Arabia has helped the United States to stabilize the price of oil, allowing oil consumers to enjoy relatively steady prices from the mid-1980s to 2003. Nevertheless, because oil production has not kept pace with increased worldwide demand for oil, especially from the United States and China, there has been a sharp increase in the price of oil over the past three years.

oil access is the most important factor for sustained American hegemony. Dr. Flynt Leverett is Senior Fellow and Director of the Geopolitics of Energy Initiative at the New America
Foundation. He is also a visiting professor of political science at the Massachusetts Institute of Technology and a principal of Strategic Energy and Global Analysis, LLC. Previously, he served in government as senior director for Middle East affairs at the National Security Council, on the Secretary of State’s Policy Planning Staff, and as senior analyst at the Central Intelligence Agency, January 10, 2007. Testimony “The Geopolitics of Oil And America’s International Standing” Committee on Energy and Natural Resources United States Senate, http://www.newamerica.net/files/070110leverett_testimony.pdf
Mr. Chairman, Senator Domenici, members of the Committee, thank you for the opportunity to speak with you about the global oil balance and its implications for America’s national security and foreign policy.1 In my view, the most profound challenges to America’s global

leadership during the next quarter century are not posed by the risk of strategic failure in Iraq, further proliferation of weapons of mass destruction, or the growth and consolidation of extremist forces in the Islamic world. Rather, the most profound challenges to U.S. preeminence during the next 25 years flow from the strategic and political consequences of ongoing structural shifts in global energy markets, especially the global oil market. Most notably, cooperation between China and Russia on energy matters is bolstering Sino-Russian cooperation on strategic issues, effectively creating a Sino-Russian “axis of oil” as the principal counterweight to America’s global hegemony.

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Oil Dependence constrains US Hegemony Council on Foreign Relations 2006 http://www.cfr.org/content/publications/attachments/EnergyTFR.pdf
the control over enormous oil revenues gives exporting countries the flexibility to adopt policies that oppose U.S. interests and values. Iran proceeds with a program that appears to be headed toward acquiring a nuclear weapons capability. Russia is able to ignore Western attitudes as it has moved to authoritarian policies in part because huge revenues from oil and gas exports are available to finance that style of government. Venezuela has the resources
First, from its oil exports to invite realignment in Latin American political relationships and to fund changes such as Argentina’s exit from its International Monetary Fund (IMF) standby agreement and Bolivia’s recent decision to nationalize its oil and gas resources. Because of their oil wealth, these and other producer countries are free to ignore U.S. policies and to pursue interests

oil dependence causes political realignments that constrain the ability of the United States to form partnerships to achieve common objectives. Perhaps the most pervasive effect arises as countries dependent on imports subtly modify their policies to be more congenial to suppliers. For example, China is aligning its relationships in the Middle East (e.g., Iran and Saudi Arabia) and Africa (e.g., Nigeria and Sudan) because of its desire to secure oil supplies. France and Germany, and with them much of the European Union, are more reluctant to confront difficult issues with Russia and Iran because of their dependence on imported oil and gas as well as the desire to pursue business opportunities in those countries. These new realignments have further diminished U.S. leverage, particularly in the Middle East and Central Asia. For example, Chinese interest in securing oil and gas supplies challenges U.S. influence in central Asia, notably in Kazakhstan. And Russia’s influence is likely to grow as it exports oil and (within perhaps a decade) large amounts of natural gas to Japan and China.
inimical to our national security. Second,

US is vulnerable to major oil exporters. These countries get to exert undue control over our foreign policy decisions Energy Security Leadership Council, Recommendations to the Nation on Reducing U.S. Oil Dependence December 2006 http://www.secureenergy.org/reports/ESLC_Oil_Report.pdf
Reduced U.S. oil dependence will help mitigate the power that major oil exporters can exert over U.S. foreign policy both directly and through their ability to coerce other importing nations. While
some may argue that the various exporting nations are too diverse to forge an effective monopoly and, moreover, too dependent on petro-dollars to contemplate lasting embargoes, the fact is that

America has adversaries who are ready to make economic sacrifi ces of their own in order to achieve goals contrary to U.S. interests. Whether or not future embargoes are probable, they are clearly not impossible, and for this reason the U.S. must prepare to deter the use of oil as a “weapon.” Our nation
is at risk, and it is time for serious action.

Oil dependence constrains US foreign policy Energy Security Leadership Council, Recommendations to the Nation on Reducing U.S. Oil Dependence December 2006 http://www.secureenergy.org/reports/ESLC_Oil_Report.pdf
oil dependence constrains American foreign policy by strengthening the nation’s adversaries and placing enormous burdens on the U.S. military. While diffi cult to quantify with precision, These constraints and burdens unquestionably render the pursuit of U.S. national interests far more diffi cult and costly.
Even in the absence of an outright supply crisis,

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Dependence Bad – Middle East Democracy
Oil dependence undermines Middle East democracy
Ann Bordetsky, Roland Copyright

Hwang Anne Korin Deron Lovaas and Luke Tonachel SECURING AMERICA Solving Our Oil Dependence Through Innovation http://www.nrdc.org/air/transportation/oilsecurity/plan.pdf 2005 by the Natural Resources Defense Council.
There is ample evidence that economic conditions are not the only element of a terrorist friendly climate in the Middle East. Prodigious oil supply can undermine democracy as well. Oil riches in the developing world have been linked to centralization of state power, difficulties in developing free societies, and the funding of incitement and terrorist networks.39 The situation has complicated U.S.-Saudi relations so much so that the commission included a specific recommendation in its report aimed at healing the relations: “The problems in the U.S.-Saudi relationship must be confronted, openly. The United States and Saudi Arabia must determine if they can build a relationship that political leaders on both sides are prepared to publicly defend – a relationship about more than oil…”40 As summarized in a Foreign Affairs article, “It is…increasingly clear that the riches from oil trickle down to those who would do harm to America and its friends. If this situation remains unchanged, the United States will find itself sending soldiers into battle again and again, adding the lives of American men and women in uniform to the already high cost of oil….”41 Therefore, reducing U.S. oil dependence could indirectly support the development of democracy, or as one columnist wrote: “Shrink the oil revenue and [Middle Eastern countries] will have to open up their economies and their schools and liberate their women so that their people can compete. It is that simple.”42

Middle east democracy is key to regional peace. Byman 2003 (Daniel- Assistant Professor in the Security Studies Program at Georgetown, International Security
28.1, p51-52) Democracy's greatest advantage for the United States, however, may be in making the Persian Gulf region more pacific. Since the British withdrawal from the gulf more than thirty years ago, war and revolution have plagued the region. Mature democracies are far less likely to fight each other, suggesting that peace may be more likely in a democratic future. It is important to
note, however, that Iran's democracy is limited at best, while the gulf states remain in essence family-run autocracies, despite recent moves toward power sharing. Thus the finding that democracies seldom war with each other may be of limited relevance to

the gulf today, though the installation of a democracy in Iraq might be a positive first step toward a broader, region-wide peace.

Middle East war goes global nuclear. John Steinbach 2002 Israeli Nuclear weapons: a threat to piece, 3/3
http://www.converge.org.nz/pma/mat0036.htm
Meanwhile, the existence of an arsenal of mass destruction in such an unstable region in turn has serious implications for future arms control and disarmament negotiations, and even the threat of nuclear war. Seymour Hersh warns, "Should war break out in the Middle East again,... or should any Arab nation fire missiles against Israel, as the Iraqis did, a nuclear escalation, once unthinkable except as a last resort, would now be a strong probability."(41) and Ezar Weissman, Israel's current President said "The nuclear issue is gaining momentum (and the) next war will not be conventional."(42) Russia and before it the Soviet Union has long been a major (if not the major) target of Israeli nukes. It is widely reported that the principal purpose of Jonathan Pollard's spying for Israel was to furnish satellite images of Soviet targets and other super sensitive data relating to U.S. nuclear targeting strategy. (43) (Since launching its own satellite in 1988, Israel no longer needs U.S. spy secrets.) Israeli nukes aimed at the Russian heartland seriously complicate disarmament and arms control negotiations and, at the very least, the unilateral possession of nuclear weapons by Israel is enormously destabilizing, and dramatically lowers the threshold for their actual use, if not for all out nuclear war. In the words of Mark Gaffney, "... if the familar pattern(Israel refining its weapons of mass destruction with U.S. complicity) is not reversed soon- for whatever reason- the deepening Middle East conflict could

trigger a world conflagration."

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Dependence Good – US Presence in the Caspian
U.S. presence in Caspian and Central Asia key to prevent Russian monopolization, instability and major war outbreak Strachota 2 Krzysztof Strachota is the Director of Central Asia and Caucuses Section at the Center at the Center for Eastern
Studies in Warsaw, Stefan Batory Foundation (Warsaw), and Institute for Democracy in Eastern Europe (Washington, DC). “Russian Policy in the Caucuses and Central Asia” Toward an Understanding of Russia: New European Perspectives, Council on Foreign Relations, New Yorkm p. 132-133.

The process of reconstructing Russia’s influence in Asia gained in intensity after September 11, 2001, because of Russia’s importance in the antiterrorist coalition and strong political factions in Afghanistan (especially after the defeat of the Taliban) and the surrounding region. Russia’s most important entry point for the future is its position in the south of the CIS in Central Asia and the southern Caucasus. This is the region that will decide Russia’s superpower potential. So far, as a result of traditions and weak economic tools, Russia has been building its influence in this region by playing on weaknesses and local conflicts. This destabilizes the region and hinders its development, but this policy seems to be successful in the short term. In the longer term, it may have catastrophic results beyond the region. The great threat for this policy after September 11, 2001 is strong military, political and economic engagement on the part of the United States (and the European Union in the economic sphere) in Central Asia and the Caucasus. This calls into question Russia’s monopoly, gives a geopolitical alternative for the region, strengthens the independence of the new states, and encourages growth in terms of regional stability. These opposing tendencies—U.S. involvement in Russia’s sphere of influence and growing role of Russia in the coalition, Russia’s particular influence in Central Asia and Afghanistan with Russia flexibility in Moscow-Washington relations—create a completely new style of policy for Russia in the south of the CIS. Thanks to its position in the region, Russia has become an important player in global (Asiatic) policy and a kind of partner and ally for the United States. Though thus far it is symbolic, the breaking of Russia’s monopoly in Central Asia by the United States seems to be a good price to pay for the change in Russia’s position, particularly as Moscow has been keeping fairly tight control of political processes in the region. Russia’s biggest problem will be keeping these political instruments and finding solutions for the region’s social, economic, and cultural problems.

U.S. presence in Central Asia is essential—leaving russia in control leads terrorism, pakistani coups, and major war outbreaks Strachota 2002 Krzysztof Strachota is the Director of Central Asia and Caucuses Section at the Center at the Center for Eastern
Studies in Warsaw, Stefan Batory Foundation (Warsaw), and Institute for Democracy in Eastern Europe (Washington, DC). “Russian Policy in the Caucuses and Central Asia” Toward an Understanding of Russia: New European Perspectives, Council on Foreign Relations, New Yorkm p. 131.

As the antiterrorist coalition has expanded, the new era of U.S. involvement in the south of the CIS has become fact. Never before has the United States had a direct military presence here. This creates both enormous opportunities and enormous dangers. The presence of the United States in the region seem inevitable: a state that wants to play the role of a superpower cannot allow itself to be absent from a place where the influences of the greatest power of Asia (at once partners and rivals of the United States) clash, four of which have nuclear weapons (Russia, China, Pakistan, and India). This is especially true as Pakistan, hitherto the linchpin of U.S. support, is undoubtedly experiencing immense internal tensions that threaten destabilization with far-reaching results beyond the region’s borders. Thus, it becomes key to provide enormous and constant support—both political and economic—for building independent and efficient states in the region. U.S. involvement also seems beyond debate in a region where the Islamic fundamentalism that given birth to terrorism plainly has perfect conditions for development (both in Afghanistan and Tajikistan, the entire Fergana Valley, and the Northern Caucasus, Chechnya, and Dagestan). The problems that accompany (and frequently precede) fundamentalism include uncontrolled trade in drugs and arms, as well as problems both social and humanitarian (such as refugees). Despite its rhetoric, Russia is not able to solve these problems, and even seems to generate them (considering the example of Chechnya, and indirectly Tajikistan). The current Russia-centered defense system therefore requires fundamental revision; otherwise problems will snowball out of control.

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Dependence Good – US Presence in the Caspian
Abrogating US leadership in the Caspian leads to regional conflict. Major Adrian W. Burke, USMC, Recent Graduate of the Naval Command and Staff College, Student at the Marine Corps’ School of Advanced Warfighting, logistics officer, Strategic Review, Fall 1999 p. 29
The President detailed US. national policy for the Caspian Sea region in the National Security Strategy. The combined Middle East Central Asia "energy field" contains the single largest concentration of hydrocarbon reserves in the world and warrants US. attention. Ensuring the U.S. corporate lead on development of the region's resources and nullifying Russian and Iranian influence on oil field exploration and development and pipeline export routes form the basis of this policy. In order to maintain influence in the Caspian basin, the United States must engage the regional heads of state, work cooperatively with US. industry, advance US. military cooperation, and all the while, address the complex challenges of access and energy security. The recommended Framework forms the basis for a Caspian Sea Basin Strategy that positions the US. as a regional leader and takes the bold step toward normalization of relations throughout the region. Regional leaders are in pursuit of economic independence and sovereignty. Abrogating a leadership role would leave a vacuum that would exacerbate regional conflict. The U.S. can be a regional stabilizer. It is in the best interests of the United States, diplomatically, economically, and militarily, to be involved in the development of the countries and the resources of the Caspian Sea basin.

US hegemony in Eurasia is vital to prevent massive international instability. Zbigniew Brzezinski, Former United States National Security Advisor, "The Eurasian Balkans," The Grand Chessboard, 1997, online at http://www.treemedia.com/cfrlibrary/library/geopolitics/brzezinski.html
Now a non-Eurasian power is preeminent in Eurasia -- and America's global primacy is directly dependent on how long and how effectively its preponderance on the Eurasian continent is sustained. Obviously, that condition is temporary. But its duration, and what follows it, is of critical importance not only to America's well-being but more generally to international peace. The sudden emergence of the first and only global power has created a situation in which an equally quick end to its supremacy -- either because of America's withdrawal from the world or because of the sudden emergence of a successful rival -- would produce massive international instability. In effect, it would prompt global anarchy. The Harvard political scientist Samuel P. Huntington is right in boldly asserting: A world without U.S. primacy will be a world with more violence and disorder and less democracy and economic growth than a world where the United States continues to have more influence than any other country in shaping global affairs. The sustained international primacy of the United States is central to the welfare and security
of Americans and to the future of freedom, democracy, open economies, and international order in the world.(1) In that context, how America "manages" Eurasia is critical. Eurasia is the globe's largest continent and is geopolitically axial. A power that dominates Eurasia would control two of the world's three most advanced and economically productive regions. A mere glance at the map also suggests that control over Eurasia would almost automatically entail Africa's subordination, rendering the Western Hemisphere and Oceania geopolitically peripheral to the world's central continent. About 75 percent of the world's people live in Eurasia, and most of the world's physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for about 60 percent of the world's GNP and about three-fourths of the world's known energy resources (see Tables). Eurasia is also the location of most of the world's politically assertive and dynamic states. After the United States, the next six largest economies and the next six biggest spenders on military weaponry are located in Eurasia. All but one of the world's overt nuclear powers and all but one of the covert ones are located in Eurasia. The world's two most populous aspirants to regional hegemony and global influence are Eurasian. All of the potential political and/or economic challengers to American primacy are Eurasian. Cumulatively, Eurasia's power vastly overshadows America's. Fortunately for America, Eurasia is too big to be politically one. Eurasia is thus the chessboard on which the struggle for global primacy continues to be played. Although geostrategy -- the strategic management of geopolitical interests -- may be compared to chess, the somewhat oval-shaped

Eurasian chessboard engages not just two but several players, each possessing differing amounts of power. The key players are located on the chessboard's west, east, center, and south. Both the western and the eastern extremities of the chessboard contain densely populated regions, organized on relatively congested space into several powerful states. In the case of Eurasia's small western periphery, American power is deployed directly on it. The far eastern mainland is the seat of an increasingly powerful and independent player, controlling an enormous population, while the territory of its energetic rival -- confined on several nearby islands -- and half of a small far-eastern peninsula provide a perch for American power.

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Caspian Defense
Central Asian countries will check great power domination—they balance influence Brian G. Carlson, an M.A. student at the Johns Hopkins University School of Advanced International Studies, Spring 2007, Journal of Public and International Affairs, “The LimiTs of sino-Russian sTRaTegic PaRTneRshiP in
cenTRaL asia,” http://www.princeton.edu/~jpia/, p. 175 Finally, a Sino-Russian partnership in Central Asia is likely to be lim- ited by the Central Asian countries’ desire to play the great powers off against each other in order to preserve their sovereignty. This tendency can be seen in Kazakhstan’s “multi-vectored” foreign policy (Tokayev 1997; Tokayev 2006; Blank 2005; Olcott 2002, 50), Uzbekistan’s entreat- ies to both Russia and China following the souring of relations with the United States, Kyrgyzstan’s delicate balancing act in which it joined the SCO declaration but reaffirmed U.S. access to the base at Manas airport, Tajikistan’s close relations with the United States, and Turkmenistan’s stubborn neutrality. Russia has been unable to create an effective collective security orga- nization under the CIS because no Central Asian country is willing to trade its sovereignty for protection by Moscow (Olcott 2005a, 187). Nor do these countries wish to endure a crippling economic dependence on Moscow that limits their sovereignty. For example, Kazakhstan has sought multiple export routes for its energy resources in order to prevent a Russian monopoly (Christoffersen 1998, 26-28).

Caspian hydrocarbons are negligible—its insignificant as a site of competition with Russia Alec Rasizade, senior associate at the Historical Research Center, April 2005, Journal of Southern Europe and the
Balkans, It is hard to think of an industry that has a hype machine as phenomenal as the Caspian energy potential industry. But it is now becoming increasingly clear that the hydrocarbon deposits in the Caspian Basin are much lower than it has been believed in the West, that the Caspian's energy promise has been deliberately exaggerated and that production from the area will not make a
major contribution to the world's energy supplies and its energy security.2 Whatever the final size of deposits, it is now obvious that much of the talk of Caspian oil was a spectacular bluff. Moreover, the costs of producing and geographic challenges of moving the Caspian oil and gas are high and the political risks are great. The Caspian states, still run by totalitarian-era leaders, are authoritarian, destitute and totally corrupt; their goal is to preserve the power. With virtually all opposition prohibited and export revenues being siphoned off to the ruling few's foreign bank accounts, the populations at large have seen decline instead of improvement in their living standards during the 'oil boom' decade, and consequently the potential risks of political extremism and terrorism in this predominantly Muslim region are horrifying. At the outset, the Caspian oil rush was akin to a high-stakes game of cards. There was a lot of bluffing.3 It was complicated further by the fact that the cards were being played within another strategic game of chess, with other rules, played by the great powers at a large geopolitical chessboard. With a relative consolidation of the chessboard into patterns, at least temporarily, the Caspian oil game is now more or less settled. Although the bluffing survives from the old days of the card game, strategy as opposed to tactics has become the conditioning environment in the region, as in a chess game.4 The officials who created a 'great game' with Caspian oil rush and pipeline strategies also played a numbers game, largely ignoring industry experts who argued that the Caspian would never affect the oil market as much as the Middle East. Such claims of great Caspian oil potential made by officials, whose proposals promoting the export pipelines that would avoid crossing Russia and Iran, were based more on geopolitics than economics. All post-Soviet geological explorations have as yet failed to find sufficiently large new deposits, except for the Kashagan field in the Kazakstan sector of the sea discovered by the Italian state energy concern ENI. After drilling of many dry wells, the area that had been pushed by the US Department of State as an alternative to the Persian Gulf was dismissed as a product of Washington's propaganda. Instead of the politically bloated appraisal of 200 billion barrels in ostensible Caspian oil reserves (compared with Saudi Arabia's 262 billion) valued at 4 trillion dollars, exuberantly cultivated for the past decade by the Department of State to justify its own strategy there,5 we are talking now about only 18-31 billion barrels of reserves, according to another US government agency, the Energy Information Administration (EIA).6 The estimates by the OECD's (Organization for Economic Cooperation and Development) International Energy Agency (IEA) of proven oil reserves in the region range from 17 to 30 billion barrels, 7.8 billion of which are believed to lie under the Kashagan. For natural gas, there is an agreement that proven reserves are about 6.5 trillion cubic metres, with Turkmenistan holding the largest deposits (outside of Russia).7 There is now emerging a question as to whether this region is of major strategic importance, despite much of the rhetorical level that the West has given to it in public statements, or its interest in this peripheral region is derivative of broader security and energy concerns, those having to do with the Middle East, Russia, Iran, China, and Islamic radicalism in Central Asia?

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No risk of major central asian war now Weitz 2006 Richard Weitz is a senior fellow and associate director of the Center for Future Security Strategies at the Hudson Institute
in Washington, D.C. Averting a New Great Game in Central Asia The Washington Quarterly 2006 Summer.

Central Asian security affairs have become much more complex than during the original nineteenth-century great game between czarist Russia and the United Kingdom. At that time, these two governments could largely dominate local affairs, but today a variety of influential actors are involved in the region. The early 1990s witnessed a vigorous competition between Turkey and Iran for influence in Central Asia. More recently, India and Pakistan have pursued a mixture of cooperative and competitive policies in the region that have influenced and been affected by their broader relationship. The now independent Central Asian countries also invariably affect the region's international relations as they seek to maneuver among the major powers without compromising their newfound autonomy. Although Russia, China, and the United States substantially affect regional security issues, they cannot dictate outcomes the way imperial governments frequently did a century ago. Concerns about a renewed great game are thus exaggerated. The contest for influence in the region does not directly challenge the vital national interests of China, Russia, or the United States, the most important extraregional countries in Central Asian security affairs. Unless restrained, however, competitive pressures risk impeding opportunities for beneficial cooperation among these countries. The three external great powers have incentives to compete for local allies, energy resources, and military advantage, but they also share substantial interests, especially in reducing terrorism and drug trafficking. If properly aligned, the major multilateral security organizations active in Central Asia could provide opportunities for cooperative diplomacy in a region where bilateral ties traditionally have predominated.

no great power war over energy resources in central asia Weitz 2006 Richard Weitz is a senior fellow and associate director of the Center for Future Security Strategies at the Hudson Institute
in Washington, D.C. Averting a New Great Game in Central Asia The Washington Quarterly 2006 Summer.

Fortunately, the fact that Central Asia does not represent the most important geographic region for any external great power also works against the revival of a traditional, geopolitical great-game conflict. Russia, China, and the United States have strong reasons to cooperate in the region. Although each country has extensive goals in Central Asia, the resources they have available to pursue them are limited, given other priorities. As long as their general relations remain nonconfrontational, Moscow, Beijing, and Washington are unlikely to pursue policies in a lower priority region such as Central Asia that could disrupt their overall ties. Most often, they will find it more efficient and effective to collaborate to diminish redundancies, exploit synergies, and pool funding and other scarce assets in the pursuit of common objectives. Unfounded fears or overtly competitive policies could undermine these opportunities for cooperation and should be avoided.

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Dependence Good – Prevents shocks
Limiting oil imports makes us more vulnerable to supply disruptions Diane Katz, director of science, environment, and technology policy with the Mackinac Center for Public Policy, 4/1, 2002, http://www.mackinac.org/article.asp?ID=4129
The fact is that oil imports per se pose no threat to national security. There is more oil to be had today from a wider variety of sources than ever before. According to economist Donald Losman of the National Defense University, the United States now is actually far less dependent on Middle East oil supplies than three decades ago. Venezuela and Saudi Arabia alternate as our No. 1 and No. 2 suppliers, while Mexico and Canada rank third and fourth, respectively. Moreover, world oil reserves have increased dramatically thanks to technological advances in locating and extracting fuels at lower cost. Robert L. Bradley Jr., president of the Institute for Energy Research, has calculated that known world oil reserves are more than 15-times greater than when record keeping began in 1948. Gas reserves are almost four-times greater than in the 1970s, and coal reserves have risen 75 percent in the past two decades. If the United States limits oil imports it will become more dependent on its remaining sources, thereby increasing its vulnerability to supply disruptions. Artificial conservation measures, meanwhile, actually invite increased consumption, as demonstrated by the doubling of vehicle miles traveled since the federal fuel efficiency regime began in 1975.

Oil shocks cause economic depression and war. Paul Roberts, energy expert and writer for Harpers, 2004, The End of Oil, pg.12-13
Suppose, for example, that worldwide oil production hits a kind of peak and that, as at Ghawar, the amount of oil that oil companies and oil states can pull out of the ground plateaus or even begins to decline — a not altogether inconceivable scenario. Oil is finite, and although vast oceans of it remain underground, waiting to be pumped out and refined into gaso¬line for your Winnebago, this is old oil, in fields that have been known about for years or even decades. By contrast, the amount of new oil that is being discovered each year is declining; the peak year was 1960, and it has been downhill ever since. Given that oil cannot be produced without first being discovered, it is inevitable that, at some point, worldwide oil produc¬tion must peak and begin declining as well — less than ideal circumstances for a global economy that depends on cheap oil for about 40 percent of its energy needs (not to mention 90 percent of its transportation fuel) and is nowhere even close to having alternative energy sources. The last three times oil production dropped off a cliff — the Arab oil embargo of 1974, the Iranian revolution in 1979, and the 1991 Persian Gulf War — the resulting price spikes pushed the world into recession. And these disruptions were temporary. Presumably, the effects of a long-term permanent disruption would be far more gruesome. As prices rose, con¬sumers would quickly shift to other fuels, such as natural gas or coal, but soon enough, those supplies would also tighten and their prices would rise. An inflationary ripple effect would set in. As energy became more expensive, so would such energy-dependent activities as manufacturing and transportation. Commercial activity would slow, and segments of the global economy especially dependent on rapid growth — which is to say, pretty much everything these days — would tip into recession. The cost of goods and services would rise, ultimately depressing economic demand and throwing the entire economy into an enduring depression that would make 1929 look like a dress rehearsal and could touch off a desperate and probably violent contest for whatever oil supplies remained.

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Dependence Good – US Presence in Middle East (mod)
Oil dependence is the reason for the strong US presence in the Middle East. Press TV, 2007 US hunts for oil in Persian Gulf Wed, 23 May 2007 20:13:
http://www.presstv.ir/detail.aspx?id=10775&sectionid=351020206

"The presence of US troops in the region has nothing to do with the security of Arabs, but it is in the framework of Washington's greed to access oil reservoirs in the region," he stressed. "Our Arab brothers well understand this reality," he said. Al-Sharaa underlined that Arabs know very well that the United States is in need of oil and is the world's largest oil consumer, adding that the US therefore intends to dominate the oil rich Persian Gulf region.

U.S. withdrawal from the gulf leads to war Zalmay Khalilzad, RAND, The Washington Quarterly, Spring 1995
In the Persian Gulf, U.S. withdrawal is likely to lead to an intensified struggle for regional domination. Iran and raq have, in the past, both sought regional hegemony. Without U.S. protection, the weak oil-rich states of the Gulf ooperation Council (GCC) would be unlikely to retain their independence. To preclude this development, the Saudis might seek to acquire, perhaps by purchase, their own nuclear weapons. If either Iraq or Iran controlled the region that dominates the world supply of oil, it could
gain a significant capability to damage the U.S. and world economies. Any country that gained hegemony would have vast economic resources at its disposal that could be used to build military capability as well as gain leverage over the United States and other oil importing nations.

Hegemony over the Persian Gulf by either Iran or Iraq would bring the rest of the Arab Middle East under its influence and domination because of the shift in the balance of power. Israeli security problems would multiply and the peace process would be fundamentally undermined, increasing the risk of war between the Arabs and the Israelis. The extension of instability, conflict, and hostile hegemony in East Asia, Europe, and the Persian Gulf would harm the economy of
the United States even in the unlikely event that it was able to avoid involvement in major wars and conflicts. Higher oil prices would reduce the U.S. standard of living.

Middle East war goes global nuclear. John Steinbach 2002 Israeli Nuclear weapons: a threat to piece, 3/3
http://www.converge.org.nz/pma/mat0036.htm
Meanwhile, the existence of an arsenal of mass destruction in such an unstable region in turn has serious implications for future arms control and disarmament negotiations, and even the threat of nuclear war. Seymour Hersh warns, "Should war break out in the Middle East again,... or should any Arab nation fire missiles against Israel, as the Iraqis did, a nuclear escalation, once unthinkable except as a last resort, would now be a strong probability."(41) and Ezar Weissman, Israel's current President said "The nuclear issue is gaining momentum (and the) next war will not be conventional."(42) Russia and before it the Soviet Union has long been a major (if not the major) target of Israeli nukes. It is widely reported that the principal purpose of Jonathan Pollard's spying for Israel was to furnish satellite images of Soviet targets and other super sensitive data relating to U.S. nuclear targeting strategy. (43) (Since launching its own satellite in 1988, Israel no longer needs U.S. spy secrets.) Israeli nukes aimed at the Russian heartland seriously complicate disarmament and arms control negotiations and, at the very least, the unilateral possession of nuclear weapons by Israel is enormously destabilizing, and dramatically lowers the threshold for their actual use, if not for all out nuclear war. In the words of Mark Gaffney, "... if the familar pattern(Israel refining its weapons of mass destruction with U.S. complicity) is not reversed soon- for whatever reason- the deepening Middle East conflict could

trigger a world conflagration."

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Dependence Good – US Presence in Middle East XT
Oil is the reason for our military presence in the Middle East
Irfan Asghar The Nation (Pakistan) March 4, 2008 HEADLINE: ARTICLE: The real motive

The salience of oil in the US policy can be gauged from the fact that it has unleashed forces of war in the Middle East to control its oil reserves. The Middle East not only has the world's largest oil reserves but also the
cheapest to produce. If the Middle East did not have the major energy reserves of the world, then policymakers today wouldn't care much about it. If we read every strategic

document regarding the Middle East produced by Washington for decades, it stresses oil as the major factor behind the importance of the area. In the early 1930s, US companies obtained a foothold in

Saudi Arabia.Dependence on oil from the Middle east also explains our need to send troops to that area Reducing our oil dependence will eliminate our reason for sending our troops there
George Heitmann, Special to The Morning Call – Freelance Morning Call (Allentown, Pennsylvania) May 13, 2008 HEADLINE: Focus on energy efficiency, not energy independence Sen. John McCain, addressing an approving audience, has indicated that his energy independence plan, by reducing our reliance upon Middle East oil, will eliminate future needs for sending U.S. troops into that troubled area. Some observers, such as Chris Matthews of "Hardball," have taken his remarks as a gaffe, revealing his acceptance of Alan Greenspan's expressed "inconvenient truth" that the Iraqi war is about oil. Of course, the Middle East is important because of oil, and Israel. Whatever the proximate cause of the Iraqi war, a fundamental reason for U.S. interest in the Middle East is oil. That should not

come as surprise to any thinking person.

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Dependence good – terrorism
Decreasing oil dependence encourages terrorist aggression The Union Leader, 2/14/2002
Leftist critics of American involvement in the Middle East are urging the United States to raise federal fuel efficiency standards to reduce
dependence on foreign oil. They claim that our purchasing of oil from that region is angering radical terrorists who would leave us alone if only we removed our presence and never again set foot on their sand-swept shores. Conservative critics of foreign oil dependency say the United States must discover and use additional domestic sources of oil because buying oil from Arabs indirectly funds Middle Eastern terrorist organizations. Once we have these new sources of oil, we can stop writing checks to Mohammed and let that region alone. Either way, the result is the same: Scared by the Sept. 11 attacks, the United States will have pulled out of the Middle East and turned inward. If this happens, the unavoidable conclusion that all Islamist jihad warriors will come to is that terrorism against the United States works. There is another answer, however. The United States does not have to turn tail and run. Instead, we could solve the problem. And dependence on oil from the Middle East is not the problem. The problem is the theocratic Middle Eastern regimes that control the oil and use Western dollars to fund terrorist organizations. This includes “friendly” countries like Saudi Arabia.

Bioterrorism causes extinction John Steinbruner, senior fellow at the Brookings Institution, chair of the committee on international security and arms control of the National Academy of Sciences, Foreign Policy, December 22, 1997
That deceptively simple observation has immense implications. The use of a manufactured weapon is a singular event. Most of the damage occurs immediately. The aftereffects, whatever they may be, decay rapidly over time and distance in a reasonably predictable manner. Even before a nuclear warhead is detonated, for instance, it is possible to estimate the extent of the subsequent damage and the likely level of radioactive fallout. Such predictability is an essential component for tactical military planning. The use of a pathogen, by contrast, is an extended process whose scope and timing cannot be precisely controlled. For most potential biological agents, the predominant drawback is that they would not act swiftly or decisively enough to be an effective weapon. But for a few pathogens - ones most likely to have a decisive effect and therefore the ones most likely to be contemplated for deliberately hostile use - the risk runs in the

other direction. A lethal pathogen that could efficiently spread from one victim to another would be capable of initiating an intensifying cascade of disease that might ultimately threaten the entire world population. The 1918
influenza epidemic demonstrated the potential for a global contagion of this sort but not necessarily its outer limit.

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